Organic production practices are often management

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Organic production practices are often management-intensive, requiring greater managerial time, skill, and decision making. Organic certification requirements can also require that a farmer not use chemicals or synthetic fertilizers for three years prior to the land becoming available for organic food production . Hence, the supply of organic food is price inelastic . Farmers are not able to respond easily to a rise in a demand and price by releasing the stocks into the market for sale.
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Discuss the demand and supply factors that determine the output of organic food and evaluate which is the most important factor. [25] Suggested Point 3: PES of organic food – likely to be <1 (use when demand rises) Hence, as seen in the figure above, with the same rise in demand, the extent of rise in equilibrium output for organic food is smaller from Q 0 to Q 1 rather than from Q 0 to Q 2 . Quantity of organic food
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Discuss the demand and supply factors that determine the output of organic food and evaluate which is the most important factor. [25] Suggested Point 4: However, the rapid technological advancement and reaping of more economics of scale may change the outlook of organic food production ( ↑supply ) [point] Firstly, the technology of organic food production is changing rapidly, as producers discover more efficient production processes that result in larger quantities and higher qualities of organic food produced at lower costs. Similarly, a cost-saving technological or regulatory change in the processing, transportation, packaging, marketing, advertising, or certification of organic food will also result in larger quantities produced by profit-motivated suppliers. Note: this is a demand and supply question even if you are using a point like EOS, gear your answer back towards demand and supply framework
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Discuss the demand and supply factors that determine the output of organic food and evaluate which is the most important factor. [25] Suggested Point 4: However, the rapid technological advancement and reaping of more economics of scale may change the outlook of organic food production ( ↑supply ) [elaboration and examples] Secondly, as the fledgling organic food industry develops, it will capture economies to scale associated with the growth and development of organic food markets. An example is marketing economies . A large firm can capitalise on its bargaining power to buy its inputs in bulk at favourable rates. Similarly, the organic food of the firm can also be sold in bulk at reduced distribution costs too. For instance, it is more cost efficient for a large firm to transport large quantities using a large truck instead of several small vans. Large firms can also afford to advertise organic food in the national press and other forms of media . Although the advertising expenditure may be substantial, the advertising average cost may be lower than that of a smaller firm because cost of advertising is spread over the larger output level .
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