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Why do governments intervene in agricultural markets? Outline and compare the effects of price support mechanisms and income support mechanisms giving details of the effects on welfare of consumers, producers and taxpayers in both cases
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Why do governments intervene in agricultural markets? Outline and compare the effects of price support mechanisms and income support mechanisms giving details of the effects on welfare of consumers, producers and taxpayers in both cases Government intervention is notably present in the agricultural markets and there is much debate about how efficient the different mechanisms used by the government actually are, and whether using a price support mechanism or an income support mechanism is more effective when providing for consumers, producers and taxpayers alike. One of the main reasons that intervention is necessary is due to the considerable price fluctuations that agricultural prices are subject to, resulting in adverse effects for both consumers (high prices) and producers (low income) alike. Fluctuating prices makes rational economic decisions difficult and discourages farmers from making long-term investment plans, which over the years reduces the growth of efficiency within the agricultural industry, resulting in...
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