price support

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Related to price support: price control

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 ?
Federal Milk Marketing Orders regulate milk marketing across state lines but within explicitly defined regions and are designed to provide price support and market stability.
We saw [Energy Secretary] Ed Davey last week and we're engaging with officials together to go through some of the details, in particular the contractual details for renewable energy price support.
The one thing the price supports never take into account is increased crop and fuel prices, and we were seeing those at the same time the financial crash took place last fall.
The Western States Dairy Producers Trade Association, representing groups whose members own 40 percent of the nation's dairy cattle, has called on the USDA to go beyond an increase in price supports, and buy 100 million pounds of cheese for distribution through food banks.
It is simply essential that the Government offers price support for those farmers affected by foot-and-mouth.
However, the government still thinks it needs to manage this modern industry's surplus inventory with the Dairy Price Support Program.
In 2001, because of the threats to the auction and price support systems, the co-op started two marketing centers as a pilot program to see if these efforts would benefit their farmer-members.
A spokesman said: "The price support mechanism put in place in 1996 was designed to ensure the lowest fuel prices possible for Statoil customers.
The purchase-for-destruction will be replaced from today by a "special purchase scheme" which will provide price support only for the destruction of cows and heifers.
PFD is being extended, and Irish steers will remain eligible instead of being pushed out into the weaker price support environment of a tender-based intervention system.
Price supports and payments based on output accounted for three quarters of this sum, but a number of ad hoc emergency packages - which are theoretically less trade-distorting - risked generating expectations of continued support which could alter future production decisions, the OECD said.
Regarding the pricing of produce, the officials say the bill is market-oriented, and that it aims to replace direct price support with a subsidy to farmers to stabilize their income.