Answer to Question #124623 in Microeconomics for Oumou Diallo

Question

Many industries face shocks (negative or positive). Dairy farmers, for example, faced hardship to deliver the products to the consumers and had to dump milk. Whereas some grocery stores were with empty shelves or imposed quota per customer. See

https://wskg.org/news/dairy-industry-upended-by-covid-19/ (Links to an external site.)

What do you think are the elements of rigidity in the short run for the industry? What kind of policy can alleviate the impact of the shock?

Answer 1

The daily farmers in the United States have faced a negative shock as they were not able to deliver their products to their respective markets on time and even dump their milk. This means that have been experiencing losses in their business. Considering that milk is highly perishable, products that come from milk like butter and cheese have also been affected.

Their business is not doing very well since most of the restaurants have been closed and even lock downs have been imposed this makes their products to even get spoil while they are even in the farm.

Most of the products are not being transported to their respective customers since most of the shops have been closed up and people might not have enough money to open their shops once more.

In the short run market prices will remain constant at this point since the farmers cannot sell their farm products at a loss.

The farm inputs such as fertilizers or even the commercial feeds might fall in terms of prices to enable the farmers adjust to the new prices in the markets.