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 ?
In the meantime, the problem of milk surpluses--and the cost to government of the price support program--grew larger.
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.
Leonard, Nixon, and Shull (2005) use a sample of 89 international equity CEF IPOs and find no evidence that underwriters extend the price support period.
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.
Tim Farron, Lib Dem MP for Westmorland and Lonsdale and chair of the All Party Parliamentary Committee on Hill Farming, is campaigning for the Government to provide much needed price support for farmers by purchasing much of the livestock that would otherwise have gone to expor t.
Claimlink Secure brings jewelry price support and replacement to a whole new level," according to Alan Fisher, president of Claimlink.
The assessment questioned whether the Dairy Price Support Program, begun in 1933 with the purpose of assuring an adequate supply of milk, was needed in an age marked by "oversupply, consolidation, global trade and environmental impacts.
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.