The Thai producers make ABKI from the sale of wheat in the market, and BCMK from the sale of wheat to the Thai government. Adding these rectangles together is a lot more revenue than the area of DELI that the free market produces.
Sunday, July 22, 2012
Rice in Thailand
The Economist has an article here that explains how Thai government intervention is distorting the market for rice in Thailand. An explanation of the article can been given using Figure 6-1, Wheat Floor.
In this model, D is the equilibrium price and L is the equilibrium quantity. When the government puts a floor on the commodity of A, C is produced but only B is demanded. C-B is a surplus that the government must dispose of either to foreign markets or give to residents at a subsidized price.
The Thai producers make ABKI from the sale of wheat in the market, and BCMK from the sale of wheat to the Thai government. Adding these rectangles together is a lot more revenue than the area of DELI that the free market produces.
The Thai producers make ABKI from the sale of wheat in the market, and BCMK from the sale of wheat to the Thai government. Adding these rectangles together is a lot more revenue than the area of DELI that the free market produces.
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