Economic Principles in Farm Management

Farm Enterprise

• Animal based

• Plant based

• Service based

• Adding value

• Production

Choose input eg

• raw material

• milk

• meat

• income

• commodity / product

Fertilizer

Capital

Farming tools

Labour

Pesticides

Herbicides

soil

These are examples of _______

• output

• process

• input

•It refer to time period involved in the production process.

•Production of a commodity depends on certain specific inputs.

•It represents the quantitative relationship between inputs and outputs.

•The time period involved to convert input into output is known as production function.

•Relationship between inputs and outputs determines what the
farmer produces.

The statements refer to

• short run

• Production Function

• long run

If fixed inputs are unchanged in short run production function, they are

• elastic

• inelastic

Fix Input

ØFixed input/ fixed cost are those that ________

ØA fixed input is a factor that remains constant for a certain level of output.

Ø

ØIn short run production, is inelastic

Ø

ØIn long run production, elastic

• do not change with the level of farming activity, such as land rent, tax, interest, insurance premiums, depreciation on fixed asset, salaries of manager & workers,office

• varying with the level of production, such as feeds, fertilizer, no. of labour, pesticides, fuel, electricity and water

Ø_______ are those varying with the level of production, such as feeds, fertilizer, no. of labour, pesticides, fuel, electricity and water

Ø

ØThe changes of _____ can change the level of output

Ø

ØIn short run/ long run production, all variable input is elastic.

Ø

ØA _________ is change with the change in output.

• Fixed input/ fixed cost

• Variable input/ variable costs

TP is

• the change in output that results from a small change in an input (holding the level of all other inputs constant)

• the amount of output produced per unit of input at each input level

• the maximum quantity of output that can be produced from a given combination of inputs.

the amount of output produced per unit of input at each input level

• Average product (AV)

• Marginal product (MP)

• Total product (TP)

•MP=      Total Product (TP) /     Input level (IL)

•The change in output that results from______ (holding the level of all other inputs constant)