Assignment On Economics And International Trade

ECONOMICS 1
Economics and International Trade
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ECONOMICS 2
Table of Contents
Introduction................................................................................................................. 2
Description of the Market structure............................................................................... 3
Empirical Analysis....................................................................................................... 6
Figure1: Simulated Demand and supply for Vegetables and Fruits...................................6
Conclusion.................................................................................................................. 7
Appendix: News Article................................................................................................. 11
Introduction
The report provides a brief and comprehensive description of the agricultural
production industry of Australia (National Rural Reporter, 2019). It describes the market
structure of the industry, changes within the market conditions say the supply and
demand of the agricultural products in the country and finally provides a conclusion.
Australia is one of the prominent countries considered the best agricultural producers in
the world. However, in past years the industry has experienced some abnormalities like
a decline in demand and supply of its products brought about by various reasons such
as; climate, tastes and preferences, arising of substitutes, high costs of production,
attitudes toward the commodity, culture and religions and so many more (Jackson et al,
2018). The agricultural sector of Australia is composed of 58% agriculture land use,
59% water extraction areas, 14% products and services exported out of the country, it
contributes approximately 2.7% of the country’s Gross Domestic Product and also
provides about 4% employment opportunities for the citizens (Lewis and Witham, 2012).
The factors determining the agricultural stand of Australia include; soil type, market
share, climate changes and water used for agriculture. The dominant section of
agriculture in the country is livestock farming well as crop growing and horticulture are
practiced on a smaller scale just around the coast. The sector of agriculture is the
backbone of Australia’s economy and for many centuries, sheep and wheat are the
dominant products on market (Hughes, 2019). The country is currently the main
exporter of meat, grains and wool throughout the world. Generally, the exports of
agricultural commodities in Australia are less than the imports implying an excessive
production.

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Description of the Market structure
The agricultural structures of Australian farms rely on market conditions. These
market conditions enable people to see the best managers of the largest farms in
operation. The sizes of the farms increase over time in form of both land area and total
receipts (FAO, 2009). However, increased size of the farm has yielded the improved
productivity using different channels:
Consumer demand; this includes tastes, preferences and perceptions of the
customer that affect the prices and quantity of agricultural commodities. Potential
customers tend to reduce the quantity demanded for products in case they do not meet
their expected quality and quantity. In turn, the industry has to reduce the prices with an
aim of getting back its market. On the other hand, if the products meet consumer
satisfaction then quantity demanded will increase and prices will have to rise. However,
this can be elaborated more with the law of demand and supply. It is evident that when
prices increases (farmer’s context) the agricultural output is increased since most of the
farms aim at increasing profits. Also, to the consumers’ context, when the prices of
products increase, the level of consumption in the market is declined and the derivative
remains true(Alston et al, 2009).
Accessibility of better technology; this allows better and great management of
labor. In the market of agricultural products, technology advancement increases the
potential market in terms buyers both abroad and locally. When the agricultural products
or services are made from better technology, the quality is assumed to be high.
Therefore, tastes and preferences of the customers are considerably to be high since
the products in the market are of good quality.
Accessibility of economies of scale; the economies of scale have been supported
through deregulation of stipulated agriculture markets and micro-economic reforms on
the economic worldwide. Economies of scale can be enjoyed by the agricultural farms
through the expansion of their sales and profits (Keogh, 2012). This creates constant
supply and demand of goods and services especially the agricultural ones.
Furthermore, Individual regions and sectors whereby they are located influences the
market of agricultural products (Australian Agricultural and Resource Economics

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Society, 2016). Big farms tend to be with much level of productivity and profitability. For
instance, empirical analysis suggests that some of the farms got the same output levels
per hectares as the greatest performances gauged over 20% of the farms (Kingwell et
al, 2016). The total sum of broad acre for agricultural output would be about 18% over
the present levels with the income of the farm (costs subtracted from receipts). This
reflects the increased productivity of the farms that are large and brings about the
advantage of structural changes especially for farm level of competitiveness. In other
words, small farms are less profitable on the mean average compared to their bigger
counterparts. Also, the households relate favorably with the population of Australia as a
whole with the debt and income that are comparably lower (Sheng et al, 2015). In
addition, Australian government’s will of strengthening the agricultural sector in the
economy improves the competitiveness with other sectors such as the booming mining
industry, it is done through making sure that it maintains its competition. This package
advocated for the A$11.4 million in 2015 to boost the regulators of Australia. Australian
Competition and Consumer Commission (ACCC) engages in the industry, the regulator
establishes the specific unit that devotes in encouraging fair trade through taking
enforcement actions and strengthening of competition in the supply chains of
agriculture. This competitiveness seeks to address ACC’s actions about increment of
consolidation that is over the farm gate and practices of trade that are unfair in
agricultural supply chain (National Rural Reporter, 2019).
The Rate of Inflation and Deflation; the rate at which general prices of the
agricultural products and services increase is termed as inflation whereas when the
general prices of the commodities decrease, this is what we call deflation. Deflation in
Australia helps to offer incentives to the buyers of the products till when they seem to
become cheaper. This situation is caused by inflation thus leading hoarding of goods
which in turn brings to higher prices since the goods are limited in circulation (Sheng et
al, 2011). It is confirmed that both deflation and general increase in prices affect the
agricultural productivity in one way or the other.
Most significant market condition about productivity in agriculture is the steadily
declining terms of trade over years. Despite the trend in the terms of trade for farmers