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The Common Agricultural Policy (CAP)

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Introduction

The Common Agricultural Policy (CAP) 1. a. EU producer prices, between 1979 and 1982 fluctuated steadily, where it peaked at a price index of 160 in 1979 and slumped to 145 in 1980. Since 1983, where it peaked at 155, the price index has been steadily decreasing and still was in 1991 where the price index reached 105. World prices have fluctuated over the 13-year period. In 1979, the index price was 100, and 3 years later, it peaked at 115. Since then, it has gradually decreasing and in 1987, it slumped to under 60. ...read more.

Middle

There was also a high intervention price. A minimum fixed price that farmers had to sell their products at. b. c. Some countries, outside the EC may have suffered from the CAP because agriculture may have been a part of their economy. With the CAP in place it drove out competition from outside and hence, a big part of economic growth is lost. The countries unemployment levels will raise as well because all farmers are know out of work. Some countries may have also benefited from the CAP, as they would not know have to pay tax on their agricultural production. ...read more.

Conclusion

In addition, an intervention price will be introduced, the intervention price is similar to that of the target price, but is a price which the CAP would be ready to come into the market and buy any surpluses in production by producers. If this intervention price was above the equilibrium price (the point where demand equals supply) then it will encourage an increase in European production. However, the target price is very high, which therefore, does not fulfil one of the objectives set out by the CAP. The objective states that consumer prices are maintained at a reasonable price, the target price set is no reasonable and therefore a large amount of consumers' income is spent on these goods and services. Created by Shan Visram Europe Module 1 ...read more.

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