How does the government regulate price of commodities?
Question: How does the government regulate price of commodities?
Governments regulate commodity prices through various mechanisms to ensure affordability, stability, and fairness. Here are some common methods:
1. Price Controls: Setting maximum (price ceilings) or minimum (price floors) prices for essential goods to prevent exploitation or ensure fair returns to producers.
2. Subsidies: Providing financial support to producers or consumers to lower the cost of essential commodities like food, fuel, or healthcare.
3. Taxation and Tariffs: Adjusting import/export duties to influence the supply and demand of commodities, thereby stabilizing prices.
4. Stockpiling and Buffer Stocks: Maintaining reserves of essential goods to release into the market during shortages, preventing price spikes.
5. Market Monitoring: Observing market trends and intervening when necessary to prevent hoarding, black marketing, or price manipulation.
6. Public Distribution Systems (PDS): Distributing essential commodities at subsidized rates to vulnerable populations.
These measures help governments balance market dynamics while protecting consumers and producers.
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