Download Macro and Micro Economics?, Property Rights?, Externalities?

WELCOME TO ARE 201
Introduction to Agricultural Economics
With
Herman Sampson
1
Microeconomics: ( the “trees”)
Studies economic behavior of individual
decision making units such as,
u Consumers
u Resource Owners
u Business Firms (producers)
in a market economy
At times, micro will study economic
behavior at the industry level
2
Macroeconomics: (the “forest”)
Studies the aggregate level of economic
activity,
u Economic system’s value of total
output:
GDP
u Level of National Income
u Total Level of Unemployment
u General Price Level of the Economy:
Inflation
3
Real GDP Annual Growth (Percent)
US Bureau of Economic Analysis
5
4
3
2
P
e
r
c 1
e
n
t
0
G
D
P
90
91
92
93
94
95
96
97
98
99
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-1
-2
-3
-4
4
U.S. Real GDP Growth Quarter to Quarter
US Bureau of Economic Analysis
5
R
a
t
e
(
)
%
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
National Unemployment Rate
Bureau of Labor Statistics Data
12
10
U 8
n
e
m
p 6
l
o
y
m 4
e
n
t
2
0
Month/Year
6
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Capacity Utilization Rate
Industrial Capacity Utilization Rate
January 1990 to December 2008
U.S. Federal Reserve Data
90
85
80
75
70
65
Month/Year
7
Industrial Capacity Utilization Rate
January 2006 to December 2011
U.S. Federal Reserve Data
90
80
75
70
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
65
Jan-06
Capacity Utilization Rate
85
Month/Year
8
9
10
More Industrial Capacity Utilization Rates
and Correlation with Recessions
http://www.economytrack.org/capacity.php
11
Work-Force Productivity:
Output per Hour Worked
Bureau of Labor Statistics
5
4.5
4
Percent Increase
3.5
3
2.5
2
1.5
1
0.5
0
90
91
92
93
94
95
96
97
98
99 2000 01
02
03
04
05
06
07
08
09
10 3Q2011
Year
12
Macroeconomics: (the “forest”)
we will deal with some macroeconomic
topics first, then concentrate on
microeconomics
13
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
14
Positive Economics:
Positive: Objective, without emotion or
value judgment!
“What is, What was, What will be”
economics
Based on probability and statistical
methods
15
Microeconomics
Normative microeconomics
Positive microeconomics
Macroeconomics
Normative macroeconomics
Positive macroeconomics
16
Macroeconomics
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
17
Private 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.
18
Private Property Rights
The cost imposed on the third party is
very difficult (expensive) for the third
party to recover
AKA a “Spillover Cost”
19
Private 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
20
Negative Externalities
Some Examples:
Seat Belt Crack Down in N.C. (Click It
or Ticket)
California Helmet Law for Motorcyclists
21
Negative Externalities
Possible Solutions:
–
–
Pass Laws
Post Bond to assure financial responsibility
22
Negative Externalities
Some Examples:
Imperial Foods of Hamlet, N.C. vs.
Imperial Sandwich Co. of Goldsboro,
N.C.
23
Positive 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.
24
Positive Externalties
The benefit bestowed on the third party is
very difficult (expensive) for the third
party to recover
AKA a “Spillover benefit”
25