Using a diagram, explain what is meant by minimum and maximum prices
- A minimum price is a price set by the government above equilibrium price below which it is illegal to sell or by a commodity. It is meant to protect producers against exploitation by the consumers. When the government fixes Pmin above PC the demand falls to Q1 while the supply rises to Q2 hence this creates surplus.
- Maximum is the a price set by the government below equilibrium price above which it is illigal to sell or by a commodity. It is meant to protect customers against exploitation by the producer. When the government fixes Pmax below PC the demand falls to Q2 while the supply falls to Q1 hence this creates excess demand.
CATEGORIES Economics
TAGS Dr. Bbosa Science
