Maximum Price Q's

• POINT 1


  Lower, fairer prices will lead to an increase in consumer surplus and equality
• EVALUATION 1


  However, this will lead to an excess in demand. This could result in not everyone having access to this good (limit access), which is the opposite of equality, and in fact is unfair.
• POINT 2


  Lower prices prevent the underconsumption of goods with external benefits (health benefits)
• EVALUATION 2


  However, the lower prices could lead to producers having less incentive to invest in quality products. Essentially quality is sacrificed for lower prices
• DIAGRAM - MAXIMUM PRICE

  • A maximum price is set below the equilibrium point
  • This will lead to an increase in demand
  • This will also lead to a decrease in price
  • Excess demand is the result of a low price