What actions might be taken by governments to reduce or limit price Essay - 1

What actions might be taken by governments to reduce or limit price fluctuations - Essay Example The paper tells that the price fluctuation concept is a natural concept, most especially for the seasonally produced goods. This is owing to the fact that applying the law of demand and supply for example in the [production of agricultural products, there will always be surplus during the harvesting time and low supply during the rest of the seasons. This means that the prices will be lower during harvesting, and then increase sometimes later when the season is far from harvesting. Thus, such seasonality is a natural aspect that the government cannot control. However, the government can intervene to mitigate or at least limit the rates of price fluctuations for the seasonally produced goods, through production planning that would ensure that enough products are generated during the season, which can last through the off-season and sustain the demand for this period, thus keeping the prices relatively constant. However, while this strategy may seem to be very practical, the limiting f actor is the perishability of the products. While bulk production can be done to last through the off-season and sustain the demand, how about the products that are perishable, and that cannot last for a few weeks or months without going bad? This calls for the development of a different strategy to address the price fluctuations. Price fluctuations are caused by a variety of economic factors that are at play at any one given time within an economy. New technologies could emerge that causes production to increase, or even the cost of production to reduce, thus causing a reduction in prices. Alternatively, substitutes can emerge which may cause the prices of the existing goods to reduce or increase, based on the nature of substitutes created. Seasonal changes in climates and other environmental factors may cause the supply of goods to reduce, thus increasing the prices of the limited commodities supplied. These factors create uncertainty in the economy, resulting in the prices changi ng with every change of the situation. Thus, measures such as importing in order to cover the deficit in supply, as well as improving the infrastructure to ensure efficient supply throughout the economy, are important strategies