Section A- Introduction to Agriculture

1. History of Agriculture

Definition Of Agriculture:
 Agriculture can be defined as the art, the science and the business of producing crops
and livestock for economic purposes.
 The art in agriculture is how skillful the farmer carries out the operations on the farm.
 The science is the pursuit and application of knowledge and understanding of the
natural world e.g., crop protection, land management.
 Agriculture as a business aims at combining the factors of production (land, labour,
capital, management) to make a profit.

What is the difference between Agriculture and Agricultural Science?

- The difference between agriculture and agricultural science is that agriculture is the
performance of farmers that grow crops and rare animals for human consumption
therefore, agricultural science is the study and biology in plants and animals.

History in Agriculture
The history in agriculture can be broken down into 3 sections:
Pre- Colonial Era
Agriculture in pre-colonial times involved mainly hunting and gathering. These activities
included hunting for wild boar and fishing.
Root crops were the primary crops planted. These crops included cassava, dasheen and sweet
potato. During the pre-colonial era, farming was managed through methods such as shifting
cultivation and slash and burn.
‘Shifting Cultivation’ is where planters cleared the land by burning and used the land until it
became infertile then they shifted to a new location and carried out the same practice.
Colonial Era
In the colonial era, the approach to farming changed drastically with the introduction of crops
such as sugar cane and banana. Some crops were introduced to the Caribbean at this time, such
as ackee and breadfruit.
Slash and burn were also practiced in the colonial era as the main way to clear land, and
livestock was used to till the soil.
Coastal fishing was popular around the islands and people used simple boats and small fishing
vessels to fish.
Livestock rearing was introduced, and consisted mainly of cattle (beef and dairy) along with an
increasing reliance on poultry for eggs and meat.

Post- Colonial Era

This era saw more changes in the technology used following the ‘green revolution’, which
encouraged the widespread use of synthetic fertilizers and pesticides to increase crop
production.
It also saw the introduction of crop rotation to minimize the negative impact of agriculture on
the soil and water.
Rearing poultry within confined spaces for both eggs and meat grew rapidly to replace the
dependence on beef.
The rearing of other animals, such as pigs for pork and bacon, and small ruminants (goats and
sheep) increased significantly.
The diversification of crops became more pronounced with the introduction of non-traditional
crops such as yam, banana, coffee, cocoa and coconut.
 2. Conventional VS Non- Conventional Systems

Conventional Farming Systems

These are traditional small, medium or large farms. They rely on the use of machinery and
equipment, fertilizer pesticides heavy irrigation systems and concentrate livestock feeding to
produce crops/ livestock products. Large number of resources are required +System can be very
productive.

Non- Conventional Systems

Involves new/ innovative farming systems that produce crop/ livestock using:
1. Little or no fertilizer/ pesticide
2. Smaller land space
3. Less water and non-disruptive to the environment/ ecosystem

TYPES OF NON-CONVENTIONAL FARMING SYSTEMS: Hydroponics, Aquaponics, Grow

boxes, Trough culture, Urban and peri-urban farming.

Hydroponics System
Plants grown using a hydroponics system are grown in water. The water is full of nutrients,
which are taken up by the roots. In hydroponics you provide the exact nutrients your plants
need, so they can develop and grow. The nutrients are fed directly at the root base, never
stressing the plant due to lack for nutrients or water. Crops such as lettuce and tomatoes are
grown using hydroponics
Advantages of Hydroponics System
 The plants receive the nutrients they need, which speeds up their growth, and the
process is totally controlled by the grower.
 The plants can also be stacked to take up less space.
 the plants use less water than plants grown conventionally.
 Soil contains a lot of diseases and pathogens that can affect the crop. These diseases
and pathogens are eliminated by hydroponics.

The Disadvantages of Hydroponics System

 An important disadvantage is that the system is expensive to establish and run
 Requires extensive knowledge of hydroponics
 Requires constant monitoring

Aquaponics System
It is the marriage of aquaculture (raising fish, etc.) and Hydroponics (the soil-less growing of
plants) that grows fish and plants together in one integrated system. The fish waste provides an
organic food source for the growing plants and the plants provide a natural filter for the water
that fish live in. The wastewater is pumped from the fish tank into the grow bed. In the Grow
bed, the wastewater is filtered by the plant roots into clean water. The clean water is then sent
back to the fish tank.

