AGB110 Study Guide - Final Guide: Planned Economy, Demand Curve, Decision Rule
Ag economics (AGB-110)
xy =m+b
radient g= run
rise =change in x
change in y=x2−x1
y2−y1
EDP =% change in price
% change in quantity demanded
rice elasticity of demand X 100 X 100P=Q2−Q1
(Q2+Q1)/2 ÷P2−P1
(P2+P1)/2
rofit total revenue total costP = −
otal revenue PT = × Q
P PM = ΔT P P
Δ Input level
P PA =Input level
TPP (T otal physical product)
verage variable cost (AV C)A=output
T otal variable cost
verage f ixed cost (AF C)A=output
T otal f ixed cost
verage total cost (AT C)A= output
T otal cost
arginal cost (MC) M= Δ output
Δ T otal cost =change in output
change in total cost
arginal cost (MC)M=Δ output or T P P
Δ T otal variable cost
arginal RevenueM =Δ output
Δ total revenue
verage RevenueA = T otal revenue
output or T P P
nput substitution ratio OR i= amount of input added
amount of input replaced
change in x
change in y
nput price ratio I= price input being added
price of input being replaced
lope of iso ost lineS −c=per unit of input y
per unit of input x
utput substitution ratioo = quantity of output lost
quantity of output gained
arginal rate of production transformations (slope)m= change in y
change in x
utput profit ratioo =prof it output lost
prof it output gained
lope of ios evenues −r=per unit price of input x
per unit price of output y
M(yield rice)variable costG = × p−
verage variable cost of production A= yield
total variable cost
reak even priceB = yield
total variable cost
reak even yieldB =output price
total variable cost
otal Gross margin (T GM)M1M2M3T=G+G+G
hole f arm operating prof it (EBIT )T GM verhead cost W= − O
et profit before tax (N P BT )BIT inance costN =E−F
et profit after tax (N P AT )N P BT axN = − T
Topic1:
Definition of economics and agriculture:
Economics: is the social science that studies how the individual (consumer/household),
firm/farm, governments and entire societies, make choices in order to scarce resources.
Agricultural economics: is an applied social science that deals with how producers,
consumers, societies and governments use scarce resources in the production process
of food and fiber products.
Scarcity and economics:
Our ability to sacrifice our wants is called scarcity. We face scarcity, we must make
decisions or choices.
Individuals and firms: maximisation of consumer unity and producer profits.
Governments and societal choices: production possibilities given existing resources
(guns vs butter??)
Scarce resources:
Resources (also called inputs or factors of production) are productive items used to
produce the goods and services that satisfy the human wants and needs. Scarce
resources exist on a finite quantity.
1. Land: natural (land, coal, oil, natural gas) and biological resources(*livestock,
wildlife, crop varieties) and climate.
2. Labour: human resources
3. Capital: manufactured resources or capital (machines, equipment structures and
inventory)
4. Management: the entrepreneur or individual who manages the above resources.
Alternative economic systems:
Free market economy (capitalism) where individuals and firms interact in markets. They
own and employ their time and resources to made production and consumption
decisions with limited government intervention (eg. Australia, USA, japan and most
european countries)
Centrally planned economy (communism and socialism) where governments decide on
the allocation of economic resources. (eg. China, north korea and cuba)
Circular flow diagram:
Firms (producers/ sellers) that producers a good (a physical product such as wheat) or
provides a service (an intangible product such as a hair cut).
Household (consumer/ buyer) that purchases a good or service.
Two broad areas of economics:
Microeconomics: studies how individual and firms make choices how they interact in
markets (eg income income of university students, how much they spend on alcohol or
average wheat tonnes per ha (productivity) in the riverina region) .
Macroeconomics: studies the economy, it analyze the performace of the nation and
global economies and include topics such as inflation, unemployment and economic
growth (eg. why did unemployment rate increase last fiscal year?) (fiscal= government=
reserve bank)
Performance of a country's economy:
Document Summary
Ag economics (agb-110) y = m + b x g radient. T otal fixed cost output verage total cost (at c) T otal cost = change in output change in total cost. = t otal revenue output or t p p nput substitution ratio i amount of input replaced. I nput price ratio price input being added price of input being replaced. C ost line per unit of input x. = per unit of input y utput substitution ratio o. = quantity of output lost quantity of output gained m arginal rate of production transformations (slope) = change in y change in x o utput profit ratio profit output gained. = profit output lost s lope of ios. = per unit price of input x per unit price of output y. P rice) variable cost verage variable cost of production. B reak even price total variable cost yield. B reak even yield total variable cost output price.
