Transcript OVERHEADS FOR ARE 012 LECTURE

WELCOME TO
Agricultural Economics Class
With
Dr.Niv Nozari
Microeconomics: ( the
“trees”)
Studies economic behavior of individual
decision making units such as,
• Consumers
• Resource Owners
• Business Firms (producers)
in a market economy
At times, micro will study economic
behavior at the industry level
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
Real GDP Growth (Percent)
6
Percent Real GDP Growth
5
4
3
2
1
0
90
91
92
93
94
95
96
-1
Year
97
98
99
2000
1st
QTR
2000
2nd
QTR
Month/Year
Jul-00
Jan-00
Jul-99
Jan-99
Jul-98
Jan-98
Jul-97
Jan-97
Jul-96
Jan-96
Jul-95
Jan-95
Jul-94
Jan-94
Jul-93
Jan-93
Jul-92
Jan-92
Jul-91
Jan-91
Jul-90
Jan-90
Unemployment Rate (%)
National Unemployment Rate
9
8
7
6
5
4
3
2
1
0
Month/Year
May-00
Jan-00
Sep-99
May-99
Jan-99
Sep-98
May-98
Jan-98
Sep-97
May-97
Jan-97
Sep-96
May-96
Jan-96
Sep-95
May-95
Jan-95
Sep-94
May-94
Jan-94
Sep-93
May-93
Jan-93
Sep-92
May-92
Jan-92
Sep-91
May-91
Jan-91
Sep-90
May-90
Jan-90
Capacity Utilization Rate
Industrial Capacity Utilization Rate
85
84
83
82
81
80
79
78
77
76
75
74
Work-Force Productivity:
Output per Hour Worked
6
Percent Increase
5
4
3
2
1
0
90
91
92
93
94
95
96
Year
97
98
99
2000
1st
QTR
2000
2nd
QTR
Macroeconomics: (the
“forest”)
we will deal with
some
macroeconomic
topics first, then
concentrate on
microeconomics
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
Positive Economics:
Positive: Objective, without emotion or
value judgment!
“What is, What was, What will be”
economics
Based on probability and statistical
methods
Microeconomics
Normative microeconomics
Positive microeconomics
Macroeconomics
Normative macroeconomics
Positive macroeconomics
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
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.
Private Property Rights
The cost imposed on the third party is
very difficult (expensive) for the third
party to recover
AKA a “Spillover Cost”
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
Negative Externalities
Some Examples:
-Seat Belt Crack
Down in Tehran.
-Iran Law for
Motorcyclists.
Negative Externalities
Possible Solutions:
–
–
Pass Laws
Post Bond to assure financial
responsibility
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.
Positive Externalities
The benefit bestowed on the third party
is very difficult (expensive) for the
third party to recover
AKA a “Spillover benefit”
References:
•
N.c.State university-College of Agriculture and Life science –Dr. herman_sampson