Capitalism and Economy
IAFNR Agribusiness Module
Economics
• What is Economics?
• Economics is…
• “the study of allocation of scarce resources among competing
alternatives.”
• “the study of how individuals and countries decide how to use scarce
resources to fulfill their wants.”
• “the study of the decisions involved in producing, distributing, and
consuming goods and services.”
Let’s learn a little more about Economics!
3 Components of Economics
• Did you notice some of the key words mentioned in
the definitions of Economics? They are the three
components of Economics.
• Scarcity
• Not enough resources to satisfy wants and needs
• Not to be confused with “a shortage”
• Resources
• Land, Labor, Capital, and Management
• Wants and Needs
• Can you think of some examples of each?
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Are these Needs or Wants?
3 Economic Questions
• In order to manage the 3 components of Economics
modern societies must answer these 3 economic
questions
• What goods should be produced, and how much of
each?
• How should these goods be produced?
• Who should get what and how much?
Economic Systems
Traditional
• Things are done “the way they have
always been done.”
• Decision based upon customs or
religious beliefs; passed down from
generation to generation
• Traditional systems exist in limited
parts of Asia, Africa, the Middle East
and Latin America
Capitalism
• Individuals have free reign over their
time and resources and can
determine how to use those assets
• Ownership is private
• Little involvement of government
• Self-regulated System
• Free market determines prices
• Competition is driving force of
activity and decisions
Economic Systems
Traditional
Capitalism
Communism
• Things are done “the way
they have always been
done.”
• Individuals have free reign
over their time and
resources and can
determine how to use
those assets
• Ownership is private
• Little involvement of
government
• Totalitarian system of
government that a single
body controls
government owned
production means
• Total control of
economic matters
• Individuals have no
power
• Decision based upon
customs or religious
beliefs; passed down from
generation to generation
• Traditional systems exist
in limited parts of Asia,
Africa, the Middle East
and Latin America
• Self-regulated System
• Free market
determines prices
• Competition is driving
force of activity and
decisions
• Everyone contributes
according to need
Capitalism
an economic system characterized by private or corporate
ownership of capital goods, by investments that are
determined by private decision, and by prices, production,
and the distribution of goods that are determined mainly
by competition in a free market
Principles of Capitalism in Agribusiness
• Private ownership of property and resources
• Anyone that owns property may use it in production (ex. Crops or business)
• Potential for profit
• Profit is a direct result of business decisions
• Free Market determines prices
• Based upon supply/demand
• Competition is driving force
• How many companies can produce a similar product? Unlimited!
• Creates change among products and supply/demand
The Big Picture of Agribusiness
Where do you see
capitalism at work in
Agribusiness?
Agricultural
Industry
Agribusiness
Input
Agribusiness
Output
Farmers
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The United States Economy
A Mixed Economy
The United States Economy
• A mixed system
• The U.S. Economy operates with aspects of different economic systems but
is known to most as the free enterprise system
• Characteristics of the U.S. Economy
• Little or no government control
• Some government regulation for
safety of the public
• Freedom of enterprise
• Free to own and make decisions about
factors of production
•
•
•
•
Freedom of choice
Rights to own private property
Profit incentive
Competition
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http://www.dailygalaxy.com/my_weblog/2008/08/can-the-usecon.html
References
Ricketts, C., & Ricketts, K. (2009). Agribusiness Fundamentals &
Applications. New York: Delmar Cengage Learning.
Merriam-Webster’s Dictionary (2014). Capitalism. Retrieved from
http://www.merriam-webster.com/dictionary/capitalism