Why might a government impose a price floor on agricultural products?

A government may impose a price floor on agricultural products primarily to ensure that farmers receive a minimum income. This intervention helps stabilize the income of farmers in the agricultural sector, which can be particularly volatile due to various factors such as weather conditions, changes in demand, and global market fluctuations. By setting a minimum price that must be paid for these products, the government helps protect farmers from prices that might drop below a sustainable level, thereby encouraging agricultural production and reinforcing food security.

Imposing a price floor can also have broader economic implications, such as maintaining rural livelihoods and avoiding the social issues associated with farmer poverty. This is especially important in economies where agriculture plays a significant role in employment and overall economic activity. A stable income supports not just farmers but the entire agricultural supply chain, contributing to food production and rural development.