Question

Show the minimum support price policy with the help of diagram.

Hint:

The MSP is crucial for ensuring that farmers receive a fair price for their produce, and the government’s intervention stabilizes agricultural markets during periods of price volatility.

Answer 1

The Minimum Support Price (MSP) is the price at which the government guarantees to purchase crops from farmers, ensuring a minimum return for their produce. This policy is implemented to protect farmers from falling prices and ensure they get a fair return for their agricultural output. The MSP policy helps in stabilizing the market and incentivizing farmers to produce essential crops.

Step 1: Understanding the Minimum Support Price Policy.
The MSP is set above the equilibrium price to ensure that farmers are assured a minimum price, irrespective of market fluctuations. If the market price falls below the MSP, the government steps in to purchase the crops at the MSP, thus ensuring that farmers are not exploited.

Step 2: Diagram Explanation.
The diagram below represents the Minimum Support Price policy: \begin{center} \begin{tikzpicture} \begin{axis}[ axis lines = middle, xlabel = {Quantity}, ylabel = {Price}, domain=0:10, samples=100, width=10cm, height=8cm, grid=major, xtick=\empty, ytick=\empty ] % Supply and Demand Curves \addplot[blue, thick] {10-x}; % Demand Curve \addplot[red, thick] {x}; % Supply Curve % Minimum Support Price Line \addplot[dashed, thick] {6}; % MSP Line \node at (axis cs:3,6.5) {MSP}; % Label for MSP Line % Labels for Supply and Demand \node at (axis cs:5,4) {Supply}; \node at (axis cs:5,7) {Demand}; \end{axis} \end{tikzpicture} \end{center}
Step 3: Interpretation of the Diagram.
In the diagram above:
- The Demand Curve represents the market demand for the commodity, showing the relationship between the price and the quantity demanded. - The Supply Curve represents the quantity of the commodity producers are willing to sell at each price. - The MSP Line is drawn above the equilibrium price level. This ensures that if the market price falls below the MSP, the government will intervene and purchase the crops at the MSP, thus safeguarding farmers' income.