AGRICULTURE: ECONOMICS AND POLICY 1 C H A P T E R

Chapter Outline: Agricultural Economics and its Scope 1 Why Agricultural Economics 2 Industrial Vs Agriculture Economics ? 3

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.

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.

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