Price Ceiling
Governments have used setting price ceilings, although businesses have not been among the happy lot. When people spend time in lines, valuable time that would have been used to do productive work is wasted, and the whole idea of having long lines becomes costly. When a government takes action that leads to the development of long lines without making up for the lost time, the economy is at the risk of suffering a negative impact. Setting ceiling prices on bread without setting a similar ceiling on ingredients increases the number of customers while the rate of production goes low hence more costs than benefits.
The factors of supply and demand exist in a general business environment where other elements are assumed to be constant. When other factors such as government come into play, the laws of supply and demand may act differently to cause disadvantages to all the involved parties (Kaplan, 2015). When the government sets ceiling prices on bread, a crucial part of the production cycle is left out. The business people have to maintain their productivity in terms of profitability. Therefore, some hard decisions, such as laying off workers or reducing the quality of bread, may be made to cut on additional costs. If some workers are laid off, the rate of production goes below the demand and lines build up. More time is wasted by consumers waiting to be served by the reduced workers. If the producers manage to keep the production rate fixed, the demand is expected to increase with supply remaining constant. Therefore, lines still build-up, and more time is wasted. Generally, the government should consider several factors, such as before making such a decision.
In sum, production is a process that depends on several interrelated factors. A government should consider all the possible factors before deciding to set ceiling prices on products. Wrong decisions may prove to be more costly to the economy than the anticipated benefits.
References
Kaplan, S. L. (2015). The Stakes of Regulation: Perspectives on’Bread, Politics and Political Economy’Forty Years Later. Anthem Press.