As Given In The Article The Dairies In Maharashtra Demanded For Subsidy On Pouched Milk
As given in the article the dairies in Maharashtra demanded for subsidy on pouched milk. This is because they are facing losses against milk powdered manufactures, previous year the powdered milk industry demanded the subsidy and the government accepted it, so the demand of pouched milk decreased.
Government intervention(1government intervention are Regulatory actions taken by a government in order to affect or interfere with decisions made by individuals, groups, or organizations regarding social and economic matters.)1, in the above case the government is influencing the milk powered industry by giving subsidy. Subsidy (it is a payment from the government to an individual or firm for the purpose of increasing the purchase of supply of a good, this is given for merit goods)
The above figure shows the subsidy graph, as we can see the government has given the subsidy to the powdered milk previous year so market share of the powdered milk industry increased from QE to Q1, because of subsidy the price decreased from PE to P1 for the consumers, the producer profit or the burden on government is PD to P1. Thus, the stakeholders of both milk industries were impacted by this subsidy.
The impacts on the stakeholder of powdered milk industry were:
The producer will be getting more profit and will produce more PE to PD. the overall demand for the powdered milk has increased as the consumer has to pay less PE to P1 but there is a financial burden on the government when they give subsidy. Whenever government imposes subsidy the burden is actually on the consumers in the form of increase in taxes.
This subsidy given to the powdered milk led to decrease in the demand of pouched milk (shift in demand), as they are a close substitute of each other. So some producers left this industry due to heavy losses also in this type of industry the entry and exit barrier are very weak. These goods are very elastic so a little change in price or non price factor can lead to great change in
Government intervention(1government intervention are Regulatory actions taken by a government in order to affect or interfere with decisions made by individuals, groups, or organizations regarding social and economic matters.)1, in the above case the government is influencing the milk powered industry by giving subsidy. Subsidy (it is a payment from the government to an individual or firm for the purpose of increasing the purchase of supply of a good, this is given for merit goods)
The above figure shows the subsidy graph, as we can see the government has given the subsidy to the powdered milk previous year so market share of the powdered milk industry increased from QE to Q1, because of subsidy the price decreased from PE to P1 for the consumers, the producer profit or the burden on government is PD to P1. Thus, the stakeholders of both milk industries were impacted by this subsidy.
The impacts on the stakeholder of powdered milk industry were:
The producer will be getting more profit and will produce more PE to PD. the overall demand for the powdered milk has increased as the consumer has to pay less PE to P1 but there is a financial burden on the government when they give subsidy. Whenever government imposes subsidy the burden is actually on the consumers in the form of increase in taxes.
This subsidy given to the powdered milk led to decrease in the demand of pouched milk (shift in demand), as they are a close substitute of each other. So some producers left this industry due to heavy losses also in this type of industry the entry and exit barrier are very weak. These goods are very elastic so a little change in price or non price factor can lead to great change in