An Interactive Text for Food and Agricultural Marketing (Thomsen)

An Interactive Text for Food and Agricultural Marketing is intended to be the primary textbook for a University of Arkansas course on this subject. The course it taught at a junior level but is foundational in that it is a required course for all majors in Agricultural Business. The text assumes an understanding of college algebra and microeconomic principles that would be covered in a typical college-level introductory economic principles course.

This chapter addresses the demand side of the market. This is also the buyer or customer side of the market. The overall aim of the chapter is to provide the background you need to use demand constructs to understand marketing strategies and models of market equilibrium that you will encounter later in the course. The chapter is organized into three sections. The first covers the states of effective, latent, and negative demand. Most of the course will deal with marketing problems for products or services in a state of effective demand. However, latent and negative demand states are important in product development and many social-marketing contexts. The second section introduces the basic mechanics of demand for a product or service under an effective demand state with a particular focus on the law of demand, the demand schedule, and variables that shift the demand schedule. Some of this will be a review of material you encountered in your introductory microeconomics course, but some will likely be new and/or will be presented in a way you have not yet encountered. The third section of the chapter introduces the idea of consumer surplus. Consumer surplus is presented in a way that should deepen your understanding of the law of demand. The concept will come up later in the course as a measure of economic welfare and will be used to understand pricing strategies used by sellers, many of which can characterized as attempts to convert consumer surplus into profits.

It is useful to think about different demand conditions or states. Specifically, there are three: effective demand, latent demand, and negative demand. Much of the class will emphasize effective demand because markets exist for products in a state of effective demand. For products in an effective demand state, you can see equilibrium prices and quantities. It is also possible estimate demand and understand how demand responds to changes in prices, consumer income, or other factors that affect the desirability of the product. In the other two demand states, markets do not yet exist, but there could or would be a market provided technological barriers can be addressed or consumer preferences can be changed. In fact, many product development efforts are aimed at overcoming some hurdle or limitation that would allow a product or service to move from a latent or negative demand state to an effective demand state.