The Effects of Price Ceilings and Subsidies on the Maize Market

The effect of price ceilings and subsidies on the maize market as part of a plan to enhance industrial capacity in developing countries

The agricultural market for maize is affected by uncertainties in the output from farmers' harvest and the income and price inelasticities of maize which result in price fluctuations and income fluctuations. The government for any country always feels it can alleviate these problems by intervening through pricing policies, subsidies, taxation and quotas. Is the government actually helping by involving themselves or are they actually aggravating the situation in agricultural markets for maize? (Sloman, J., 2006)

REFERENCES

Rural Life and Agriculture Tour - Kasame [ Biz/ed Virtual Developing Country], 2001. Government Intervention in the Maize Market: The impact of farming on the environment.

[Online]. Available: http://www.bized.co.uk/virtual/dc/farming/kasame/issue6.htm

Date accessed [2011, April 27]

Sloman, J. 2006. Government Intervention in the market. ECONOMICS. 6th ed. England: Pearson Education Limited.

During the 1970s and 1980s, the Zambian government's aim was to enhance self-sufficiency in the production of maize, alleviate poverty and to reduce or eliminate dependence on imports. The government of Zambia set a price ceiling for maize that was low enough for all Zambian citizens to afford. They also provided subsidies to producers of maize so that they could produce more maize to offset the shortage brought about by the price ceiling they had implemented. Although the yield per farm increased due to the subsidies, many producers left the maize market for crops that fetched higher prices on the market. Ultimately, less maize was produced resulting in more imports of the grain. The government did not achieve its aim of self-sufficiency in the maize market and instead of improving it, it actually worsened it and as a result became more reliant on