Government 1B Week 10 Price Controls and the Origin of Money

Question 1: What problems do price controls cause, and what are the benefits of letting prices adjust without government interference?

The obvious economic issue that arises from forced price controls are production shortages. When price is legally forced down people that would otherwise not buy a product flock to it. It sells like hotcakes, but the producer only makes half of his usual salary. Hes unable to keep up with the demand for his product, and hes not making enough money to upgrade any of his equipment. So there are shortages. The benefits of letting prices adjust naturally create just the opposite, the economy flourishes because prices are aloud to be truthful with consumers. If the producer isn’t making enough to keep up with demand he raises his prices and is once again back on track. Since hes now raised his prices hes able to afford upgrades, and his ability to produce quickly intensifies. Once hes upgraded his equipment he can lower prices again, and now there’s twice as much being produced for a lower price. In times of normal economics (times when there aren’t any natural disasters, urgent wars, ect.) prices need to be aloud to grow and evolve naturally. Trying to evolve the economy by merely passing a law is going to have the opposite result that the government agent intended.

Question 2: What is the origin of money?

Originally we partook in commerce through barter, for example I might trade some wheat for some wool or something of the like. But using this method can sometimes get complicated, if you’re trying to trade a shirt for a hat you have to find someone who wants to make that specific of a trade. The specificality associated with this commerce method eventually wore people down and they began searching for a material that can be seen as universally valuable. We settled with gold, since it has value both in its appearance and ability to be crafted into different valuable things. But carrying around chunks of gold is pretty inconvenient

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s