, Columnist
Italy Learns a Hard Lesson on Face Masks
The problem with fixing a very low price on face masks is that it will cause shortages, unless you boost supply.
How much?
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It takes economics students a couple of classes to understand why price caps are generally a bad idea. The Italian government has nonetheless chosen to set one for face masks — and it’s learning the lesson the hard way.
The problem with picking a price that’s artificially low is that it will cause shortages. Consumers will want to buy too many of the items, while suppliers will produce too few because of the lack of incentive. That is what’s happening in Italy after the government said surgical masks should cost 50 euro cents (54 cents), excluding VAT.