EconomicsNotes

  Energy prices are a basic cost. They are semi-variable for most businesses, in that a basic fixed cost of energy is generated by the need to heat or to cool buildings, and to carry out operations. In addition, a marginal cost exists for producers in terms of the energy required to increase production. Finally, energy costs are also built into the transport of raw materials, and the distribution of finished goods and services, which again contribute to marginal costs. If global energy prices are rising wholesale, it is unlikely that businesses or individuals will be able to lower the retail cost of energy by switching between suppliers. Energy storage is expensive and encourages economies of scale and oligopolies, in which consumer choice is limited at times of higher wholesale prices. When energy prices are low, smaller companies can purchase wholesale and make money at the margin undercutting bigger companies as storage costs will be a burden for the latter and the small compa...

  Evaluating the likely micro- and macro-economic effects of price controls. Price controls are legal restrictions on the maximum or minimum prices that can be charged for a good. They are imposed by governments either in for the long-term  because of structural problems in a market or political choices, or as short-term provisions in an emergency. They work by making it illegal for traders and consumers to buy or sell goods outside of the set price. If a government imposes a maximum price above the market equilibrium, or a minimum price below the market equilibrium, this should not have any effect on the market equilibrium. Instead, a maximum price for rent, for instance, set above the equilibrium, would in theory restrain bad landlords from exploiting renters. Those economists who believe in free markets would say that landlords should be allowed to practise first degree price discrimination and to charge whatever the market will bear (whatever someone is prepared to...