Agriculture Production Economics

Agriculture Production Economics

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  Concept, Goal, Natureand Significance of Agricultural Production Economics Prepared By: Manoj Sharma MSc .Ag ( Agri-Economics) Agriculture and Forestry University 2/4/2019 1
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  Contents: • Definition ofAgriculture Production Economics • Objectives • Significance • Concerns of Production Economics • Goals • Nature • Subject Matters • Conclusion 2
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  What is ProductionEconomics? • Application of the principles of microeconomics in production • Principles: Cost concepts, Output, input and enterprise relationships, Cost minimization, Profit maximization etc., • Production economics, thus provides a framework for decision making at the level of a firm for increasing efficiency and profits. 3
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  What is AgriculturalProduction Economics? • A sub-discipline within the broad subject of agricultural economics • “An applied field of science wherein principles of economic choice are applied to the use of resources of land, labor, capital and management in the farming industry” • Concerned with the selection of production patterns and resource use efficiency so as to optimize the objective function of farming community 4
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  Why Agricultural Production Economics? •What is efficient production? • How is most profitable amount of inputs determined? • How the production will respond to a change in the price of output? • What enterprise combinations will maximize profits? • What should a manager do when he is uncertain about yield response? • How will technical change affect output? 5
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  Contd…  Basic ProductionProblems • What to produce? – Output relationships • How to produce? - Capital intensive or labour intensive; Enterprise combination; Input relationships • How much to produce? – resource use efficiency • When to buy and sell? – seasonality, product markets • Where to buy and sell? 6
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  Objectives • To determineand outline the conditions which provide for optimum use of resources • To determine the extent to which the existing use of resource deviate from the optimum use • To analyze the forces which condition production pattern and resource use • To explain the means and methods for the changing existing use of resources to the optimum level 7
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  Concerns of ProductionEconomics • Goals and Objectives of farm manager: Profit maximization or maximizing revenue subject to constraints imposed by the availability of resources • Choice of outputs to be produced : • Allocation of resource among output • Assumption of risk and uncertainty • The competitive environment in which the firm operates 8
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  Goals of AgriculturalProduction Economics • Assist farm managers: choice of input, output and enterprise • Assist policy makers: Determining the consequences of alternative public policies on output, profits and resource use on farms • Evaluate the uses of theory of firm for improving farm management and understanding the behavior of the farm as a profit maximizing entity • Evaluate the effects of technical and institutional changes on agricultural production and resource use 9
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  Contd.. • Determine individualfarm and aggregated regional farm adjustments in output supply and resource use to changes in economic variables in the economy 10
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  Nature • Agriculture isno more confined to production at farm level only. • The storage, processing, and distribution of agricultural products involve an array of agribusiness industries. • Thus, Production economics is used at two levels; At farm level & At regional or national level. • The production problems on individual farms are important one. • And application of economic logics to those problems. 11
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  Contd.. • “By-words” –resource allocation and marginal productivity • Don’t be confused with Consumption Economics ?- Utility maximization vs Profit maximization i.e, allocation of income vs allocation of resources • Much wider than Farm management 12
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  Subject Matter • Productionrelationships • Cost concepts • Optimization of the use of farm resources • factor-product, factor-factor and product-product relationships • the size of the farm, returns to scale • risk and uncertainty • Yield gap analysis etc., It is concerned with any subject matter that deals with how farm resources are used or should be used. 14
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  Production Function withtheir Elasticity 15
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  Optimum factor Combination/Least cost combination 16
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  The Development ofProduction Principle and Theory • No other field of agricultural economics so well endowed with basic principle and theory as in production economics • “More exact” than other branches of economics – “Many established Laws” • Marshall and Davenport: Great Contributions • Others: Stiger, Pigou, Robinson, Samuelson, Fischer, Hicks, Allen – Literature in theory of firms and production aspects of welfare economics • A leading role in Econometrics developments: Leontief, Tinbergen, Lange, Frisch • Location Theory and mass producer adjustment: Haberler, Ohlin, Keynes and Weber 17
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  CONCLUSION • Concerns withany phenomenon which have bearing on economic efficiency in the use of the agricultural resources. • Thrusts Area: Production Possibilities, Cost structures and Resource Management • It integrates both individual and aggregated aspects of agricultural resource use • Has important contributions to national programs and planning i.e., production economic policy 18
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  Thank You 19