what is the main argument for agricultural price supports


Price Supports Cause Overproduction. By supporting prices above the market-clearing level, governments encourage farmers to expand production. To produce more, farmers apply more inputs per acre. They also compete against one another for the finite amount of farmland, bidding up its price.

How does the government support the price of agricultural products?

 · What is the main argument for agricultural price support? Price supports are subsidies or price controls used by the government to artificially increase or decrease prices in the agriculture market. Click to see full answer. Then, what is one of the main reasons for variations in agricultural supplies? A check sent to farmers that makes up the difference …

What is the main reason for the variation in agriculture prices?

Agricultural price supports often stimulate larger production, tax consumers, and impede international trade. They often transfer income from lower-income consumers to wealthier owners of farmland. Price supports do little to help farmers with below-average incomes because benefits are distributed in proportion to sales.

What are the disadvantages of price support for farmers?

CAP ensures Europeans have stable food supplies at reasonable prices. As global warming increasingly impacts on harvests it’s even more important to protect domestic food supplies. Without CAP, all 28 EU nations would develop their own competing farm support systems, creating single market chaos. 2. SO MUCH FROM SO MANY TO SO FEW

What is the relationship between price and demand for agricultural products?

A situation where all buyers and sellers in a market have complete access to technological information and market information(all input and output prices, and technology)


Why does the government use agricultural target prices?

The intention is to boost and stabilize farm incomes. But, with price floors, consumers pay more for food than they would otherwise, and governments spend heavily to finance the programs. With the target price approach, consumers pay less, but government financing of the program continues.

What is the significance of price support?

In economics, a price support may be either a subsidy, a production quota, or a price control, each with the intended effect of keeping the market price of a good higher than the competitive equilibrium level.

Why did the federal government establish agricultural price support programs?

Why did the federal government establish agricultural price support programs? A payment, typically by the government, to cover a financial deficiency.

What are the main objectives of agriculture price in India?

The foremost objective of agricultural price policy is to ensure the appropriate relationship between the prices of food grains and nonfood grains and between the agricultural commodities so that the terms of trade between these two sectors of the economy do not change sharply against one another.

What is the main effect of price support on a market?

The Impact of a Price Support on the Welfare of Society In essence, the government is paying to make producers better off and consumers worse off, and the losses to consumers and the government outweigh the gains to producers.

What is support price How does it affect the producer?

Support price is the price fixed by the government higher than the equilibrium price to protect the interests of producers especially farmers. 2. To protect the interest of producers especially farmers.

Why do farmers need a minimum support price?

MSP ensures a profit of at least 50% over the cost of production for the farmers. Moreover, if the farmers get favourable terms to sell their produce or better price than MSP, they are free to sell to non-government parties. The concept first began in 1966 with the Green Revolution.

How government provides price supports to farms quizlet?

A subsidy is a payment by the government to a producer to cover part of the cost of production. When the government buys the surplus produced by farmers, it provides them with a subsidy. Without the subsidy, farmers could not cover their costs because they would not be able to sell the surplus.

What are agricultural prices?

Agricultural prices cover prices of agricultural products (output prices) and prices of requisites for agricultural production (input prices) at various stages of marketing.

What are the main objectives of agricultural policy of India elaborate?

In India, the main objectives of agricultural policy are to remove the major problems of agricultural sector related to improper and inefficient uses of natural resources, predominance of low-value agriculture, poor cost-benefit ratio of the sectoral activities and insignificant progress of cooperative farming and …

What is the main objective of the national agricultural policy?

National Agriculture Policy The Policy seeks to actualise the vast untapped potential of Indian agriculture and aims at achieving a growth rate in excess of 4 per cent per annum in the agriculture sector. It also seeks to achieve growth with equity, i.e., growth, which is widespread across regions and farmers.

How agricultural price is determined?

5.1 Food and agricultural commodity prices in India are primarily determined by domestic demand and supply factors influenced by domestic price policy. The nature of markets facing the agricultural commodities and imperfections in these markets also influence the price transmission and the final consumer prices.


Can farmers buy crop insurance?

Farmers can purchase government-subsidized crop insurance against natural disasters. Farmers can also buy a form of price insurance in the futures markets. Commodity-futures options are really a form of price insurance for which a farmer pays a premium (the price of the option).

What is commodity futures?

Commodity-futures options are really a form of price insurance for which a farmer pays a premium (the price of the option). Before planting his crop, a farmer can purchase a guarantee of a minimum price, without incurring the obligation to sell at that price should the market price be higher at harvest time.

What is the common agricultural policy?

FOR the Common Agricultural Policy. 1. WASTE. By ignoring the rules of supply and demand, the Common Agricultural Policy is hugely wasteful. It leads to overproduction, forming mountains of surplus produce which are either destroyed or dumped on developing nations, undermining the livelihoods of farmers there.

Why is CAP important?

Left to the mercy of the market, they couldn’t invest in improvements to productivity, food safety or environment protection. CAP ensures Europeans have stable food supplies at reasonable prices. As global warming increasingly impacts on harvests it’s even more important to protect domestic food supplies.

Is CAP a double whammy?

CAP supporters say this is a price worth paying for food security, but that’s nonsense. With free trade we could import bountiful cheap food from the United States, Canada, China and elsewhere in the globalised world. Food security just isn’t a problem. CAP artificially shields farmers from healthy competition, hindering the evolution of more modern, more efficient agriculture.

What is an agricultural subsidy?

An agricultural subsidy is a governmental subsidy paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cast and the supply of such commodities. Subsidies in India have a long history.

What is input subsidy?

Input subsidies tax the budgetary capacity of the government. Fiscal imbalance paves the way for macro-economic imbalances creating inflation, lowering growth and creates inability to finance imports. Growth, in order to be sustainable, has to be efficient and subsidies of the kind the India agriculture is used to, …

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