Tuesday, April 3, 2012

Crop Prices and Farmland

One of the early topics in Prin. of Microeconomics is the idea of supply. While there is not a "law" of supply, which will be revealed later in the course, there is a fairly strong relationship between prices and the quantity of output that firms produce and that relationship is positive. The New York Times recently reported that farmers in Iowa have been increasing the amount of land devoted to farming as crop prices have risen, and this is an outgrowth of this general supply relationship, that as prices rise, firms have an incentive to produce (supply) more output.

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