经济学第三章.pptVIP

An Australian story: the wheat industry wheat farmers have experienced a decline in net returns (or profits) supply and demand factors have resulted in the long-term trend for price levels is downwards supply wheat yields increasing increased efficiency and adoption of technology new varieties of grain better suited to the Australian environment supply curve shifting outwards demand side the demand for agricultural products is price inelastic relatively steeply sloped demand curve the income elasticity of demand for agricultural products is low increase income increased demand but not by much Price (dollars per bushel) Quantity (millions of tonnes) 0 Q11960 output P1 1960 price Supply2010 Demand1960 1. A large shift in supply due to rapid productivity increases … 2. …and a small shift in demand due to low income elasticity … 3. …results in a large decline in price. Demand2010 P2 2010 price Q2 2010 output Supply1960 An Australian story: the wheat industry An Australian story: the wheat industry “ok, that was modelling what has happened, but how useful is that? I still don’t get why economics is useful” The model not only explains what happened, but allows us to do what if type analysis eg what if farmers increased wheat output by another 10%? what would that do to the prices they received and their incomes? Government can then determine future agriculture policy based on the analysis And finally… We have covered? price, income and cross price elasticity of demand and price elasticity of supply determinants and how they are calculated the relationship between the price elasticity of demand and total revenue use elasticity to analyse economic issues What do you do now? read or re-read Hubbard. (2010) Chapter 4, your notes, listen again to the lecture recording focus on what you did not understand in the lecture fill in the missing gaps any problems consultations prepare for the tutorial information on Blackboard take any problems along with you to y