Question

Government policies or laws on products or on inputs needed for production (labor, raw materials, utilities and others) and their impact on pricing, demand and supply? Describe as detailed as possible?

Answer 1

Goverment policies sometimes have major impact on pricing, demand and supply of the products.

Government laws on inputs like labour laws affect supply of inputs and in turn, cost of production. For example, a labour law aiming to give compulsory employee insurance increases cost for employer increasing her cost of production which in turn influences price by providing upward pressure as in this case.

Government laws on products can hugely regulate its price, demand and supply. By setting various ceiling and floor prices, goverment ensures fair play in the market which may correct excess demand and supply situation with the help of price mechanism.