AGECON1

CHAPTER 1
The Agriculture Industry
and Its Economic Performance
MARIA KARISSA C. LANZA, MSc.

College of Agriculture and Agri-Industries

Caraga State University
Ampayon, Butuan City, Agusan del Norte, Ph
Outline
• Structure of the Agriculture Sector
• Inputs and Products of Agriculture
• International Trade
• Contribution of the Agriculture
Sector to the National and Local
Economies Key Issues
GDP share of agriculture, forestry, and fishing sector
Philippines 2016-2021

The contribution of the

agriculture, forestry, and
fishing sector industry to the
GDP of the Philippines was at
9.6 percent in 2021.
The GDP contribution of this
industry had been fluctuating
over the past six year and has
remained below 11 percent.
The services industry has the
highest contribution to the
Philippine GDP.
Share of basic sectors in total employment (%), 1995–2021
Agricultural Exports
Export crops means crops whose majority of production shall be for
export outside the State or whose majority of the value-added
products shall be exported.
Agricultural Imports
Imports are products or raw materials bought from another
country for use in your own country.
Comparative Advantage
Comparative advantage refers to the ability to produce goods
and services at a lower opportunity cost, not necessarily at a
greater volume or quality.
Scope of Economics
Scarce Resources
• The term scarcity refer to the finite quantity that are available to meet
society’s needs.
• Nature does not freely provide enough of resources, only a limited
quantity is available.
• Scarce resources can be broken down into the following categories
(1) Natural and biological resources
(2) Human resources
(3) Manufactures resources
Scarce Resources
Natural and Biological Resources
• Land and mineral deposits are example of scarce
natural resources.
• The quality of these natural resources differs
greatly from region to region.
• Some lands are incapable of growing anything in
their natural state, and other land are extremely
fertile.
• Natural resources, scarce resources also include
biological resources such as livestock, wildlife,
and different genetic varieties of crop
 Scarce Resources
Human Resources
• Human resources are services provided by the
labourers and management to the production
of goods and services that also are considered
scarce.
• Farm labourers provide the labor input to
produce crops and livestock
• Management, another form of human
resource, provides entrepreneurial services,
which may entail the formation of a new firm.
Scarce Resources
Manufactured Resources
• Third category of scarce resources is
manufactures resources or, more simply, capital
• Manufactured resources are machines,
equipment, and structures.
• A product that has not been used up in the year
it was made also considered a manufactured
resources.
• For example, inventories of corn raised but not
fed to livestock or old to agribusiness represent
a manufactured resource.
Making choices
• Resource scarcity forces consumers and producers to make choices.
• These choices have a time dimension.
• The choice one makes also have an associated opportunity cost
• Opportunity cost, refers to the implicit cost associated with the next best
alternative in a set of choices available to decision makers.
• Choices in the allocation of resources made by society ( a collection of
individuals) might be quite different from the choices made by individual
members of society.
• Society as a whole must decide how best to allocate its resources between
the production of civilian goods and services and the production military
goods.
 WHAT IS ECONOMICS?
Economics is 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.
Definition of terms

• Macroeconomics: Deals with the whole or aggregate economy- GNP,

GDP, inflation, unemployment.
• Microeconomic: Deals with the individuals- households, firms,
market, consumers, producers.
Positive vs. Normative Economics
Positive economics; makes statements on what “what is” or “what will happen”;
unbiased; cause and effect
Normative Economics: makes statement on “what should be”; biased; value
judgements used in formulating policies. Opinion
 Normative Statement Positive Statement

Paying people who aren’t working, Programs like welfare reduce the
even though they could work, is wrong incentive for people to work
and unfair
Statements
• The government should raise taxes on the wealthy to pay for helping
the poor
• Raising taxes of the wealthy to pay for government programs grows
the economy
• Raising taxes on the wealthy slows economic growth
 Normative Statement Positive Statement

Paying people who aren’t working, Programs like welfare reduce the
even though they could work, is wrong incentive for people to work
and unfair
The government should raise taxes on Raising taxes of the wealthy to pay for
the wealthy to pay for helping the poor government programs grows the
economy
Raising taxes on the wealthy slows
economic growth
Definition of terms

Economic model- the basic building

block in the logic of the economist; a
conceptualization based on assumptions
of how economic activity occurs;
example; perfectly competitive firm
Production Possibilities Frontier
(PPF)-all the possible combinations of
the maximum amounts of two goods and
services that can be produced with a
given amount of resources.
Ceteris paribus- other things being
equal
Definition of terms

Diminishing Returns-Indicates that as

you increase the amount of something,
ceteris paribus, the additional impact of
that ‘something (economic viable) will
eventually increase at a decreasing rate.
Marginality- An additional or
incremental unit of something
Economic Resources- Scarce and
command a non-zero price, i.e. they cost
something; example; land, labor, capital
Basic Economic Problems

a. What to produce?- what society desires

b. How much to produce?- how much of the goods available on the
time that they are needed or wanted
c. When to produce?-making goods available on the time that they are
needed or wanted
d. How to produce? Who will produce and with what resources and
production techniques (labor intensive or machine intensive)
e. For whom to produced?- who gets to eat the fruit of economic
activity
Economic Goals

a) Full Employment - all available resources should be employed or fully utilized or no workers
should be involuntarily out of work
b) Equity - an equitable distribution of wealth and income
c) Efficiency - producing any given level of output at minimum opportunity cost of the inputs used
in production
d) Economic growth - expansion of production, constantly increasing output or national income,
reduction in poverty incidence, increase in employment, etc.
e) Economic freedom -- includes our freedom to choose what to produce or consume,
employment, etc.; the freedom to do economic activities within the legal framework of the
economy
f) Price stability - the absence of inflation (successive increase in prices of almost all kinds of
commodities in the market) and wide fluctuations in prices
g) Economic development - improvement in the quality of life of the people
h) Economic Security - assurance of the fulfilment of economic needs of every member of
society, including the handicapped
Agricultural Economics

• Agricultural economics is the application of economic

principles to agriculture.
• To perceive agricultural economics as being limited only to
the economics of farming and ranching operations would be
incorrect
• This operations accounts for only 2% to 4% of the nation’s
output
• Agricultural economics goes well beyond the farm gate to
encompass a broader range of food-and fiber-related activities
Food And Fibre Related Activities
.
üThe impact of the food and fibre üThis production is then sold to the
system on the economy is multiplied sectors
by its links to a variety of industries • that store, process, transport,
such as: manufacture, distribute, export, and
• Machinery, merchandise the products.
• Fertilizer, üThe food and fibre system is
among the largest users of real
• Chemicals, estate and rental services and
• Seed, feed, labor, transportation and warehouse
services.
• Financial services,
• And other inputs are required to
üViewed from this broader
perspective, the agricultural
produce crops and livestock. sectors accounts for approximately
12% to 15% of the nation’s output