Agricultural Economics

and Marketing.
MARLON JAN B. GARCIA
Instructor
Chapter 1:

Introduction To
Agricultural Economics
Learning Objectives:

▪ Explain the definitions, importance,

methods and scope of economics.
▪ Explicate the relationship of Economics to
other social sciences.
Economics

▪ is a social science concerned with using scarce

resources to obtain the maximum satisfaction of the
unlimited material wants of society (Walstad &
Bingham).
▪ is the study of proper allocation and efficient use
of scarce resources to produce commodities for the
satisfaction of unlimited needs and wants of man
(Needs vs Wants).
▪ The study of how people use their limited resources
to try to satisfy unlimited wants. (Parkin and Bade).
Divisions of Economics

▪ 1. Microeconomics
– concerned with the behavior and activities of
specific economic units – individuals, households,
firms, industries and resource owners.

Examples are the determination of the price of a

single product or the behavior of a single consumer
or business firm.
Divisions of Economics

▪ 2. Macroeconomics
– deals with the behavior of the economy as a
whole with respect to output, income, price level,
foreign trade, unemployment, and other aggregate
economic variables.
Agricultural Economics

▪ According to Prof.Hibbard, “Agricultural economics is

the study of relationships arising from the wealth-
getting and wealth- using activity of man in
agriculture”.
▪ Snodgras and Wallace defined agricultural economics
as “an applied phase of social science of economics
in which attention is given to all aspects of
problems related to agriculture.”

It is primarily concerned with the solutions of

economic problems of the farmers in agriculture.
 DICHOTOMIES OF ECONOMICS

POSITIVE ECONOMICS NORMATIVE ECONOMICS


describes how things work.  describe what should be

is the branch of economics (opinions).
that concerns to the
description and explanation  is a part of economics that
of economic phenomena. expresses value or normative

It focuses on facts and judgments about economic
cause-and-effect behavioral fairness, or what the outcome of
relationships and includes the economy or goals of public
the development and testing policy ought to be.
of economics theories.

as science, concerns analysis
of economic behavior.
 Economics as Related to Other Social
Sciences

Anthropology and Economics

Anthropology is a branch of science that
studies the biological, psychological,
social and cultural aspects of human life.

In economics, it is really necessary to

understand the social aspects so that we
become aware of the basic needs of a human
being to enhance his social life.
 Economics as Related to Other Social
Sciences

Political Science and Economics

Political Science is a systematic study of
the state and government.

Political Science is important in economics

because it studies the mechanics of the
distribution of power and its primary
concern is to find out the relationship
between the authority and the masses.
 Economics as Related to Other Social
Sciences

Sociology and Economics

Sociology comes from the Greek words “socio”
and “logus” means study of the society.

Economics studies the society by means of

analyzing human groups, institutions and its
social relationships. It analyzes the social
patterns that result from numerous
individual interactions.
 Economics as Related to Other Social
Sciences

Psychology and Economics

▪ Psychology derived from Greek words “psyche” and
“logos” meaning soul and study. Psychology is
defined as the scientific study of the behavior and
living organisms with special attention to human
behavior.

▪ Psychology gives us an idea on how it is related to

economics through mind conditioning that influence
an individual’s perception and decision (buying of
g/s, choosing leaders in the government).
 Economics as Related to Other Social
Sciences

History and Economics

History is important in studying economics not only
through a systematic recording of past events, but
a detailed and in-depth interpretation of the
causes and effects of past events on the lives of
the members.

Through history we can be able to compare the things

that happened in the past and correlate it with
what is happening at the present time.
Basic Economics Problems

Scarcity is what drives society to answer the following problems:

a. What to produce? – what the society desires.
b. How much to produce? - How much of the goods and services the
society desire.
c. When to produce? – making goods available on the time that
they are needed or wanted.
d. How to produce? – who will produce and with what resources and
production techniques (labor intensive or machine intensive).
e. For whom to produce? – who gets to eat the fruit of economic
activity.
Economic Goals

a. Full Employment – all available resources should be

employed or fully utilized or no workers should be
involuntarily out of work.
b. Equity – an equitable distribution of wealth and
income.
c. Efficiency – producing any given level of output at
minimum opportunity cost of the inputs used in
production.
d. Economic Growth – expansion of production, constantly
increasing output or national income, reduction in
poverty incidence, increase in employment, etc.
Economic Goals

e. Economic Freedom – freedom to choose what to produce or

consume, employment, etc.
- the freedom to do economic activities within the legal
framework of the economy.
f. Price Stability – absence of inflation and wide fluctuations
in prices.
g. Economic Development – improvement of the quality of life of
the people.
h. Economic Security – assurance of the fulfillment of economic
needs of every member of society.
Foundations of Economics

1. Idea of Scarcity of Resources

Scarcity- refers to the condition wherein most things that
people want are available only in limited supply.
- imbalance between our desires and the means of
satisfying those desires
- means that resources are limited and there are too
many people running after too scarce resources (or
opportunities) , so in many ways, it is the survival of
the fittest.
Foundations of Economics

2. Concept of Opportunity Cost

- what are you giving up by choosing between two
alternatives.
- The cost of choosing the use of resources for one
purpose measured by the sacrifice of the next best
alternative for using those resources.
ECONOMIC IDEOLOGIES

I. CAPITALISM
- a method where individuals and companies control the
distribution of goods and market forces. It drives
competition and innovation as people act on the
basic human nature.
- mainly characterized by private individuals owning
and operating the majority of businesses that
produce goods and services.
- either pure or modified capitalism.
ECONOMIC IDEOLOGIES

I. CAPITALISM
- also called market economy or free-enterprise
economy.
- features:
a. Absence of a central economic plan
b. Private ownership of property
c. Operation of the pricing process/price system
d. Competitive conditions
e. Profit motive
f. presence of essential freedoms
ECONOMIC IDEOLOGIES

II. COMMUNISM
- Is a society which the government owns all the nation’s
government.
- Opposite of capitalism.
- The decision on what goods or services to produce and
how they will be produced and distributed are determined
by central government planning.
-is a philosophy that all socio-economic structures will
eventually evolve to the point where all people are
equal and will provide for each other based on needs and
not on greed or a desire for power.
ECONOMIC IDEOLOGIES

II. COMMUNISM
- also called command economy or classless economy.
- opposite of capitalism
- features:
a. Essential freedoms enjoyed in capitalist system are
eliminated.
b. Factors of production are owned by the government.
c. Government determines the aims of the economy, directs
production, and regulates (or controls) distribution and
consumption of outputs.
d. Government determines the type, quality, and quantity of
commodities to be produced.
e. Government regulates the prices.
ECONOMIC IDEOLOGIES

III. Socialism
- mixed economic system.
- features:
a. Operation of the pricing process/price system.
b. Freedom of choice in consumption and in the pursuit
of occupations.
c. A private sector of small producing units.
d. A public sector which oversees the fulfillment of
collective objectives.
ECONOMIC IDEOLOGIES

IV. Fascism

- a method of governing that implies total government control

and oppression of all dissenting opinions.

- stems from the Italian word fascio, which may mean bundle, as
in a political or militant group, or a nation.
ECONOMIC IDEOLOGIES

V. Feudalism

- an economic system that still persists in many developing

countries.

- an agrarian economic system in which the control of land and

the specialization of class roles between landholders and
peasants is strictly structured.