system
Given the following post, respond as if you're commenting on Reddit:
human
What would happen if the government legislated price caps on the essentials (food, water, fuel) at their current levels, strictly going up 2% per year? (effectively legislating the inflation rate for these products)
gpt
If costs to produce those goods grew too rapidly, businesses would stop producing them at the needed quantities, causing a shortage. If there is a shortage in goods, by definition, people are willing to pay more to buy that good. If there is no price cap, companies will then produce more to take advantage of those higher prices. The influx of production wipes out the shortage and lowers prices, keeping things in equilibrium. 

If prices are capped, the market can’t mitigate the shortage by raising prices and inspiring higher production rates. 

Capping prices would A) create a shortage or B) require the government to subsidize production, unless the cap is high enough that companies can profitably provide the needed amount of goods.