Answer to Question #242263 in Microeconomics for Kavya

Question

Highlight of the advantages and disadvantage of such pricing practices, for the supply side and society consumers

Answer 1

The advantages of a pricing policy lies in its ability to make your product appealing to customers, while also covering your costs. The disadvantages of pricing strategies come into play when they are not successful, either by not sufficiently appealing to customers or by not providing you with the income you need.Price controls can take the form of maximum and minimum prices. They are a way to regulate prices and set either above or below the market equilibrium:

• Maximum prices can reduce the price of food to make it more affordable, but the drawback is a maximum price may lead to lower supply and a shortage.
• Minimum prices can increase the price producers receive. They have been used in agriculture to increase farmers income. However, minimum prices lead to over-supply and mean the government have to buy surplus.