The Effects of Price Control in Japan
If supply is greater than demand, the price of a product will decrease.If demand is greater than supply, the price of a product will increase.This is a simple rule that determines the price of almost all consumer goods.But what happens if the price is too high.What happens if there is a massive shortage or if a war breaks out and the price of everyday products such as sugar or bread skyrockets.Who will protect the consumer?And vice versa, who will protect the seller.This is where the government steps in and imposes price controls.Price controls are imposed to help or protect particular parts of the population which would be treated unequitably by the unfettered price system.
With today’s technology, many farmers around the world find themselves producing far more than they can sell or a surplus and this drives down prices.Therefore to support the farmers, many governments have created price floors to increase the income of their farmers who without them would fail to make a living profit.Japanese agricultural policy so far has focused on maintaining agricultural income by price controls.
During the 1960s, Japan was in a stage of extraordinarily rapid growth.But Japanese farmers still produced more crops, namely rice, then they could sell, and this drove prices down and dwindled their profits.All the while, the industrial sector began creating massive profits.As a result, the income gap between the two was widening.Politicians knew that social and political unrest would result if the situation worsened.And so they began to resort to price controls to protect agriculture.
To increase the farmers’ income, the government placed price floors or price supports on rice and other crops.Therefore, the price of rice would not be determined by the free market but by this set price.The Japanese government set the price floor higher than the equilibrium price or t…


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