Question

When several hurricanes hit Florida in 2004, a number of local governments imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. In the areas where the controls were imposed, they resulted in ___________.a. an expanded availability of these badly needed products. b. a reduced availability of these badly needed products. c. an increase in the speed with which people recovered from the hurricanes. d. a more efficient allocation of these goods for which price controls were in effect.

Answer 1

Answer:

B) a reduced availability of these badly needed products.

Explanation:

"The road to hell is paved with good intentions" is the translation from an old French quote from Saint Bernard of Clairvaux. It is still as valid today as it was centuries ago.

The government imposed a price ceiling which was not binding, in other words, it was above equilibrium price. The whole purpose of this action was to prevent speculators from selling basic necessities at higher prices. The problem with this reasoning is that even though non binding price ceiling do not cause shortages under normal circumstances, this wasn't a normal circumstance.

As demand dramatically increased, the equilibrium price would naturally increase, but the price ceiling prevented that. What was one a non binding price ceiling turned into a binding price ceiling, and now the deadweight losses and lost economic efficiencies will always show up. So the worst case scenario became a self-fulfilling prophecy.

Something similar is happening right now in areas that have been hit hard by the corona virus and things are getting out of control pretty fast. Shelves at the supermarkets are all empty, and even though the stores themselves have plenty of stock, since they do not know when and at what price they will be able to replenish their stocks, they only partially replenish their shelves everyday. At my house we had to spend a whole day shopping at every single supermarket and grocery store that we could find until finally we got almost everything that we needed. Under normal circumstances, we should have gotten everything from one single place, and in this case this is really bad because we had to go to 5 different places and we are talking about a disease, not a hurricane.

Answer 2

Answer:

a reduced availability of these badly needed products.

Explanation:

Price control is when the government imposed a price regime that is aimed at protecting the consumer from over pricing by sellers. When price ceilings are imposed there is a maximum price the the seller cannot go above in pricing of products.

In this case if ocal governments imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. It will result in reduced availability of the products to these areas.

Sellers tend to reduce amount supplied, due to scarcity consumers will have to buy at black market prices that are higher.