Explain the concept of 'buffer stock' as a tool of price floor. - Vidyadip

Question

Explain the concept of 'buffer stock' as a tool of price floor.

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Answer

Government ensures price Floor/ minimum Support price with the tool called buffer stock.
If government feels market price is lower than what it ought to be, it would purchase the commodity at higher price from the farmers, producers so as to maintain stock.
Government maintain this buffer stock with itself and they real eased in case of shortage of the commodity in future.

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