Advantages of Aquaponics System

 Reduction in the use of water
 No harmful fertilizers or pesticide run-off
 There is no need for artificial fertilizers
 Reduction in labour costs
 Two incomes are gained – crop and fish
Disadvantages of Aquaponics System
 Requires electrical energy
 Cost of fish food and Start-up cost is high
 Limited to the production of certain types of crops - e.g., root crops cannot be grown

Grow- Box
The Grow Box system is the use of an enclosed box-like structure filled with a special mixed
medium inside the box. Soil is NOT used in making the medium inside the box. The material
used inside include: - bagasse, sharp sand, limestone and fertilizers are used instead.

Trough Culture
Trough culture involves growing crops in shallow troughs. Troughs can be filled with an inert,
soil-free medium such as rock wool and are connected to a drip system that supplies water and
nutrients in solution. Once the troughs have been set up, they are easy and inexpensive to
maintain. They can be used for vegetables and flowers and the gardener can put them in
greenhouses or anywhere convenient. Both grow boxes and trough culture enable plants to be
grown where space is limited or the soil is poor. Modifications can be made to suit the
circumstances, for example, the number of units and their arrangement, the use of different
types of inert material and temperature and lighting control (if needed). Commercial systems
have many units, but both methods can be used on a smaller scale.

Urban and Peri- Urban Farming

This is the cultivation of small areas of land, usually less than two hectares, in or near cities,
towns or villages. Vegetables, fruits and meat are produced for urban consumers.
Urban Farms
it is a mixed farm (both plants and animals) with small animals and the manure is used as
fertilizers. Grows crops that ripen within 3 months e.g. tomatoes, lettuce, pakchoi, celery. They
use pots, troughs, grow boxes and hydroponics to grow crops.
 3. Organic Farming

Organic Farming
Organic farming is an approach that seeks to limit or eradicate the introduction of synthetic
elements into agriculture. It is the production of plants and animals without using synthetic or
inorganic chemicals. No synthetic pesticides, fertilizers, antibiotics or growth hormones are
used.

Principles of Organic Farming

Organic farming restricts the use of herbicides and pesticides to increase biodiversity.
Biodiversity is the variety of living organisms in a specific habitat or area.
Organic farming benefits the environment in many ways. Different weed species growing in an
organic crop attract insects, which then feed on plant pests. In turn, these insects provide food
for birds and mammals.
Farmyard manure is used to add organic matter to the soil, which encourages soil micro-
organisms to break down the manure and increase the soil fertility.
Overall, there are 30% more species found on organic farms than on conventional farms.

Soil Management on Organic Farming

Since artificial (inorganic) fertilizer is not used, the farmer uses soil management to ensure a
supply of the essential nutrients (N.P.K).
Instead of relying on artificial fertilizers, the farmer can use some of the methods:
 Crop rotation
 Green manuring
 Intercropping
Use of organic manure and composts such as crop residues (sugar cane waste, spent mushroom
compost)
Crop- Rotation

Crop Rotation is a sequence of different crops being grown from year to year (cereals, root
crops, legumes). The sequence is planned so that crops are grown on different plots each year.

Benefits of Crop- Rotation

 Life cycles of pests and pathogens are broken (different types of crops attract different
types of pests and pathogens).
 Inclusion of a legume increases soil nitrogen.
 Different crops need different methods of cultivation so this improves soil texture.
Green Manure
Green Manure is the ploughing in of a cover crop into the soil. This adds organic matter to the
soil. It Improves soil fertility by increasing soil nitrogen.

