Meditations and Learnings

Meditations and Learnings

Price Controls and Hoarding

Shortages occur when prices for products are prevented from reaching the levels they would in a free market. Consumers buy more of the product further exacerbating the increased panic purchasing.
During the gasoline shortages in the 1970s, motorists would keep their cars filled to the brim with gas out of fear. This meant that far more gas was in the vehicles than usual. Another example is that occupiers of accommodation which exceeds their needs won’t vacate when incentivised not to do so by rent controls.
Hoarding occurs only with those goods for which it is feasible. Consumers will not hoard fresh apples but may buy excessive amounts of toilet paper.