AGRICULTURAL PRICE

ANALYSIS
INTRODUCTION
 Description and analysis of the basis for price
variation through time and space, price
differences related to quality and the impacts
of governments programmes on prices
SUPPLY, DEMAND AND MARKET PRICE
 Market equilibrium – market demand and
supply functions are combined to form the
model of competitive price determination in
short run.
Pricing with inelastic supply and
demand
inelastic
 An economic term used to describe the
situation in which the supply and demand for
a good are unaffected when the price of that
good or service changes.
 Elasticity of supply: responsiveness of output to changes
in price; computed as the percentage change in the
quantity supplied divided by the percentage change in
the price. Supply is said to be elastic (inelastic) if the
elasticity exceeds (is less than) 1. The more elastic
supply is, the more will a change in price increase
production.
Elasticity of demand: responsiveness of buyers to
changes in price, defined as the percentage change in
the quantity demanded divided by the percentage
change in price. Demand for luxury items may slow
dramatically if prices are raised, because these
purchases are not essential and can be postponed.
COMMODITY PRICE THROUGH TIME
 Seasonal price changes
 Commodity storages – storage creates time

utility by bridging the gap between discrete

production and consumption.
 Storages involve physical facilities such as

warehouses, grain elevators, refrigerated

room or storage tanks.
 Price cycle – repeats itself regularly over time,

usually in response to a production cycle.

SPATIAL PRICES
 Dealing of individual buyers and sellers in a
geographic area will result in a market price
typically varies from point to point in the
markets because of transportation costs.

 Geographic price relationships – a market for

a good is the area within which the price of
the good tends to uniformity, allowance
being made for transportation costs.
 Transfer costs – location differentials in a
competitive market will be determined by the
lowest costs means of moving the product
from one location to another.
 Interregional price relationships
PRICE AND PRODUCTS QUALITY
 Efficiency aspects of grades and standards
 Impact of grades on commodity demand
 Hedonic prices – based on the hypothesis

that goods are valued for their utility bearing

attributes
Impacts of government commodity
programmes
 Price supports
 Government purchase programmes
 - limiting production
 Tariff and import restrictions
 -consumption or export subsidiaries
 -deficiency payment
 -government price controls