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Week : 01
Lecture : 01 & 02
Lecture Topic : Introduction to Agricultural Marketing
Facets of marketing
Coordination and process of exchange.
How does the supply of food become available to those who demand it?
Both suppliers and consumers are part of markets and marketing.
Geographical aspects.
Locations where buyers and sellers meet (Billings wheat market).
Broader context: U.S. wheat market; World wheat market.
Value-adding activities.
Transformation
Transportation
Storage
Role of prices
The role of price is integral in agricultural markets.
Price is a signal for production and consumption.
Government can play a large role in affecting prices in agricultural markets.
Knowing and predicting future prices is very important (but extremely hard to do).
Course Name : Agricultural Marketing
Course Code : MKT- 413
Course Teacher : Md. Shariful Islam
Week : 02
Lecture : 03 & 04
Lecture Topic : Basics of Supply and Demand
Aggregate Demand
There are millions of consumers who consume agricultural commodities. How do we determine the
demand functions for the entire population?
We aggregate all individual demand functions - horizontal aggregation.
Consumer surplus
Consumer surplus (CS) is the amount of value that is derived by the consumer above the price that was
paid for the good.
Typically, consumer surplus is the area below the demand curve and above the price (frequently, we will
model CS is a triangle).
Properties of supply
Firms must be able to cover their long-run (average) variable costs If P < AVC, then firms no
longer continues produce.
Fixed costs exist only in the short run
In the long run, any fixed cost can be eliminated.
In general: AVC < ATC
Remember: All costs are opportunity costs. This is important when thinking about costs in the
agricultural sector.
What changes supply?
Change in price will result in a movement along the supply curve.
Change to an external factor will shift the supply curve.
Relative price of inputs.
Creation and adoption of technology (e.g., GM crops, farming equipment).
Price of other related products (e.g., ethanol demand caused acreage to be turned over to corn
at the expense of soybeans).
Risk levels and crop insurance policies.
Government acreage controls (CRP).
Weather.
Aggregate Supply
Just as with aggregate demand, horizontal aggregation is used to derive the market supply curve.
Producer surplus (PS) is the amount of value the firm receives above the marginal cost incurred to
produce and sell the good. It is measured as the area above the supply curve, bounded by the sales price.
Equilibrium
Under perfect competition, rationing and resource allocation will cause prices to adjust until supply
equals demand.
Market Equilibrium is Characterized by the Crossing of the Supply and Demand Curves.