Instant Access To 100,000+ Essays!

The buffer stock scheme is a scheme where an organisation buys and sells in the open market so as to maintain a minimum price for a product. It is used mainly on primary products such as agriculture, mining, and etc¡K It was designed to even out price fluctuations for producers and to maintain production. An intervention price is set, which is a minimum fixed price. Minimum prices are usually set to help producers increase their incomes. The government may decide that the free market price for wheat is too low a price for farmers to receive and therefore set a minimum price. (fig. 1)This will result in an increase in supply of wheat because farmers can receive higher prices for it. This increase in price then leads to a decrease in demand so there will be an excess supply. Because of this excess, the government has to intervene in the mar