| |
| |
| |
| Introduction | |
| |
| |
| |
| What Is Agricultural Economics? | |
| |
| |
| Scope of Economics | |
| |
| |
| Scarce Resources | |
| |
| |
| Making Choices | |
| |
| |
| Definition of Economics | |
| |
| |
| Microeconomics versus Macroeconomics | |
| |
| |
| Positive versus Normative Economics | |
| |
| |
| Alternative Economic Systems | |
| |
| |
| Definition of Agricultural Economics | |
| |
| |
| What Does an Agricultural Economist Do? | |
| |
| |
| Role at the Microeconomic Level | |
| |
| |
| Role at the Macroeconomic Level | |
| |
| |
| Marginal Analysis | |
| |
| |
| What Lies Ahead? | |
| |
| |
| A Review of Graphical Analysis | |
| |
| |
| Constructing a Graph | |
| |
| |
| Slope of a Linear Curve | |
| |
| |
| Slope of a Nonlinear Curve | |
| |
| |
| Exercises | |
| |
| |
| |
| The U.S. Food and Fiber System | |
| |
| |
| Indices | |
| |
| |
| What is the Food and Fiber Industry? | |
| |
| |
| Employment | |
| |
| |
| Output | |
| |
| |
| Changing Complexion of Farming | |
| |
| |
| Physical Structure | |
| |
| |
| Productivity | |
| |
| |
| Profitability | |
| |
| |
| Financial Structure | |
| |
| |
| Other Sectors in the Food and Fiber Industry | |
| |
| |
| Farm Input Suppliers | |
| |
| |
| Food Processors, Wholesalers, and Retailers | |
| |
| |
| Value Added Process | |
| |
| |
| Fiber Manufacturers | |
| |
| |
| Shippers and Handlers | |
| |
| |
| Importance of Export Markets | |
| |
| |
| Exercises | |
| |
| |
| |
| Understanding Consumer Behavior | |
| |
| |
| |
| Theory of Consumer Behavior | |
| |
| |
| Utility Theory | |
| |
| |
| Total Utility | |
| |
| |
| Marginal Utility | |
| |
| |
| Law of Diminishing Marginal Utility | |
| |
| |
| Indifference Curves | |
| |
| |
| Concept of Isoutility | |
| |
| |
| Marginal Rate of Substitution | |
| |
| |
| The Budget Constraint | |
| |
| |
| Exercises | |
| |
| |
| |
| Consumer Equilibrium and Market Demand | |
| |
| |
| Conditions for Consumer Equilibrium | |
| |
| |
| Changes in Equilibrium | |
| |
| |
| Changes in Product Price | |
| |
| |
| Changes in Other Demand Determinants | |
| |
| |
| The Law of Demand | |
| |
| |
| Market Demand | |
| |
| |
| Interpretation of Market Demand | |
| |
| |
| Tastes and Preferences | |
| |
| |
| Composition of the Population | |
| |
| |
| Attitudes toward Nutrition and Health | |
| |
| |
| Food Safety | |
| |
| |
| Lifestyles | |
| |
| |
| Technological Forces | |
| |
| |
| Advertising | |
| |
| |
| Consumer Surplus | |
| |
| |
| Advanced Topics | |
| |
| |
| Extension of Conceptual Framework | |
| |
| |
| Exercises | |
| |
| |
| |
| Measurement and Interpretation of Elasticities | |
| |
| |
| Own-price Elasticity of Demand | |
| |
| |
| Income Elasticity of Demand | |
| |
| |
| Cross-price Elasticity of Demand | |
| |
| |
| Other General Properties | |
| |
| |
| Some Real-World Examples | |
| |
| |
| Applicability of Demand Elasticities | |
| |
| |
| Exercises | |
| |
| |
| |
| Business Behavior and Market Equilibrium | |
| |
| |
| |
| Assessing Business Performance | |
| |
| |
| Annual Business Reports | |
| |
| |
| Business Balance Sheets | |
| |
| |
| Business Income Statements | |
| |
| |
| Use in Business Planning | |
| |
| |
| Cost of Doing Business | |
| |
| |
| Explicity versus Implicit Costs | |
| |
| |
| Costs in Short Run versus Long Run | |
| |
| |
