Introduction to Business EconomicsMTP May 20Question 599 of 209
All Questions

Administered prices refer to:

Options

APrices determined by forces of demand and supply
BPrices determined by sellers in the market
CPrices determined by an external authority which is usually the government
DNone of the above.
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Correct Answer

✅ Option c — Prices determined by an external authority which is usually the government

All Options:

  • APrices determined by forces of demand and supply
  • BPrices determined by sellers in the market
  • CPrices determined by an external authority which is usually the government
  • DNone of the above.

Detailed Solution & Explanation

• Administered prices are a key concept in economics, particularly when discussing market interventions. They refer to prices that are not set by the free play of market forces. • The correct answer, (C) Prices determined by an external authority which is usually the government, accurately defines administered prices. Governments or regulatory bodies often set these prices for essential goods and services like electricity, water, public transport, or certain agricultural products. This is typically done to ensure affordability, control inflation, or support specific industries. • For example, a government might set a maximum price (price ceiling) for essential medicines to make them accessible, or a minimum price (price floor) for agricultural produce to protect farmers' incomes. These are all forms of administered prices. • Option (A) Prices determined by forces of demand and supply is incorrect because this describes market prices, which are the opposite of administered prices. In a free market, prices fluctuate based on the interaction of buyers and sellers. • Option (B) Prices determined by sellers in the market is also incorrect. While sellers do influence prices in a market, especially in imperfect competition, administered prices are imposed from *outside* the direct seller-buyer interaction by an authority. • Therefore, administered prices represent a departure from purely market-driven pricing mechanisms, reflecting a deliberate policy intervention.

About This Chapter: Introduction to Business Economics

Paper

Paper 4: Business Economics

Weightage

5%

Key Topics

Meaning, Scope, Price Mechanism

This chapter lays the groundwork for understanding Business Economics as a discipline. It covers the meaning, scope, and nature of economics — including key distinctions like Microeconomics vs Macroeconomics, Positive vs Normative economics, and the fundamental economic problem of scarcity. Students learn how businesses use economic principles for decision-making in a competitive marketplace.

View Official ICAI Syllabus

Exam Strategy Tip

Focus on definitions and distinctions between concepts. Questions often test whether you understand the difference between Micro and Macro, or Positive and Normative statements.

Related Comparison Tables

Microeconomics vs Macroeconomics: The Complete CA Foundation GuidePositive vs Normative Economics: Fact vs Opinion

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