Post on 19-Jan-2018
description
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Introduction to Agricultural EconomicsWith
Herman Sampson
WELCOME TO ARE 201
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Microeconomics: ( the “trees”)Studies economic behavior of individual decision
making units such as, Consumers Resource Owners Business Firms (producers)
in a market economyAt times, micro will study economic behavior at the
industry level
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Macroeconomics: (the “forest”)Studies the aggregate level of economic
activity, Economic system’s value of total output: GDP Level of National Income Total Level of Unemployment General Price Level of the Economy:
Inflation
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90 91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Percent
GDP
Real GDP Annual Growth (Percent)US Bureau of Economic Analysis
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U.S. Real GDP Growth Quarter to Quarter US Bureau of Economic Analysis
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0
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Unemployment
Rate
(
%)
Month/Year
National Unemployment RateBureau of Labor Statistics Data
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65
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80
85
90Jan-90
Jul-90
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Cap
acity
Util
izat
ion
Rat
e
Month/Year
Industrial Capacity Utilization RateJanuary 1990 to December 2008
U.S. Federal Reserve Data
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65
70
75
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85
90Jan-06
Jul-06
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Cap
acity
Util
izat
ion
Rat
e
Month/Year
Industrial Capacity Utilization RateJanuary 2006 to December 2011
U.S. Federal Reserve Data
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More Industrial Capacity Utilization Rates and Correlation with Recessions
http://www.economytrack.org/capacity.php
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0
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90 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05 06 07 08 09 10 3Q2011
Perc
ent I
ncre
ase
Year
Work-Force Productivity:Output per Hour Worked
Bureau of Labor Statistics
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Macroeconomics: (the “forest”)
we will deal with some macroeconomic topics first, then concentrate on microeconomics
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Normative Economics:Normative: subjective, value laden, emotional
“What ought to be” economics
Rx and/or Policy oriented
Hear a bunch of normative economic statements during political elections
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Positive Economics:Positive: Objective, without emotion or
value judgment!
“What is, What was, What will be” economics
Based on probability and statistical methods
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MicroeconomicsNormative microeconomicsPositive microeconomics
MacroeconomicsNormative macroeconomicsPositive macroeconomics
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Macroeconomics1. Fiscal Policy:Govt. tax and spend policies
2. Monetary PolicyManipulation of the money supply by the Federal Reserve system to affect short-term interest rates and control inflation
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Private Property Rights
“Negative Externality”:
When you produce or consume a commodity or service within your private property rights that imposes a cost on a third party not directly involved in the market transaction.
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Private Property Rights
The cost imposed on the third party is very difficult (expensive) for the third party to recover
AKA a “Spillover Cost”
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Private Property Rights
Laws are often enacted by legislative bodies that constrain private property rights in order to rectify negative externalities, or at least reduce the cost to third parties in recovering damages
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Negative Externalities
Some Examples:
Seat Belt Crack Down in N.C. (Click It or Ticket)
California Helmet Law for Motorcyclists
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Negative Externalities
Possible Solutions:
– Pass Laws
– Post Bond to assure financial responsibility
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Negative Externalities
Some Examples:
Imperial Foods of Hamlet, N.C. vs. Imperial Sandwich Co. of Goldsboro, N.C.
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Positive Externalities
When you produce or consume a commodity or service within your private property rights that bestows a benefit on a third party not directly involved in the market transaction.
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Positive Externalties
The benefit bestowed on the third party is very difficult (expensive) for the third party to recover
AKA a “Spillover benefit”