CAMS 2003

FOOD AND RESOURCE

ECONOMICS
Dr. Msafiri Daudi Mbaga
Output Index
1996=1.0

Expansion of Agricultural Production

College of Agricultural and Marine Sciences

Natural Resource Economics
Department

Index of Inputs
1996=1.0

Declining Role of Hired Farm Labor

Food Crops

Livestock

CHAPTERS ONE AND TWO

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Introductory Course
College requirement.
Since students do not have any background
in economics only basic principles will be
introduced.
The objective of the course is to provide an
intuitive understanding of how the market
economic system functions.

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Scarce Resources

Natural and biological resources

Land, mineral and coal deposits, oil and natural gas reserves

and water are examples of scarce natural resources

Biological resources include livestock, wildlife and different
genetic varieties of crops

Human Resources

The services provided by laborers and management to the

production of goods and servicesare considered scarce

Manufactured Resources (MR)

MR are machines, equipment, and structures
Include a product not used up in the year it was made e.g.
corn stock

Pages 2-3
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Making Choices

Resource scarcity forces consumers and

producers to make choices
Opportunity cost an implicit cost associated
with economic decisions
Specialization comparative advantage and
the basis for trade
Individual decisions maximization of
consumer utility and producer profits
Societal decisions production possibilities
given existing resources (guns versus butter)

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Definition of Economics
a social science that deals with how
consumers, producers and societies
choose among the alternative uses of
scarce resources in the process of
producing, exchanging, and consuming
goods and services.
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Scope of Economics
Microeconomics versus macroeconomics
Micro - individuals or groups of individuals
Macro - broad aggregates at economy level
Positive versus normative economics
Positive - what is, or what would happen if
Normative - what should be
Alternative economic systems
Capitalismis a free mkt economic system in
which individuals own resources with minimal
legal constraints from the government
Socialismresources are collectively and the
government decides how resources should be
utilized. Prices are largely set by the government
Oman has mixed economic system
Pages 5-6

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What is Agricultural
Economics?
Agricultural economics is an applied (in
agriculture) social science that deals with
how producers (farmers), consumers and
societies use scarce resources in the
production, processing, marketing and
consumption of food and fiber products.

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What does an
Agricultural Economist
do?

Guide decision makers (farmers, businessmen,

bureaucrats, politicians etc.).
Production Economist
Market Economist
Financial Economist
Natural Resource economist
Macro Economist
Policy Economist
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How economists report measures of

economic activities?
Output and Price Indices
Apple Production

Price of apples

Year

(million pounds)

Output Index

($/pound)

Price index

1985

4,162

0.86

$0.66

0.91

1990

4,828

1.00

0.72

1.00

1995

5,289

1.10

0.84

1.16

2002

4,278

0.89

0.95

1.32

1990 is the
base year
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Output and Price Indices

Apple Production

Price of apples

Year

(million pounds)

Output Index

($/pound)

Price index

1985

4,162

0.86

$0.66

0.91

1990

4,828

1.00

0.72

1.00

1995

5,289

1.10

0.84

1.16

2002

4,278

0.89

0.95

1.32

1990 is the
base year

1.10 = 5,2894,828
Output 10% higher in
1997 than it was in
1990.

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Output and Price Indices

Apple Production

Price of apples

Year

(million pounds)

Output Index

($/pound)

Price index

1985

4,162

0.86

$0.66

0.91

1990

4,828

1.00

0.72

1.00

1995

5,289

1.10

0.84

1.16

2002

4,278

0.89

0.95

1.32

1990 is the
base year

1.10 = 5,2894,828
Output 10% higher in
1995 than it was in
1990.

CAMS 2003:Introduction and Key Measurement Concepts

1.16 = 0.840.72
Price 16% higher in
1995 that it was in
1990
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Nominal and Real Expenditures

Year

Nominal Expenditures

CPI

Real Expenditures

(million dollars)

1982-84=100

(Million dollars)

1980

120.3

0.824

145.99

1985

168.8

1.076

156.91

1990

248.5

1.307

190.10

1995

302.4

1.524

198.44

2000

385.8

1.722

224.03

1982-84
average is
the base
year for
the CPI
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Nominal and Real Expenditures

Year

Nominal Expenditures

CPI

Real Expenditures

(million dollars)

1982-84=100

(Million dollars)

1980

120.3

0.824

145.99

1985

168.8

1.076

156.91

1990

248.5

1.307

190.10

1995

302.4

1.524

198.44

2000

385.8

1.722

224.03

1982-84
average is
the base
year for
the CPI

CPI was 72.2%

higher in 2000
than it was in
1982-84 period

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Nominal and Real Expenditures

Year

Nominal Expenditures

CPI

Real Expenditures

(million dollars)

1982-84=100

(Million dollars)

1980

120.3

0.824

145.99

1985

168.8

1.076

156.91

1990

248.5

1.307

190.10

1995

302.4

1.524

198.44

2000

385.8

1.722

224.03

1982-84
average is
the base
year for
the CPI

CPI was 72.2%

higher in 2000
than it was in
1982-84 period

CAMS 2003:Introduction and Key Measurement Concepts

224.03 = 385.81.722
The increasing CPI
eroded the purchasing
power of the dollar.
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The food system consists of four sectors that provide food and
fiber products to their ultimate consumer.
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The Nations food and fiber system consists of four sectors that
Provide food and fiber products to their ultimate consumer.
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The Nations food and fiber system consists of four sectors that
Provide food and fiber products to their ultimate consumer.
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The Four Sectors of the Food and Fiber System

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Where Does a Food Dollar Go?

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Where Does a Food Dollar Go?

Only 19 percent of each dollar spent on food products goes

to farmers and ranchers
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SummaryMain Points Covered

Resource scarcity - natural,

human and manufactured forces

individuals and societies to make
choices
Definition of agricultural
economics
Increasing role of capital
Productivity
Interrelationship among sectors in
the food and fiber industry
Farmers/ranchers share of food
dollar

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