Intercropping
Intercropping is where two or more crops grown at the same time on the same land.
This results in:
 Reduces competition from weeds
 The cover from the vegetation reduces run-off. Saves on space
 Crops are harvest at different times

Organic Manure/ Compost

It can either be spread or ploughed into the soil, used as a mulch and it helps with aeration and
drainage in clay soils, Retains water in sandy soils, Releases nutrients slowly over time.
Provides food for soil animals e.g., Earthworms

Weed Controls on Organic Farms

No chemicals are used therefore weeds are controlled by:
 hand-weeding
 Hoeing
 Mulching with compost / plastic film
In rice-growing areas-- ducks and fish introduces to eat weeds and insects.
Pest Controls on Organic Farms
It is difficult to control insects and other pests without chemicals. Pests can cause serious losses
but organic farmers are not permitted to use any chemical pesticides. If they do, their farms are
not considered truly organic.
Integrated Pest Management (IPM) involves pest control using a range of complementary
approaches, including natural predators and other biological and environmental control
practices, instead of chemicals.

Biological Control
Biological control is a method of controlling pest populations naturally, without the use of toxic
chemicals.

Certification of Organic Farms

Farmers who want to sell their produce as ‘organic’ must first obtain certification. At the
moment, there is no organic certification in the Caribbean, so a farmer who wants to be
accredited as an organic farmer needs to decide which country to use to obtain the
certification.
The application form requires details about:
 soil fertility planning
 seeds and seed planting
 weed and pest management practices
 storage and handling of produce
 the crops grown and the fields used (a map of the farm has to be supplied)
 the plans for monitoring how the farm will be managed to avoid contamination with
non-organic products
When the farm is inspected, the fields, implements and buildings are reviewed.
The farmer provides the inspector with records of the crops planted, the sources of seeds used,
the harvesting and storage practices, the transportation methods for the produce and the sales.
Before a certificate can be granted, the land has to be free from prohibited pesticides and
fertilizers for three years.
If livestock are involved, the conditions in which they are kept, their feed and their medication
have to be inspected. The inspectors have to be convinced that the producer uses techniques
that conserve and build soil resources, produce little pollution and support natural pest
management.
In addition, the inspectors make sure that there is no contamination from pesticides and
fertilizers used on neighboring farms. Becoming ‘organic’ can be expensive and time-consuming
for a small farmer.
There is usually a fee to be paid for inspection and certification, and a lot of recordkeeping and
paperwork. However, the principles of organic farming encourage the maintenance of
ecological balance and biodiversity.
Many consumers are prepared to pay more for organically produced food.
 4. Importance of Agriculture in National, Regional and International Economies

Importance of Agriculture in National, Regional and International Economies:

 Food Security
 Imported Food compared to locally produced food
 Foreign Exchange Earnings
 Contribution to GDP
 Employment
 Land Area in Agriculture
 National and regional plans for agricultural development
 Trade Liberalization

Food Security
Food Security is where all people, at all times, have physical, social, and economic access to
sufficient, safe, and nutritious food that meets their food preferences and dietary needs for
an active and healthy life.
Countries can achieve food security by encouraging agricultural production.

Imported Food Compared to Locally Produced Food

Locally grown foods are fresher: Fruits and vegetables begin to lose their nutrients within 24
hours of being picked, so fresher produce is more nutritious. locally grown food is picked at its
peak ripeness, when it’s most dense with nutrients.
Most produce in the grocery store is harvested before it’s fully ripe so it can make the trip to
store shelves without rotting. Air, artificial lights and temperature changes during transport
lower a food’s nutritional value as well
By comparison, local food is healthier because it’s only transported short distances and isn’t
exposed to chemicals, gasses or waxes used to preserve food for long-distance transport.

Foreign Exchanges Earnings

Foreign exchange is earned when Caribbean agricultural goods and services are sold to other
countries. For example, the export of bananas and coffee earns foreign currency. However,
when foreign agricultural goods and services are imported, Caribbean currency is converted
into foreign exchange. Importing agricultural machinery from abroad is therefore a loss to the
local community.

Contribution to Gross National Product

The Gross National Product (GNP) is a measure of the current value of goods and services from
all sectors of the national economy. Agriculture is a vital sector of the Caribbean national
economy and contributes to the GNP.

