2. Are large price movements inevitable in agricultural markets? What other mechanisms might be used to limit such movements?

3. Farmers can eliminate the uncertainties of fluctuating crop prices by selling their crops in "futures" markets(agreeing to a fixed price for crops to be delivered in the future). Who gains or loses from this practice?

The US economy would be not better off without government intervention in agriculture. However, it would not be worse off, either. The US economy as a whole would not be impacted with or without government intervention in agriculture. According to the chapter, it seems that farm prices depend on the economy and not the other way around. Farm prices are dependent, either on Congress setting a price floor through subsidies like set asides and government stockpiles, or to market conditions when there is no government condition. Because of technological advances in agriculture, there are currently less US farmers producing more agricultural products. When government intervention is reduced, as it was in the late 1980's and early 1990's, US agricultural prices

Without any kind of outside supply stabilizing influence, large price movements are inevitable in agricultural markets. The supply of agricultural produce depends on many factors, among which are demand for the product, technology, weather. The Law of Supply states that the higher the supply of a product, the lower the price. Conversely, the Law of Demand states the greater the demand for a product, the higher the price of that product will be. Technological advances in agriculture have less farmers in the US producing more products with less economic cost. Thus, technology allows for a greater supply. Because people can only consume so much, the amount of produce consumed per person doesn't vary greatly on average. This means that the demand for produce is inelastic, that is, consumer response (the percentage change of the amount of produce they demand) doesn't vary greatly whether or not the price of produce or the income of the consumer is high or low. If produce comes out exceptionally well in one year, the supply may be great enough to set a low equilibrium price. In reaction to this, a farmer may do one of two things. Because an individual farmer has no real market power, he cannot necessarily alter market prices of his produce by adjusting the supply he puts out. He may choose to grow and sell an alternate product or he may produce less of this product in hopes of selling this product at higher prices. However, because of the time gap between time when the good is planted and finally sold on the market, agricultural market conditions may be very different than the market the farmer initially responded to. Conversely, a farmer must grow excess goods when prices are high simply in the hopes of cashing in on high prices before they inevitably fall from excess supply. Without g

Some common words found in the essay are:
Law Demand, , agricultural market, government intervention, Law Supply, government intervention agriculture, fixed price, opportunity cost, futures market, intervention agriculture, doesn't vary greatly, market agricultural market, farmers producing, technological advances, price movements inevitable, price paid, agricultural products, inevitable agricultural markets,
Approximate Word count = 1218
Approximate Pages = 5 (250 words per page double spaced)