1. Steve Fries July 2011 Weekend Intensive
By Choice – What We Eat
Steve Fries
July 2011
Weekend Intensive

2. Economics – a brief review
Macroeconomics
Aggregate
Microeconomics
Individual Units
Positive Economics
Facts, Data, Cause & Effect
Normative Economics
Value Judgments, Desirability of Certain Economic Aspects

3. Individual’s Economizing Problem
Limited Income
Unlimited Wants
Attainable and Unattainable Combinations
Tradeoffs & Opportunity Costs
Choice
Income Change

4. Society’s Economizing Problem
Scarce Resources
Resource Categories
Land
Labor
Capital
Entrepreneurial Ability
Factors of Production

5. Theory of the Firm Expected Value Maximization
Owner-managers maximize short-run profits
Primary goal is long-term expected value maximization
Constraints and the Theory of the Firm
Resource constraints
Social constraints
Competition forces efficiency

6. Stakeholders

7. Food Industry’s Contribution to U.S. Economy
Food industry is about 7% of GDP (consumption and investment)
Employment is about 10% of total U.S. employment

8. Opportunity Costs
Opportunity Cost – This is the foregone value of the next best alternative
Utility is the satisfaction one gets from consuming a good or service
Not the same as usefulness
Subjective
Difficult to quantify

9. Consumer Behavior Rational behavior Preferences Budget constraint
Prices

10. Total Utility and Marginal Utility10
Total Utility
(1)
Tacos
Consumed
Per Meal
(2)
Total
Utility,
Utils
(3)
Marginal
Utility,
Utils 10 20 30 8 6 4 2 -2 1 3 5 7
Total Utility (Utils)
Marginal Utility (Utils) TU 1 2 3 4 5 6 7 10 18 24 28 30 ] 10 8 6 4 2 -2 MU
LO1
6-10

11. Role of Business in Society
Why Firms Exist
Business is useful in satisfying consumer wants.
Business contributes to social welfare
Social Responsibility of Business
Serve customers.
Provide employment opportunities.
Obey laws and regulations.

12. Business & Societal Environment

13. Government Regulation of Business
The action of government to establish rules of conduct for citizens and organizations. It is a primary way of accomplishing public policy.
Reasons for regulation
Market failure
Aim to modify the normal operation of the free market and the forces of supply and demand
Ethical rationale
Aimed at such important social goals as protecting consumers and the environment and providing workers with safe and healthy working conditions

14. Spending on U.S. Regulatory Activities
About 1% of GDP

15. Staffing of U.S. Regulatory Activities

16. U.S. Food & Drug Administration
Formed
1906
Preceding agencies
Food, Drug, and Insecticide Administration (July 1927 to July 1930) Bureau of Chemistry, USDA (July 1901 through July 1927) Division of Chemistry, USDA (Established 1862)
Jurisdiction
Federal government of the United States
Headquarters
10903 New Hampshire Ave, Silver Spring, MD 20903
Employees
9,300 (2008)
Annual budget
$2.3 billion (2008)
Agency executive
Margaret A. Hamburg, Commissioner of Food and Drugs[2]
Parent agency
Department of Health and Human Services