buffer stocks Flashcards
What will happen to the equilibrium price of grapes when the government buys up the grapes to put in the buffer stock?
The government is buying up grapes, which means that there are fewer grapes in the market. Supply is therefore decreasing. This will increase the equilibrium price back towards the average price,
What will happen to the equilibrium price of grapes when the government releases grapes from the buffer stock and puts them back on to the market?
The government is releasing grapes on to the market. This means that there are more grapes in the market, so supply is increasing. This will decrease the equilibrium price back towards the average price,
Which of the following shows the likely impact of a reduction in price instability ?
Stable prices make it much easier for investors to predict future prices. This makes it easier for them to predict their future revenue and therefore their future profit. There is more certainty and so investment will increase
Which of the following will occur when the government sets a price range for a buffer stock scheme ?
The floor is the lower limit in the price range and it is set below the average price. The ceiling is the upper limit in the price range and it is set above the average price.
Which of the above combinations shows the impact of an increase in investment ?
More stable prices -> Easier to predict prices -> Higher levels of investment -> Increase productivity -> Decrease unit costs -> Decrease prices -> More competitive -> More profit -> More corporation tax revenue -> More government spending on development
Complete the following statement: Buffer stocks may not lead to growth and development because farmers have an incentive to over. This is because the has guaranteed to buy any excess stock. This means that buffer stocks can quickly become very to run, meaning the government has less money available to spend on .
Complete the following statement: Buffer stocks may not lead to growth and development because farmers have an incentive to over produce . This is because the government has guaranteed to buy any excess stock. This means that buffer stocks can quickly become very expensive to run, meaning the government has less money available to spend on development .
