Price vs. Income Support Price support – Production controls Income support – involves government support of farm income − −Income is supported but price.

Slides:



Advertisements
Similar presentations
Social Goals vs. Market Efficiency Chapter 6: Section 3 Kishan Patel, Harriotte Davis, Katherine Bishara, Sava Patel.
Advertisements

Social Goals vs. Market Efficiency
Social Goals vs. Market Efficiency As a market, we share seven economic and social goals. Sometimes these goals are in conflict with each other. Goals.
U.S. Agriculture Should American farmers participate in a free market?
Agricultural Economics
PARTIAL EQUILIBRIUM ONE GOOD. NO TRADE EQUILIBRIUM PRICE OF BREAD QUANTITY OF BREAD A D PBPB QBQB SdSd DdDd.
CHAPTER 3 Market Equilibrium. CHAPTER 3 Market Equilibrium.
History and Overview of Production Controls and Marketing Quotas Josh Morgan.
The Circular Flow of Income. The circular flow of income The interdependence of goods markets and factor markets.
2.1 Markets Supply Pg 47 Oliver Chang. Determinant of Supply Taxes: increases production costs and reduces supply Subsidies: lowers producers’ costs and.
Price policy analysis in a closed economy setting Economics of Food Markets Lecture 13 Alan Matthews.
Ag Policy, Lecture 11 Knutson, Penn, & Flinchbaugh, Chapter 7 & 5 Dairy Programs Livestock Impact Supply & Demand for Trade.
Elasticity and Its Application
Government Intervention in Agriculture
Government Intervention in Agriculture
Market mechanism DEMAND/SUPPLY. The Circular Flow of Economic Life Products Market Factors Market HouseholdsBusinesses Supply of L,L,C Payments for L,
© The McGraw-Hill Companies, 2008 Chapter 3 Demand, supply and the market David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 9th Edition, McGraw-Hill,
Supply and Demand Models
The imposition of a per-unit tax on Supply Exhibit the effect of the tax on: Pre-tax Price and Quantity Pre-tax Total expenditure on the good Pre-tax Producer.
1 Supply Lecture. 2 Supply Schedule and Supply Curve : Supply schedule : – – A tabular depiction of the numerical relationship between the quantity supplied.
Aggregate Demand and Aggregate Supply. Modeling the Aggregate Economy Aggregate Demand –Aggregate demand is a schedule relating the total demand for all.
Demand, Supply & Market Equilibrium
5.1 – An Economic Application: Consumer Surplus and Producer Surplus.
Ag Policy, Lecture 9 Knutson, 6 th Edition Chapter 7 Price Supports.
Prices as a System Prices help consumers and producers make decisions
PRODUCER AND CONSUMER SURPLUS Colander 8 th ed Ch. 8 (179 – 180) Colander 9 th ed Ch. 7 Baumol Ch. 5 (94-96) 1.
What Is a Farm Bill? Joe’s Long Definition – Shorter Definition – Tells USDA what to do, how to do it, who to do it for, and for how long Ex. Provide food.
Tailoring the U.S. Sugar Program for the Future Jackie Theriot Louisiana Farm Bureau – Executive Committee Sec./ Treasurer.
Agriculture: Farmers’ Problems, Government Policies, and Unintended Effects Del Mar College John Daly ©2002 South-Western Publishing, A Division of Thomson.
Chapter Four: Supply and Demand. The Theory of Supply.
Agricultural Price and Income Policies Agricultural price and income policies are designed to respond to farm problems in the United States.
Chapter 3: Competitive Dynamics How Competitive Markets Operate Market Equilibrium:  The stable point at which demand and supply curves intersect PRICE.
Supply & Demand. Before We Start Economic Terms: Market Competitive Market Perfectly Competitive Normal Good Inferior Good Substitutes Complements Ceteris.
Prices and Decision Making
C hapter 6 Price Ceilings and Price Floors © 2002 South-Western.
Problem #1 Price of Gasoline rises and Autoworkers gain 10% pay raise Price Qty SUV’s D1D1 S1S $30K 2 Mil. E1E1 D2D S2S2.
