AGRICULTURAL AND BIOSYSTEMS ENGINEER LICENSURE EXAMINATION REVIEW CLASS MANILA REVIEW INSTITUTE INC.ECONOMICS Economics is the study of how societies use scarce resou: produce valuable commodities and distribute them among different people. Simply, economics is the study of the ALLOCATION of SCARCE resources to meet UNLIMITED human wants.ECONOMICS Scarcity is the condition of having to choose amo: alternatives. Scarce good is one for which the choice of one alternative use of the good requires that another be given up. Free good is one for which the choice of one use does not require that we give up another.ECONOMICS Microeconomics studies individuals and business decisions. It focuses on supply and demand, and other forces that determine price levels, making it a bottom-up approach. Macroeconomics analyzes the decisions made by countries and governments. It takes a top-down approach and looks at the economy as a whole, trying to determine its course and nature. Positive economics describes and explains various economic phen: based on fact and cannot be approved or disapproved. Normative economics focuses on the value of economic fairness, economy "should be" or "ought to be." It is based on value judgme! .ECONOMICS Microeconomics studies individuals and business decisions. It foct supply and demand, and other forces that determine price levels, m: bottom-up approach. Macroeconomics analyzes the decisions made by countries and governments. It takes a top-down approach and looks at the economy as a whole, trying to determine its course and nature. Positive economics describes and explains various economic phenomena. It is based on fact and cannot be approved or disapproved. Normative economics focuses on the value of economic fairness, or what the economy "should be" or "ought to be." It is based on value judgments.AGRICULTURAL ECONOMICS Agricultural economics is an applied social science dealing with how mankind chooses to use technical knowledge and scarce productive resources such as /and, labor; capital, and management to produce desired level of output and to distribute it for consumption to various members of society over time. Simply, it is the study of the allocation, distribution, and utilization of the resources used, along with the commodities produced, by farming.Basic Agricultural Economic Problems Scarcity is what drives society to answer the follo problems: a. What to produce? b.How much to produce? c. When to produce? d.How to produce? e. For whom to produce?Theory of Production The theory of production examines the relationship between the factors of production (land, labor, capital, entrepreneur) and the output of goods and services. The theory of production is based on the "short run" or a period of production that allows production to change the amount of variable input, in this case, /abor. The "long run" is a period of production that is long eno} producers to adjust various inputs to analyze the best mi: factors of production, i.e., purchase of more land and eq °Theory of Production The theory of production examines the relationship be factors of production (land, labor, capital, entrepreneur) al output of goods and services. The theory of production is based on the "short run" or a period of production that allows production to change the amount of variable input, in this case, /abor. The "long run" is a period of production that is long enough for producers to adjust various inputs to analyze the best mix of the factors of production, i.e., purchase of more land and equipment. °Factors of Production Land refers to all natural resources. All natural resources either on the surface of the earth or below the surface of the earth or above the surface of the earth is Land. It is the primary and natural factor of production. All gifts of nature such as rivers, oceans, land, climate, mountains, mines, forests etc. are land. The payment for land is rent.Types of Land e Residential e Commercial e Recreation e Cultivation e Extraction e UninhabitableFactors of Production Labor refers to all human effort that assists in production is labour. This effort can be mental or physical. It is a human factor of production. It is the worker who applies their efforts, abilities, and skills to produce. The payment for labour is the wage. Types of Labor © Unskilled © Semi-skilled Skilled e Professional °Factors of Production Capital refers to all manmade resources used in the production process. It is a produced factor of production. It includes factories, machinery, tools, equipment, raw materials, wealth etc. The payment for capital is interest. Types of Capital e Fixed e Working e VentureFactors of Production Entrepreneur refers a person who brings other factors of production in one place. He uses them for the production process. A person who takes these decisions along with the associated risk is an entrepreneur. The payment for entrepreneur is profit.THEORIES/CONCEPTS/ APPLICATION ECONOMIC AND COST CONCEPTSFirst Cost/ Initial Cost Operation And Maintenance Cost First cost (also known as initial cost, investment cost) is the cost 0: getting an activity started. Ordinarily occurs only once for any given activity. Example: cost of land and design and construction cost of a factory building Operation and maintenance costs are costs experienced continually over the useful life of an investment project or venture; contains most of the recurring costs associated with operating a business or project. Examples: wages, materials, cost of powerFixed Cost Variable Cost Fixed costs are those that are unaffected by changes in activity level over a feasible range of operations for the capacity available. Example: cost of a machine, interest on borrowed capital Variable costs are those associated with an operation that will vary in total with the quantity of output. Example: cost of materials, labor fuel consumptionFixed Cost Variable Cost Total cost Cr Total variable cost, Gy mon Total Fixed Cost, Cr ProductionDirect Cost Indirect Cost Direct costs are those that can be reasonably measured and allocated to a specific output or work activity. Example: cement needed to make hollow blocks, amount of