The Effect of a Change in Wheat Prices on Incomes

The effect of an exogenous change in wheat prices on the welfare of farmers, middlemen, consumers and the government is analysed in” a partial” equilibrium framework under a wide range of elasticity assumptions. The resulting computer simulations yield the tradeoffs for various policies. Although pareto optimality calls for equating the consumer, producer and international prices, this policy cannot be followed with abandon because of its adverse effects on consumers.