Ag Policy, Lecture 14 Knutson, 6 th Edition Chapter 7 Target Price Target Price & Loan Rates Introducing the Target Price in 1970’s.
Government Intervention in Agriculture Chapter 11.
Chapter 2 The Basics of Supply and Demand. Topics to Be Discussed n The Market Mechanism n Shifts in Supply and Demand n Short-Run Versus Long-Run n Understanding.
Unit 6 - Profit Maximization of a Purely Competitive Firm n Types of Industries We distinguish between four types of industries: 1.Pure (Perfect) Competition.
Econ 339X, Spring 2010 ECON 339X: Agricultural Marketing Chad Hart Assistant Professor/Grain Markets Specialist
Government Intervention in Agriculture Slides are from:
Jeopardy SupplyDemandEquilibriumGov. Interv. Other Q $100 Q $200 Q $300 Q $400 Q $500 Q $100 Q $200 Q $300 Q $400 Q $500 Final Jeopardy.
THE MODEL OF DEMAND AND SUPPLY Lesson 3 1. LET’S BUILD THE MODEL… 2.
MARKET EQUILIBRIUM  Market equilibrium exists when quantity demanded (Qd) equals quantity supplied (Qs).
SUPPLY & DEMAND. Demand  Demand is the combination of desire, willingness and ability to buy a product. It is how much consumers are willing to purchase.
Chapter 6 Combining Supply and Demand. Equilibrium- where the supply and demand curves cross. Equilibrium determines the price and the quantity to be.
Chapter 3 Demand, supply and the market David Begg, Stanley Fischer and Rudiger Dornbusch, Economics, 8th Edition, McGraw-Hill, 2005 PowerPoint presentation.
$2.50 $2.00 Price Frozen pizzas per week $3.00 $3.50 MB 4 MB 3 MB 2 MB 1
The government of an importing country wants to introduce a policy to support the incomes of its farmers. It is considering making the choice between three.
Prices and Decision Making. Price The monetary value of a product as established by supply and demand Signals: –High prices: producers to produce more.
Effect of a tax on price and quantity S + tax S O P1P1 Q1Q1 D P Q.
Government Intervention in Agriculture Chapter 11.
Demand A Schedule Showing the Consumers are Willing and Able to Purchase At a Specified Set of Prices During A Specified Period of Time Amounts of a Good.
Social Goals v. Market Efficiency. How could economic and social goals conflict? -This is partially the reason government plays a role in the economy.
Fig. 1 The Competitive Industry and Firm Ounces of Gold per Day Price per Ounce D $400 S Market Demand Curve Facing the Firm $400 Firm 1.The intersection.
By Muhammad Shahid Iqbal Module No. 03 Equilibrium & Disequilibrium Engineering Economics.
ECONOMICS: Principles and Applications 3e HALL & LIEBERMAN © 2005 Thomson Business and Professional Publishing Perfect Competition.
Chapter 6 Equilibrium. Price at which the quantity demanded equals the quantity supplied. Intersection of Supply and Demand Curves. Represents the “market.
Revision Achievement Standard 3.1 4credits Demonstrate understanding of the efficiency of market equilibrium Name ______________________.
Changes in Equilibrium!. Equilibrium Review Equilibrium is where quantity supplied and quantity demanded are equal. Graphically, equilibrium is the point.
D1D1 The 4 shifts of the Supply and Demand Curve Shift 1- Demand Away D0D0 S 0 Price (P) Quantity (Q) P0P0 Q0Q0 P1P1 Q1Q1 4. ∆Q S; Movement along the S.
The Basics of Supply and Demand
Demand, Supply, and Market Equilibrium
EQ # 12 – AGEC 105 – November 11, 2013 (5 points)
$100 $100 $100 $100 $100 $200 $200 $200 $200 $200 $300 $300 $300 $300 $300 $400 $400 $400 $400 $400 $500 $500 $500 $500 $500.
SUPPLY & DEMAND.
Chapter 6 Price!.
Market Equilibrium – Consumer and Producer Surplus Graphically, we can identify the areas representing consumer and producer surplus, which.
AGED 570: Teaching H.S. Agricultural Economics
Presentation transcript:

