ECO401 GDB 1 Solution and Discussion
Total Marks 5
Starting Date Friday, November 15, 2019
Closing Date Thursday, November 21, 2019
Question Title Government’s Role in Price Determination & Equilibrium Analysis
Governments get involved in agricultural output markets to stabilize prices of agricultural goods so that producers get reasonable prices. Pakistan’s agriculture sector recorded a slow growth rate of 0.85 percent during the last fiscal year (2018-19). It’s very important to enhance agricultural production to increase farmers’ income, imports reduction and to expand export base of the country. The National Agriculture Emergency Program plans to spend Rs.290 billion in the next five years to boost the sector. The program will be implemented with the coordination of all provinces to improve productivity of major crops i.e. wheat, sugarcane, cotton, rice etc.
Being student of economics identify appropriate price policy measure which government can opt to motivate the farmers and increase agricultural productivity. Logically discuss how the identified price policy will boost the agricultural production.
Four types of market structure
In our case there is a perfect competition because so many sellers having identical or same products. Which are characteristics of perfect competition.
Pure or perfect competition is a theoretical market structure in which the following criteria are met: all firms sell an identical product (the product is a “commodity” or “homogeneous”); all firms are price takers (they cannot influence the market price of their product); market share has no influence on price; buyers have complete or “perfect” information – in the past, present and future – about the product being sold and the prices charged by each firm; resources such a labor are perfectly mobile; and firms can enter or exit the market without cost.
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