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In the context of the economy, what do you understand by the Cobweb theory?
- a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.
- b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.
- c)It is a theory that draws a direct relation between exports and value of a currency.
- d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.
Correct answer is option 'B'. Can you explain this answer?
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In the context of the economy, what do you understand by the Cobweb th...
Cobweb theory is the idea that price fluctuations can lead to fluctuations in supply which causes acycle of rising and falling prices. The farmers are caught in the cobweb phenomenon when they base their sowing decisions on prices witnessed in the previous marketing period.
• So, if the farmer observes a higher price for a specific crop in period ‘t-1’, he would opt to produce more of it in period ‘t’. However, if the production of the crop exceeds market demand, prices fall in period ‘t’, signaling farmers to produce less of the commodity in period ‘t+1’.
• Economic Survey 2019-20 highlights the trend of inflation rate of pulses. Inflation rate of pulses peaked during the years of 2012-13, 2015-16 and 2018-19. And the inflation rates slipped into negatives during 2013-14 and 2017-18. The presence of peaks might indicate towards the presence of cobweb phenomenon in pulses.
• To prevent the occurrence of the cobweb phenomenon, it is essential that apart from existing measures in place to safeguard pulses, farmers, from crop failure/price shocks like market intervention under Price Stabilization Fund (PSF), coverage under Pradhan Mantri Fasal Bima Yojana, PM-AASHA, providing ware houses, improving transportation, price discovery through e-NAM, etc., free export of pulses also needs to be encouraged for India to become self-sufficient in pulses production.
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In the context of the economy, what do you understand by the Cobweb theory?a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.c)It is a theory that draws a direct relation between exports and value of a currency.d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.Correct answer is option 'B'. Can you explain this answer?
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In the context of the economy, what do you understand by the Cobweb theory?a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.c)It is a theory that draws a direct relation between exports and value of a currency.d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.Correct answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about In the context of the economy, what do you understand by the Cobweb theory?a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.c)It is a theory that draws a direct relation between exports and value of a currency.d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In the context of the economy, what do you understand by the Cobweb theory?a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.c)It is a theory that draws a direct relation between exports and value of a currency.d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.Correct answer is option 'B'. Can you explain this answer?.
In the context of the economy, what do you understand by the Cobweb theory?a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.c)It is a theory that draws a direct relation between exports and value of a currency.d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.Correct answer is option 'B'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about In the context of the economy, what do you understand by the Cobweb theory?a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.c)It is a theory that draws a direct relation between exports and value of a currency.d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In the context of the economy, what do you understand by the Cobweb theory?a)It is an economic theory that supports expansionary fiscal policy to increase demand and boost economy.b)It is an idea that price fluctuations can lead to fluctuations in supply which causes a cycle of rising and falling prices.c)It is a theory that draws a direct relation between exports and value of a currency.d)It is a theory that focuses on devising an approach that promotes harmonious economic interactions between humans and nature.Correct answer is option 'B'. Can you explain this answer?.
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