For many crops a strange situation arises a bad crop year results in a good year for farm incomes and a good crop year results in a bad year for farm incomes. Explain this framers dilemma using demand and supply analysis with a relevant example.

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First lets understand the meaning of Demand and Supply Analysis 1 Demand Analysis In this there is an inverse relationship between price and quantity demanded for the commodity and all the remaining factors are constant It means when price rises the quantity demanded for any goods and services decreases and when price falls quantity demanded increases The factors which influence demand are price income price of related products taste and preferences consumers expectations government policies and many more see figure 1 2 Supply Analysis There is a direct functional relationship between the price and the quantity supplied of the commodity and all the remaining factors as constant It means the higher the price received by the supplier the quantity supplied will rise In short if price increases the quantity will also rise and if price decreases the quantity will also fall The factors which influence the supply are Price of the product technological advancement weather conditions availability of factors of production improvement in transport facility market structure government policies and many more In supply curve the equilibrium stage is obtained when the quantity demanded is equal to the quantity supplied see figure 2 Now in a question bad crop year results in a good year for farm incomes and a good crop year results in a bad year for farm incomes Here when there is a ... View the full answer