Economic Equilibrium in Traditional Agriculture - USP Lecture Notes

These flashcards cover key concepts and findings about economic equilibrium in traditional agriculture as discussed in the lecture notes from the University of the South Pacific.

What are the five hypotheses of the economics of agriculture according to T. W. Schultz?

1. Farmers in traditional agriculture respond to economic incentives. 2. Agricultural development is not primarily about the supply of capital but about the forms of investment. 3. There are few significant inefficiencies in the allocation of factors of production. 4. Little is gained from imitating the best farmers. 5. The rate of return to capital is low in traditional agriculture.

What is the main problem identified by Schultz regarding agricultural development?

It is a problem of determining the forms of investment that will make it profitable to invest in agriculture.

What is a characteristic of traditional agriculture as stated in the findings?

It is characterized by low land productivity and low yields.

What factors contribute to low labour productivity in traditional agriculture?

Limited land available per farmer, limits on resources with hand and animal tools, and low productivity of crop varieties and livestock.

What model is important for understanding traditional farmers' decision-making?

An economic model that accounts for the effect of price changes on farming decisions.

What is the relationship between farm size and productivity in traditional agriculture?

Increasing farm size is usually associated with decreasing land productivity and lower total productivity; small farms typically have greater productivity.

Why do small farms have greater agricultural productivity?

Due to increased quality and quantity of labor, diligence, entrepreneurship, and better labor management.

What is the indication of equilibrium in supply and demand in traditional agriculture?

Little change in the position of demand and supply curves over time; average preferences and income remain constant.

What does efficient allocation of resources by traditional farmers entail?

It occurs when marginal costs are equated with marginal returns.

What is a major challenge faced by traditional agriculture regarding yield?

Highly uncertain yields due to little control over crop-growing variables.