Buffer Stocks - Term Paper - Free College Essays, Term.
Buffer stock. A buffer stock is a system or scheme which buys and stores stocks at times of good harvests to prevent prices falling below a target range (or price level), and releases stocks during bad harvests to prevent prices rising above a target range (or price level).The buffer stock scheme is a scheme where an organisation buys and sells in the open market so as to maintain a minimum price for a product. It is used mainly on primary products such as agriculture, mining, and etc. It was designed to even out price fluctuations for producers and to maintain produc.Buffer stocks are excess supplies of foodstuffs bought and stored by the government, usually for the purpose of stabilizing commodity prices. For example, a government might buy up hundreds of thousands of bushels of corn when the price is falling to shore up demand.
A buffer stock scheme (commonly implemented as intervention storage, the “ever-normal granary”) is an attempt to use commodity storage for the purposes of stabilising prices in an entire economy or, more commonly, an individual (commodity) market.(1).Then you can talk about how a buffer stock is supposed to work (like you said, stabilises the price etc.) and then talk about where it might fail (high administrative cost, opportunity cost, the target price is often set too high due to political pressures) and then maybe end the essay with other possible methods of intervention, finally.
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