Cobweb theory approach: An application to rice production in Kerala

Abstract

Ail attempt is made to examine how rice fanners respond to output with movements in prices, over the last fifteen years, using Cobweb model. It is found that the slope of the demand curve to be greater than the slope of the supply curve of paddy and the price structure of paddy in Kerala is following a convergent Cobweb starting above the equilibrium. The projected values based on the model show that the instability of the supply behaviour to adjust to changes in price should be changed to reduce the time lag in achieving the equilibrium price and output.