Question

A. How do price controls lead to undesirable rationing mechanisms?

Answer 1

Answer:

Price controls are mechanisms of control of the economy by certain governments with centralized economic systems, through which certain guidelines are set for determining the prices of different goods in the market. Thus, for example, the value of consumer goods such as food and other types of essential goods is determined, removing the participation of the law of supply and demand in this process. However, the main conceptual error of this type of measure is that by setting prices that may not be competitive, producers may decide to restrict the supply, either in protest or because it is unproductive for them to offer goods at normal levels, thereby producing a less quantity of goods, with which there is a situation of scarcity.