This document is an introduction to basic concept of economics and Agricultural economics.

1. UNIVERSITY OF
MAKENI
AGRICULTURAL
ECONOMICS

2. WHY ECONOMICS?

4. Alfred Marshal:
“Economics is the study of mankind in the ordinary
business of life”
In his definition economics has to deal with our
daily activities.

6. Adam smith:
In his book Wealth of Nation
“An inquiry into the nature and the cause of
wealth of nation”
To him economics is about making wealth

7. John Stuart Mill
“The practical science of production and
distribution of wealth”.
To him economics is about how people produce
and distribute various goods and services that
required for the maintenance of human existence.

8. Professor Lord Lionel C. Robbins

9. Professor Lord Lionel C. Robbins
“The science which study human
behavior as a relationship
between ends and scarce means
which have alternative uses”

10. Dolan & Lindsey (Economics Sixth Edition)
“The social science that seeks
to understand the choices
people make in using scarce
resources to meet their want”.

11. L. G. Reynolds
Economics is about economizing; that is,
about choice among alternative uses of
scarce resources. Choices are made by
millions of individuals, business and
government units. Economics examines
how these choices add up to an
economics system, and how this system
operate.

12. QUIZE 1
1. What do you understand about the term
ECONOMICS?
2. Which other Economists do you know?

13. Scarce Resources
Natural and biological resources
Natural: land, mineral deposits, water
Biological: livestock, crops
Human resources
 labor
Manufactured resources
 capital, machines, equipment, structures

14. What is Scarcity in Economics?
In economics, scarcity refers to the limited
resources we have. For example, this can
come in the form of physical goods such as
gold, oil, or land – or, it can come in the form of
money, labour, and capital.

15. These limited resources have alternate uses.
There are many ways to spend Le50,000, but it
can only be spent on one thing. A consumer
with Le 50,000 in their pocket, they cannot buy
both a pair of trainers AND a nice jumper. That
is the very nature of scarcity.
It limits human wants.

16. What are the 3 Causes of Scarcity?
1. Demand Driven
Resources become scarce when demand increases faster than supply. As
more people buy goods, there are fewer resources available to others. For
instance, let us say there is a supply of 1 million barrels of oil delivered to the
market – enough to meet demand. However, over the course of a year,
demand increases to over 1.5m barrels.
As a result, oil becomes a relatively scarce resource, driven by the increase
in demand. Oil itself is a scarce resource, but because of the new higher
level of demand, it is relatively scarce. Producers are unable to meet the new
demand, which creates a scarcity of resources in the short-term.

17. 2. Supply Driven
When demand is constant, but supply declines, we
have a supply-driven scarcity. However, this is
created by limited resources. In other words, there
is a dwindling supply that cannot be extended. For
instance, during the cause of Ebola hundreds of
manufacturing plants were closed and it took out a
significant source of supply to both domestic and
international markets. Prices inevitably rose as the
economy took the hit.

18. 3. Structural
Structural scarcity occurs when a certain
resource is scarce to a proportion of the
population. In other words, there is unequal
access to resources because of political
issues or location. For example, people living
in the suburbs may not have the same access
to a doctor, and healthcare as someone living
in a city. In addition, they may not have the
same choice of schooling to send their kids.

19. Resource scarcity forces consumers and producers
to make choices
Opportunity cost – an implicit cost associated with
economic decisions
Specialization – comparative advantage and the
basis for trade
Individual decisions – maximization of consumer
utility and producer profits
Societal decisions – production possibilities given
existing resources
Making Choices

20. A nation that is comprised of mostly a desert
climate will have to make economic choices
based on the scarcity of water. Other nations
that have huge populations will have to allocate
resources due to the scarcity of quality air.
Essentially, scarcity causes choices on how to
spend money and allocate other resources.
How does Scarcity Affect Economic Decisions?

21. Scope of Economics
Microeconomics versus macroeconomics
Micro - individuals or groups of individuals
Macro - broad aggregates at economy level
Fallacy of Composition
That which is true in an individual situation is not
necessarily true in the aggregate
Positive versus normative economics
Positive - “what is”, or “what would happen if”
Normative - “what should be”
Alternative economic systems
Capitalism, socialism, communism
Sierra Leone has mixed economic system

22. 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.”

23. What Does an Agricultural Economist Do?
Agricultural economists examine data to determine patterns
and trends in economic activity. They also conduct research to
collect data and market samples. They use the predictions
obtained from their research to inform, influence, and improve
the business decisions of clients and agricultural organizations.
As agricultural economists better determine market indicators
like farm income and food prices, they study many areas, such
as:
Natural resource management
Agricultural policy
Food science
Farm credit
Agricultural marketing systems
Commodity exchanges

24. Whether they want to offer a short-term forecast or
long-term prediction for some part of the agricultural
market, these professionals must have an excellent
understanding of agricultural production and relevant
economic forces. This involves devising data
collection methods and using appropriate statistical
methods to obtain useful information.
Agricultural economists may also communicate their
findings at seminars and conferences to encourage
further research or investment in a particular area.

25. References
1. Agricultural Economics, H. Evan Drummond and John W. Goodwin, third
Edition
2. Introduction to Agricultural Economics John B. Penson, Jr and other Sixth
Edition
3. Dolan & Lindsey (Economics Sixth Edition)