Macroeconomics
Macroeconomics
11th Edition
ISBN: 9781260506891
Author: Colander
Publisher: MCG
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Chapter 5, Problem 3QAP

(a)

To determine

Speed of adjustments in the economy.

(b)

To determine

Relevance of adjustments in the economy.

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Agricultural economists are frequently accused of spending too little time in the real world. A preoccupation with abstract theoretical issues means that agricultural economists are sometimes unable or unwilling to look at the fundamental issues linked to the production and marketing of agricultural commodities. Do you agree or disagree?
The real world is dynamic. If so, why do agricultural economists continue to rely so heavily on comparative statics?
(a) Assume that the markets for sugar cane, rum, and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop. Sugar cane is a principal ingredient in rum, but it is not an ingredient in whiskey. Rum and whiskey are substitutes for consumption.   (i) Discuss the impact of the good harvest on each of the three markets.      (ii) Discuss the effect on the markets for each of the three products if the government implements a price restriction in the sugar cane market with the aim of protecting the farmers. How will this impact the revenues for sugar growers, rum producers, and whiskey producers?      (b) Identify a newspaper article that illustrates a market failure in your assigned Caribbean country. Ensure that you provide a screenshot of the article in your submission. NOTE: Only the following market failures should be examined: public good, asymmetric information, positive or negative…
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