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Abstract
This study examines the scope of this mechanism by estimating the supply response for major principal crops in the Andhra Pradesh state from 1970 to 2005 using Nerlovian adjustment adaptive expectation model. The acreage response functions are estimated and supply response elasticities were derived. The results reveal that the coefficients of time trend, acreage and yield response performed to be substantial, whereas, the supply elasticity with respect to sowing season rainfall found to be highly significant and relative price is inelastic for rice crop. As we expected, the elasticity of acreage response and relative price were found crucial factors for the commercial crops like groundnut, tobacco, chillies, cotton and sugarcane validate that the farmers respond to price incentives similarly to non-price factors.