3 ms·
> Regulating the price to a point well below the free market supply/demand driven price causes a decrease in the amount of bread supplied to the market. In som
by Mediterraneo10 6y ago
> Regulating the price to a point well below the free market supply/demand driven price causes a decrease in the amount of bread supplied to the market.
In some countries like Egypt, bread (or another basic staple) is heavily subsidized below the free market price, but that doesn’t seem to meaningfully impact the market’s supply: any consumer able to pay that artificially low price can still eat all the bread he or she wants.
- HDMI_Cable 6y agoWell it seems more that the supply is sufficiently high to prevent a shortage from the demand (I guess we can thank modern farming techniques).
- sokoloff 6y agoI agree that subsidies perturb the free market, but in this case to the side of increasing supply. (You can model it as the supply curve being shifted downward by the amount of the government subsidy.)
- nickff 6y agoSubsidies are different from price ceilings; subsidies often spur over-production along with over-consumption (think HFCS), whereas price ceilings discourage production and encourage hoarding (arguably a form of over-consumption). Price ceilings also foster a domestic black market, whereas subsidies foster an export black market.
- deleted 6y ago[deleted]
- deleted 6y ago[deleted]