1. Resources for veterinary work Henk Hogeveen Jonathan Rushton This presentation was developed within the frame of the NEAT project, funded with support from the European Commission under the Lifelong Learning Programme (Grant no. 527 855). Please attribute the NEAT network with a link to www.neat-network.eu. Except where otherwise noted, this presentation is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.www.neat-network.euCreative Commons Attribution-NonCommercial-ShareAlike 4.0 International License

2. 2 Learning objectives  In the next 45 minutes we will examine:  What resources are?  Which resources are available to the veterinarian and their clients  How resources are valued and how this relates to their availability in society  You will be given information to help understand these different issues and an exercise to reinforce your understanding of the information.

3. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 What are resources?  Resources things that can be used to generate a “benefit”  They can include:  Physical items – such as land, water  Human time – could be as labour or it can be intellectual  Specialised equipment – for example an X ray machine in a veterinary practice  ……… 3

4. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Definition 1: Cost factors  Land: includes renewable (forests) and non-renewable (minerals) resources  Labour: all owner and hired labor services, excluding management  Capital: necessary for manufactured goods such as fuel, chemicals, tractors and buildings  Management: production decisions designed to achieve specific economic goal

5. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Use of resources  When we work we mix (manage) resources into products (good and services)  When we relax we use resources to gain pleasure (that is the “product”)  Our goods and services are core to what we want to achieve in terms of improving animal health and welfare  They are also core to what the clients need to use to obtain benefits from their animals, that can either be  monetary benefits from a food animal  excitement from a sport animal  comfort and love from a pet  pleasure from wild animals 5

6. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 What are resources? Classroom input  Help me with examples of resources for  A veterinary practise  A farmer  A citizen 6

7. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Transferring resources into products (veterinarian) 7 Resources Labour Land Capital Products -Drugs -Advice -Surgery -Diagnostics -Feed -……..

8. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Transferring resources into products (farmer) 8 Resources Labour Land Capital Products -Milk -Eggs -Meat -Animals -Wool -……..

9. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Transferring resources into products (citizen) 9 Products -Pleasure -Feeling good -……..

10. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Your products are a resource for your clients They have to see the value of your products 10

11. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Value  Value (economic definition): “something” has value when it contributes to fulfillment of goals/needs  As a business  As a person  Goals/needs differ between persons  If you had a veterinary practise, what would be the goal of your practise? 11

12. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Value  Value (economic definition): “something” has value when it contributes to fulfillment of goals/needs  As a business (profit maximisation, shareholder value maximisation, utility)  As a person (utility)  Goals/needs differ between persons  If you had a veterinary practise, what would be the goal of your practise? 12

13. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 So…  If a product adds much to reach your goal, you give it a high value  Thus you are willing to pay much for it 13 But…  You may not have enough resources to reach your goal completely (maximum utility)  Scarcity  Choices

14. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 What is scarcity: an example  Free resources vs scarce resources  E.g., River  Few people: water is free  More people: water is scare  Choices have to be made  Water for drinking  Water for industry  Etc.  Economic scarcity ≠ shortage

15. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 What are costs?  Costs exist if “something” is used that has value and is scarce  Opportunity costs: the lost value if you had used that resource for the second best purpose.

16. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Costs ≠ expenditures We have not talked (yet) about money 16

17. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Definition 2: Fixed and variable costs  Total costs = fixed costs + variable costs  Fixed costs  Determined by production capacity (land, buildings, machines, labour) and do not vary with the level of production  Variable costs  Costs vary with the level of production, within a certain production capacity

18. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Variable costs  Feed  Drugs  Materials for diagnostic equipment  …....

19. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Rule of thumb  When production level changes, the fixed costs remain the same and variable costs change

20. Consequences? [1]

21. Consequences? [2]

22. Consequences? [3] Break even point

23. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 But:  Rule off thumb: with increasing production, the fixed costs remain the same.  There is a maximum. At a certain moment you have to increase fixed costs: large step.

24. Quasi-fixed costs

25. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Definition 3: Types of costs  Payments  Depreciation  Interest

26. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Depreciation  Compare with savings for replacement  Calculation (linearity principle):  Replacement (or purchase) value (A)  Lifespan (n)  Rest value (R)  (A - R)/n

27. Linear depreciation A = 20.000 R = 5.000 N = 10

28. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 Interest  Determined by:  Value of assets  Price of capital (%)  Interest may differ:  Short term: 7 %  Long term (mortgage): 5 %  Land: 2 %  Not only paid interest  Calculated over everything (opportunity costs)

29. Interest fixed assets Varying over time Average: (A-R)/2 * r

30. Chapter 4 Introduction Chapter 1 Questions Chapter 2Chapter 3 In summary  Basic resources: labour, land, capital  Management mixes these resources to produce products  In such a way to maximal fulfill goals/needs  A product that is important in reaching the goal has a high value  Products of a veterinarian are resources for clients  There are fixed costs and variable costs  There are different types of costs: payments, depreciation and interest  Costs ≠ expenditures (at least not always)

31. Contact Henk Hogeveen Wageningen University Henk.Hogeveen@wur.nl http://www.neat-network.eu 31