| Measuring Business Revenue | |
| |
| |
| Assessing Profit | |
| |
| |
| The Accountant versus the Economist | |
| |
| |
| Why the Fuss over Profit? | |
| |
| |
| What Lies Ahead? | |
| |
| |
| Exercises | |
| |
| |
| |
| Introduction to Production and Resource Use | |
| |
| |
| Conditions for Perfect Competition | |
| |
| |
| Classification of Inputs | |
| |
| |
| Land | |
| |
| |
| Labor | |
| |
| |
| Capital | |
| |
| |
| Management | |
| |
| |
| Important Production Relationships | |
| |
| |
| The Production Function | |
| |
| |
| Total Physical Product Curve | |
| |
| |
| Marginal Physical Product Curve | |
| |
| |
| Average Physical Product Curve | |
| |
| |
| Stages of Production | |
| |
| |
| Assessing Short-run Business Costs | |
| |
| |
| Total Costs and the TPP Curve | |
| |
| |
| Average Costs and the APP Curve | |
| |
| |
| Marginal Costs and the MPP Curve | |
| |
| |
| Economics of Short-run Decisions | |
| |
| |
| Marginal and Average Revenue | |
| |
| |
| Level of Output: MC = MR | |
| |
| |
| Level of Resource Use: MVP = MIC | |
| |
| |
| A Real-World Application | |
| |
| |
| What Lies Ahead? | |
| |
| |
| Exercises | |
| |
| |
| |
| Economics of Input Substitution | |
| |
| |
| Concept and Measurement of Isoquants | |
| |
| |
| Rate of Technical Substitution | |
| |
| |
| A Case Example | |
| |
| |
| The Iso-cost Line | |
| |
| |
| Least-cost Use of Inputs for a Given Output | |
| |
| |
| Short-run Least-cost Input Use | |
| |
| |
| Effects of Input Price Changes | |
| |
| |
| Least-cost Input Use for a Given Budget | |
| |
| |
| Long-run Expansion of Input Use | |
| |
| |
| Long-run Average Costs | |
| |
| |
| The Long-run Planning Curve | |
| |
| |
| Economics of a Business Expansion | |
| |
| |
| Capital Variable in the Long Run | |
| |
| |
| Expansion Path Through Isoquants | |
| |
| |
| Advanced Topic | |
| |
| |
| Exercises | |
| |
| |
| |
| Economics of Product Substitution | |
| |
| |
| Concept and Measurement of the Production Possibilities Frontier | |
| |
| |
| Production Possibilities Frontier | |
| |
| |
| Product Substitution | |
| |
| |
| Concept and Measurement of the Iso-revenue Line | |
| |
| |
| Profit-maximizing Combination of Products | |
| |
| |
| Choice of Products in the Short Run | |
| |
| |
| Effects of Change in Product Prices | |
| |
| |
| Long-run Expansion of Production | |
| |
| |
| Capital Variable in the Long Run | |
| |
| |
| Expansion of Production Possibilities Frontier | |
| |
| |
| Exercises | |
| |
| |
| |
| Market Equilibrium and Product Price: Perfect Competition | |
| |
| |
| Derivation of the Market Supply Curve | |
| |
| |
| Firm Supply Curve | |
| |
| |
| Market Supply Curve | |
| |
| |
| Own-price Elasticity of Supply | |
| |
| |
| Producer Surplus | |
| |
| |
| Market Equilibrium under Perfect Competition | |
| |
| |
| Market Equilibrium | |
| |
| |
| Total Economic Surplus | |
| |
| |
| Applicability to Policy Analysis | |
| |
| |
| Adjustments to Market Equilibrium | |
| |
| |
| Market Disequilibrium | |
| |
| |
| Length of Adjustment Period | |
| |
| |
| Cobweb Adjustment Cycle | |
| |
| |
| Exercises | |
| |
| |
| |
| Market Equilibrium and Product Price: Imperfect Competition | |
| |
| |
| Market Structure Characteristics | |
| |
| |
| Number of Firms and Size Distribution | |
| |
| |
| Product Differentiation | |
