(a) Define the terms demand and supply and state the law governing them. (b) Explain the implications of demand and supply on agricultural production

Answer Details

(a) Demand, supply and the laws governing them

Demand is the quantity of a commodity that consumers are willing and able to buy at a given price at a particular time. The law of demand states that, other things being equal, the higher the price of a commodity, the lower the quantity demanded, and the lower the price, the higher the quantity demanded.

Supply is the quantity of a commodity that producers or sellers are willing and able to offer for sale at a given price at a particular time. The law of supply states that, other things being equal, the higher the price of a commodity, the higher the quantity supplied, and the lower the price, the lower the quantity supplied.

(b) Implications of demand and supply on agricultural production

• When the price of farm produce is high, farmers are encouraged to produce more, thereby increasing supply.
• When supply exceeds demand (a glut), prices fall, farmers earn less and may reduce production in the next season.
• When demand exceeds supply (scarcity), prices rise and this encourages increased production.
• The perishable and seasonal nature of farm produce causes price fluctuations that affect farmers' incomes.
• Demand and supply guide the farmer on what crop to grow and how much to produce, and help government to plan price-stabilization and storage policies.