Employment
The agriculture sector provides employment from unskilled labourer to the professional soil
scientist. When agriculture is developed in a country, many jobs will be created for example:
Labourers, farmers, managers, extension Officers, Overseers, Research workers, Veterinarians,
Agricultural Engineers, Viticulturists, Soil Scientists, Teachers.

Land Area in Agriculture

With rising population levels, housing, industry, agriculture, urban development and
infrastructure, competes for land use.
National and Regional Plans for Agriculture
Agricultural plans are policy documents prepared by governments, private firms or
international organizations, which set out plans for agricultural development. Normally, local or
national plans are prepared by the government of each Caribbean country for a five-year
period.
The plan for each country identifies:
The areas of agriculture that need attention and may specify the current status, constraints,
strategies and resources required for the development of each area.
Carefully prepared plans can result in agricultural development and national development.

Trade Liberalization
Trade liberalization helps global competitiveness. A fair trade in goods and services develops
when tariffs and non-tariff barriers are removed. A tariff is a tax levied by a government on
imports (or occasionally exports).
A government uses a tariff to protect a local industry or product to help its balance of payments
or to raise revenue.
The aim of global trade liberalization initiatives is to encourage greater efficiency in marketing
and trade. The initiatives focus on restructuring trade policies to reduce any barriers set up to
protect producers and service providers from competition.
Trade liberalization does not just depend on the removal of barriers and the negotiation of
better access to markets. It requires rules that control how each government forms its trade
policies. This should result in each country being encouraged to improve productivity in
agriculture and make greater efforts to improve the quality of agricultural products.
 5. Agricultural Enterprise

What are Agricultural Enterprises?

Agricultural enterprises mean those small business concerns engaged in the production of food
and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural
related industries. Agricultural Enterprises can be small e.g.; subsistence farming, and it can
also be large e.g.; Blue Mountain Coffee in Jamacia, Primary Product Processed into Product.
Agricultural Enterprises: Farming, Processing, Sales and Marketing
Farming
Rearing livestock or growing of crops. Includes plant propagation. Products can be sold at the
farm gate, at the market or to suppliers who process the primary product into other products
for resale locally /export.
Processing
Argo processing involves turning the raw materials into other products. E.g., tomato processed
into ketchup, guava/strawberry processed into jams, jellies, etc.
These can be sold locally and internationally. Argo processing provides employment
opportunities from skilled to unskilled labour.
How Tomato Ketchup Is Made, Tomato Harvesting and Processing Process with Modern
Technology.
Sales and Marketing
Agricultural produce Is sold in shops, roadside stalls, markets, supermarkets. Produce is moved
from the farms to the wholesalers and then to retailers/vendors. Transportation involves
loaders and drivers. Produce may be stored at the wholesalers, employment opportunities such
as storekeepers, clerks, security officers are created. At shops, jobs such as managers, cashiers,
sales personnel are needed.
 6. Major Challenges Affecting Local and Regional Agriculture

Major Challenges Affecting Local and Regional Agriculture: Climate, Topography, Predial
Larceny, Rural Infrastructure, Land Tenure, Access to Finance, Global Warming, Availability of
Labour.

Climate
Rainy Season: This brings flood, increases in pest and diseases and hurricanes which destroys
crops.
Dry Season: There is lack of water for plant use therefore expensive irrigation is needed.
Strategies of coping with Climate
In the dry season, farmers conserve soil water using cultural practices such as organic mulching,
including organic matter and manure in the rainy season, drainage systems are essential.
Governments can give farmers subsidies to establish ponds, which will reduce the disastrous
effects of flooding and allow farmers to store water for the dry season.
The Forestry Division, another part of the government, can help farmers to establish
windbreaks in areas where crops suffer from strong winds.

Topography
Farmers can carry out strip cropping, cover cropping, contouring and terracing. Erecting barriers
of stone, wood or grass can help to control soil erosion, but this process is expensive.
Solutions to Topography
Farmers can carry out strip cropping, cover cropping, contouring and terracing.
Erecting barriers of stone, wood or grass can help to control soil erosion, but this process is
expensive.

