if you've taken a year of US History you've heard about the Sherman Antitrust Act of 1890. the ackermans in response to a handful of monopolistic companies doing a bunch of shady stuff and using unfair pricing practices and that wasn't the only time the government has taken action to prevent these businesses from taking advantage of customers but what type of unfair practices do businesses engage in and how does the government stop them this is the second video in unit 20 pricing take a look at this breakdown which shows you how often this unit comes up on District State and international exams for each of the different clusters [Music] hello and welcome this is lesson 20.2 governmental influence on pricing let's get to work team in this video there are a few topics that we'll be discussing first we'll Define unfair pricing practices then we'll talk about the seven types of unfair pricing practices finally we'll talk about pricing laws and government price controls so what counts as an unfair pricing practice basically they're anything meant to deceive the customer and these practices are either illegal or unethical and they're usually reported to authorities the best case scenario for these businesses is that they lose a few customers worst case scenario is that the owners may have to pay huge fines and the whole business goes under let's just say it's best to avoid these unfair pricing practices altogether there are seven unfair pricing practices bait and switch price fixing price discrimination deceptive pricing predatory pricing a loss leader and price gouging let me reiterate do not do any of these let's start out with bait and switch this is the practice of advertising one product to lure customers to you but then once they're lowered you persuade them to buy a more expensive product instead for example let's say you just saw my ad for a broom that cost six dollars when you came to the store asked about it I told you so sorry but we're all out instead buy this vacuum cleaner for sixty dollars the second type is price fixing this is when a group of competitors get together and set the price of a product usually higher than where the market equilibrium would fall let's say you're used to buying your basketball shoes for around a hundred dollars you're so excited to buy a new pair for the upcoming season when you go to the store all the shoes are 500 bucks that's because all of the basketball shoe retailers got together and decided on 500 bucks per pair so you're forced to buy them for a higher price no matter where you shop price discrimination is when a business sells the same products to different people at different prices this is usually based on personal characteristics for example let's say that a store employee does not like people with brown curly hair everyone else gets the grapes at three dollars but people with brown curly hair have to pay five dollars the fourth type is deceptive pricing which refers to pricing products in a way that intentionally misleads customers that sounds vague and it is deceptive pricing can be anything from pressuring customers to buy something to only revealing the total price of something at the end of the purchasing process next is predatory pricing which refers to the act of setting super low price just temporarily to wipe out all of your competition for example many companies overseas like Xi'an have super cheap products to try to drive domestic companies out of business another unfair pricing practice is a lost leader which is pricing the item much lower than the current market price or the price of acquiring the item the hope is that the Lost Leader's price draws customers into the store and once they're in they usually buy other things that make up for the Lost profit predatory pricing and lost leaders sound really similar but they're subtly different the purpose of predatory pricing is to drive out the competition while the purpose of a lost leader is to get your customers into the store so they buy other things that make up for the Lost profit the final type of unfair pricing that we'll be discussing is price gouging which refers to raising prices on certain Goods to a really high level during an emergency do you remember how the beginning of the kova 19 pandemic there was a shortage of toilet paper well most retailers made toilet paper really expensive since so many people were rushing to get it price gouging is technically a form of price fixing but it comes up a lot on exams you should know it as its own type now that we've covered all of these unethical and illegal pricing tactics that businesses use let's talk about how the government fights it essentially there are a bunch of pricing laws to prevent these practices as well as the formation of monopolies here's a list of a bunch of pricing laws that the government passed to help protect both retailers and customers you should know these so feel free to take a screenshot to look over later enacting the law is only one tool the government can use to fight unfair pricing practices they can also use governmental price controls price controls refer to when the government intervenes in the pricing of a product in order to help control the economy or help consumers for example when inflation is getting out of hand the government can help with price controls now many economists believe that price controls are sometimes helpful but they can often worsen their problems one tool is a price ceiling which is a maximum price for goods that are too expensive price ceilings are often set during times of emergency when there may be shortages that could drive prices up but price ceilings mean that goods are cheaper so more people end up buying them ultimately causing the shortage anyways the government also sets price floors which are minimum prices for goods that are too cheap this is to help the producers for instance the government might say that milk can't be sold for cheaper than two dollars a gallon however if the price floor is set higher than the market price there will be a surplus which refers to unsold Goods as a result the government usually has to buy the excess inventory now that we've gone over all the content it's time to test your knowledge with a real deck of question pause the video and try to answer the answer is C agreeing on the price of a certain product remember that price fixing is when all companies in Industry get together and set a price that is really high to force customers to spend more money regardless of where they shop and here are the sources we use for this video feel free to check them out if you still have any questions all right that pretty much sums up less than 20.2 governmental influence on pricing great work team we'll see you in the next video