UNIT 1 .

- THE AGRICULTURAL ECONOMY AND ENTERPRISE

SHORTAGE AND ELECTION. The economy can be defined as "all activities carried out
in human societies to meet the material needs of people and achieve wellness th
rough the use of scarce resources available. The three essential elements: mat
erial satisfaction of human needs All economic activity is designed to meet mate
rial needs, ie the individual providing goods and services which are fed, dresse
d, transported, sight-seeing, its spirit grows , etc. The social dimension of
the economy is said that the economy has a social dimension as it is not applica
ble to an individual alone but to the relationships established between individu
als in society. The lack of economic assets and goods are scarce, the economic
resources to produce (types of labor, capital, land, entrepreneurship) are limi
ted or scarce, in conjunction with the wishes of individuals who always or do no
t exceed limits. The shortage forced to choose between alternatives. Choose some
thing implies something else aside. This is called OPPORTUNITY COST. What happen
s when you do not choose to produce something, is the main opportunity cost. The
cost of alternatives abandoned. What people have done to address the scarcity o
f economic activity. Economic activity has three fundamental aspects: PRODUCTI
ON: production of economic goods to satisfy needs. It is a creative activity. Cr
eate utilities. CONSUMPTION: the satisfaction of needs. It is a destructive ac
tivity. Destroy profits. EXCHANGE: enables the relationship between production
and consumption. This activity involves the use of competing for scarce resourc
es (how used), and people compete for control of these resources (ownership). Co
mpetition is a struggle for control of scarce resources. In the capitalist syste
m normally means OR PRIVATE ENTERPRISE ECONOMY MARKET ECONOMY, since although th
e government produces some goods, most produced by private companies. A key rule
of economic competition in this system is that people can compete against each
other by offering more favorable exchange, but can not compete with each other s
imply seizing something that belongs to someone else. One might think that coope
ration, that is working together to achieve a specific purpose, could solve econ
omic problems without resorting to competition, but not, as it does not eliminat
e economic scarcity,. THE ECONOMIC SYSTEM The economic system is the mechanism t
hat allocates scarce resources among competing uses. Able to determine: TO PRO
DUCE GOODS AND SERVICES AND THAT AMOUNT. or Choose the goods and services and th
e amount of each that the economy can produce. o How are decisions made to produ
ce consumer goods and private goods produced by the Government PRODUCE AS Sele
ction or combination of factors and the particular technique to be used to produ
ce goods and services. o As a rule, the production can be performed with various
combinations of factors and different techniques, we present the problem of det
ermining which ones to use. or Given the scarcity of resources, you should selec
t the technique which has minimum cost, ie using the fewest possible resources .
. for those who produce or how they should divide the total output among diffe
rent consumers,
taking into account the distribution of money income. o In the name of equity an
d justice, governments typically modify the primary distribution of income, remo
ving the rich through taxes and redistributing to the poor through subsidies and
welfare payments, or through the provision of public goods like education free
The law and order and defense. ECONOMIC SYSTEM shows two types of components:
makers: The decision-makers. or families: Any group of people who live together
and act as a decision making unit. o COMPANIES private organizations use resourc
es to produce goods and services (farmers, industrialists, merchants, banks, ins
urance companies, etc.) State organizations or governments that provide goods an
d services (national defense, security, law, public health, transportation, educ
ation, etc..), and redistribute income and private wealth. The MARKETS Areas i
n which transactions are conducted sale.€MARKETS or, alternatively, in the purch
ased goods and factor markets services or those in which productive resources ar
e bought: WORK: Any mental or physical effort made to produce EARTH: Natural
resources of all types CAPITAL: Equipment buildings, tools, and in general al
l goods that can be used in production. Families and firms make decisions that r
esult in transactions in the markets for goods and factors. Families decide how
much of their labor, land and sell or lease capital in factor markets, for which
they receive income in the form of wages, rent, interest and benefits. And also
decide how to spend their income on goods and services produced by firms. The c
ompanies choose the quantities of factors of production to rent or buy, as used
and how much goods and services produced, sold in the markets for goods. Governm
ents decide which goods and services provided to families and businesses, which
factors of production to rent or buy, as well as taxes to finance their activiti
