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What Midwest dairy farmers made the government do (the Eau Claire Rule) so they could take advantage of refrigerated trucks and how they hoped to benefit?
There is a Demand-Supply Mismatch in Markets like Idaho, Tallahassee. Eau Claire rule will reduce this by increasing the local supply. Interstate commerce would increase and this will open up new markets for the Wisconsin farmers with the use of Refrigerated trucks. Bonus prices will jack up market prices elsewhere making Wisconsins milk the cheaper option available. Rise in supply of milk due to bonus given to farmers far away from the mid west region.
Supply
Price ($/Gallon)
Demand
Increased Supply
Original Shortage
Price ($/Gallon)
P1 P0
D
Price ($/Gallon)
S1960
S1990
As an example of technology making supply cheaper, lets look at mineral resources over last 100 years.
Quantity (mil Galllon)
Although demand for most mineral resources has increased dramatically over the past century, prices have fallen or risen only slightly in real (inflation-adjusted) terms because cost reductions have shifted the supply curve to the right just as dramatically.
P Mopped up min
by inefficient farmers
Peq
Price ($/Gallon)
Buyers Surplus