Buffer Stock Scheme  

Definition of Buffer Stock Scheme

A buffer stock scheme is a government plan to stabilise prices in volatile markets.

Prices for agricultural products are often volatile because

Buffer stock schemes aim to

If there is a surplus one year, the market price would fall. This is when the government will buy the surplus stocks and store the goods. This reduces supply and keep prices higher.

If there is a shortage in the next year, the government can sell from its buffer stock to reduce prices and increase market supply

Diagram of Buffer Stock Scheme

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The government buy Q2-Q1 to maintain prices at the target price.

 

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