AGRICULTURAL ECONOMICS

DEFINITION OF TERMS
NATURE AND SCOPE
FOUNDATION OF ECONOMIC
IDEOLOGIES
ECONOMIC THEORIES
DEFINITION OF TERMS
• ECONOMICS
- The Study Of how people choose to scarce or limited productive resources
(land,labor,capital goods such as machinery ,technical knowledge) to produce various commodities.
Origin:Okonomia (Gk)=household management
• Macroeconomics vs.Microecomics
- Macroeconomic deals with the whole or aggregate economy-GNP,GDP ,inflation,unemployment.
-Microeconomics:deal individuals-household, firms,markets,consumers,producer.
• Positive vs.Normative Economics
-positive Economics statements on “what is” or “what will happen”,unbiased;cause and effect

-Normative economics makes statement on “what should be”, biased;value judgements used in
formulating policies.
• Economic Model
• - the basic building block in the logic of the economist; a conceptualization based; on assumptions of
how economic activity occurs; sample perfectly competitive firm.
• Agriculture economics
• -Applies the principles of economics to crop and animal production
-deals with the allocation of scarce resources for competing alternative uses found in the p
production,processing distribution and consumption of food,feed,and fiber.
• -In the philippines:Burea of Agricultural Economics was formed on june 22
1963under the office of the secretary of agriculture and Natural resources
• Production Possibilities Frontier(PPF)
-useful tool for illustrating the choices available to society and its constraints
-all the possible combinations of the maximum amounts of two goods and
services that can be produced with a given amount of resources
-negative slope illustrates the trade off opportunity cost
• -inside the PPF;inefficient use of resources; outside the PPF infeasible
• Ceteres paribus
-others things being equal’’
• Opportunity Cost
-the value of the best forgone alternative
• Diminishing Returns
-economic variable will eventually increase at a decreasing rate
-in consumption: Law of Diminishing Marginal Utility
-in production: Law of Diminishing Marginal Product
• Marginality

-An additional or incremental unit of something

• Economic Resource
-scarce and command a non-zero price i,e they cost of something example
land, labor, capital

Nature and Scope

-Economics is a social science and even utilizes principles from other social
sciences such as political science, history and sociology
-describes, analyzes explains, and correlates economic behavior, which
encompasses the production, consumption, and distribution of goods and
services, in a systematic fashion
Basic economic Problems
-scarcity is what drives society to answer the following problems
a. What to produce? -what society desires

b. How much to produce? -how much of good or service society desires

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 involuntary 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
employment ,etc.
E . Economic freedom –includes our freedom to choose what to produce or
consume, employment ,etc, the freedom to economic
activities within the legal framework of the economy
f. Price stability -the absence of inflation (successive increase in prices of almost
all kinds of commodities in the market) and wide fluctuations
in prices
g. Economic development - improvements in the quality of life of the people

h. Economic Security – assurance of the fulfillment of economic needs of every

member of society , including the handicapped

Foundation of Economics
- Self-interest
- scarcity
-Choice
Ideologies
• 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

Communism
-also called command economy or classless economy
- opposite of capitalism
- features
a. Essential freedoms enjoyed in a capitalist system are eliminated, and property
Ceases to be the source of private or individual
b. Factors of production are owned by the government, which regulates and
controls their functions in consonance with a central economic plan
c. Government determines the aims of the economy, directs production, and
regulates ( or controls) distribution and consumption of output
d. government determines the type, quality, and quantity of commodities to be
produced and arbitrarily allocates the output of production
e. Government regulates the prices of goods and services

• 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

• Fascism
- an economic system associated more with the political system of a strong
one-man or junta dictatorship. Large companies were linked to state power
and had great monopoly power
• Feudalism
- an economic system that still persists in many developing countries; an
agrarian economic system in which the control of land
Economic Theories
• Prehistory – economics has developed into a body of knowledge by various
thinkers or writers were called earlier as philosopher, mercantilists
pamphieteers, arithmeticians, political economists

• Classical Economics – a market economy tends toward an equilibrium with full

employment and tends to be stable if monetary conditions
are stable changes in the quality of money are the major
cause of changes in aggregate demand

a. Adam Smith – father of modern economics in wealth of nations (1776) he advocated the
laissez-faire or left-alone policy in the invisible hand of theory

b. David Ricardo – proposed the labor theory of value, which states that labor creates value in
principle of political economy and taxations, he elaborated the theory of value, taxations, and
international trade in the classical tradition

c. Thomas Malthus – English economist and demographer; directly connected the problems of an
economic system to the rapid growth of population
d. Jhon Stuart Mill – heir to David Ricardo in the exposition of classical economics
in Principles of Political Economy (1848)

• Neoclassical Economics – value depends on both costs of production

(supply)and utility (demands) economic measurement involving the tools of
modern probability and statistics and special techniques

a. Leon Wairas- introduced the general economic system analysis of general

equilibrium was achieved; market equilibrium can take place only at a price where
the quantities supplied and demanded are equal.

b. Alfred Marshal – in principles of Economics, he emphasized that price and

output are determined by supply and demand.

• Jhon Maynard Keynes – father of macroeconomics; published his General

Theory of Employment, Interest, and Money in the 1930s, which changed the
focus of economics to macroeconomics- national income, employment, general
price level, and fiscal policy
Post-Keynesian Mainstream (Mainstream economics) –the present state of the
development of economics is a hybrid of neoclassical economics and Keynesian
economics.

• Socialist Economics

A. Karl Marz – he attempted an ambitious effort in examining the law of motion

of the capitalist production by embracing historical, sociological, and
economic.

B. Friedrich Engels – collaborator of Karl Marz in the foundation of communism;

co-authored the communist Manifesto with Marz