Introduction to Agricultural Economics

by Penson, John B.; Capps, Oral; Rosson, C. Parr

• ISBN13: 9780139011900
• ISBN10: 0139011900
• Edition: 2nd
• Format: Hardcover
• Copyright: 1998-10-01
• Publisher: Pearson College Div

Summary

This text presents Agribusinesss vis- -vis Production. The text presents basic concepts of economics applied to the food and fiber industry. The micro and macro focuses influencing the decisions of producers and consumers is quite detailed.

Table of Contents

PART I INTRODUCTION	1	(52)
CHAPTER 1 WHAT IS AGRICULTURAL ECONOMICS?	3	(17)
Scope of Economics	4	(4)
Scarce Resources	5	(1)
Making Choices	6	(2)
Definition of Economics	8	(2)
Microeconomics versus Macroeconomics	8	(1)
Positive versus Normative Economics	9	(1)
Alternative Economic Systems	9	(1)
Definition of Agricultural Economics	10	(1)
What Does an Agricultural Economist Do?	10	(1)
Role at the Microeconomic Level	10	(1)
Role at the Macroeconomic Level	11	(1)
Marginal Analysis	11	(1)
What Lies Ahead?	11	(3)
A Review of Graphical Analysis	14	(5)
Constructing a Graph	14	(2)
Slope of a Linear Curve	16	(1)
Slope of a Nonlinear Curve	17	(2)
Exercises	19	(1)
CHAPTER 2 THE U.S. FOOD AND FIBER SYSTEM	20	(33)
Indices	21	(2)
What is the Food and Fiber Industry?	23	(3)
Employment	23	(1)
Output	24	(2)
Changing Complexion of Farming	26	(10)
Physical Structure	26	(3)
Productivity	29	(1)
Profitability	30	(3)
Financial Structure	33	(3)
Other Sectors in the Food and Fiber Industry	36	(15)
Farm Input Suppliers	36	(3)
Food Processors, Wholesalers, and Retailers	39	(2)
Value Added Process	41	(5)
Fiber Manufacturers	46	(1)
Shippers and Handlers	46	(1)
Importance of Export Markets	46	(5)
Exercises	51	(2)
PART II UNDERSTANDING CONSUMER BEHAVIOR	53	(68)
CHAPTER 3 THEORY OF CONSUMER BEHAVIOR	55	(19)
Utility Theory	56	(4)
Total Utility	56	(2)
Marginal Utility	58	(2)
Law of Diminishing Marginal Utility	60	(1)
Indifference Curve	60	(2)
Concept of Isoutility	60	(1)
Marginal Rate of Substitution	61	(1)
The Budget Constraint	62	(7)
Exercises	69	(5)
CHAPTER 4 CONSUMER EQUILIBRIUM AND MARKET DEMAND	74	(26)
Conditions for Consumer Equilibrium	75	(2)
Changes in Equilibrium	77	(5)
Changes in Product Price	77	(3)
Changes in Other Demand Determinants	80	(2)
The Law of Demand	82	(4)
Market Demand	82	(2)
Interpretation of Market Demand	84	(2)
Tastes and Preferences	86	(4)
Composition of the Population	86	(1)
Attitudes toward Nutrition and Health	86	(1)
Food Safety	87	(1)
Lifestyles	88	(1)
Technological Forces	88	(1)
Advertising	89	(1)
Consumer Surplus	90	(3)
Advanced Topics	93	(1)
Extension of Conceptual Framework	93	(1)
Exercises	94	(6)
CHAPTER 5 MEASUREMENT AND INTERPRETATION OF ELASTICITIES	100	(21)
Own-price Elasticity of Demand	101	(4)
Income Elasticity of Demand	105	(1)
Cross-price Elasticity of Demand	106	(1)
Other General Properties	106	(12)
Some Real-World Examples	110	(2)
Applicability of Demand Elasticities	112	(6)
Exercises	118	(3)
PART III BUSINESS BEHAVIOR AND MARKET EQUILIBRIUM	121	(146)
CHAPTER 6 ASSESSING BUSINESS PERFORMANCE	123	(18)
Annual Business Reports	126	(7)
Business Balance Sheets	126	(2)
Business Income Statements	128	(2)
Use in Business Planning	130	(3)
Cost of Doing Business	133	(2)
Explicity versus Implicit Costs	134	(1)
Costs in Short Run versus Long Run	134	(1)
Measuring Business Revenue	135	(1)
Assessing Profit	136	(2)
The Accountant versus the Economist	136	(1)
Why the Fuss over Profit?	137	(1)
What Lies Ahead?	138	(2)
Exercises	140	(1)
CHAPTER 7 INTRODUCTION TO PRODUCTION AND RESOURCE USE	141	(31)
Conditions for Perfect Competition	142	(1)
Classification of Inputs	143	(1)
Land	143	(1)
Labor	143	(1)
Capital	143	(1)
Management	144	(1)
Important Production Relationships	144	(7)
