Describe the short-run situation in U.S. agriculture. What are its causes?

What will be an ideal response?


In the short run, there are frequent changes in the incomes of farmers from one year to the next. One cause is the inelastic demand for farm products. This elasticity of demand for farm products is about 0.20 to 0.25, which means that a 40 to 50 percent fall in price would be necessary to get a 10% increase in the quantity demanded for farm products. Another cause is fluctuations in output from year to year. Given the inelastic demand, small changes in output result in large changes in farm incomes. Bumper crops reduce farm incomes for all farmers and poor crops increase farm incomes for those farmers that are able to produce. A third cause is fluctuations in domestic demand. A slight fall in demand can produce a large fall in income whereas an increase in demand can cause a sharp rise in income. This volatility is again the result of the inelastic demand for farm products. Finally, American agriculture has become increasingly dependent on foreign demand for agriculture products. This foreign demand also fluctuates and can be more unstable than domestic demand.

Economics

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Economics

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Economics

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Economics

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Economics