fertilizer applied per hectare of farm planted to rice, volume of coconut oil needed to make bar soap Indirect costs (other terms are overhead cost or burden) are those that are difficult to attribute or allocate to a specific output or work activity. Example: cost of electricity needed to provide lighting to a factory; depreciation cost of equipment used to fabricate a certain part of a productSunk Cost Opportunity Cost Sunk cost — it is one that has occurred in the past and has no relevance to estimates of future costs and revenues related to an alternative course of action. Example: In deciding whether one should replace an old machine with a new one, the purchase cost of the old machine is generally treated as a sunk cost Opportunity cost - is the cost of the best rejected (foregone) opportunity and is often hidden or implied. Example: A farmer chooses to plant wheat; the opportunity cost is planting a different crop, or an alternate use of the resources (land and farm equipment).Supply Demand Demand is the quantity of a certain commodity that is bought at a certain price at a given place and time. Demand refers to how much (quantity) of a product or service is desired by buyers. Law of Demand The demand for a commodity varies inversely as the price of the commodity, though not proportionately. Example: For instance, a baker sells bread rolls for Pt each. They sell 50 each day at that price. However, when the baker decides to increase to price to P1.20 - they only sell 40,“Under conditions of perfect competition the price at which a given product will be supplied and purchased is the price that will result in the supply and the demand being equal.” Law of Supply/Demand When supply and demand are equal (i.e. when the supply function and demand function intersect) the economy is said to be at equilibrium. At this point, the allocation of goods is at its most efficient because the amount of goods being supplied is exactly the,same as the amount of goods being demanded.Elasticity Elasticity is a measure of a variable's sensitivity to a change in another variable, most commonly this sensitivity is the change in quantity demanded relative to changes in other factors, such as price. It is predominantly used to assess the change in consumer demand as a result of a change in a good or service's rice.|e| > 1. elastic | Q changes more than P | |e] = 1 unit elastic | Q changes like P Elasticity lel<1 | inelastic | Q changes less than P If demand for a good or service is relatively static even when the price changes, demand is said to be inelastic, and its coefficient of elasticity is less than 1.0. If elasticity = 0, then it is said to be 'perfectly' inelastic, meaning its demand will remain unchanged at any price. A product is considered to be elastic if the quantity demand product changes more than proportionally when its price incr or decreases.Elasticity ‘ > > > > Value=0 Value=0 & 1 ‘Value= 1 & infinity Value= Infinity Perfectly inelastic demand Inelastic demand Elastic demand Perfectly elastic demandUtility Utility refers to the total satisfaction or benefit consuming a good or service. a. Ordinal utility refers to the concept of one good being more useful or desirable than another. b.Cardinal utility is the idea of measuring economic value through imaginary units, known as "utils." c. Marginal utility is the utility gained by consuming an additional unit of a service or good.International Trade — trade between people or firms in different country e Export — the sale of goods and services abroad ¢ Import — the purchase of goods and services abroad ¢ Net exports — the value of goods and services sold abroad minus the goods and services from the rest of the world; xports minus imports. mbargo - a complete prohibition against the import or xport of a commodity.© Quotas - In reference to foreign trade policy, a quota is a limitation on the quantity of an item that may be imported. ¢ Duty - a tax levied on an import. ¢ Tariffs - a duty or tax imposed on an import or an export; a schedule of charges of a business, especially of a public utility. e Value added tax - an indirect tax (also known as ad alorem tax) levied at the time of each exchange of goods ind services from primary production to consumption, enerally stated as a proportion of the value added at each tage of production.PRICE, DEMAND TOTAL REVENUEPRICE-DEMAND-REVENUE RELATIONSHIP The relationship between selling price (p) and demand (D) for a product can be expressed as a linear function: p=a-—bD where: a = intercept on the price (y) axis b = slope; it is the amount by which demand increases for each unit decrease in pPRICE-DEMAND-REVENUE RELATIONSHIP The total revenue, TR, is the product of the selling price per unit, p, and the number of units sold, D. Thus, . TR = price x demand = px DINT =o mall on EV COST, V BREAKCOST-VOLUME-BREAKEVEN POINT ANALYSIS At any demand, D, total cost C; is C,=C,+C, here: C, = total fixed cost Cy = total variable costCOST-VOLUME-BREAKEVEN POINT ANALYSIS If c, is the variable cost per unit, then the total variable cost will be Cj=c,xD re: D is the total product produced or volume demanded.COST-VOLUME-BREAKEVEN POINT ANALYSIS For any volume or demand, D Profit (x) or Loss = Total Revenue — Total Costs =(a-c,) x D-bD* -C, value of D* that will maximize profit, D* = ac, 2bCOST-VOLUME-BREAKEVEN POINT ANALYSIS Break even Total revenue = Total cost pD =CF+CV pD=CF+cvD D= CF / (p—cv) k Even = Fixed Cost / (Unit Price - Variable Unit )EXAMPLE An engineering consulting firm measures its output in a standard service hour unit, which is a function of the personnel grade levels in the professional staff. The variable cost (cv) is $62 per standard service hour. The charge-out rate [i.e., selling price (p)] is 1.38cv = $85.56 per hour. The maximum output of the firm is 160,000 hours per year, and its fixed cost (CF) is $2,024,000 per year. For this firm, what is the breakeven point in standard service hours and i percentage of total capacity.Given: variable cost (cv) is $62 per standard service hour. selling price (p) is 1.38cv = $85.56 per hour maximum output of the firm is 160,000 hours per year fixed cost (CF) is $2,024,000 per year What is the breakeven point in standard service hours and in percentage of total capacity?Given: cv = $62/hr p = $85.56/hr Total Capacity = 160,000 hr/year CF = $2,024,000/year (a) what is the breakeven point in standard service hours? Solution: Break Even = Fixed Cost / (Unit Price - Variable Unit Cost) D= CF / (p—cv) = ($2,024,000/year)/($85.56/hr-$62/hr) = 85908.32 hr/yearManagement is defined as the process of setting and achieving goals through the execution of the management functions that utilize human, financial and material resources. Simply, the effective and efficient use of scarce resources to achieve organizational goals.Farm Management is the decision-making process whereby limited resources are allocated to a number or production alternatives to organize and operate the business in such a way as to attain some objectives. Business refers to any activity which involves the production, selling or trading of needed products services. When such activity revolves around a fa farm business.Farm Management is the decision-making proce| whereby limited resources are allocated to a num production alternatives to organize and operate the business in such a way as to attain some objectives. Business refers to any activity which involves the production, selling or trading of needed products and services. When such activity revolves around a farm, it is a farm business.Process of Management 1.Planning 2. Organizing 3. Staffing 4. Directing 5. Controlling 6. LeadingPlanning he process of establishing goals and a suitable course of action for achieving those goals. Managers think their actions through in advance. heir actions are usually based on some method, Plan, or logic rather than on a hunch. Plans are needed t organization its goals and set up the best proc reaching them.Planning The process of establishing goals and a suitable co} action for achieving those goals. Managers think their actions through in advance. Their actions are usually based on some method, plan, or logic rather than on a hunch. Plans are needed to give the organization its goals and set up the best procedure for reaching them.Organizing The process of arranging and allocating work, authority and resources among an organization's members so that they can achieve the organization’s goals. Managers coordinate the human and material resources of the organization. The organizing process can be described in a three-step procedure: e Detail all the work that must be done to attain the organization’s goals Divide the total work load into activities that can logically and comfortably be performed by one person Set up a mechanism to coordinate the work of organization members into a unified, harmonious whole. eStaffing Concerned with locating prospective employees to fill the job created by the organizing process. Staffing involves the process of reviewing the credentials of the candidates for the jobs and trying to match the job demands with applicant's abilities. It also involves the development and implement: system for appraising performance and providing for performance improvement.Staffing Concerned with locating prospective employees job created by the organizing process. Staffing inv! process of reviewing the credentials of the candidates for the jobs and trying to match the job demands with applicant's abilities. It also involves the development and implementation of a system for appraising performance and providing feedbackDirecting Directing is aimed at getting members of the organization to move in the direction that will achieve its objectives. It builds a climate/environment, provides leadership and arranges opportunity for motivation.Controlling The process of ensuring that actual activities conform to planned activities. Managers attempt to assure that the organization is moving toward its goals. If some part of their organization is on the wrong track, managers try to find out about it and set things right.Leading The process of directing and influencing the task-related activities of group members or an entire organization. Managers direct and influence subordinates. They don’t act alone, but get others to perform essential tasks. They don’t simply give orders. By establishing the proper atmosphere, they help their subordinates to do their best.Three contexts to farm management ¢ Farm level farm management e Farm management extension e Farm management researcha___—~ Farm level management -is the day-to-day running or operation of activities within the farm business -involves administration of the farm business, day-to-day decision making, organising, controlling, leading and planning of farm resources. > -farmers/ farm managers have to make the following decisions on the activities to be carried out;Farm business activities Investment/ Farm development -these are activities related to the purchase, depreciation, sale of long lived assets (obsolete) e.g. land, buildings, machinery, orchards, vineyards and breeding stock. -records kept on each asset should include purchase date, purchase price, annual depreciation amount, book value, current market value, sale date, sale price, gain or loss when soldFarm business activities Production -these are activities that are done on the farm related to the crop and livestock -include the revenue from sales -it also includes expenses incurred during the production cycle e.g. feed, fertilizers, chemicals, fuel; interest, depreciation. -all these need to be recorded in the accounting systemFarm business activities Financial -include all transactions related to borrowing money and paying interest and principal on debt of all kinds. -this also includes money borrowed to finance new investmentRelationship of the farm business activities mn Om D GmSummary of farm business activities and their examples ACTIVITY _|EXAMPLE Production Input level and combination, enterprise choice combinations, tillage practices Farm 5 Purchase of machinery, land conservation, Development marketing outputs, purchase inputs, infrastructural development Financing Acquiring funds, utilizing funds, planning future financial needs Accounting Maintaining production records, financial