Question

What is one of the major arguments AGAINST price ceilings and price floors?

The correct
allocation problems
in the market
They don't do
anything useful
They only benefit a
small fringe group
of people
DELL
They can cause illegal
trades or Black
Markets to emerge to
fill the market demand

Answer 1

One of the major arguments against price ceilings and price floors is that they can cause illegal trades or black markets to emerge to fill the market demand. When the government sets a price ceiling below the equilibrium price, it creates a shortage of the product. This shortage may cause some consumers to turn to the black market where the product is sold at a higher price. Similarly, when the government sets a price floor above the equilibrium price, it creates a surplus of the product. This surplus may cause some producers to sell the product on the black market at a lower price.