In the 2000s, Venezuelan President Hugo Chàvez instituted economic policies that caused smuggling and hoarding of food. What did Chàvez do to create this behavior, and which zone (represented by a letter) on the graph represents the result?
Chavez set a price ceiling on food. This is represented by the letter C - A price ceiling is a control or limit imposed by a government over how high a price can be charged for a product. By doing this, Hugo Chavez made a huge blunder, since it resulted in the quantity of food demanded exceeding the quantity supplied. This in turn resulted in people smuggling and hoarding food.
