D44MCMtor Faming Saturday, December 14, 1985
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Elasticity of demand-an
economic term that is so important
to agriculture and so misun
derstood by farmers and con
sumers. The other day I was
reading a letter to the editor in a
national farm magbazine where
the writer had totally misun
derstood the term. He had figured
out that there was no surplus
because he could always sell his
wheat any time he wanted to haul
it to the mill. He figured the sur
plus problem was invented to beat
down farm prices. But he wasn’t
reckoning with elasticity of
demand.
Economists talk about demand
as the amount of something that
people need. But they go on to point
out that within certain limits
people will buy more or less of
something they need at different
prices. They buy more as the price
comes down-less as it goes up.
Let’s take milk for example. As
farmers produce too much milk
the price has to go down to get
people to buy it. In a free market,
consumers and farmers arrive at a
price that will clear the market.
All milk produced is sold. But the
market isn’t exactly free, and over
a period of time dairymen have
developed the ability to produce
Jake, did I ever get Good Buys
at BINKLEY & HURST BROS.
CASH & CARRY DAYS SALE!
r Luke, I was there when the
doors opened Dec. 9th, and I’m
going back before the sale ends
,J)ecT 31st for more good buys!
You remembered what I told you,
Jake... The Early Bird gets
the bargains! >
: BINKLEY & HURST BROS., INC.
133 Rothsville Station Rd., Lititz, PA 17543
Located 1 ? Mile North ol Rothsville
fPH: 717-626-4705
Hours Mon Fn 7A M SPM,
Sat 7AM 11:30 A M Sun. Closed Lord's Day
77^
y
j Farm
Talk
Jerry Webb
more milk than consumers will
buy at what fanners call a fair
price.
Then someone thinks of a way to
pull this excess off the market. But
there’s another economic law at
work.
When people have satisfied their
basic needs, only lower prices will
encourage them to consume, more.
After you’ve eaten one steak you
wouldn’t pay much for seconds.
Small amounts of extra produc
tion, then, can have a disastrous
effect on prices.
But the reverse is also true. By
cutting back just a bit on
production, prices take more than
a proportionate climb. This means
farmers as a group can produce
less and make more money.
Economists call this inelasticity.
Food, including milk, tends to have
an inelastic demand. In contrast,
the demand for automobiles tends
to be elastic. Most of us could use
another car quite easily.
This seems to be one of the most
difficult principles to explain to
farm surpluses and scream at the
folly of paying farmers not to grow
things. Or of buying up the excess
they have already grown.
But remembering’ the low
stretching point connected with
Thanks, Luke! I’m going i
' irough that 20 page flyer
igain and heading back
INKLE Y & HURST - they
have something for
everyone!
Penn State offers swine correspondence course
UNIVERSITY PARK - The
animal science staff at Penn State,
with staff from agricultural
engineering, veterinary science,
and agricultural economics con
tributing lessons, have written a
course about swine.
CommnU Soto PtoimMm mi
Marketing, a correspondence course
available from Penn State, is a
comprehensive guide for the
commercial swine producer or
farmer with a hog enterprise.
This 16-lesson course includes
information on planning and
financing the enterprise, buildings
and equipment, improving the
swine herd through breeding,
feeding and nutrition, marketing
live hogs, and all aspects of swine
health.
Complete information is given on
levels of performance of boars and
farm demand, it’s easy to see that
without some effort to control farm
prices, we could be in a much
larger mess than we’re in now.
For instance, a 10 percent over
production of milk has kept the
dairy business depressed for
years. A little too much means a
weak market and low prices.
On the other hand, a 10 percent
shortage compared to what con
sumers think they want, and prices
would take a tremendous jump.
That’s why some people can get
so excited about holding actions
and other efforts to reduce sup
plies. There are lots of ideas for
holding down output-thus boosting
prices. Some have worked, some
haven’t. Some haven’t even been
tried.
A lot is made out of the efforts
that don’t work. And consumers
complain about the ones that do
work. It seems the farmer can’t be
a hero no matter what happens.
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I i
i {
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I That Lasts |
! AU Year... »
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| i SUBSCRIPTION TO— !
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i Fuming j
* I
| Clip And Mail This Coupon To: S
| LANCASTER FARMING |
1
ONLY *7.50 PER YEAR
or
*13.00 FOR TWO YEARS
In PA, NJ, MD, DE. NY, VA & WV
(Other Areas $14.00 Per Year or
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PLEASE SEND LANCASTER FARMING TO:
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GIFT CARD TO READ FROM
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