Economic Ia

Topics: Supply and demand, Economic equilibrium, Economics Pages: 4 (751 words) Published: August 27, 2013
Economic IA name: Jammy
Ghana has experienced shortage in the sustainability of the Fertilizer Subsidy Programme (FSP) being implemented by Peasant Farmers Association of Ghana (PFAG). In the recent occurrences in the Fertilizer Subsidy Programme (FSP) could negatively affect output in the agriculture sector. A subsidy is a grant or other financial assistance given to another party for support or development from one party, in this case the third party is government. The purpose of subsidizing the fertilizer is to provide resources in order to lower the production cost of farming, to the poor who can’t afford it, subsidies have the potential to bring an equitable distribution of economic well-being if the free market can’t adjust itself to the equilibrium (Classical model point of view suggested that in an economy, prices and wages freely adjust to the ups and downs of demand over time in long run). Supply of fertilizer

Price of fertilizer in GH¢
Price of fertilizer in GH¢
Market of Fertilizer in Ghana

Excess supply
Excess supply
S1
S1
S
S

P1
P1
P
P

D
D

Q
Q
Q1
Q1
Quantity of fertilize in Kgs

S= Supply of fertilizer with subsidies D= Demand of fertilizer S1=Supply of fertilizer with lessen subsidies

The leftward shift of supply curve indicates that for any given price, less is being supplied, or for any given quantity, price is higher, in the graph S > S1 indicated less of fertilizers is being supplied, quantity decreased from Q > Q1, create extra burden to farm to cover their cost of production and also creates upward pressure on price, to remain covering the real cost of production(including the cost of all resources used and the cost of not employing those resources in alternative uses), they Have no choice but to increase the price( P>P1 ), which could have some effect on the willingness of consumer to purchase the product, depending on...
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