Agriculture as an Almost-Constant-Cost Industry: Evidence and Implications

Hans-Erik Uhlin and Kent Olson

Review of Agricultural Economics, 1999, vol. 21, issue 2, 409-423

Abstract: Instead of a significant, positive slope, we argue that agriculture's intermediate-run supply curve is S-shaped with a large, nearly horizontal area in the middle. If the demand curve intersects the nearly horizontal area, farmers lack the economic signals of who should remain and who should leave. Extension and advisory services, rural social development programs, and industrial policies need to be refocused during these periods of indeterminacy and instability. Development of alternative products and resource uses would help move "horizontal resources" to better alternatives, reduce the elastic portion of the supply curve, and create a more stable demand and supply intersection.

Date: 1999
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