Abstract
Arguments of irrational response of peasants to changes in product prices have been put forward, as have arguments for rational economic behaviour. The paper investigates whether the farmers' behaviour complies with economic theory—if they respond in an economically rational manner—when they produce a crop both as a staple and cash crop. A Nerlovian partial adjustment lagged model was used to estimate the maize supply response of farmers in the Middledrift district of the Eastern Cape to changes in product prices. The results indicate that producers are responsive to price incentives and their response is elastic in both the short (1,23) and long run (1,41). The coefficient of adjustment which measures the speed of adjustment is 0,87. The prices of maize and the competing crop (sorghum) and the areas under maize in the preceding season are found to be important factors to the producers in their land allocation decision making process. The model therefore shows that farmers to changes in product prices to ...
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