Introduction to

Agricultural Economics
SIXTH EDITION
GLOBAL EDITION

CHAPTER 1
What is Agricultural
Economics?

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

Penson | Capps | Rosson | Woodward All Rights Reserved
 REFERENCES

Penson, J.B., Capps, O., Rosson, C. P.,

and Woodward, R. T. (2010).
Introduction to Agricultural Economics.
5th Edition. Pearson.
Drummond, H. E. and Goodwin, J.W.
(2011). Agricultural Economics. 3rd
Edition. Pearson.
Any book on basic economics.
Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited
Penson | Capps | Rosson | Woodward All Rights Reserved
 Learning Objectives

State the scope of economics

Define economics and agricultural
economics
Explain the roles of agricultural
economists

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 Scarce Resources

Natural and biological resources

328,657 square kilometers of land
surface
Only 29.4% of our countrys total land
area are used for agricultural crops,
rubber plantations, oil palm plantations,
urban and other uses
Human resources
12.9 million people in Malaysian civilian
labor force (15-64 years old category)
Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited
Penson | Capps | Rosson | Woodward All Rights Reserved
 Making Choices

Resource 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
Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited
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 Making Choices

Individual decisions
Maximization of consumer utility and
producer profits
Societal decisions
Production possibilities given existing
resources (guns versus butter)

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 Opportunity Cost

The implicit cost associated with the

next best alternative in a set of choices
available to decision-makers.
Opportunity cost associated with
pursuing a college degree.

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 Specialization

Definition
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

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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An Example of Specialization

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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Figure 11 Specialization and resource allocation.

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 Relative strengths of Kansas

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 Relative strengths of Idaho

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

Penson | Capps | Rosson | Woodward All Rights Reserved
 Relative strengths of Florida

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

Penson | Capps | Rosson | Woodward All Rights Reserved
 Each state specializes in what it does
best and trades with other states

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

Penson | Capps | Rosson | Woodward All Rights Reserved
 Each state specializes in what it does
best and trades with other states

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

Penson | Capps | Rosson | Woodward All Rights Reserved
 Each state specializes in what it does
best and trades with other states

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

Penson | Capps | Rosson | Woodward All Rights Reserved
 Each state specializes in what it does
best and trades with other states

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

Penson | Capps | Rosson | Woodward All Rights Reserved
 Scope of Economics

Microeconomics versus
macroeconomics
Micro
Individuals or groups of individuals
Macro
Broad aggregates at economy level

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 Scope of Economics

Positive versus normative economics

Positive
"What is", or "what would happen if"
Normative
"What should be"
Alternative economic systems
Capitalism and socialism
U.S. has mixed economic system

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 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."

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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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."

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 What Does an Agricultural
Economist Do?
Role at microeconomic level
Production economists
Market economists
Financial economists
Resource economists
Role at macroeconomic level
Marginal analysis

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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 In Summary

Resource scarcity
Natural, human and manufactured
Forces individuals and societies to make
choices
Comparative advantage leads to trade
Micro vs. macroeconomics
Definition of agricultural economics

Introduction to Agricultural Economics, 6e, GE 2015 Pearson Education Limited

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