The demand and supply model shows how people and firms will react to the incentives provided government laws to control prices, in ways that will often lead to undesirable consequences. Laws that government enacts to regulate prices are called Price controls . The imposition of a price floor or a price ceiling will prevent a market from adjusting to its equilibrium price and quantity, and thus will create an inefficient outcome. In this chapter I discuss two cases rent ceiling and winimum Wage control.