Predial Larceny
Is the stealing of agricultural produce. It is an everyday problem and its difficult to prove usually
poor police response and also minimal fines.
Solutions to Predial Larceny
Local and regional government can: Hire predial larceny officers, conducting regular police
checks in rural areas, Imposing severe fines on offenders.

Rural Infrastructure
A rural area or countryside is a geographic area that is located outside towns and cities.
Infrastructure refers to the basic services needed for a community to function such as
transportation, water, electricity and schools. A lack of infrastructure results in:
 The rural-urban drift
 Abandonment of agricultural land
 A shortage of agricultural labour
An urban area is the region surrounding a city. Most inhabitants of urban areas have
nonagricultural jobs. Urban areas are very developed.
Rural to Urban Drift – This is where farmers leave the rural area and migrate to urban areas for
a better lifestyle. This causes an abandonment of agricultural lands, absentee farmers and
lowering of agricultural farmers.
Solution to Rural Infrastructure
The government of Caribbean countries needs to address the needs of farmers in rural
communities.
Investment in rural infrastructure is the pathway to greater agricultural productivity and food
security.

Land Tenure (Land Ownership)

Land is an important recourse for agriculture because the population is increasing, the land
available for agriculture is decreasing. Also, many farmers rent land to practice agriculture
therefore they are not willing to develop it.
Solutions To Land Tenure
The government needs to ensure that agricultural lands are identified and allocated by a land
tenure system to farmers for agricultural production and national food security.
Tougher measures are needed to ensure that good agricultural land is not used for the
development of residential areas.

Access To Finance
If a farmer needs to finance an agricultural enterprise and has no family money, he or she may
look for a low-interest loan. The farmer may have to offer capital assets as collateral to the
bank or lender. Collateral is property that you agree to give to a bank if you fail to pay back
money that you have borrowed.

Gobal Warming
The Earth is surrounded by the atmosphere, which is a blanket of air made up of many gases.
Two of these gases, carbon dioxide and methane, are called greenhouse gases. In a greenhouse,
the glass roof and walls trap the heat energy of the sun and keep it within the greenhouse.
This process maintains a warm temperature in the greenhouse and the enclosed plants thrive.
Within the last century, there has been an increase in the production of greenhouse gases due
to human activity.
Industrialization, motorized transport, aero planes, the burning of waste, bush fires and
deforestation all lead to increased levels of greenhouse gases in the atmosphere.
This means that more heat energy is trapped within the Earth’s atmosphere, which results in
global warming.
Global warming can produce these effects:
 a rise in sea level,
 increased temperatures
 more frequent droughts
 more powerful storms and hurricanes a rise in sea temperature, which kills coral reefs
and affects the ecosystem of

Availability of Labour
1) Movement away from rural areas – result from rural to urban drift
2) Ageing farming population – many of the present farmers are old and may not be able
to carry on farming.
3) Limited participation of youth –, fewer young people are training in agriculture and
becoming farmers. This is unfortunate, as more young farming entrepreneurs are
required for new ideas and the development of innovations to solve agricultural
challenges.

Technical Knowledge
The lack of training facilities and the shortage of trained personnel (Extension Officer) result in
poor production practices.
Credit
Credit is needed for farm development and to pay labour. Very difficult to get because of the
risk involved and poor management ability of farmers. Interest rates are often high.
Environment
Destruction to biodiversity, Pollution of watercourses, Global Warming, Clearing of prohibited
lands and swamps also Buildup of resistance to pesticide by pests.
Trade
Barriers to trade e.g., duties quotas, exchange control, import bans. Imbalance of trade.
 Section D- The Business of Farming
1. Factors Of Production

When starting a business, four factors need to be considered. These are called factors of
production. There are four factors of production:
 Land
 Labour
 Capital
 Management

Land
Land is the primary requirement to start a business, it provides a site where production takes
place. One problem with land is its availability. The size of the land remains the same while the
population is increasing. Agriculture competes with housing and industry for land and many
farmers work on land that are rented or leased. Topography of the land is also possessing a
problem to farmers.

