The document discusses producer surplus, emphasizing its significance for economic development and market activities. It explains the relationship between marketed and marketable surplus, various types of market structures, and their influence on competition and pricing. Additionally, factors affecting marketable surplus and the dynamic nature of market conduct and performance are addressed.

1. Assignment Title
Producer Surplus and Marketing
Structure Conduct Performance
By
S.ADHIYAMAAN
B.Sc. Horticulture

2. PRODUCER’S SURPLUS
 This is the quantity which is actually made available to the non-producing
population of the country.
 From the marketing point of view, this surplus is more important than the
total production of commodities.
 An increase in production must be accompanied by an increase in the
marketable surplus for the economic development of the country.

3. Importance of Producer’s Surplus
 Framing Sound Price Policies
 Developing Proper Procurement and Purchase Strategies
 Checking Undue Price Fluctuations
 Export/Import policies
 Development of Transport and Storage Systems

4. Relationship between Marketed surplus and
Marketable surplus
 The marketed surplus is more than the marketable surplus
Marketed surplus > Marketable surplus
The marketed surplus is more than the marketable surplus when the farmer
retains a smaller quantity of crop than his actual family and farm requirements.
 The marketed surplus is less than the marketable surplus
Marketed surplus < Marketable surplus
This situation holds good under a) large farmers generally sell less than the
marketable surplus because of their better retention capacity.
 The marketed surplus may be equal to the marketable surplus
Marketed surplus = Marketable surplus
The marketed surplus may be equal to the marketable surplus when the farmer
neither retains more nor less than his requirement.

5. Types of Producer's Surplus
 Marketable Surplus
The marketable surplus is that quantity of the produce which can be made
available to the non-farm population of the country.
 Where
MS = Marketable surplus
P = Total production, and
C = Total requirements (family consumption, farm needs, payment to labour,
artisans, landlord and payments for social and religious work).
 Marketed Surplus
Marketed surplus is that quantity of the produce which the producer-farmer
actually sells in the market, irrespective of his requirements for family
consumption, farm needs and other payments.

6. Relationship between prices and marketable surplus
 Inverse relationship
This implies that the farmers' consumption is a residual, and that the
marketed surplus is inversely proportional to the price level. This behaviour
assumes that farmers have inelastic cash requirements.
 Positive relationship
This relationship is based on the assumption that farmers are price
conscious.

7. Selling Behaviour of Farmers
 It is determined by the following factors
 Financial condition of the farmer
 Nature of commodity to be marketed
 Marketable surplus
 Binding of farmer to particular middleman.
 Development of marketing institutions.
 Transport and infrastructure facilities availability.
 Market information
 Government policies
 Weather conditions at the time of harvest
 Packing materials and destination of markets.

8. Factors Affecting Marketable Surplus
 Size of Holding
 Production
 Price of the Commodity
 Size of Family
 Requirement of Seed and Feed
 Nature of Commodity
 Consumption Habits
M = f(x1, x2, x3, x4)

9. Market Structure
 The term structure refers to something that has organization and
dimension – shape, size and design; and which is evolved for the purpose
of performing a function.
 Market structure refers to those organizational characteristics of a market
which influence the nature of competition and pricing, and affect the
conduct of business firms
 Market structure refers to those characteristics of the market which affect
the traders' behaviour and their performances.

10. Features of Market Structure
 The number of firms
 The market share of the largest firms
 The nature of costs
 The degree to which the industry is vertically integrated
 The extent of product differentiation
 Entry barriers
 The degree of standardization of product
 Pricing

11. Components of market
 Concentration of Market Power
 Degree of Product Differentiation
 Conditions for entry of Firms in the Market
 Flow of Market Information
 Degree of Integration

12. Types of market structure

13. Perfect
Competition
Monopolistic
Competition
Oligopoly Pure
Monopoly
No. and
Size of
Firm
Many Many A Few One
Extent of
Product
Differentiation
Identical Different Identical or
Different
No Close
Substitute
Barriers to
Entry
None None Moderate to
Difficult
Blocked

14. Characteristics of Monopoly
 Monopolies can maintain super-normal profits in the long run. As with
all firms, profits are maximized when MC = MR.
 With no close substitutes, the monopolist can derive super-normal
profits, area PABC.
 A monopolist with no substitutes would be able to derive the greatest
monopoly power.

15. Characteristics of Oligopoly

16. Duopoly & Characteristics of Monopolistic
Competition
 Duopoly Characteristics of Monopolistic Competition

17. Influence of Market structure on Market Conduct and
performance

18. Market Structure Dynamics
 Market dynamics are pricing signals that are created as a result of
changing supply and demand levels in a given market.
 Market dynamics is a fundamental concept in supply, demand and
pricing economic models

19. Market Conduct
 Market conduct refers to the price and other market policies pursued by sellers, in
terms both of their aims and of the way in which they coordinate their decisions and
make them mutually compatible.

20. Conduct and market structure
Market
structure
Conduct of
Firms
Performance
The conduct of firms in a market
can affect market structure – e.g.
merger and takeover activity

21. Market Performance
Performance refers to the economic outcomes that result from the market
structure and the firms’ conduct. To evaluate an industry’s performance,
economists consider
 allocation efficiency;
 production efficiency;
 equity; and
 technological advancement.

22. Performance and changing markets
Market
structure
Conduct of
Firms
Performance
The actual performance of firms in the market affects market structure –
e.g. rising dominance of best performing businesses – examples:
pharmaceuticals, food retailing

23. For satisfaction market performance, the market
structure, should keep pace with the following changes
 Production Pattern
 Demand Pattern
 Cost and Pattern of marketing functions
 Technological change in industry