| |
| |
| Barriers to Entry | |
| |
| |
| Economic Environment | |
| |
| |
| Classification of Firms | |
| |
| |
| Imperfect Competition in Selling | |
| |
| |
| Monopolistic Competition | |
| |
| |
| Oligopoly | |
| |
| |
| Monopoly | |
| |
| |
| Comparison of Alternative Market Structures | |
| |
| |
| Welfare Effects of Imperfect Competition | |
| |
| |
| Imperfect Competition in Buying | |
| |
| |
| Monopsony | |
| |
| |
| Oligopsony and Monopsonistic Competition | |
| |
| |
| Market Structures in Livestock Industry | |
| |
| |
| Governmental Regulatory Measures | |
| |
| |
| Legislative Acts | |
| |
| |
| Ceiling Price | |
| |
| |
| Lump-sum Tax | |
| |
| |
| Minimum Price | |
| |
| |
| Exercises | |
| |
| |
| |
| Government in the Food and Fiber Industry | |
| |
| |
| |
| Government Intervention in Agriculture | |
| |
| |
| Rationale for Government Intervention | |
| |
| |
| Farm Economic Issues | |
| |
| |
| Defining the Farm Problem | |
| |
| |
| Forms of Government Intervention | |
| |
| |
| Food Safety | |
| |
| |
| Consumer Issues | |
| |
| |
| Adequate and Cheap Food Supply | |
| |
| |
| Nutrition and Health | |
| |
| |
| Food Subsidies | |
| |
| |
| Rural Communities | |
| |
| |
| Resource Issues | |
| |
| |
| Soil Erosion and Land Use | |
| |
| |
| Adequacy of Water Supply | |
| |
| |
| Hired Farm Labor | |
| |
| |
| Energy | |
| |
| |
| International Issues | |
| |
| |
| Adequacy of World Food Supply | |
| |
| |
| Movement toward Free Trade | |
| |
| |
| What Lies Ahead? | |
| |
| |
| |
| Supporting Farm Prices and Incomes | |
| |
| |
| Price and Income Support Mechanisms | |
| |
| |
| Loan Rate Mechanism | |
| |
| |
| Set-Aside Mechanism | |
| |
| |
| Target Price Mechanism | |
| |
| |
| Conservation Reserve Mechanism | |
| |
| |
| Commodities Covered by Government Programs | |
| |
| |
| Phasing Out of Supply Management | |
| |
| |
| Domestic Demand Expansion Programs | |
| |
| |
| Importance of Export Demand | |
| |
| |
| Calculating Total Demand Elasticity | |
| |
| |
| Impact of Rising Export Demand | |
| |
| |
| Impact on Farm Revenue of Wheat Producers | |
| |
| |
| Implications for Policy | |
| |
| |
| Exercises | |
| |
| |
| |
| Macroeconomics of Agriculture | |
| |
| |
| |
| Product Markets and National Output | |
| |
| |
| Circular Flow of Payments | |
| |
| |
| Barter Economy | |
| |
| |
| Monetary Economy | |
| |
| |
| Composition and Measurement of Gross Domestic Product | |
| |
| |
| Consumption, Savings, and Investment | |
| |
| |
| Determinants of Planned Consumption | |
| |
| |
| Determinants of Planned Saving | |
| |
| |
| Determinants of Planned Investment | |
| |
| |
| Equilibrium National Income and Output | |
| |
| |
| Aggregate Expenditures | |
| |
| |
| The Keynesian Cross | |
| |
| |
| Deriving Aggregate Demand Curve | |
| |
| |
| Aggregate Supply and Full Employment | |
| |
| |
| Recessionary and Inflationary Gaps | |
| |
| |
| What Lies Ahead? | |
| |
| |
| Exercises | |
| |
| |
| |
| Consequences of Business Fluctuations | |
| |
| |
| Fluctuations in Business Activity | |
| |
| |
| Nature of Business Fluctuations | |
| |
| |
| Indicators of Economic Activity | |
| |
| |
| Consequences of Business Fluctuations | |
| |
| |
| Unemployment | |
| |
| |
| Inflation | |
| |
| |
| Short-run Phillips Curve | |
| |
| |
| Macroeconomic Policy Options | |
