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| Question | Answer |
| What factor affects the demand of a good ? | Demand for a good depends on income, prices of other goods, preferences, population growth etc. |
| What are the factors affecting the supply of a good ? | Supply depends on the level of technology, prices of other goods, factor prices etc. |
| What is curve shifting ? | • When income rises, the demand curve will shift rightwards. • When there is technological progress, the supply curve will shift rightward. |
| General principle of demand and supply applies for what type of market ? | The general principles of supply and demand do not only hold for product markets, but also for input markets. |
| What do a farmer demand and supply at the same time as input | Demand: Fertilizer, pesticide, seed etc Supply: Feed, Piglets etc. ( these stuffs are inputs for some other enterprise) |
| Where do the price change in the market affects ? | Price changes in one market often also cause price changes in upstream, downstream, and parallel markets. |
| What is the relevancy of understanding market behaviour in smallholders case ? | Understanding market behavior of households and market interlinkages is important for designing policies and assessing their impact |
| What is the purpose of understanding elasticities ? | Often, we are not only interested in what direction certain determinants influence demand and supply, but also in quantifying the magnitude of this influence ie. quantifying the relation of variables. |
| What is Engel’s law ? | With increasing income levels, people tend to spend a decreasing share of their income on food. |
| What is Bennett’s law ? | The transition in consumption from a few inexpensive starchy staples to a greater variety of more expensive foods with rising incomes is known as Bennett’s law. |
| Classify goods according to their income elasticity | Normal good: n> 0 (more rich more consume Inferior good : n< 0 (more rich less consume) Luxury good: n>1 Essential good: n<1 n_staple< n_non-staple |
| What is own-price elasticity of demand ? | It is the proportional ( percentage) change in quantity demanded of good X divided by the proportional change in the price of good X. |
| What is own-price supply elasticity ? | It is the proportional ( percentage) change in quantity supplied of good X divided by the proportional change in the price of good X. |
| What is cross price elasticity of Demand ? | It is the proportional ( percentage) change in quantity demanded of good X divided by the proportional change in the price of good Y |
| What are substitutes and complements ? | Substitutes in consumption are goods that can be used in place of each other e.g. you can substitute Coke for Pepsi. Complements are goods that are consumed together eg. Coffee cream and Sugar. |
| What will happen if price raise in one of the substitute good ? | The cross price elasticity for substitutes in consumption is positive. This is because a rise in the price of good Y will c ause people to substitute the cheaper good X for Y. eg if there is rise in price of Coke demand for Pepsi will increase. |
| What will happen if price raise in complement good ? | The cross price elasticity for complements in consumption is negative. This is because rise in the price of good Y will causes people to consume less of good Y. Since they consume X and Y together, they will consume less of good X as well. e.g. Price of coffee increases demand for sugar decreases. |
| Why in case of luxury goods income elasticities are greater than one ? | Becasue in case of luxury goods percentage change in demand is greater than the percentage change in income that caused that change. Eg. Given a 10% rise in income the change in demand for fishing rod is 20%. The income elasticity of fishing rod is 2. |
| What will happen in case of necessary good when income changes ? | Necessities are those good with an income elasticity less than one but greater than zero. Example, Milk. It is unlikely that a rise in income will spur bouts of increased milk drinking. |
| What is the importance of understanding demand elasticities ? | Understanding food demand elasticities is also important from a household food security perspective. For instance, one can quantify the change in staple food consumption when households receive a certain income transfer. |
| How agriculture research budget affect the nutrition status of the HH ? | Research in a given commodity will eventually increase the market supply of that commodity and lower the market price. This will eventually affect the consumption pattern. |
| What is the most common welfare measure to evaluate policies? | In order to evaluate policies, a welfare measure is needed. • In economics, the most common welfare measure used is economic surplus, which consists of producer surplus and consumer surplus. |
| What is producer and consumer surplus ? | •Producer surplus is an aggregate measure of firm profits. • Consumer surplus is an aggregate measure of net consumer utility. |
| What helps to quantify the consumers and producers surplus ? | The market supply and demand curves help to quantify these measures |
| What is closed and open economy ? | • In the case where equilibrium price is determined domestically and the country does not participate in international trade; it is a closed economy. • If there is international trade, the country is an open economy. |
| what are non-tradable goods ? | The general model solution for social factor prices is based on the assumption that all commodities have world market prices. But in almost all economies, a large class of goods is not traded on international markets. Nontradable goods such as electricity and water have high international transport costs. Bulky goods |
| What is small open economy ? | If a country participates in trade, and its traded quantities are relatively small, such that the world-market price is not influenced, we talk of a small open economy. Eg. rice export from Nepal as compared to Philippines. |
| What is large open economy ? | If the traded quantities are large enough to influence the world-market price, we talk of a large open economy (e.g., US for maize and soybean exports, Brazil and Argentina for soybean exports, Thailand and Vietnam for rice exports, EU and China for soybean imports). |
| What factors affects a country to successfully participate in trade ? | Moreover, a country’s geographic location (land-locked countries) and infrastructure conditions determine in how far it can successfully participate in trade. |
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