The fixing of maximum prices by government is mainly on selected essential goods. This is because the government wants to ensure that these goods are affordable for everyone, especially the poor.
Inferior goods are goods that people demand less of as their income increases. Luxury goods are goods that people demand more of as their income increases. Imported capital goods are goods that are used to produce other goods.
The government is less likely to fix maximum prices on these goods because they are not essential for everyone's survival.
Here are some examples of selected essential goods that the government may fix maximum prices on:
Food
Water
Electricity
Medicine
Housing
The government may also fix maximum prices on other goods that are considered to be essential, such as gasoline and public transportation.
The goal of fixing maximum prices on essential goods is to prevent prices from rising too high, which could make these goods unaffordable for some people. This can help to protect the poor and vulnerable from the effects of inflation.
However, there are also some potential drawbacks to fixing maximum prices. For example, it can lead to shortages of goods, as suppliers may be reluctant to sell their goods at a lower price. It can also lead to black markets, where goods are sold at prices above the maximum price.
The government must carefully consider the pros and cons of fixing maximum prices before making a decision
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