33 - 1 copyright mcgraw-hill/irwin, 2002 economics of agriculture effect of output changes on farm...
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33 - 1Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
AGRICULTUREECONOMICS AND
POLICY
33C H A P T E R
33 - 2Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
ECONOMICS OF AGRICULTURE
Short Run Problem:Price and Income Instability
Inelastic Demand for Agricultural Products
Fluctuations in Output
Fluctuations in Demand
Unstable Foreign Demand
33 - 3Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
EFFECT OF OUTPUT CHANGES ONFARM PRICES AND INCOME
Pp
Pn
Pb
Qp Qn Qb
Small changes in quantity produced...
D
Make large changesin farm prices
33 - 4Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
EFFECT OF OUTPUT CHANGES ONFARM PRICES AND INCOME
P1
P2
Qn
Small changes in demand...
D1
Make largechanges infarm prices
D2
33 - 5Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
Long Run Problem:A Declining Industry Technology and
Supply Increases
Population GrowthAgribusiness
Income-Inelastic Demand
Graphically...
ECONOMICS OF AGRICULTURE
33 - 6Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
P1
Demand Increases...
D2D1
S1
Q1
LONG-RUN FARM PROBLEM
33 - 7Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
P2
P1
Are Offset by Larger Supply Increases
D2D1
S1 S2
Q1 Q2
Technology causessupply to increaseeven more thereby
reducing farmprices
LONG-RUN FARM PROBLEM
33 - 8Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
EthiopiaMozambique
ChinaIndia
BrazilRussiaJapan
FranceGermany
United States
0 25 50 75 100
GLOBAL PERSPECTIVEPercentage of Labor Force inAgriculture, Selected Nations
Source: International Labour Office
33 - 9Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
ECONOMICS OF FARM POLICY
Rationale for Farm Subsidies
Agricultural Adjustment Act of 1933
Parity ConceptParity Ratio
Prices received by farmers
Prices paid by farmers
ParityRatio =
33 - 10Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
ECONOMICS OF PRICE SUPPORTS
• Surplus Output• Gain to Farmers• Loss to Consumers• Resource Overallocation • Other Social Losses• Environmental Costs• International Costs
33 - 11Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
EFFECT OF PRICE SUPPORTS
Pe
D
S
QeQc Qs
Surplus
Ps
Surplus beingcreated by the
subsidies
Q
P
Price SupportLevel
33 - 12Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
ECONOMICS OF PRICE SUPPORTS
Reduction of Surpluses•Restricting Supply
•Acreage Allotment Programs
•Bolstering Demand•New Uses•Domestic and Foreign Demand
33 - 13Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
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CRITICISM, POLITICS, AND REFORM
Misguided SubsidiesPolicy Contradictions
Symptoms, Not Causes
The Politics of Farm PolicyPublic Choice Theory
Changing Politics•Declining Political Support•World Trade Considerations
33 - 14Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
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CRITICISM, POLITICS, AND REFORM
Recent Reform
Freedom to Farm Act 1996
Transition Payments
Expected Outcomes
Emergency Aid
Chapter Conclusions
short-run farm problemlong-run farm problemagribusinessparity conceptparity ratioprice supportsacreage allotments Freedom to Farm Act
ENDBACKCopyright McGraw-Hill/Irwin 2002
33 - 16Copyright McGraw-Hill/Irwin, 2002
Economics of Agriculture
Effect of Output Changes on Farm Prices and Income
Long-Run Farm Problem
Economics of Farm Policy
Economics of Price Supports
Effect of Price Supports
Criticism, Politics, and Reform
Key Terms
PreviousSlide
NextSlide
EndShow
Next:
Income Inequality & PovertyChapter 34