PREREQUISITES OF AN EFFICIENT ECONOMIC SYSTEM

When every prerequisite is met in the general economic system, the marketing system can lead, not only to an efficient satisfaction of producer and consumer needs, but also to an efficient allocation of society’s limited resources. Three of the prerequisites are as follows.

A Free Market Economy

A free market economy must exist,where consumers provide the answers to the questions of what to produce, how much to produce, when to produce, who should produce, and for whom goods should be produced. The level of profits in such a system are a measure of how well producers answer these questions.

Price That Reflect the Full Value of Market Resources

When prices reflect the full value of resources,resources are allocated to their highest and best use. How close an economic system comes to achieving this is a measure of pricing efficiency. A high degree of pricing efficiency is desirable because it results in :

Producers using the most efficient technology available and the lowest-cost combination of inputs to make their products.

The Conflicting Needs of Producers and Consumers That Agrimarketing Seeks to Resolve

Producers try to :                                         Consumers try to : ·         Maximize long-run profit                         *maximize the satisfaction they receive ·         Sell large quantities                                     from the products they consume with  of a few products                                        their limited incomes ·         Seek the highest prices                              *buy small quantities of many products                                                                    *seek the lowest prices

Figure 13-4    Producers and consumers must work together to determine the needs in agrimarketing.              

Consumers purchasing only those products that lead to the maximization of their total satisfaction.¹¹

A High Degree of Interaction between Consumers and Production Agriculturalists

When consumers and production agriculturalists interact, both parties have a good knowledge of the variety and prices of goods available for sale and therefore can make informed choices.

            The satisfaction of these three prerequisites is desirable because it will lead to the development of an efficient economic system where there will be:

v  Decision making by the consumers as to the who, what, and where of the economic system

v  A pricing system that brings about an efficient allocation of resources

v  The maximization of consumers’ satisfaction

v  The maximization of producers’ long-run profits¹²