Management Notes

Reference Notes for Management

Price policy mainly benefits

Price policy mainly benefits


A. marginal farmers
B. middle man
C. small farmers
D. large farmers

The Correct Answer Is:

  • D. large farmers

Price policies in agriculture can have a significant impact on various stakeholders within the sector. While they can affect different groups in different ways, it is essential to understand that the benefits of price policies are not universally distributed. In this context, the statement suggests that price policies mainly benefit large farmers.

Let’s delve into this assertion, examine why it holds true, and explore why the other options are not as accurate.

Price Policy Benefits for Large Farmers:

Price policies in agriculture encompass various measures taken by governments to regulate and stabilize the prices of agricultural products. These policies can include subsidies, price floors, and procurement programs. Large farmers, often characterized by substantial landholdings and resources, tend to benefit from price policies in several ways:

1. Economies of Scale:

Large farmers can take advantage of economies of scale. They can produce more significant quantities of crops or livestock, spreading their fixed costs over a larger output. When price policies ensure higher prices for their produce, these large-scale operations can yield substantial profits.

2. Access to Credit:

Large farmers generally have better access to credit and financing options. Price policies that support higher prices can enhance their creditworthiness, allowing them to invest in modern equipment, technology, and agricultural inputs.

3. Market Power:

Large farmers often have more bargaining power in the market. When prices are guaranteed at higher levels, they can negotiate better deals with processors, wholesalers, and retailers, further increasing their profits.

4. Risk Mitigation:

Price policies, such as price floors, can provide a safety net for large farmers, reducing their exposure to price volatility. This stability enables them to plan their production and marketing strategies more effectively.

5. Government Support:

In many countries, government support programs are designed to benefit large farmers. Subsidies, grants, and preferential treatment in procurement programs are more likely to benefit larger agricultural operations.

6. Infrastructure Development:

Governments often invest in infrastructure development in regions dominated by large farms. Improved roads, irrigation systems, and storage facilities can benefit large farmers by reducing transportation costs and post-harvest losses.

7. Crop Diversification:

Large farmers have the resources to diversify their crops, taking advantage of price policies that support various agricultural products. This diversification can further increase their income.

Why Other Options Are Less Accurate:

A. Marginal Farmers:

Marginal farmers typically have small landholdings and limited resources. Price policies may not benefit them significantly because they lack the scale to take full advantage of increased prices. Moreover, they often face challenges accessing credit and markets.

B. Middlemen:

Middlemen, such as traders and brokers, may benefit from price volatility but not necessarily from price policies. Price policies are typically aimed at stabilizing prices and ensuring fair returns for producers, which can sometimes reduce the middlemen’s profit margins.

C. Small Farmers:

Small farmers may benefit from price policies to some extent, but the impact is often limited. They may lack the scale and bargaining power of large farmers. However, price policies can provide them with some income stability and protection from market fluctuations.

D. Large Farmers:

As discussed above, large farmers are more likely to benefit significantly from price policies due to their scale, access to resources, and market power.

In summary, price policies in agriculture primarily benefit large farmers due to their ability to take full advantage of increased prices, access to resources, and market power. While small farmers and marginal farmers may receive some benefits, their gains are often limited by their smaller scale and fewer resources.

Middlemen may not necessarily benefit from price policies, as these policies aim to stabilize prices and ensure fair returns to producers. Therefore, the statement that price policies mainly benefit large farmers is accurate based on these considerations.

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