Buffer Stock Schemes
Economics notes
Buffer Stock Schemes
➡️ Buffer stock schemes are government-run programs that aim to stabilize prices and incomes in the agricultural sector.
➡️ They involve the government buying and storing large quantities of a particular commodity when prices are low, and then releasing it onto the market when prices are high.
➡️ This helps to reduce price volatility, which can have a negative impact on farmers➡️ incomes.
➡️ Buffer stock schemes can also be used to ensure a steady supply of a particular commodity, which can be beneficial for consumers.
➡️ Finally, buffer stock schemes can help to reduce the risk of food shortages, which can have a significant impact on the economy.
What is a buffer stock scheme in economics?
A buffer stock scheme is a government intervention strategy that aims to stabilize the prices of certain commodities by buying and selling them in the market. The government sets a target price range for the commodity and buys it when the price falls below the lower limit and sells it when the price rises above the upper limit.
What are the advantages of a buffer stock scheme?
One advantage of a buffer stock scheme is that it can stabilize prices and prevent extreme fluctuations in the market. This can benefit both producers and consumers by providing a more predictable market environment. Additionally, buffer stock schemes can help to support the incomes of farmers and other producers by ensuring that they receive a fair price for their goods.
What are the limitations of a buffer stock scheme?
One limitation of a buffer stock scheme is that it can be expensive for the government to implement and maintain. Additionally, it may be difficult to accurately predict the demand for the commodity and set an appropriate target price range. Finally, buffer stock schemes may not be effective in addressing underlying issues in the market, such as overproduction or lack of competition.