Buffer stocks enable supply response without price spikes

Steps:

• Identify the goal: Firms need to boost supply easily when demand rises, avoiding price increases.
• Recall supply elasticity: Events that shift or make supply curve more elastic help meet demand via quantity, not price.
• Evaluate options: Check how each affects production costs, capacity, or market stability.
• Select best: Choose the one that directly supports supply expansion without barriers.

Why C is correct:

• Buffer stock schemes involve government buying surplus and releasing stocks during demand surges, stabilizing supply per price stabilization policy, allowing firms to meet demand via increased availability rather than price hikes.

Why the others are wrong:

• A: Reduces worker skills, lowering productivity and shifting supply curve left, making supply harder to increase.
• B: Raises costs of productivity-enhancing machines, increasing production expenses and shifting supply left.
• D: Strengthens unions causing poor productivity, reducing output capacity and shifting supply left.

Final answer: C