Why price control may fail

  • Producers may shift towards the production of commodities whose prices are not' controlled away from the price-controlled commodities.
  • New investors may avoid industries which produce commodities subjected to maximum price control.
  • The emergence of parallel or black market makes it difficult to monitor the maximum 'price in the market.
  • Lack of storage capacity may lead to failure to absorb the excess supply of the commodity in case of minimum price.
  • The shortages that arise plus the hoarding of goods . by producers/sellers may force desperate buyers to violate the Maximum price controls.
  • Lack of sufficient funds by the government to buy off the excess supply in case of minimum price.
  • Problems of bribery, corruption and favoritism may render the Maximum price control ineffective.
  • The unnecessary inconvenience caused to consumers may force them to ignore Maximum price controls.
  • It is very expensive to maintain and administer.
  • The farmers may fail to follow the minimum price due to ignorance and apathy.
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