Let's look at chapter six with the gilded age and the plight of farmers. So, the idea earlier in the early 1800s and late 1700s, came from Thomas Jefferson that the ideal job, or the ideal American, was that of being a yeoman farmer, which means independent in running his own small farm and valuing liberty and freedom. This idea starts to change in the late 1800s with the Second Industrial Revolution because, essentially, as the country is industrializing, agriculture is becoming a relatively smaller share production. Yes, there's more, there's more agriculture that's going on, but as a share of all production, it's a much, much, much smaller share compared to the industrialization. So here, when we start from the 1860s to the 1870s, these yeoman farmers are actually prospering, and I'm going to use John Deere as an example, and John Deere is a real guy from the period. John Deere invents something called the steel plow, should say innovates, because he didn't invent the plow and he didn't invent steel, so he put two ideas together and that's what innovation is. Here's the price and here's the quantity, but we are just going to look for one farmer, which would be John Deere, and if we'd look at just one farmer, farmers operate in what we call a perfectly competitive market. It's highly competitive, and therefore, farmers are going to be, individually, price takers, and you might remember from principles of micro, that means that the demand curve that one individual farmer faces is perfectly elastic. So if this is, let's put a price. If this is five bucks per barrel of wheat or bushel of wheat, then each and every one can be sold at five bucks, and the individual farmer's such a small person in the market that he or she does not affect the price, can sell as much as he or she wants. The individual farmer faces a marginal cost curve here, and here's with the iron plow, and this demand curve is the marginal revenue curve because each and every, which is equal to the price, because each and every one we'd sold for five bucks. So that's the additional revenue earned, and basically this farmer, John Deere, here, equates to marginal revenue to the martial cost of production, and decides to produce this much here, and, of course, this price. Now, the thing is that one day John Deere is thinking, and he says, "Hey, that steel stuff's pretty good compared to iron. Iron wears out. I gotta sharpen iron more. Iron breaks more frequently, much more frequently. If I didn't have to replace my plow as much, and I made it out of steel, I can be much more productive and spend more time plowing the fields." So, when John Deere invents or innovates the first steel plow, what that does is it lowers his marginal cost production. I'm just going to shift the marginal cost curve down like that. So, as profit-maximizing now for John Deere, to increase his production, new marginal cost, marginal revenue, he wants to increase his production, and by now you should know how to find producer surplus and total revenue to John Deere, and you'll see that producer surplus will be higher, so John Deere will be happier, and total revenue, as well, to John Deere is going to be higher too because he sells a larger quantity at the same price, so John Deere is better off. So, farmers are innovating things like this. You got Glidden who invents barbed wire, similar idea with ranching, and this makes these yeoman farmers better off between the, excuse me, 1860s and the 1870s. Things changed though from the 1880s to 1890s. So, I'm going to scoot this up. So, from the 1880s to the 1890s, there's a few things going on, but the first one that I'm going to focus on is bonanza farming, and the large picture here is that the small yeoman farmers start to suffer and they're going to be pushed out of business. So, instead of looking at the demand for an individual farmer, I'm going to look at the entire industry to explain how bonanza farming affects things, and bonanza. You might say, well, what's a bonanza farm grow? Did they grow bonanzas for monkeys? Well, no. A bonanza farm is a large farm that focuses or specializes on growing one specific kind of crop, and they get really, really, really, really good at doing it. So, you can think of bonanza farms as being like large farms, just like Rockefeller ends up creating a really large refineries for oil. So for the entire industry, the demand curve is downward sloping, but because we're dealing, and I'll just say food, but in agriculture, the demand for, for these food, food agriculture products is relatively inelastic because people need to eat. And, here's the supply before, and I'll go ahead and put with the iron plow. So basically, word spreads after John Deere comes out with the steel plow, and now all farmers are going to adopt the new technology. When all farmers adopt the new technology, we go ahead and we shift that supply curve to the right, because that's, that's what we call a technological advance. It's a better method, better way of doing stuff, and the equilibrium price and quantity here is going to fall, so the, excuse me, the equilibrium price falls, and equilibrium quantity rises. Now, if you notice total revenue is equal to price times quantity, and the price is falling significantly because of this steep or inelastic demand, relatively inelastic demand curve, and the quantity is only rising a little bit. So what happens here is the technological advances are causing total revenue to fall in the entire industry because the demand is inelastic. We're getting the opposite result that we got before when we looked at Rockefeller with oil. Rockefeller and Carnegie with steel, they faced relatively elastic demand, which meant they had the motivation to decrease costs, so that they could increase total revenue. Here, because the inelastic demand, if farmers could monopolize, they would never adopt the steel plow, because what it does is, it causes revenue for the whole industry to fall. But it's the large amounts of competition in this industry that creates an incentive for individual farmers to come up with these technological advances, which makes them better off being first adopters, but then when all the farmers end up adopting the new technology here, as a whole, they're worse off. So, it's the competition that is making the individual farmers worse off. So, as the revenue falls here, what's going to happen is yeoman farmers are going to be put, starting to be pushed out of business, and these larger farms are essentially taking over. It's the same exact thing as when Rockefeller decreases the price of oil and pushes out all the smaller refineries, pushes them out of business. So that's, that's the same. What's different, again, is the demand being elastic versus inelastic. Here we have inelastic demand, so that that's how that works. This means that the technological advances, the way they work in this industry, is that farming labor and farming capital are substitutes of production because as the price of the capital is essentially falling, the demand for the, for the yeoman farmers is going to fall too, and they're going to be pushed out of the industry. Where, as in chapter five, we saw that for manufacturing workers, the way the technological advances worked with the capital is that the labor and the capital were complements of production. So here, because farmers are getting pushed out of the industry, they're substitutes. Let's look at, here, so, go on from the industry in the 1880s to 1890s. Let's look at what happens to John Deere, or I should say yeoman farmers. So now we have the new technology with the steel plow. This would be the marginal costs with the steel. We have the demand, which is the same thing as the marginal revenue for an individual farmer. So, we'll put Yeoman farmer, and we have this price here, and this profit-maximizing quantity where marginal cost equals marginal revenue right here. So, few things are gonna happen. You have the bonanza farming, and what the bonanza farming does is it causes that price to fall. There's a couple other things going on over the period as well. Europe increases the supply of agricultural products because they're building more farms. And then the second thing, which is pretty close to this, is that Europeans, whoops, Europeans, put higher tariffs on US food, or agricultural, exports. These two things here do the exact same. They're going to drive that price of food down. So this bonanza farming combined in the 1880s and the 1890s with the increased world supply of food, and then the higher tariffs all cause the price to fall for the market, and for an individual yeoman farmer, what that looks like now is, the demand curve for an individual farmer is going to decrease. So, the price that this farmer can sell each and every unit for is going to fall for each and every unit. So the demand curve decreases, which means that it is profit-maximizing for the small yeoman farmers to decrease production. This is going to cause producer surplus for these farmers to fall, and it's going to cause total revenue to fall as well. Again, pushing, pushing these small farmers out of business. So what happens is these small farmers start to organize and say, "Okay well, we need government intervention," where before they were against government intervention, now they're asking the government to come in and help them out, and we're going to take a look at that in the next lecture. Thank you for listening.