What is a fixed price system?

In a fixed prices system, the government sets a ceiling on how high prices can be either for all or selected items. When it has only a few fixed price items, it is also called a mixed price system. Fixed prices are usually enforced in an effort to reduce inflation or restrictions. The system that sets prices can be used to help populations with lower income or to stabilize the fighting economy.

A fixed price system can be temporary or permanent. The reasons for temporary use of the system include war, deficiency and economic crisis. It can also be introduced as a result of a dramatic change in supply and demand. This is primarily to prevent prices from irritating if there is a lack of necessity, such as housing.

Depending on the item of fixed prices, the real price system can actually increase the actual prices. If the individual is forced to wait for too long a line or spend time looking for a product with high demand, the advantage of low price may be reduced. Factoring in time lost Cwashed significantly increases cENU items. Sellers who are forced to maintain their prices low can resort to reducing corners. As a result, the value of the item decreases and the customer gets a lower quality product.

6 This may include rent, fuel and food. Also, caps have been set for the amount of interest that can be charged from loans so that people who need money are not further endangered.

Many economists do not like a fixed price system because they believe that low prices can cause lack. The belief is that while some people will have the advantage of more affordable goods, they will also run out of stock. This can lead to a larger population that must be done without, thus growing demand. Basically, it is assumed that higher prices are enforced by allocation.

The opposite of the fixed price system is the free prices system. There are no government controls or wages with this system. It is common in more economically secure countries. With this kind of sysThese prices are usually dictated by the market, and especially supply and demand.