3.2 Methods and effects of government intervention in markets

Question 1

Define the term “Maximum Price”

Answer 1

A price that is fixed ; the market price should not exceed this price ; sometimes it is called a price ceiling.

Question 2

Define the term “Minimum Price”

Answer 2

A price that is fixed; the market price should not go below this price; it is sometimes called a price floor.

Question 3

Define the term “Buffer Stock Scheme”

Answer 3

A type of commodity agreement designed to limit price fluctuations.

Question 4

Define the term “Incidence”

Answer 4

The extent to which the tax burden is borne by the producer or the consumer or both.