Agricultural economics

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Economic study at Ballard Farmers Market

Agricultural economics applies many aspects of finance, production, management, statistics, policy making and marketing to farming. Agricultural economics is primarily focused on environment, resources management, risk analysis, raw material supply chains, produce marketing chains, cost analysis, rural income, market structure, market intelligence, viability and capital resources.

This branch of study was initially focused on land use and was known as land economics and agronomics. The focus was on maximizing the crop production as well as conserving the soil from degradation.

With the turn of the 20th century, these studies came into prominence with the establishment of the Department of Agricultural Economics at Wisconsin in 1909. This discipline had developed largely as an empirical branch of general economics. With the empirical applications of mathematical statistics many econometric methods were evolved.

In the end of 20th century, agricultural economics had become broad based with integrated multidisciplinary approach covering farm management, finance, marketing, environment, resource management, policy making, community and rural development, international agri-trade, food safety and nutrition.

Farming and marketing of produce has become a basis for evolving many field models like the cobweb model or cobweb theory, hedonic regression model, hedonic pricing model, new technology diffusion models, multi-factor productivity measurement, and the random coefficient regression Models.

The cobweb model or cobweb theory explains how a time lag between supply and demand decisions causes periodic price fluctuations in livestock and farm produce markets.

Agricultural economics is essential for resource creation, resource allocation, planning for risk and uncertainty, establishment of farm supply and consumption chains, fixing of prices of commodities, market structures, development of agricultural trade and arriving at the viability of farm practices.

These studies helps framing farming polices and recommending strategic directions, founded on social, environmental, and economic sustainability.
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