AN ECONOMIC MODEL FOR RICE DIVERSION PROGRAM

Agricultural policies that attempt to increase farm incomes must either raise farmers' receipt or reduce their costs. Government's intervention in the commodity markets can increase receipts and in factor markets can reduce costs. The primary goal of policy is always set to increasing receipts by raising farm prices. Although many mechanisms for accomplishing this end have been tried, they can be categorized into two approaches: reducing supply or increasing demand. For example, production controls can be used to reduce supply, while government commodity acquisitions can increase demand. Other ways to reduce supply include acreage controls and taxes on output. Activities such as government-subsidized consumers program and subsidized promotion of products through advertising are the common ways to increase demand.