8 Assuming
static producer expectations, given
current a high producer price, producers
will increase production, however due to excessive supply prices will fall.
Realising low prices, farmers will
reduce production and supply, but due to a market shortage (excess demand) price will
rise and the process continues. The theory assumes producers have static expectations and thus they base their production plans on past experiences on prices. Hence this study also assume tobacco farmers in Zimbabwe have static expectations and they do make their production decisions basing
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