Question

Some farmer groups want the government to legislate minimum price laws for their product – much like the minimum wage laws. If the government were to accept their proposal and guarantee parity prices for all agricultural produce (except those covered by supply-managed marketing boards), discuss: Which national and agricultural goals would be served? Who would gain and who would lose? What would happen to the price of resources in agriculture? What would be the long-term consequences of this policy on Canadian agriculture and on farmers’ incomes?

Answer 1

Answer

Agriculture will be more profitable and it will give incentive to produce more. Agricultural income will rise and share of agriculture in national income will increase. With minimum price laws farmers will gain who are directly involve in agriculture will gain, wages of agricultural labor will also rise and price of inputs used in agriculture will also rise, thus agricultural labor and input producers will also gain. While consumers of agricultural products will loose. This policy may have negative impact on global competitiveness of agricultural products. prices of resources in agriculture such as land, tractor and labor will also rise. In the long run agricultural farmers will become more self sufficient but the domestic demand for agricultural products will fall as consumers elasticity of demand will increase in long run. Agricultural imports may also rise, however the impact on farmer's income will be uncertain as input prices will rise and demand for domestic agricultural products would fall.