Question

What, exactly, if the “Farm Problem” --- also known as “The Farmers’ Problems”? Please name and discuss the Supply and Demand conditions that make life difficult for farmers, both “year after year” and “decade after decade”---please take me through the various elements of ‘The Farm Problem” one by one. 2. What, exactly, is a price “support”, also known as a price “floor”? How does a price support work, in theory? 3. In theory, if our government pays SOME farmers $5 per bushel for their wheat, but Supply and Demand intersect at $4 per bushel, WHAT PROBLEMS EMERGE AS A RESULT? 4. In theory, what GOALS does our government try to achieve with a policy of farm price supports? 5. What are some of the possible ALTERNATIVE SOLUTIONS that exist in theory that may get us closer to those goals? 6. Of these possible alternative solutions, which idea may be the best idea, in your opinion? Why? 8. Which idea is the worst, in your opinion? Why? 9. It is the understatement of the century to say that MANY Americans are going through a VERY tough time right now…. In your opinion, do farmers in America deserve “special treatment” by our government? Why or why not?

Answer 1

Farm problem is the great difference between the income which farmers earn which is far less than than of the non-farmers.

There are low price elasticities of demand and supply which leads to price instability. Thus when demand increases, there is a lag which leads to supply not increasing as much as possible, and when demand reduces, the farmers are not able to suddenly cut down on production, leading to less prices.

Additionally as developed economies move towards the market economy, nonfarm payroll will be greater in order to bring the labor force from the farm labor. and thus food prices are also prone to fall further.

2. Price floor puts a limit as to how low a price can go. In theory it should be higher than the equilibrium price, otherwise it won't be effective, because it will lead to losses for the farmers and there will be no surplus.

3. So if the government pays $5 per bushel, but demand and supply intersect at $4 per bushel. So the price floor is higher leading to excessive surplus and incentivising the farmers to produce more bushels in order to earn profits. This will ultimately lead to too much surplus, which will pull the equilibrium price down further as supply will increase as compared to the demand.

4. In theory the government wants to increase farm incomes and producer surplus through farm price supports.

5. Some of the alternative solutions which will get us closer to the goals could be purchase of surplus production by the government so that the quantity is maintained and price doesn't fall. Management of supply by the government which coordinates supply and demand between products to prevent shortages so that farmers get a fair return.

6. Management of supply is the best idea so that the government is able to control hoarding and accumulation, in order to raise farmers income and no single farmer is discriminated because of this regulation.

8. Surplus purchase is the worst, because it destroys the quality of the produce and there should be proper warehouses to monitor that the crop is healthy.

9. They do deserve special treatment because agricultural products are a necessity and if farmers are not helped in this current stage than people won't have goods to consume, especially now with supply chain disruptions, local farmers are the drivers of the economy as the entire global demand has slackened, only local goods can save the local economy in this current stage and they should be the key focus right now in the light of the pandemic.