alt Hacker NewsThat always seems to happen with this sort of protections. It's like when the government tries to incentivize people to buy electric cars by paying 25% of it (example from the climate bonus in Sweden, which was given for years), but what happens is that buyers actually end up paying just maybe 5% less as the car companies now can increase their prices and still sell the cars they produce while making more money.
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The electric car does illustrate what happens to prices well.. but I just want to point out that those incentives are not necessarily meant to decrease prices. The incentives are as much for EV car companies as it is for the consumer. Giving them better margins makes them motivated to keep investing in EVs and coming out with new models. It encourages them to do marketing for those EVs since they can actually get some profit from selling them.
One of the reason why EVs was going nowhere for so long was there was no incentives for the car companies since there were no prospects of increasing profits by selling EVs.
This also happens when a certain price range gets different benefits.
For example lower mortgage rates if the house costs below $X. Now houses that could sell for far lower than $X actually list close to $X.
That this would happen is evident to everybody with a minimum knowledge of economics. It’s the same reason UBI won’t work because it would make prices skyrocket.
That happened in New Zealand, where the govt. paid $5,000 for electric cars. When this subsidy expired, prices decreased by a few thousand.
If a consumer was willing to pay $20,000 for a car why would they sell it to them for less than $25,000 when the final bill to the consumer will be $20,000, with the govt. paying an extra $5,000.