Final answer:
The Cabinet Committee on Economic Affairs has set the minimum support price for wheat, rice, and pulses. This measure helps protect farmers from price fluctuations and ensures agricultural sustainability but can also result in a surplus when prices are kept above the market equilibrium, which can be costly for taxpayers and consumers.
Step-by-step explanation:
The Cabinet Committee on Economic Affairs has announced the minimum support price for wheat, rice, and pulses. This means that for each of these agricultural commodities, the government has set a price floor, which is a minimum price at which the government will purchase the crops from farmers, ensuring a guaranteed market and income for their produce. Setting a minimum support price is a tool often used by governments to protect farmers from price volatility and to ensure agricultural sustainability.
In economics, the concept of price floors can lead to a surplus where the quantity supplied exceeds the quantity demanded because the support price is above the market equilibrium price. This scenario is illustrated in the context of wheat in Europe where government policies keep the price artificially high, resulting in a surplus. This surplus can have consequences such as government purchasing the excess supply, which can be costly to taxpayers and consumers.
In addition to wheat, commodities like corn and soybeans are also impacted by various factors such as weather conditions. For instance, a drought on the Manchurian Plain in Northeastern China significantly reduced the supply of these crops, demonstrating how environmental factors can shift the supply curve to the left. Conversely, favorable weather conditions can shift the supply curve to the right, increasing the quantity supplied at any given price.