Transcript OVERHEADS FOR ARE 012 LECTURE

WELCOME TO ARE 012
Introduction to Agricultural Economics
With
Herman Sampson
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Microeconomics: ( the “trees”)
Studies economic behavior of individual
decision making units such as,
u Consumers
u Resource Owners
u Business Firms (producers)
in a market economy
At times, micro will study economic
behavior at the industry level
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Macroeconomics: (the “forest”)
Studies the aggregate level of economic
activity,
u Economic system’s value of total
output:
GDP
u Level of National Income
u Total Level of Unemployment
u General Price Level of the Economy:
Inflation
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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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Microeconomics
Normative microeconomics
Positive microeconomics
Macroeconomics
Normative macroeconomics
Positive macroeconomics
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Macroeconomics
1. Fiscal Policy:
Govt. tax and spend policies
2. Monetary Policy
Manipulation 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:
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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”
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