ABSTRACT
In the previous chapter some of the difficulties were dis cussed which arise on the supply side when maximum prices are imposed. Difficulties as great, however, will be encountered on the demand side. When a maximum price is fixed by the Government it is, of course, as a rule lower and sometimes considerably lower, than the price previously ruling. Now at the lower price a greater quantity of the commodity will be demanded; how much greater depends on the difference between the free price and the Government price and the elasticity of the demand for the commodity. Referring to diagram on page 28, if the free price were 3s., then 320 units would be sold in a given period, say in a day. But at 2s. the demand would be 500 units. If then the maximum price is fixed at 2s., the demand will be raised from 320 to 500, but the mere fixing of the price at 2s. will have done nothing to increase the supply; indeed, as shown in the previous chapter, the effect will probably be to still further reduce it. The shopkeepers, therefore, were faced with the difficulty that they had not enough of the regulated commodities to meet the wishes of their customers. Some of them met the difficulty by evading the order, generally by means of a conditional sale (i.e., only selling to those who bought an unregulated commodity at a high price). Some would only sell to large customers; others, more honest and conscientious, would only sell to their regular customers and tried to divide the limited supply among these in a fair manner. All these methods were declared illegal and heavily punishable. Therefore the only possible method became the primitive one of “ first come, first
served ” ; with the result that late-comers found nothing left. The inevitable result was the queue system, with all the hardship and discontent which it entailed. In fact, as all trained economists had foreseen, the necessary corollary of maximum prices is a system of rationing. It is possible, however, that the public would not have submitted to this had it not experienced the unpleasant ness of queues.
