<p><a href="https://i.sstatic.net/9zjfJ.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/9zjfJ.jpg" alt="enter image description here"></a><br>
<sub>(source: <a href="http://www.dineshbakshi.com/images/economics_diagrams/price-control-1.jpg" rel="nofollow noreferrer">dineshbakshi.com</a>)</sub>  </p>

<p>As you can see in the graph, price controls policies create excess demand, therefore you will end up with shortage or you will import more bananas.</p>

<p>I'm not a banana expert, but I assume bananas are pretty inelastic. Also, banana supply is inelastic in the short run (they have already planted bananas), therefore the excess demand will be less than the graph shows.</p>

<p>Whatever the case, price control policies generate deadweight loss and it depends on the elasticities who loses more (consumer vs supplier). This market is no longer efficient and that impacts the welfare negatively.</p>

CC BY-SA 4.0
2017-02-05T20:02:07.683Z
2019-02-20T16:30:16.127Z
2019-02-20T16:30:16.127Z
Commissar Vasili Karlovic
<p><em>Diclaimer: This is not a homework question. Every word of it was written originally by me.</em></p>

<h3>Hypothetical Scenario</h3>

<p>Alice is shopping for groceries and thinks the current price of bananas at <code>$</code>0.79/lb is a little too high for her budget. Alice calls Bob, her local legislator, and asks Bob to sponsor a bill that regulates the price of bananas to cost no more than $0.50/lb in the grocery store so Alice can afford to buy them.</p>

<p>Bob thinks this is a great idea because it will help more people (especially the poor and those on a fixed income) afford to buy more bananas — a very nutritious food.</p>

<h3>Question</h3>

<p>Is this bill to regulate the price of bananas really a good idea? What would be the impact of such a law if it were to pass?</p>

CC BY-SA 3.0
2017-02-04T20:03:56.187Z
This seems to be a homework question. We pass on that. Moreover, it has nothing to do with actual bananas. So the title is misleading.
Bayesian
CC BY-SA 3.0
2017-02-04T20:09:57.710Z
@Bayesian: The title reflects the question and the hypothetical scenario postulated therein. I can not see any harm in including the word "bananas" in the title to a question that contains a hypothetical scenario involving bananas.
FreeMarketUnicorn
CC BY-SA 3.0
2017-02-04T20:13:30.377Z
@Bayesian: I am flattered you think so much of my question writing skills, but this is not a homework question. I have a minor in economics and graduated many, many years ago. The purpose of this question is to understand how to simplify many of my discussions with others and explain tbasic economic principles to lay people in a way consistent with modern thought and study of economics. Every word of this question is original and came from me, personally. I guarantee it.
FreeMarketUnicorn
CC BY-SA 3.0
2017-02-04T20:31:29.833Z
ok, well, in that case I am sorry. I assumed it because it is worded like a homework question - and I felt like there are implicit assumptions missing (that may come from the related lecture). 
This question is hard to answer without specifying the setting: If the market is competitive, $p=mc$ and reducing the price exogenously would mean no goods are offered (it leads to losses). The market could be monopolistic and a price reduction could lead to welfare gains. You need to specify more, or is this question about the actual market for bananas and you are after an empirical analysis?
Bayesian
CC BY-SA 3.0
2017-02-05T07:51:28.647Z
The problem is under-specified - there's insufficient information to provide  a meaningful answer .As such, it is unclear what you are asking.
410 gone
CC BY-SA 3.0
2017-02-05T07:59:30.003Z
@EnergyNumbers: The question is about price controls. Do they work or not? What more information do you need in order to be able to answer that question meaningfully?
FreeMarketUnicorn
CC BY-SA 3.0
2017-02-05T10:53:02.397Z
If you want to ask "do price controls work", then ask that, once you've checked for duplicates. Show us what research effort you've made so far. And provide context that illustrates the real-world problem that you are trying to solve. "Does this real-world tool X work" is almost always going to be answered with "It depends; in some circumstances it works quite well; in others not so well". And that answer would be no use to anyone.
410 gone
CC BY-SA 4.0
2020-03-02T14:30:36.633Z
It's actually funny how obvious it is, that you don't really care about bananas, and you just need a question to point to whenever someone mentions price controls. Even if the thing being price-controlled is totally different to bananas. Have you sent this link to the Berlin senate yet?
Criticize SE actions means ban
<pricing><regulation>
Should the government regulate the price of bananas?
FreeMarketUnicorn
# Should the government regulate the price of bananas?

