Page 108 - Microsoft Word - 00 ACCA F1 Notes Prelims.docx

Chapter 7

6.2 A Government sets maximum prices

 Typically to protect consumers and/or control inflation

P
D S

P max

D > S

Q

 Shortages Queues, black markets, prices higher second
hand

 Arbitrary allocation of resources

 Misallocation of resources E.g. companies may cut quality

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