Invisible Hand Blog Post #2

Price ceilings, which is when the government puts a maximum price for a product. This causes shortages as suppliers are not able to set prices high so that they get more profit, there will be some suppliers that will leave the market, creating a decrease in supply. However, now consumers can buy their wants for a cheaper price, which creates an increase in demand. Therefore, because demand exceeds supply, it causes a shortage.

Now, a black market is when unofficial people start selling products for their self-interest. Black markets will alleviate shortages because now the people supplying the product won’t decrease, which will contribute in alleviating a shortage.

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