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Capitalism and Economy IAFNR Agribusiness Module

Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

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Page 1: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Capitalism and Economy

IAFNR Agribusiness Module

Page 2: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Economics

• What is Economics?• Economics is…• “the study of allocation of scarce resources among competing

alternatives.”• “the study of how individuals and countries decide how to use

scarce resources to fulfill their wants.”• “the study of the decisions involved in producing, distributing,

and consuming goods and services.”

Let’s learn a little more about Economics!

Page 3: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

3 Components of Economics

•Did you notice some of the key words mentioned in the definitions of Economics? They are the three components of Economics.• Scarcity• Not enough resources to satisfy wants and needs• Not to be confused with “a shortage”

• Resources• Land, Labor, Capital, and Management

• Wants and Needs• Can you think of some examples of each?

Page 4: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Are these Needs or Wants?

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Page 5: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

3 Economic Questions

• In order to manage the 3 components of Economics modern societies must answer these 3 economic questions• What goods should be produced, and how much

of each?• How should these goods be produced?• Who should get what and how much?

Page 6: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Economic Systems

Traditional• Things are done “the way they

have always been done.”

• Decision based upon customs or religious beliefs; passed down from generation to generation

• Traditional systems exist in limited parts of Asia, Africa, the Middle East and Latin America

Capitalism• Individuals have free reign over

their time and resources and can determine how to use those assets• Ownership is private• Little involvement of

government

• Self-regulated System• Free market determines prices• Competition is driving force of

activity and decisions

Page 7: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Economic Systems

Traditional• Things are done “the

way they have always been done.”

• Decision based upon customs or religious beliefs; passed down from generation to generation

• Traditional systems exist in limited parts of Asia, Africa, the Middle East and Latin America

Capitalism• Individuals have free reign

over their time and resources and can determine how to use those assets• Ownership is private• Little involvement of

government

• Self-regulated System• Free market

determines prices• Competition is driving

force of activity and decisions

Communism• Totalitarian system of

government that a single body controls government owned production means• Total control of

economic matters • Individuals have

no power

• Everyone contributes according to need

Page 8: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Capitalism

an economic system characterized by private or corporate ownership of capital goods, by

investments that are determined by private decision, and by prices, production, and the

distribution of goods that are determined mainly by competition in a free market

Page 9: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

Principles of Capitalism in Agribusiness

• Private ownership of property and resources• Anyone that owns property may use it in production (ex. Crops or

business)• Potential for profit

• Profit is a direct result of business decisions

• Free Market determines prices• Based upon supply/demand

• Competition is driving force• How many companies can produce a similar product? Unlimited!• Creates change among products and supply/demand

Page 10: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

The Big Picture of AgribusinessAgricultur

al Industry

Agribusiness Input

Agribusiness

Output

Farmers

Where do you see capitalism at

work in Agribusiness?

Page 11: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

The United States Economy

A Mixed Economy

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Page 12: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

The United States Economy

• A mixed system• The U.S. Economy operates with aspects of different economic

systems but is known to most as the free enterprise system

• Characteristics of the U.S. Economy• Little or no government control

• Some government regulation for safety of the public

• Freedom of enterprise• Free to own and make decisions about

factors of production• Freedom of choice• Rights to own private property• Profit incentive• Competition

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Page 13: Capitalism and Economy IAFNR Agribusiness ModuleIAFNR Agribusiness Module

References

Ricketts, C., & Ricketts, K. (2009). Agribusiness Fundamentals & Applications. New York: Delmar Cengage Learning.

Merriam-Webster’s Dictionary (2014). Capitalism. Retrieved from http://www.merriam-webster.com/dictionary/capitalism