Project log entry #2
Why do price ceilings cause shortages? What is a black market and why might it alleviate shortages?
When the price ceilings have been set up, it will increase the demand, but at the same time the supply stay the same; thus at one point, the demand will exceed the supply. The example of gas-price control that we did in the class best illustrates the statement. A black market is a market selling illegal or scarce products. When the shortage occurs, the people who has the good will sell them to those who need them and run out of them. This alleviates the shortage by allowing some good-less buyers to obtain that good they need.
