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During the spread of COVID-19, the price of surgical masks skyrocketed. Some people in Hong Kong...

During the spread of COVID-19, the price of surgical masks skyrocketed. Some people in Hong Kong suggested the government to impose a price ceiling on surgical masks. Explain, in economic sense, why this might not be a good idea in handling the needs of Hong Kong people.

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Answer) In case of a price ceiling, the maximum price that can be charged for a good or service is fixed by the government. Such a price could help to regulate the price of mask in the market. Thereby minimizing the possibility of inflated prices quoted by retailers.

However the practice of price cieling is only viable if the data of demand and supply of mask is accurately known. Otherwise if price cieling becomes binding or below the Equilibrium prices. Then there would be huge shortage in the market. Creating new avenues for black marketing, hoarding, and quoting arbitrary prices.

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