Transcript Agricultural Economic

Agricultural
Economics
An introduction to supply and
demand
Introduction
 The most successful farmers have an
awareness of the market, that is who
wants their produce, when and where.
 To do this they need to have an
understanding of economics – the
relationship between supply and
demand.
 A simple way to start is to use graphs.
The Demand Curve
Demand Curve
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Price
 The demand curve is a
graph showing the
relationship between the
price and demand for a
product.
 Normally there is an
inverse relationship
between the two
variables which is the
higher the price the
lower the demand
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Demand
 There are several factors which can affect
demand:
 The price of the product
 Price of similar products
 Taste and preferences of consumers
 Income of consumers
 Population size
 Season
 etc.
When there are changes to the demand the curve
shifts to the left or right.
Demand
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 The curve shifts to
the left if the demand
reduces which could
happen if there were
a disease scare.
 The curve shifts to
the right if the
demand increases
possibly due to a
seasonal effect.
Demand Curve
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The Supply Curve
 The supply curve is a
graph showing the
relationship between the
price and supply of a
produce.
 Normally there is direct
relationship between the
two variables which is as
the price rises so to does
the supply
Supply
 Like demand, there are many factors which
can affect supply:
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Price of the product
Cost of inputs
Number of producers
Skill of the farmer
Technology
Seasonal effects
Storage and transport
Government restrictions and incentives
etc.
Supply
 The curve shifts to
the left if supply
reduces which could
happen if there were
a drought.
 The curve shifts to
the right if the supply
increases possibly
due to a mild winter.
Equilibrium Price
 To understand the market place the two
curves most be fitted together.
The Equilibrium Market Price
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The Equilibrium Market Price
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