Chapter 1: Problem 16

During the Great Depression, food was left to rot in the fields or fields that had once been actively cultivated were left fallow. Use one of the principles of economy-wide interaction to explain how this could have occurred.

Short Answer

Expert verified

Answer: The principle of supply and demand can be applied to the Great Depression context by examining the decline in demand for goods and services, including food, due to high unemployment rates and reduced purchasing power. As a consequence, farmers were unable to sell their produce at profitable prices, making it uneconomical to continue production. This led to food being wasted and cultivated fields being abandoned.

Step by step solution

Introduce the principle of supply and demand

The principle of supply and demand is a key concept in economics, which states that the market will reach an equilibrium price that balances the quantity supplied by sellers with the quantity demanded by buyers. Economists use the principle of supply and demand to explain various market phenomena and the interaction between economic agents.

Describe the Great Depression context

The Great Depression was a severe economic downturn that lasted throughout the 1930s. As a result of the depression, unemployment rates skyrocketed, and people's purchasing power significantly decreased. This led to a sharp decline in demand for goods and services, including food.

Apply the principle of supply and demand to the Great Depression

Due to the decline in demand for food during the Great Depression, farmers faced a situation in which they were unable to sell their products at profitable prices. The low-demand environment made it increasingly difficult for them to continue production as they were unable to cover their costs.

Explain how the decline in demand impacted the agricultural sector

Because of the low demand for food, farmers had no incentive to maintain their levels of production. Leaving food to rot or abandoning previously cultivated fields was a rational response, as the costs of harvesting, storage, and transportation would have not generated sufficient revenue to cover these expenses. As a result, food was wasted, and once-productive fields were left fallow.

Summarize and conclude

In conclusion, the principle of supply and demand can be used to explain the phenomenon of food rotting in the fields and the abandonment of cultivated lands during the Great Depression. The sharp decline in demand for goods and services, including food, made it uneconomical for farmers to continue production, leading to a decrease in production and the wastage of food.