PRINCIPLES OF

A G R I C U LT U R A L E C O N O M I C S

LECTURE ONE
BY : MR. S. M. DUBE
sdubesimadu@gmail.com/ 263-0773052997
LEARNING OBJECTIVES

1. Define agricultural economics

2. Define economic systems
3. Describe the economic systems
LECTURE OUTLINE

1. Defination of Agricultural Economics

2. Economic systems
a) Command economy
b) Market economy
c) Mixed economy
AGRICULTURAL ECONOMICS -
- THE OLDEST PROFESSION?

Who was the first Agricultural Economist?

Bless the Lord, O my soul,
thou dost cause the grass to
grow for the cattle, and
plants for man to cultivate,
that he may bring forth
food from the Earth.
Psalm 104
WHAT IS AGRICULTURAL
ECONOMICS ?
“…an applied social science that deals with how producers,
consumers and societies use scarce resources in the
production, processing, marketing and consumption of food
and fiber products”.
It examines how :
a) Scarce resources are allocated
b) Firms maximize profits
c) Market competition affects firms and consumers
also the limitations of the market
OPPORTUNITY COSTS

~ A benefit , profit or value of something that must be given up to

acquire or achieve something else
~ next best alternative forgone
~ Opportunity cost means the foregone benefits that you could have
earned had you chosen to a different course of action.
MAJOR ECONOMIC
SYSTEMS
• are the means by which countries and governments distribute
resources and trade goods and services.
• are defined by the method that a nation uses to allocate its goods and
services.
ECONOMIC SYSTEMS

# There are three basic questions that have to be answered by the

economic systems :
What to produce ?
How to produce ?
For whom to produce ?
WHAT TO PRODUCE ?

 What kind of goods and services should be

produced

HOW TO PRODUCE ?
 What productive resources are used to produce
goods and services
FOR WHOM TO PRODUCE ?

• Who gets to have the goods and services

The way a society answers

these questions determines
its economic system.
HEALTH BREAK

LETS BREAK FOR 5

MINUTE HEALTH
BREAK
MAJOR ECONOMIC
SYSTEMS
1)Command economy
2)Market economy
3)Mixed economy
COMMAND ECONOMY

 Government makes all economic decisions and owns

most of the property
 Also called the planned economy , managed economy
 A central authority ( government ) makes most of the
major economic decisions
 Examples : Cuba , Former Soviet Union , North Korea
, China
 The government determines what to produce , how to
produce and for whom to produce
 all resources are owned by the state
MERITS OF THE COMMAND
ECONOMY
 Income & wealth more evenly distributed
 Little unemployment
 Profits used to expand production
 Production of goods and services is planned to meet society’s needs
 Consumers receive basic necessities.
 Command economies can provide economic security
 Command economies also have the ability to adjust rapidly to
changing circumstances
DEMERITS OF COMMAND
ECONOMY
 Lack of incentive
Lack of technological progress
Bureaucracies (planning creates inflexibility)
Black markets
Loss of individuality
Inefficient and widespread waste of resources.
Command economies also limit economic freedom
Slow to respond to changes
DISCUSSION BREAK

5 MINUTE DISCUSSION BREAK

MARKET ECONOMY

 economic system in which individual choice and voluntary exchange

direct economic decisions
 based on individual choice, not government directives
 is a type of economic system where supply and demand regulate the
economy, rather than government intervention
 Producers decide what goods or services they will offer.
 An “invisible hand” seems to coordinate economic activity (Adam
Smith)
 The government plays little if any role in the marketplace
KEY FEATURES OF A MARKET
ECONOMY
◊ Freely determined price: a price that is determined by the interaction
of individuals and firms in the market.
◊ Property rights: rights over the use, sale and proceeds from a good
or a resource.
◊ Incentives: motivate people to take action, usually so as to increase
economic efficiency.
◊ Freedom to Trade: allowing people to interact freely both within and
beyond national borders.
MERITS OF THE MARKET
ECONOMY
 Efficiency
 Choice
 Innovation
 Higher economic rates

DEMERITS OF THE MARKET
ECONOMY
 Market economies tend to produce inferior goods and
services
 It harms the environment
 Commodity prices typically rise in a market economy
 Regulation of negative actions
 social services
BRAINSTORM TIME AND
GROUP WORK TIME
WHAT IS A MIXED ECONOMY
WHAT ARE THE ADVANTAGES OF
A MIXED ECONOMY
WHAT ARE THE DISADVANTAGES
OF A MIXED ECONOMY
[ 10 MINUTES ]
PRESENTATION TIME

FIRST GROUP – 3 MINUTES

SECOND GROUP – 3 MINUTES

THIRD GROUP – 3 MINUTES

MIXED ECONOMY

 Both the government and individuals play important roles in deciding

how much to produce and what to buy
Key Features of a Mixed Economy
 Co-existence of public and private sectors
 Existence of social welfare and private profit motive
 Individual freedom
ADVANTAGES OF MIXED
ECONOMY
 more equitable than market economies
 provide a ‘safety net’ to prevent people living in absolute poverty
 freedom to possess the means of production
 high level of state participation and spending
DISADVANTAGES OF A
MIXED ECONOMY
 Un-stability
 Ineffectiveness of Sectors
 Inefficient Planning
 Lack of Efficiency
 Delay in Economic Decisions
 More Wastages
 Corruption and Black Marketing
 Threat of Nationalism
END OF LECTURE 0NE

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