What Is Price Support?

The so-called price support is a means by which the government supports producers by stabilizing prices. In order to stabilize production and guarantee the income of producers, the government sets up a "support price" or "guaranteed price" that is absolutely changed by market supply and demand.

Price support

Right!

The so-called price support is a means by which the government supports producers by stabilizing prices. In order to stabilize production and guarantee the producer's

If the market price is higher than the guaranteed price, producers can

Price support for export industries

In order to guarantee the producer's income, the government of a country sets a guaranteed price P, that is, the producer can get this guaranteed price regardless of the world market price. If the market price is lower than P, then the producer can sell the product directly to the government and still get the profit when the price is P!

Under this guaranteed price, the output of the producer's product will not increase or decrease because of fluctuations in market prices, but will only be determined based on cost. The price paid by domestic consumers is also equal to the guaranteed price, because whether the producer sells directly to domestic consumers or the government resells it will not be lower than this price. Due to the domestic price at a given price

The changes in the benefits brought by the price support policy to the society are mainly: the producers benefit and the benefits increase; the consumers suffer losses; the government increases additional expenditures to ensure product prices, and the benefits of the entire society will be lost. The reason is because of price support

The purpose of establishing guaranteed prices in the import market is to ensure that the interests of domestic producers are not affected by price fluctuations in the international market. The specific impact of price support for the import industry due to changes in circumstances and benefits should be judged based on the relationship between guaranteed prices and equilibrium prices. The situation is more complicated. For more detailed analysis, please refer to the latest edition of the book "International Trade" edited by Haiwen.