Labour
Labour is the human effort used in production. There are three types of labour:
Operator Labour: This is where the farmer does everything. This form of labour is not very
efficient
Family Labour: This is where a farm is run by a farmer and members of his family. This is
efficient in certain types of farms e.g., poultry
Hired Labour: There are two types of hired labour: Permanent and Temporary.
Problems With Labour in Agriculture
 Rural – Urban Drift
 Psychological Attitude
 Low Wages
 Absenteeism

Capital
Capital refers to all cash, buildings, machinery, equipment, materials, tree crops and livestock.
There are two types of capital:
 Fixed Capital: refers to assets that are not used up in the production of a product e.g.
land, building and machinery
 Working Capital: refers to assets that are used to convert raw material into a product.
E.g., feed, fuel, cash
How Do Farmers Obtain Capital
 Savings
 Commercial Banks
 Agricultural Banks
 Co-operatives
 Credit Unions

Management
Management combines the other three factors of production of land, labour and capital.
Management determines the success or failure of a business.
 2. Supply Chain and Value Chain

Supply Chain
The supply chain is simply the movement of goods from the supplier to the consumers. This is
where agriculture goods would be transported to market vendors and market vendors sell the
goods to the consumers.

Value Chain
Value Chain is the movement of goods from the suppliers or the different business units to the
consumers, with the main intention of satisfying the consumers while making a profit.

Economic Functions
There are three (3) major economic functions in any country:
1. PRODUCTION
2. CONSUMPTION
3. MARKETING

Production
Focuses on the manufacture of goods and the provision of services. The aim of production is to
satisfy what people want. As the volume of production increases, wealth is created and this
promotes the economic welfare of the population. The satisfaction of people’s wants improves
their standard of living.

Types Of Production
There are two types of production:
1) Primary production: refers to goods or raw materials that are produced initially, for example,
pineapple or sugar cane. Some of these goods may be consumed as primary products
2) Secondary Production: this is where primary products may undergo secondary production,
which involves processing the raw products into secondary products. For example, pineapple
may be processed into jam and juice, and sugar cane can be processed to make sugar,
molasses, bagasse and rum.

Marketing
Is the LINK between production and consumption. It incorporates several business activities in a
coordinated way to promote the flow of goods and services from the point of production until
they reach the consumer. Marketing is the system which enables the goods to move from
producer to consumer.
Middlemen operate between the producers and the consumers. Middlemen are like Brokers,
wholesalers (merchants), Processors, Retailers (vendors).

Marketing Functions
1. Merchandising: Includes buying. pricing, selling. Activities involve trading, product
promotion, changing ownership of goods
2. Handling: Includes transportation, grading, assembling, storage. Activities involve physical
activities that enable processing and easy distribution to retailers and consumers.
3. Processing: Includes manufacturing, packaging, labelling. Activities involve activities that
change the form of the product and adds value, increases shelf-life and satisfy consumer’s
tastes and preferences.
4. Supporting: Includes standardization, financing, risk-bearing/insurance, market intelligence.
Involves facilitating functions that enable all the other functions to be carried out smoothly.
Consumption
Consumption is an economic, consumer-centered activity. It involves the purchase and use of
goods and services by clients and customers, known as consumers. Consumption normally
comes after production and marketing, and is the fuel that keeps the economic engine of
production running.

Consumption patterns vary. Here is a list of some of the factors that affect the decisions that
consumers make:
Income level: Consumers want to obtain goods and services at the lowest cost. They purchase
and use those goods and services that they can afford.
Satisfaction of needs: Consumers choose goods and services that satisfy their tastes and
convenience. With respect to food, consumers buy products that are easy to prepare and use,
and that meet the consumers’ nutritional and health needs.
Religious reasons: Some consumers do not buy certain foods, for example, pork and beef,
because of religious beliefs.
Health concerns: More consumers are becoming health-conscious and avoid buying foods that
contain high amounts of cholesterol and saturated fats.
Aesthetic features: Product features (design, presentation, color, taste and general appearance)
may appeal to consumers, increasing the consumption of those products.
Product substitutes: Knowledge of product substitutes and their availability might enable some
consumers to make compromises and choose alternative goods and services
 3. Demand and Supply

Demand
Demand is the quantity of a product that consumers are willing to buy at a certain price at a
particular time. Demand is directly related to price. If the price is high, the demand will be low.
A decrease in price will lead to an increase in demand.
Demand Schedule
A demand schedule is a table that depicts quantity demanded at every price, all else equal.
Demand Curve
Demand curve shows the relationship between the price and quantity demanded.

