VETM 2501: Animal Production I

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Questions and Answers

What occurs when the supply curve is steeper than the demand curve?

Prices and quantities spiral outward.

Fluctuations decrease in magnitude with each cycle. (correct)

Demand curve is less elastic than the supply curve.

Fluctuations increase in magnitude with each cycle.

In the unstable case, what is indicated about the elasticities of the curves?

Supply curve is more elastic than the demand curve. (correct)

Both curves have equal elasticity.

Demand curve is less elastic than the supply curve.

Supply curve is less elastic than the demand curve.

What visual representation indicates a stable market condition according to the supply and demand relationship?

An outward spiral of prices and quantities.

Random fluctuations without a pattern.

A straight line for prices.

An inward spiral of prices and quantities. (correct)

What is one function of good financial record keeping for farmers?

Aid in assessing and mitigating farm business risks. Signup and view all the answers

In the example of a farmer raising pigs, what ultimately happens by the time the pig is ready for market?

There are too many pigs, causing the price to fall. Signup and view all the answers

What does price elasticity of demand (PED) measure?

The responsiveness of quantity demanded to changes in price. Signup and view all the answers

Which factor does NOT shift the demand curve?

Production technology advancements Signup and view all the answers

What does a downward-sloping demand curve signify?

Higher prices lead to decreased quantity demanded. Signup and view all the answers

What happens when the absolute value of price elasticity of demand (PED) is greater than 1?

Demand is elastic. Signup and view all the answers

Which of the following is a determinant of supply?

Production technology Signup and view all the answers

Which statement best describes the agricultural cobweb model?

It shows the lag in production decisions that affects prices. Signup and view all the answers

What is an example of a Giffen good?

Staple foods whose demand increases with price due to necessity. Signup and view all the answers

Which of the following describes the concept of market equilibrium?

Market price stabilizes at the intersection of supply and demand. Signup and view all the answers

What goes into successful business management in agriculture?

Effective payroll and inventory management. Signup and view all the answers

If the price of a substitute good rises, what is likely to happen to the demand for the original good?

Demand for the original good increases. Signup and view all the answers

Study Notes

VETM 2501: Animal Production I

Course covers general farm management
Key learning objectives include understanding agribusiness application, livestock industry supply and demand, price elasticity of demand and supply, the agricultural cobweb model, financial record keeping importance and methods.

Lecture Outline

Learning objectives
Introduction to agribusiness
Supply and demand in livestock production
Financial record keeping and its significance

Learning Objectives

Understand applying agribusiness principles
Explain livestock industry supply and demand
Define price elasticity of demand and supply
Explain the agricultural cobweb model
Understand financial record keeping importance and examples of how it's done

Farm Business Financial Management Model

Records include collecting and organizing data
Management reporting includes organizing, analyzing, and reporting
- Financial position
- Financial performance
Decision-making includes planning
- Pro forma
- Feasibility
- Profitability
- Risk-ability
- Budgets
  - Cash
  - Partial
  - Enterprise
Financial statements include balance sheets, income statements, statements of cash flows, statement of owner equity

Introduction

Agribusiness encompasses economic activities related to farm products
Includes production, processing, transportation, marketing, and distribution
Successful business management is crucial for profitability and includes
- Payroll
- Inventory
- Budgets
- Balance sheets

Management Decisions

Selecting profitable enterprise combinations
Determining profitable farm business size
Using credit wisely
Deciding on profitable production methods
Determining profitable production levels
Timing production
Making marketing decisions
Determining quality of products to be sold
Managing risk

Supply and Demand in Livestock Production

Market price determined by supply and demand in uncontrolled markets
Market equilibrium occurs when supply and demand balance
Demand measures the quantity of a good or service consumers are willing to buy at a certain price
- Consumer tastes, preferences, number of buyers, consumer income, price of related goods, future expectations affect demand
Demand curve is generally downward sloping; rare goods have upward sloping demand curves (e.g., Giffen, Veblen Goods)
Supply measures the total amount of a good or service available at a certain price
- Determinants include resource/input costs, production technology, taxes/subsidies, supplier expectations, and number of sellers
Price elasticity of demand (PED) measures how demand changes in response to price changes
- PED is negative due to the inverse relationship between price and quantity demanded
- PED values indicate elasticity:
  - 0-1 = inelastic
  - 1 = unitary elastic
  - 1 = elastic
A high PED means consumers are very sensitive to price changes
Price elasticity of supply (PES) measures how supply changes in response to price
Cobweb model explains periodic price fluctuations in certain markets
- Production determined by past or current prices
- Current price determined by current production
- Based on time lag between supply and demand decisions. Two outcomes are possible:
  - Stable (convergent): Fluctuations decrease in magnitude. The supply curve is steeper than the demand curve.
  - Unstable (divergent): Fluctuations increase in magnitude. The demand curve is more elastic than the supply curve.

Financial Record Keeping and Its Importance

Make informed farm business decisions (track profits, losses, expenses)
Analyze profit by identifying most profitable farm enterprise(s)
Manage cash flow to ensure funds for daily activities
Implement investments to upgrade or diversify
Income tax purposes

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Description

This quiz covers vital topics in animal production focusing on general farm management principles. Key areas include agribusiness applications, livestock supply and demand dynamics, price elasticity, and the significance of financial record keeping. Test your understanding of these essential concepts in agricultural economics.