1. Forest Business Management
NRM 357
Credit hour (2+0)
B.Sc Forestry (Fifth Semester)
Prabin Pandit
Lecturer
Purbanchal University
College of Environment and Forestry (PUCEF)
foresterpandit@gmail.com
2. Business
• It refers to any " occupation in which people regularly engage in an activity to
earn profit."
• A business is any activity that provides goods or services to consumers for the
purpose of making a profit.
• The activity of buying and selling goods, manufacturing goods or providing
services in order to make profit.
• “ Business is an institution organized and operated to provide goods and
services to society under the incentives of private gain”- Wheeler B .O
4. Production
• Production is the process by which resources are transformed into useful
goods and services.
• Resources (or inputs) refers to anything that can be used, directly or
indirectly, to satisfy human wants.
• Production means “Creation or Addition of Utility”.
• Factors of production is an economic concept that refers to the inputs needed
to produce goods and services.
6. 6
• Form Utility
Changing the Form of
Natural Resources
i.e
.
Converting the Raw Material into items
Possessing Utility.
For Example, Changing the form of a Log
of Wood into a Table or Changing the
form of Iron into a Machine.
Production
7. • Place Utility
Changing the Place of Resources from the Place
where they are of little or no use to another
place where they are of Greater use.
• Removal of Coal , Gold etc
from Mines & Supplying
them to Markets.
Extraction
from
Earth
in
Mustan
g
• Apples
Orchar
ds
Transferring Goods from
Where they give little or no
Satisfaction to places
where 5
Production
8. 8
• Time Utility
Making Available Materials at times
when they are not Normally
Available.
For Example, Harvested Food Grains
are Stored for use till next Harvest.
Canning of Seasonal Fruits is
Production
9. Woo
l
General Economics: Theory of Production 9
Changed to Woollen
Cloth
Transported to
Market
Used in
Form
Utility
Created
Place
Utility
Created
Time
Utility
Created
Production
11. 1
1
• Land in Economics does not mean Soil or Earth’s Surface alone but refers to all Free Gifts of
Nature which would include Natural Resources, Fertility of Soil, Water, Air, etc.
• Land is a Free Gift of Nature.
• Land is Strictly Limited in Quantity.
• Land cannot be Shifted From One Place to Another Place.
• Properties of land can not be destroyed.
• Land does not Yield any Result unless human efforts are employed
Land
12. 1
2
• Labour is referred to as “Mental or Physical Effort directed to Produce Goods or Services “.
• Work done for the Sake of Pleasure or Love does not represent Labour in Economics. Eg. If a
Person Sings before his Friends, it will not be Labour as it is done for the Sake of Pleasure.
• Directly connected with Human Efforts.
• A Labourer cannot Store his Labour.
• Labour Power differs from Labourer to Labourer
• All labour is not productive
Labour
13. 1
3
• Capital is that part of Wealth of an Individual or Community which is used for further Production of
Wealth.
• It refers to manmade factors such as machines, tools, buildings, money, roads, bridges, raw materials
which are used for further production of good and services and reward for the use of capital is called
interest.
• It is a Stock Concept which yields a Periodical Income which is a Flow Concept.
• Depreciates: the value of capital depreciates with the pass of time
Capital
14. 1
4
• Entrepreneur mobilizes all the factors of production i.e land, labour and capital, combines in the
right proportion, initiates the process of production and bears risk involved in it.
• Also known as “The Organiser”; “The Manager”; “The Risk Taker”.
Entrepreneur / Organiser
15. 1
5
• The production function expresses a functional relationship between physical inputs and physical
outputs of a firm at any particular time period. The output is thus a function of inputs.
Mathematically production function can be written as;
Q= f (Land, Labour, Capital and Entrepreneur)
• Here output is the function of inputs.
• Hence output becomes the dependent variable and inputs are the independent variables.
