Question

consequences of price control in kenya

Answer 1

As a result of rising prices, particulatly of food, the Kenyan parliament passed a bill regulating prices of commodities. This bill threatens to undermine the free market ideas. It gives the Kenyan Treasury the right to set the maximum prices of retail and wholesale prices of essential commodities, making ir illegal for producers and retailers to sell above that price, thus controlling their profit margins.

Economists believe that price controls have an opposite effect on the economy in the form of distortions. Even though the inflation may be in check in Kenya now, but losing the incentive to earn greater returns results in lower employment in the economy. And as the Philips curve predicts, a lower inflation results in higher unemployment. Moreover, this also affected investor confudence and high foreigj investmnets that Kenya received in the previous decades will fall.