Chapters 10 and 11

1

• Chapters 10 and 11

2

• Transportation is critical to Montana
  agriculture
• Large distances to market
• Heavy/bulk commodities
• Few transportation alternatives available (market
  power)

3

• Four truths from economics
• Entrepreneurs will move grain/livestock and other
  goods from one region to another if profitable
• Entrepreneurs will set up feeding and or
  processing facilities in a region if profitable
• Entrepreneurs will do value-added projects if
  profitable
• If a government tries to do (or subsidize)
  something entrepreneurs dont, the project will
  likely lose

4

• Spatial Price Model
• Works for interregional or international trade
  with the appropriate conversions
• Example U.S. and Japanese beef trade
• Begin with zero transfer costs. Excess supply
  and demand
• Add Transfer cost between regions (part of
  marketing margins)

5

• Provided trade is allowed,
• If there is trade between regions, price
  differences transfer costs
• If no trade between regions, price differences lt
  transfer costs

6

• Effects of a decrease/increase in transportation
  costs, license fees/tariffs, exchange rate
• Effects of a supply or demand change in a
  country?
• Unless they change trade direction, changes in S
  and D dont affect price differences this only
  depends on transfer costs
• Extend to more destinations and sources, every
  exporting country sells to their best net option,
  considering the destination price - transfer
  costs