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Any support that would normally be in the amber box, is placed in the blue box if the support also
requires farmers to limit production (details set out in Paragraph 5 of Article 6 of the Agriculture
Agreement). At present there are no limits on spending on blue box subsidies. In the current
negotiations, some countries want to keep the blue box as it is because they see it as a crucial means of
moving away from distorting amber box subsidies without causing too much hardship.
Green box
The green box is defined in Annex 2 of the Agriculture Agreement.
In order to qualify, green box subsidies must not distort trade, or at most cause minimal distortion. They
have to be government-funded (not by charging consumers higher prices) and must not involve price
support. They tend to be programmes that are not targeted at particular products, and include direct
income supports for farmers that are not related to (are “decoupled” from) current production levels or
prices. They also include environmental protection and regional development programmes. “Green box”
subsidies are therefore allowed without limits, provided they comply with the policy-specific criteria set
out in Annex 2.
de minimis
Minimal amounts of domestic support that are allowed even though they distort trade — up to 5% of the
value of production for developed countries, 10% for developing.
Production Possibility Curve - is a graph that compares the production rates of two commodities that
use the same fixed total of the factors of production. A PPF shows all possible combinations of two
goods that can be produced simultaneously during a given period of time.
Expansion path - expansion path (also called a scale line) is a line connecting optimal input
combinations as the scale of production expands. A producer seeking to produce the most units of a
product in the cheapest possible way attempts to increase production along the expansion path.
Marginal Rate of Transformation - The slope of the production–possibility frontier (PPF) at any given
point is called the marginal rate of transformation (MRT). The slope defines the rate at which production
of one good can be redirected (by re-allocation of production resources) into production of the other. It
is also called the (marginal) "opportunity cost" of a commodity.
Price Elasticity - Price elasticity of demand (PED or Ed) is a measure used in economics to show the
responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price.
More precisely, it gives the percentage change in quantity demanded in response to a one percent
change in price (holding constant all the other determinants of demand, such as income). It was devised
by Alfred Marshall.
Law of equimarginal returns - The law of Equi-marginal returns is concerned with the allocation of the
limited amount of resource among different enterprises. The law states that “profits are maximized by
using a resource in such a way that the marginal returns from that resource are equal in all cases”