126.96.36.199 Government Intervention - Maximum Prices (AQA A-Level Economics Teaching PowerPoint)
Last updated 2 Nov 2023
This AQA Economics teaching powerpoint covers aspects of Government Intervention - Maximum Prices
Maximum prices, or price ceilings, are another form of government intervention in markets, and they are the opposite of minimum prices. Here's how they work:
- A maximum price is a price set by the government that is lower than the market price.
- This means that sellers cannot charge more than the maximum price, even if they would be able to in a free market.
- Price ceilings are often introduced to protect consumers from high prices, such as in the case of essential goods like food or medicine.
- However, maximum prices can lead to shortages, as producers may not be able to cover their costs at the lower price, and may reduce production or exit the market altogether.
- Critics argue that maximum prices can also lead to black markets, where goods are traded at higher prices outside of the legal market.