analyse in detail, with the aid of a graph,maximum prices as a method of government intervention
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– A maximum price occurs when a government sets a legal limit on the price of a good or service – with the aim of reducing prices below the market equilibrium price. For example, the government may set a maximum price of bread of £1 – or a maximum price of a weekly rent of £150.
If the maximum price is set above the equilibrium price then it will have no effect.
If the maximum price is set below the equilibrium price, it will cause a shortage – demand will be greater than supply.
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