The Production Function	144	(1)
Total Physical Product Curve	145	(1)
Marginal Physical Product Curve	146	(2)
Average Physical Product Curve	148	(1)
Stages of Production	149	(2)
Assessing Short-run Business Costs	151	(4)
Total Costs and the TPP Curve	151	(3)
Average Costs and the APP Curve	154	(1)
Marginal Costs and the MPP Curve	154	(1)
Economics of Short-run Decisions	155	(7)
Marginal and Average Revenue	155	(1)
Level of Output: MC = MR	156	(3)
Level of Resource Use: MVP = MIC	159	(1)
A Real-World Application	160	(2)
What Lies Ahead?	162	(5)
Exercies	167	(5)
CHAPTER 8 ECONOMICS OF INPUT SUBSTITUTION	172	(25)
Concept and Measurement of Isoquants	173	(4)
Rate of Technical Substitution	174	(2)
A Case Example	176	(1)
The Iso-cost Line	177	(2)
Least-cost Use of Inputs for a Given Output	179	(3)
Short-run Least-cost Input Use	179	(2)
Effects of Input Price Changes	181	(1)
Least-cost Input Use for a Given Budget	182	(1)
Long-run Expansion of Input Use	183	(4)
Long-run Average Costs	184	(1)
The Long-run Planning Curve	185	(2)
Economics of a Business Expansion	187	(3)
Capital Variable in the Long Run	189	(1)
Expansion Path Through Isoquants	190	(2)
Advanced Topic	192	(2)
Exercises	194	(3)
CHAPTER 9 ECONOMICS OF PRODUCT SUBSTITUTION	197	(15)
Concept and Measurement of the Production Possibilities Frontier	198	(3)
Production Possibilities Frontier	198	(1)
Product Substitution	198	(3)
Concept and Measurement of the Iso-revenue Line	201	(2)
Profit-maximizing Combination of Products	203	(3)
Choice of Products in the Short Run	204	(1)
Effects of Change in Product Prices	205	(1)
Long-run Expansion of Production	206	(3)
Capital Variable in the Long Run	206	(1)
Expansion of Production Possibilities Frontier	207	(2)
Exercises	209	(3)
CHAPTER 10 MARKET EQUILIBRIUM AND PRODUCT PRICE: PERFECT COMPETITION	212	(19)
Derivation of the Market Supply Curve	213	(3)
Firm Supply Curve	213	(1)
Market Supply Curve	214	(1)
Own-price Elasticity of Supply	215	(1)
Producer Surplus	216	(1)
Market Equilibrium under Perfect Competition	216	(6)
Market Equilibrium	217	(2)
Total Economic Surplus	219	(2)
Applicability to Policy Analysis	221	(1)
Adjustments to Market Equilibrium	222	(5)
Market Disequilibrium	222	(1)
Length of Adjustment Period	223	(1)
Cobweb Adjustment Cycle	224	(3)
Exercises	227	(4)
CHAPTER 11 MARKET EQUILIBRIUM AND PRODUCT PRICE: IMPERFECT COMPETITION	231	(36)
Market Structure Characteristics	232	(3)
Number of Firms and Size Distribution	232	(1)
Product Differentiation	233	(1)
Barriers to Entry	233	(1)
Economic Environment	234	(1)
Classification of Firms	235	(1)
Imperfect Competition in Selling	235	(13)
Monopolistic Competition	236	(5)
Oligopoly	241	(3)
Monopoly	244	(2)
Comparison of Alternative Market Structures	246	(1)
Welfare Effects of Imperfect Competition	246	(2)
Imperfect Competition in Buying	248	(4)
Monopsony	248	(3)
Oligopsony and Monopsonistic Competition	251	(1)
Market Structures in Livestock Industry	252	(2)
Governmental Regulatory Measures	254	(8)
Legislative Acts	254	(3)
Ceiling Price	257	(1)
Lump-sum Tax	258	(1)
Minimum Price	259	(3)
Exercises	262	(5)
PART IV GOVERNMENT IN THE FOOD AND FIBER INDUSTRY	267	(50)
CHAPTER 12 GOVERNMENT INTERVENTION IN AGRICULTURE	269	(23)
Rationale for Government Intervention	270	(1)
Farm Economic Issues	271	(6)
Defining the Farm Problem	271	(3)
Forms of Government Intervention	274	(2)
Food Safety	276	(1)
Consumer Issues	277	(3)
Adequate and Cheap Food Supply	277	(1)
Nutrition and Health	278	(1)
Food Subsidies	278	(1)
Rural Communities	279	(1)
Resource Issues	280	(4)
Soil Erosion and Land Use	281	(1)
Adequacy of Water Supply	281	(2)
Hired Farm Labor	283	(1)
Energy	284	(1)
International Issues	284	(4)
Adequacy of World Food Supply	285	(1)
Movement toward Free Trade	286	(2)