records, transaction recordsFarm management extension - Is concerned with the provision of information which will assist farmers in their management to achieve goals - Involves the introduction of models that enables farmers to make sound decisions - Involves teaching farmers skills to identify their problems, analyse them and make informed decisiogs on how to; ¢ Plan the use of limited resources ¢ Plan for more productive and profitable livestock and crop production activities ¢ Plan for expected cash supply and utilizationFarm management research - Is concerned with generating knowledge on farmers production goals, farmers’ decision making process, farm problems, factors that are affecting farmers’ performance and behaviour, constraints facing farmers (technical, institutional, social etc) - Generates information 6n the impact of government policies, technology and price changes on farm productivity and profitability as well as farm income.Farm management decisions: Farm management implies decision-making p z Several decisions need to be made by the farmer as a manager in the organization of farm business. The management decisions are broadly classified into organizational management decisions, administrative management decisions and marketing management decisions.1. Organizational Management Decisions The organizational management decisions are further sub-divided into operational _management __decisions _and__ strategic management decisions. a) Operational Management Decisions/ Tactical farm management Those decisions, which involve less investment and are made more frequently, are called operational management decisions. It considers taking short-run actions that keep the business moving along the chosen course until the destination is reached. ,b) Strategic Management Decisions/ Strategic farm management These decisions involve heavy investment and are made less frequently. The effect of these decisions is long lasting. These decisions cannot be altered. However, in the case of reversal of these decisions farmer has to incur high costs. These decisions are also called basic decisions. Size of the farm, niachinery and labour programme, construction of farm buildings, permanent improvements on the Jarm like development of irrigation and storage facilities, soil conservation, reclamation etc., are some of the examples of strategic management decisions.Administrative Management Decisions Besides organizational management decisions, the farmer also makes several administrative decisions like financing of the farm business, supervision, accounting and adjusting his farm business according to Government policies. = Financing the Farm Business: Majority of the farmers are capital starved; hence they have to depend on borrowed capital. For borrowing, he has to examjne the decisions like from whom to borrow, when to borrow and how much to borrow. = Supervision: To get the desired results on the farm, farmers should keep a close watch on all the activities performed in the production of crop and livestock enterprises.3. Marketing Management Decisions Marketing decisions are the most important under the changing environment of agriculture. These decisions include buying and selling. = Buying: Every farmer makes an attempt to purchase necessary inputs at the least cost source. In buying resources, a farmer has to decide the agency, the timing, and the quantity to be purchased. " Selling: Though farm prodyet prices are not under the control of the farmer (price taker), yet by adjusting the timing of sales, farmers can obtain better prices. What to sell, where to sell, whom to sell, when to sell and how to sell are the important selling decisions that are to be made by the farmer.Human Resource Management Human Resource Management includes all activities used to attract & retain employees and to ensure they perform at a high level in meeting organizational goals. Components of a HRM System Component should be consistent with the others, organization structure, and strategy. . Recruitment: develop a pool of qualified applicants. . Selection: determiné relative qualifications & potential for a job. . Training & Development: ongoing process to develop worker’s abilities and skills.Human Resource Management > Performance appraisal & feedback: provides information about how to train, motivate, and reward workers. - Managers can evaluate and then give feedback to enhance worker performance. « Pay and Benefits: high performing employees should be rewarded with raises, bonuses. - Increased pay provides additional incentive. - Benefits, such as health insurance, reward membership in firm. « Labor relations: managers need an effective relationship with labor unions that represent workers. + Unions help establish pay, and working conditions.Human Resource Management © Performance appraisal & feedback: provides information about how to train, motivate, and reward workers. . Managers can evaluate and then give feedback to enhance worker performance. « Pay and Benefits: high performing employees should be rewarded with raises, bonuses. - Increased pay provides additional incentive. - Benefits, such as health insurance, reward membership in firm. . Labor relations: managers need an effective relationship with labor unions that represent workers. . Unions help establish pay, and working conditions.Sources of Labor Family labor — farm labor mainly supplied by the family circle. Hired labor- farm labor supplied from outside of the family.Classification of Farm Jobs 1. Fieldwork — Fieldwork on crops should come first and must be done in clear weather with moderately dry soil. Plowing, preparing the seedbed, and planting crops must be done at just the right time to be most effective. 