| |
| |
| Laissez-faire Macroeconomic Policy | |
| |
| |
| Demand-oriented Macroeconomic Policy | |
| |
| |
| Supply-oriented Macroeconomic Policy | |
| |
| |
| Exercises | |
| |
| |
| |
| Money, Money Markets, and Monetary Policy | |
| |
| |
| Characteristics of Money | |
| |
| |
| Functions of Money | |
| |
| |
| Money versus Near Monies | |
| |
| |
| Backing of Money | |
| |
| |
| Federal Reserve System | |
| |
| |
| Organization of the Federal Reserve System | |
| |
| |
| Functions of the Federal Reserve System | |
| |
| |
| Monetary Policy Instruments | |
| |
| |
| Changing the Money Supply | |
| |
| |
| Creation of Deposits | |
| |
| |
| Monetary Policy and the Money Supply | |
| |
| |
| Money Market Equilibrium | |
| |
| |
| Demand for Money | |
| |
| |
| Equilibrium Conditions | |
| |
| |
| Effects of Monetary Policy on the Economy | |
| |
| |
| Transmission of Policy | |
| |
| |
| Combating Recessionary Gaps | |
| |
| |
| Combating Inflationary Gaps | |
| |
| |
| Combating Stagflation | |
| |
| |
| Microeconomic Perspectives | |
| |
| |
| Potential Problems in Policy Implementation | |
| |
| |
| Exercises | |
| |
| |
| |
| Fiscal Policy and Budget Deficits | |
| |
| |
| The Federal Budget | |
| |
| |
| Federal Expenditures | |
| |
| |
| Federal Receipts | |
| |
| |
| Budget Deficit | |
| |
| |
| The National Debt | |
| |
| |
| National Debt and GDP | |
| |
| |
| Interest Payments and GDP | |
| |
| |
| Ownership of National Debt | |
| |
| |
| Burdening Future Generations? | |
| |
| |
| Fiscal Policy Options | |
| |
| |
| Automatic Policy Instruments | |
| |
| |
| Discretionary Policy Instruments | |
| |
| |
| Fiscal Policy and Aggregate Demand | |
| |
| |
| Combating Recessionary Gaps | |
| |
| |
| Combating Inflationary Gaps | |
| |
| |
| Combating Stagflation | |
| |
| |
| Difficulties in Policy Implementation | |
| |
| |
| What Lies Ahead? | |
| |
| |
| Exercises | |
| |
| |
| |
| Macroeconomic Policy and Agriculture | |
| |
| |
| Impacts of Policy Actions on the General Economy | |
| |
| |
| Market Interest Rates | |
| |
| |
| Real GDP and Disposable Income | |
| |
| |
| Unemployment Rate | |
| |
| |
| Inflation Rate | |
| |
| |
| Foreign Exchange Rate | |
| |
| |
| Impacts of Policy Actions on Agriculture | |
| |
| |
| Farm Product Prices | |
| |
| |
| Farm Input Prices | |
| |
| |
| Farm Interest Rates | |
| |
| |
| Net Farm Income | |
| |
| |
| Farmland Prices | |
| |
| |
| A Brief History Lesson | |
| |
| |
| The 1970s: A Decade of Expansion | |
| |
| |
| The 1980s: A Decade of Contraction | |
| |
| |
| The 1990s: A Decade of Change | |
| |
| |
| Status of the Macroeconomy | |
| |
| |
| Status of the Agricultural Economy | |
| |
| |
| Federal Farm Policies | |
| |
| |
| |
| International Agricultural Trade | |
| |
| |
| |
| Agriculture and International Trade | |
| |
| |
| Growth and Instability in Agricultural Trade | |
| |
| |
| Export Boom and Bust | |
| |
| |
| Moves toward Trade Liberalization | |
| |
| |
| The Importance of Agricultural Trade | |
| |
| |
| Increased Export Dependence | |
| |
| |
| Greater Dependence on Imports | |
| |
| |
| Farm and Nonfarm Impacts of Exports | |
| |
| |
| The Composition of Agricultural Trade | |
| |
| |
| The Role of Agricultural Exports | |
| |
| |
| The Role of Agricultural Imports | |
| |
| |
