(a) Outline any four objectives of a price control policy.
(b) Highlight any four effects of a maximum price control policy.
Explanation
(a)(i) To prevent exploitation of consumers by middlemen and 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 monopoly).
(v) To prevent fluctuation of prices of some products e.g. agricultural produce.
(vi) To stabilize the income of some producers, e.g. farmers.
(vii) To make possible planning for future output.
(viii) To accumulate surplus for government.
(b)(i) It stimulates excess demand which cannot be satisfied i.e. shortages in the market.
(ii) It encourages hoarding of commodities by sellers so as to sell above the maximum price.
(iii) It leads to creation of parallel markets or under-the-counter sales. In this case the goods disappear from the open markets.
(iv) It encourages conditional sales. In this case, buyers are forced to purchase what they do not need in addition to what they need.
(v) Shortages result in queues. People have to line up so as to obtain some of the available goods.
(vi) It leads to rationing. Consumers are allocated a specific quantity irrespective of their need.
(vii) Preferential treatment is encouraged. Here, sellers prefer to sell to regular customers, friends and relatives.