UGBA 101A Lecture Notes - Lecture 5: Demand Curve

• School: Berkeley
• Department: Business Administration Undergraduate Program
• Course: UGBA 101A
• Professor: Todd Fitch

Document Summary

In this model, the supply and demand curve are both inelastic, hence the curve are both steep (almost vertical). That is, producers are price insensitive and are unable to react quick to market changes, because they need a significant time to produce products. Similarly, demand is also insensitive to price as food is a necessity no matter the price. Therefore, the supply will be less volatile than before using the drought-resistant crops; resulted in more constant output in the long run. The impact to the supply curve is that it becomes more elastic (less volatile). Therefore, there will be less impact on the price than before: i(cid:374) se(cid:272)tio(cid:374) 4(cid:271), the arti(cid:272)le (cid:373)e(cid:374)tio(cid:374)s (cid:862)fi(cid:454)ed dire(cid:272)t pa(cid:455)(cid:373)e(cid:374)ts(cid:863) (cid:894)paragraph 1(cid:895) as support for the far(cid:373)ers. Fixed direct payment is a form of subsidy by the government. Farmers could be benefited by applying this method because they will get a fixed income even though the products/output are uncertain.