Back to top

Key Facts

Price Controls: Still a Bad Idea
Creation of Shortages
A price ceiling below the free-market price causes buyers to demand more than they wanted at the free-market price and sellers to sell less than they wanted to sell at the free-market price. The result: a shortage.
Why Prices Might Rise
During the COVID-19 pandemic, prices of used cars skyrocketed. But that wasn’t due to greedy car owners. A computer chip shortage limited the supply of new cars, so more drivers chose to keep their used cars instead. Reduced supply meant higher prices.
Time Is Wasted
Implementing price controls might appear to reduce prices, but under such restrictions, for example, fewer people would sell their cars, and cars for sale would sell instantly. The result would be that many more people wouldn’t be able to buy a car at all.