Agricultural Economic Resources, The economic meaning of agriculture

Why is agricultural economics important to learn? There are two main reasons, first, the human need for agricultural products (goods and services) is unlimited both in quantity and quality. Second, agricultural resources commonly referred to as factors of production such as land, capital, labor and management, which can be used to produce goods and services to meet the needs that are not limited to available in limited quantities (rare).

The field of agricultural economics

Every time we are faced with economic choices. Each individual must choose the best goods, services and activities. On the other hand we are faced with limited resources that will be used to obtain the goods, services and activities that we want. The problem is how we use limited resources to meet unlimited needs, which is also known as an economic process. Since childhood, we have actually been used to make choices between two or more activities: whether to go with dad to a relative's house or go with a mother to a shop. Making such a choice is an economic decision because choosing one activity means you have to sacrifice the other activities. As they grow into adults, economic decisions become more complex such as studying in college or working, buying a tractor or buying cattle, repairing a house or expanding land to be rented. In this case we have unknowingly applied economics as an art, even though we do not study or understand economics.

Experts in agriculture, agribusiness actors, heads of government at any time are also faced with economic problems. Studying the application of economic principles in agriculture does not guarantee successful economic decision making, but will provide an understanding of economic processes and direct better economic decision making (Sjo, 1976).
Experts in agriculture, agribusiness actors, heads of government at any time are also faced with economic problems. Studying the application of economic principles in agriculture does not guarantee successful economic decision making, but will provide an understanding of economic processes and direct better economic decision making (Sjo, 1976).


Because every individual must carry out economic actions at all times, the understanding of economic practice will be more than the understanding of economic theory. Every time we use ideas or concepts and economic terms, such as demand (demand), supply (supply), welfare (wealth), price (price), competition (competition).

Therefore, to find out the area of agricultural economic discipline it is necessary to first understand the meaning or definition of agricultural economics and economics itself. The following will be explained regarding the definitions of these two fields of science. According to Sjo (1976), to define economics we must consider four things, namely:
  1. unlimited human desires;
  2. limited resources;
  3. resource allocation;
  4. time period.

By combining the four things, economics can be defined as the study of how society, both individuals and groups, allocates limited resources among various desires to maximize satisfaction at a certain time.

According to Abbot and Makeham (1979), economics is the science used to analyze the use of limited resources to meet basic needs. As is the case with scientific disciplines in general, expertise is needed in using economic principles to solve various problems. These applications include:
  1. determine alternative ways of using resources;
  2. meet various needs and desires at various levels of preferences;
  3. relating to points 1 and 2, it means that economics studies human behavior including making the best decisions about the use of resources.
Thus, economics is a science that deals with efforts to meet physical needs that are not directly related to money. Furthermore it was stated that in general, economics is useful to help the people of a country to choose goods and services that are better, more goods and services and higher quality (standard of life).

Based on the above description and understanding of economics, agricultural economics can be defined as applied social science, the principles and analytical methods of economics used to find solutions to economic problems in agriculture. In general there are two types of problems faced by experts in agriculture. First, agricultural economists must be able to determine the needs and desires of consumers. Second, agricultural economists must face the problem of the production and distribution of agricultural products. Traditionally, agricultural economists are more oriented towards these two types of problems. At present, the economy is more consumer-oriented so agricultural economists are required to try to better understand the desires of consumers.

The following will be presented an overview of the importance of agricultural economics for solving a country's problems. This description begins by showing the importance of agriculture to the country's economy, the economic system adopted, the use of economic principles in solving the problems faced. In the end it will show the area of agricultural economic discipline.

The United States is one of the developed countries that is constantly increasing its attention on economic policies that can improve the welfare of life for its people, the country and its relations with other countries throughout the world. The problem is that human resources and potential physical resources are not sufficiently available both in quantity and quality to supply food that can meet the increasing needs of the world community.

Specifically, food and fiber production and its distribution are an important part of the United States economy. As the largest producer of various agricultural commodities, the United States plays an important role in the world food situation. Because food is one of the basic human needs, all countries will always pay attention to the growth, development and stability of food production and distribution. Therefore understanding of economic principles to be applied to production, distribution and consumption in agriculture and food commodities is important. In addition, a picture of US agriculture and sustainable food policy benefits the welfare of the people of the United States.

Basically, the United States adheres to a free enterprise economic system. This economic system provides a large degree of freedom for each individual to choose or buy goods and services, enter or exit business activities and utilize resources (land, labor, capital and management). The term mixed economy is sometimes used to describe the economy of the United States of America in relation to the ownership of productive resources by the private sector and the government. The United States is also described as a country with a market-oriented economic system (market-oriented economy) that is different from economic systems whose economic activities are planned by the government. An understanding of a country's economic system requires a study of market price systems, the role of supply and demand in the allocation of goods and services, as well as resources among various economic activities.

Important aspects in the production process

In order to understand the main forces that determine the supply of a commodity available in the market, producers must know the physical and economic relationship in the production process. Important aspects of the production process include:
  • type of product;
  • the best combination of resources that will be used in the production process;
  • knowledge of the various types of production costs;
  • producing at the level of output that maximizes profits (Donald and Malone, 1981).
Behind the demand for various kinds of goods and services that consumers want to buy, there are forces that influence consumer choices in order to fulfill their desires. Consumers will try to maximize their satisfaction by choosing a combination of goods and services that is better or more preferred than other combinations, subject to limited income or budget constraints.

The market, which is an economic place of exchange in a free market economic system, can be studied to determine how resources and products (goods and services) are allocated in the economic system in response to price changes. Market failure can occur in a free market. It is believed that certain industries experience economic benefits or economic losses in relation to other industries. In certain cases, it might not be enough to rely on the market price mechanism as a means of distributing economic resources. In such a situation it is necessary to intervene or intervene the government in the price system through price fixing, production regulation, and / or consumption as well as the estimated economic implications for various economic sectors.

Policies in agriculture and food are closely related to international economic policies and are very important, especially for consumers and producers in the country (domestic) and foreign consumers and producers throughout the world. Analysis of policies in agriculture and food as well as an evaluation of aspects affecting the domestic and world economy can be done at any time.

Finally, the relationship between natural resource use, policy and agricultural production can be tested through a study or research. Issues relating to the conservation of resources used in economic activities, competition or complementary between resources such as land and water for food production or for other uses can be analyzed and sought for resolution.

Based on the description that has been stated, it can be said that the discipline of agricultural economics has a broad scope (area). However, according to Soekartawi (1987), in principle this scope can be classified starting from production, consumption and marketing activities as well as other aspects that affect these productive activities.

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