es. In the diagram below you can see the interrelationship: red represents the f
low of goods and services and factors of production, and black financial flows:
GOODS AND SERVICES FAMILY GOODS AND SERVICES TAX WORKING CAPITAL LAND MARKET FAC
TORS BENEFITS SALARY BENEFITS SALARY INTEREST INCOME INTEREST INCOME
MONEY
MARKET OF GOODS AND
GOVERNMENTS
REAL MONEY AND GOODS AND SERVICES TAX SERVICES BUSINESS
WORKING CAPITAL LAND
MECHANISMS OF COORDINATION The daily choices they make families, businesses and
governments collide with each other. How is it possible that millions of individ
ual decisions by households, businesses and government be reconciled?. MARKET CO
ORDINATED BY THE INDIVIDUAL DECISIONS price mechanism. If the quantity supplied
of a good is less than the amount that people want to buy, some can not. For ele
ctions between buyers and sellers are compatible, increase the supply and reduce
d demand. An increase in the price of good cause that result. In the opposite si
tuation, a decrease in the price of good will increase demand and decrease suppl
y. In this way the market decides how much to produce. In the same way the marke
t solves as producing, identifying the goods and the techniques used in producti
on. Finally, the market helps resolve for whom to produce, since the owners of r
esources and more scarce skills, gain a greater share of the product. In a broad
sense PRICES serve three main functions: encourage the production means that
prices in response to all know what to do and thus keeping the economy functioni
ng rationing scarce resources, arising from the equalization of quantities dem
anded and offered through the equilibrium price, discouraging higher bid or offe
r pointers be mechanisms to transfer resources from one use to another, is thr
ough changes in prices that indicated the need to transfer resources from one pr
oduction line to another. There is a first unifying principle of these decisions
: the marginal principle. This means that economic decisions do not belong to th
e class of all or nothing, but the rate of one a little bit more versus less. Th
at is, weigh the benefits of tinkering at the margin. What happens in the econom
y is the result of an enormous amount of marginal decisions taken daily business
, workers and consumers. WITH RESPECT TO WORK, people must decide: whether the
y work or not: it depends on the economic necessity of individual psychological
and social pressure how to work: Depends on individual preference system and t
he weighting that makes the relationship cost between work and leisure where t
o work: what kind of job, that company and where in the country or the world, de
pends on individual preferences, the level of training acquired and which is the
most attractive package offered. WITH RESPECT TO CAPITAL OR INSTRUMENTS OF PROD
UCTION, companies must decide: What quantity and quality of goods purchased. D
epend on: o the demand of the final product€as demand for capital goods is a der
ived demand or wear or depreciation with capital goods used in production and th
erefore their need for replacement or upgrade needs of technologically How to
finance the purchase of the assets or savings made by the company to expand empl
oyment or loans obtained from the money market, by which you will pay an interes
t rate. WITH RESPECT TO THAT AMOUNT CONSUMER GOODS THAT ARE PRODUCED, companies
must decide: Guided by the system of consumer preference
Comparing the production costs with prices that consumers are willing to pay.
Which production method will work or combination of factors of production tech
nique is technically feasible or economically preferable alternative, to involve
the lower production cost MARKET ECONOMY IN PEOPLE owner receives income from l
abor and capital with which contributes to the production . The income depends o
n the amount of resources to help you, multiplied by its price. But the amount o
f resources owned by an individual depends: capital accumulated, whether from
inheritance or savings on the proceeds practiced The capacity for productive w
ork, whether innate or acquired capacity cost of a person is given by the sum of
those resources and revenues accumulated in a period of time. The presence of S
tate determines that some redistribution of capacity via: The tax system: Depe
nding on the extent to which extent the different individuals according to their
economic capacity Public spending: Depending on the extent and who benefits,
either through direct transfers to individuals, and through the provision of goo
ds for free. The market is a coordination mechanism applies to a market economy.
But there are other alternative mechanisms of coordination. A MECHANISM OF CONT
ROL is a method for determining what, how and for whom goods and services produc
ed by the use of a hierarchical organization structure in which leaders make dec
isions that require actions that are transmitted by a chain of command . In the
command economy, a central planning office makes the decisions. An economy based
on both market mechanisms as the mechanisms of command, called mixed economy ..