The typical demand curve DD slopes downward from left to right. The curve shows that, when
the price is high the quantity demanded is low and, as the price comes down, the quantity
demanded goes up.
Law of Demand
The ‘law of demand’ states that the lower the price is, the greater the quantity demanded.

Shift In A Demand Curve

In Figure 16.10, the original state of demand is represented by curve DD.
Curve DD shows that, at price P, the quantity demanded is Q.
Curve D1D1 represents a change in demand. At the same price of P, the quantity now
demanded is Q1.
This quantity is smaller than the original quantity.
Curve D2D2 shows another change in demand.
Now, at the same price of P, a larger quantity, Q2, is demanded.
Factors That Change Demand
Some of the factors bringing about a change in demand are:
Change in tastes and preferences
Change in income
Replacement of old products with new ones (technical innovations)
Change in the prices of other commodities
Change in the population
Change in future trade expectations
Change in taxes and duties
Change in product advertising.

Supply
Supply is the quantity of a commodity that is placed in the market at a particular time and at a
particular price. This is not the entire stock; it is only the amount that is placed in the market at
a particular price. As with demand, the supply of a product is directly related to the price of
that product. Sellers release a larger amount into the market when the price goes up.

Supply Schedule
The supply schedule for a commodity is the total of all the amounts of the individual sellers,
tabulated to show the quantity offered for sale at different prices. This is also known as the
market supply schedule and the prices in the schedule are called supply prices.
Figure 16.12 shows a typical supply curve. This curve shows that, as price goes up from P1 to
P2, the quantity supplied goes up from Q1 to Q2. The curve SS slopes upwards from left to
right.
The second law of supply and demand, also called the ‘law of supply’, states that the higher the
price is, the greater the quantity supplied is.
Factors That Change Supply
These factors cause a change in supply:
A high consumption of its own product by the producer (less product is supplied to the market)
Changes in the cost of production
Changes in production techniques
Changes in the weather
Taxation of commodities
Changes in future expectations

Pricing
Commodity prices in a perfect market are determined by the interaction of the market forces of
supply and demand.
The price of the product is determined by the demand in relation to the conditions of the
supply at a particular time.
At some point, these two forces are brought into balance (or equilibrium). The equilibrium
price is the price at which demand and supply are equal.

The EQUILIBRIUM is where the demand curve DD intersects with the supply curve SS.
If the price is set above the equilibrium price, this will lead to supply exceeding demand and
sellers having a large number of unsold products (glut/surplus in the market)
If the price is set below the equilibrium price, this will cause the demand to exceed supply and
lead to a shortage of the product.
The Effects of Changes In Demand And Supply
An increase in demand tends to increase price
and increase supply.

A decrease in demand has the opposite effect,

resulting in lowering of price and the quantity
Supplies.

An increase in supply tends to lower price and

increase demand.

A decrease in supply will increase price and

reduce the quantity demanded.
 4. Laws of Diminishing Returns

THE LAWS OF DIMINISHING RETURNS

The law of diminishing returns states that “if increased amounts of a variable resource are
added o fixed resource, Marginal Output first rises, reaches a maximum and eventually
declines.
For example, the fixed input is land, the varying factor is the fertilizer.
Another example:

If a particular input (fertilizer) is increased, unit by unit, there is an incremental (small) increase in
output up to a point!

After this point, any further increase in input does not increase the rate of output.

The rate of increase of output declines with each additional unit of input. This is the law of diminishing
returns.