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Essay example - Floor pricing of wood in Australia

Finance & Accounting
Pages 3 (753 words)
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Floor pricing of wool in Australia Abstract The paper deals with the economic mechanism of imposing floor price in the wool industry in Australia from the period 1974 to 1991 which brought with it severe agricultural financial disaster with reference to the book, Breaking the sheep’s back by Charles Massey a wool grower and merino ram breeder in New South Wales…

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Australian wool industry was quite booming during 1950-1951 and during that period Australia was said to be ‘riding on sheep’s back’. But the scenario changed and the wool prices fell drastically and revenues squeezed. In order to stabilize the situation, from 1971 a Wool Deficiency Payments Scheme functioned for two years. But after that within 1974 and 1991 the Australian Wool Corporation (AWC) introduced a minimum reserve price with the aim of stabilizing the future wool price movements. The idea was to purchase wool which did not achieve the agreed floor price and then selling the wool later in times of high demand (Australian Bureau of Statistics n.d.). Floor Pricing & Australian wool industry Floor pricing Sometimes the government may legally fix the minimum price at which the sellers may sell a particular good or service. Such price is known as floor price or the minimum support price. Floor price benefits the supplier of a good or service. Floor price is fixed to assure the producers that they would get a remunerative price for their product. The floor price will motivate the producers to produce more by ensuring that they will get a minimum reasonable price for their product. ...
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