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The Effect Of Paddy And Fertilizer Prices On The Optimum Rate Of Fertilizer Use And Farmer's Income

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  • W. K. Oh

Abstract

The optimum rate of fertilizer is commonly defined as the amount of fertilizer which gives the maximum profit to the farmer. As the response of a crop toward fertilizer usually follows the law of diminishing return, the maximum profit can be obtained when that amount of fertilizer is used at which the first derivative of the response function is equal to the ratio of the price of a unit of fertilizer to the price of a unit of the yield increase. Therefore, the optimum rate of fertilizer use will change as the prices of the product and fertilizer change. That is, the increase of fertilizer price and/or the decrease of paddy price will automatically bring down the optimum rate of fertilizer, which in turn will reduce the product, and in so doing decrease the income of the farmers.

Suggested Citation

  • W. K. Oh, 1969. "The Effect Of Paddy And Fertilizer Prices On The Optimum Rate Of Fertilizer Use And Farmer's Income," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 17, pages 14-38.
    • Handle: RePEc:lpe:efijnl:196902
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    Keywords

    price; farmer; rate; income; fertilizer; profit;
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