When the government fix the price of essential commodities, this is referred to as:

1. Analyze the question The question asks for the term used when the government sets the price of essential goods (such as petrol, rice, or drugs) instead of leaving it to the market.

2. Explain the concept In a free market, price is set by demand and supply. Sometimes the government steps in to protect consumers or producers. This intervention is called price control (or price fixing). It takes two main forms:

• Price ceiling (maximum price): A legal limit above which the price cannot rise. It protects consumers. An example is the government-regulated pump price of petrol in Nigeria.
• Price floor (minimum price): A legal limit below which the price cannot fall. It protects producers. An example is the guaranteed minimum price for farm produce like cocoa or grains.

3. Go through the options

• A. Price equilibrium: This is the price where quantity demanded equals quantity supplied. It is set by market forces, not by government.
• B. Price control: This is government fixing or regulating prices. It matches the question.
• C. Demanded price: This is not a standard economic term. It loosely refers to what buyers are willing to pay.
• D. Asking price: This is the price a seller wants for a product, such as in bargaining. It has nothing to do with government.

4. Answer The correct option is B. Price control.

5. Exam tip When you see "government" together with "fix" or "set" in a question about prices, think price control. Remember: Equilibrium = market sets it; Control = government sets it. Also remember that a ceiling is a maximum price (it protects buyers) and a floor is a minimum price (it protects sellers).