The Economic Cost (EC) is the Total Cost Incurred by the Public Procurement Agency - Economics Assignment Help

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Task:

Question:-The Economic Cost (EC) is the total cost incurred by the public procurement agency for particular food grain. The EC includes the pooled cost of grain, acquisition cost and distribution cost. In other words, EC is the sum of Minimum Support Price (MSP), and all charges from procurement of grain and storing it in the warehouses. The EC does not include any profit margin or environmental cost in production and subsidy provided for farming. Hence, EC is the minimum level of cost that any private or public agency must undertake. Table 1, provides the all India weighted average EC of Wheat and Wholesale Price (WP). Table 1: Yearly Average Economic Cost and Wholesale Prices of Wheat (Rs per Quintal). Year EC Wheat WP Wheat 2015-16 2127 2102 2016-17 2197 2127 2017-18 2298 2163 Source: EC – Food Corporation of India, WP – Department of Consumer Affairs. For all years mentioned in the table, EC is higher than the WP, which is not sustainable for any economic entity. How would you explain the situation that a wholesaler in the market is selling at a price that is less than the Economic Cost? Explain your answer with the help of wheat produced and sold in Punjab, Bihar, Rajasthan and Jharkhand during 2015-16, 2016-17 and 2017-18.

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