Question

If people can't afford the equilibrium price for a good, would it be a good idea for the government to force the producer to produce it and give it to the poor people? Why or why not?

Answer 1

The government cannot force the producer to produce it and give it to the poor people but the government can set a price ceiling. A price ceiling is a price set by the government for a good which prevents the price from rising above a certain level. This price is set below the equilibrium price in order to benefit the consumers. Government usually set a price ceiling to prevent the interest of the consumers so that the producers cannot manipulate witht the prices in the market. The price ceiling is usually set at the price which isn't below the producers manufacturing cost. So in this way there is a win-win situation for both parties as consumers can get the good at a lower price and because of the decrease in price of that good the quantity demanded increases, thus the profit margins for the producers might increase along.