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Flashcards in Farm Policy (Exam 2) Deck (8)
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1

2 reasons for government involvement

- Long term decline in agricultural employment (avg. farm size increased, better technology)
- Inelastic nature of agricultural goods

2

Nature of demand in farm policy

- Inelastic
- Increase in supply causes decreases in price and increase in supply traded

3

Subsidy

Program of financial aid and other assistance given to business or industrial sector

4

Price support

- Places legal restrictions on minimum price that can be charged for a good
- Decreases consumer surplus

5

Supply restrictions

- Raise price by placing legal limit on supply of agricultural goods

6

Demand enhancement

- Raise price by increasing demand; generally target low-income groups
- Demand increases, price increases, and quantity increases

7

Income support

- Direct payments to producers of many agricultural commodities; subsidized crop insurance programs; disaster relief

8

implications of support

- Increased incomes
- Increased prices for consumers
- Higher taxes
- Reduced competitiveness
- Inefficient use of resources