Macroeconomic Theory Applied to Dairy Farms

Using Macroeconomics to Explain Entry, Exit, and Farm Size in the Dairy Industry in the United States

Foltz (2004) applied macroeconomic theory and models to explain farm exits and changes in herd-size among Connecticut dairy farms. Foltz (2004) found that a relatively stable, inelastic demand caused many farmers to exit the industry when excess demand depressed prices. The demand for dairy products remained relatively stable regardless of price; however, excess supply led many farmers to reduce prices in efforts to move their products. Thinning the number of suppliers brought supply in line with stable demand, allowing prices to rise to profitable levels.

Demand, in economics, is defined as the quantity of some product · either a good or a service · that is either needed or desired by one or more consumers · an individual person, a single firm, or a group of individuals or firms. Individual demand is the quantity of a product required by a single entity, while market demand is the sum tota

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Approximate Word count = 734
Approximate Pages = 3 (250 words per page)