C HAPTE R
1
AGRICULTURE:
ECONOMICS AND POLICY
Chapter Outline:
1
Agricultural Economics and its Scope
2
Why Agricultural Economics
3
Industrial Vs Agriculture Economics ?
Agriculture Sector:
The agriculture sector has the following main areas:
1.
Crops Production
2.
Fruits Production (Pomiculture)
3.
Forestry (Silviculture)
4.
Live stocks
5.
Poultry farming
6.
Bees Keeping (Apiculture)
7.
Fisheries (Aquaculture)
1. Agri. Crops & Fruits
2. Forestry
3. Live Stock
4. Poultry Farming:
5. Beekeeping:
6. Fisheries:
Agricultural Economics:
• Agricultural Economics is a branch of economics in which the
principles and methods of economics are applied to the
agriculture industry.
• Agricultural economics brings under discussion those
principles which are concerned with the problems of farmer
such as
What to produce?
How to produce?
How much to produce?
How to sell?
so that the farmer earn maximum net benefit and from which
all the people of the society get benefit as a whole.
Agricultural Economics:
Agriculture Economics can also be defined as the
knowledge and art of cultivating the soil of the land”
According to Goodwin, “Agriculture Economics is the
study of the allocation of scarce resources among those
competing and alternative uses found in the production,
processing, distribution, and consumption of
agricultural commodities.
Agricultural Economics:
• The problem of the scarcity has the vital importance in
agriculture economics too because Land is limited and
it is impossible to increase land with the help of human
efforts. Keeping this fact in mind, the land should be
utilized in such a way that we obtain the maximum
production from it that result in the satisfaction of
human being.
Objectives of Studying Ag-Econ.
• To learn the general economic laws that describe
rational human behavior in the production,
processing, distribution, and consumption of
agri. products.
• To master the basic economic principles that
should be applied in the rational management of
businesses in agriculture.
Objectives of Studying Ag-Econ.
• To examine and analyze typical economic
problems confronting the managers of
individual agricultural businesses;
• To explore the economics of factors of
production with particular emphasis on
natural resource use and the problems of
environmental integrity.
Objectives of Studying Ag-Econ.
• To appreciate the importance of international
trade to the agriculture sector and the role of
the agriculture sector in the world food
situation.
Scope of Agriculture economics
The scope of agriculture economics is extended to the following:
1. Economics of Agriculture Production:
In agriculture economics we study about the agricultural Produce.
In this respect we study the following:
• What are the properties of farms
• whether their sizes are economic or non-economic;
• whether farmers produce for themselves or for market;
• whether the farmers are risk-takers or risk-evaders.
Agriculture economics study the economics of land protection. We
observe why the lands are pray to water-logging and salinity and
that how they can be protected.
Scope of Agriculture economics….. continued
2. Problems of Agri. Sector and Remedial Measures:
In agriculture economics, we will study in detail the problems in
the various areas of agriculture sector like why the per acre
production of the crop is low; why the share of forest is declining;
why fisheries is contributing low to GDP; what are the problems of
livestock etc.
Moreover, we will suggest remedial measures for the various
problems of the agriculture sector in order to increase the
agriculture production to increase its contribution to GDP
Scope of Agriculture economics….. continued
3. Agricultural Credit:
In case of developing countries the peasants are mostly poor. They
are in need of finance both for consumption and production,
therefore, in agriculture economics we study agri. loans, their
nature, their use, their need, their sources and their proper
utilization etc.
4. Agricultural Marketing:
In agriculture economics, we study the kinds of markets, the
prevailing methods of sale in agriculture markets, the functions of
agri. Markets, problems of agricultural marketing, the
standardization of agri. products and transportation of agri.
products. Moreover, we also study the role of cooperatives and
govt. to deal with the problems of agri. markets.
Scope of Agriculture economics….. continued
5. Demand, Supply and Prices of Agriculture Goods:
In agriculture economics, we analyze the demand for, supply of and
prices of agri. goods. In other words, all the economic concepts of
economic theory like demand, supply, price, elasticity of demand,
elasticity of supply, price controls, support prices and subsidies are
well applicable in case of agriculture economics.
