BASIC ECONOMIC PRINCIPLES
1. Scarcity: Scarcity can be defined as the limited supply of resources which are used for the satisfaction of unlimited wants.
2. Choice: It is the system of selecting or choosing one out of a number of alternatives.
3. Scale of Preference: This is defined as a list of unsatisfied wants arranged in the order of relative importance.
4. Law of Diminishing Returns: Law of diminishing returns states that as a successive unit of a variable factor (labour) is applied to a given fixed factor (land). Output will increase at first, but it will get to a point at which the addition of one more variable factor will result in less additional unit of output.
FACTOR OF PRODUCTION
1. Land: Land is a free gift of nature.
2. Capital: Capital is all man-made assets put in or utilized in production e.g. tractor.
3. Labour: Labour can be defined as all forms of human effort utilized in production.
4. Entrepreneur: It is a person who manages, coordinate and organize all the process of production in order to make maximum output at minimum cost, thereby making profit.
CHARACTERISTICS OF LABOUR
i) Labour is skillful
ii) Labour has feeling
iii) Labour requires motivation
iv) Labour is perishable
v) Labour has initiative
vi) Labour is mobile
vii) Labour is not fixed
TYPES OF LABOUR
i) Skilled Labour: This is a type of labour who makes use of his mental effort, and he has gone through a relatively long training and formal education.
ii) Unskilled Labour: This is a type of labour who makes use of his physical effort as a result of low training or no formal education. They are referred to as the brown collar job.
PRINCIPLES OF DEMAND
Demand: Demand is the quantity of that commodity which a consumer is willing and able to buy at a given price during a given period of time.
LAW OF DEMAND
i) The law of demand states that the lower the price the greater (higher) the quantity of goods that will be demanded.
ii) The higher the price the smaller the quantity that will be demanded.
FACTORS AFFECTING DEMAND
i) The price of a commodity: The higher the price of a commodity the lower the quantity that will be demanded
ii) The price of other commodities: The higher the price of a good will make consumers to look for close substitutes
iii) The amount of tax: Higher tax will increase the price of a commodity and will influence quantity to be demanded of a given commodity.
iv) Income of the consumer: The income of a consumer will determine the quantity of commodity to be demanded. Higher income means more purchase.
v) Taste of consumer for a particular commodity.
vi) Other factors like the population of a place, expectation of change in price of commodity, or period of festivals like Christmas and Salah will also affect the quantity of good to be consumed.
SHIFT IN THE DEMAND CURVE
It is possible for the quantity of the product demanded by a consumer to change while the price remains unchanged. Hence, there is a new demand curve that shows relationship between quantity demanded and prize.
Demand curve can shift through the following
i) Rise or fall in consumer income.
ii) Customer taste.
iii) Prices of other related products.
MOVEMENT ALONG THE DEMAND CURVE
The cause of the change in the quantity demanded is due to changes in the price of the commodity under consideration. The quantity of a commodity demanded changes with price. More is purchased at a lower price than at a higher price.
PRINCIPLES OF SUPPLY
Supply: Supply is the quantity of goods which producers are able and willing to offer for sale at given prices over a period of time.
LAW OF SUPPLY
The law of supply states that the higher the price, the greater the quantity that will be supplied and the lower the price the, the smaller the supply.
SHIFT IN SUPPLY CURVE
Supply curve may shift to the left or right depending on the factors which may reduce or increase supply at a given price.
A change in the following can lead to a shift in supply
i) Price of substitutes
ii) Level of technology
iii) Price of factors of production
MOVEMENT ALONG THE SUPPLY CURVE
The cause of the change in the quantity supplied is as a result of the change in the price of the commodity under consideration. The quantity of a commodity supplied changes with price.
More is supplied at higher price than at a lower price.
FACTORS AFFECTING SUPPLY OF AGRICULTURAL PRODUCT
i) Changes in price of commodity
ii) Changes in the cost of production
iii) Changes in the technique of production
iv) The effect of weather
v) The effect of taxation
vi) Shift in consumption by consumer
vii) Changes in demand
viii) Changes in distribution or marketing channels
ix) Change in the number of producers
x) Aims and objectives of the farmers
IMPLICATION OF DEMAND AND SUPPLY FOR AGRICULTURAL PRODUCTION
1. When the demand for a farm product exceeds supply, prices would tend to rise and farmers would tend to produce more of such goods.
2. When the demand is lower than supply, prices would fall and farmers would be discouraged from production.
3. When there is increase in the income of consumers, there will be increase in the demand for agricultural products and vice versa.
4. High cost of certain goods will lead to the demand for their low price substitutes.
5. Higher supply of agricultural products by producers may lead to reduction in price and demand.
6. High cost and lack of farm inputs may lead to low supply and high cost of farm products.
7. The increase in the number of farmers will lead to higher supply and reduction in prices of products and vice versa.