Economics: Price Control Policy
Economics: Price Control Policy
WEEK TOPICS
1 **PRICE CONTROL
LEGISLATION /POLICY
2 **RATION AND HOARDING
3 PRODUCTION POSSIBILITY
CURVE
4 COST CONCEPT
5 REVENUE CONCEPT
6 ECONOMIC SYSTEMS
7 MID TERM
8 LABOUR MARKET
9 SUPPLY AND DEMAND FOR
LABOUR
10 MARKET STRUCTURE
11 INDUSTRIES IN NIGERIA
12 LOCATION OF INDUSTRY
REVISION AND EXAMINATION
Price control is defined as a process government or its agency fixes the prices of
essential commodities . The government uses the instrument of the law to fix the
prices of the certain commodities through the office of the price control board
Price control is divided into two, the maximum price control and minimum price
control.
1. Maximum price control: This is when the price of goods is fixed below the
equilibrium market price. It is the highest price by law that goods and
service can be sold, seller can sell below the price but cannot above it. The
aim of maximum price is to protect consumers and the low income
earners from exploitation of the producers, especially during rising
price(inflation).However ,the price being fixed below price equilibrium
could leads to demand of goods and services to be greater than supply.
The effect of this could be the introduction of black market. The graph
below explains maximum price control. Maximum price control is also
known as price ceiling, on the other hand, is a maximum price set for
a good or service, meaning that the market price cannot exceed this
level
2.Minimum price control :This is when prices of specified goods and services are
fixed above the equilibrium price .It is the lowest price fixed by law that the
specified goods and services can be sold or bought ,it can be above but cannot go
below it . The aim is to protect producers (especially agricultural producers) from
fluctuation of brought about bad harvest or weather . Minimum price control is
known as price floor (is a minimum price that is set for a good or service,
meaning that the market price cannot go below the level).