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In Nigeria, the government can reduce the cost of accommo...

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 is D

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.