2. Outside work that can be delayed — These include tasks as hauling manure, building fences, plowing, husking corn, ditching and tiling, cutting and hauling wood and outside repairs to buildings. & 3. Work for rainy days — In order that no time will be wasted by downpour, indoor work such as repairing machinery, sharpening mower sickles and oiling machinery and harness should be kept in mind. ,Classes of Risks in Agriculture e Those resulting from natural factors such as extreme weather conditions, fire, flood, earthquakes, and pests and diseases. e Those arising from human factors such as carelessness, incompetence, dishonesty, theft, and political disturbances. e Those arising from unpredictability of the market conditions.Methods of Reducing Risks 1.Insurance 2.Diversification 3.Future contract — selling the product at current on agreed price delivering them in some future time. 4.Flexibility — ease with which the organization of production can be changed. 5.Liquidity — the maintenance of balance of money or assets that can be readily converted into cash.Financial Analysis: a) Liquidity/Solvency ratios Current Ratio = Current Assets/ Current Liabilities {For every PhP 1.00 of current liabilities, there is a PhP (Current Ratio) of assets to pay for the liabilities} (IDEAL CURRENT RATIO => 2:1)Financial Analysis: b) Quick/Acid-Test Ratio = (Current Assets-Inventories)/Current Liabilities (IDEAL QUICK RATIO => 1:1) ¢) Net Working Capital = Current Assets — Current Liabilities (Amount of funds available for payment anytime)Definition of Key Marketing Terms: Oeste crcea * Physical food, clothing, shelter, safety, water Oe eu UC eaa * individual knowledge and self-expression. ‘Awant is a product desired by a customer TEs eursakas Wk eg syDefinition of Key Marketing Terms: Petra) physical goods are transferred from Ceeaanad fteannot be manufactured, stored, Ce lcuiaam eae ae es eee eee eae our hn O Ce eqs Recerca ae It eannot be returned or replaced. ee eee ea EelethetleDefinition of Key Marketing Terms: Exchange vs. Transaction * Exchange: = Transaction: - Act of obtaining —A trade of a desired object values between from someone wo oa ; by offering — One party gives something in X to another party and gets Y we return. in return. Can x : include cash, * F credit, or check. Ch \What Is Marketing? = The process of determining the needs and wants of consumers & being able to satisfy those needs & wants profitability = Marketing includes all of the activities necessary to move a product from the producer to the consumer = Traditionally, a “market” was a physical place where buyers and sellers gather to buy and sell goods.What Is Marketing?... u“The process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals.” =Marketing-is the management process responsible for identifying, anticipating, and satisfying customer requirements profitably.What Is a Market? = A market is made up of buyers & sellers = Buyers are people who need or want a product or service and have the money to buy it = A market must also have sellers who are willing & able to produce goods & services for saleAgricultural Marketing? The bridge that links producer & consumer \ ef fo} "Agricultural marketing is the study of all activities, agencies, and policy involved in the procurement of farm inputs and the movement of agricultural product from the farms to the consumer. Seach)Two Types of Agricultural Markets Input market Product market —The input market includes -This is the market where _ final items like metal, fertilizer, products are sold to consumers seed & wood —Eggs and potatoes from farms ~These types of products are purchased by producersWhat Is Market Segmentation? “The process of dividing a market into meaningful, similar and identifiable groups.” ns That Segmentation Is I fant: 1) Enables marketers to identify customers with similar needs, buying behavior, 2) Allows for the tailoring of the “Marketing mix” to specific segments (also cost effective). 3) Consistent with marketing concept of satisfying customer wants and needs. elo} iieifsiein)Conflict of interest in agricultural/food marketing systems Key P| Inte: Farmers Maximum price, unlimited quantities Manufacturers/processors Low purchase price, high quality Traders and retailers Low purchase price, high quality Consumers Low purchase price, high qualityCharacteristics of Marketing of Agricultural produce The agricultural commodities are characterized by: v Perish ability of the Product v Seasonality of Production vBulkiness of Products v Variation in Quality of Products v Irregular Supply of Agricultural Products v Small Size of Holdings and Scattered Production v Processing v Time lag of agricultural products v The law of diminishing returnsImportance of Agricultural Marketing vy An efficient agricultural marketing system leads to the optimization of resource use and output management. v An efficient marketing system ensures higher levels of income for the farmers v Marketing system widens the market for the products by taking them to remote corners both within and outside the countryImportance of Agricultural Marketing contd... v Agricultural marketing helps in the growth of agro-based industries and stimulates the overall development process of the economy. v Price Signals: it gives farmers to plan production in accordance with the needs of the economy v Adoption and Spread of New Technology v Employment creation v Addition to National Income v Creation of UtilityMarketing utility: Utility will refers to the value of marketing which adds to goods and services. The marketing function will allow to create utility. There are five types of utilities, namely; Form utility: To change the raw materials to finished products. For example, palm oil bunch to edible cooking oil. Time utility: Making the products is available during the convenient hours. Place utility: Making the products and services available in convenience location and place.Marketing utility r4 = Possession utility: Making the exchange of goods and services between the buyers and sellers. = Information utility: To inform the buyers that the products exist, how to use it, the price and other related information of the products availability. ° lato's screen IFactors leading to the growth of agricultural marketing The following factors have led to the growth in agricultural marketing: > Specialization > Urbanization > Transportation and communication > Technological change in agricultureClassification of Markets = Markets may be classified on the basis of 1. On the basis of Location 2. On the Basis of Time Span 3. On the Basis