Price controls will tend to cause misallocation of resources because

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25-10-2019
Business

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Price controls will tend to cause misallocation of resources because

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letmeanswer letmeanswer · Answer 1 · 2019-11-08T18:43:51+01:00

Price controls will tend to cause mis-allocation of resources because the cost of production (or opportunity) does not match market prices any more.

Explanation:

Price controls can be as high and low prices as possible. You can control demand and balance the market whether above or below it:

Higher prices may reduce food costs and make it easy to buy, but the downside of high prices can lead to a decline in supply and a shortage.
The recipients of prices may increase the minimum prices..
In farming, they were used to increase farmers' incomes. Minimum prices however lead to surplus supplies, which mean the government must buy surpluses.