When looking at prices you will find that they are flexible

When looking at prices, you will find that they are flexible in our economy.

What would happen if the government started to control the direction of prices?

How would buyers be able to respond to these changes?

Solution

It depends on the market structure. If there is a monopoly and it restricts the other firms to enter the market where the existing firm is charging utmost then, it is not bad. But there is no need for government to intervent if the market is perfectly competitive. Price floor or ceiling makes bottom section better. It also ensures better welfare. Price is controlled at the cost of quantity.

If price falls buyers would like to demand more and vice versa, ceteris peribus.