Theory question 110
Basic Agricultural Economics(a) Define the terms demand and supply and state the laws governing them.
(b) Explain the implications of demand and supply on agricultural production.
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(a) Demand: the quantity of a commodity consumers are willing and able to buy at a given price and time. Law: the higher the price, the lower the quantity demanded, other things being equal
Supply: the quantity of a commodity producers are willing and able to offer for sale at a given price and time. Law: the higher the price, the higher the quantity supplied, other things being equal
(b) Any reasonable implications: high demand/prices encourage farmers to produce more; surplus at harvest lowers prices and farmers' income; scarcity in off-season raises prices, so storage pays; farmers should produce what is demanded (consumer sovereignty); supply of farm produce is inelastic in the short run (seasonal), causing price fluctuations; government may fix prices or buy surplus to stabilise income
State both laws, then link price changes to farmers' decisions.