Flashcards in The cost of underperformance in livestock Deck (25):
the efficiency of conversion of inputs to outputs
takes into account the costs of a livestock enterprise. This measure has enough information to assess the productivity.
Formula - productivity
= total value of outputs per unit time/ total value of inputs per unit time
- other methods include: production/ animal or per hectare (allows arable comparison)
What is a production function?
a technical relationship b/w and input and output (to identify an optimum level of production). Very important to determine rational level of production
Inputs - livestock production
- animal health care
- farmer time
List ouputs of livestock production
- meat/ milk/ live animals (i.e. positive price items)
- exceptions = negative price items (manure)
difference between output and input
When is an economic optimum reached?
where profit is maximised
How do you determine profit on an economic optimum graph?
profit is the vertical distance (the difference) b/w total revenue and total costs
When is there a break-even point?
when total revenue = total costs
When is profit maximised on an economic optimum curve?
where slope of total revenue is line is equal to slope of total cost line. This is equal to the point where there is greatest difference b/w two lines
Define technical optimum
maximum amount of production
Define economic optimum
the maximum profit
When are the technical and economic optimums closest?
the lower the unit price of an input relative to an output, the closer the technical and economic optimums are.
What is the John Nix Farm Management Handbook?
- published every year
- up to date information on most important outputs and variables
What is the agricultural budgeting and costing book published by Agro Business Consultants?
- similar to Nix but contains a range of gross margins with different prices and outputs
T/F: vet services and meds are often a large proportion of the cost structure of livestock systems
False - often a small proportion. However meds can influence efficiency of feed/forage and overall productivity of the unit. Vet advice often impacts on labour, skills and equipment and health and welfare of livestock.
How may a vet and farmer's aim of optimums differ?
- vet - eradicate all disease regardless of costs and benefits and achieve a technical optimum
- farmer - economic optimum
DEfine law of diminishing returns (also called the law of variable proportions)
states that if increasing amounts of one input are added to a production process while all other inputs are held constant the amount of output added per unit of variable input will eventually decrease.
- often referred to the law of diminishing marginal returns (as the marginal change as the point)
Outline stage 1 of production
total production is increasing at an increasing rate. PRoducitivity is thus increasing during this stage.
Outline end of stage 1 and beginning of stage 2 of production
productivity, the conversion of input --> output, changes from an increasing to a decreasing rate.
Outline stage 2 of production
- output continues to increase but at a diminishing rate
- efficiency of using a variable inut is at its greatest where stage 2 begins
- the efficiency of using the fixed inputs is greatest at the end of stage 2
- optimal use of inputs lies somewhere in stage 2 and it depends upon the input costs and output prices
Outline the end of stage 2/ beginning of stage 3 of production
the output reaches its maximum point
Outline stage 3 of production
the production of output declines. It would be wasteful if producers were at this stage of the production function.