(b) Discuss the possible benefits and drawbacks of government subsidies to agriculture. [12] by CJB

DIAGRAMS

CJBurrows — 2015-11-28 18:01:33 UTC

You can use one or both of these diagrams to assist in your response.

2015-11-30 12:16:32 UTC

Agricultural subsidies enables and encourages food production in a country to be self sufficient. This takes away the heavy reliance on the international food market; therefore, if the outside source suffers poor harvests, the food market will not suffer In the self sufficient country

Rudi.

Nick and Ala

2015-11-30 12:21:26 UTC

Subsidies come with an opportunity cost for the government as funding in other sectors may lack as a result.

2015-11-30 12:24:46 UTC

Governments cannot freely hand out subsidies. Higher tax is (often) required to obtain the funding. An opportunity cost is therefore burdened on the tax payer.

Rudi.

Alan and Nick

2015-11-30 12:32:29 UTC

Benefits to society if the subsidy is imposed on a market that the government believes consumers should consume more of. E.g. Merit goods.

SOME FOODSTUFFS MIGHT BE CONSIDERED A MERIT GOOD i.e. BETTER FOR THE INDIVIDUAL THAN THE INDIVIDUAL THEMSELVES APPRECIATES.

CJB

CJBurrows — 2015-12-01 08:26:45 UTC

1. 'Fairness' - drives down prices to consumers. Food is large % of budget of low income households.

2. Support to farmers. 'Fair' income.

3. Also, EXTERNAL BENEFITS arising to urban populations from 'managed' countryside. Without it risk of depopulation of some rural areas etc.

4. Greater Self-sufficiency - links to Rudi's point above.

5. Better than 'surplus' created by alternative mechanism of minimum prices for farm produce.

CJB

CJBurrows — 2015-12-01 08:30:00 UTC

Total cost to the State (BCDEFG) exceeds gain in producer surplus (BC) and consumer surplus (DEF), so there is a DEADWEIGHT LOSS (G).

Extent of DWL depends upon PED and elasticity of supply.

[This should be explored in greater detail in an essay such as this]