chp01 intro
TRANSCRIPT
Learning OutcomesWhen you complete this chapter, you should be able to:
• Define economics and agricultural economics• Distinguish between the fields of microeconomics and macroeconomics
• Discuss the difference between positive and normative economic policy analysis
ScarcityNatural and biological resources
Natural: land, mineral deposits, waterBiological: livestock, crops
Human resources labor
Manufactured resources capital, machines, equipment, structures
Making ChoicesResource scarcity forces consumers and producers to make choices
Opportunity cost – an implicit cost associated with economic decisions
Specialization – comparative advantage and the basis for trade
Individual decisions – maximization of consumer utility and producer profits
Societal decisions – production possibilities given existing resources
Economic DecisionsEvery Economic System Must Decide:
WHAT to produceHOW & HOW MUCH to produceWHOM is it produced forWHEN to produce it WHERE to produce it
Opportunity CostThe implicit cost associated with the next best alternative in a set of choices available to decision-makers.
Opportunity cost associated with pursuing your study at UPMKB.
SpecializationDefinition:the separation of productive activities between persons or geographic areas in such a manner that none of these persons or regions is completely self-sufficient.
Example of specialization for regions of the United States
Scope or EconomicsMicroeconomics versus macroeconomics
Micro - individuals or groups of individualsMacro - broad aggregates at economy level
Fallacy of CompositionThat which is true in an individual situation is not
necessarily true in the aggregatePositive versus normative economics
Positive - “what is”, or “what would happen if”Normative - “what should be”
Alternative economic systemsCapitalism, socialism, communismU.S. has mixed economic system
Levels of Economic Analysis• Microeconomic Consumer Producer• Market Supply Demand• Macroeconomic Fiscal Policy Monetary Policy
Definition of Economics• “…a social science that deals with how consumers, producers and societies choose among the alternative uses of scarce resources in the process of producing, exchanging, and consuming goods and services”.
What is Agricultural Economics• “…an applied social science that deals with how producers, consumers and societies use scarce resources in the production, processing, marketing and consumption of food and fiber products.”
What Agricultural Economics Do?• Role at microeconomic level
Production economistsMarket economistsFinancial economistsResource economists
• Role at macroeconomic level• Marginal Analysis