Oct 21 Ag Supply Dr Chambers

Oct 21 Ag Supply Dr Chambers - 1 AGRICULTURAL SUPPLY...

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Unformatted text preview: 1 AGRICULTURAL SUPPLY SCHEDULES, SHIFTERS, ELASTICITIES (10/21/10) Today: AGRICULTURAL SUPPLY SCHEDULES, SHIFTERS, ELASTICITIES Chapter 5 (Schrimper) AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles Differences in Ag Supply vs Supply for other Consumer Goods Biological/Harvesting Lags in Agriculture Grain/Vegetable production – several months Livestock – several years Fruit/Nuts – several years Timber – several decades AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles Timber – several decades Weather Impacts Perishable Products Ease of Entry? What about Exit? (Specialized Inputs) Homogenous vs Differentiated Products? (Price Taker or Price Setter?) Technology Supply Schedules • Individual vs Market Supply • An individual supply schedule represents the quantities that an individual firm (i.e., seller) will produce at alternative prices, at given place and time, holding all other factors constant AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles Compare/contrast with a demand schedule Underlying Assumptions Production function indicating how inputs can be combined to produce varying quantities of output Maximize profit at the quantity Maximize profit at the quantity where MR=MC Optimal quantities (above AVC) map out short run upply function (schedule) Individual Supply Farmer’s Supply Schedule for Wheat Price (dollars per bushel) Quantity Supplied per Year (Q S ) 3 18,000 5 20,000 7 24,000 9 28,000 Assumptions: Production costs (e.g., price of seed, fertilizer, capital, etc.) remain constant. Prices of straw and other related outputs remain unchanged. Individual Supply Schedule Price P 2 S 1 Do agricultural producers know AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles Quantity P 1 Q 1 Q 2 producers know the market price when production decisions are made? 2 What Factors Do Producers Take Into Account in Forming Price Expectations? Previous or Current Prices Contract Prices Forward Prices AEC 305, Food and Agricultural Marketing Principles AEC 305, Food and Agricultural Marketing Principles Future Market Prices Price Supports/Loan Rates Analyst’s Forecasts...
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This note was uploaded on 01/13/2011 for the course AEC aec 305 taught by Professor Dr.williamm.snell during the Spring '10 term at Kentucky.

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Oct 21 Ag Supply Dr Chambers - 1 AGRICULTURAL SUPPLY...

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