Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Economics What is Economics? What is Economics? Economics is… Economics is… “the study of allocation of scarce resources among competing alternatives.” “the study of allocation of scarce resources among competing alternatives.” “the study of how individuals and countries decide how to use scarce resources to fulfill their wants.” “the study of how individuals and countries decide how to use scarce resources to fulfill their wants.” “the study of the decisions involved in producing, distributing, and consuming goods and services.” “the study of the decisions involved in producing, distributing, and consuming goods and services.” Let’s learn a little more about Economics!

3 Components of Economics Did you notice some of the key words mentioned in the definitions of Economics? They are the three components of Economics. Did you notice some of the key words mentioned in the definitions of Economics? They are the three components of Economics. Scarcity Scarcity Not enough resources to satisfy wants and needs Not enough resources to satisfy wants and needs Not to be confused with “a shortage” Not to be confused with “a shortage” Resources Resources Land, Labor, Capital, and Management Land, Labor, Capital, and Management Wants and Needs Wants and Needs Can you think of some examples of each? Can you think of some examples of each?

Are these Needs or Wants? Image retrieved from: most-expensive-basketball-shoes-in-the-world/

3 Economic Questions In order to manage the 3 components of Economics modern societies must answer these 3 economic questions In order to manage the 3 components of Economics modern societies must answer these 3 economic questions What goods should be produced, and how much of each? What goods should be produced, and how much of each? How should these goods be produced? How should these goods be produced? Who should get what and how much? Who should get what and how much?

Economic Systems Traditional Things are done “the way they have always been done.” Decision based upon customs or religious beliefs; passed down from generation to generation Traditional systems exist in limited parts of Asia, Africa, the Middle East and Latin America Capitalism Individuals have free reign over their time and resources and can determine how to use those assets Ownership is private Little involvement of government Self-regulated System Free market determines prices Competition is driving force of activity and decisions

Economic Systems Traditional Things are done “the way they have always been done.” Things are done “the way they have always been done.” Decision based upon customs or religious beliefs; passed down from generation to generation Decision based upon customs or religious beliefs; passed down from generation to generation Traditional systems exist in limited parts of Asia, Africa, the Middle East and Latin America Traditional systems exist in limited parts of Asia, Africa, the Middle East and Latin America Capitalism Individuals have free reign over their time and resources and can determine how to use those assets Individuals have free reign over their time and resources and can determine how to use those assets Ownership is private Ownership is private Little involvement of government Little involvement of government Self-regulated System Self-regulated System Free market determines prices Free market determines prices Competition is driving force of activity and decisions Competition is driving force of activity and decisions Communism Totalitarian system of government that a single body controls government owned production means Totalitarian system of government that a single body controls government owned production means Total control of economic matters Total control of economic matters Individuals have no power Individuals have no power Everyone contributes according to need Everyone contributes according to need

Capitalism an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

Principles of Capitalism in Agribusiness Private ownership of property and resources Private ownership of property and resources Anyone that owns property may use it in production (ex. Crops or business) Anyone that owns property may use it in production (ex. Crops or business) Potential for profit Potential for profit Profit is a direct result of business decisions Profit is a direct result of business decisions Free Market determines prices Free Market determines prices Based upon supply/demand Based upon supply/demand Competition is driving force Competition is driving force How many companies can produce a similar product? Unlimited! How many companies can produce a similar product? Unlimited! Creates change among products and supply/demand Creates change among products and supply/demand

The Big Picture of Agribusiness Agricultural Industry Agribusines s Input Agribusines s Output Farmers Where do you see capitalism at work in Agribusiness?

The United States Economy A Mixed Economy Image retrieved from:

The United States Economy A mixed system A mixed system The U.S. Economy operates with aspects of different economic systems but is known to most as the free enterprise system The U.S. Economy operates with aspects of different economic systems but is known to most as the free enterprise system Characteristics of the U.S. Economy Characteristics of the U.S. Economy Little or no government control Little or no government control Some government regulation for safety of the public Some government regulation for safety of the public Freedom of enterprise Freedom of enterprise Free to own and make decisions about factors of production Free to own and make decisions about factors of production Freedom of choice Freedom of choice Rights to own private property Rights to own private property Profit incentive Profit incentive Competition Competition Image retrieved from: econ.html

References Ricketts, C., & Ricketts, K. (2009). Agribusiness Fundamentals & Applications. New York: Delmar Cengage Learning. Merriam-Webster’s Dictionary (2014). Capitalism. Retrieved from