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12/29/2021

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Just kind of a question; are price controls put on the retailer or the manufacturer? Cause I imagine that if price control was just at the point of consumer, the manufacturer could still keep them high and would thus eat the retailers margins and profits... so in this case it would be less of a concern for the manufacturing supply chain than it would be retailers going out of business?

Great question Erik. Price controls usually apply at the retailer level. Whether the incidence mostly falls on the retailer or the wholesaler depends on their relative bargaining power. Since price controls usually apply to all retailers across the board, so that wholesalers do not have any alternatives (except to export), usually wholesalers also bear a lot of the incidence. So in general price controls reduce incentives to supply goods (while also increasing demand) so that you end up with a shortage of the goods targeted by price controls. This is why a vast majority of economists think price controls are a bad idea. See here for more: https://en.wikipedia.org/wiki/Price_controls

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