of Volume of Transactions 4. On the Basis of Nature of Transactions 5. On the Basis of Degree of Competition1.0n the basis of Location a. Village Markets: located in a small village, where major transactions take place among the buyers and sellers of a village b. Primary wholesale Markets: located in big towns near the centers of production of agricultural commodities. a major part of the produce is brought for sale by the producer. c.Secondary wholesale Markets: located in district headquarters or important trade centers or near railway junctions. Transactions in commodities take place between the village traders and wholesalers.1.On the basis of Location... d. Terminal Markets: it is one where the produce is either finally disposed of to the consumers or processors, or assembled for export. Merchants are well organized and use modern methods of marketing. = located either in metropolitan cities or in sea-ports e. Seaboard Markets: Markets which are located near the seashore and are meant mainly for the import and/or export of goods2. On the Basis of Time Span: P a) Short-period Markets: The markets which are held only for a few hours. « The products dealt within these markets are of highly perishable nature, such as fish, fresh vegetables, meat and liquid milk. b) Long-period Markets: These are held for a longer period than the short period markets. = The commodities traded in these markets are less perishable and can be stored for some time; E.g food grains & oilseeds2. On the Basis of Time Span... c) Secular Markets: These are markets of permanent nature. The commodities traded in these markets are durable in nature and can be stored for many years. = E.g. markets for machinery and manufactured goods.3.On the Basis of Volume of Transactions a) Wholesale Markets: commodities are bought and sold in large lots or in bulk. Transactions stake place mainly between traders. b) Retail Markets: which commodities are bought by and sold to the consumers as per their requirements. Transactions in these markets take place between retailers and consumers. The retailers purchase in wholesale market and sell in small lots to the consumers. These markets are very near to the consumers.4. On the Basis of Nature of Transactions a) Spot or Cash Markets: A market in which goods are exchanged for money immediately after the sale. b) Forward Markets: A market in which the purchase and sale of a commodity takes place at time "t* but the exchange of the commodity takes place on some specified date in future i.e., time t+ 1.5. On the Basis of Degree of Competition = Market structure — identifies how a market is made up in terms of: “The number of firms in the industry The nature of the product produced “The degree of monopoly power each firm has “The degree to which the firm can influence price Profit levels “*Firms* behaviour-pricing strategies, non-price competition, output levels “The extent of barriers to entry “The impact on efficiency °Market structure 1. Perfect Competition BFeatures of perfect competitive market = Large number of buyers and sellers = Homogeneous products = Perfect mobility of factors of production = Free entry & free exit of firms = Perfect knowledge = Absence of collusion or artificial restraint = No govt. interventionImperfect Markets: a.Monopoly Market: is a market situation in which there is only one seller of a commodity. When there is only one buyer of a product the market is termed as a monopsony market. b. Duopoly Market: is one which has only two sellers of acommodity. They may mutually agree to charge a common price which is higher than the hypothetical price in a common market. The market situation in which there are only two buyers of a commodity is known as the duopsony market.c. Oligopoly Market: A market in which there are more than two but still a few sellers of a commodity. A market having a few (more than two) buyers is known as oligopsony market. d. Monopolistic competition: When a large number of sellers deal in heterogeneous and differentiated form of a commodity. The difference is made conspicuous by d/t trade marks on the product. Different prices prevail for the same basic product. For example, they have to choose between various marks of insecticides, pumpsets, fertilizers and equipments.Features of the four market structures Type of Number Freedom of Nature of Examples market of firms entry product Perfect, Homogeneous Cabbages, carrots competition Numerous Unrestricted — (ungitferentiated) (approximately) Monopolistic Many sisonea’ ota Builders, competition several UN" Diferentited restaurants Undiferentiated Cement Oligopoly Fow Restricted or differentiated cars, electrical appliances Local water Monopoly one Restricted or Unique company, train ‘completely operators (over Particular routes)Market equilibrium «It is the (price) level where quantity demanded is equal to quantity supplied. It is also called market clearing (price) level because all the commodities provided for market are sold in the market since the demand is there. *The price level at this intersection point is called equilibrium price and the quantity at this level is called equilibrium quantity. °Government intervention to stabilize price These are: setting of price ceiling and price floor. >Setting floor price when it is thought that producers are in danger. Floor Price plays a significant role when it is set above equilibrium price. > Setting price ceiling is done when it is thought that consumers are hurt. Price ceiling work better when it is set below equilibrium priceSurplus refers to the amount of a resource that exceeds the amount that is actively utilized. Shortage refers to a condition whereby there is an excess demand of products in comparison to the quantity supplied in the market. Price ‘Surplus Supply Equilibrium Shortage Domand 0 QuantityMarketing Functions, Costs and EfficiencyMarketing Functions Marketing functions can be broadly classified as following:- 5. Processing 6. Packaging itating FunctionsMarketing Functions = Any activity performed in carrying a product from the point of its production to the ultimate consumer is termed as a marketing function. = A marketing function is a fundamental or basic physical process or service required to give a product the form, place, time, and possession utility consumers desire.Packing and Packaging Packing means, the wrapping and crating of goods before they are transported. Goods have to be packed either to preserve them or for delivery to buyers. Packaging is a part of packing, which means placing the goods in small packages like bags, boxes, bottles or parcels for sale to the ultimate consumers. Label — part of the package that gives information about the productPacking and packagingBrand vs Trademark 1. Meaning When a product canbe Whena Letter, Name, Identified through the _sign, picture or design or. medium of trademark, a mix of all, Is registered word, name &design. —_ under law. 2. Nature All brands are not All trademarks are Trademark. brands. 