Simple Economics

Jim Webster

Holstein friesian cows walking to milking shed, Biddulph Hall farm, Biddulph, Staffordshire, England, United Kingdom

The price of food is inelastic. This means that if the output of food increases, you won’t eat more. Even if the price drops you’re not going to eat an extra meal a day.

If the output falls, then you’re not going to say, ‘fair enough, food’s too dear, I’ll only eat every other day, not a problem.

In times for famine people sell their children.

The problem is that over long experience (about four thousand years) it’s been discovered that round about a 5% shortfall in production produces major food price rises as people scrabble to buy it and a 5% over production produces major food price crashes.

It’s always been true, (get hold of the book ‘The Grain Market in the Roman Empire’ for example)

Because of this, the basic rule in agriculture has been that farmers go bust in years of plenty and make money in famines.

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