The article about Venezuela facing food shortages relates to this chapter well. It verifies the economic theory that price ceilings can create shortages. When a price ceiling is set, prices aren't allowed to rise like they would in a free market. The demand is present, but prices are kept artificially low and it creates a shortage of goods.
Consumers also end up paying with their time. A restaurant worker, Nery Reyes, is quoted in the article saying "I'm wasting my day here standing in line to buy one chicken and some rice." With the time she stood in line, she probably could have made more than enough money working at the restaurant to pay the free-market price for those items.
We were also instructed to consider Hurrican Katrina and high prices speculators set for bottled water. If price controls would have been imposed, there would have been a shortage. The lucky few who would have been first in line would have been able to purchase water, but what about the rest? Dr. Edward Glaeser said, "In a free market system, goods go to the people who value them most; in a price-controlled system, goods go to whoever is lucky enough to get them." Suppliers raising prices when they think the consumers are willing to pay more isn't necessarily greedy. It curbs overconsumption by creating incentives and forcing people to determine what they really need.
"Price 'gougers' save lives" - Milton Friedman
Sources:
http://www.nytimes.com/2012/04/21/world/americas/venezuela-faces-shortages-in-grocery-staples.html?_r=1
http://www.slate.com/articles/business/moneybox/2012/10/sandy_price_gouging_anti_gouging_laws_make_natural_disasters_worse.html
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