Answer to Question #124762 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

High taxes and high costs of production

The government need to provide farmers with subsidy to ensure there increased production for vegetables.Also the government should reduce taxes levied on these product to enhance productivity.