So now the price will go up, and it'll be worthwhile growing mustard seeds again.
It will make sense for some to switch, and some will.
It'd be interesting to have an accounting of what end-of-the-day benefits people got for giving up their mustard.
But has it been studied that this is actually how this plays out with a low-level consumer good like mustard?
It would be a pretty big difference to me.
Lending money today instead of giving money lets leaders and voters today to punt sacrifices to tomorrow’s taxpayers, and of course inflates college tuition prices so the borrowers have reduced purchasing power, as well as future users of the currency.
That is the whole reason lending for college tuition became a thing. Some genius figured out how to cut taxes today while still being able to say they are helping expand access to higher education to poor people and college students.
Across all goods/services, that means richer people would be able to consume less, and poorer people would be able to consume more. Whether or not people sacrifice eating Dijon mustard is up to them.
The goal is not to guarantee Dijon mustard for everyone, the goal is to mitigate how poor poorer people are.
The other way to bring down Dijon mustard prices is for the government to increase supply of Dijon mustard, or remove whatever is restricting supply of Dijon mustard.
You're correct that the new equilibrium would be below 100.
The market will find an equilibrium, but it will involve people giving up mustard because the cost is too high. They have to - there is less mustard. Someone will have to give up consuming mustard and in the medium term it is going to be prices that are the mechanism. That is what prices going up generally mean - the market is shaking some people out so they stop using a product. In the short term I see they have a sign saying "only 1 mustard" or something like that.
I think we’ll have a lot more of these sacrifices coming up in the next thirty years that will hurt a lot more. Coffee is the one that I’m most worried about.
Unless something else (not price action) increases the demand for mustard, its price will not move back to equilibrium. This concept is in Econ 101 (albeit one of the less intuitive concepts taught)
But also it's likely that when the equilibrium point moved, farmers (or other parts of the supply chain) overshot it. That puts us in a price spike, so even if the new normal is higher than the old normal, if you check during a spike you should expect the price to go down.
All foodstuff prices are going up now anyway. And tbh, mustard is like 0.1% of my food budget so if it goes up a bit or even triples in price I won't think twice about it.
I just meant that this will force a new equilibrium, subsidy or not, people will keep growing mustard.
And of course tackling climate change is also a big priority, and renewable fuels are a good option for things that can't be electric (e.g. planes).
The only noteworthy fact is that we got in this situation because it was not a completely free market but a regulated market due to subsidies for rapeseed, artificially increasing their profit margin.
If you price shift a good upwards and the demand remains static, yield per good increases and then supply should increase as suppliers willing to supply at the new price is greater than supplier willing to supply at the old price.
How can this be an assumption? Of course demand will respond to price.
In this context demand is the total desire of the market to consume that good at all, represented by a slope that has an inverse relationship with the price axis.