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Parity ratio: The ratio of the prices
received index, 1910-14=100, to the prices paid
index on a 1910-14=100 base (called the parity index). The
parity ratio is a measure of relative price relationships. It is not a measure
of farm income, of farmers’ total purchasing power, or of farmers’ economic
welfare. The well-being of the farm community depends upon a number of factors
other than price relationships, such as changes in production efficiency and
technology, quantities of farm products sold, and supplementary income
(including income from off-farm jobs and federal farm programs). Over time the
parity ratio has declined due to greater efficiency gains in agriculture.
Compared to a parity ratio of 100 in the 1910-14 time period, the 1998 annual
parity ratio was 42.
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