AGEC 105 Introduction to Agricultural Economics Dr. Oral Capps, Jr.

1. AGEC 105 Introduction to Agricultural Economics Dr. Oral Capps, Jr.

2. TA Information TBA

3. Romer, David. “Do Students Go to Class? Should They?” Journal of Economic Perspectives Summer 1993:167-174 • Attendance counts in economics courses indicates that absenteeism is rampant • About one-third of students are not in class • The difference in performance between a student who attends regularly and one who attends sporadically is about a full letter grade!

4. Justification for AGEC 105 -- The level of basic economic literacy among U.S. citizens is appalling according to a recent national survey conducted by the Gallup organization and the National Council on Economic Education

5. UNITS Introduction to the Field The Food & Fiber Industry Understanding Consumer Behavior Business Behavior & Market Equilibrium Government in the Agricultural Sector Macroeconomics of Agriculture International Trade

6. What is your EQ? EQ = Economics Quotient Similar to IQ (Intelligence Quotient) Opportunity to Earn Additional (extra credit) Points

7. Do You Know? The current U.S. Secretary of Agriculture is ______. On average, the U.S. farmer gets ______ cents from each dollar spent on food by consumers. The current Commissioner of Agriculture of Texas is ______. U.S. consumers spend about ______ percent of their disposable personal income on food. 20% of U.S. farmers produce _______% of U.S. agriculture output. The magnitude of the U.S. federal budget deficit currently is $___________. The magnitude of the U.S. national debt is $__________.

8. Do You Know? The acronym GDP stands for ___________ . The index most frequently used by economists to measure inflation is the ___________. ___________ policy refers to changes in government spending and taxation. The number of U.S. farmers is roughly ________ million. The current price of: gold = $______/ounce corn = $______/bushel cotton = $_______/pound soybeans = $______/bushel

9. Do You Know? Crude oil prices are $______ per barrel. The chairman of the Federal Reserve System is _______. The letter K on your dollar refers to which Federal Reserve Bank? The current inflation rate is ___________. The current unemployment rate is _______. The agricultural sector accounts for what percent of the GDP in the United States? _______% The GDP of the United States is roughly $________ trillion.

10. AGRICULTURAL ECONOMICS -- THE OLDEST PROFESSION? Who was the first Agricultural Economist?

11. What isAgriculturalEconomics? Chapter 1

12. 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

13. Topics of Discussion SCOPE OF ECONOMICS Scarce Resources Making Choices DEFINITION OF ECONOMICS Microeconomics versus Macroeconomics Positive versus Normative Economics Alternative Economic Systems DEFINITION OF AGRICULTURAL ECONOMICS WHAT DOES AN AGRICULTURAL ECONOMIST DO? Role at the Microeconomic Level Role at the Macroeconomic Level Marginal Analysis

14. Scarce Resources • Natural and biological resources • Natural: land, mineral deposits, water • Biological: livestock, crops • Human resources • labor • Manufactured resources • capital, machines, equipment, structures Page 2

15. Making Choices • 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 Pages 3-4

16. Opportunity Cost • The implicit cost associated with the next best alternative in a set of choices available to decision-makers. Opportunity cost associated with pursuing a degree at Texas A&M University.

17. Problem 8 in Chapter 1 (see page 9)

18. Specialization Definition: the separation of productive activities between persons or geographic areas in such a manner that none of these persons or regions is completely self-sufficient. Example of specialization for regions of the United States

19. Relative strengths of Kansas

20. Relative strengths of Idaho

21. Relative strengths of Florida

22. Each state specializes in what it does best and trades with other states… Page 4

23. Each state specializes in what it does best and trades with other states… Page 4

24. Each state specializes in what it does best and trades with other states… Page 4

25. Each state specializes in what it does best and trades with other states… Page 4

26. 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 • U.S. has mixed economic system Pages 5-6

27. Definition of Economics “…a social science that deals with how consumers, producers and societies choose among the alternative uses of scarce resources in the process of producing, exchanging, and consuming goods and services”. Page 5

28. 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”. Page 6

29. What Does an Agricultural Economist Do? • Role at microeconomic level • Production economists • Market economists • Financial economists • Resource economists • Role at macroeconomic level • Marginal Analysis

30. IMPORTANT WEBSITES http://agecon2.tamu.edu/people/faculty/capps-oral  Capps http://www.ers.usda.gov  USDA http://research.stlouisfed.org/fred2/  Federal Reserve Economic Database http://afcerc.tamu.edu

31. Assignments • Please do all problems in Chapter 1 (see page 9) • Review Graphical Analysis (pages 10-12)