What is Administered Price?

Administered Price is the price of an item or service circulating in the community based on government regulations. In this case, the government will determine the policy on the basic price of goods or services based on economic conditions or other factors. So, the price of goods or services can be even and stable in the market .

But not only the government can determine the price of goods or services in circulation. In some cases, administered prices can also refer to prices determined by a company in selling a type of product. The goal is to monopolize the price of these products on the market.

Commodities that are usually set for sale prices are oil, rice, basic electricity tariffs, foodstuffs, and so on. Not only at the selling price, the administered price also applies to the rental price. So, the rental price of goods or services can also remain stable. For example, the price of renting an apartment in Jakarta is regulated by the government.

Example of Administered Price

The simplest case to illustrate administered prices is when the government lowers or raises the price of fuel oil (BBM). For example, in mid-February 2019, President Joko Widodo made a policy to reduce fuel prices because world oil prices also fell.

The price of Pertamax is down by Rp350 per liter, Dexlite is down by Rp100 per liter, Pertamax Turbo is down by Rp800 per liter, and Dex is down by Rp50 per liter. This is of course done by the government to maintain the stability of oil prices.

Application of Administered Price

In general, administered prices are applied to reduce prices, but on the other hand, administered prices are also applied to increase market prices. Therefore, two terms appear in administered prices, namely ceiling prices and floor prices. This is done so that the prices of goods and services remain stable in the market.

  • Ceiling price

The highest price set for goods and services

  • Price floor

The lowest price set for a good or service

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