Micro Economic Analysis in Agriculture in 2 Vols

Kumar, K Nirmal Ravi

• Publisher: Daya Publishing House
• Year: 2021
• eBook ISBN: 9789383048496
• Topic: Technology & Engineering
• Subtopic: Agriculture
• Index: Technology & Engineering

Having a thorough knowledge on the fundamental aspects of any subject is essential to analyze and understand its advanced versions. The same is conceptualized in this text book entitled, 'Microeconomic analysis in Agriculture', as it dealt all the basic concepts of Microeconomics and thus explained the related advanced versions in a more analytical manner. Though several books were authored in the context of explaining microeconomic aspects, this book is relatively a significant achievement, as it offered an analytical background considering examples from the micro-level aspects of agriculture to the extent possible. This is the first of its kind and the style of presentation is very simple and easy to understand for the student community. The important concepts of modern microeconomics like Game theory, Theory of Contestable Markets, Fixation of Minimum wages to labour etc., were also dealt in this book in a simplified manner. In this perspective, this book is extremely useful for all the students, who wish to pursue their career majoring in Economics in general and Agricultural Economics in particular. Further, it contains an up-dated and standard material on the various aspects of Micro-economics duly covering the latest syllabi as prescribed by the several universities in India, thereby, it helps the Academicians for better explanation of the concepts to the student community. The concepts are illustrated with neat graphical representations wherever necessary and they are well-explained to suit the requirements of student community. This book is very useful for the students pursuing B.Sc. (Agriculture), M.Sc. (Agricultural Economics), Ph.D (Agricultural Economics), BA, MA, B.Com, M.Com, JRF, NET, ARS, IAS, IFS and other competitive examinations.

Table of contents

• Foreword
• Preface
• Author’s Note
• Part I – Basic Concepts
• 1. Definitions and Scope of Economics
• Definitions
• Wealth definition
• Welfare definition
• Scarcity definition
• Growth definition
• Employment stability centered definition
• Scope of Economics
• Subject matter of Economics
• Economics is a social science
• Whether Economics is a science or an art?
• Whether Economics is a positive or normative science?
• Macro and Micro economic spheres
• Agricultural Economics
• Nature and scope of Agricultural Economics
• Why a separate branch of Agricultural Economics
• Methods of economic analysis
• Deductive method
• Inductive method
• Economics in relation to other social sciences
• Economic Laws
• Scientific nature of economic laws
• Features of economic laws
• Assumptions of Economic laws
• Economic laws vis-à-vis Laws of other sciences
• Reasons for uncertainity of economic laws
• Schools of economic thought.
• 2. Basic Economic Terms and Concepts
• Goods
• Classification of goods
• Utility
• Types of utility
• Value
• Price
• Wealth
• Types of wealth
• Wealth and Money
• Wealth and Income
• Wealth and Welfare
• Income
• Money income
• Real income
• Savings
• Investment
• Human wants
• Characteristics of human wants
• Classification of wants.
• 3. Economic Systems
• Capitalist economy or Capitalism
• Essentials of Capitalism
• Merits of Capitalism
• Demerits of Capitalism
• Modern Capitalism
• Socialism
• Essentials of Socialism
• Merits of Socialism
• Demerits of Socialism
• Communism
• Essentials of Communism
• Merits of Communism
• Demerits of Communism
• Mixed economy
• Essentials of Mixed economy
• Merits of Mixed economy
• Demerits of Mixed economy
• Features of an Indian economy
• Differences across theeconomic systems.
• 4. Central Problems of an Economy
• Causes of economic problems
• Central or Fundamental economic problems
• Solutions to central economic problems
• Production Possibility Frontier (PPF)
• Assumptions
• Construction of a PPF
• Shapes of PPF
• Substitution and Opportunity cost
• Slope of PPF
• Position and Shifts in PPF
• Reallocation of resources based on PPF
• Application of PPF.
• Part II - Demand Theory
• 5. Theory of Consumer Behaviour
• Techniques employed to study the consumer behaviour.
