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- Unfair trade practices are dishonest or unfair methods that sellers use to gain, at the cost of buyers, workers or small producers.
| Unfair trade practice | What happens |
|---|---|
| Overcharging | A shopkeeper charges more than the MRP (maximum retail price) |
| Under-weighing | A seller gives 900 g but charges for 1 kg |
| Adulteration | Water is mixed into milk |
| False advertising | An ad makes false claims about a product |
| Hoarding and black marketing | Goods are stocked up to create a shortage, then sold at a high price |
| Very low wages | Workers are paid too little for their work |
| Monopoly pricing | A single seller uses its power over price to charge higher prices |
- The government protects consumers, workers and producers from exploitation and injustice in three ways:
- Price ceiling - fixing a maximum price
- Price floor - fixing a minimum price
- Controlling monopoly - keeping a dominant seller's prices and supply in check
- It also has regulators that watch over different markets.
- Example - the government fixes the maximum price of essential medicines. Sellers cannot charge more than this, so no one is overcharged.
- Price ceiling - an imposed price control that sets the maximum amount a seller can charge for a product or service.
- Example - the government fixes a minimum wage . Employers must pay workers at least this much for their work.
- Price floor - an imposed limit on how low a price can be charged for a product, good, or service. For a price floor to be effective, it must be set above the market equilibrium price .
- Example - a town has only one cable TV operator, and no other choice. He can charge high fees, give poor service, and cut supply whenever he likes.
- Monopoly - a market structure with a single seller or producer controlling the entire supply of a unique product or service, facing no close substitutes , allowing them significant power to set prices and output.
- When one or a few sellers dominate a market, they may charge higher prices, give poorer quality goods and services, and restrict supply. This harms consumers.
- So the government keeps their prices and quantity supplied in check.
- Markets give goods only to those who can pay, so essential goods may not reach poor and vulnerable people.
- The government steps in to make the market fair for everyone.
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Example
- A life-saving medicine becomes very costly.
- Rich families can buy it, but poor families cannot.
- So the government fixes its maximum price.
- Regulators are bodies set up by the government to make rules for a market and check that they are followed, making sure markets are transparent (open and honest).
| Regulator | Area | How it keeps the market fair |
|---|---|---|
| Reserve Bank of India (RBI) | Banking | Makes rules for banks so that people's money is safe |
| Central Consumer Protection Authority | Consumer rights and unfair trade practices | Acts against overcharging, false ads and other unfair practices |
| Telecom Regulatory Authority of India (TRAI) | Telecommunications | Sets rules for mobile and internet companies so customers are treated fairly |
| Securities and Exchange Board of India (SEBI) | Securities (share) market | Protects investors from fraud in the share market |
- These regulators were studied in the Grade 7 chapter "Understanding Markets".
Question: Have you ever seen or heard of the government fixing prices or wages (for example, bus fares, medicines, or minimum wages)? Share an example and why you think it was done.
| What is fixed | Why it is done |
|---|---|
| Fares of government buses | So that ordinary people can afford to travel |
| Maximum price of essential medicines | So that treatment is affordable for all |
| Minimum wage | So that workers are not exploited and earn enough |
Question: During COVID-19, the demand for sanitisers surged, leading to stockouts and sharp price increases. Some shopkeepers began hoarding and black-marketing. The government intervened by declaring sanitisers essential commodities under the Essential Commodities Act, 1955, capping the maximum retail price at Rs 100 for 200 ml bottles. Meanwhile, many companies started production, and sanitisers soon became widely available at fair prices. How do such price controls affect suppliers and consumers? While in this case the price control was for an emergency, do you think such controls should be in practice forever?
- Hoarding - accumulation of goods, commodities, or money by individuals or firms beyond what is immediately necessary, typically driven by fear of future shortages, anticipated price increases, or speculative motives.
- Black marketing - the illegal trade of goods and services that are banned or regulated.
- Should such controls be forever? No. They are useful in an emergency. If kept forever, sellers may make less because profit is capped, and this can cause shortages later.
6. The government levies higher taxes on products such as tobacco and alcohol to promote healthier choices among citizens. Can you find out other goods where price controls have been set in place? What are the reasons for the same?
Beyond the textbook: researched examples.
| Good or service | Type of control | Reason |
|---|---|---|
| Essential medicines | Maximum price (ceiling) | Keep treatment affordable |
| Heart stents | Maximum price (ceiling) | Stop overcharging patients for a life-saving device |
| Crops like wheat and rice | Minimum Support Price (floor) | Make sure farmers get a fair price |
| Labour | Minimum wage (floor) | Protect workers from low pay |
| Auto and taxi fares | Fares fixed by state governments | Protect passengers from overcharging |
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Dishonest methods sellers use to gain at the cost of others. Examples: charging more than the MRP, adulteration.
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A price ceiling is an upper limit on price that protects buyers. A price floor is a lower limit on price that protects sellers and workers.
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Monopoly.
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Any two of: RBI (banking), TRAI (telecom), SEBI (securities market), Central Consumer Protection Authority (consumer rights).
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False. It must be set above the equilibrium price, or it will have no effect.
- Unfair trade practices like overcharging, adulteration and hoarding harm buyers, workers and producers.
- The government controls them with price ceilings, price floors and checks on monopolies, and regulators like RBI, TRAI and SEBI keep markets transparent.
- It steps in because markets serve only those who can pay, and fairness and equity are needed for everyone.
