Summary
Samenvatting Economics of Agribusiness - AEP33306 (AEP33306)
- Course
- Institution
Including figures and graphs
[Show more]
Seller
Follow
marijnedankaart
Content preview
Economics of AgribusinessWeek 1
Agriculture and horticulture = industries producing agricultural and horticultural products.
Agri-complex / agribusiness (food industry)
● Based on domestically produced raw products
● Based on domestically produced and imported raw products
Value added
● Net versus gross value added by firm or industry
● Net and Gross Domestic Product = national sum of value added
● National Income = GDP corrected for net income earned abroad
Notes
- External effects are not taken into account (e.g. pollution)
- Income is not utility
- Income distribution is not taken into account
- Non-valued production is not taken into account (e.g. raising children)
GDP - capital depreciation = NDP
- Capital depreciation is very hard to determine
Employment
● Source of income
● Source of taxes
Notes
- Working is a way to earn income but often involves negative utility
- Created by subsidies
Balance of payments / balance of trade
● Exports are a source of foreign currencies
● Export balance = exports - imports (often seen as a sign of competitiveness)
Notes
- Income earned with exports is important not the exports as such
- The Netherlands is a large exported but a large share of it concerns re-exports
,Emissions of pollutants
● Greenhouse effects: CO2 (Carbon dioxide), N20 (Nitrous oxide), CH4 (methane)
● Acidification: NOx, nitrogen, oxides, SO2 (Sulphur dioxide), NH3 (Ammonia)
● Eutrophication: N nitrogen & P phosphorus
● Fine dust
Week 2
Firm = organisation that transforms inputs into outputs
Output = grown or manufactured commodities and services
Inputs = factors of production - resources used in production like labour, capital goods,
energy and materials.
Variable inputs = quantity can be adjusted in short run e.g. raw materials
Quasi-fixed inputs = quantity fixed in short run but can be adjusted in long run e.g. family
labour and capital goods or land.
Characteristics of agricultural production
1. Main market form (farm-level) is perfect competition.
a. Individual producers are price takers in input and output markets
2. Farms are too small to do research. Supplied by others (agencies/companies)
3. Time-lag between decision to produce and realised production. Varies by sector.
4. Seasonality of production -> fluctuating output prices and limited operation.
5. Uncertainty
a. Weather risks
b. Diseases and pests
c. Policy
6. Joint production (milk and meat, crop rotation)
Production function
● Production set = all technologically
possible combinations of inputs and
outputs
● Production function = the boundary of the
production set, describing the relation
between inputs x and output y
In case of multiple outputs:
● Distinguish variable and quasi-fixed inputs
● Only scarce inputs & physical outputs considered
,Characteristics production function
● Neoclassical assumptions
○ Continuous / smooth
○ Increasing in inputs
○ Concave in inputs
● Marginal product change in output for a 1 increase in input
● Production elasticity
Economies of scale
● parameter :
○ Increasing returns to scale u > 1
○ Constant returns to scale u = 1
○ Decreasing returns to scale u < 1
Production function
- 2 inputs (capital, labour)
- Concave to the origin
Isoquant
- Convex to the origin
- Slope represents ease of substitution
Marginal Rate of Technical Substitution MRTS
Substitution elasticity
● Measure of the convexity of the isoquant
● By how many percent does the ratio of inputs increase if I increase the MRTS by 1%
○
, Profit maximisation
● Profits = total revenues of output - total costs of inputs
○
● Single input case optimum
○
● Value of Marginal Product = Marginal costs
○ VMP = MC
Multiple inputs and outputs
● Variable inputs X1, X2 etc
● Quasi-fixed inputs Z1, Z2 etc
● Short run optimisation of profits subject to technology constraint (transformation
function) given level of quasi-fixed inputs
○
○ Subject to:
● Optimise over Yj and Xi
○ For given Yj minimise costs (set optimal Xi)
○ Choose the profit maximising level of output
Cost minimisation: 2 inputs
● Costs
● Iso-cost line
● Slope Isoquant
● Minimum costs where iso-cost line is tangent to isoquant
Graphical solution:
Slope of isoquant = Marginal Rate of
Substitution
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller marijnedankaart. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.73. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
73918 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now