Price Floors and Ceilings in the Dairy Industry Research Paper

Price Floors and Ceilings in the Dairy Industry - Research Paper ExampleWhereas it may be convenient to assume that perfect competition subsists within many market places around the world, the fact of the matter is that governments lots provide subsidies and encourage scathe floors and/or ceilings as a manner of ensuring the domestic mathematical product strength of a abandoned industry or enterprise. Oftentimes, this is done as a means of ensuring that the domestic production capability lead remain constant regardless of the shifts and changes in supply and demand that are prove as a function of a true capital market. For purposes of this brief analysis, the author go out cerebrate upon the dairy industry in the existence up value floors and ceilings that are represented throughout. Through much(prenominal) an examination, it is the hope of this author that the reader will come to a more full and complete taking into custody of the means by which these legal injury fl oors and ceilings work to keep something of a static market and values resiliently unchanged apparently regardless of how the market might move at any given time. The obvious rationale for these price floors and ceilings is with respect to the fact that individuals within society, oftentimes the most vulnerable, will not be in riskiness of being unable to afford many of the common nutritional components of a healthy lifestyle. Conversely, these price floors and ceilings exist as a agency of ensuring that producers will not choose to leave the market and a comparatively static level of production capability will be exhibited due to the fact that producers are conscious the fact that they will not make below a given level of profit upon all(prenominal) gallon of milk produced. Firstly, with regards to the social welfare theory that is aptly represented within this particular case, the price ceiling that exists denotes the fact that the individual consumer within the economy will not be expected to pay off more than a given amount for a gallon of milk. This has a powerful impact upon the way in which the domestic economy operates due to the fact that a litany of different products derive their ultimate price based upon the dairy market. Whereas milk itself is the main(a) complement, cheese, butter, protein, way, and a litany of other substances and food products are all derived from the primary milk that exists within the dairy market itself. As such, by creating a price ceiling, secondary and third producers are also given a level of assurance that the cost of production for their individual commodities will not fluctuate greatly from one period of time to the next (Dairy Industry, 2004). This ultimately serves as a type of insurance through which different food producers can rely upon the fact that even though demand for products might change, the supply and price of the compound and goods which are required to produce a given food substance are likely t o remain close to if not exactly the same price as they are within the current market. Comparatively, the existence of a price ceiling within the dairy industry denotes a level of social welfare with regards to the consumer however, a level of subsidization and ultimate profit also exists within this same market when one considers the price floors that exist. The price floors that exists within the dairy market are ultimately a means of assuring the producer that regardless of what shifts market takes, the producer will still be guaranteed a minimum price for each gallon of milk that they produce. This assurance allows the producers to punctuate their industry and develop in a way that they might otherwise not if they were more pertain with the continual shifts and