If the price fixed by the market forces are not satisfactory, the government may control the...

If the price fixed by the market forces are not satisfactory, the government may control the price by increasing or decreasing the price determined by the market. What do you think the objectives of this kind of a price control by government? Discuss any five objectives in detail. [Answer in 150 – 200 words]

microeconmics

Solutions

Expert Solution

Government can do one of the following things to control the price determined by the market:

1. Price floor – It refers to fixing the minimum price that can be charged for a commodity.

2. Price Ceiling- It refers to fixing the minimum price that can be charged for a commodity.

The objectives of this kind of a price control by government are as follows:

1. The Equity or Distributive Justice – Price control measures aim to protect the citizens of a country by shielding them against steep inflation and abnormal price fluctuations.

2. For maintaining quality of goods and services- If the amount received by the producer is fair to him/her, he/she will ensure that good quality products are delivered to the customers in future too.

3. For preventing monopolistic, restrictive and unfair trade practices qhich cause immense increase in prices for the customers.

4. To ensure smooth supply of resources by providing a fair price to the producers.

5. To control inflation. Keeping a check on the maximum price that can be charged to the customers, inflation can be kepr under control.

Rahul Sunny answered 1 year ago

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