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

It is not a good idea for the government to force the producer to produce more and give it to the poor people can't afford the equilibrium price and What happens in this scenario is that this can result in reduction of producer surplus as a result of which the profit level of the producer decreases and he will be demotivated to produce or stay in the industry and apart from that he would have less investment available for the research and development purposes which can increase the productivity in the future and this will hamper the chance of reduction of prices in the future on the whole. that is the reason why it is not a good idea for government to force the producer to produce more and give it to the poor and rather government can give the subsidy to the consumers itself and bare the rest of the cost so that everyone is benefited