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Economics AS Unit 1

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    • Thread Starter

    To what extent are subsidies more effective than minimum prices in supporting farmers? need some points...

    (Original post by keenafied)
    To what extent are subsidies more effective than minimum prices in supporting farmers? need some points...
    How many marks?

    -Define subsidies and minimum prices
    -Draw a graph for each (possibly, maybe just for one of them is enough)
    -Talk about the advantages of a subsidy:
    1) Lower costs for farmers, cheaper to produce. Could encourage them to increase output and supply. This would fix a shortage of the good. They could do this by investing in machinery, etc. Eval: However the switch from workers to machinery could increase unemployment? (to an extent)
    2) Could encourage them to lower prices for the goods. More affordable to consumers. Could benefit the poor (depending on the type of good).
    3) Farmers gaining more revenue. Could encourage them to remain in the market and encourage others to join the market. (maybe stop monopolies?)
    -Advantages of Min Price (over subsidy):
    1) Guaranteed income for farmers --> Reduce uncertainty in the market. --> Encourage investment, etc
    2) In a market of high competition, farmers have to drop prices low to compete. Prices could get too low for it to be worthwhile/profitable for them. A min price scheme stops this

    Talk about which points will have a bigger impact. Weigh up both sides.
    Talk about short-run/long-run effects of each, maybe one will be better in a few years.
    Talk about elasticity of supply and demand. E.g. A min price causes excess supply. This could go to waste. I vaguely recall a system where the govt bought the excess supply.
    Talk about assumptions vs reality.

    These are just a few ideas of the top of my head. Try to use chains of reasoning, one effect leading to another. Evaluate each point. Show considerations for both sides. Don't forget to quote from the text whenever possible. The main thing is to show strong understanding and backing up what you say with evidence and reasoning does this.

    I'm doing my AS Economics with Edexcel on Monday. Are you doing the same? Good luck anyway!

    For the macroeconomics paper (Edexcel AS), does anyone know if we need any context when answering questions? i.e. applying the current economic situation to our answers?
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