TheSchoolofAthens Posted January 7, 2015 Share Posted January 7, 2015 Hello everyone, I am reading Omnipotent Government by Mises, every page is wonderful and as a result I find myself highlighting almost entire pages sometimes haha. I am a bit confused by one small part though:"If the government, without a corresponding increase in the quantity of goods available for sale, decrees that buying and selling must be done at a lower price, and thus makes it illegal either to ask or to pay the potential market price, then this equilibrium can no longer prevail. With unchanged supply there are now potential buyers on the market, namely, those who could not afford the higher market price but are prepared to buy at the lower official rate. There are now potential buyers who cannot buy, although they are ready to pay the price fixed by the government or even a higher price." What does Mises mean in the sentence that I put in italics? I understand everything else, but does he just mean that there are lots of people willing to buy but can't buy because the supply is so low? Link to comment Share on other sites More sharing options...
shirgall Posted January 7, 2015 Share Posted January 7, 2015 Hello everyone, I am reading Omnipotent Government by Mises, every page is wonderful and as a result I find myself highlighting almost entire pages sometimes haha. I am a bit confused by one small part though: "If the government, without a corresponding increase in the quantity of goods available for sale, decrees that buying and selling must be done at a lower price, and thus makes it illegal either to ask or to pay the potential market price, then this equilibrium can no longer prevail. With unchanged supply there are now potential buyers on the market, namely, those who could not afford the higher market price but are prepared to buy at the lower official rate. There are now potential buyers who cannot buy, although they are ready to pay the price fixed by the government or even a higher price." What does Mises mean in the sentence that I put in italics? I understand everything else, but does he just mean that there are lots of people willing to buy but can't buy because the supply is so low? The key is that there is no change in supply. If you get there first, you can buy. If you get there later, it's sold out. The rest of that paragraph: e price is no longer the means of segregating those potential buyers who may buy from those who may not. A different principle of selection has come into operation. ose who come first can buy; others are too late in the field. e visible outcome of this state of things is the sight of housewives and children standing in long lines before the groceries a spectacle familiar to everybody who has visited Europe in this age of price control. If the government does not want only those to buy who come first (or who are personal friends of the salesman), while others go home empty handed, it must regulate the distribution of the stocks available. It has to introduce some kind of rationing. Link to comment Share on other sites More sharing options...
TheSchoolofAthens Posted January 7, 2015 Author Share Posted January 7, 2015 The key is that there is no change in supply. If you get there first, you can buy. If you get there later, it's sold out. The rest of that paragraph: That is what I thought he meant, thank you for the clarification and reinforcement shirgall! I do appreciate it. Link to comment Share on other sites More sharing options...
Daniel Unplugged Posted January 16, 2015 Share Posted January 16, 2015 Strictly speaking, price controls do not alter (short term) supply or demand. Supply and demand are curves on a chart. On one axis is price, on the other is quantity demanded/quantity supplied. Both of these (QD and QS) are dependent on price. In a free market QD=QS at the market price (the intersection of the 2 curves). Only when the price is forced to be something other than the market price does QD not equal QS. Hence, (unless the government fixes the price at the market price, which would be pointless) where there are price controls there will be either a glut or a shortage. Eg. Minimum wage causes unemployment. Eg. Free healthcare causes a shortage of healthcare. Eg. Free roads cause traffic jams. Eg. Free bread causes bread shortages. 1 Link to comment Share on other sites More sharing options...
QueechoFeecho Posted January 16, 2015 Share Posted January 16, 2015 Nice work, Daniel Unplugged. For serious. Link to comment Share on other sites More sharing options...
Daniel Unplugged Posted January 17, 2015 Share Posted January 17, 2015 Thanks Link to comment Share on other sites More sharing options...
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