Topic - 1
Agriculturecan be defined as the production and cultivation of crops,
edible plants, or animals and animal products. The term is synonymous
with farming, and involves the production of food and other organic
materials.
According to Professor A. W. Gray, agricultural economics may be
defined as ‘the science in which the principles and methods of
economics are applied to the special conditions of agricultural
industry’
Prof. Benjamin H. Hibbard defined agricultural economics as ‘the study
of relationship arising from the wealth-getting and wealth-using
activity of man in agriculture’.
2
Scope of Agricultural Economics
3
Scope of Agricultural Economics
Agricultural economics demands in-depth knowledge of problems
pertaining to production, finance marketing and government policies, and
their impact on production and distribution, find out suitable solutions for the
farm problems. It helps a farmer to make the following decisions:
Kind of food to be produced
Nature of crop to be raised in order to maximize profits
Price point of the produce
The main problems faced by the agricultural sector can be grouped
under three main heads:
I. Production
II. Marketing
III. Financing 4
Scope of Agricultural Economics
All the tools of analysis used in general economics are employed in
agricultural economics as well. Some important branches of agricultural
economics are economics of production, consumption, distribution,
marketing, financing, planning and policy making as in case of general
economics.
Agricultural economics examines how a farmer chooses various
enterprises, e.g., production of crops or raising of cattle, and how he
chooses various activities in the same enterprise, e.g., which crop to grow
and which crop to drop; how the costs are to be minimized; what
combination of inputs for an activity are to be selected; what amount of
each crop is to be produced; what type of commercial relations the
farmers should have with people from whom they purchase their inputs or
to whom they sell their products.
5
Scope of Agricultural Economics
In agricultural economics, we also study how the development of
agriculture helps the development of the other sectors of the
economies; how can labor and capital flow into the non-agricultural
sectors; and how agricultural development initiates and sustains the
development of other sectors of the economy.
Agricultural economics not only develops principles concerning the
optimum use of scarce resources in agriculture but also examines the
principles regarding:
I. The outflow of scarce resources to other sectors of the economy
II. The flow of these resources from other sectors into the agricultural
sector itself
6
Nature of Agricultural Economics
Itis a social science that deals with the allocation of scarce
resources among competing alternative uses found in
production, processing, distribution, and consumption of
food.
Agricultural economics makes use of the principles of general
economics.
Agricultural economics does not merely involve direct
implications of principles to the field of agriculture. The principles
of economics are too general in nature and the general theory of
economics has been considered as an abstraction from reality.
7
Firstly, agricultureis a unique industry in which the mode of
life and business enterprise is combined together. It is more
influenced by sociological, political and sentimental
considerations.
Secondly, another characteristic of agricultural production which
distinguishes it from industrial production is that the farmer
produces chiefly for his own needs.
Thirdly, many agricultural commodities are joint products like
wheat and mutton and wool because they are both part of the
same plant or the same animal. In agriculture, it is rarely justifiable
to consider the supply of any product in isolation.
8
Fourthly, agriculture requires a far larger proportion of land in
relation to its employment of other factors than does industry.
Fifthly, farming mostly is undertaken in small sized units and
thereby gives little scope for division of labor.
Sixthly, unlike in the manufacturing industry, combinations are
not possible in farming due to the existence of a large number of
small farm holdings.
Finally, in agriculture, farmers’ control over production is very
limited.
9
The Nature of Linkage
Backward Linkage: This refers to the relationship between
industry and the suppliers of its inputs.
Forward linkage: This refers to the relationship between an
industry and other industries which use output as an input. A
change in output or price transmitted forwards to the
industry/user of produce.
10
Agriculture Linkage to Different Sectors
1. Primary Sector: The primary sector of the economy relies
on basic food and material which are extracted from the
earth.
2. Secondary Sector: This sector is dependent on the
primary sector because finished goods are produced from
raw material which is extracted by the primary sector.
3. Tertiary Sector: The tertiary sector relies on the
secondary sector and also known as the service sector.
4. Quaternary Sector: This sector is closely linked with the
tertiary sector and includes fields such as government,
libraries, culture, scientific research, education and
information technology
11
Agriculture Linkage to Different Sectors
5. Other linkages and contribution:
I. Agricultural contribution to industrial growth
II. Source of Capital formation and Foreign Exchange
III. Market demand
IV. Bank Finance
V. Energy Sector
12