What is the price control in Nigeria?
Unknown to many Nigerians of our age, the law of price control that prohibits anybody to buy or sell a commodity at a price which exceeds the controlled price fixed by the government still exist.
What do you understand by price controls?
The term “price controls” refers to the legal minimum or maximum prices set for specified goods. They are usually implemented as a means of direct economic intervention to manage the affordability of certain goods and services, including rent, gasoline, and food.
How do you control price?
How to Control the Price-Level in a Free Market?
- Maximum Price Legislation: We know that the price of a product is determined by the forces of demand and supply in a free market.
- Price Control-Cum-Rationing: Fig.
- Minimum Price Legislation: The government may also fix up a minimum price for a commodity.
Why is price control required?
That is the essential role of prices: They reflect the current state of supply and demand in an economy and work as an incentive mechanism for producers to produce more when prices rise and for consumers to consume more when prices fall. A price cap also destroys any incentive to put the scarce resource to best use.
What is the justification for such price control?
Reasons for government price controls Make some goods more expensive (e.g. food to increase revenue of farmers or discourage demand for demerit goods. Make some goods cheaper (e.g. to make sure housing is affordable) To stabilise prices (e.g. prevent rapid fluctuations in the price of food)
What is the objective of price control?
The objectives of price control (minimum and maximum) are: (i) to prevent exploitation of consumers by producers. (ii) to avoid or control inflation. (iii) to help low income earners, e.g. minimum wage. (iv) to control the profits of companies (especially monopolies).
Why price controls are so uncontrollably persistent?
The ubiquity of price controls shows that economists have less influence than many people think. Price floors result in food rotting in warehouses. Ceilings lead to underinvestment, hoarding and black markets. Efforts to stabilise prices at home can increase volatility abroad.
What are the consequences of price control?
The immediate effect of this price ceiling is, thus, the emergence of excess demand or persistent shortage of the commodity. Because of the legal stipulation of price, neither buyers nor sellers dare enough to raise the price to eliminate excess demand. So, excess demand in the market would stay.
What are the effects of price control by the government?
Let us learn about the effects of price control by the government in the market. Government may find it wise to prevent rise in prices above the market equilibrium or to prevent fall in prices below the market equilibrium. Such method of intervention is called price control.
What are the methods of price control?
Government may find it wise to prevent rise in prices above the market equilibrium or to prevent fall in prices below the market equilibrium. Such method of intervention is called price control. Sometimes businessmen create an artificial scarcity of an essential commodity with the motive of raising the price of the commodity.
How are consumers exploited in the process of price control?
In the process, consumers are exploited since they are now forced to purchase commodity at a higher price. In order to protect the interest of the consumers the government imposes price ceiling or maximum price above which no one will sell the commodity.
Is a non-binding price control an economic issue?
A non-binding price control is not really an economic issue, since it does not affect the equilibrium price. If a price ceiling is set at a level that is higher than the market equilibrium, then it will not affect the price.