Key terms
- Buffer stock scheme
- A buffer stock scheme keeps a commodity's price between a floor and a ceiling by buying stock when harvests are good and selling it when they are bad.
- Price floor
- A price floor is the lowest price that one can legally pay for some good or service.
Predict first
A bumper wheat harvest is about to push the market price below the scheme's floor. What do you think the agency does?
A floor in a buffer stock scheme is held up by buying, not by law. Buying the extra wheat adds to demand, so the price stays at the floor instead of falling below it.