CAPF AC 2020 Q62: Indian Economy – Agriculture & Rural Development
Fixation of price levels for wheat and rice by the Commission for Agriculture Costs and Prices (CACP) is an example of?
- (a) Administered Price
- (b) Market Price
- (c) Control Price
- (d) Support Price
Answer: (d) Support Price
Explanation
Minimum Support Price
How to think: the Commission's price is a floor.
It supports the farmer if the market price falls below it.
A price that supports is a support price.
| Step | Who |
|---|---|
| Recommends the price | Commission for Agricultural Costs and Prices (CACP) |
| Approves the price | Cabinet Committee on Economic Affairs |
| Buys wheat and rice at that price | Food Corporation of India and State agencies |
The options compared:
| Price | Meaning | Verdict |
|---|---|---|
| Administered price | Fixed by the Government for a good it controls, such as urea | Incorrect |
| Market price | Set by demand and supply | Incorrect |
| Control price | A ceiling to protect buyers | Incorrect |
| Support price | A floor to protect farmers | Correct |
Support prices are announced for 22 crops, before the sowing season.
Answer: (d) Support Price.
Why each option is right or wrong
- (a) Incorrect. An administered price is one the Government itself fixes and enforces for a good.
- (b) Incorrect. The market price is set by demand and supply, not by a Commission.
- (c) Incorrect. A control price is a ceiling that protects consumers.
- (d) CORRECT. The price for wheat and rice is a Minimum Support Price, a floor for farmers.
Key point
Minimum Support Price: recommended by CACP, approved by the Cabinet Committee on Economic Affairs, announced before sowing for 22 crops; a floor price for farmers.
Remember
CACP recommends the Minimum Support Price: a floor for farmers.
Common mistakes
- Saying the CACP fixes the price; it only recommends.
- Confusing a floor price (support) with a ceiling price (control).
- Mixing up Minimum Support Price with issue price, at which grain is sold from ration shops.
Exam tip
Floor protects sellers, ceiling protects buyers. Farmers are sellers, so they get a floor.
Sources
- Commission for Agricultural Costs and Prices — Price Policy reports
- NCERT Class XII Economics — Introductory Microeconomics (Market Equilibrium: price floor and price ceiling)