1. Why is Agricultural development important in developing countries?

2. Development into other sectors can be costly.
If they develop the sector where they already have the equipment for it, more money can be spent on development in other areas as opposed to on the transition to other sectors.

3. It takes time to educate and train people in the skills needed for the new industry.
This time lag may result in a waste of resources that are not being used during transition.

4. They become self sufficient in agriculture to satisfy domestic consumption.
They can specialize where they have a comparative advantage and therefore attract worldwide demand.
Similarly they can develop economies of scale.

5. Problems of over-dependency on agricultural development

6. Volatility of commodity prices- cobweb theory: Cobweb theory explains why prices in certain markets are subject to periodic fluctuation. It is an economic model of cyclical supply and demand in which there is a lag between response of producers to a change of price.

7. Farming is a good example, as there is a lag between planting and harvesting. The classic example is that of the market for agricultural goods, such as the market for strawberries.
As a result of good weather, the strawberry crop is very good and strawberry farmers go to market with many strawberries. This unusually high supply, equivalent to a rightward shift in the market's supply curve, results in low prices. Therefore, the following year, farmers will reduce their production of strawberries in favor of other goods.
When they go to market, the supply will then be low, equivalent to a leftward shift in the supply curve, resulting in high prices.
Thus, the following year, farmers will increase their production of strawberries and then find that when they go to market, prices are low. This process is also known as the spite effect.

8. Lower returns on primary products- in recent times greater competition puts downward pressure on primary product prices
Unreliability- primary products are subject to natural disasters, crop contamination, seasonal changes and droughts
Agriculture is a low-skilled industry – little education is required so we end up with an uneducated population
Over-dependency in the primary sector makes it difficult for an economy to haul itself out of a recession:
- Because hard to increase supply in the short-run
Failure to develop secondary and tertiary sectors – less consumer choice
PED is elastic – puts downward pressure on prices
Inelastic supply – lag times for crop growth
Inelastic YED – people won’t buy more as incomes rise

9. How do we increase agricultural development?
Development of secondary sector, increased machinery
Increased Investment (domestic/foreign)
International co-operations
Increase in human capital through education, learn about sustainability and physical capital.
Reduction of tariffs/quotas (trade barriers)
Intensive farming, high yield variety (HYVs)
Government needs to creates environment for entrepreneurial spirit – increase in agricultural development.
Set world price – Fair Trade – less exploitation of poor countries
Agricultural training from abroad
Research and Development, processing of crops and improve machinery efficiency.
Provide aid to farms on how to increase productivity and yield of crops.
Increase infrastructure such as roads and railways to improve the ease of trade.

10. Constraints on agricultural development
Lack of finance (money/capital)
Land – climate, soil, seasonal, crop contamination/diseases
Need for profits, as opposed to subsistence farming
Need for chemicals and pesticides to increase production
Government restrictions
Lack of mechanisation (physical capital)
Lack of skilled labour to implement scientific techniques (human capital)

11. Lack of fair trade (exploitation)
Lack of domestic demand, therefore unable to develop and become internationally competitive
Lack of entrepreneurial spirit (little risk-taking e.g. diversification, trying new methods, don’t know how to exploit economies of scale)
Over-dependence due to over-specialisation
Does not encourage much FDI
Lack of research and development to produce more productive technology
Corruption reduces material wealth of economy so subsidies etc. cannot be implemented