Question

Discuss the reasons why governments sometimes choose to control prices.

Answer 1

ANSWER:

The control on prices is government-mandated legal maximum or minimum prices set for certain goods, often implemented as a means of direct economic intervention to manage the affordability of specific goods. The main reasons for implementing such controls can is to maintain affordability of essential goods even during shortages such as energy or food products, and to slow inflation, or, alternatively, to ensure a minimum income for providers of specific goods or a minimum wage. There are two main forms of price control, a price floor, the minimum price that can be charged, and price ceilings the maximum price that can be charged. The price control is only effective measures on an extremely short-term basis. Over the long duration, such controls inevitably lead to problems such as shortages, rationing, and quality deterioration.