Government Price Controls

Sometimes authorities decide the market price is unfair. Price ceilings cap how high prices can go — rent control is the classic example. When rents are capped below market rate, landlords lose the incentive to maintain buildings or build new housing.

Price floors set minimums. The minimum wage stops employers from paying less than a set amount. Critics argue floors create surpluses: if the minimum wage exceeds what some workers produce, those workers can lose their jobs.

Both controls reveal the same tension. Markets set prices efficiently but sometimes produce outcomes society finds unacceptable.