Introduction to Food Economics
Dr. Chenguang Li
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Questions
• What is Economics?
https://www.youtube.com/watch?v=2YULdjmg3o0
• What is Food Economics?
• What is the relevance of Food Economics to
Food Business Strategy?
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Scarcity leads to tradeoffs and
choices…
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Scarcity
“there is no such thing as free lunch”
“ you can’t have your cake and eat it too”
Scarcity: fixed quantity of resources that are
available to meet individual and society’s needs.
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In Agricultural Context
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Scarce Resources (in Ireland)
– Natural and biological resources
• 6.9 m hectares land area
• 4.6 m hectares used for agriculture/forestry
• 1.5 m dairy cows (+400,000 cows in the last 5 years)
– Human resources
• 4.64 m population
• Labour force
agri-food sector accounted for 173,800 jobs, 7.9%
of total employment, according to the CSO Labour
Force Survey.
– Manufactured resources / capital
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Scarcity in Different Situations
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Making Choices
• Resource scarcity
– Forces consumers and producers to
make choices
• Opportunity cost
– An implicit cost associated with
economic decisions
Choices involve evaluating tradeoffs of resource between alternative uses
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Opportunity Cost
• The implicit cost associated with the next
best alternative in a set of choices
available to decision-makers.
• Do economic benefits exceed income,
including forgone income?
• Examples:
– Opportunity cost associated with pursuing a college
degree.
– Beef to dairy substitution
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Making Choices
• Individual decisions
– Maximization of consumer utility and
producer profits
• Societal decisions
– Production possibilities given existing
resources
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Specialization based on comparative
advantages
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Specialization
• Most resources are best used for a particular
use
• Individuals/countries should do what they do
comparatively better than others, given their
resources
• Comparative advantage is the basis for trade
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The United States
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Farm Resource Regions
Northern Great Plains
Heartland Northern Crescent
• Largest farms and smallest population.
Basin and Range • 5% of farms, 6% of production value, • Most farms (22%), highest
• Most populous region.
17% of cropland. value of production (23%), and
• Largest share of nonfamily • 15% of farms, 15% of value of
• Wheat, cattle, sheep farms. most cropland (27%).
farms, smallest share of U.S. production, 9% of cropland.
• Cash grain and cattle farms.
cropland. • Dairy, general crop, and cash
• 4% of farms, 4% of value of grain farms.
production, 4% of cropland.
• Cattle, wheat, and sorghum
farms.
Eastern Uplands
• Most small farms of any
region.
• 15% of farms, 5% of produc-
tion value, and 6% of
cropland.
• Part-time cattle, tobacco,
and poultry farms.
Fruitful Rim
• Largest share of large and very
large family farms and nonfam-
ily farms.
• 10% of farms, 22% of produc-
tion value, 8% of cropland. Southern Seaboard
• Fruit, vegetable, nursery, and
• Mix of small and larger farms.
cotton farms.
Prairie Gateway • 11% of farms, 9% of produc-
tion value, 6% of cropland.
• Second in wheat, oat, barley, • Part-time cattle, general field
rice, and cotton production. crop, and poultry farms.
• 13% of farms, 12% of produc-
Mississippi Portal
tion value, 17% of cropland. • Higher proportions of both
• Cattle, wheat, sorghum, small and larger farms than
cotton, and rice farms. elsewhere.
• 5% of farms, 4% of value, 5%
of cropland.
• Cotton, rice, poultry, and
Electronic files linking counties to the Farm Resource Regions are online For more information about ERS publications and d
at the ERS home page. hog farms. see our home page.
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Relative strengths of Kansas
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Relative strengths of Idaho
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Relative strengths of Florida
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Each state specializes in what it does
best and trades with other states…
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Each state specializes in what it does
best and trades with other states…
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Each state specializes in what it does
best and trades with other states…
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Agricultural Regions in Ireland
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(For more information and detailed data, visit CSO website.) 22
Key Messages
• Resource scarcity
– Natural, human and manufacture
• Forces individuals and societies to make choices
• Opportunity cost is an implicit cost associated
with economic decisions
• Comparative advantage leads to specialization
and trade
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