How Government and Legal Regulations Affecting Price Determination? - QS Study
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Government and Legal Regulations Affecting Price Determination

In order to defend the interest of public against inequitable practices in the field of price fixing, Government can get involved and control the price of merchandise. Regulations may limit businesses from trying out convinced pricing strategies. Government can state a product as necessary product and control its price. Governments make the rules and frameworks in which businesses are capable to struggle against each other. From time to time the government will modify these regulations and frameworks forcing businesses to change the way they function.

For example, the cost of a medicine manufactured by a company having control in the production of the same come to $5 Dollars per strip of ten and the buyer is ready to pay any amount for it, say $20 dollars. In the absence of any opponent, the seller may be tempted to extort the utmost amount of $20 dollars for the medicine and arbitrate to control the price. Usually in such a case, the Government does not permit the firms to accuse such a high price and intervene to control the price of the medicine. This can be done by the Government by declaring the medicine as necessary product and regulating its price.

The lawful and regulatory environment plays a especially vital role in determining the success of any businesses. The government imposes taxes among other authoritarian measures to endorse financial expansion and to mitigate customers from development.