• 6. Utility Analysis or Marshallian Approach of Consumer Behaviour
• Basic assumptions of Utility analysis
• Concepts of utility
• Consumer’s equilibrium or Maximization of consumer’s satisfaction
• Consumer’s equilibrium when the commodity is available free of cost to the consumer
• Consumer’s equilibrium when commodity is priced to the consumer
• One-commodity consumer’s equilibrium
• Two commodities or More than one commodity consumer’s equilibrium.
• 7. Law of Diminishing Marginal Utility (One Commodity Equilibrium)
• Law
• Assumptions
• Explanation of the law
• Consumer’s equilibrium when the commodity is priced
• Exceptions or Limitations of the law
• Practical importance
• Criticisms.
• 8. Law of Equi-Marginal Utility (More than One Commodity Equilibrium)
• Law
• Assumptions
• Explanation of the law
• Limitations
• Practical importance
• LEMU vis-à-vis LDMU
• Derivation of demand curve from Utility or Marshallian analysis
• Derivation of demand curve in case of single commodity based on the concept of LDMU
• Derivation of demand curve in case of more than one commodity based on the concept of LEMU
• Shortcomings of Utility analysis or Marshallian approach of consumer behaviour.
• 9. Indifference Curve Analysis-Consumer Optimization without Measurable Utility
• Concepts in IDC analysis
• Assumptions
• IDC
• Monotonic preferences
• Properties of IDC
• Price line
• Consumer’s equilibrium
• Assumptions
• Conditions to be fulfilled to arrive at consumer’s equilibrium
• Interior and Corner solutions of consumer’s equilibrium
• Economic effects in consumer’s equilibrium
• Income effect
• Income Consumption Curve (ICC)
• Types of Income effect
• Different shapes of ICCs
• ICC and Engel curve
• Properties of ICC
• Shapes of Engel’s curves
• Derivation of income demand curve from ICC
• Substitution effect
• Hicks-Allen approach
• Slutsky approach
• Price effect
• Price Consumption Curve (PCC)
• Properties of PCC
• Decomposition of price effect into income effect and substitution effect
• Hicks
• Allen approach
• Slutsky approach
• Hicks
• Allen approach vs Slutsky approach
• Income and substitution effects and nature of goods
• Relative strengths of substitution effect and income effect and nature of goods
• Income effect and Substitution effect and Law of demand
• Substitutes and complementary relationships in IDC analysis
• Hicks version of substitutes and complements
• Analysis of substitutes in case of two commodities
• Analysis of substitutes in case of three-commodities
• Analysis of complements in case of two-commodities
• Analysis of complements in case of three commodities
• Derivation of demand curve from PCC
• Derivation of market demand curve
• Computation of elasticity of demand from PCC
• Marshallian uncompensated demand curve vs Compensated demand curves
• Comparative picture between Marshallian uncompensated demand curve and Compensated demand curves
• Similarities between Marshallian approach and IDC approach
• Superiority of IDC analysis over Marshallian analysis
• Applications of IDC analysis
• Criticisms of IDC analysis.
• 10. Revealed Preference Theory
• Assumptions
• Concepts in Revealed Preference Theory
• Differences between Revealed Preference Theory and IDC technique
• Revealed Preference Theory and Law of demand
• Derivation of demand curve from Revealed Preference Theory
• Derivation of IDC from Revealed Preference Theory
• Superiority of Revealed Preference Theory over Marshallian utility analysis and IDC analysis
• Criticisms of Revealed Preference Theory.
• 11. Theory of Demand
• Types of demand
• Price demand
• Law of demand
• Features of law of demand
• Assumptions of the Law of demand
• Exceptions to the Law of demand
• Importance of law of demand
• Individual demand
• Individual demand schedule
• Individual demand curve
• Reasons for downward sloping of demand curve
• Market demand
• Market demand schedule
• Market demand curve
• Individual demand schedule vs Market demand schedule
• Income demand
• Cross demand
• Cross demand for substitutes
• Cross demand for complements
• Demand function
• Importance of demand function
• Movement versus Shifts in the demand curve
• Inter-related demands
• Joint demand
• Composite demand
• Direct demand
• Derived demand.
