Question

2-Consider very specific products. that you typically purchase.

a) When should the government regulate prices in specific product markets and when should we let supply & demand do their job? (Don't get bogged down in "big issues" such as income distribution or product safety or macro issues)

Think of a product like skirts or blouses. Should the government give out free skirts or blouses to all, or should they be sold in stores? Should the price be kept down by the government, so everyone can afford them? Be sure to justify your answer.

b) Consider the product called 'education.' Why is public school on the elementary and high school level "free" but you need to pay (use supply and demand) for college?.

Hint: Consider/cite specific examples. For example, do we use supply and demand within the family unit? Regulation of housing/construction markets? School vouchers?

Answer 1

A.Government should regulate a product when the it is a necessity and the price is too high(eg-life saving drugs)

Supply and demand should be let to work on its own for goods which have elastic demand(eg-luxuries)

B.Government should keep the price low for necessary clothes so that the poor section of the society can afford them.However,for high end brands like D&G,the government should not keep the prices low.

C.Public and high schools are free because the government wants everyone to have at least some basic education and attain a desired level of literacy.But college is not free because it is a luxury.People pursue higher education for better job opportunities.