1. Use of Buffer Stock as a Means of Stabilising Prices
... has to intervene in the market in order to not let prices for wheat drop to below the minimum price. One such way is through the buffer stock scheme. Fig. 1) Minimum Price for Wheat The government may set an intervention price for wheat and therefore increase the free market price of P1 to P2 ... Q2Q3. In the case of wheat, when free market price is below the intervention price, the buffer stock agency that is funded by the government will buy in the wheat (which is called the buffer stock) and when the free market price goes above the intervention price, they will resell the wheat and t...
- Word Count: 568
- Approx Pages: 2
- Grade Level: High School