Chapter 7, Problem 5DQ

To determine

The benefits of agricultural subsidies.

Concept introduction:

Demand:

The willingness of a consumer to buy a commodity or a service backed with his purchasing power is known as demand.

Supply:

A particular amount of product available in the market at a particular price is called supply.

Explanation:

Farmers grow food, which is very important for human survival. However, if farmers do not get any benefit from growing food, then they would surely stop production one day. However if farmers keep increasing their prices, the cost of food will become too high.

Therefore, to motivate farmers to keep growing food and compensate them adequately and keep the price of food low, subsidies are provided to them, so that they increase the production to fulfill the growing needs of the population.

If farmers are restricted from producing food items that contain more calories, then this would directly result in significant decrease in their profits. This decrease in profit would demotivate them to produce further.