Agricultural Markets

From WikiTextbook

In agricultural markets the prices are most often set by the forces of supply and demand. also in these markets there is the most government intervention. This is because:

agricultural prices are subject to considerable fluctuations- this can cause high prices or low wages for farmers.
low incomes of farmers
protection of traditional rural ways
competition from abroad; therefore the government need to intervine to keep farms in uk in business.

Reasons for large price fluctuations are;

inelastic supply- it's difficult to expand production of foodstuffs in the short run.
supply fluctuations- harvests are unpredictable.
inelastic demand-foodstuffs tend to be inelastic because many are considered basic needs, there are no close substitutes and they account for a small proportion of people's incomes.

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