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Unit 1 Principle of Microeconomics and Macroecomonics CONTENTS

1.0 Introduction 2.0 Objectives 3.0 Main Content

3.1 Basic Concept of Economics in Animal Production 3.2 Microeconomics in Animal Production

3.3 Macroeconomics in Animal Production

4.0 Conclusion

5.0 Summary

6.0 Tutor Marked Assignment 7.0 References / Further Readings

1.0 Introduction

An agricultural production function expresses the relationship between the physical volume of output and the various inputs employed. In economics, a production function relates physical output of a production process to physical inputs or factors of production. It is a mathematical function that relates the maximum amount of output that can be obtained from a given number of inputs – generally capital and labor.

In simple words, production function refers to the functional relationship between the quantity of a good produced (output) and factors of production (inputs). ―The production function is purely a technical relation which connects factor inputs and output.

Though the number and variety of the different resources businesses require is limitless, economists divide the factors of production into three basic categories: land, labor, and capital. Land refers to all of the natural resources that businesses need to make and distribute goods and services.

2.0 Objective

At the end of this unit you should be able to expalin the basic concept of economics in animal production, micro and macro economics in animal production.

3.1 Basic Concept of Economics in Animal Production

Economics is concerned with the well-being of all people, including those with jobs and those without jobs, as well as those with high incomes and those with low incomes.

Economics acknowledges that production of useful goods like animal products and services. It probes questions like how to tell when big businesses or big labor unions are operating in a way that benefits society as a whole and when they are operating in a way that benefits their owners or members at the expense of others. It looks at how government spending, taxes, and regulations affect decisions about production and consumption.

Economics covers two parts: Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses; Macroeconomics looks at the economy as a whole. Microeconomics and macroeconomics are not separate subjects, but rather complementary perspectives on the overall subject of the economy.

In economics, the micro decisions of individual businesses are influenced by whether the macroeconomy is healthy; for example, firms will be more likely to hire workers if the overall economy is growing. In turn, the performance of the macroeconomy ultimately depends on the microeconomic decisions made by individual households and businesses.

3.2 Microeconomics in Animal Production

What determines how households and individuals spend their budgets? What combination of goods and services will best fit their needs and wants, given the budget they have to spend? How do people decide whether to work, and if so, whether to work full time or part time? How do people decide how much to save for the future, or whether they should borrow to spend beyond their current means?

What determines the products, and how many of each, a firm will produce and sell? What determines what prices a firm will charge? What determines how a firm will produce its

products? What determines how many workers it will hire? How will a firm finance its business? When will a firm decide to expand, downsize, or even close? In the microeconomic part of this book, we will learn about the theory of consumer behavior and the theory of the firm.

What determines the level of economic activity in a society? In other words, what determines how many goods and services a nation actually produces? What determines how many jobs are available in an economy? What determines a nation‘s standard of living? What causes the economy to speed up or slow down? What causes firms to hire more workers or to lay workers off? Finally, what causes the economy to grow over the long term?

3.3 Macroeconomics in Animal Production

An economy's macroeconomic health can be defined by a number of goals: growth in the standard of living, low unemployment, and low inflation, to name the most important.

How can macroeconomic policy be used to pursue these goals? Monetary policy, which involves policies that affect bank lending, interest rates, and financial capital markets, is conducted by a nation‘s central bank..

Macro-economics: Macro-economics is concerned with aggregate and averages of the entire economy, such as national income, aggregate output, total employment, total consumption, saving and investment, aggregate demand, aggregate supply general land of prices, etc. we study how these aggregate and averages of the economy as a whole are determined and what causes fluctuation in them. Macroeconomic deals also with how an economy grows. It analyses the chief determinants of the economic development and the various stages and processes of economic growth. The macro-approach is useful in several ways, namely:

i. It is helpful in understanding the functioning of a complicated economic system.

ii. It gives a bird‘s eye view of the economic world.

iii. It is of the utmost significance for the formulation of useful economic policies for the nation.

iv. It also occupies an important place in economic theory in its pursuit of the solution of urgent economic problems.

Thus, we are able to study the economy in its dynamic aspect. Limitations of macroeconomics:

Macro-analysis has limitations of its own.

1) Individual is ignored altogether; it is the individual welfare which is the main aim of economics.

2) It overlooks individual differences. E.g. general price level may be stable, but the prices of food grains may have gone spelling ruin to the poor. Thus, according to the views of the economist today, the subject matter of economics includes.

3) Price theory (or micro-economics) Income and employment theory (or macro-economics) and Growth theory

Hence, broadly speaking, economics may be described as a study of the economic system under which men work and live. It deals with decisions regarding the commodities to be produced and services to be rendered in the economy, how to produce them most economically, distribute them properly and to provide for the growth of the economy.

4.0 Conclusion

Microeconomics and macroeconomics are two different perspectives on the economy.

The microeconomic perspective focuses on parts of the economy: individuals, firms, and industries. The macroeconomic perspective looks at the economy as a whole, focusing on goals like growth in the standard of living, unemployment, and inflation.

Macroeconomics has two types of policies for pursuing these goals: monetary policy and fiscal policy.

5.0 Summary

Microeconomics is also called as Price Theory. Price theory explains the composition, or allocation, of total production- why more of some things is produced than of others. When we speak of or the micro approach, what we mean is that it is some small part or component of the whole economy that we are analysing. Thus, micro

economic theory studies the economic behaviour of individual decision - making units such as consumers, resource owners and business firms. Macro - economics is called Income Theory. Income theory explains the level of total production and why the level rises and falls. Macro - economics is concerned with aggregates and averages of the entire economy, such as national income, aggregate output, total employment, total consumption savings and investment, aggregate demand aggregate supply general level of prices, etc., It studies the behaviour of economic system as a whole or all the decision making unit combined together.

6.0 Tutor Marked Assignment

1. Expalin briefly the economics in animal production:

2. What is the difference between microeconomics and macroeconomics?

3. Enumerate the usefulness and limitation of macro and microeconomics 7.0 References / Further Readings

https://opentextbc.ca/principlesofeconomics/chapter/1-2-microeconomics-and-macroeconomics/

Payne, W.J.A. (1990). An Introduction to Animal Husbandry in the Tropics. Fourth Edition. Longman Scientific & Technical (Publ.)

Sankhayan, P.L. (1988), Introduction to the Economics of Agricultural Production, Prentice Hall of India Private Limited, New Delhi-110 001.

Unit 2 Production Function in Agriculture