Practise explaining how buffer stock schemes operate, analysing effects on agricultural prices, quantities and incomes, and evaluating their effectiveness and limits.
The table shows the market demand and market supply for kiwifruit over a year.
At a market price of $ 3 per kg there is disequilibrium in the market.
Which action would the government have to take to achieve market equilibrium at a price of $ 3 per kg?
impose an indirect tax of $ 2 per kg on kiwifruit
purchase the entire supply at $ 3 per kg and sell at $ 2 per kg
set a maximum price of $ 3 per kg
subsidise kiwifruit production by $ 2 per kg