Production Function
16. 1
6
Q= f (Land, Labour, Capital and Entrepreneur)
• For simplicity, we consider only two inputs; Suppose Labour and Entrepreneur be (L) and capital
and land be (K)
• Hence;
Q =f (L, K)
Types of Production Function
i. Short Run Production Function
ii. Long Run Production Function
Production Function
17. 1
7
Short Run Production Function
• A production function in which at least one input (capital) is fixed and some inputs (labor) are variables is called
short run production function.
For Example;
• Consider that an agroforestry firm has 6 acres of land and it initially uses one unit of labour only (variable factor)
on its land (fixed factor). So, the land-labour ratio is 6:1. Now, if the farm chooses to employ 2 units of labour,
then the land-labour ratio becomes 3:1 (6:2).
• Mathematically in can be written as;
• Q (agroforestry products) = f (L and K)
Production Function
Where,
Q= Output,
L= Units of labor (variable) and
K = Constant units of capital (Land)
18. 1
8
Long Run Production Function
• A production function in which all input (capital and labour) are variables is called short run production function.
For Example;
In the long run, by contrast, all inputs are variable. Agroforestry farm can alter its employees to meet any variety of
demands, and it can also expand it’s land area and purchase new technology. And enters into long run market
• Mathematically in can be written as;
• Q (agroforestry products) = f (L and K)
Production Function
Where,
Q= Output,
L= Units of labor (variable) and
K = Units of capital (Land) variables
19. 1
9
• When firm changes production with change in quantity of one factor while other factors
remains constant , it is known as change in level of production.
• It provides the basis for ‘Law of Variable Production’.
• When the firms increase production by increasing the quantity of all the factors of
production simultaneously and in the same proportion, it increases the scale of production.
• It provides the basis of for ‘Law of Returns to Scale
Level (Size) of Production
20. 2
0
• The law states that if you go on using more and more units of variable factor (labour) with
fixed factor (capital), the total output initially increases at an increasing rate but beyond a
certain point, it increases at a diminishing rate and finally it falls.
Level (Size) of Production
Law of Variable Proportion
21. 2
1
• Law of return to scale is a long run production function. It explains how output changes
when all factors of production are changed together at same proportion
• There are following stages;
i. Increasing return to scale:
ii. Constant returns to scale
iii. Decreasing returns to scale
Level (Size) of Production
Law of Return to Scale
22. • A decision-making process is a series of steps taken by an individual to determine the best
option or course of action to meet their needs.
• In a business context, it is a set of steps taken by managers in an enterprise to determine the
planned path for business initiatives and to set specific actions in motion.
Example:
There are the case in which future market parameters are unknown and landowners must
make land-use or forest management decisions in present.
decision making
23. Process of Acquiring capital necessary to conduct a business activity is called
financing.
Financing, is the process of raising funds or capital for any kind of expenditure.
Two of the most common forms of financing are
i. Debt financing
One borrows money, usually from an institution, with the promise to return the
money with interest at some point in the future.
This provides capital to the borrower and a profit to the lender.
ii. Equity Financing:
A company sells portions of ownership to those who are interested.
Financing
24. Referred to as simply “income” or “gross revenue,” business turnover is the
complete sum of sales made over a given period.
Whereas profit measures overall earnings, turnover measures everything that’s
actually coming into your business on the top line before expenses have been
deducted.
Turnover is the total sales made by a business in a certain period.
It is an important indicator of a business’s performance.
Calculating business turnover helps you secure investments, value your
company and see how healthy your business is.
Turnover
25. Standardization is the process of creating protocols to guide the creation of a
good or service based on the consensus of all the relevant parties in the
industry.
The standards ensure that goods or services produced in a specific industry
come with consistent quality and are equivalent to other comparable products
or services in the same industry.
Standardization also helps in ensuring the safety and compatibility of goods
produced. Some of the parties involved in the standardization processes
include users, interest groups, governments, corporations, and standards
organizations.
Standardization of Practices and Products
26. Advantages:
Improved Production Efficiency
Cost Reduction
Quality Assurance
International Opportunities
Consumer Benefits
Reduced waste
standardization of practices and
products
Disadvantages
Equipment Differences
Failure to Adapt
Cultural Differences
Less focus on innovation
27. The Law of Demand
According to the law of
demand, a lower price
will result in an increase
in the quantity of the
good that consumers are
willing to buy, holding all
else constant.
