Agricultural Economics
Agricultural Economics
Agricultural Economics
Economics
Introduction
Pictures & ideas in your mind when you hear the word
economics?
Pictures & ideas in your mind when you hear the word agriculture?
Course organization
This course is divided into 4 chapters:
Chapter 1: Important Concepts in Agricultural Economics
Chapter 2: Demand & Supply Market Mechanisms for Agricultural
Products
Chapter 3: Government Intervention in Agriculture An Economic
View
Chapter 4: Agriculture Challenges and Opportunities for
Cambodia
manufacturing sector.
Little power in influencing prices in the market >> Cooperatives >>
politically organized farmers association.
High level of uncertainty: quasi-unpredictable climatic condition, and
diseases. >> patterns of seasonality
Part-time working: very important employment in the farm sub-sector
Asia 45%
North and Central America 16.1%
Europe 15%
Africa 8.6%
South America 7.8%
Oceania 1.6%
Others 5.9%
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2. B. Supply function
Characteristics of Supply
Agricultural production: the process of converting certain inputs or
factors of production into a final product, or outputs.
direct consumption
Outputs
Input for other firms (farms)
Land, labor and capital are the farms input.
Capital: machinery, buildings, tools, fertilizers, and human capital
(management skills and entrepreneurship)
Fixed factors of production (Short term): land and buildings, etc.
Variable factors of production
(Short term): fertilizer, fuel, labor, etc.
TITH Seyla, Master in Economics,
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2. B. Supply function
Input-Output Relationship
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2. B. Supply function
Law of diminishing returns
Marginal physical product (MPP) = Q/ Xi
MPP of an input Xi refers to the change in the level of output
associated with a change in the use of input Xi, ceteris paribus, that is
assuming that all other remaining inputs remain fixed.
Level of input: 0 to 70: MPP positive: extra kg of fertilizer per
hectare will have a positive impact on output, that is on rice yields.
Level of input: 0 to 30: MPP positive and increasing with
constant growth of Xi
Level of input: 30 to 70: MPP positive and decreasing with
constant growth of Xi
Level of input: > 70: MPP negative: soil exhaustion, pollution, etc.
TITH Seyla, Master in Economics,
seyla.tith@gmail.com
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2. B. Supply function
Production and supply function
Q = f (L, K, l)
Q: output produced within a specified time period
L: labor
K: capital
l: land
The production function describes the technological conditions of
production in a farm-firm.
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2. B. Supply function
Production and supply function
Q = f (T, Pp, P1...Pn, I1...Im, O, MS, W, G)
Q: quantity of an agricultural product supplied to a market per time
period t,
T: the production function of the product as described above
Pp: is the price of the product
P1...Pn: the price of n other products, which could possibly be
competing with product p
I1...Im: the price of m inputs
O: the objective of the firm
MS: market structure relating to a specific agricultural industry
W: weather
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seyla.tith@gmail.com
G: government policy and
institutional factors
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