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04 Government Intervention (Price Ceiling (Consequences (Shortage…
04 Government Intervention
Price Ceiling
Consequences
Shortage
Emergence of underground markets
where good is bought at Pc and sold at Pe
Non-price rationing
Price no longer functions to signal and incentivise
Other mechanisms like
Waiting lines
Favouritism
India
:
Price ceiling imposed on Uber drivers to give taxis a fighting chance
Price Floor
France
:
Minimum wage of
€10.03 per hour
Consequences
Inefficient firms
Emergence of underground markets
where good is bought at Pc and sold at Pe
Government needs to dispose of surplus
Export
Store
Destroy
Surplus: excess supply of goods
Taxes
Subsidies