The Futility of Price Controls Student’s Name Institution Affiliation: The Futility of Price Controls Part I The main reason for controlling inflation is that it inevitably leads to price controls though this cure often turns worse than the disease. For instance over the recent years Venezuela has tried to cure inflation through price controls but failed to achieve the desired goals. Perhaps the earliest attempts used by the government to control inflation using price controls happened in the late Imperial Rome in which before the end of the third waiting in line A person has to stand in line for an hour to purchase 10 gallons of gas and if that person’s time is worth $10 per hour then The full or effective price per gallon of gasoline in the presence of price controls is given by: 1.50+1 (10 hours/ 10 gallons= $2.50 Thus the effective price per gallon is $2.50. However in case the gasoline gets exhausted the actual price of gasoline per gallon will be infinite because the commodity will be unavailable. Reference HYPERLINK "mason.gmu.edu https://mason.gmu.edu/~sgillesp/Homework/Home4Fall17Article.htm [...]
Historically, the most popular method of controlling inflation has been the imposition of price controls. Miller and Benjamin, in their book “The Economics of Macro Issues”, explain why this is a bad idea. Click here to read the article，mason.gmu.edu Part 1. Briefly, summarize the main points of the article. Part 2. Answer this question: Suppose the equilibrium price of gasoline is $2.00 per gallon and that at this price, the average person purchases 10 gallons on each visit to the gas station. Now assume that the maximum lawful price for gasoline is set by the government at $1.50 per gallon. At this ceiling price, there will be an excess demand for gasoline. Assume that this excess demand is rationed by waiting in line. If the typical person has to stand in line for an hour to purchase 10 gallons of gas, and if that person’s time is worth $10 per hour, what is the full or effective price per gallon of gasoline in the presence of price controls?