Price Supports are the opposite of Price Controls, and they are always the result of Producer Cartels.
The inevitable consequence of Price Supports, however, is a Production Surplus.
- In the absence of some form of coercion or collusion, at the support price of Ps, Suppliers will produce for sale a quantity of Qs.
- At the support price of Ps, however, consumers will demand only Qd.
- Leaving the surplus (Qs minus Qd)
And the Unintended consequences of Price Supports stem from the consequences of those Production Surpluses.
Production Surpluses in a market is prima facia evidence for the existence of a cartel.
