Race for... Food???
The Government of Venezuela removes price ceilings from yummy food...
October 2016
What is Price Ceiling?
Necessary items, such as food, sometimes become very expensive for consumers with low income. To ensure that every person gets the adequate amount of items (in this case, food), a government sets up a "Price Ceiling", which is the maximum price for which sellers can sell that good.
Sometimes price ceiling can have effects which are totally undesirable to everyone living in that region. This example of what happens in Venezuela will show what kinds of problems can arise due to unforeseen circumstances.
Recession in Venezuela led to a lack of food in the shops. Since the supply of the food items was low, you would expect the price to rise, right??
Not when you have Price Ceilings!
Since there was a price ceiling in the Venezuelan economy for food, the price didn't increase. As a result, all the consumers RUSHED to get all the food since it was very scarce. Shops were completely empty within HOURS ⏰after they become available. Many goods were then resold on the black market at higher prices. The government had to act....
AND THEY DID!!!!
The government removed the price ceiling and the prices for food went up again. That brought back the yummy foods back to the shops... problem fixed, right??
Partially...
see, the prices, which were determined by the market system, were so high that a country like Venezuela had the same food prices as the US!
The government then forced the food companies to distribute 50% of their produce to the state at fixed prices. This food was distributed to the extremely poor and needy people. However, the problem of Venezuelan recession still remains.😓😣😐
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