Go to the U.S. Department of Agriculture website at www.nass.usda.gov (Links to

Question

Go to the U.S. Department of Agriculture website at www.nass.usda.gov (Links to an external site.)

Select Find Charts or Maps. Under Economics, select Agricultural Prices. Under Prices Received, select one farm product (e.g. Corn, Milk, Wheat, etc.). Has the price of this product seen a general increase, or decrease, or has it remained constant over the past few years?

Compare your selected farm product to that of another classmate’s selection. Do you think Supply increased more rapidly than demand over these years for your product? Or do you think demand increased more rapidly than supply? Explain.

If the government placed a price ceiling or a price floor on this product, what would happen in the market? Explain. (Specify the price and state whether it is a price ceiling or a price floor in your case).

Explanation / Answer

If corn is selected for studying then we find that over a time period of ten years (2006-2015) the price this product has risen from $2 to more than $5 per bushel steadily till the middle of 2008 but after that it has shown a decrease in prices to less than $4 upto 2011. Again, from 2011 to 2013 it is stable at high prices ($6 to $8 per bushel) but then from 2013 to 2015 there is a steep decline in the prices of corn.

Now, if we consider another product like wheat we wil see that there was a steep increase in prices of wheat upto 2008, i.e., $3 per bushel to more than $10 per bushel after which it has declined more or less in the same pattern upto 2010. Then, again, it showed stability of prices in the mid-range ($6 to $8 per bushel) till 2015.

In my opinion, in case of corn there was a decease in supply in the early years but after 2008, the supply was relatively stable. Again, in the period of 2011-2013, demand rose high but supply was not enough as compared to demand, hence prices rose high. But after 2013, the prices steeply fell due to decline in demand for corn.

If the government placed a price floor at $4 per bushel then as prices could not decline below it the farmers would be better-off as they would get their required earning even if there was not demand for corn in the market.

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