How does this relate to the theories from the chapter?
This relates to the theories from the chapter because the Chavez government imposed a binding price ceiling on competitive markets, which caused a shortage of goods because at this price which was below equilibrium, the quantity demanded was greater than quantity supplied.
Now consider a different case. After Hurricane Katrina speculators brought in bottled water, but charged quite a lot for it. What might have happened had price controls been imposed? Where does the concept of fairness fit into this theory?
If price controls had been imposed, according to theory, there wouldn’t have been as much brought into the cities that needed it because people wouldn’t have had the incentives to bring it in, meaning quantity supplied would be less than quantity demanded, like discussed above.
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