What is Price legislation? This is also known as price control policy, refers to how the government or its agency fixes the price of essential commodities. Price control was carried out in Nigeria by the Price Control Board.
Types of price control policy and legislation
- Minimum price control policy: The minimum prices are the lowest prices by law, below which the specified goods and services cannot be sold or bought.
- Minimum prices may be fixed on commodities if the aim is to protect producers (especially agricultural producers) from the income fluctuation brought about by poor harvests.
- Maximum price control policy: A maximum price control is the highest price level above which goods and services cannot be sold. Under this condition, nobody is allowed to sell goods and services above the maximum price but selling below it is allowed.
What are the Objectives of price control policy?
The objectives of price control policy, both minimum and maximum are:
- To prevent the exploitation of consumers by producers.
- To avoid or control inflation.
- To help low income earners, e.g. minimum wage earners.
- To control the profits of companies (especially monopolists).
- To prevent fluctuation of prices of some products, e.g. agricultural produce.
- To stabilize the income of some producers, e.g. farmers.
- To make possible planning for future output.
the effects of price control legislation
(1) It stimulates excess demand, which cannot be satisfied, i.e. shortage in market.
(2) It encourages hoarding of commodities by wholesalers and retailers.
- It leads to the creation of “black market” or under counter sales and its attendant high prices.
- It encourages conditional sales of products.
- It discourages shortages, which might result in queues and racketeering..