Economics (McConnell), 18th Edition

Chapter 19: Agriculture: Economics and Policy

Key Questions

1. Carefully evaluate: "The supply and demand for agricultural products are such that small changes in agricultural supply result in drastic changes in prices. However, large changes in agricultural prices have modest effects on agricultural output." (Hint: A brief review of the distinction between supply and quantity supplied may be of helpful.) Do exports increase or reduce the instability of demand for farm products? Explain.

2. Explain how each of the following contributes to the farm problem:

1. The inelasticity of the demand for farm products.
2. The rapid technological progress in farming.
3. The modest long-run growth in demand for farm commodities.
4. The volatility of export demand.

3. Explain the economic effects of price supports. Explicitly include environmental and global impacts in your answer. On what grounds do economists contend that price supports cause a misallocation of resources?

Chapter 19 Key Question Solutions (29.0K)