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ECONOMICS
Asked by Ilyas

If government subsidies wheat through buying it in a high price, what is its effect to the farmer who is producing rice?

Sorry I posted an answer to this question and had misread the question. If the government subsidises wheat and buys it at a higher price, the farmers producing rice may see an increase in demand as rice is more price competitive than wheat.

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Grace Cooper
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The farmers will have a guaranteed level of income, which will be higher and more stable than their previous income. As a result the farmers and their families will have an improved standard of living. They may also be incentivised today produce more rice as they can gain more producer surplus from each unit, due to the higher price, which may cause them hire additional workers/find new methods of increasing production. Hope this helped!

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Grace Cooper
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