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If producers are inclined to pass savings onto consumers, why did Europe mess with price controls on bread?

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If producers are inclined to pass savings onto consumers, why did Europe mess with price controls on bread?

Postby hurst » Mon Jul 30, 2012 10:48 am

European countries such as France subsidized grain to make the stuff more affordable to their people. What is interesting is that they didn't stop there. Let's use 18th century France as an example;
In addition to to subsidizing grain;
1)French bakers were required to sell bread at a price no higher than allowed by the State, a price control.
2)If a French baker ran out of bread, he had to sell the next most expensive item available at the State determined price of bread(hence, let them eat cake)
3)Attempts were even made to determine what legally constituted bread. (cue sawdust in bread jokes)

Many of these laws remain on the books in France and European countries, albeit in modified form.
However, the question remains. If it is in the nature of producers to pass all savings onto the consumer and not pocket extra earnings, why did France and others pass such laws to ensure that grain subsidies were passed onto the people in the form of cheaper bread?
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If producers are inclined to pass savings onto consumers, why did Europe mess with price controls on bread?

Postby gabrielo19 » Mon Jul 30, 2012 10:52 am

They know what happens when the masses become hungry. A Tale of Two Cities, happens.
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If producers are inclined to pass savings onto consumers, why did Europe mess with price controls on bread?

Postby cruz50 » Mon Jul 30, 2012 11:11 am

Those stupid European laws are the REASON our ancestors left. Now the stupid laws have followed us.
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If producers are inclined to pass savings onto consumers, why did Europe mess with price controls on bread?

Postby calvert » Mon Jul 30, 2012 11:19 am

1. All companies seek to maximise profit. Therefore, producers (or sellers or companies) ARE NOT INCLINED to pass savings to consumers. With more producers in the market, there would be (price) competition and therefore those who set prices at highest or maximum will ultimately be weeded out.

2. Many countries have anti-trust laws to prevent producers (or companies) to collude on pricing or to merge into a single entity like monopoly so that such entities could set prices to maximise profits.

3. Producers (or companies) never view themselves as charitable organisations and therefore have no obligation (absolutely no obligation) to pass savings onto consumers.
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