Most economies in the real world markets and controls used to coordinate econom
ic activity. The what, how and for whom to produce goods and services depends pr
imarily on the market mechanism, but also partly control mechanisms arising from
the legal system, through which laws are enacted, establishing regulations and
institutions are created to monitor market economy. In this way governments infl
uence the economic decisions of households and businesses. Business Economics tr
aditional agrarian economy is divided into three main sectors of production. T
he primary sector or extractive activities, those that derive their products fro
m the soil, subsoil, rivers or the sea, that is, using nature as a factor of pro
duction. o include farming and forestry, mining, fishing and energy production (
oil and natural gas) The secondary sector: Activities that transform raw mater
ials and intermediate products into other assets. o include all industrial activ
ities that typically work with physical capital (machinery and equipment) and hu
man capital, ignoring almost completely the land factor. Within this sector or i
s the food industry are processed products from agricultural and forestry activi
ties that turn into other products or consumer goods for the food end of the fam
ily. or industry is also processed products from agricultural and forestry activ
ities, which are converted into other non-food goods (cotton, wool, wood, leathe
r, etc..) The tertiary sector or service activities. o include trade, transpor
t, banking, insurance, storage, etc.
Agricultural enterprises are a part of the primary sector. This classification i
s a first definition of farming which says it's made by companies that produce p
rocessed foods and raw materials of plant and animal origin through the exploita
tion of the soil. This definition reflects a narrow focus on agrarian,€where the
focus is on the products obtained by agricultural producers like final consumer
goods and intermediate goods that require processing before sale. A bit of walk
ing appreciate that it is unsatisfactory, since it would exclude the agribusines
s and farms without land, such as poultry, rabbits, hydroponic culture, etc. Exc
luding agribusiness firms involved aside as dairies, warehouses, factories or oi
l., Many of which operate on a small scale in rural areas. With economic develop
ment, agrarian approaches lose interest and are being replaced by an approach to
food. Agriculture is not conceived as a producer of food itself, but raw materi
als for food and other goods, which are intended for own agriculture, food indus
try and food industry. The long road leading crops from field to retail is a rea
l process of production, costs of technology, capital and labor costs that signi
ficantly exceed agricultural phase. Farm businesses, with some exceptions, are p
art of a broader sector by the size and unmistakable that it has acquired in our
society: the food industry and agribusiness. This sector is at the crossroad be
tween agriculture, industry and trade. The term food in principle reduce the fie
ld to those industries producing food, while the term agribusiness is broader an
d includes all materials processing companies originating in farming. Under thes
e assumptions we can accept the following definition of Land Corporation. AGRICU
LTURAL ENTERPRISE IS AN ORGANIZED UNIT OF PRODUCTION STRUCTURE WITHIN A RURAL SO
CIO-BUT CONNECTED TO NETWORKS different commercial, which aims is to offer food
and raw materials obtained by planting, livestock, forestry techniques TECHNICAL
AND AGRO-INDUSTRIAL , MANAGER WITH A PLAN THAT IS PART OF OFTEN (BUT NOT ALWAYS
) THE OPERATION OF FACTOR EARTH. Employer called the operator who takes the init
iative and the risk of a company. The employer sets the target and the productio
n plan, making major decisions and is responsible for the results. No one receiv
es a salary but variable pay (profit business), which depends on the success of
the business. The farmer, with or without employees, is an entrepreneur. In real
ity we can observe agricultural enterprises with different characteristics. They
can be corporations, civil or cooperatives, whose level of organization depends
on the size and complexity of activities. But even today, is for most family bu
sinesses with or without employees where the employer is engaged full time. But
they have made increasingly important by venture capitalists to part-time employ
ees, who spend part of their time to different professions and jobs, or other co
mmercial and industrial activities. Seen from the point of view of supply agricu
ltural business function is to achieve and meet the factors of production, alloc
ating the use of these factors with one or more production processes, and take t
he risk by all decisions taken. The agricultural employer or seek to control the
production processes and this must plan its actions with some minimum time. Thr
ough this proposed planning objectives, such as, obtaining the best possible har
vest cotton and maximize their profits. The first is a technical goal and the se
cond an economic objective. To quantify the technical objective variables are us
ed as output and final agricultural production. To quantify the economic objecti
ve using other variables such as value added, gross margin, net margin and cash
flow. All are important but each one is applied according to the aim pursued. Th
e agricultural company can follow a simple production strategy, ie perform a sin
gle activity as it could be the breeding of pigs or the planting of soybeans, or
follow a strategy
Multiple production is more diversified activity either combining different crop
s or livestock farming activity. In any case, the total production is calculated
using the formula: Y = Σpi not. Io Qi where pi = market price for the product i
o Qi = quantity of products obtained during the year i on = quantity of products
, which is a simple production. A common feature of agricultural enterprises on
the type of activity carried out is that part of the re-production or use in the
ir own exploitation.€This book would be the case for future planting seed or pro
duce fodder for their cattle, or the use of timber suitable for a chute or a fen
ce. Final agricultural production is given by output less the value of the produ
cts concerned. This calculation can be difficult in the absence of acceptable pr
