BASIC ECONOMIC PRINCIPLES

The following economic concept explains the behavior of consumers of agricultural goods. These concepts or elements includes.

1. Wants: this is the desire or needs of man to own goods and services that give satisfaction. These wants are insatiable because the resources needed to cater for them are limited (in short supply). The basic need or wants of man are food, clothing and shelter.
2. Scarcity: this refers to the limited supply of resources needed to meet (satisfy) wants.
3. Choice: this is the system employed in selecting one need to satisfy out of a number of alternatives.
4. Scale of preference: is a list of unsatisfied wants in order of importance. This is relative to the individual
5. Opportunity cost: is the satisfaction of one want or need at the expense of another. It is expressed in terms of the value or worth of forgone alternative. It is also referred to as the true or real cost while money cost is the amount spent in order to acquire a particular good or service.

PRINCIPLES OF DEMAND AND SUPPLY

Demand: Demand may be defined as the quality of goods a consumer is willing and ready to buy at a given price over a given period of time. Demand is effective when willingness to buy is backed with the ability to pay.

LAW OF DEMAND

The law of demand states that the higher the price, the lower the quantity of goods that will be demanded or the lower the price, the higher the quantity of goods that will be demanded.

DEMAND SCHEDULE

This is a table showing the relationship between the price and quantity of that commodity demanded. This table below obeys the law of demand.

Price N	Quantity Demanded (kg)
100	10
80	20
60	30
40	40
20	50

DEMAND CURVE

Demand Curve is a graph showing the relationship between price and quantity of that commodity demanded. This curve derived from demand schedule.

Demand Curve: 

FACTORS AFFECTING DEMAND

1. Price of good
2. The price of other commodities
3. Income of the consumer
4. Changes in taste of consumer
5. Population
6. Periods of festivals
7. Expectation of changes in prices
8. Taxation

EVALUATION

1. What is demand?
2. List five factors affecting demand.

SUPPLY

Supply may be defined as the quantity of goods which a producer is willing and ready to offer for sale at a given price over a given period of time. Quantity of goods offered for sale in the market is referred to as effective supply.

LAW OF SUPPLY

The law of supply states that the higher the price, the higher the quantity of produce that will be supplied or the lower the price, the lower the quantity of produce that will be offered for sale.\

SUPPLY SCHEDULE

Supply Schedule is the table which shows the relationship between price and quality of commodity supplied. See the table below.

Price N	Quantity Supplied (kg)
100	50
80	40
60	30
40	20
20	10

SUPPLY CURVE

Supply Curve is a graph showing the relationship between price and quantity of goods supplied or offered for sale. The supply schedule is used to draw the supply curve as shown below.

Supply Curve: 

FACTORS AFFECTING SUPPLY

1. Price of good
2. Level of Technology
3. Cost of production
4. Government Policy
5. Weather condition
6. Taxation
7. Price of other commodities
8. Number of producers
9. Natural disasters

EVALUATION

1. What is supply?
2. State the law of supply.

LAW OF DIMINISHING RETURN

The law states that as successive amount of a variable factor are applied to one or more fixed factors, output might increase a lot at first, but there comes a point at which the use of an additional amount of the variable factor will add less to output than the proceeding amount.

In other words, it state that as more and more units of a variable factor of a production are added to fixed factor, after a certain point, the marginal product diminishes or declines.

Diminishing returns is caused by poor/inexperienced management resulting in the use of more than required amount of one or more factors of production thereby making them less effective.

IMPORTANCE OF LAW OF DIMINISHING RETURNS IN AGRICULTURE

1. It enables managers effectively combine factors of production to attain optimal output.
2. It minimizes wastage on unproductive input.

DEFINITION OF TERMS

1. Fixed factors: these are assets or resources whose value does not change in the short run e.g Land.
2. Variable factor: these are assets or resources whose value changes in the short run e.g capital, labour
3. Total product (TP or Q): is the overall quantity of output or yield produced by the farm.
4. Average product (AP): is the overall quantity of output or yield produced by the farm per variable input.
5. Marginal product (MP): is the change in quantity produced resulting from change in variable input.

This can be represented in the table below;

Fixed factor	Variable factor	Total output (kg)	Marginal product (kg)	Average product (kg)
10	1	10	–	10
10	2	25	15	12.5
10	3	46	21	15.3
10	4	60	14	15
10	5	73	13	14.6
10	6	83	10	13.8
10	7	83	0	11.9
10	8	80	-3	10

Graph demonstrating the law of diminishing return.

CLASS ACTIVITY (WAEC PQ)

1. State the law of diminishing returns.
2. Using the table below, make an input-output graph and describe the relationship between fertilizer used and maize yield.

Quantity of fertilizer (bags)	0	4	8	12	16	20	24	28	32	36
Maize yield (Kg)	8	24	48	80	120	150	170	180	180	170

1. Explain the main cause of diminishing returns in agricultural production.

GENERAL EVALUATION

1. What is demand?
2. State the law of demand
3. What is supply?
4. State the law of supply
5. State the law of diminishing return
6. Differentiate between total product, marginal product and average product.

ASSIGNMENT

1. The higher the price, the ____ the quantity demanded A. higher B. lower C. up D. down
2. Increase in population will lead to _____ demand A. high B. low C. medium D. long
3. The real cost of an item is the ____ A. cost of forgone alternative B. amount spent to acquire the item C. cost of substitute item D. money cost of the item
4. Short run in production refers to ____ A. a period in which there is at least one fixed factor of production B. a period in which there is at least one variable factor of production C. a period in which there is no fixed factor of production D. a period in which there is variable factor of production
5. An example of variable input in poultry production is? A. Land B. Feed C. Fertilizer or manure D. Incubator

THEORY

Complete this table.

Quantity of fertilizer (bags)	0	4	8	12	16	20	24	28	32	36
Maize yield (Kg)	8	24	48	80	120	150	170	180	180	170
Marginal product (Kg)
Average product (Kg)

See also.

CROP IMPROVEMENT

WEEDS FOUND IN FARMS

INSECT PESTS | ECONOMIC IMPORTANCE, PREVENTION & CONTROL

CLASSIFICATION OF INSECT PESTS

WEEDS