GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Prices determined by forces of demand and supply
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Prices determined by sellers in the market
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Prices determined by an external authority which is usually the government
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None of the above
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Detailed explanation-1: -An administered price is the price of a good or service as dictated by a government or centralized authority, as opposed to buyers and sellers interacting according to supply and demand.
Detailed explanation-2: -In India government has a control price or ceiling price of the commodities which it considers essential for the masses. For examples some goods such as wheat, rice, sugar, kerosene oil etc. have a control price. Due to excess demand for the commodity at ceiling price government resorts to rationing.
Detailed explanation-3: -Administered prices are prices of goods set by the internal pricing structures of firms that take into account cost rather than through the market forces of supply and demand and predicted by classical economics.
Detailed explanation-4: -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. This is called ‘price ceiling’ or ‘maximum price legislation’. Again, prices of commodities may tumble if there are surplus productions.