In Nigeria, the government can reduce the cost of accommodation by fixing the rent
ECONOMICS
JAMB 2013
In Nigeria, the government can reduce the cost of accommodation by fixing the rent
- A. at the prevailing rate
- B. at the equilibrium price
- C. above the equilibrium price
- D. below the equilibrium price
Correct Answer: D. below the equilibrium price
Explanation
The government can reduce the cost of accommodation by fixing the rent at a maximum price. Maximum prices occur 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. Governments try to control the rate charged for rent by keeping the cost of renting below a certain level. However, setting the price below equilibrium maximum will cause a shortage – demand will be greater than supply.
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