3. Objective ‘Objective of a brand Is to Trademark’s objective Is help the Identification of to stop product’s product & provide It duplication or copy. difference & specialty. 4, Registration Brand Registration Is not Trademark registration Is compulsory. compulsory.Storage and warehousing Storage function concerned with making goods available at the desired time. It allows a smooth, and as far as possible, uninterrupted flow of product in to the market. It tries to balance supply and demand.Transportation = Transportation function concerned with making the goods available at the right place. = It includes activities as weighing of alternative routes and types of transportation to use, activities in the preparation for shipment such as crating and loading.Processing = The processing function would include all those essentially manufacturing activities that change the basic form of the Washing — Peeling. Cutting Baby Carrots product. Carrots Juicing Apples Apple Juice2. Exchange Functions ress ® those activities involved in the transfer of title or ownership to goods. = 2.1.The buying function:Seeking out the sources of supply, assembling of products, and activities associated with the purchase = 2.2.The selling function: All the various activities that are called merchandising. physical arrangements of display of goods, advertising and other promotional services to influence/create demands.3. Facilitative Functions rr = Facilitating functions are those that make possible the smooth performance of the exchange and physical functions. = The standardization function is concerned with the establishment and maintenance of uniform measurements of both quality and quantity. It simplifies the buying and selling. = Standardization means the determination of the standards to be established for different commodities.Grading and standardization = Standards are established on the basis of certain characteristics-such as weight, size, colour, appearance, texture, moisture content, staple length, amount of foreign matter, ripeness, sweetness, taste, chemical content, etc. = Gradingmeans the sorting of the unlike lots of the produce into different lots according to the quality specifications laid down. It is a method of dividing products into certain groups or lots in accordance with predetermined standards.Financing = The financing function of marketing involves the use of capital to meet the financial requirements of the agencies engaged in various marketing activities. = Like credit from various lending agencies = Commercial bank = Development bank = Credit coop/credit union, investorRisk Taking = The risk bearing function is the accepting of the possibility of loss in the marketing of a product. = Some risks such as: 1. Quantity Loss 2. Quality Deterioration 3. Price RiskMiddlemen in Agril. marketing a Marketing middlemen: are those individuals or business firms that specialize in performing the various marketing functions. These are: 1. Merchant Middlemen, 2. Agent Middlemen, ” 3. Speculative Middlemen, ; | 4, Processors and Manufacturers, and s. Facilitative Organizations/middlemenMarketing middlemen... 1.Merchant middlemen take title and therefore own the product the handle. They buy and sell for their own gain. = Retailer buys products for resale directly to the ultimate consumer of the goods = Wholesalers sell the commodity to retailers, other wholesalers and industry users, but do not sell in significant amount to ultimate consumers2. Agent Middlemen = Agent Middlemen act only as representatives of their clients. = They don"t take title; therefore don"t own the products the handle. = agent middlemen receive their income in the form of fee and commission. They sell their services (knowledge and know-how in bargaining) to their principals, not physical goods to customers = Commission Agents: granted with more power than broker = Brokers usually don“t have physical control over the product 3. Speculative middlemen are those who take title to products with the major purpose of profiting from price movements.4. Processors and Manufacturers = Processors and manufacturers exist primarily to undertake some actions on products to change their form = Agricultural processors take an active part in other institutional aspects of marketing. Some act like as their own buying agents in producing areas, some participate in the wholesaling of their products to retailers5. Facilitative organizations = Facilitative organizations assist the various middlemen in performing their tasks. Such organizations do not directly participate in marketing process as either merchants or agents. = They provide the physical facilities for the handling of products or for bringing buyers and sellers together They may also aid in grading, arranging and transmitting payment and the likeMarketing Channels =Marketing channels are the chain of intermediaries through whom the various agricultural products passes from the producers to the consumers. ult represents the route through which agricultural products move from the producers to the consumers. Jt is the set of firms and individuals that take title or assist in transferring title, to a good or service as it moves from the producer to the final consumer.Marketing Channels QO Contract-buyers -type of intermediaries most prevalent in the fruits and vegetables. Buying