This is the article I will be commenting on: http://dawn.com/news/1053004/india-cuts-wheat-export-floor-price
Recently India has reduced their price floor of wheat from government warehouses to $260 which is a 13% decrease. The reason for this decrease in the price floor is because India currently has huge amounts of unused wheat stored. Analysts say that this will also make Indian grain more competitive and more economically viable.
Recently India has reduced their price floor of wheat from government warehouses to $260 which is a 13% decrease. The reason for this decrease in the price floor is because India currently has huge amounts of unused wheat stored. Analysts say that this will also make Indian grain more competitive and more economically viable.
As you can see from the graph before the reduction in the price floor there was a large oversupply of wheat and also due to the price floor the wheat was also less competitive where as when the price floor was implemented the oversupply was reduced and the wheat is more competitive. The blue area represents the producer surplus after the price floor was reduced, the purple area represents the increase in consumer surplus after the price floor had been reduced and the red area represents the consumer surplus.