What Lies Ahead?	288	(4)
CHAPTER 13 SUPPORTING FARM PRICES AND INCOMES	292	(25)
Price and Income Support Mechanisms	294	(9)
Loan Rate Mechanism	294	(2)
Set-Aside Mechanism	296	(3)
Target Price Mechanism	299	(1)
Conservation Reserve Mechanism	300	(1)
Commodities Covered by Government Programs	301	(2)
Phasing Out of Supply Management	303	(1)
Domestic Demand Expansion Programs	304	(2)
Importance of Export Demand	306	(8)
Calculating Total Demand Elasticity	307	(1)
Impact of Rising Export Demand	308	(1)
Impact on Farm Revenue of Wheat Producers	309	(2)
Implications for Policy	311	(3)
Exercises	314	(3)
PART V MACROECONOMICS OF AGRICULTURE	317	(128)
CHAPTER 14 PRODUCT MARKETS AND NATIONAL OUTPUT	319	(28)
Circular Flow of Payments	320	(3)
Barter Economy	320	(1)
Monetary Economy	321	(2)
Composition and Measurement of Gross Domestic Product	323	(3)
Consumption, Savings, and Investment	326	(10)
Determinants of Planned Consumption	327	(3)
Determinants of Planned Saving	330	(2)
Determinants of Planned Investment	332	(4)
Equilibrium National Income and Output	336	(6)
Aggregate Expenditures	336	(1)
The keynesian Cross	337	(1)
Deriving Aggregate Demand Curve	337	(1)
Aggregate Supply and Full Employment	338	(3)
Recessionary and Inflationary Gaps	341	(1)
What Lies Ahead?	342	(4)
Exercises	346	(1)
CHAPTER 15 CONSEQUENCES OF BUSINESS FLUCTUATIONS	347	(23)
Fluctuations in Business Activity	348	(3)
Nature of Business Fluctuations	348	(1)
Indicators of Economic Activity	349	(2)
Consequences of Business Fluctuations	351	(10)
Unemployment	351	(2)
Inflation	353	(7)
Short-run Phillips Curve	360	(1)
Macroeconomic Policy Options	361	(7)
Laissez-faire Macroeconomic Policy	362	(1)
Demand-oriented Macroeconomic Policy	362	(2)
Supply-oriented Macroeconomic Policy	364	(4)
Exercises	368	(2)
CHAPTER 16 MONEY, MONEY MARKETS, AND MONETARY POLICY	370	(25)
Characteristics of Money	371	(2)
Functions of Money	371	(1)
Money versus Near Monies	372	(1)
Backing of Money	372	(1)
Federal Reserve System	373	(5)
Organization of the Federal Reserve System	373	(2)
Functions of the Federal Reserve System	375	(2)
Monetary Policy Instruments	377	(1)
Changing the Money Supply	378	(6)
Creation of Deposits	378	(4)
Monetary Policy and the Money Supply	382	(2)
Money Market Equilibrium	384	(2)
Demand for Money	384	(1)
Equilibrium Conditions	385	(1)
Effects of Monetary Policy on the Economy	386	(7)
Transmission of Policy	386	(1)
Combating Recessionary Gaps	387	(1)
Combating Inflationary Gaps	388	(1)
Combating Stagflation	389	(1)
Microeconomic Perspectives	389	(1)
Potential Problems in Policy Implementation	390	(3)
Exercises	393	(2)
CHAPTER 17 FISCAL POLICY AND BUDGET DEFICITS	395	(23)
The Federal Budget	396	(4)
Federal Expenditures	396	(2)
Federal Receipts	398	(1)
Budget Deficit	398	(2)
The National Debt	400	(5)
National Debt and GDP	401	(1)
Interest Payments and GDP	402	(1)
Ownership of National Debt	403	(1)
Burdening Future Generations?	403	(2)
Fiscal Policy Options	405	(8)
Automatic Policy Instruments	405	(1)
Discretionary Policy Instruments	406	(2)
Fiscal Policy and Aggregate Demand	408	(1)
Combating Recessionary Gaps	409	(2)
Combating Inflationary Gaps	411	(1)
Combating Stagflation	412	(1)
Difficulties in Policy Implementation	412	(1)
What Lies Ahead?	413	(3)
Exercises	416	(2)
CHAPTER 18 MACROECONOMIC POLICY AND AGRICULTURE	418	(27)
Impacts of Policy Actions on the General Economy	419	(3)
Market Interest Rates	419	(1)
Real GDP and Disposable Income	419	(1)
Unemployment Rate	420	(1)
Inflation Rate	421	(1)
Foreign Exchange Rate	421	(1)
Impacts of Policy Actions on Agriculture	422	(7)
Farm Product Prices	422	(2)
Farm Input Prices	424	(1)
Farm Interest Rates	425	(1)
Net Farm Income	426	(2)
Farmland Prices	428	(1)
