The 2008/09 recession took a toll on organic farmers. Until the financial crisis, the industry was booming as consumers switched to products perceived as greener, healthier and more ethically produced. Following the financial crisis, as many consumers felt the pinch, they switched to cheaper foodstuffs. The resulting decline in demand for organic food has turned profit into loss for many organic farmers. At the severest point of the recession, at least two organic farmers left the movement each week. But what will happen as the economy recovers and people start turning back to organic products? Given that it takes some two years to convert to organic standards, there could be supply shortages next year.

4.1 How close to perfect competition is the market for organic foods? Explain. (6 marks) 4.2 What determines whether an organic farmer should continue in the market even though a loss is being made? Explain using relevant diagram(s). (13 marks) 4.3 What can you conclude about the income and price elasticities of demand for organic produce? Explain. (6 marks)