ADMINISTERED PRICE Meaning and
Definition
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Administered price is a term used in economics to refer to the pricing of goods and services by government or other non-market mechanisms. Unlike market-determined prices that result from the interaction of supply and demand, administered prices are established through direct government intervention or regulation. They are typically set to achieve specific economic or social objectives, such as controlling inflation, ensuring affordability, or promoting equitable access.
Administered prices can be implemented in various ways. The government may directly set the prices of particular goods or services, or it may establish price ceilings or floors to limit price fluctuations. Additionally, price controls can be applied to different sectors of the economy, including utilities (such as electricity and water), transportation, healthcare, and agricultural products.
The rationale behind administered prices is to correct market failures, address externalities, or promote social welfare. For example, governments may cap the prices of essential goods to ensure that they remain affordable for the general population. However, while administered prices may be introduced with good intentions, they can often lead to unintended consequences. Price distortions, market imbalances, and reduced investment incentives are some of the challenges associated with administered prices.
Administered prices have significant impacts on consumers, producers, and overall economic stability. Therefore, it is essential for policymakers to carefully consider and evaluate the long-term effects and trade-offs associated with the implementation of administered price systems.
Etymology of ADMINISTERED PRICE
The term "administered price" is a compound term derived from the combination of "administered" and "price".
- "Administered" comes from the Latin word "administrare", which means "to manage" or "to conduct". It evolved through Old French and Middle English before coming into use in modern English. The word "administered" refers to the act of regulating or controlling something, such as a policy, law, or system.
- "Price" traces back to the Old English word "pris", which referred to the value or worth of something. It has cognates in various Germanic languages and ultimately originates from the Proto-Indo-European root *per- meaning "to traffic in, sell".
When these words are combined, "administered price" refers to a price that is regulated, controlled, or set by a governing authority instead of being determined by market forces.