• 12. Elasticity of Demand
• Types of elasticity of demand
• Price elasticity of demand
• Degrees of price elasticity of demand
• Differences between slope of demand curve and price elasticity of demand
• Factors influencing price elasticity of demand
• Price elasticity of demand and PCC
• Importance of price elasticity of demand
• Income elasticity of demand- Degrees of income elasticity of demand
• Classification of goods based on income elasticity of demand
• Measurement of income elasticity of demand
• Determinants of income elasticity of demand
• Importance of income elasticity of demand
• Cross elasticity of demand
• Cross elasticity of demand, if the commodities under consideration are substitutes
• Cross elasticity of demand, if the commodities under consideration are complements
• Importance of cross elasticity of demand
• Substitution elasticity of demand
• Methods of measuring price elasticity of demand
• The Total-Revenue Test
• Significance of elasticity of demand
• Relationship between price elasticity, income elasticity and substitution elasticity.
• 13. Consumer’s Surplus
• Definition and Meaning of Consumer surplus
• Explanation of the law
• Changes in consumer’s surplus due to changes in price and quality of the commodity
• Market consumers’ surplus
• Assumptions of consumer’s surplus
• Measurement of consumer’s surplus
• Measurement of consumer’s surplus as an area under the demand curve (Marshallian approach)
• Consumer’s surplus and elasticity of demand
• Changes in consumer’s surplus due to changes in demand and supply
• Consumer’s surplus for related commodities
• Measurement of consumer’s surplus through IDC analysis
• Hicksian approach of measuring the Marshallian consumer’s surplus by assuming constant MU of money
• Hick’s approach of measuring the consumer’s surplus by assuming diminishing MU of money
• Hicks’s four consumer’s surpluses when the price of commodity X changes
• Price compensating variation or Compensating variation
• Price equivalent variation or Equivalent variation
• Quantity compensating variation or Compensating surplus
• Quantity equivalent variation or Equivalent surplus
• Difficulties in the measurement of consumer’s surplus
• Practical importance of the concept of consumer’s surplus
• Can firms reduce consumer surplus.
• Part III - Production Theory
• 14. Theory of Producer Behaviour
• Production function
• Concept of period in production function
• Short run production function
• Long run production function
• Basic concepts in short run production function
• Production function with one variable factor (Returns to a variable factor)
• Traditional approach
• Modern Approach -LVP
• Assumptions
• Explanation of the law
• Limitations
• Importance of LVP
• Differences between Traditional approach and Modern approach of Returns to a variable factor
• Production function with two variable factors
• Isoquants
• Properties of isoquants
• Similarities between isoquant and IDC
• Dissimilarities between isoquant and IDC
• Iso-cost line
• LCC of factors or Optimum factor combination
• Cost minimization for a given level of output
• Output maximization for a given cash outlay and prices of the two resources
• Isoclines
• Expansion path in long run and short run
• Ridge lines
• Effect of changes in factor price on factor usage
• Substitution relationship between the factors
• Complementarity relationship between the factors
• Factors are perfect substitutes
• Factors are perfect complements
• Difference between expansion path and price-factor curve
• Elasticity of factor substitution
• Returns to scale
• MRs to a variable factor and returns to scale
• Differences between LVP and Returns to scale
• Explanation of LVP in terms of isoquant approach
• Multi-product firm
• Production possibility curve
• Properties of Production possibility curve
• Production possibility curve vis-a-vis Isoquant
• Iso-revenue line
• Optimum product combination
• Types of production functions
• Linear homogenous production function
• Non-homogenous production function of ‘k’ degree
• Cobb-Douglas production function.
