Transcript Markets and Prices

Markets and Prices
Behaviour of a firm and determination of price in a
market have attracted the attention of economists
significantly.
Enormous contributions were made on the market
and marketing aspects which are central to an
economy, particularly the capitalist economy.
Market is the very basic foundation on which the
capitalist economy rests and operates.
Price determination
Price for a commodity is determined in many
ways depending on the nature of the market.
In a socialist or closed economy government
intervenes and regulates prices in the interest
of the people and economy.
In a capitalist economy the market forces are
considered to operate freely and prices for the
commodities are determined by the free
interplay of demand and supply in the various
kinds of markets.
When buyer and seller meet, negotiate and
transact over an agreed price, then marketing
becomes complete.
Price is indicated as the point of intersection of
demand and supply curves.
The price at which demand equals supply is
called market equilibrium price at which the
entire supply is sold.
In other words, the market is said to be cleared
at the market equilibrium price.
Price is dynamic. It is always associated with
quantity, place and time without which price is
meaningless.
When price for a commodity is high, producers
tend to produce more which may bring down
price due to the operation of law of demand,
other things remaining equal.
But, prices do vary which imposes difficulties
in production planning. Hence, the government
is concerned with price stabilisation.
The problem is more pronounced in the
primary sector producing perishable goods
such as fish.
Therefore, the government adopts policy
interventions (i) to stabilise price of all
commodities, particularly essential and
necessary commodities in primary sector and
(ii) to prevent fluctuations in the income of
farmers.
In order to tide over these problems the
farmers and fisherfolk could collectively
regulate the supply which would help to
stabilise not only prices of their products but
also their incomes.
It is easier said than done. Minimum price
support policy is employed for this purpose by
government.
In the case of agriculture, the government is
actively involved in price regulation and
stabilisation efforts.
Unfortunately fisheries sector remains highly
unorganised and the government needs to do
more to alleviate the problems of fisherfolk in
marketing the fish landed by them.
Norway is a pioneer in fisheries development
with focus on the development of its fisheries
industry and welfare of its fisherfolk.
Fishermen collect together to form marketing
federations which will be the principal supplier
of fish.
The federations have been authorised by law to
determine a minimum price below which no
seller could buy.
The minimum price is determined so as to
include the cost of production and a reasonable
profit to the producers.
Then, the fish is auctioned outright and the
price at which the fish is sold is always equal
to or above the minimum price.
This mechanism benefits consumers as well
since they could plan their household
expenditure which indeed benefits the sellers
also.
 Since the producers in our country are largely
unorganised, the government adopts the following
measures for ameliorating their conditions:
i) Subsidy to farmers,
ii) Demand promotion,
ii) Crop and output restriction (indirectly),
iv) Support price and government purchase and
v) Subsidised producer – consumer price
differential.