Foundations in Aquaculture Economics Foundations in Aquaculture Economics Dr. Craig Kasper

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  • Slide 1
  • Foundations in Aquaculture Economics Foundations in Aquaculture Economics Dr. Craig Kasper
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  • Outline Objectives: provide a basic understanding of the microeconomic factors which influence farm establishment, production and sales of aquatic productsObjectives: provide a basic understanding of the microeconomic factors which influence farm establishment, production and sales of aquatic products Application of economic principles to a practical settingApplication of economic principles to a practical setting
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  • The Next Few Weeks We will focus heavily on Aquaculture Economics 1)introduction to economics 2)business planning/financial analysis 3)marketing
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  • Foundations of Agriculture Economics Lets face it. Our complex world always changes!Lets face it. Our complex world always changes! Globalization, industrialization, and mechanization has all contributed to convenience and speed that only Danica Patrick could appreciate!Globalization, industrialization, and mechanization has all contributed to convenience and speed that only Danica Patrick could appreciate!
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  • Foundations of Agriculture Economics Production methods in agriculture have changed dramatically.Production methods in agriculture have changed dramatically. How??How??
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  • Ag. Econ Intro. Aquaculture is no stranger to this either (ponds, raceways, cages, recirc, etc.)Aquaculture is no stranger to this either (ponds, raceways, cages, recirc, etc.) Managers of todays farms must be efficient and knowledgeable with respect to economic, marketing, and financial issues.Managers of todays farms must be efficient and knowledgeable with respect to economic, marketing, and financial issues. To be competetive, you must think and act globally.To be competetive, you must think and act globally. Aquafarmers must master technical aspects of production and economics to survive in todays world.Aquafarmers must master technical aspects of production and economics to survive in todays world.
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  • Understanding Economics By understanding how your resources can be used to satisfy the needs and desires of people, you can appreciate economics.By understanding how your resources can be used to satisfy the needs and desires of people, you can appreciate economics. We must be aware of individual consumers and producers needs.We must be aware of individual consumers and producers needs. All our resources are finite!All our resources are finite! Most goods and services are also finite hence, the continuing need for green technology devleopment.Most goods and services are also finite hence, the continuing need for green technology devleopment.
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  • Scarcity: The Bottom Line Scarcity: finite resources cannot supply all the goods needed to satisfy affluence (lust).Scarcity: finite resources cannot supply all the goods needed to satisfy affluence (lust). REM: If we had it all, no one would be interested in use of resources (or anything Gore, Obama or anyone else has to say).REM: If we had it all, no one would be interested in use of resources (or anything Gore, Obama or anyone else has to say). Guess what? If scarcity doesnt exist, everything is free!Guess what? If scarcity doesnt exist, everything is free!
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  • To Avoid Scarcity Allocation: partitioning something, and/ or providing an alternative useAllocation: partitioning something, and/ or providing an alternative use Best use must agree with individual and social objectivesBest use must agree with individual and social objectives Scarce resources must be partitioned between competing uses (fish meal: swine, chicken, aquaculture).Scarce resources must be partitioned between competing uses (fish meal: swine, chicken, aquaculture).
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  • Choose, but choose wisely (Knight, Indiana Jones and the Last Crusade) Its nearly impossible to placate all your desires, you must choose.Its nearly impossible to placate all your desires, you must choose. Even if human action was rational, you would likely satisfy your wants before your needs (impulse).Even if human action was rational, you would likely satisfy your wants before your needs (impulse). Choice is fundamental to economicsChoice is fundamental to economics I dont have time to go cut the weeds at the ponds, Id better go feed the fish!I dont have time to go cut the weeds at the ponds, Id better go feed the fish!
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  • Choose Thus, when you dont want to do something, you generally choose to do something you like instead (shopping or fishing vs. homework or studying for exams).Thus, when you dont want to do something, you generally choose to do something you like instead (shopping or fishing vs. homework or studying for exams). Time is also finite! One must choose how to spend it (Human nature??) 1440 Rules!!Time is also finite! One must choose how to spend it (Human nature??) 1440 Rules!! We have the greatest freedom on how we spend our income (and that isnt much freedom).We have the greatest freedom on how we spend our income (and that isnt much freedom). For example: Manager asks How much do I invest in technology vs. How much do I save for a rainy day?For example: Manager asks How much do I invest in technology vs. How much do I save for a rainy day? Also: people often say they cannot afford to buy something when they really mean they prefer to buy something else.Also: people often say they cannot afford to buy something when they really mean they prefer to buy something else.
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  • Goals Goals: ends, or objectives may seem infiniteGoals: ends, or objectives may seem infinite We must prioritize to achieve them.We must prioritize to achieve them. Thus, economics might be viewed as the science of choice-making.Thus, economics might be viewed as the science of choice-making. It considers allocating finite resources between competing alternatives!It considers allocating finite resources between competing alternatives!
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  • Homework Assignment #2 As potential aquaculturist, make a short list (10 items) of resources and what are some competing alternatives (i.e., how else could you use these resources)? Due next week!
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  • How to Achieve a Goal: Scale of Preference Rem: Economics assumes we are rational and make equally rational decisions!Rem: Economics assumes we are rational and make equally rational decisions! However, we usually make the one yielding the greatest satisfaction!However, we usually make the one yielding the greatest satisfaction! Implies all have our own preference scale!Implies all have our own preference scale! A list of unsatisfied wants arranged in order of preference.Preference scale: A list of unsatisfied wants arranged in order of preference.
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  • Scales of Preference Example: Buy feed and/or chemicals?Example: Buy feed and/or chemicals? Oops! We have a budget!Oops! We have a budget! Example: What if we throw in politics? Deciding between funding a large-scale fisheries project vs. a large-scale aquaculture project?Example: What if we throw in politics? Deciding between funding a large-scale fisheries project vs. a large-scale aquaculture project? Reality: You may find that your decision must be made among an infinite number of combinations, not just two alternatives.Reality: You may find that your decision must be made among an infinite number of combinations, not just two alternatives.
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  • Production Transform Curve B2 A1 O Slope of Curve Unattainable E2 E1 A B Attainable Investment in Aquaculture Investment in Fisheries Production Possibility Frontier B1 A2
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  • Opportunity Costs Since the production transformation curve slope is concave downwards, it illustrates the cost of increasing the expenditure on one commodity in terms of sacrificing consumption (purchase) of other goodsSince the production transformation curve slope is concave downwards, it illustrates the cost of increasing the expenditure on one commodity in terms of sacrificing consumption (purchase) of other goods It is the value of one item in terms of the other (opportunity cost)It is the value of one item in terms of the other (opportunity cost) Opportunity cost: money lost by producing item A instead of item B.Opportunity cost: money lost by producing item A instead of item B.
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  • Part 2: Types of Economics Economics consists of macroeconomics and microeconomicsEconomics consists of macroeconomics and microeconomics Microeconomics (Micro-) : the study of specific economic units that make up an economic sector.Microeconomics (Micro-) : the study of specific economic units that make up an economic sector. Focus is on a single unit (or an aggregation of units), always part of a wholeFocus is on a single unit (or an aggregation of units), always part of a whole Studies individual farms, their relationships to each other, and to the industry (economy) as a wholeStudies individual farms, their relationships to each other, and to the industry (economy) as a whole
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  • Macroeconomics (Macro-): entire economy is considered.Macroeconomics (Macro-): entire economy is considered. How does an economic system deal with inflation, depression and unemployment.How does an economic system deal with inflation, depression and unemployment. Example: Issues in aquaculture relative to the rest of the economyExample: Issues in aquaculture relative to the rest of the economy Macro-: forest; mic