Price Maxima and the PPM

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  • #17727

    Hi Professor Herbener,

    Reading Man, Economy, and State with Power and Market on Triangular Intervention (p. 1078), I don’t understand this sentence: “Overall price maxima are equivalent to imposing a minimum on the purchasing power of the money unit, the PPM [Purchasing Power of Money].”

    So in breaking this down, this is as far as I’ve gotten: triangular intervention (government regulating trade between individuals) can involve a price maximum, which theoretically allows consumers to purchase goods more readily than if the prices had no ceiling. But I don’t see how this equates to a price minimum of the PPM.

    Is there a simpler way I can understand this?


    The purchasing power of money is the inverse of the prices of goods. So if the government sets general maximum prices this is equivalent (since it applies to all prices) to a minimum PPM.

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