Final answer:
Price controls are governmental laws to regulate market prices, which can lead to market disequilibria such as shortages or surpluses. Price ceilings keep prices low for consumers, and price floors ensure producers earn a minimum amount, but both can interfere with natural demand and supply adjustments. The correct answer is O controls persuasion and positive.
Step-by-step explanation:
Price controls are government regulations that set the maximum or minimum prices that can be charged for specific goods and services, with the intention of maintaining affordability or ensuring a minimum income for producers. There are two primary types of price controls: price ceilings and price floors.
A price ceiling is set below the equilibrium price and is designed to prevent prices from rising too high, which can help consumers but may lead to shortages if producers aren't willing to sell at lower prices. Conversely, a price floor is set above the equilibrium price, ensuring producers receive a certain income, but this can result in a surplus if consumers aren't willing to buy at higher prices.
Demand and supply act as a social adjustment mechanism in market economies. Prices are flexible to adjust the quantity demanded and supplied to reach equilibrium. When price controls are implemented, they can disrupt this balance, leading to unintended consequences such as shortages or surpluses.
Just like in the proverb about killing the messenger, intervening in the natural price mechanism can deprive the market of the vital information prices provide about supply and demand.