• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Explain the special characteristics of agricultural markets.

Extracts from this document...

Introduction

Stephanie Merks Agricultural Markets a.) Explain the special characteristics of agricultural markets. (15) Agricultural markets are special types of markets that have special characteristics that differ from other markets. These are mainly due to factors affecting supply of agricultural products, and the situation of producers in this business. First of all the agricultural market is very competitive because the producers are all very small and large in number. Therefore, they don't have a great influence on the price of their products. Agricultural producers are what are known as price takers, producers that have little or no influence on the price of their output. The demand for individual producers is very price elastic. This is because they are in a competitive environment due to the large number of farmers. These producers are all competing for the same market and therefore when their prices rises slightly the quantity demanded for their products decreases significantly. This happens because the consumers have the choice between a producer with a slightly higher price and the original lower prices of other producers. This is why individual farmers suffer from price changes. On the other hand, the total market demand for agricultural producers is very price inelastic. ...read more.

Middle

These decreases will inflict either less money coming in for products or too much supply for demand. Both of these situations will decrease a country's export revenue and if this revenue is the country's main source of money, and decrease can significantly hurt that country's economy. These countries should be in balance of payments deficits or else another problem of international debt will occur. b.) What policies can be used to intervene in agricultural markets? (10) Agricultural markets are markets with a large amount of government intervention to keep the markets stabilized. Because of the dramatic drops of supply and changes in prices the government sets up policies to protect both consumers and producers. In the European Union the Common Agricultural Policy (CAP) was set up in 1969 to control the agricultural markets. The CAP was put in place to increase agricultural productivity as well as stabilizing markets. By doing so they would control the fluctuations of the prices and try to increase the income of the farmers to ensure a fair standard of living for them. The CAP also helped to provide certainty of supplies and ensure these products to consumers for reasonable prices. ...read more.

Conclusion

For example, the price paid for corn by the consumers is 1 euro while the farmers are guaranteed 3 euros for the corn they produce. The government pays the 2 euros difference to satisfy both the consumer and producer to stabilize supply and demand. Although the CAP helps the consumers and producers greatly, there are also a few problems that this policy creates. First of all this policy takes up a large percentage (80%) of the EU's money. So a lot of the money that could be used to improve Europe is used up for paying farmers. Also by setting up these minimum and maximum prices, overproduction occurs and a solution needs to be found for the excess supply. Either put in buffer stocks, if possible, if not, dumping occurs where the supply is sold cheaply abroad because it is perishable. This buffer stock policy encourages the inefficiency of farmers knowing that if they cant meet demand one year, the EU will take care of the excess demand through stock. Also knowing that they don't have work to meet demand because of the money they are guaranteed already through subsidies from the government. New Zealand's milk market has been extremely successful without subsidization because farmers have many incentives to work hard because they aren't guaranteed money, and this is why it is a very strong market. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Marketing & Research section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Marketing & Research essays

  1. Unit 2 Investigating business

    It is good for us to know the figure so that we have something to work towards, like a goal. We will be paying �100 back to our bank loan each month so by the end of the year we will have paid back a total of �1200, as our

  2. Marketing Research

    activities at periodic intervals and who are selected based on a combination of their willingness and representativeness. In a consumer panel, there is a permanent sample of respondents. Advantages of consumer panel 1) Continuous supply of information: information is provided on an ongoing basis.

  1. Applied Business Studies

    Competition refers to a situation where there are rival businesses which allow a customer to decide which place they want to go to. The more competition there is in an industry, the more choice a customer has and this could affect the way in which a business behaves.

  2. Impact on Automobile Industry Due To Recession in India

    Then, unemployment rates will rise because companies start laying off workers to cut more costs, because consumers are not spending like they were. It is these combined factors that manage to drive the economy into a state of recession. This set of circumstances, coupled with the ability of people to

  1. unit 2 recruitment in the work place

    cases it would be a temporary leave - meaning the employee will be back to work after a certain period of time. * Maternity Leave: This could be a case when an employee will be off from as they going to have a baby (pregnant), this would be quite a

  2. Investigating Marketing

    The Kids' World includes Dolphin University to learn about Ocean Park's breeding centre and information about Dolphins, Whiskers Theatre, Town Games and Rides for kids. Marine Land contains the jellyfish exhibition, pacific pier to get a personal experience with

  1. Managing Markets

    The same would be diagnosed with PESTEL which has been proposed by Francis J Aguilar who coined this concept with only the first four metrics. However, during the course of its maturity the other two factors were also added to have a right perspective of the macro environment.

  2. This is a report on the international dimension of Costa Coffee and Coffee Aroma.

    As it is a well-known and the leading brand of coffee brewing and retailing in UK. 1. Name of the organization with global presence: Costa Coffee is a multinational coffeehouse company headquartered in Dunstable, United Kingdom and a wholly owned subsidiary of Whitbread.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work