Chapter 14 - Farm policy. After completing this unit, you should be able to: Describe the history and evolution of government agricultural policy, demonstrate how inelastic demand influences agricultural goods’ prices, describe the main components of U.S. farm policy,...
Trang 1Introduction to Economics: Social Issues and Economic Thinking
Wendy A Stock
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Trang 2Ø Describe the history and
evolution of government
agricultural policy
Ø Demonstrate how inelastic
demand influences agricultural
goods’ prices
Ø Describe the main components
of U.S farm policy
Ø Demonstrate the impacts of
price supports in agriculture
Ø Illustrate the impacts of supply restriction policies
Ø Illustrate the impacts of demand enhancement policies
Ø Asses the costs and benefits
of recent U.S farm policy
After studying this chapter, you should be
able to:
Trang 3Ø In 2008, despite a presidential veto and
criticism from the United Nations, the World
Trade Organization, and several other
international and national organizations, a new U.S farm bill was passed
Ø Formally known as the Food, Conservation, and Energy Act of 2008, it is a $288 billion program that finances direct payments, loan and
insurance programs, and a wide variety of other supports for agricultural producers.
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introduction
Trang 4Declining Employment and Increased
Concentration in agriculture
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Agricultural Population as percent of Total
Population in Various Countries
Trang 6Ø Supply-side Explanations:
Technological change and increased productivity
Ø Demand-side Explanations:
Increased incomes and increased population
Forces behind changes in agriculture
industry
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Changes in Demand and Supply of
agricultural goods
Trang 8Ø The elasticity of demand for agricultural
commodities ranges from −0.04 for fluid milk to
−0.7 for pork
Ø The inelastic demand implies that changes in
supply in agricultural markets do not cause large changes in equilibrium quantity but do cause
large fluctuations in price.
Inelastic demand for agricultural products
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Changes in Supply When Demand Is Elastic
and Inelastic
Trang 10Price Changes in Agricultural Commodities
Trang 11Ø A Subsidy is a program of financial or other
assistance given to a business or industrial sector
Ø Four Categories of Agricultural Policies
Ø Price supports
Ø Supply restrictions
Ø Demand enhancement
Ø Income supports
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Agricultural policies
Trang 12Ø A Price Support is a policy aimed at preventing the price of a given good or service from falling below a target level.
legally charged for a good or service.
price support
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Impact of a Price Floor
Trang 14Ø Supply restriction programs pay farmers for limiting production by not planting on some of their acreage.
Ø Supply restriction programs have existed since the 1930s, appearing under titles including acreage
controls, soil conservation, soil bank, and set-aside
Ø Conservation Reserve Program (CRP) provides
payments to eligible farmers when they convert land from farming to conservation use
Supply Restrictions
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Impact of Supply Restriction Policies
Trang 16Ø Demand Enhancement policies raise the prices of agricultural goods by increasing their demand
Ø Demand enhancement policies tend to be targeted toward low-income groups and foreign countries as well as agricultural producers
Ø Food assistance programs, nutrition programs,
international food aid programs, and
government-supported school lunch programs are various forms
of demand enhancement policies
Demand Enhancement
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Impact of Demand Enhancement policies
Trang 18Ø Income support programs include direct payments
to producers of many agricultural commodities,
subsidized crop insurance programs, disaster relief funds, and subsidized loan programs
Ø Income support programs tend to increase the
supply of agricultural products output and reduce
food prices
Income Support
Trang 19Ø Increased Incomes for Agricultural Producers
Ø Higher Prices for Consumers
Ø Higher Taxes
Ø Reduced Competitiveness
Ø Higher Costs for Farmland
Ø Inefficient Use of Resources
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THE COSTS AND BENEFITS OF
AGRICULTURAL POLICY
Trang 20Venezuela in 1999, he promised his people lower food prices He felt this would ensure that everyone would have enough to eat, and farmers and other food producers would not
be lining their pockets with profits made off the poor Chavez set a price ceiling on certain
commodities and quotas on the amount that each producer had to produce What does the demand and supply model predict would
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