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AAEC 2305 Fundamentals of Ag Economics

AAEC 2305 Fundamentals of Ag Economics. Introduction. INTRODUCTION. Economics is the study of how to allocate scarce resources to produce goods & services that help satisfy unlimited human wants. INTRODUCTION. Three important aspects of definition:

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AAEC 2305 Fundamentals of Ag Economics

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  1. AAEC 2305Fundamentals of Ag Economics Introduction www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  2. INTRODUCTION Economics is the study of how to allocate scarce resources to produce goods & services that help satisfy unlimited human wants. www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  3. INTRODUCTION • Three important aspects of definition: “Economics is the study of how to allocate scarce resources to produce goods & services that help satisfy unlimited human wants.” • Limited Resources (Resource Scarcity) • Unlimited Wants - most basic assumption is that each individual has a desire for more - more is preferred to less (ex. money) • Allocation - making decisions about how to use our resources or capabilities among unlimited wants. www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  4. RESOURCE SCARCITY • A resource is an input that is modified by humans using technology to produce goods to satisfy human wants. • Resources are also called inputs or factors of production (ex. land, labor, equipment, water, etc.) • Combining resources through human activity & technology produces useful outputs. www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  5. IMPORTANT CHARACTERISTICS OF RESOURCES • Resources have economic value • Producers generally must pay to use resources • Resources have alternative uses • Since resources have alternative uses, trade-offs must be made • Opportunity costs are the measure of this trade-off www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  6. OPPORTUNITY COSTS If you use a good for one purpose, you give up the opportunity to use it elsewhere; opportunity costs reflect the value of alternative opportunities foregone or sacrificed www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  7. ALLOCATION OVER TIME • Time is another important element in economic decisions. • Someone has to make the decision whether to use a resource today or in the future. (ex. Gas, Water, etc.) www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  8. MICRO VS MACRO • The study of economics consists of two broad categories: • 1) Macroeconomics - encompasses the performance of a national economy and the international economy (ex - inflation, unemployment, dist. of income, etc.) • 2) Microeconomics - the study of economic decisions at the individual producer & consumer level (ex - profit maximizing level of output for a firm, how to spend your weekly budget) www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  9. All economic systems need to answer four basic questions: • What to produce? • How to produce? • For whom it will be produced? • When it will be consumed? www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  10. COMMON ASSUMPTIONS • Economists use assumptions to answer economic questions because the real world is complex. The following are two common assumptions that simplify economic scenarios • Individuals want to maximize their well being (utility) • Firms want to maximize profits www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  11. AGRICULTURE OVERVIEW • Agriculture refers to the complex system that begins with natural resources and involves farms, agribusinesses, and governmental organizations in providing products of the land to the consumers. • Three main sub-sectors: • The Farm Sector • Agribusiness • The Public Sector www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  12. Farm Sector • Includes all the farms and ranches (including hobby farms & ranches) that grow crops and raise livestock (usually for sale) • Changes in the farm sector have occurred in the US due to technological advancements, the development of markets, and governmental policy. www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  13. AGRIBUSINESS • Includes (1) firms & industries that produce & sell goods for use in farm production (input sub-sector) & (2) firms & industries that buy, store, & process farm commodities & distribute them to domestic & export markets (Agricultural processing & marketing sub-sector). www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  14. PUBLIC SECTOR • The development & growth of agriculture is marked by important advances in an array of publicly supported services know as the public sector. • Example – higher education available to the farm sector, extension services, information services, roads, harbors, etc. www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

  15. Examples of some Agricultural Economic Issues • Food Availability & Safety • Environmental Consequences of Agricultural Production • Managing Technological Advances in Agriculture • Increasing Internalization of Agriculture • Policy Responses to Uncertainty in Agriculture • Decline in the Number of American Farmers www.aaec.ttu.edu/faculty/smisra/misra/aaec2305.htm

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