A full free economy however has never existed. Total price deregulation is simply not possible even in a capitalist government. To impose restrictions on prices is an aspect of a mixed economy. Sometimes governments found it necessary to limit activities of certain market actors to protect the interest of the consumers.

Supply and demand forces are constantly at work in a free market. The quantity of the product supplied is determined by the quantity demanded by the consumer. The quantity demanded by consumer, in turn, is determined by the product's price.

The law of supply is directly proportional to price of the product which means the higher the price, the more supply is needed. The law of demand is inversely proportional to the demand and price which means, the higher the price the less demand.

For the supply and demand curve to be steady, equilibrium in the marketplace must be maintained. Equilibrium means price and quantity will remain where it began. For instance, if the price of a product is below equilibrium, the consumers demand increased sharply. There is an abrupt increase in demand which is more than what the producers are capable of supplying. Shortage of the product, in this instance the soup, occurs. The shortage will then cause the product's price to go up quickly. Producers are forced to increase the price until it is able to produce enough products to meet the consumers' rising demands or the equilibrium is once again reached.

The opposite is also true. If the good is sold above equilibrium, then demand lowers and the producers have to lower the price to eliminate excess inventory until the equilibrium of demand and supply is reached.

In this case, if a price shock occurs drastically changing the supply and demand curves then most probably the desire or demand of the product from those with the purchasing power is greater than the supply or production. Therefore there are more consumers with the desire and capacity to buy chicken soup but the supply is limited or not enough to meet those demands hence the very dramatic increase in price occurs.

A price shock in a market economy will lead to a temporary reduce of the degree of output and consequent increase of the price. Adjustments forces will normally bring back equilibrium by bringing the output rate and the price level back to their former levels.

Now suppose that Governor Davis of California decides that Goldilocks is paying too much for chicken soup and adequate nutrition is a necessity (the reason she is going about eating the soup of the three bears). The current market price of chicken soup is $1.00 per 10 oz. can; the Governor announces a price cap of $0.75 per 10 oz. can. In the usual supply and demand case, this move will greatly affect the equilibrium.

Since the price of the chicken soup is now lower and the demand is still much higher than the actual amount producers are prepared to supply then further shortage of the chicken soup could occur. This could actually be a detriment instead of a solution to the price shock occurrence. The increase to the aggregate demand coupled with the dwindling supply could lead to permanent changes in the price of the chicken soup.

If regulation of chicken soup price is to be imposed then regulation of the amount of chicken soup each household can buy should be imposed too in order to equal demand with supply.

The impact of the household choice in this situation is critical to the goal of attaining market equilibrium of supply and demand. Households may opt to forego buying the chicken soap altogether. They might protest the $1 price as excessive and choose to spend their money on similar but lesser expensive products such as chicken noodles or asparagus soup. Or, more economically, they can make their own chicken soup from scratch. If the suppliers cannot meet the demand for the time being, then the consumers might as well temporarily refrain from buying chicken soup until such time that the original selling price is back.

There are great elasticities of demand and supply enjoyed in the wholesale electric power market. Wholesale electric power market monopolizes the supply of electricity. That means they do not have competitors that could affect their product pricing. It is also difficult if not virtually impossible for consumers to stop or even lessen their demand for electricity. The sales volume therefore will not likely lower as the demand will continue to be the same despite the higher price thus effectively increasing their revenues. This offers the wholesale electric power market a lot of power over product pricing. It is not unusual to find situations where wholesale electricity producers will deliberately hold power off the market to force consumers to pay prices for electricity thus increasing their profits even higher.

Governor Gray Davis` demand for the federal government to impose price caps on wholesale electricity to be able to cope with the rising electricity charges and afford to supply all essential services is reasonable. The temporary price caps at wholesale could effectively soften the increasing fiscal burden on the state government until new plants come on line. The price caps could be set at a level that would yield a strong return to the industry`s investments. Wholesale price caps on electricity could be the best option for the government. In this instance, price regulation could work favorably to attain equilibrium of demand and supply.