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A farmer traditionally irrigates fields manually (labour-intensive). He installs drip irrigation (a technology upgrade) that reduces water use by 40 per cent and increases yield by 30 per cent. How does this affect a. His cost of production, b. His willingness to supply at different prices, c. The overall market supply if many farmers adopt this technology?
Concept
Other Determinants of Supply
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- a. Cost of production - he uses 40% less water and less manual labour, and gets 30% more crop, so his cost for each kg of crop falls.
- b. Willingness to supply - each kg now costs less to grow, so selling it gives more profit. He is willing to supply more at every price.
- c. Overall market supply - if many farmers adopt drip irrigation, market supply rises, and with more supply, prices may fall.
