Fig. 90 Income support.
In many countries income-support systems are used specifically to assist the agricultural sector. In the graph, the equilibrium market price is OA. If this price is considered too low to adequately remunerate farmers, the government will set a guaranteed or SHADOW PRICE
, say OB, and thus supplement farm incomes by a deficiency payment equal in the aggregate to the shaded area ABCE. Note, in contrast to the PRICE-SUPPORT
method, consumers still pay the market-determined price OA and producers sell market-determined output OQ.
The UK used the income-support method to assist its agricultural sector prior to joining the EUROPEAN UNION'S COMMON AGRICULTURAL POLICY scheme in 1973. See AGRICULTURAL POLICY.