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Quantity controls are restrictions set in place and enforced by governments on the amount of goods and services in a market.[1][2] The intent behind implementing such controls can stem from maintaining a clean environment to propping up the earnings of firms cozy with government officials.
Although quantity controls are routinely used by governments, most economists generally agree that most quantity controls do not benefit consumers and recommend such controls be avoided.
Another technique used by governments to affect the market for goods and services is price controls.
Economics
editMost quantity controls limit the maximum amount of a product. Since the supply is held below its natural level, prices increase. The higher prices benefit producers. However, local consumers are usually hurt, because there is less product available and, when they can purchase it, it is at a higher price.
Some economists argue that quantity controls should be considered as an alternative to taxes, which also increase the price and lower the supply.[3]
See Supply and Demand.
Examples
editAn uncommon but clear example of a quantity control is the production quota. That is, a limit on the total amount of product (or service) in a market. OPEC attempts to control the global price of oil through production quotas. Obviously, a higher price is better for OPEC's members, which are oil-producing countries. New York City and other cities put a quota on the number of taxi cabs.
The most common example of a quantity control is an import quota. This is a limit on the amount of a product that can be brought into the country. In general, this increases local prices to the benefit of local producers. Importing firms that are able to get permits to import also benefit. Local consumers are usually hurt by the lower supply and higher price.
One use of a quantity control that economists generally support is the environmental regulation known as cap-and-trade. The government creates a limit on the number of licenses to pollute. That quantity control means that the amount of pollutant permitted in the environment is fixed. The price paid for licenses will vary, based on the demand to pollute.
See Also
edit- Price controls
- Rationing, which is a quantity limit for individuals or on transactions
References
edit- ^ "Module 9: Module 9: Supply and Demand: Quantity Co... Supply and Demand: Quantity Controls" (PDF). Fairfax County Public Schools. Retrieved 2 January 2023.
- ^ Krugman, Paul; Wells, Robin; Lindahl, Solina. "Economics, 5th edition" (PDF). Macmillian Learning.
- ^ Glaeser, Edward J.; Shleifer, Andrei. "A Case for Quantity Regulation" (PDF). NBER Working Paper (8184). Retrieved 2 January 2023.