Chapter 19 Notes

Chapter 19 Notes - eco202 Prof Jui-Chi Huang CHAPTER 20...

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eco202 Prof. Jui-Chi Huang eco202ch20Spr04.doc CHAPTER 20 AGRICULTURE ECONOMICS AND POLICY ± Economics ± Policy ± Criticism, Politics, and Reform o One of the nation’s largest industries; o Real world example of pure competition (without government farm programs); o Example of government policy interfering with the forces of supply and demand; o Reflects the increasing globalization of markets. ECONOMICS o Agricultural prices and incomes are volatile in the short run because an inelastic demand converts small changes in farm output and demand into relatively larger changes in prices and income. o Technological progress has generated large increases in the supply of farm products over time. o Increases in demand for farm products have been modest in the U.S., because demand is inelastic with respect to income and because population growth has been modest. o The combination of large increases in supply and small increases in demand has made U.S. agriculture a declining industry. 1. Short-Run Farm Problems – Price and Income Instability : a. Inelastic Demand for Agricultural Products b. Fluctuations in Output c. Fluctuations in Demand 2. Long-Run Farm Problems – A Declining Industry: d. Over time, the SUPPLY of farm products has increased rapidly because of technological progress. 1. Technological Progress – a. The mechanization of farms; b. Improved techniques of land management; c. Soil conservation; d. Irrigation (watering technique); e. Development of hybrid crops;
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Chapter 19 Notes - eco202 Prof Jui-Chi Huang CHAPTER 20...

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