Price vs. Income Support Price support – Production controls Income support – involves government support of farm income − −Income is supported but price is not supported

Price and Income Support (combined) (Basically raises price and thus also supports income) Purchase program − Nonrecourse loan (CCC LR) − Production control (ARP) −

Government Purchase Program Government stands willing to purchase What happens in the market? Will need to know – Where is support price relative to competitive equilibrium? –Impact on Quantity Supplied –Impact on Quantity Demanded by consumers –Quantity purchased by government –Does elasticity of supply and demand matter?

Nonrecourse Loan Why a loan? –Lowest Prices typically at harvest –Allows farmer to store and market Farmer takes out loan from Commodity Credit Corporation (CCC) = loan rate (LR) * production Repayment Options –Sell crop and repay loan plus interest –Forfeit crop (no recourse for forfeiture)

Nonrecourse Loan Rate (Case #1) Is it Price or Income Support? Set below competitive equilibrium Does it matter? –Why not? –Why? $ P 1 D q 1 Q/yr S LR

Nonrecourse Loan Rate (Case #2) Set above competitive equilibrium Does it matter? $ P 1 D q 1 Q/yr S LR q d2 q p2 CCC stocks

Acreage Reduction Program No Nonrecourse Loan What happens? Any guess at why it isn’t drawn as a parallel shift? $ P0P0 D0D0 Q/yr S0S0 q1q1 S1S1 q0q0 P1P1

Acreage Reduction Program With Nonrecourse Loan #1 What happens? Does the LR do anything? $ P 0 = LR D0D0 Q/yr S0S0 q d1 = q s1 S1S1 q d0 P1P1 q s0 CCC Stocks 0

Acreage Reduction Program With Nonrecourse Loan #2 What happens? Does the LR do anything? $ P 1 = P 0 = LR D0D0 Q/yr S0S0 q d0 = q d1 S1S1 q s1 q s0 CCC Stocks 0 CCC Stocks 1

Loan Rate with Export Demand Set above competitive equilibrium in domestic market and above TD curve Does it matter? $ P1P1 DD q1q1 Q/yr S LR q d2 q p2 CCC stocks TD

Loan Rate with Export Demand #2 Set above competitive equilibrium in domestic market and above ED curve Does it matter? $ D Q/yr S LR q dd qpqp CCC stocks TD q ed Export Demand Domestic Demand

Loan Rate Below International Equilibrium Set below competitive equilibrium Does it matter? $ D Q/yr S LR q dd qpqp TD Export Demand Domestic Demand P

Target Price (Case #1) Is it Price or Income Support? Set below competitive equilibrium Does it matter? –Why not? –Why? $ P 1 D q 1 Q/yr S TP

Target Price (Case #2) Set above competitive equilibrium Does it matter? $ P 1 D q 1 Q/yr S TP Q p2 = Q d2 No CCC stocks MP Deficiency Payments

Target Price (Case #2a) Another way to look at this Supply curve vertical until above target price $ D Q/yr S TP Q p2 = Q d2 No CCC stocks MP Deficiency Payments

Target Price & Loan Rate (Case #1) Both set above competitive equilibrium Now what happens? $ LR D Q/yr S TP Q p2 CCC stocks MP Deficiency Payments Q d2 If loan rate wasn’t effective this Would be the market price

Target Price & Loan Rate (Case #2) Target price set above competitive equilibrium and loan rate below market price Now what happens? $ LR D Q/yr S TP No CCC stocks MP Deficiency Payments Q p2 = Q d2

Target Price & Loan Rate (Case #3) Both set below competitive equilibrium What are the impacts? $ LR D Q/yr S TP No CCC stocks MP Q p2 = Q d2

Target Price and Loan Rate with Export Demand Set above competitive equilibrium in domestic market and above ED curve Does it matter? $ DD Q/yr S TP q d2 q p2 No CCC stocks TD LR MP International Demand Domestic Demand Deficiency Payments

Question: How can we get price from current $2/bu to desired $3/bu? What can you do? $ DD Q/yr S TD MP = $2.00

Question: How can we get price from current $2/bu to desired $3/bu? What can you do? –Supply control $ DD Q/yr S TD MP = $2.00 S2S2 Q d1 =Q p1 Q d2 =Q p2

Question: How can we get price from current $2/bu to desired $3/bu? What can you do? –Supply control –Price support $ DD Q/yr S TD MP = $2.00 LR = MP = $3.00 q d2 q p2 Q d1 =Q p1

Question: How can we get price from current $2/bu to desired $3/bu? What can you do? –Supply control –Price support –Export subsidy $ DD Q/yr S TD MP = $2.00 MP = $3.00 q dd2 q p2 Q d1 =Q p1 International Demand TD 2

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.