Faculty of social studies department of economics supply response of tobacco output to price changes in
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| 1.2 Problem Statement Several constraints such as land and agricultural pricing policies have been identified as the major factors hindering agricultural growth in Zimbabwe. According to FAO (2012), total agricultural production has been declining since 2000 and the agricultural pricing policy has been the major contributor towards stagnation of agricultural activities in Zimbabwe. Muir- Leresche and Muchopa (2006) have noted that the falling of producer prices during the shave resulted in the reduction in area planted for some major crops including tobacco which resulted in reduced farm earnings thereby contributing to a reduction in area planted to tobacco, hence resulting in low supply. The downward trend in tobacco production since 2000 brought some implications for policies to increase tobacco supply within the agricultural based economy of Zimbabwe. The tobacco industry with some assistance from the Zimbabwean government has to redirect their efforts and resources towards encouraging increased tobacco production (Pfumayaramba, 2011). Ina bid to encourage farmers to increase their production, economic incentives were provided to farmers and these include information and input provision. Farmers were encouraged to engage in contract farming and several input provision programmes such as the Presidential Input Support Scheme, Operation Maguta and the Champion Farmers Program were launched. However, with all these efforts targeted to increase tobacco supply, tobacco production has not yet surpassed the highest realised output of 236 000 tonnes produced in 2000 (TIMB, 2014). Therefore, there is need to estimate the tobacco supply function in which its structural parameters will assist policymakers in formulating policies most appropriate for effective growth in tobacco supply in Zimbabwe. 1.3 Research Questions To address the research problem, the following research questions are formulated: • How does tobacco output in Zimbabwe respond to price changes • What are the short-run and long-run price elasticities of tobacco output in Zimbabwe 4 |