University of zimbabwe faculty of social studies department of economics
Organisation of the Rest of the Study
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taku dissertation, taku dissertation
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- CHAPTER TWO LITERATURE REVIEW 2.0 Introduction
| 1.7 Organisation of the Rest of the Study The rest of the study is organised as follows Chapter Two will review both theoretical and empirical studies relating to supply response of tobacco output to prices. Chapter Three provides an outline of the study methodology which covers data sources, time period and estimation techniques. Estimation, presentation and interpretation of results are done in Chapter Four. Lastly, Chapter Five gives the summary, conclusion and policy recommendations. 6 CHAPTER TWO LITERATURE REVIEW 2.0 Introduction This chapter reviews underlying theories and also some previous empirical findings in the field of agricultural supply response to changes in producer prices and other non-price factors. 2.1 Theoretical Literature 2.1.1 Basic Theory of Supply and Supply Response In this study the general micro-economic theory of supply, the Nerlove (1958) theory of supply response and the Cobweb theory are used to examine the responsiveness of tobacco output to price changes in Zimbabwe. Generally, the supply of a product is a function of its price assuming that other factors are held constant. Changes in the major determinants of supply either result in the movement along or a shift of the supply curve. The major shifters of supply are the state of technology, the natural environment, institutional settings, input prices, prices of competing products and joint products. The basic supply function is a static model implying that a change in exogenous factors induce an instantaneous response in supply that is there are no delays in adjustment. However, delayed adjustments exist in agricultural markets therefore there is need to incorporate adjusted quantity supplied and prices in order to differentiate between the short-run and long-run responses. The supply response concept is based on the assumption that a price change is likely to result in changes in other factors that influence supply for example arise in price may induce the adoption of new technology. The theory of supply has been used inmost agricultural supply response studies and it will also be used in this study. Download 0.76 Mb. Share with your friends:
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