Question

“Even though price controls fail to protect many consumers’ controls hold the promise of protecting groups that are particularly hard-pressed to meet price economies”. 1.1. In terms of the above statement, discuss the two (2) main types of price controls that can be implemented by government in your country. Substantiate your answer with the aid of diagrams. (20)

1.2. Explain the role of the National Energy Regulatory Authority in South Africa (NERSA) in terms of prices controls. (10)

Answer 1

1.ANSWER-

Price controls are applied and applied by governments to the prices that can be charged for goods and services in a market. The intent behind implementing such controls may slow inflation and the desire to maintain the affordability of goods even during shortages, or, alternatively, to ensure minimum income for providers of certain goods or living. To try to get wages. There are two primary forms of price control: a price range, the maximum price that can be charged; And a price floor, the lowest price that can be charged. A well-known example of a price ceiling is rent control, which limits rent increases. The widely used price floor is the minimum wage (wage is the price of labor). Historically, price controls have often been imposed as part of a larger income policy package, which also includes wage control and other regulatory elements.

1.price ceiling-

A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings to protect consumers from conditions that could make commodities prohibitively expensive. Such conditions can occur during periods of high inflation, in the event of an investment bubble, or in the event of monopoly ownership of a product, all of which can cause problems if imposed for a long period without controlled rationing, leading to shortages. Further problems can occur if a government sets unrealistic price ceilings, causing business failures, stock crashes, or even economic crises. In unregulated market economies, price ceilings do not exist.

While price ceilings are often imposed by governments, there are also price ceilings which are implemented by non-governmental organizations such as companies, such as the practice of resale price maintenance. With resale price maintenance, a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices (resale price maintenance), at or below a price ceiling (maximum resale price maintenance) or at or above a price floor.

Non-binding price ceiling

Pricing, quantity, and welfare effects of a binding price ceiling

2.price floor-

A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product,good, commodity, or service. A price floor must be higher than the equilibrium price in order to be effective. The equilibrium price, commonly called the "market price", is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal (in a perfectly competitive market). Governments use price floors to keep certain prices from going too low.

Two common price floors are minimum wage laws and supply management in Canadian agriculture. Other price floors include regulated US airfares prior to 1978 and minimum price per-drink laws for alcohol. While price floors are often imposed by governments, there are also price floors which are implemented by non-governmental organizations such as companies, such as the practice of resale price maintenance. With resale price maintenance, a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices (resale price maintenance), at or above a price floor (minimum resale price maintenance) or at or below a price ceiling (maximum resale price maintenance). A related government- or group-imposed intervention, which is also a price control, is the price ceiling; it sets the maximum price that can legally be charged for a good or service, with a common government-imposed example being rent control.

An ineffective, non-binding price floor, below equilibrium price

An effective, binding price floor, causing a surplus (supply exceeds demand).

2 ANSWER-

National Energy Regulator of South Africa (NERSA) was the regulatory authority that presided over the electricity supply industry (ESI) in South Africa. In November 2005, the National Energy Regulator of South Africa (NERSA) replaced the NER.

NERSA is responsible for regulating the price of pipeline gas and petroleum, reducing monopoly in the energy sector, improving competition and boosting economic growth.

NERSA, established in terms of the National Energy Regulator Act of 2004, is mandated to regulate South Africa's electricity, piped gas and petroleum industries and to collect levies from people holding title to gas and petroleum.

The idea behind a single regulator for the three industries was to improve efficiency and cut costs. It is also expected to boost private sector participation in the energy sector.

As an economic regulator, NERSA will ensure a level playing field and prevent abuse by monopolies. While legislation exists to govern the gas and petroleum pipeline industries, they were previously not subject to control by a regulatory body.

The regulator is important as it will encourage greater access and competition in a sector dominated by single major players: Eskom in electricity, Petronet in petroleum and Sasol in gas.


NERSA's functions include issuing licences, setting and approving tariffs and charges, mediating disputes, gathering information pertaining to gas and petroleum pipelines, and promoting the optimal use of gas resources.