• Part IV - Product Pricing
• 15. Theory of Costs: Costs and their Behaviour Patterns
• Different types of costs
• Cost function
• Theories of costs
• Traditional theory
• Short run Absolute costs
• Short run per unit costs
• Long run per unit cost curves
• Derivation of LRATC
• Shapes of LRATC curve
• Derivation of LRMC
• Shape of LRMC curve
• Optimum size firm
• Factors influencing optimum plant size
• Relation between LRATC and SRATC curves
• Relation between LRMC and SRMC curves
• Modern theory of costs
• Short run per unit cost curves
• Long run per unit cost curves
• Derivation of LRTC curve from expansion path
• Derivation of LRATC curve from LRTC curve
• Derivation of LRMC curve from LRTC curve.
• 16. Economies and Diseconomies of Scale
• Economies of scale
• Importance of economies of large scale
• Types of economies of large scale
• Internal economies of large scale
• External economies of large scale
• Diseconomies of large scale
• Internal diseconomies of large scale
• External diseconomies of large scale
• Avoiding diseconomies of large scale.
• 17. Supply and Elasticity of Supply
• Law of supply
• Features of law of supply
• Assumptions of the Law of supply or Determinants of supply
• Importance of law of supply
• Individual supply
• Individual supply schedule
• Individual supply curve
• Reasons for upward sloping of supply curve
• Exceptions to the Law of supply
• Market supply
• Market supply schedule
• Market supply curve-Individual supply schedule vs Market supply schedule
• Supply function
• Importance of supply function
• Movement versus Shifts in the supply curve
• Elasticity of supply
• Price elasticity of supply
• Degrees of elasticity of supply
• Differences between slope of supply curve and elasticity of supply
• Factors influencing elasticity of supply
• Methods of measuring elasticity of supply
• Applications of Price elasticity of supply
• Supply curve under perfect competition
• Supply curve under perfect competition in short run
• Supply curve for firm in short run
• Supply curve for industry in the short run
• Supply curve under perfect competition in the long run
• Supply curve when the industry experiences ‘increasing returns’ or ‘decreasing costs’ in the long run
• Supply curve when the industry experiences ‘constant returns’ or ‘constant costs’ in the long run
• Supply curve when the industry experiences ‘diminishing returns’ or ‘increasing costs’ in the long run
• Supply curve under monopoly competition
• Producer’s surplus
• Measurement of producer’s surplus
• Influence of price changes on producer’s surplus
• Influence of changes in demand and supply on producer surplus
• Sizes of the consumer and producer surpluses at various output levels
• Producer surplus for an industry and a firm under perfect competition
• Relation between producer surplus and profit
• Social Surplus
• Must consumer’s surplus equal to producer’s surplus at equilibrium price
• Inter-related supply
• Joint supply
• Composite supply
• Equilibrium price
• Changes in equilibrium price
• Floor price
• Price ceiling
• Welfare analysis.
• 18. Morphology of Markets and Analysis of Firm’s Equilibrium
• Classification of market structure or competition
• Perfect competition
• Pure competition and Perfect competition
• Imperfect competition
• Monopoly
• Oligopoly
• Monopolistic competition
• Analysis of firm’s equilibrium
• Concepts of revenue
• ARC and MRC under perfect market competition
• ARC and MRC under imperfect market competition
• Monopoly
• Oligopoly
• Monopolistic competition
• Derivation of ARC and MRC from TRC
• Relation between TR, AR and MR curves
• Relationship between TR, AR, MR and price elasticity of demand
• Determination of firm’s equilibrium
• Normal profits
• Super-normal profits
• Sub-normal profits
• Assumptions to determine firm’s equilibrium
• Methods to determine the firm’s equilibrium
• TR and TC approach
• Firm’s equilibrium based on TR and TC approach under perfect competition
• Firm’s equilibrium based on TR and TC approach under imperfect competition
• Case of profit maximization
• Case of minimization of losses
• Limitations of TR and TC approach
• MR and MC approach
• Firm’s equilibrium based on MR and MC approach under perfect competition
• Firm’s equilibrium based on MR and MC approach under imperfect competition
• MR=MC analysis in markets with linear demand
• Importance of AR and MR curves.
