AGEC 2003 : AGEC 2003 Exam 2
Exam 1 3/28/2012 5:23:00 PM
Chapter 1
Ag Econ: an applied social science dealing with how humans choose to use
technical knowledge and scarce productive resources such as land, labor,
capital and management to produce food and fiber and distribute it for
consumption to various members of society over time.
-Goes from input, buyer, farm, to product.
W.M. Hays and Andrew Boss, University of Minnesota
• First ag economists were actually trained agronomists.
• Established a route system for collecting cost and input data such
as labor costs as well as management practices from a number of
farmers.
H.C. Taylor, University of Wisconsin and T.N. Carver, Harvard
• Created first ag econ book.
Agribusiness: The sum total of all operations involved in the manufacture
and distribution of farm supplies; production operations on the farm; and
the storage, processing, and distribution of farm commodities, and items
made by them.
Scarcity: The condition created when society (individual) has unlimited
wants or needs but limited resources in order to satisfy these wants or needs.
Opportunity Costs: The costs of alternative opportunities foregone or
sacrificed.
• (If you have a dollar and you spend it on candy, you can’t spend it
on ice cream.) You give up one thing for another thing.
Law of Diminishing Marginal Utility: The principle that the more of a
good we have, the less we value an additional (marginal) unit of it because
we receive less satisfaction for each addition unit of a good we consume.
• The satisfaction (utility) we receive from consuming the 1st ice
cream cone is greater compared to the satisfaction from consuming
the 10th ice cream cone (after already consuming 9 cones earlier)
Microeconomics: Field of econ that studies the decision making of a single
economic entity.
• A consumer or a producer. Producer wants to produce more so they
can have more money, and a consumer wants to own, do, ect more
things.
Macroeconomics: Field of economics that studies the larger economic
system and the impact that changes in policy have on the major aggregate
economic variables of the economies such as employment, unemployment,
and national income (GDP).
Economic Model: A simplification of reality where assumptions are made to
explain or predict economic behavior. Economic models may be simple if-
then statements, a word description, a diagram or graph relating two
variables, or a complex mathematical equation.
• Uses price and quantity, and finds the relationship between them.
Could be simple as if the number of teachers decrease at LSU, the
number of students in classes will increase.
Positive Economics: What is or what can be.
• Looks specifically at numbers, and says if “this” happens, then “this”
will happen. Doesn’t have any value judgment; looks at data.
Normative Economics: What ought to be or what should be done.
• Has to deal with someone’s value judgment. Obama would be
someone who would say Healthcare will benefit the people, and that
they should have it (based on his opinions).
Dependent Variable: A variable in which its magnitude is reliant upon one
or more independent variables.
Independent Variable: A variable which influences or impacts the
magnitude of the dependent variable in an economic model.
• The amount of studying you do will depend on how many courses
you are taking. Dependent= amt of studying Independent= # of
courses.
Ceteris Paribus: “all other things remaining equal” or “constant.”
• Used by economists a lot because they just look at models, or at
things that have happened historically. Trying to keep everything
constant.
• Parity: keeping everything constant.
o The way it works in the NFL, the teams that do well during
the season, get low talented members while the not so well
teams get the higher talented members so that the playing
field is even.
Chapter 2
**pick a parish and go to the USDA website and write information about it.
Family Farms
Family farms are incorporated for 3 reasons
• A corporate form of organization can be used to transfer farms to
others (father to son) at a lower cost than other forms of business
organization.
• Employee benefits such as social security and unemployment
insurance are tax deductible for the corporation, but not an
individual proprietorship.
• A corporation can separate management from ownership in or to
reduce liability of both management and owners. (you can separate
things so if you get sued for one thing, it won’t affect the others.)
Classifying farms by value of farm products sold.
• Sales >$100,000 (expanding class) produce 82% output, received
62% of government support payments, off-farm income $37,392
per farm.
• Sales between $20,000 and $99,000 only produce 14% output,
receives 26% of government payments, off-farm income is $63,396
per farm.
• Sales less than $20,000 is considered a Non-commercial class. Off-
farm income $49,678.
Vertical Coordination: the linking of successive stages in the marketing
and production of a commodity in one decision entity. (Vertical Integration)