ices for valuing intra. Achieve a given production involves using factors of pro
duction or inputs that have their costs and therefore to scale the economic obje
ctive value is necessary to detract from that of final output, ie get the busine
ss benefit. For the evaluation of economic achievement can follow two alternativ
e approaches: optics business profit, which answers the question What is the g
ain of the employer in the exercise?. It covers the economic result of the emplo
yer as a private business The optical value, in response to the question How h
ave won the employees, the owners of capital and the entrepreneur in the exercis
e?. It covers the economic outcome from a social standpoint as sum of income ear
ned by all actors in the production process. The business benefit is determined
by the difference between income earned in the year and the costs needed to prod
uce the quantity sold, whatever its nature. Within a very particular costs are o
pportunity costs. The can be defined as those resulting from the sacrifice made
by using the employer's own resources on your business and are measured by the p
rice of the alternatives set aside. Its calculation is very difficult because fo
r that we should know what income could be obtained if instead of being invested
in the company had invested in another similar business risk. Example of opport
unity costs are the entrepreneur's personal work or their families if they are n
ot paid, the lease of land or the use of its capital in its different variants.
Therefore the employer benefit is obtained by deducting including opportunity co
st. This method of calculation is strictly economic and differs from the way the
y usually calculate the profit or surplus of the company for accounting or tax,
which does not deduct the opportunity cost. Another type of costs that also offe
rs difficulties in calculating the depreciation of fixed assets, including deter
ioration and obsolescence. Hence, for certain planning problems abandons the for
mula of business profit and replaced by the concept of gross margin. When we ded
uct the cost of income, excluding depreciation and opportunity, we get the gross
margin. Under this approach costs deducted are those which have actually been d
isbursed, ie, have led to the departure of money, but there is a category that a
lso results in cash outflows that is the payment of income tax and is not a cost
but decreases the availability of the employer. The margin, cash flow in the An
glo- axon terminology, is the flow of money entering the business after paying f
or your purchases of goods and services, wages and taxes. DECI ION OF BU INE
ADMINI TRATION MANAGER RURAL can be defined as the decision-making process by wh
ich scarce resources are distributed among a number of alternatives, with the pu
rpose of organizing, directing and controlling the business in such a way that a
chieve the objectives. The administration of rural enterprises is part of the ap
plication of various sciences to the analysis
administrative problems, social, economic and technological enterprise. The basi
c functions of rural enterprise manager: planning, organization, execution and c
ontrol, to act in three areas simultaneously, production, marketing and finance.
FIVE GREAT DECI ION I TO TAKE THE MANAGER: they produce. or the basis of li
mited available resources it possesses, must establish some way that allows you
to choose among all the alternatives that are presented, the most favorable in t
erms of economic benefits. how to produce. or there are many alternative syste
ms to produce, should evaluate them to choose between them which will mean the m
inimum cost. The choice of the production system is not independent of the choic
e of product since its objective is the maximum profit as the difference between
revenues and costs. PRODUCE THAT AMOUNT. or et the product or products and p
roduction system, determine how much to produce of each to sell at a profit,€for
which compare the benefits from different levels of production. when buying a
nd selling. or prices of products and inputs vary with time. ome have seasonal
variations. hould analyze all these elements to resolve the time of sale or pur
chase. WHERE TO BUY and ELL. or alternative markets exist, so that prices can
be different and transportation costs are also different. Must be determined as
safe as possible where you get the most benefit. For the purposes of decision m
aking is important to have a AGRICULTURAL TECHNOLOGY MANAGEMENT MANAGERIAL that
enable it to examine the conditions under which the production process must deve
lop and implement the principles of economics to business planning. This technol
ogy consists of a series of stages, which methodologically can be outlined as fo
llows, forming A PIRAL OF MANAGEMENT:
7 - EVALUATION
1 - DE CRIPTION
6 - CONTROL
2 - ANALY I
5 - EXECUTION
3 - DIAGNO I
4 - PLANNING description or information on the region (climate data, soil, mar
ket, etc.) O Information on the amount of resources available to the company, an
d its use. ANALY I or order of the information collected. o Establishment of
indicators of physical and economic efficiency. DIAGNO I
or interpretation of the analysis, comparing the indicators with existing standa
rds or detect the strengths and weaknesses of the company or PLANNING Formulat
ion of goals and targets, and formulation of alternative plans of production or
physical and financial programming the selected plan or Posted EXECUTION AND C
ONTROL in place of something planned or Periodic control of the operation undert
aken. Evaluation and achievements are evaluated by comparing with the objectiv
es and proposed targets DECI ION MAKING A feature that is common to the family b
usiness and the leader of a large agricultural enterprise is the need to make de
cisions. Making decisions means liberty to determine the action to be taken towa
rds a specific situation. But there are limits to the freedom of choice imposed
by: The rationality of individuals: Not all possible actions are equally desir
able and many decisions to be taken are conditioned by earlier decisions. The
potential of each case: The company-specific factors and external factors At t
he objectives: The choice is guided by a set of economic and social objectives,
such as increasing net income, reduced economic risks taste and personal desire.