• 19. Perfect Competition
• Features of perfect competition
• Price determination under perfect competition
• Role of time element in influencing equilibrium price
• Very short period price or Market period price
• Very short period price or Market period price in case of a perishable commodity
• Very short period price or Market period price in case of a semi-durable commodity
• Short period price
• Long Period Price or Normal Price
• Long run price or Normal price and the Laws of returns
• Secular period
• Comparison between market price and normal price
• Equilibrium of the firm and industry under the perfect market competition
• Equilibrium of firm and industry under perfect competition in the short run
• Equilibrium of the firm and industry in the short run under identical cost conditions
• Equilibrium of the firm in the short run under varying cost conditions
• Equilibrium of firm and industry under perfect competition in the long run
• Equilibrium of the firm in the long run
• Equilibrium of the industry
• Long run equilibrium of the firms and industry under identical cost conditions
• Long run equilibrium of the firms under varying cost conditions
• Is perfect competition a ‘reality’ or a ‘myth’
• Advantages of perfect competition
• Disadvantages of perfect competition.
• 20. Imperfect Competition
• Monopoly
• Oligopoly
• Monopolistic competition.
• 21. Monopoly
• Sources of monopoly power
• Features of monopoly
• Kinds of monopoly
• Price and output determination in monopoly
• Price determination of a monopoly firm in short run and long run
• Profitability decisions of a monopoly firm in short-run or Short run monopoly equilibrium
• Profitability decisions of a monopoly firm in the long-run or Long run monopoly equilibrium
• Laws of returns and monopoly price determination in the long run
• Comparison of price determination under Perfect competition and Monopoly
• Monopoly price and Price elasticity of demand
• Monopoly pricing with threat of entry
• Multi-plant monopoly firm
• Price discrimination
• Conditions of price discrimination
• Types of price discrimination
• Degrees of price discrimination
• Justification of price discrimination
• Differences between Simple monopoly and Discriminating monopoly
• Monopoly power
• Merits of monopoly
• Evils of monopoly
• Regulation of monopoly
• Social cost under monopoly
• Differences between Perfect competition and Monopoly
• Desirability of monopoly competition.
• 22. Oligopoly
• Different forms of oligopoly
• Causes of oligopoly
• Features of oligopoly
• Output and price determination under duopoly
• Output and price determination under oligopoly
• The Cournot duopoly model
• The Bertrand model
• The Edgeworth model
• The Chamberlin’s model
• Non-collusive oligopoly model (Kinked demand curve theory)
• Price and output determination
• When trade is relatively under depressed conditions
• When trade is under boom conditions
• Factors influencing price of the product in oligopoly market
• Collusion
• Cartel
• Joint profit maximization cartel
• Market sharing cartel
• Non-price competition cartel or Market sharing by non-price competition
• Quota system of cartel or Market sharing by output quota
• Cartels on an international scale
• Merits of formation of cartel
• Possible break-downs of cartels
• Price leadership theory
• Types of price leadership models
• The low-cost price leadership model
• The low-cost price leadership model with equal market shares among the firms
• The low-cost price leadership model with unequal market shares among the firms
• The dominant firm price leadership model
• The Barometric price leadership model
• Exploitative price leadership model
• Difficulties of price leadership
• Game theory
• Theory of Contestable markets
• Essential conditions or Features of a contestable market
• Pricing under contestable market
• Criticisms of contestable markets
• Cartel model vis-à-vis Contestable market model
• Advantages of oligopoly
• Disadvantages of oligopoly
• Desirability of oligopoly competition.
