What is prices support?
Price support system is a situation where the price of the product is artificially reinforced, brought up or manipulated through third -party events. The third party is the most commonly involved, because the government provides subsidies for certain products and goods and imposes regulations to ensure that the price does not bid below a certain level. If there is price support, there is an exception from the capitalist system of the free market and the price of the goods concerned is not determined by the supply of supply and demand, such as on the actual free market.
Traditionally, economists believe that the market will set the price of the product through its demand for it. Economists believe that at some point in each supply curve and demand curve there is a perfect intersection where supply and demand are at their optimal level. The supplier would lose customers if he raised his rates, which would result in a loss, and would also lose money if he reduced his rate. As such, this point nanabídek and demand for treatment is the price at whichThe item sells in the free market.
Sometimes, however, there are too many products and/or not sufficient product demand. In private enterprises and many industries, when this happens, the company closes. However, the government will sometimes want to prevent society or entity or group of entities for various reasons largely related to the creation of jobs.
When the government proceeds to determine price support, it is generally aimed at the market price good higher than it would be if the market price was set in the free market system. As such, it may have to be artificially to create demand by paying farmers to destroy crops, so there is less excess of the item. It may also have to subsidize part of the cost of high prices paid to the consumer per item.
Price support advocates believes to help small entrepreneurs. Generally there is a concept of price support in the countrythe duty. Proponents therefore argue that without the support of the price, farmers would be obliged to sell their goods and items at such low costs that they could not survive on what they had made from the sale. However, because the government provides price support, smaller companies are able to enter the field and stay above the water.