contracts between the buyer and the producer are made even before the product is harvested. QO Wholesaler - they sell to retailer, other wholesalers, and industrial users, but do not sell in significant amounts to ultimate consumers. Q Commission Agent -takes over the physical handling of the product, arranges for the terms of sales, collects, deducts his fees, and remits the balance to his principal. -grains, poultry, and livestock are commonly sold to wholesalers and processors through the commission agent. eMarketing Channels QO Wholesaler-Retailer -business operators who get the produce in large quantities either from the wholesalers or contract buyers. They sell mainly to retailers on wholesale basis but they do also retail to rest and maintain permanent stalls in the market. Q Assembler-Wholesaler -buy from producers and contract-buyers, assemble the products in large volume and transport them to market centers, locally known as the viajeros that sell products on wholesale basis. Q Butcher — Retailer -Middlemen who buy live poultry and livestock from the wholesaler or direct from the producer and sell them in dressed or carcass form. O Retailer -Product handlers who serve qs the last link in the market channel.Marketing Margins rs Marketing Margins (Price Spread) - Difference between prices at different levels of the marketing system - Difference between what the consumer pays and what the producer receives for his produce Ways to subdivide marketing margin into different components: 1. Marketing cost — returns to the factors of production used in providing the processing and marketing services rendered between the farmers and consumers. Components of Marketing Costs: a. Wage — return to labor b. Interest — return to borrowed capital c. Rent—return to land and buildings d, Profit — return to entrepgeneurship and risk capitalMarketing Margins 2. Market charges -returns according to the various agencies or institutions involved in the marketing of products. Types of Margins 1. Absolute Margin (AM) = Selling Price (SP) — Buying Price (BP) 2. Percentage Margin (PM) = (AM/SP) x 100% 3. Percent Mark-up = (AM/BP) x 100% Breakdown of consumer’s peso: 1. Farmer’s share = (Farm Price/Final Retail Price) x 100% 2. Middleman’s share = Middlemen’s Absolute Margin/Final Retail Price a. Wholesaler Share (WS) = WS Absolute Margin/ Final Retail Price b. Contract Buyer Share (CB) = CB Absolute Margin/ Final Retail Price Teme edil Share (R)= Absolute Margin/Final Retail PriceMarketing Integration Horizontal Integration This occurs when a firm or agency gains control of other firms or agencies performing similar marketing functions at the same level in the marketing sequence. In this type of integration, some marketing agencies (say, sellers) combine to form a union with a view to reducing their effective number and the extent of actual competition in the market. Vertical Integration Vertical integration occurs when a firm performs more than one activity in the sequence of the marketing process. It is a linking together of two or more functions in the marketing process within a single firm or under a single ownership. For example, if a firm assumes the functions of the commission agent as well as retailing, it is vertical integration. ®Marketing Integration Vertical Integration (a)Forward Integration: If a firm assumes another function of marketing which is close to the consumption function, it is a case of forward integration; for example, a wholesaler assuming the function of retailing. (b) Backward Integration: This involves ownership or a cqmbination of sources of supply; for example, when a processing firm assumes the function of assembling/purchasing the produce from villages. Conglomeration A combination of agencies or activities not directly related to each other may, when it operates under a unified management.Marketing Mixes The marketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market. Product, Price, Promotion & Place = These marketing mixes are sometimes called the "four P*. = Note that the four P's represent the sellers view of the marketing tool available for satisfying and influencing buyers. = From the buyer's point of view, each marketing tool is designed to deliver a customer benefit. = Robert Lanrterborn suggested that sellers‘ four Ps correspond to the customer‘s four CsMarketing Mixes Four C’s Product Customers solution Price Customer cost Place Convenience Promotion Communication ~All the marketing mixes are for better customer satisfaction. vBased on the mkting concepts, the whole activities of mkting are centered on customer value. Hence, customer is not part of the mkting mix.The four Ps of marketing The marketing mix can be divided into four groups of variables commonly known as the four Ps: 1.Product: The goods and/or services offered by a company to its customers. 2.Price: The amount of money paid by customers to purchase the product. 3.Place (or distribution): The activities that make the product available to consumers. 4.Promotion: The activities that communicate the product’s features and benefits and persuade customers to purchase the product. °Marketing tools Each of the four Ps has its own tools to contribute to the marketing mix: . Product: variety, quality, design, features, brand name, packaging, services . Price: list price, discounts, allowance, payment period, credit terms . Place: channels, coverage, assortments, locations, inventory, transportation, logistics . Promotion: advertising, personal selling, sales promotion, public relationsThe four Ps as the four Cs i The four Ps of the marketing mix can be reinterpreted as the four Cs. They put the customer’s interests (the buyer) ahead of the marketer’s interests (the seller). e Customer solutions, not products: Customers want to buy value or a solution to their problems. © Customer cost, not price: Customers want to know the total cost of acquiring, using and disposing of a product. e Convenience, not place: Customers want products and services to be as convenient to purchase as possible. ¢ Communication, not promotion: Customers want two-way communication with the companies that make the product.