Analysis

In 2014, Venezuela implemented a price ceiling on many essential goods, including food, medicine, and household items. The government set a maximum price that retailers could charge for these goods, in an attempt to control inflation and make them more affordable for low-income households.

Evaluation

Short Run

• Cheaper for lower income families
• Sudden surge in demand caused consumers to rush and stock up on goods before they disappeared.
• Non-price rationing

Long Run

• The policy created shortages, leaving many without their basic needs.
• Led to corruption, undermining the government.
• Hyperinflation

Assumptions

• Consumers would comply, but they didn’t, leading to black markets.