To protect farmers during a bumper harvest; the government usually?

A. set a maximum price
B. release products from the buffer stock
C. sell the excess to consumers
D. set a minimum price

Correct Answer:

Option D – set a minimum price

Explanation

During seasons where farmers experience a bumper harvest, the government protects the farmers by setting minimum prices that the produce can be exchanged for. This is done in order to avoid a situation where farmers end up exchanging their products for an amount less than the value of the product.

As the law of demand would have it, when the supply is higher than the demand, prices will fall. Hence the government set the minimum price at which the produce can be sold.