Homework 2- Drousche

Homework 2- Drousche - Tammy L. Drousche 19 February 2007...

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Tammy L. Drousche 19 February 2007 Homework 1 Assignment: Read chapters 4, 5, and 6 in your textbook and answer the following questions. Please submit through the assignment tool in Vista by 10:20 am on Monday, February 19 , 2007. 1. Under what circumstances could there be large variances from one month to another, or one year to another, in the amounts demanded of a commodity at any particular price level? Demands for food are fairly steady in general. Large shifts in demand for food are unusual, but when they do occur it could be for various reasons. Large increases or decreases in demand for food could be seasonal (Turkeys at Thanksgiving or eggs at Easter). Recessions, inflation, and other significant influences in disposable income can change food demand overall. A large shift recently was the increased demand for meat due to the wide adoption of low carb diets. A sudden jump in foreign demand can occur because there was a harvest failure in either the importing nation or in a competing exporter. War, politics, and weather can also cause large shifts. 2. List three factors, besides the weather, that can influence the amount of farm commodities supplied. Perishability can influence the amount of farm commodities supplied. This is because of the costs involved with storage. Labor strikes can affect how much a farm commodity is supplied. Prices can also affect the amount of supply. Producers will increase products produced when they anticipate very profitable prices and vice versa. 3. Discuss the following statement:.”Low prices cure low prices and high prices cure high prices.” Explain how such prices lead to a better allocation of resources. This saying is related to the level of anticipated profits. Producers plan to increase production when they anticipate profitable prices and decrease when anticipate low prices. As a result of this, prices perform the function of guiding production. This leads to a better allocation of resources. 4.
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Homework 2- Drousche - Tammy L. Drousche 19 February 2007...

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