Definition of Buffer Stock Scheme A buffer stock scheme is a government plan to stabilise prices in volatile markets. This requires intervention in buying and selling. Prices for agricultural products are often volatile because: Supply can vary due to the weather. Demand is inelastic Supply is fixed in the short term See: Why are prices …
To overcome market failure, the government can use various policies. For example, to reduce consumption of demerit goods, they can increase taxes. Policies to overcome market failure Taxes on negative externalities Subsidies on positive externalities Laws and Regulations Electronic Road Pricing – a specific tax related to congestion Pollution Permits – giving firms the ability to …
Cobweb theory is the idea that price fluctuations can lead to fluctuations in supply which cause a cycle of rising and falling prices. In a simple cobweb model, we assume there is an agricultural market where supply can vary due to variable factors, such as the weather. Assumptions of Cobweb theory In an agricultural market, …
What causes price fluctuations for the supplier in an agricultural market such as coffee/tea? Coffee and tea are agricultural products, and therefore supply can be variable depending on several factors behind the control of producers (weather, disease). Furthermore, because demand and supply are inelastic, any change in supply can cause a significant change in price. …
What are the advantages and disadvantages for a developing economy, such as Ghana if it is dependent on primary products? Definition of Primary products: Raw materials and resources used in the productive process. Examples include metals, agricultural products and minerals. Advantages of Producing Primary Products For many developing economies, their main comparative advantage will be …
Readers Question: How is the market of raw coffee determined on the world commodity markets? The price of raw coffee is determined by the basic principles of supply and demand. Demand for coffee beans will be largely determined by the large coffee firms such as Nestle and Kenco. In turn their demand depends on the …
Definition of ceiling prices – When there is a limit placed on the increase of prices in a market. In a buffer stock scheme, governments attempt to reduce price volatility. Therefore, ceiling prices may be placed for certain goods; this prevents the price of food rising too rapidly. If prices do rise and governments have …