List three items which invole the maximum/minimum expenditure .
Answers
Definition – 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.
Diagram of maximum price

In this diagram, the max price causes excess demand of Q2-Q1.
Reasons for maximum prices
Maximum prices involve the government making a normative judgement that the market clearing price is too high, and needs to be reduced. The government may impose a maximum price for a variety of reasons.
The good is essential for daily living – without a maximum price, some people may be unable to afford the good. By reducing the price, it can help reduce relative poverty.Monopoly exploitation. If firms have monopoly power, they can charge high prices to consumers – higher than the marginal cost of production and higher than in a competitive market. A maximum price can be a way of reducing ‘monopoly prices’ and also increase allocative efficiency.Inelastic supply. If supply is very inelastic, then a maximum price will not reduce the supply of the good, therefore, there will be no fall in the quantity supplied.Resource allocation. If rents were very high, it may cause investors to concentrate on building new houses and ignoring other aspects of the economy. However, an excess of house-building could contribute to a bubble in home-building – which leaves the market vulnerable to a correction in prices. For example, housing bubbles in Ireland and Florida pre-2007 credit crisis. A maximum price limits the resources flowing to houses and enables a more balanced economy