Answer to Question #300566 in Economics of Enterprise for akshitha

Question

What is the economic rationale of 'Minimum Support Price' in Indian agriculture? Explain in not more than 400 words.

Answer 1

The economic rationale of the MSP in India is that it assures farmers of at least the minimum price for their produce from the government even during the bumper period when it is excessive production and supply making the prices fall drastically.