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Cake day: August 1st, 2023

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  • Cleverdawny@lemm.eetoMemes@lemmy.mlInflation yaay!
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    1 year ago

    Starvation isn’t a widespread issue in either the US or the EU. We aren’t spending 80% of the typical family income on food in either location. This isn’t South Sudan or a nation similarly undeveloped, where families are scratching at subsistence farming.

    If you capped the price of bread at, say, $1 a loaf, then bakeries would want to sell for less in order for retailers to sell for that one dollar figure. Which means baking loads for a percentage of that $1, which means reducing the local price of wheat to match. In a location where the price of a loaf of bread is $2 a loaf, then they can pay more or less twice as much for wheat.

    Basic supply-demand equation. Econ 101.

    The point here is that if you break the supply-demand equation by instituting a cap on the price of bread, you’re moving the supply down while moving the demand up as more people seek to buy bread and it becomes a much less attractive product to bake and sell. Barring subsidies to producers and retailers to support the price cut - at which point, we may as well just centrally distribute bread - then there will be unfulfilled demand, since the price cannot rise enough to motivate supply to meet demand.

    Which means shortages. Very basic econs.

    A price cap moves the measurement point in that graph away from equilibrium and shifts both lines to the left. The gap in between is unfulfilled demand.