Write notes on:
(a) Minimum support price
Answers
Answer:
MSP is derived as minimum support price
Explanation:
The FCI[food cooperation of India] purchases items like wheat and rice from farmers by giving some money this is known as MSP
It is declared by Government
In Microeconomics,minimum price support is mainly applicable to the agricultural market in which the government mandates a minimum price at which it buys agricultural commodities from the farmers.
Explanation:
Minimum price support system is usually implemented to provide economic support to the farmers.In many countries,farmers suffer from chronic poverty mainly due to unacceptably low prices of agricultural crops and grains.Due to a long agricultural supply and long price transmission process in most developing countries,the farmers are not able to get the right or fair share of the revenue.Hence,the government intervenes and set a price which is higher than the equilibrium market price for agricultural products.At this higher price,the government purchases the excess supply of agricultural products in the market from the farmers and hence,they can enjoy the extra revenue gain from the higher price as part of the price support system executed by the government.