The actual choices do not always satisfy the original objectives, whether by th
e imperfect knowledge of technical and economic phenomena, the lack of external
factors, or impossibility of integrating simultaneously on the same reasoning or
calculation the same set of causes and effects involved. The development of rat
ional thought can not be achieved only with the help of a mathematical tool: the
decision model. The decision model is only a simplified representation and an i
mperfect approximation to reality. The decision is to choose among possible acts
, those which may present a maximum value for the objective pursued. The prepara
tion of decisions is a valuable aid in economic theory, which as we know, studie
s the use of scarce resources in alternative uses. In our field study the fundam
entals of the theory of production, based on marginal cost theory. (Units 2,3,4,
5 and 6) The marginal approach develops a coherent set of propositions and reas
oning and analysis methods are pursued: how how it is possible to conceive fo
rmally efficient productive combinations applicable to the company (functions pr
oduction) Calculate the equilibrium relations that are established in terms of
technical data and price when it pursues profit maximization, with the restrict
ive condition of not passing a certain level of spending or to achieve a certain
level of production. Calculate these relations of equilibrium when the maximu
m benefit has no limitations, or cost or production. These models will help us f
ind the right answer to the questions of how much to produce, by analyzing the r
elationship between the production function and cost function for different poss
ible levels of production and which of them determines the balance of the compan
y (Units 2 , 3 and 4), such as producing, analyzing the relationship between alt
ernative inputs (Unit 5) and produces,€analyzing the relationship between possib
le products (Unit 6) In summary, it is examining the equilibrium conditions that
the producer must pursue in their quest for maximum benefit. Additionally we wi
ll discuss some basic concepts that allow us to define the decision-making in a
context of risk and uncertainty that usually surrounds such as the agricultural
enterprise (Unit 7), and the criteria that can be taken to evaluate investments
whose maturation occurs several financial years (Unit 9). Furthermore we will an
alyze the methods of preparation of the optimal,
Budgeting methods that specifically address the problems in decision-making. (Un
it 8). Budgetary methods as opposed to analytical methods allow total or partial
reconstruction of the production system of a real company. This requires making
some forecasts on income and expenditure on factors of production employed, on
activities carried out and decisions to be taken. These methods refer to the ver
ification of the value of the hypotheses, ie to examine whether its implementati
on results in a significant improvement and lasting benefit. Other methods, espe
cially those that rely on linear programming, allows the complete reconstruction
of a production system without prior assumptions, but on the basis of an exhaus
tive enumeration and evaluation of activities, production techniques and the fac
tors productive.
THEORETICAL FOUNDATION RECOVERY On what is the economy. Why the scarcity fo
rces us to choose. Why the shortage involves competition. Competition between wh
at or from whom. What is the Economic Activity What is the Economic ystem,
how it works and what does determine. What are the components of the Economic
ystem and what each one. how to coordinate decisions of households, businesse
s and governments. What are the main functions of prices What is the margina
l principle. What kind of decisions people must make regarding work and busine
ss for the instruments of production and goods produced. Distinguish between m
arket economy, drive mechanism and mixed economy. Defining Agricultural Activi
ties, Agricultural Business and management of rural enterprises. Which are the
different ways of measuring the technical and economic goals of agribusiness.
What are the decisions to be taken by the administrator. What relationship ca
n be established between that result and how to produce. Give two decisions th
at are within the sphere of power of the manager and two on which he has no cont
rol What are the stages that divides the management scheme or technology used
to study and plan the agricultural enterprise. Why is it said that the scheme
is a spiral of management.