• 23. Monopolistic Competition
• Features of monopolistic competition
• Price-Output determination of firm under monopolistic competition in the short run
• Price-Output determination of a firm under monopolistic competition in the long run
• Chamberlin’s alternative approach of ‘group’ equilibrium under monopolistic competition
• Short run firm’s equilibrium
• Long run group equilibrium when entry of new firms is blocked
• Long run group equilibrium when new firms enter the industry
• Concept of excess capacity
• Chamberlin’s concept of excess capacity
• Concept of excess capacity with entry of new firms and price-competition between the firms
• Concept of excess capacity with entry of new firms and with non-price competition
• Non-price competition
• Selling costs
• Effect of selling costs (advertising costs) on the demand for the product
• Average Selling Cost and Marginal Selling Cost curves
• Combined cost
• Selling (Advertising) costs and profit maximization
• Gap between Average Combined Cost and Average Production Cost
• Price-output determination of a firm under selling costs
• Price-output determination of a group under selling costs
• Price-output determination of a firm under variable selling costs and price of the product
• Price-output determination of a firm in the context of product differentiation
• Merits of Monopolistic competition
• Wastes of monopolistic competition
• Desirability of monopolistic competition
• Market failure
• Differences between market structures.
• Part V-Factor Pricing
• 24. Theory of Distribution
• Features of factors of production
• Distribution
• Functional distribution vs Personal distribution
• Why a separate theory of distribution
• Importance of factor pricing
• Theories of factor pricing or distribution
• Marginal productivity theory of distribution
• Factor pricing under imperfect competition
• Modern theory of distribution or Demand and Supply theory of distribution.
• 25. Rent
• Contract rent vs Economic rent
• Different concepts of rent
• Classical approach
• Modern approach
• Definitions of rent
• Classical definitions
• Modern definitions
• Theories of rent
• Ricardian theory of rent or Classical theory of rent
• Assumptions
• Concept of Ricardian theory of rent under extensive cultivation
• Concept of Ricardian theory of rent under intensive cultivation
• Rent and Price
• Criticisms against Ricardian theory of rent
• Modern theory of rent
• Ricardian theory vs Modern theory of rent
• Quasi-rent
• Differences between rent and quasi rent
• Similarities between rent and quasi rent
• Differences between quasi rent and interest
• Differences between rent and profit
• Economic rent and Transfer earnings.
• 26. Wages
• Different types of wages
• Why a separate theory of wages
• Different theories of wages
• The Subsistence theory of wages
• The Wages Fund theory of wages
• The Residual Claimant theory of wages
• The Standard of living theory of wages
• The Bargaining theory of wages
• The Marginal Productivity theory of wages
• Discounted marginal productivity theory of wages
• Modern theory of wages
• Determination of equilibrium wage level of labour in a firm
• Equilibrium of firm in the short run regarding the employment of labour
• Equilibrium of the firm in the long run regarding the employment of labour
• Exploitation of labour
• Collective bargaining (Trade unions) and wage determination of labour
• Limitations of collective bargaining of trade unions
• Causes for wage differentials
• Fixation of minimum wages
• Merits of fixing minimum wage level
• Demerits of fixing minimum wage level.
• 27. Interest
• Gross interest and Net interest
• Theories of interest
• Marginal productivity theory of interest
• Abstinence theory of interest
• Agio or Austrian theory of interest
• Time preference theory of interest
• Classical theory of interest
• Loanable funds theory of interest
• Liquidity preference theory of interest
• Superiority of Keynesian theory over Classical theory of interest
• Superiority of Keynesian theory over Neo-Classical or Loanable funds theory of interest
• Modern theory of interest
• Comparative picture across different theories of interest
• Whether interest is a real or monetary phenomenon
• Why interest rates differ
• Whether interest rate can fall to zero.
• 28. Profits
• Different types of profits
• Economic profit and Accounting profit
• Gross profit and Net profit
• Different theories of profits
• Rent theory of profits
• Wages theory of profits
• Risk theory of profits
• Uncertainty bearing theory of profits
• Dynamic theory of profits
• Innovations theory of profits
• Marginal productivity theory of profits
• Modern theory of profits or Determination of profits under perfect competition.
• References
• Subject Index