What is a price support program in an agricultural market? Explain its impact on a market
What will be an ideal response?
A price support program is essentially a price floor in an agricultural market. The government typically:
• isolates the domestic market from global competition by restricting imports from the rest of the world;
• introduces a price floor, which in an agricultural market is called a "price support." The government guarantees to buy at this price;
• pays a subsidy to the farms by buying the surplus crop that is produced.
A price support leads to a decrease in the quantity consumed by private consumers. The government must buy the surplus crop produced. And a deadweight loss is created.
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A common resource is used efficiently if marginal social benefit equals marginal social cost
Indicate whether the statement is true or false
Which of the following pairs of goods would be considered substitutes?
a. Milk and cookies. b. Tires and automobiles. c. Ink and pens. d. Coca-Cola and Pepsi. e. Computers and computer software.
As interest rates increase, the quantity of loanable funds that are supplied to the loanable funds market
a. increases because people will be attracted by the higher rate of interest b. decreases because businesses borrow less c. increases because businesses borrow less d. decreases because people save less e. decreases because people will be attracted by the higher rate of interest
People are often heard saying, "She makes good money." An economic interpretation of this statement would be that
a. she has an honest job. b. she makes money that is not counterfeit. c. she has a high income. d. there is little inflation.