In addition to these, we analyze the statistics regarding economic
variables and trends concerning the production of crops, livestock,
size of farms and volume of population etc as they influence the
demand and supply of agri. goods etc.
Scope of Agriculture economics….. continued
6. Agricultural Policies and Programmes:
There exists a greater uncertainty in agri. sector as there are big
fluctuations in the output and prices of agri. Products. This badly
affects the poor peasants and small farmers. In such state of affairs
govt. devise policies regarding farms. As the government set
minimum procurement prices for agri. Products. The government
purchase agricultural goods. The farmers are provided with
subsidies. The seeds, fertilizer and water are provided at lower
prices.
Scope of Agriculture economics….. continued
7. Tax on Farm Productivity:
Govt. is desirous of getting something from farmers in the form of
taxes because the rise in prices of agri. goods had led to increase
the incomes of the big farmers. Therefore the big farmers are
required to pay some taxes. Thus, in agriculture economics we
study agri. Taxes and their effects on farm productivity.
Scope of Agriculture economics….. continued
8. Agriculture and World Trade:
Food is basic requirement of human being but the climatic
conditions of the world do not remain alike. Sometime there is
drought while on the other occasions, there may be floods. In such
like situation situations the agri. Sector in so many countries fails to
meet the requirements of rising population. Accordingly, the food
and other agri. Products are obtained from other countries. With
this the foreign trade of agri. Goods come into being.
Now the question arises as to what are the determinants of world
agri. Trade; how the international specialization of agri. Goods will
come into being; and what will be the effects of such specialization.
These like issues are discussed in agriculture economics.
Scope of Agriculture economics….. continued
9. Rural & Agricultural Development:
The last part of agriculture economics is concerned with the
problems of life in the rural area and with the policies and steps
that can help in the development of the rural area which will have a
direct and positive effect on the agriculture development.
Why
Agriculture Economics
as a
Separate Discipline
Agriculture vs Industry
Agriculture sector is different than industrial sector in various
ways. In the coming slides we will compare the agriculture and
Industrial sector which lead us to the conclusion that agriculture
economics should be studied as a separate discipline.
Moreover, now-a-days agriculture has attained the status of
industry. As the agri. Product is produced at a large scale on the
farms. The efficient farm managers manage the agri. Farms. They
calculate revenues and costs. The marketing of agri. Produce is
made. The store and warehouses are setup in agri. Farms. The
agri. goods are produced on commercial basis.
Proportion of Land use:
• in industrial production, from a small piece of land, with the help
of huge investment, plant is constructed that can produce bulks of
production on every production floor. But in agriculture beside
the Labour and Capital, a large area of land is required to increase
the agriculture production.
Common Production:
• Various agricultural product have common
supply such as with wheat the supply of straw,
with meat the supply of skin increases. But in
industry it is not common.
Inelastic Supply
• The supply of industrial products can change
with the change in prices in the market but the
supply of agricultural products can not be
increase. It has an inelastic supply.
Difference in Nature of Goods Produced
• The goods produced by agriculture and
industrial sectors are different. The
agricultural products are mostly perishable
while industrial products are mostly durable.
Hence, the need for a separate study on the
part of agriculture economics rise.
Environmental Effect:
• The weather change has a serious effect on the
agricultural production and that is the reason due
to which agricultural production is either surplus
or shortage while industrial production is free
from the weather changes.
Trade Union:
• In agriculture, the labor are unorganized. They get wages
below the subsistence level. Hence the financial position
of labor is very weak.
• On the contrary, the industrial labor is well-organized.
They get better wages. They formulate their unions.
• Because of non-existence of trade unions in agri. Sector,
the relationship between the land-owner and the tillers
remains stable, though the agri. Workers get lower
wages.
Difference in Govt. Policies:
• Generally, the government of LDCs are crazy to
industrialize themselves as soon as possible. For this
purpose, they giver certain facilities to the industrialists.
Moreover, the industrial sector is provided benefits in
the form of cheaper loans, tax holidays, better means of
transportation and communication. In such situation, the
problems and issues of agri. Sector will be different
from industrial sectors. Therefore, to deal with them,
agriculture economics will be needed.
Thank You