Agricultural Economics

February 6, 2019 Agriculture

Agricultural Economics and the role of the Agricultural Economist

The world of agricultural economics is a dynamic and vibrant world that has both broadened and deepened in recent years. The field originated in the early 20th century with a focus on farm management and commodity markets but has since moved far into the analysis of issues on food, resources, international trade, and linkages between agriculture and the rest of the economy.

In the process, agricultural economists have been pioneering users of developments in economic theory and econometrics. In the process of intense focus on problems of economic science that are central to agriculture, agricultural economists have developed methods of empirical investigation that have been taken up in other fields.

The application of economics to agriculture in a complex market company such as that of South Africa has a long and rich history. We can summarise the activities of agricultural economists at micro- and macroeconomic level.

Agricultural economists at the micro level are concerned with issues related to resource use in the production, processing, distribution, and consumption of products originating in agriculture.

Production economists examine resource demand by businesses and their supply response
Market economists focus on the flow of food and fibre through market channels to its final destination and the determination of prices at each stage
Financial economists are concerned with issues related to the financing of businesses and the supply of capital to these firms
Resource economists focus on the use and preservation of the nation’s natural resources
Other economists are interested in the formation of government programmes for specific commodities that will support the incomes of farmers and provide food and fibre products to low-income consumers​

​​Agricultural economists involved at the macro level are interested in how agriculture and agribusinesses affect domestic and world economies, and how the events taking place in other sectors affect these firms, and vice versa.

Agricultural economists employed by the Central Banks must evaluate how changes in monetary policy affect the price of food
Macroeconomists with a research interest may use computer-based models to analyse the direct and indirect effects that specific monetary or fiscal policy proposals would have on the food and agricultural industry
Those employed by multinational food companies examine, and conduct or facilitate, global trade relationships for food and fibre products
Others address issues in the area of international development​

​​Economists are frequently concerned with what happens at the margin. A microeconomist may focus on how the addition of another input by a business, or the purchase of another product by a consumer, will change the economic well-being of the business and the consumer.

A macroeconomist, on the other hand, may focus on how a change in the tax rate on personal income may change the nation’s output, interest rates, inflation, and the federal budget deficit.

The key work in this example is change, or more specifically how a change in price, quantity, etc. will affect other prices and quantities in the economy, and how this might change the economic well-being of consumers, businesses, and the economy as a whole.

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