28. The Law of Supply
all other factors being
constant, as the price of a
good or service increases,
the quantity of goods or
services that suppliers
offer will increase, and
vice versa.
Price
Quantity
Supplied
140 1
160 4
180 7
200 9
220 11
240 13
260 15
280 16
300 17
31. Shortage
5 10 20
Quantity Millions of Bicycles
Price
(Dollars per Bicycle)
200
180
160
140
300
280
260
240
220
Demand
Supply
4
15
14
At P=160, QS= 4 and
QD= 14. The
shortage = 10. The
shortage will cause the
price to rise.
Shortage amount
32. Surplus
15 20
5 10
Quantity Millions of Bicycles
Price
(Dollars per Bicycle)
200
180
160
140
300
280
260
240
220
Demand
Supply
3
At P=260, QS= 15
and QD= 3. The
surplus = 12. The
surplus will cause the
price to fall.
Surplus Amount
33. excess demand (D>S) and excess supply (S>D)
Change in Cost of production (wage, interest, rent and
profit margin)
change in Government policy (tax and subsidy)
Change in Price of related goods (substitute and
complementary)
Supply shocks(landslide, flood, earthquake, drought)
Fear of shortage
Natural factors (favorable monsoon and climate)
Change in taste and preferences of consumers
Causes of changes in prices of goods and services
36. Law of Demand states that if price of commodity increases quantity demanded
will falls and if price of commodity falls quantity will increases.
Law of demand indicates only direction of change in quantity demanded in
response to change in price but ELASTICITY OF DEMAND states with how
much or to what extent the quantity demanded will change in response to change
in any determinants
Elasticity of Demand
37. If price rises by 10% - what happens to demand?
We know demand will fall.
By more than 10% ?
By less than 10% ?
Elasticity measures the extent to which demand will change.
According to the degree of the change in the demand, the elasticity can be
classified in:
Elasticity of Demand
Perfectly Elastic
Relatively Elastic
Unitary Elasticity
Relatively Inelastic
Perfect Inelastic
38. Perfectly Inelastic Demand- Perfectly Inelastic demand is where any price change does not change quantity
demanded at all. Consumers are willing to pay any price in order to obtain a given quantity of a good or service.
This situation can be represented by a vertical demand curve.
Ordinary necessities of life have a Perfectly Inelastic Demand like salt, medicines etc.
38
Elasticity of Demand……
39. Relatively Inelastic Demand- Relatively Inelastic Demand is that demand when any price change brings
about a relatively lower change in quantity demanded.
Those goods which are essential for our living have Relatively Inelastic Demand.
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Elasticity of Demand……
40. Unitary Elastic Demand- Unitary Elastic Demand is that demand in which change in price brings
about proportionate change in quantity demanded. (total amount spent by consumers remains
unchanged because numerator and denominator both have proportionate change.)
The goods which are Not Essential or which are Luxurious have normally an Elastic Demand like
cars, air conditioners, cosmetics etc.
40
Elasticity of Demand……
41. Perfectly Elastic Demand- When a very small change in price increases quantity demanded
infinitely, is known as Perfectly Elastic Demand. It shows a strong response to a barely change in
price. Hence quantity demanded is extremely responsive to a change in price.
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Elasticity of Demand……
42. • Rigidity is the state or quality of being rigid—stiff and inflexible
• Consumption of forest products refers to the expenditure on consumption of forest goods
and services at a given level of income (a portion of income that is used to purchase goods
and services.
• Income = consumption + saving
• There is longer rotation times in case of timber related trees.
• Non-timber forest products may not be collected on time
42
Time Rigidity in Consumption of Forest Products
43. • Rigidity is the state or quality of being rigid—stiff and inflexible
• Consumption of forest products refers to the expenditure on consumption of forest goods
and services at a given level of income (a portion of income that is used to purchase goods
and services.
• Income = consumption + saving
• There is longer rotation times in case of timber related trees.
• Non-timber forest products may not be collected on time
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Business Environment
