Agricultural Economics 101

Spring Semester 2001

Handouts are required and should be brought to class each period.

HANDOUT 1: EFFECTS OF AN INCREASE IN SUPPLY, GIVENINELASTIC DEMAND.

HANDOUT 2: EFFECTS OF AN INCREASE IN SUPPLY, GIVENELASTIC DEMAND.

HANDOUT 3: DERIVING THE INDIVIDUAL’S DEMAND FORCHEESE.

HANDOUT 4: DETERMINING AGGREGATE OR MARKET DEMANDFROM THE INDIVIDUAL’S DEMAND FUNCTIONS.

HANDOUT 4: CONTINUED.

HANDOUT 5: EXAMPLES OF EFFECTS OF CHANGES IN MARKETSUPPLY AND MARKET DEMAND ON FARM-LEVELDEMAND.

*Analysis assumes that all prices are farm-level prices.

I. Handout 6: Own-Price Elasticities of Demand at the Retail Levelfor Selected Commodities.

Commodity Commodity

BeefVealPorkLamb and MuttonChickenTurkeyFishEggsButterLardShorteningMargarineSalad DressingFresh MilkEvaporated MilkCheeseIce CreamPotatoesSweet PotatoesSugarCorn SyrupApplesBananasOrangesCanned PeachesCanned Pineapples

0.64381.71770.41302.62550.77731.55530.23000.31380.65240.40001.01580.84650.69440.34550.31980.46010.52760.30860.52040.24190.44290.72000.61500.66320.75920.8262

Other Fresh FruitDried FruitsFrozen FruitsLettuceTomatoesBeansOnionsCarrotsOther Fresh VegetablesCanned PeasCanned CornCanned TomatoesDry VegetablesFrozen VegetablesOther Canned Fruits/VegetablesRiceWheat FlourBreakfast CerealsCorn MealBread and Other CerealsCoffeeSoup Other BeveragesAll FoodNonfood

0.60000.65531.00000.14140.38460.25500.25000.49710.32000.18500.25500.17600.48001.03440.40000.32000.30000.22000.22000.15000.25220.45000.43870.23681.0180

II. Handout 6 Continued: Selected Cross-Price Elasticities ofDemand at the Retail Level.

Commodity Ex

Chicken w.r.t. TurkeyFish w.r.t. ChickenButter w.r.t. MargarineApples w.r.t. BananasLettuce w.r.t. ApplesCanned Peas w.r.t. Canned CornCoffee w.r.t. Other BeveragesRice w.r.t. Beef

0.40000.00370.42450.21360.00010.05900.03300.0002

III. Handout 6 Continued: Income Elasticities of Demand.

Commodity Commodity

BeefVealPorkLamb and MuttonChickenTurkeyFishEggsButterLardShorteningMargarineSalad DressingFresh MilkEvaporated MilkCheeseIce CreamPotatoesSweet PotatoesSugarCorn SyrupApplesBananasOrangesCanned PeachesCanned Pineapples

0.28990.59110.13350.57120.17850.76840.00400.05490.3181

-0.05000.02910.00000.28490.20360.00000.24890.33130.11660.00000.03210.17370.13990.13930.26050.40000.3407

Other Fresh FruitDried FruitsFrozen FruitsLettuceTomatoesBeansOnionsCarrotsOther Fresh VegetablesCanned PeasCanned CornCanned TomatoesDry VegetablesFrozen VegetablesOther Canned Fruits and VegetablesRiceWheat FlourBreakfast CerealsCorn MealBread and Other CerealsCoffeeSoup Other BeveragesAll FoodNonfood

0.44730.31530.66140.14700.17030.00000.00470.31940.15000.03210.02360.17340.21690.61610.20000.05550.08310.05770.05780.00000.04720.23640.23000.17631.2432

HANDOUT 7: DERIVATION OF APP, MPP, FROM TPP.

(1) TPP = Total Physical Product = Y

(2) APP = Average Physical Product =

(3) MPP = Marginal Physical Product =

X1 = INPUT Y = OUTPUT(TPP)

Y/X1

(APP) (MPP)

0 0

1 44.9

2 83.6

3 110.1

4 127.3

5 136.9

6 139.9

7 137.1

8 129.1

HANDOUT 7: CONTINUED

HANDOUT 8: RELATIONSHIPS BETWEEN TPP, APP, AND MPP.

HANDOUT 9: TOTAL COST, TOTAL REVENUE, AND PROFIT.

HANDOUT 10: TOTAL COST, TOTAL REVENUE, MARGINAL COST,MARGINAL REVENUE, AND PROFIT.

HANDOUT 11: SHORT RUN, FIRM-LEVEL ANALYSIS.

HANDOUT 11: CONTINUED

HANDOUT 12: EXAMPLES OF AN ISOQUANT: GRAINCONCENTRATE AND ALFALFA HAY COMBINATIONSNECESSARY TO PRODUCE A 300-LB. GAIN ON BEEFCALVES.

Alfalfa(in lbs.)

Grain Concentrate(in lbs.)

1,0001,1001,2001,3001,4001,5001,6001,7001,8001,9002,000

1,3151,2591,2081,1621,1201,0811,0461,013984957932

Source: Castle, E. M., M. Becker and F. Smith. Farm Business Management: The Decision-Making Process (2ndEdition, p. 33). Data drawn from Oregon State University Agricultural Experiment Station Miscellaneous Paper 98.

HANDOUT 13: DETERMINING THE LEAST-COST COMBINATIONSAND THE PROFIT-MAXIMIZING LEVEL(S) OFOUTPUT.

HANDOUT 13: CONTINUED.

HANDOUT 14: PRODUCTION POSSIBILITIES CURVE.

A. Peas = 17,200 Cwt. Lentils = 0 Cwt.

B. Peas = 16,000 Cwt.Lentils = 6,000 Cwt.

C. Peas = 12,000 Cwt.Lentils = 12,000 Cwt.

D. Peas = 6,000 Cwt.Lentils = 15,000 Cwt.

E. Peas = 0 Cwt.Lentils = 15,500 Cwt.

HANDOUT 15: COMPARATIVE GRAPHS.

HANDOUT 15: CONTINUED.

HANDOUT 15: CONTINUED.