Price Controls applied by the Qatar Government
Agriculture is also a vital sector in the Qatar economy because of the objective of Qatar, which is food security. Qatar is the main importer of agricultural goods. Price Floors regards the minimum prices put by the government for particular goods and services, which it considers producers to be trading in an unjust market with very low prices, and hence such producers, need some assistance. Price floors become a problem when the government puts them higher than the equilibrium price. Once the prices are higher than the market price, there is a likelihood that there will be a surplus or excess supply. In case this takes place, producers who cannot predict difficulty ahead will make the bigger quantity where the new price crosses their supply curve (Wessels, 2006). Clients will not purchase that many products at a higher price and so those products will end up unsold. There could be a serious economic depression if producers notice that there is insufficient demand, and in reaction reduces production. There exists deadweight loss linked with this decrease in quantity, mirrored in the loss of producer and customer surplus at lesser points of production. This policy can be of benefit to the producers, although only if they have an elastic supply curve and thus they do not have any net loss. This type of government does not favor consumers. They are the losers, as they pay high prices and the certain prices drive some out of the market, as they cannot afford the products. There are many policies of the government for putting up a price floor and handling its consequences. They may put an easy price floor, put production quotas or employ price support. In Price supports, the government puts a minimum price, and then purchases all the surplus or excess supply (Carbaugh, 2011). This is normally more incompetent and expensive for the government and community as a whole than for the government to subsidize the firms concerned. Either the Production quotas increase the price by limiting production using authorized quotas or giving firms incentives to decrease their production. In Qatar, for instance, the government applies these techniques extensively with oil and agriculture. The government compensates the farmers to maintain some parts of their lands uncultivated, hence increasing prices.