WAEC Economics 2025 Theory — Question 4

Model answer

(a) Minimum price control is the lowest price below which a particular commodity must not be sold; it is usually set above the equilibrium price to protect producers, especially farmers. (b) Reasons for setting minimum prices for agricultural produce: (i) to protect farmers from exploitation by buyers and middlemen; (ii) to stimulate/encourage farmers to produce more; (iii) to prevent unstable farmer incomes caused by price fluctuations. (c) Disadvantages of minimum price control: (i) it increases government costs, as the government may have to purchase the excess supply; (ii) it may lead to excessive supply of agricultural produce, leading to wastage; (iii) it may encourage smuggling, since prices are set above the equilibrium price.