(a)(i) Explain the law of diminishing returns. (ii) State how the law of diminishing returns affect agricultural production.
(b) Discuss how each of the following factors affect the supply of agricultural produce: (i) price (ii) technology (iii) weather (iv) subsidy (v) government policy.
(a) Explanation of the law of diminishing returns: (i) The law of diminishing returns states that as successive amounts of a variable factor are applied to one or more fixed factors, output will increase a lot at first but there comes a point at which the use of one more amount of the variable factor will add less to output than the preceding amount. That is the point where diminishing returns sets in. (ii) How the law of diminishing returns affects agricultural production: It enables farmers to determine/know the optimum level of combination of factors of production that will maximize output and profit.
(b) How some factors affect the supply of agricultural produce (i) Price: (a) The higher the price of the produce, the greater will be the supply. (b) The higher the supply of the produce, the lower will be the price.
(ii) Technology: (a) The development of new method of production which brings about increased output at lower cost leads to increase in supply. (b) The use of obsolete technology lowers production and thus reduces supply.
(iii) Weather: (a) In good weather there is abundant rainfalls and sunshine which favours agricultural production thereby increases supply. (b) Bad weather conditions such as drought, hurricanes etc affect agricultural production and lowers supply.
(iv) Subsidy: (a) Subsidy which is a non-repayable grant given to farmers in kind or cash helps to reduce the overall cost of production and encourages the farmers to produce more. (b) It enables the farmers to acquire farm inputs at lower prices thus enabling them to increase their production and supply.
(v) Government policy: (a) Taxes on agricultural inputs by the government increase the cost of production and this will cause a reduction in the supply of farm produce and vice versa. (b) A ban on importation of competitive produce will encourage local production thereby increasing supply and vice-versa. (c) Good policy on subsidy will either encourage or discourage production.
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