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Market inefficiencies the price controls

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Reference no: EM131104071

Without government intervention, the market price moves to the level at which the quantity supplied equals the quantity demanded through the interactions of supply and demand. But governments intervene in the market now and then to control prices.

  1. What are the market inefficiencies the price controls measures such as price ceilings and price floors create? Why do price ceilings and price floors lead to productive and allocative (marketing) inefficiency?
  2. Who benefits and who loses from government interventions in markets through price control methods known as price ceilings and price floors? Why price controls are used despite their well-known problems?

Reference no: EM131104071

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