Chapter_4 Lecture note.pptx Agricultural Marketing Extension

Agricultural Marketing Extension

1. Chapter Four: Agricultural Marketing Price and Information March 4, 2022 1 4.1 Sources of Marketing Information 4.2 Agricultural price determination 4.3 Information, Price and Rural Marketing 4.4 Price Spread Analysis 4.5 Price Efficiency/Allocative Efficiency

2. 4.1 Sources Of Marketing Information March 4, 2022 2 Notice boards of APMCs News paper Magazine, Periodicals, Special bulletins Post Radio, Television Telephone, Telegram, Fax Email, Website 2

3. Websites for Marketing Information March 4, 2022 3 ATA MoA ECX CSA Capital one Reporter 2

4. Required Information to Extension System and Farmers March 4, 2022 4 Suitability of land to various crops/enterprises Crops in demand in near future/Market prices of crops/Availability of inputs Credit facilities Desired qualities of the products by consumers Market price differences/Production technologies WTO regulations

5. March 4, 2022 5 To summarize the traditional neoclassical economic theory of price determination To introduce some useful concepts for actual decisions such as revenue, marginal revenue, marginal cost etc. Economic theory is more concerned with the behavior of aggregates or markets, particular how persistent and widespread behavior, leads to stable results called “equilibrium” 4.2 Agricultural Price Determination Aims:

6. March 4, 2022 6 Definition of Price: The value that one will purchase a finite quality, weight, or other measure of good or services Price is the sacrifice that one party pays another to receive something in exchange.

7. March 4, 2022 7 Definition of Price determination: Pricing is the process of determining what a company will receive in exchange for its product.

8. March 4, 2022 8 Demand curve P Q Quantity Price D

9. March 4, 2022 9 Objectives of Price determination: Maximize long-run and short-run profit. Increases sales Increase market share To obtain the target of return of investment Company grow th To obtain or maintain the loyalty and enthusiasm of distribution and other sales personnel.

10. March 4, 2022 10 Needs of Price determination: Market price serves as the adjustment mechanism to move to equilibrium. Firms equilibrium- means the level of output where firm is maximizing its profits and therefore has no tendency to change its outputs

11. Demand and supply Law of demand Applicable for buyers Price is inversely proportional to the demand Law of supply Applicable for supplies Price is directly proportional to the supply March 4, 2022 11

12. March 4, 2022 12 Profit Market demand Industry standard Skill level Cost Experience Cost Factors of price determination

13. March 4, 2022 13 Agricultural price determination is the process of determining agricultural commodities market price in terms of revenue, profit, marginal revenue, marginal cost, etc. 4.2 Agricultural Price Determination

14. 4.3 Information, Price and Rural Marketing March 4, 2022 14 The term “ rural marketing” used to be an umbrella term for the people who dealt with rural people in one way or other. Rural marketing is defined as managing all the activities involved in assessing, stimulating, and converting the purchasing power of the rural consumers into effective demand for specific products and services and moving them to the people in rural areas to create satisfaction and a better standard of living and these achieving organizational objectives.

15. 4.3 Information, Price and Rural Marketing March 4, 2022 15 Price information is vital for making marketing decision process of agricultural goods and services per time.

16. 4.4. Price Spread Analysis March 4, 2022 16 Price Spread: defined as the difference between the price paid by consumers and the net price received by the producer for an equivalent quantity of farm produce. It is expressed as percentage of consumer’s price. x100  

17. Price Spread Analysis March 4, 2022 17 Costs in price spread includes: ( i ) the cost involved in moving the product from the point of production to the point of consumption i.e. marketing cost. (ii) profit of the various market functionaries involved in moving the produce from the initial point of production till it reaches the ultimate consumer.

18. Price Spread of wheat March 4, 2022 18

19. 4.5 Price Efficiency/Allocative Efficiency March 4, 2022 19 How well are our scares resources used? This is what is discussed when economists talk about and the economic efficiency.

20. Economic efficiency March 4, 2022 20 Efficiency is about society making optimal use of scarce resources to help satisfy changing wants and needs. There are several meanings of efficiency but they all link to how well a market system allocates our scarce resources to satisfy consumers. Normally the market mechanism is good at allocating these inputs, but there are occasions when the market can fail

21. Economic e fficiency March 4, 2022 21 Allocative efficiency Productive efficiency Dynamic efficiency Social efficiency

22. March 4, 2022 22 Allocative efficiency is at the output which maximizes total consumer welfare At the market equilibrium price, consumer, and producer surplus is maximized at this output, economic welfare is maximized. Economic efficiency means making optimum use of scarce resources

23. The basics of allocative e fficiency March 4, 2022 23

24. Allocative e fficiency March 4, 2022 24 Optimum distribution of goods All points that lie on the PPF are allocatively efficient because we cannot produce none of one product without affecting other products available. AE reached when “no one can be made better off without making worse off”. This is also known as “pareto efficiency”

25. Allocative e fficiency March 4, 2022 25 AE occurs when the value that consumers place on a good or service (reflected in the price they are willing and able to pay) equals the cost of factor resources used up in production. The main condition required for allocative efficiency in a given market is that market = marginal cost of supply”