price support

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Price support

Government intervention to set an artificially high price through the use of a price floor designed to aid producers.

Price Support

A government subsidy that keeps the price for a good or service higher than it otherwise would be. For example, the government may set a price support for milk by mandating that suppliers may not accept anything less than the stated price. Price supports exist to protect the livelihoods of suppliers who cannot afford a price war or anything approaching one; many economists oppose price supports because they claim they interfere with competition and the free market.
Price supportclick for a larger image
Fig. 151 Price support.

price support

a means of supporting the income of certain producers by administratively maintaining the PRICES of their products above market price. In many countries, price support systems are used specifically to assist the agricultural sector by ensuring an adequate level of total farm incomes. In Fig. 151, the EQUILIBRIUM MARKET PRICE is OA. If this price is considered too low to adequately remunerate farmers, the government will set a support price, say OB, at which it is prepared to buy up any unsold output. At the support price of OB, the government is then committed to acquiring the unsold output of CF at a total cost equal to the shaded area CFGH. The main problems with the price support method are that it penalizes consumers and results in wasteful overproduction. The price support method is used as the basis of the COMMON AGRICULTURAL POLICY of the European Union. Compare INCOME SUPPORT. See also AGRICULTURAL POLICY, BUFFER STOCK.
References in periodicals archive ?
For the longer term, the Federation--after extensive consultation with its members--unveiled Foundation for the Future, a plan to end price supports and focus instead on insuring producer margins.
The Dairy Product Price Support Program supports the price of fluid milk at $9.
Department of Agriculture in July announced a temporary increase in the amount paid for dairy products through the Dairy Product Price Support Program, left Holmes and more than 100 New Hampshire dairy farmers breathed a sigh of economic relief.
Department of Agriculture's Dairy Price Support Program is designed to moderate price swings.
Thus, the government was pledged to high price supports until the end of 1948.
import restrictions or price supports on commodities like wool and peanuts-instead of funneling even more money into international ad departments.
There has been a gradual and consistent [EU] move away from previously high levels of market price support and output payments and reduction in the level of support," the OECD said.
At auctions, if the tobacco companies didn't bid for a pile of tobacco for at least one cent more than the price support, the farmer received an advance, non-recourse loan from the co-op or pool.
Much of the increase was in the form of price supports, which lead to higher costs for consumers.
Dairy price supports will be phased out by 2000, thanks to the 1996 farm bill.
A five-pound bag of sugar costs three times what it might without the price supports.