Investopedia

Continue to Site »

Price Controls

Filed Under » ,
Dictionary Says

Definition of 'Price Controls'

Government mandated minimum or maximum prices that can be charged for specified goods. Governments sometimes implement price controls when prices on essential items, such as food or oil, are rising rapidly.

Also known as "price floors" or "price celings".
Investopedia Says

Investopedia explains 'Price Controls'

History has shown that price controls are, at best, effective only on a very short-term basis. Over the long term, they can lead to shortages, rationing, quality deterioration and black markets.

Consider the price controls placed by the Nixon and Carter administrations on gasoline, which led to long lines at the pump and restrictions on how much gas could be purchased during the 1970s.





Rent control provides another example of the ineffectiveness of price controls. Rent controls, such as those used in New York City, are intended to keep housing prices affordable. Instead, they decrease the supply of rental housing and thereby raise prices of existing rental housing. In a vicious cycle, rent controls discourage new landlords from entering the market and cause existing ones to leave, creating a supply of housing that is less than the free market would allow and causing further upward pressure on housing rental prices. Rent controls also reduce the financial incentives for landlords to maintain and improve their properties, leading to lower quality housing.

Articles Of Interest

  1.

    Why The Consumer Price Index Is Controversial

    Find out why economists are torn about how to calculate inflation.

  2. 22 Ways To Fight Rising Food Prices

    As food costs rise it can be difficult to stay on budget. Here are some handy tips to spend less at the till.

  3. The Consumer Price Index: A Friend To Investors

    As a measure of inflation, this index can help you make key financial decisions.

  4. What Determines Oil Prices?

    Changes in the price of oil aren't arbitrary. Read on to find out what moves them and why.

  5. Why You Can't Influence Gas Prices

    Don't believe the water-cooler talk. Big oil companies aren't to blame for high prices.

  6. What Determines Gas Prices?

    Gas prices are influenced by more than supply and demand. Find out what determines the price you pay at the pump.

  7. How Does Crude Oil Affect Gas Prices?

    Find out how this commodity's fluctuating price affects more than just how much you pay at the pump.

  8. Austerity: When The Government Tightens Its Belt

    When a government tightens its belt in tough economic times the entire nation feels the squeeze.

  9. Why It's Important To Regulate Foreign Exchange

    In an increasingly globalized economy, the significance of the foreign exchange marketplace cannot be underestimated.

  10. Zynga's New Venture Is A Major Gamble

    The current state of online gambling in the U.S. makes Zynga’s move into the market a very risky one.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  2. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  3. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  4. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  5. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  6. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.
Trading Center
Array ( )
taggroups(for debug only):
Array ( [0] => Economy And Economics )