09-26-2005, 12:03 AM
[size 4][green][font "Poor Richard"][cool][black][size 3]I am well aware of the obscene profits being generated by the oil companies. However, I do not think that price controls are the answer. Seems to me that price controls were implemented back in the 70’s with disastrous results. [/size][/black][/font][/green][/size][font "Poor Richard"][black][size 3]Disrupting supply and demand the determining of market prices through the dynamic interaction of supply and demand is the basic building block of economics. Consumer preferences for a product determine how much of it they will buy at any given price. Consumers will purchase more of a product as its price declines, all else being equal. Firms, in turn, decide how much they are willing to supply at different prices. In
general, if consumers appear willing to pay higher prices for
a product, then more manufacturers will try to produce the
product, will increase their production capacity, and will
conduct research to improve the product. Thus, higher
expected prices lead to an increased supply of goods. This
dynamic interaction produces an equilibrium market price;
when buyers and sellers transact freely, the price that results
causes the quantity demanded by consumers to exactly
equal the supply produced by sellers.
But when government adopts a price control, it defines
the market price of a product and forces all, or a large percentage, of transactions to take place at that price instead
of the equilibrium price set through the interaction between
supply and demand. Since supply and demand shift constantly
in response to tastes and costs, but the government price will change only after a lengthy political process, the government price will effectively never be an equilibrium price. This means that the government price will be either too high or too low.
When the price is too high, there is an excessive amountof the product for sale compared to what people want.
Personally I don’t think that they should rebuild New Orleans. It would be another disaster waiting to happen. Maybe not today or tomorrow but sometime again in the future. Mother nature doesn’t respect boundary lines, walls or levies. Here in California people build homes on the sides of cliffs using caissons to support their homes hanging on the edge. When their house collapses in an earthquake they are quick to place blame on someone else for their misfortune and want to be reimburse for their losses. I am willing to help people out in time a crisis but am not willing to buy them a house when they have been on welfare all their lives.
I guess we agree on some things and not on others. That is what is great about this country. We have the right to voice our opinion without the threat of reprisal.
By the way I do e-mail my legislator when I disagree with their views and voting stance.
Until next time, stay well my friend
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general, if consumers appear willing to pay higher prices for
a product, then more manufacturers will try to produce the
product, will increase their production capacity, and will
conduct research to improve the product. Thus, higher
expected prices lead to an increased supply of goods. This
dynamic interaction produces an equilibrium market price;
when buyers and sellers transact freely, the price that results
causes the quantity demanded by consumers to exactly
equal the supply produced by sellers.
But when government adopts a price control, it defines
the market price of a product and forces all, or a large percentage, of transactions to take place at that price instead
of the equilibrium price set through the interaction between
supply and demand. Since supply and demand shift constantly
in response to tastes and costs, but the government price will change only after a lengthy political process, the government price will effectively never be an equilibrium price. This means that the government price will be either too high or too low.
When the price is too high, there is an excessive amountof the product for sale compared to what people want.
Personally I don’t think that they should rebuild New Orleans. It would be another disaster waiting to happen. Maybe not today or tomorrow but sometime again in the future. Mother nature doesn’t respect boundary lines, walls or levies. Here in California people build homes on the sides of cliffs using caissons to support their homes hanging on the edge. When their house collapses in an earthquake they are quick to place blame on someone else for their misfortune and want to be reimburse for their losses. I am willing to help people out in time a crisis but am not willing to buy them a house when they have been on welfare all their lives.
I guess we agree on some things and not on others. That is what is great about this country. We have the right to voice our opinion without the threat of reprisal.
By the way I do e-mail my legislator when I disagree with their views and voting stance.
Until next time, stay well my friend
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[signature]