Bread lines were a fact of life in the Soviet Union, and a thriving black market existed to supplement unmet demand. Learn More in these related Britannica articles: They may apply to staple goods such as sugar and soap, or more intangible prices such as interest rates.
See Article History Administered price, price determined by an individual producer or seller and not purely by market forces. In both of these examples, the market for food and consumer Administered pricing was characterized by chronic shortages.
Administered prices are common in industries with few competitors and those in which costs tend to be rigid and more or less uniform. Theory aside, capitalist economies do not entirely shun administered prices.
The stability of administered prices is counted by some observers as an advantage in its provision of a basis for planning. Rent control is used to keep housing stock affordable in New York City, but the demand for these cheap apartments far outstrips the supply.
Price controls may specify a price ceiling an maximuma price floor a minimumor both. Classical economic theory purports to explain why price controls tend to lead to shortages.
They are considered undesirable when they cause prices to be higher than a competitive standard, when they are accompanied by excessive non-price Administered pricing efforts to increase sales without enhancing the value of the productor when they add to inflationary tendencies—either by failure to lower prices in response to cost reductions or by increasing prices Administered pricing maintain a given margin of profit in the face of rising costs.
A more accurate statement might be that the undesirable effects are not inherent in administered prices but in the nature of the competition that accompanies them.
If a price is set lower than the market equilibrium price — the point at which the two curves intersect — the quantity supplied will be less than the quantity demanded: The supply curve has an upward slope, meaning the higher prices correspond to greater supply; the demand curve has a downward slope, so higher prices correspond to lower demand.
Some consumers have been found to prefer predetermined prices as facilitating budgeting in advance. They may change in response to shifts in supply and demand, either by design or on an ad hoc basis.
Centrally planned systems such as the Soviet Union and Cuba employed price controls extensively Cuba continues to do so. Claims have also been made that administered prices are necessary to the operation of a mass production to avoid the inefficiency in negotiating prices in each transaction.
Other attempts at limiting prices across an economy, for example by the Committee of Public Safety during the French Revolution and the Roman Emperor Diocletian in the third century, have been largely unsuccessful.Administered prices are prices set by firms that do not vary in response to short-run fluctuations in demand and supply conditions.
OECD Glossary of Statistical Terms - Administered prices (set by firms) Definition. Administered Price A price dictated by any entity other than market forces. Most of the time, an administered price refers to a price set by a government, but it may also be set by a private company with sufficient control over the market that it can control prices.
See also: Monopoly. administered price a PRICE for a product which is set and controlled. Administered price definition is - a price determined by the conscious price policy of a seller rather than by impersonal competitive market forces. a price determined by the conscious price policy of a seller rather than by impersonal competitive market forces See the full definition.
The purpose of administered pricing is to eliminate price competition or to maintain price stability [ ] A condition in which the prices of certain goods and/or services are determined by governmental authority, supplier cartels (legal or illegal), or trade associations, and not by market forces.
The purpose of administered pricing is to. Administered price: Administered price, price determined by an individual producer or seller and not purely by market forces.
Administered prices are common in industries with few competitors and those in which costs tend to be rigid and more or less uniform. They are considered undesirable when they cause prices to. An administered price is the price of a good or service as dictated by a government, as opposed to market forces.
Examples of administered prices include price controls and rent controls. Price.Download