(Asked by: username_0 on 2017-02-04)

*Diclaimer: This is not a homework question. Every word of it was written originally by me.*

### Hypothetical Scenario

Alice is shopping for groceries and thinks the current price of bananas at `$`0.79/lb is a little too high for her budget. Alice calls Bob, her local legislator, and asks Bob to sponsor a bill that regulates the price of bananas to cost no more than $0.50/lb in the grocery store so Alice can afford to buy them.

Bob thinks this is a great idea because it will help more people (especially the poor and those on a fixed income) afford to buy more bananas — a very nutritious food.

### Question

Is this bill to regulate the price of bananas really a good idea? What would be the impact of such a law if it were to pass?

**Tags:** pricing, regulation

> **Comments:**
> **username_1**: This seems to be a homework question. We pass on that. Moreover, it has nothing to do with actual bananas. So the title is misleading.  
> **username_0**: @username_1: The title reflects the question and the hypothetical scenario postulated therein. I can not see any harm in including the word "bananas" in the title to a question that contains a hypothetical scenario involving bananas.  
> **username_0**: @username_1: I am flattered you think so much of my question writing skills, but this is not a homework question. I have a minor in economics and graduated many, many years ago. The purpose of this question is to understand how to simplify many of my discussions with others and explain tbasic economic principles to lay people in a way consistent with modern thought and study of economics. Every word of this question is original and came from me, personally. I guarantee it.  
> **username_1**: ok, well, in that case I am sorry. I assumed it because it is worded like a homework question - and I felt like there are implicit assumptions missing (that may come from the related lecture).  This question is hard to answer without specifying the setting: If the market is competitive, $p=mc$ and reducing the price exogenously would mean no goods are offered (it leads to losses). The market could be monopolistic and a price reduction could lead to welfare gains. You need to specify more, or is this question about the actual market for bananas and you are after an empirical analysis?  
> **username_2**: The problem is under-specified - there's insufficient information to provide  a meaningful answer .As such, it is unclear what you are asking.  
> **username_0**: @EnergyNumbers: The question is about price controls. Do they work or not? What more information do you need in order to be able to answer that question meaningfully?  
> **username_2**: If you want to ask "do price controls work", then ask that, once you've checked for duplicates. Show us what research effort you've made so far. And provide context that illustrates the real-world problem that you are trying to solve. "Does this real-world tool X work" is almost always going to be answered with "It depends; in some circumstances it works quite well; in others not so well". And that answer would be no use to anyone.  
> **username_3**: It's actually funny how obvious it is, that you don't really care about bananas, and you just need a question to point to whenever someone mentions price controls. Even if the thing being price-controlled is totally different to bananas. Have you sent this link to the Berlin senate yet?  

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## 1 answers

### Answer by username_4 on 2017-02-05. Score: 3

[![enter image description here](https://i.sstatic.net/9zjfJ.jpg)](https://i.sstatic.net/9zjfJ.jpg)  
(source: [dineshbakshi.com](http://www.dineshbakshi.com/images/economics_diagrams/price-control-1.jpg))

As you can see in the graph, price controls policies create excess demand, therefore you will end up with shortage or you will import more bananas.

I'm not a banana expert, but I assume bananas are pretty inelastic. Also, banana supply is inelastic in the short run (they have already planted bananas), therefore the excess demand will be less than the graph shows.

Whatever the case, price control policies generate deadweight loss and it depends on the elasticities who loses more (consumer vs supplier). This market is no longer efficient and that impacts the welfare negatively.


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