In response to Mykhaylo Borushevsky’s blog post, I strongly believe that the Russian government should not put a price cap on bread. Due to the drought that took place in some regions in Russia the price for grain has increased significantly. As a result the price of bread is increasing by 5-10%. Mykhaylo stated that one resolution to the increasing rice would be do introduce a price ceiling. If a price ceiling is implemented a shortage will be created. The demand curve for wheat is very bread is very inelastic therefore, a small reduction in quantity will result in a large price increase. The creation of price ceilings often result in black markets, rationing, sellers preference. A black market can be created if some consumers by extra bread to sell for a higher price. Rationing will take place if the government feels the need to distribute bread more equally. Lastly, sellers preference will most likely take place if producers decide to sell their limited supply to family and friends. In conclusion, I believe that the government should not insert a price ceiling on bread, due to the many negative factors that come along with that decision.
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