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Introduction to Agricultural Economics

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Introduction to Agricultural Economics Chapter 1 Introduction to Agricultural Economics Introduction to Agricultural Economics Introduction to Agricultural Economics ... – PowerPoint PPT presentation

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Title: Introduction to Agricultural Economics


1
Introduction to Agricultural Economics
  • Chapter 1

2
Introduction to Agricultural Economics
Introduction to Economics You cant have your
cake and eat it too!
What is Economics?
3
Introduction to Agricultural Economics
Introduction to Economics You cant have your
cake and eat it too!
What is Economics?
Economics is a social science that deals with how
consumers, producers and societies choose
among Alternative uses of scarce resources in the
process of producing, exchanging, and consuming
goods and services.
4
Introduction to Agricultural Economics
There are two branches of Economics -- Micro
and Macroeconomics.
Macroeconomics focuses on broad aggregates like
growth in GDP, interest rates, inflation and
employment
Microeconomics focuses on consumer and
producer level decision making
5
Types of Resources
  • Natural and Biological -- example (Land)
  • Human example (Labor)
  • Manufactured example (Capital)
  • Management a special kind of labor
  • Scarcity finite quantity of resources
    available, its a relative concept.

6
Choices and Sacrifices
Opportunity Cost the value of the benefit
forgone from the next best alternative to the one
you have chosen.
What are some real world examples of opportunity
cost?
7
Graphs and Economics
  • Economic analysis is used to explain peoples
    responses to changes in their economic
    environment.
  • Economists do this to try and predict future
    behavior with some accuracy.
  • Relationships can be complicated and sometimes
    better explained using graphs.

8
Graphs and Economics
What is this in mathematical terms?
-2 -1 0 1 2
9
Graphs and Economics
3 2 1 -1 -2 -3
-2 -1 1 2
How about this?
10
Graphs and Economics
Y
II
Quadrant I
3 2 1 -1 -2 -3
X
-2 -1 1 2
III
IV
What kind of values do X and Y take on in
Quadrant 1? 2? .. 3? .. 4?
11
Graphs and Economics
Y
II
Quadrant I
3 2 1 -1 -2 -3
X
-2 -1 1 2
III
IV
12
Graphs and Economics
4 3 2 1
1 2 3 4
In Economics we use Quadrant I almost
exclusively, Why is that the case?
13
Graphs and Economics
Price
4 3 2 1
1 2 3 4
Price is a variable that is denoted in Dollars,
prices arent negative. Right?
14
Graphs and Economics
Price
4 3 2 1
1 2 3 4
Quantity
What about quantities? Can they be negative?
What are the Units?
15
Graphs and Economics
Price
4 3 2 1
Demand
1 2 3 4
Quantity
What kind of relationship is denoted between
price and quantity In this graph?
16
Graphs and Economics
Price
Supply
4 3 2 1
1 2 3 4
Quantity
What kind of relationship is denoted between
price and quantity In this graph?
17
Graphs and Economics
Price
Supply
4 3 2 1
1 2 3 4
Quantity
How would you describe this relationship? What
is true about Its slope throughout?
18
Graphs and Economics
Price
4 3 2 1
1 2 3 4
Quantity
How would you describe this relationship? What
is true about Its slope?
19
Graphs and Economics
Costs
4 3 2 1
Average Total Costs
1 2 3 4
Quantity
How would you describe this relationship? What
is true about Its slope?
20
Graphs and Economics
Costs
4 3 2 1
Average Total Costs
1 2 3 4
Quantity
This relationship is Convex, It has a minimum.
We want to minimize costs.
21
Graphs and Economics
Output
4 3 2 1
Total Physical Product
1 2 3 4
Quantity Input
How would you describe this relationship? What
is true about Its slope?
22
Graphs and Economics
Output
4 3 2 1
Total Physical Product
1 2 3 4
Quantity Input
This relationship is Concave, it has a maximum.
We want to maximize production or profit.
23
Graphs and Economics
Output
4 3 2 1
What does this look Like?
1 2 3 4
Quantity Input
This relationship is Concave, it looks like a
cave!
24
Graphs and Economics
One more curvy line
Output
4 3 2 1
Total Physical Product
1 2 3 4
Quantity Input
This relationship is Concave and Convex, it does
have a global maximum though.
25
Graphs and Economics
A couple more things
1 Ceteris paribus means all other things
remaining equal This is a simplifying
assumption that allows us to determine the
impact of single changes in the economic
environment.
2 The independent variable is on a different
axis to that of your math class. Quantity (X)
depends on Price (Y) economics was developed at
the same time as mathematics and the econ guy
labeled his graphs differently. Sorry!
26
Graphs and Economics
Actually Three
3 We make an assumption for most of the
remainder of this class that all variables can
be considered continuous. What is the
difference between that and being discrete?
27
Graphs and Economics
I think that about does it for Chapter 1
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