ECON 2200 Lecture Notes - Lecture 8: Grain Elevator, Economic Equilibrium, Normal Good
16 Dec 2016
School
Department
Course
Professor
Document Summary
Why were farm prices falling so rapidly relative to other prices? (why were they experiencing adverse & worsening terms of trade?) Supply issues: world (domestic + international (canada, nz, australia, argentina)) agricultural output increased. Supply curve shifted majorly to the right and the equilibrium price went down; demand increased but not as much as supply so price was not totally mitigated. Demand issues: u. s. population rose (increased d), but: supply of agricultural products grew more rapidly than the demand for agricultural products grew, food demand is price inelastic. How much does quantity demanded go up when price goes down. Recall that price elasticity of demand (ped) = % change in qd / % change in. Recall that income elasticity of demand (ied) = % change in qd / % change income (assume normal goods) Thus, u. s. farmers had to export surplus:
