Commentary on microeconomics. The main problem outlined in the article is low price of tomatoes in Coimbatore market, Tamil nadu

It is believed that demand will remain low in Kerala until the national festival onam arrives and will gradually start increasing. This demand will make the western Tamil nadu farmers to shift focus back to the Kerala’s market. This will result in decrease in supply in the market of Coimbatore, which will lead to increase in price of tomatoes in Coimbatore market.

This graph shows the decrease in supply in the market of Coimbatore represented by the leftward shift of the supply curve(s 2) to the new supply curve(s 3). This in turn increased the price from P 2 TO P 3.

This graph shows demand and supply in the market of Kerala after the arrival of onam festival and before it. The equilibrium demand is De and equilibrium supply is Se. Firstly, the supply increases from Se to S2 because of a bumper harvest and to prevent from loses they move their that part of the market to Coimbatore represented by the reverse movement from S2 to Se. Later when the festival season arrives the demand increases indicated by the rightward shift of De and in respond the supply also increases from Se to S2.

The outcome of the whole situation is very devastating on the farmers. They are not even being able to get back half of the total production cost and are facing huge losses. And if this continues they will be forced to let the tomatoes to rot. Which means that the factors of production used in the process of farming are wasted. Which has a huge cost to it as that factors(such as the farm land) could have been used for some other purpose.

This problem of surplus of tomatoes in the market is seen every year and therefore a step should be taken by the government to tackle this issue, as the producers are a part of the society and it is a market failure if the producers don’t receive the right amount for their commodity, which is, also misallocation of resources as too much of a commodity is being produced at too low price. That means welfare loss to the society.

Therefore, the government of India should take solid steps in order to stop the exploitation of the farmers and give them an incentive for continuing producing their commodity. This can be done in many ways. First is by fixing a minimum price or floor price for tomatoes to sell at which will help the producers get a appropriate profit and buy the surplus of the commodity and sell it elsewhere in the country.

The government can also form an union for tomato farmers which will in times like one discussed in the article will buffer stock and regulate the supply to get the minimum price or sell tomato in the other local markets of the country and if possible and appropriate import it to other countries. This will help farmers get high profits as well as improves the trade balance of the country.