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Prices lower than the market-clearing price necessarily mean rationing or empty shelves. If you have a hundred potatoes and two hundred people, lowering prices
by solveit 4y ago
Prices lower than the market-clearing price necessarily mean rationing or empty shelves. If you have a hundred potatoes and two hundred people, lowering prices just mean some people won't be able to buy at the low price.
- deleted 4y ago[deleted]
- TheOtherHobbes 4y agoIf you have a hundred potatoes increasing the prices means many people won't be able to afford them and those potatoes will be wasted. Increasing the cost of potato supply, with - for example - extortionate energy and fuel prices means the potatoes don't get grown in the first place. This is exactly what's been happening in the UK. Literally. Not I-read-this-in-an-econ-textbook hypothetically. But for real in the stores.
- iamflimflam1 4y agoExactly this - the current inflation is not demand driven. It is supply constraints that is causing it. This means that the normal way of controlling inflation (e.g. taking money away from people so they can't spend it) is not going to work. And in many ways is probably counter productive as it is making supplying goods more difficult.