AGEC 105 Study Guide - Comprehensive Midterm Guide: Budget Constraint, Marginal Utility, Utility

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TAMU
AGEC 105
MIDTERM EXAM
STUDY GUIDE
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Ag Econ Lecture 1
Topics of Discussion
1. Scope of economics
a. Scarce resources
b. Making choices
2. Definition of economics
a. Microeconomics vs macroeconomics
b. Positive vs normative economics
c. Alternative economic systems
d. Definition of agriculture economics
3. Graphs and their meaning
Scarce Resources
Natural and biological resources
o Natural : land, mineral and oil deposits, and water resources
o Biological: livestock, crops, forests
Human resources
o Labor
141.1 million people in the U.S. Civilian Labor Force
o Manufactured resources
Tools, machinery, equipment, factory, storage, transpoertation
4 million miles of higheways
600,000 bridges
121.4 million tons of steel making capacity
Making Choices
Resource scarcity
o Limited resources but unlimited wants; forces consumers and producers to make
choices
Opportunity costs
o An implicit cost associated with economic decisions
Specialization
o Comparative advantage and the basis for trade
Individual decisions
o Maximization of consumers utility and producer profits
Societal decisions
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o Production possibilities given existing resources
Opportunity Cost
The implicit cost associated with the next best alternative in a set of choices available to
decision-makers
What is your opportunity cost of pursuing a degree at Texas A&M University?
o Bill Gates, Mark Zuckerberg, Oprah Winfrey, Alex Rodrigues, etc.
Specialization
The separation of productive activities between persons and geographic areas in such a
manner that none of these persons or regions is completely self-sufficient
Each state specializes in what it does best and trades with other states
Specialization in production provides the basis for trade among producers and
consumers
o Relative strength of Kansas wheat
o Relative strength of Idaho- potatoes
o Relative strength of Florida oranges
Definition of Economics
Micro vs macro
o Micro individual or groups of individuals
o Macro- broad aggregates at economy level
Positive vs normative
o Positive what is or what would happe if
o Normative what should e
Alternative economic systems
o Capitalism and socialism
… a soial siee that deals with how osuers, produers, ad soieties hoose
among the alternative uses of scarce resources in the process of producing, exchanging,
and consuming goods and services
What is Agriculture?
Food Commodities: Farm supply Farms First Handler
Food Products: Processor Distributor Retailer
What is Agriculture Economics?
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