So many economic concepts in one article - Indian tomato production.

A great example here of a number of economic concepts in the Indian tomato market. Included are supply and demand, costs of production and the shutdown point, accounting vs economic costs, monoposonistic buying power, calls for government intervention, and the problems of a lack of capital goods for primary producers.

This article would make a great data response question or just for general class discussion.

The story starts with a bumper crop of tomatoes which drives the prices down in terms of what the farmers can sell them for. Although the retail price is Rs.40 per kg the farmers are only being offered Rs 4 - 6 per kg by middlemen. Indian farmers are therefore “shutting down” ie dumping tomatoes on the road because their costs of production are Rs 5 - 6 per kg. And this is before their opportunity costs (normal profit) are taken into account!

The farmers blame the buying power of the middlemen, and want the government to intervene, in particular to help them form a co-operative. The real issue seems to be that the individual farmers are unable to travel the 70 - 100km to market to sell their produce. Having capital goods such as a truck (as opposed to a donkey) would surely solve this problem!

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