A Brief History Lesson	429	(9)
The 1970s: A Decade of Expansion	429	(3)
The 1980s: A Decade of Contraction	432	(6)
The 1990s: A Decade of Change	438	(7)
Status of the Macroeconomy	438	(1)
Status of the Agricultural Economy	439	(1)
Federal Farm Policies	440	(5)
PART VI INTERNATIONAL AGRICULTURAL TRADE	445
CHAPTER 19 AGRICULTURE AND INTERNATIONAL TRADE	447	(27)
Growth and Instability in Agricultural Trade	448	(4)
Export Boom and Bust	449	(1)
Moves toward Trade Liberalization	450	(2)
The Importance of Agricultural Trade	452	(3)
Increased Export Dependence	452	(1)
Greater Dependence on Imports	453	(1)
Farm and Nonfarm Impacts of Exports	454	(1)
The Composition of Agricultural Trade	455	(4)
The Role of Agricultural Exports	456	(1)
The Role of Agricultural Imports	456	(3)
Direction of U.S. Agricultural Trade	459	(6)
Emerging Export Market Trends	460	(1)
Key Regional Markets	460	(3)
Major Import Suppliers	463	(2)
U.S. Agricultural Trade Performance	465	(9)
The Balance of Trade	468	(6)
CHAPTER 20 EXCHANGE RATES AND AGRICULTURAL TRADE	474	(32)
Exchange Rates and the Foreign Exchange Market	475	(3)
Exchange Rates Defined	475	(1)
The Foreign Exchange Market	476	(2)
The Balance of Payments	478	(5)
The Current Account	479	(2)
The Private Capital Account	481	(1)
Official Settlements Account	481	(1)
The United States as a Debtor Nation	481	(2)
The International Monetary System	483	(6)
The Gold Standard and the Interwar Years	483	(1)
The Bretton Woods System	484	(2)
The Present International Monetary System	486	(2)
The European Monetary System	488	(1)
Exchange Rate Determination	489	(5)
Demand and Supply of Foreign Currencies	489	(1)
Relative Interest Rates	490	(2)
Changes in Relative Prices	492	(1)
Balance of Trade Impacts	492	(1)
The Role of Expectations	493	(1)
Exchange Rates and U.S. Agricultural Trade	494	(4)
Exchange Rate Indices	495	(1)
Exchange Rate Impacts on Prices	496	(1)
Exchange Rates and International Competition	497	(1)
Exchange Rates and Agricultural Policy	498	(1)
Considerations for Policy Coordination	498	(8)
Macroeconomic Policy Coordination	499	(1)
Domestic Agricultural Policy Coordination	500	(6)
CHAPTER 21 WHY NATIONS TRADE	506	(15)
Why Trade?	507	(7)
Absolute Advantage	508	(2)
Comparative Advantage	510	(2)
Factors Affecting Comparative Advantage	512	(1)
Comparative Advantage and Competitive Advantage	512	(2)
Gains from Trade	514	(7)
The Importance of Exchange and Specialization	514	(1)
Distribution of the Gains from Trade	515	(6)
CHAPTER 22 AGRICULTURAL TRADE POLICY	521	(27)
Trade and Welfare	522	(4)
Autarky or the Closed Economy	522	(1)
Trade and Partial Equilibrium	523	(2)
Welfare Gains from Trade	525	(1)
Why Restrict Trade?	526	(2)
Protectionism in Agriculture	526	(1)
Arguments against Trade	527	(1)
Trade Restrictions	528	(10)
Import Policies	529	(6)
Domestic Agriculture and Food Policies	535	(1)
Export Policies	536	(2)
Agricultural Trade Policy Making	538	(10)
The General Agreement on Tariffs and Trade	538	(2)
The United Nations Conference on Trade and Development	540	(1)
U.S. Agricultural Trade Policy Formulation	541	(7)
CHAPTER 23 EMERGING ISSUES IN AGRICULTURAL TRADE: THE FORMATION OF PREFERENTIAL TRADING ARRANGEMENTS	548
The Importance of Preferential Trading Arrangements	549	(1)
Forms of Economic Integration	550	(1)
Reasons for Preferential Trading Arrangements	551	(2)
Preferential Trading Arrangements and the GATT	551	(1)
Counter Economic and Political Power in Other Parts of the World	552	(1)
Reduce Side Effects	553	(1)
Foster Political Stability and Economic Prosperity	553	(1)
Do Preferential Trading Arrangements Create or Divert Trade?	553	(5)
Static Effects	554	(3)
Dynamic Effects	557	(1)
Provisions of the North American Free Trade Agreement	558