| Direction of U.S. Agricultural Trade | |
| |
| |
| Emerging Export Market Trends | |
| |
| |
| Key Regional Markets | |
| |
| |
| Major Import Suppliers | |
| |
| |
| U.S. Agricultural Trade Performance | |
| |
| |
| The Balance of Trade | |
| |
| |
| |
| Exchange Rates and Agricultural Trade | |
| |
| |
| Exchange Rates and the Foreign Exchange Market | |
| |
| |
| Exchange Rates Defined | |
| |
| |
| The Foreign Exchange Market | |
| |
| |
| The Balance of Payments | |
| |
| |
| The Current Account | |
| |
| |
| The Private Capital Account | |
| |
| |
| Official Settlements Account | |
| |
| |
| The United States as a Debtor Nation | |
| |
| |
| The International Monetary System | |
| |
| |
| The Gold Standard and the Interwar Years | |
| |
| |
| The Bretton Woods System | |
| |
| |
| The Present International Monetary System | |
| |
| |
| The European Monetary System | |
| |
| |
| Exchange Rate Determination | |
| |
| |
| Demand and Supply of Foreign Currencies | |
| |
| |
| Relative Interest Rates | |
| |
| |
| Changes in Relative Prices | |
| |
| |
| Balance of Trade Impacts | |
| |
| |
| The Role of Expectations | |
| |
| |
| Exchange Rates and U.S. Agricultural Trade | |
| |
| |
| Exchange Rate Indices | |
| |
| |
| Exchange Rate Impacts on Prices | |
| |
| |
| Exchange Rates and International Competition | |
| |
| |
| Exchange Rates and Agricultural Policy | |
| |
| |
| Considerations for Policy Coordination | |
| |
| |
| Macroeconomic Policy Coordination | |
| |
| |
| Domestic Agricultural Policy Coordination | |
| |
| |
| |
| Why Nations Trade | |
| |
| |
| Why Trade? | |
| |
| |
| Absolute Advantage | |
| |
| |
| Comparative Advantage | |
| |
| |
| Factors Affecting Comparative Advantage | |
| |
| |
| Comparative Advantage and Competitive Advantage | |
| |
| |
| Gains from Trade | |
| |
| |
| The Importance of Exchange and Specialization | |
| |
| |
| Distribution of the Gains from Trade | |
| |
| |
| |
| Agricultural Trade Policy | |
| |
| |
| Trade and Welfare | |
| |
| |
| Autarky or the Closed Economy | |
| |
| |
| Trade and Partial Equilibrium | |
| |
| |
| Welfare Gains from Trade | |
| |
| |
| Why Restrict Trade? | |
| |
| |
| Protectionism in Agriculture | |
| |
| |
| Arguments against Trade | |
| |
| |
| Trade Restrictions | |
| |
| |
| Import Policies | |
| |
| |
| Domestic Agriculture and Food Policies | |
| |
| |
| Export Policies | |
| |
| |
| Agricultural Trade Policy Making | |
| |
| |
| The General Agreement on Tariffs and Trade | |
| |
| |
| The United Nations Conference on Trade and Development | |
| |
| |
| U.S. Agricultural Trade Policy Formulation | |
| |
| |
| |
| Emerging Issues in Agricultural Trade: the Formation of Preferential Trading Arrangements | |
| |
| |
| The Importance of Preferential Trading Arrangements | |
| |
| |
| Forms of Economic Integration | |
| |
| |
| Reasons for Preferential Trading Arrangements | |
| |
| |
| Preferential Trading Arrangements and the GATT | |
| |
| |
| Counter Economic and Political Power in Other Parts of the World | |
| |
| |
| Reduce Side Effects | |
| |
| |
| Foster Political Stability and Economic Prosperity | |
| |
| |
| Do Preferential Trading Arrangements Create or Divert Trade? | |
| |
| |
| Static Effects | |
| |
| |
| Dynamic Effects | |
| |
| |
| Provisions of the North American Free Trade Agreement | |