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 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