FEEDBACK TUTORIAL LETTER. 1st SEMESTER 2018 ASSIGNMENT 1 ECONOMICS OF AGRICULTURE EOA611S

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1 FEEDBACK TUTORIAL LETTER 1st SEMESTER 2018 ASSIGNMENT 1 ECONOMICS OF AGRICULTURE EOA611S 1

2 COURSE: ECONOMICS OF AGRICULTURE COURSE CODE: EOA611S TUTORIAL LETTER: 01/2018 DATE: APRIL 2018 Dear Student This Tutorial Letter is to give feedback on Assignment 1. Congratulations with completing the first assignment. I trust that you have studied hard thus far and will continue to do so. I would like to continuously remind you that by doing your assignment on your own, and not copying it from another person will only be to your benefit in the coming exams. Remember to read thoroughly through the questions before answering, especially the multiple-choice questions. Always try to answer all questions. Don t simply write down the answer, but show all your calculations. Avoid making unnecessary calculation mistakes and always write down the initial formula for any calculation. Use this opportunity to revise the questions in Assignment 1 with the memorandum in hand. Give attention to the remarks of the marker-tutor in your assignment book. If there is anything that you are still unsure of, do not hesitate to contact me. Good luck with your exams!!! Tutor-marker Eslon Ngeendepi Tel: engeendepi@nust.na PERFORMANCE STATISTICS Total number of students who submitted Assignment 1 = 9 Total score = 520 Average score = Students who scored above 50% = 8 2

3 Students who scored above 40% = 1 Borderline cases, that is, 40% = 0 Highest score = 68% Lowest score = 33% ASSIGNMENT 1 SECTION A 10 Marks QUESTION 1 [1O MARKS] 1.1 D 1.2 A 1.3 C 1.4 D 1.5 B 1.6 D 1.7 B 1.8 D 1.9 C 1.10 D SECTION B 10 MARKS QUESTION Inferior good 1.2 Isoquant 1.3 Operational credit 1.4 Normative 1.5 Allocative efficiency 3

4 1.6 Cardinal 1.7 Marginal Rate Substitution 1.8 Change in quantity demanded. 1.9 Quota Essential SECTION C : CALCULATION QUESTIONS 40 MARKS QUESTION 1 [14 MARKS] 1.1 Graphically illustrate production stages and explain their relationship with the marginal physical product (MPP) and average physical product (APP). Stage I of production: Level of input use that is to the left of point A, where APP = MPP. This is an irrational stage of production, in the sense that the producer can become more efficient if he or she increases the quantity of input used. Since the average productivity is increasing, the producer could become more productive by increasing the level of input use. Therefore, the rational producer will never locate in Stage I, because productivity could increase by using more inputs. Stage III is also an irrational stage of production. The third stage of production includes all input levels greater than the point at which MPP becomes negative. In Stage III, the producer is using 4

5 too much input, since total productivity diminishes with each additional unit of input use. Total output would increase if the quantity of inputs were decreased. In other words, higher levels of productivity are possible at lower levels of input use (too many cooks in the kitchen lower the number of meals cooked). Stage II, the stage between Stage I and Stage III, is the rational stage of production, since the producer is operating in the region of input use that is most productive. The exact point of input use that is optimal. (6) 1.2 a) N$700 N$30 = N$670 (2) b) Total cost (TC)= 30 x 900 = N$ (2) c) Total Revenue = N$700 x 900 = N$ (2) d) Total Profit = = N$ (2) QUESTION 2 [6 MARKS] MU X1 = X 2 MU X2 = X 1 MU X1 / MU X2 = X 2 / X 1 X 2 / X 1 = 20 / 10 X 1 = 0.5X 2 M = 20 X X 2 M = 20 (0.5X 2) + 10 X = 10X X = 20 X 2 X 2 = 500 X 1 = 250 (6) QUESTION 3 [20 MARKS] 1.1 r = A x R x t r = N$ x (15/100) x 10 r = N$ x 0.15 x 10 r = N$ (2) 1.2 5

6 r = A x R x t r = N$ x (10/100) x 9 r = N$ x 0.10 x 9 r = N$ (3) 1.3 a) N$ x (10.7/100) = N$ (2) b) = 19 (3) c) Formula= (Total charges/one-half the loan amount) x (no. of payments/ no. of years) x (1/( no. payments + 1)) = {(2675/ 12500) x (19/4) x ((1/(1/19+1))} = x 4.75 x 0.05 = x 100 = 5.08 (10) SECTION D : DISCUSSION QUESTIONS 40 MARKS QUESTION 1 [20 MARKS] 1.1 a) b) c) Cyclical nature of production Price instability (2) It can provide the food and fibre necessary expanding population that is growing in income and wealth. It can release workers needed for non agricultural goods and services production It can serve as a market for non farm goods and services, thus providing a stimulus for expansion of employment and output in the non farming sector. It can provide a source of capital that can be invested in improved productive facilities in the rest of the economy. (4) Unclear property rights Limited opportunities for foreign direct investment Capital constraints Climatic uncertainty Government directed production 6

7 Currency appreciation (4) 1.2 Political and ethnic challenges Land use problems Institutional tensions Agreement on land policy Role of stakeholders Whom land rights and decision-making is vested in (4) 1.3 Changes in supply can be caused by any of the determinants of the quantity supplied except the price. They are as follows: The price of factors of production and other inputs Technology The prices of alternative products Taxes and subsidies The number of sellers supplying the product Expected future prices of the product Natural disasters (6) QUESTION 2 [20 MARKS] 2.1 Form utility: Farmers who produces cows and MeatCo that slaughter and processes them into meat cuts, add form utility, i.e. They change the form of raw material into something useful. Place utility: the railroad and truckers add place utility by moving the meat cuts from MeatCo in Windhoek to wholesalers, retailers and consumers in all over the country. making sure the product is accessible, bring it to the customer, or have it in convenient place. Time utility: The meat processors may freeze and store some of the meat cuts and supermarkets may also hold inventory for future use. These are the time utilities. Making sure the product is available when people need it. Possession utility: Commission agents normally seek out meat processors who need meat and help transfer the cows from the farmer to the meat processors. A wholesaler also seeks out a retailer who will formally sell the meat to the consumer. These people are said to add possession utility. letting the customer have the product, usually after they pay, they can "possess" it and hold it, transport it etc. Possession utility is the value consumers put on 7

8 purchasing a product and having the freedom to use the product as it was intended or finding a new use for the product. Making the exchange of goods and services between the buyers and sellers. (8) 2.3 (a) Exchange functions (b) Physical functions (c) Facilitating functions (4) 2.4 Agric marketing is the performance of all business activities involved in the flow of food products and services from the point of initial agricultural production until they are in the hands of the consumers. (2) Increased population growth: As a result of population growth, the quantity of food that is marketed has increased, raising the total expenses of food. Increased income which increases Demand for marketing services (packaging, convenience, etc.) Rising costs of marketing: Rising labor and energy costs in food marketing have added to the rising cost of marketing food. (4) The economic doctrine that the consumer is Queen or King in the marketplace that is driven by consumer demand is known as Consumer Sovereignty. This is the concept that each consumer decides independently what to buy and that the combined individual decisions directs all production and marketing activities in the economy. (2) TOTAL MARKS 100 8