Farming price guarantees are expensive because group of...

Farming price guarantees are expensive because, Group of answer choices they promote international competition on agricultural products. farmers are forced to sell part of their harvest to consumers at unreasonably low prices. the government must purchase the surplus farming production and destroy it. they discourage the production of agricultural products in the US.

Transcript

00:01 Okay, so the question is agriculture price supports a result in government holding large inventories of agriculture products.

00:08 Why do you think the government cannot simply give the products away to the poor people? okay, so i have this graph for you.

00:20 Let me zoom it a bit.

00:25 So on x -axis we have the quantity of agriculture products, correct? and on the y -axis we have the price of agriculture products so this is the graph you can have a look on it see the government buys agriculture products from the farmers government purchase agriculture product from the farmers and keep them as buffer stock from where they either distribute okay or they keep it for emergency purposes if some famine occurs in the country okay so in that case it is going to be distributed from the buffer stock itself fine so this buffer stock it is stored the farmers product agriculture products let's say we rise in order to meet the demand during the time of adversities if it arises if government would give away that stock to poor people, then they will not buy from the producers directly, as they will have to pay the market price for that.

01:54 If a middle class person, say, if he is purchasing from the farmer, then he is going to give him some cash or any retailer, let's say, buy his product from the farmer, he'll give a cash.

02:09 And this keeps the economy running.

02:12 But if government simply gives this purpose stock to distribute the grains, wheat, rice, to people or the retailers for a person a, then person a will not give any money because it's government giving them.

02:31 So he has to pay no money or very less amount of money from the government.

02:35 So in this case, the money will not keep moving in the economy, correct? so at this situation, what happens is the demand for agricultural goods from the producers it will fall if government simply distribute.

02:57 Then person why will this person will purchase from the farmer if the government is giving them for free? correct.

03:05 So the poor people will get all the produce from the government.

03:08 It is also possible that they take the produce from the government is just possible that they take the large amount than required okay and further sell it for higher prices fine so the net profit who is making the person a or the retailer not the farmer who is producing who is investing his sweat in the due process of agriculture he'll not get the profit okay which is expected so it is also possible that they take the produce from government a large amount and hold so this will lead to the increase in supply of the good in the market so the effect of decrease in demand first and then increase in supply which can be seen in the graph okay see here we have different agriculture products prices p0 p1 and p2 so when p not was the price the demand was the quantity of agriculture produce was q0 okay which was quite more than the respective to q1 and q2.

04:21 Similarly for price p1 we have the demand or the quantity of the agriculture products is q1...

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