Maximum Price Schemes Flashcards
1
Q
Why are maximum price schemes imposed?
A
to encourage consumption of merit goods and equity
2
Q
What are the disadvantages of maximum price schemes?
A
- shortage created (inefficiency in market) due to contraction in supply
- ^^ results in exploitation in black market
- lower quality due to lower price
- cost of enforcement (opp cost too)
3
Q
What affects whether a maximum price scheme would work or not?
A
- enforcement
- set at right level?
