Agricultural Economics Class

With

Dr.Niv Nozari

WELCOME TO

Microeconomics: ( the Microeconomics: ( the “trees”)“trees”)

Studies economic behavior of individual decision making units such as,

• Consumers

• Resource Owners

• Business Firms (producers)

in a market economy

At times, micro will study economic behavior at the industry level

Macroeconomics: (the Macroeconomics: (the “forest”)“forest”)

Studies the aggregate level of economic activity,

• Economic system’s value of total

output: GDP• Level of National

Income• Total Level of

Unemployment• General Price Level of

the Economy: Inflation

Real GDP Growth (Percent)

-1

0

1

2

3

4

5

6

90 91 92 93 94 95 96 97 98 99 20001st

QTR

20002ndQTR

Year

Per

cen

t R

eal

GD

P G

row

th

National Unemployment Rate

0

1

2

3

4

5

6

7

8

9Ja

n-90

Jul-9

0

Jan-

91

Jul-9

1

Jan-

92

Jul-9

2

Jan-

93

Jul-9

3

Jan-

94

Jul-9

4

Jan-

95

Jul-9

5

Jan-

96

Jul-9

6

Jan-

97

Jul-9

7

Jan-

98

Jul-9

8

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Month/Year

Un

emp

loym

ent

Rat

e (%

)

Industrial Capacity Utilization Rate

74

75

76

77

78

79

80

81

82

83

84

85

Jan-

90

May

-90

Sep-

90Ja

n-91

May

-91

Sep-

91Ja

n-92

May

-92

Sep-

92

Jan-

93M

ay-9

3Se

p-93

Jan-

94

May

-94

Sep-

94Ja

n-95

May

-95

Sep-

95

Jan-

96M

ay-9

6Se

p-96

Jan-

97M

ay-9

7Se

p-97

Jan-

98M

ay-9

8

Sep-

98Ja

n-99

May

-99

Sep-

99

Jan-

00M

ay-0

0

Month/Year

Cap

acity

Util

izat

ion

Rat

e

Work-Force Productivity: Output per Hour Worked

0

1

2

3

4

5

6

90 91 92 93 94 95 96 97 98 99 20001st

QTR

20002ndQTR

Year

Per

cen

t In

crea

se

Macroeconomics: (the Macroeconomics: (the “forest”)“forest”)

we will deal with some macroeconomic topics first, then concentrate on microeconomics

Normative Economics:Normative Economics:

Normative: subjective, value laden, emotional

“What ought to be” economics

Rx and/or Policy oriented

Hear a bunch of normative economic statements during political elections

Positive Economics:Positive Economics:

Positive: Objective, without emotion or value judgment!

“What is, What was, What will be” economics

Based on probability and statistical methods

Microeconomics

Normative microeconomics

Positive microeconomics

Macroeconomics

Normative macroeconomics

Positive macroeconomics

MacroeconomicsMacroeconomics

1. Fiscal Policy:

Govt. tax and spend policies

2. Monetary Policy

Manipulation of the money supply by the Federal Reserve system to affect short-term interest rates and control inflation

Private Property RightsPrivate Property Rights

“Negative Externality”:

When you produce or consume a commodity or service within your private property rights that imposes a cost on a third party not directly involved in the market transaction.

Private Property RightsPrivate Property Rights

The cost imposed on the third party is very difficult (expensive) for the third party to recover

AKA a “Spillover Cost”

Private Property RightsPrivate Property Rights

Laws are often enacted by legislative bodies that constrain private property rights in order to rectify negative externalities, or at least reduce the cost to third parties in recovering damages

Negative ExternalitiesNegative Externalities

Some Examples:

-Seat Belt Crack Down in Tehran.-Iran Law for Motorcyclists.

Negative ExternalitiesNegative Externalities

Possible Solutions:

– Pass Laws

– Post Bond to assure financial responsibility

Positive ExternalitiesPositive Externalities

When you produce or consume a commodity or service within your private property rights that bestows a benefit on a third party not directly involved in the market transaction.

Positive ExternalitiesPositive Externalities

The benefit bestowed on the third party is very difficult (expensive) for the third party to recover

AKA a “Spillover benefit”

References:References:

•N.c.State university-College of Agriculture and Life science –Dr. herman_sampson