Distort the Allocation

  • High taxes can distort Market price signals and reduce work incentives
  • Land regulations can increase production costs and therefore reduce the profitability and supply of some goods and services
  • Public sector organizations may be inefficient and produce poor quality goods because they are not profit-incentive
  • corruption

Price controls

[!def] Price controls
A restriction governing a price a market can sell product at

Maximum price

[!def] Maximum price
A product cannot be sold/bought for a price higher than the specified level

cause Excess demand / Shortage

  • consumers can benefit from the lower price

Salary Cap

[!def] Salary Cap
A limit placed on the total amount that a firm can pay out to its employees

  • Create financial stability
  • control spiralling club costs
  • help increase competition
  • Disadvantage: ability to attract and retain the top players falls

Minimum price

[!def] Minimum price
A product cannot be sold/bought for a price lower than the specified level

causes Excess supply / surplus