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WELCOME TO ARE 012. Introduction to Agricultural Economics With Herman Sampson. Microeconomics: ( the “trees”). Studies economic behavior of individual decision making units such as, Consumers Resource Owners Business Firms (producers) in a market economy

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Presentation Transcript
slide1

WELCOME TO ARE 012

Introduction to Agricultural Economics

With

Herman Sampson

microeconomics the trees
Microeconomics: ( the “trees”)

Studies economic behavior of individual decision making units such as,

  • Consumers
  • Resource Owners
  • Business Firms (producers)

in a market economy

At times, micro will study economic behavior at the industry level

macroeconomics the forest
Macroeconomics: (the “forest”)

Studies the aggregate level of economic activity,

  • Economic system’s value of total

output: GDP

  • Level of National Income
  • Total Level of Unemployment
  • General Price Level of the Economy: Inflation
macroeconomics the forest9
Macroeconomics: (the “forest”)

we will deal with some macroeconomic topics first, then concentrate on microeconomics

normative economics
Normative Economics:

Normative: subjective, value laden, emotional

“What ought to be” economics

Rx and/or Policy oriented

Hear a bunch of normative economic statements during political elections

positive economics
Positive Economics:

Positive: Objective, without emotion or value judgment!

“What is, What was, What will be” economics

Based on probability and statistical methods

slide12
Microeconomics

Normative microeconomics

Positive microeconomics

Macroeconomics

Normative macroeconomics

Positive macroeconomics

macroeconomics
Macroeconomics

1.Fiscal Policy:

Govt. tax and spend policies

2. Monetary Policy

Manipulation of the money supply by the Federal Reserve system to affect short-term interest rates and control inflation

private property rights
Private Property Rights

“Negative Externality”:

When you produce or consume a commodity or service within your private property rights that imposes a cost on a third party not directly involved in the market transaction.

private property rights15
Private Property Rights

The cost imposed on the third party is very difficult (expensive) for the third party to recover

AKA a “Spillover Cost”

private property rights16
Private Property Rights

Laws are often enacted by legislative bodies that constrain private property rights in order to rectify negative externalities, or at least reduce the cost to third parties in recovering damages

negative externalities
Negative Externalities

Some Examples:

Seat Belt Crack Down in N.C. (Click It or Ticket)

California Helmet Law for Motorcyclists

negative externalities18
Negative Externalities

Possible Solutions:

  • Pass Laws
  • Post Bond to assure financial responsibility
negative externalities19
Negative Externalities

Some Examples:

Imperial Foods of Hamlet, N.C. vs. Imperial Sandwich Co. of Goldsboro, N.C.

positive externalities
Positive Externalities

When you produce or consume a commodity or service within your private property rights that bestows a benefit on a third party not directly involved in the market transaction.

positive externalties
Positive Externalties

The benefit bestowed on the third party is very difficult (expensive) for the third party to recover

AKA a “Spillover benefit”