5 billion 200 100 30 billion 10 1 0 billion d 25 0 5

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: year) Harvests, Farm Prices, and Farm Revenues MS0 Pr rice (dollars per tonne) t MS2 400 300 200 $2.0 billion Bumper harvest 100 $2.0 billion $0.5 billion D 25 0 5 10 15 20 Quantity (millions of tonnes per year) Farm Marketing Boards Price floors Quotas Subsidies Hold inventories Price Floor 6 Surplus S 5 Price 4 3 a b Price Floor D 20 21 22 23 Quantity A Quota Quota 6 5 Price 4 3 20 b S a D 21 22 23 Quantity A Subsidy S 6 S less subsidy 5 Price 4 3 D 20 21 22 23 a Quantity How Inventories Limit Price Changes Q1 Price (do ollars per tonne) Q2 Inventory Speculation When production increases.... 400 300 When production decreases... ...to increase supply ...to reduce supply to 20 million. to 20 million. 200 100 ...take 5 million from inventory... i t S D ...send 5 million to inventory... 0 5 10 15 20 25 Inventory Quantity (millions of tonnes)...
View Full Document

This document was uploaded on 03/13/2014.

Ask a homework question - tutors are online