Introduction to agricultural economics - Softcover

The purpose of this book is to provide beginning students in agriculture with a systematic introduction to the basic concepts and issues in economics as they relate to a major segment of the US economy—namely, the food and fiber industry. This requires that the student understand. the microeconomic and macroeconomic forces influencing the decisions of producers and consumers of food and fiber products, which include (1) farmers and ranchers, (2) the agribusinesses that supply them with production inputs and credit, (3) the agribusinesses that process food products and manufacture fiber products, and (4) the agribusinesses that provide marketing and related services at the wholesale and retail levels to both domestic consumers and overseas markets.

We begin the book by answering the question raised by the title of Chapter 1, "What is agricultural economics?" We do this by first defining the field of economics and then developing a definition of agricultural economics based on the role that agricultural economists play at both the micro and macro levels. Chapter 2 discusses the changing structure of agriculture during the post-World War 11 period and the structure of those sectors in the economy that supply farmers and ranchers with inputs and process their output.

Part II helps students understand the economic decisions made by consumers of food and fiber products. The topics covered here include the forces influencing consumer behavior (Chapter 3) and the concept market demand for a particular product (Chapter 4). Part II concludes with the elasticity of demand (Chapter 5). The specification of various elasticity measures is supplemented by empirical examples and their relevance to decision making in the food and fiber industry, including the potential magnitude of consumer response and the implication for producer revenue.

Part III turns to the supply side of the market. Chapter 6 describes some basic fundamentals of assessing current business performance. Issues related to resource use and production response by businesses in the short run are explained in Chapter 7. This is followed by a discussion of the economic forces underlying the firm's input use (Chapters 8) and the firm's choice of commodities to produce (Chapter 9). Chapter 10 introduces the market supply curve, followed by the determination of market clearing prices and quantities under perfect and imperfect competition in Chapter 11. Empirical examples illustrate the magnitude and applicability of the relationships covered in the chapter.

Part IV addresses the role of government in the food and fiber industry. Chapter 12 outlines the general nature of government involvement in farm economic issues, consumer issues, resource issues, and international trade issues. Resource issues are also addressed in other chapters as well. Chapter 13 explores the relationship between market equilibrium and farm program policy, introducing the variety of approaches taken to support prices and incomes of farmers over the last 50 years. This includes the current farm commodity legislation set to expire after 2002.

Part V focuses on the macroeconomics of agriculture. Chapter 14 outlines the general linkage between product markets and national output, Chapter 15 illustrates the consequences of business fluctuations in the economy, Chapter 16 documents the importance of monetary policy to the economic performance of the economy, and Chapter 17 does the same thing for fiscal policy. Part V establishes the relationship between events in the general economy and their impacts on agriculture and other sectors in the U.S. food and fiber industry. Chapter 18 concludes this part of the book with a brief walk through the last several decades, illustrating graphically how changes in the macroeconomy affected the economic performance of agriculture.

Part VI focuses on international agricultural trade issues. Chapter 19 examines the growth and instability of agricultural trade, including the relative dependence on exports and imports. Chapter 20 focuses on the foreign exchange market, the international monetary system, and the effects of foreign exchange rates on U.S. agricultural trade. Chapter 21 explores the rationale for why nations trade and who gains from trade. Chapter 22 addresses agricultural trade policy, the rationale for restricting free trade, and the trade policy decision-making mechanisms and institutions. Finally, Chapter 23 examines the formation of preferential trading arrangements and their potential impact.

Each chapter concludes with a summary of the chapter's purpose and the major points covered. In addition, the key terms used in the chapters are defined. Most chapters also include a number of exercises the readers can use to test their understanding of key issues covered in the chapter. There is also a list of references and further readings.

This textbook differs substantially from the traditional introductory agricultural economics textbook in several ways. First, the book explicitly goes beyond the farm gate to address the entirety of the food and fiber industry, which accounts for about 17% of U.S. national output. Second, the book places an unusually strong emphasis on the macroeconomics of agriculture (five chapters) and international trade (five chapters). The experience of the 1980s and 1990s certainly has shown that farmers and ranchers, agribusinesses, financial institutions, and consumers of food and fiber products are significantly affected by macroeconomic policies and trade agreements.

Supplementary materials to complement this textbook—an instructor's manual containing chapter outlines as well as a test bank of questions and problems (with solutions) that have been classroom tested over an extended time period, and transparency masters that help present key concepts from the text—are available. A slide show of key features of each chapter in PowerPoint will also be made available.

We wish to thank the many students who have given us comments and suggestions during the developmental phases of this edition.

John B. Penson, Jr.
Oral Capps, Jr.
C. Parr Rosson III