Q1) Explain the effects of low price-guarantee on the price

In most of the developing countries government ensure minimum selling price to producers for some important sectors of the economy. Recent example can be taken from the 'Minimum support price' offered by indian government to farmers for certain commodities.

direct short effect of low price- guarantee.

- hindrance in free flow of market forces.
- lack of possitive transformation in the sector.
- Affects the capacity of government in using resources in alternative and mre important sceme for the sector.

impact on price.
negative.

- hindrance in the growth of sector leads to stagnatation of price of product.
- Inrequent payment by government due to its limited capacity

possitive

- minimum price can provide guarantee to producers, which can encourage production, ultimately leads to decrese in prices.
- minimum income to producers can help with investment in latest technology, which further improoves production and can affects price negatively.