Marketing Plan

Price stabilization, which refers to the control or dampening of the inflation rate is one of

the primary objectives of Philippine government policy. Price stability, as opposed to high

inflation rates or the rapid increase in the general price level of goods and services, has been

shown to be conducive to long run and sustainable growth of the economy. On the other hand, a

rapid rise and wide fluctuation in price levels is considered undesirable both on the part of

consumers and producers.

Policymakers in general have several ways to stabilize prices. One is through price

control measures such as setting ceiling prices. The other way is through non-price control

measures such as productivity improvement programs and increased investments in

infrastructure and other supporting services. The government may likewise use monetary

policies such as increasing its reserve requirement for banks to siphon off excess liquidity to

control inflation.

In the past, price controls were imposed to restrain the rapid rise in the prices of basic

commodities such as rice, corn, sugar, cement, fertilizer, etc. Price controls have been shown,

however, to result to distortions in production, resulting to inefficiencies and welfare losses. The

government ends up defending and supporting floor and ceiling prices using limited resources

and in effect sending wrong signals to industry. Price control policies have the direct effect on

transferring wealth to individual producers while transferring risk in the opposite direction. It

redistributes wealth and risk within the system, distorting the traditional market free signal

mechanism.

Rausser, et. al. (1982) documented the distortions arising from government instruments

on both domestic and industrial agricultural systems. For instance, the introduction of a ceiling

or floor price means that at this price, the social marginal costs of producing each level of output

will no longer be equal to the social marginal benefits. The payment of a subsidy to importers of

a commodity to cover the