Price mechanism and Price Control

Prices of goods and services in a free market are determined by intersection of supply and demand curves. Interference means that the forces of demand and supply no longer determine the price of the commodity. The market price is not the most advantageous one for either producers or consumers and it is necessary for an outside agency (government) to intervene and set the price which is not established by the forces of demand and supply. Examples of interference include;

  • minimum price,
  • maximum price,
  • resale price,
  • maintenance,
  • international commodity agreements,
  • buffer stocks and
  • stabilisation funds.