Question 14
[Maximum number: 1]
Why might a government introduce a minimum price for a product?
A
to benefit poorer consumers
B
to encourage consumption of a merit good
C
to encourage production of a public good
D
to support the incomes of producers
CAIE A-Level Economics 3.2.4 Maximum and Minimum Prices
Practise locating effective maximum and minimum prices around equilibrium, measuring shortages or surpluses and evaluating controls in food, housing and labour markets.
How this is tested
- identify a maximum below equilibrium or minimum above equilibrium as the effective control
- read demand and supply at the controlled price to calculate shortage, surplus and traded output
- evaluate affordability or producer income against illegal markets, storage costs and long-run supply