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# In your own words, explain how derived demand is found. That is, knowing the demand for products in

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In your own words, explain how derived demand is found. That is, knowing the demand for products in the retail market and the supply of marketing & processing services, how do you determine the derived demand for the farm-level commodity? (4)

Determine the equilibrium quantity and prices in the sorghum farm market and the retail market. Suppose that sorghum is used to produce malt grain and straw, and that the individual demands for grain and straw are as follows:

Dgrain: PDgrain= 200 - 0.25Q

DDstraw: PDstraw = 115 - 0.2Q

You also know that the processing and marketing of sorghum-based products is characterized by the function:

SP&M : PSP&M = - 250 + 4Q

Lastly, you know that the production of sorghum involves fixed input costs and variable labor costs. Fixed costs are P150 and the labor supply function is:

QSL = 7 + 0.04P

(Hint: use this last piece of information to solve for your farm-level sorghum supply function.)

Calculate the following:

The demand function for total sorghum-based products. (4)
The derived demand function for sorghum. (4)
The supply function for sorghum.
The equilibrium quantity of sorghum (in thousand kilograms). (4)
The equilibrium price of sorghum (in thebe per kg). (4)
The equilibrium price of the malt grain (p**a per ton) and the price of straw (p**a per ton). (4)

"Margins" are often used in the analysis of the efficiency of marketing systems. Do high marketing margins necessarily imply that the farmers (producers) are being exploited?
(5)
Consider the market for chicken. Typically consumers purchase chicken wings, b*****s, and legs. These parts are processed in fixed proportions i.e. each chicken yields 2 wings, 2 b*****s, and 2 legs. As a poultry farmer, you are interested in determining the demand for the raw product – chicken.

Suppose you have the following demand and supply functions:

Dlegs: PDL = 5 – 0.25Q
Dwings: PDW = 10 – 0.75Q
Dbreasts: PDB = 15 – Q
SM&P: PSM&P = 8 + 0.25Q
Schicken: PSC = -10 + 5Q

Calculate the demand for processed chicken. (4)
Determine the equilibrium quantity of processing. (4)
Solve for the demand function for raw chickens. (4)
Determine the equilibrium price and quantity of raw chickens. (4)
Find the price of legs, wings and b*****s. (4)

Price transmission analyzes how market shocks through the various stages of the marketing chain are transmitted through related markets, and how the price in one market affects prices in another market.
What is meant by asymmetry in price transmission? (2)
Discuss three main sources of asymmetry in price transmission in agricultural commodity markets. (9)

Tags: demand, derived, explain, found, Knowing, own, Products, Words

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