Underperformance Definition And Costs (Economics)

Question 1

Production versus productivity

Answer 1

• profitability takes into account costs of livestock enterprise
• this measure has enough info to asses productivity of enterprise
• efficiency of conversion inputs -> outputs is the productivity of an activity
• different inputs and products
  > to estimate livestock productivity common to convert inputs and outputs to monetary values

Question 2

Production v productivity

Answer 2

-

Question 3

Define productivity

Answer 3

Total value outputs per unit time / total value inputs per unit time

Question 4

Common methods of livestock productivity?

Answer 4

> production per animal
- £1500-£2000 per dairy cow, investment! = proxy of something?
production per hectare
- allows comparison with crops and different animal production

Question 5

What is important when thinking of performance?

Answer 5

Identify resources used in production system are that are scarce and estimate the output per unit of the scarce resource

Question 6

Technical and economic optimism

Answer 6

• technical relationship between an input and output = a production function
• inputs = fed, forage, health care etc,

Question 7

What is the Technical optimum levels of production important for?

Answer 7

• defining a rational level of production

Question 8

What are the 3 stages of production ?

Answer 8

Stage 1 - increasing outputs with increasing in puts
Stage 2 - decreasing inputs for still increasing outputs
Stage 3 - decreasing output for increasing inputs
> OPTIMUM STAGE 2 : region of rational production

Question 9

Where are market values for livestock found?

Answer 9

Farming press

Question 10

What is required for an economic optimim?

Answer 10

• inputs all have value (even farmers time)
• outputs valued monetarily (some exceptions eg. Manure has NEGATIVE value)
• therfore technical relationship needs to be modified to include prices of inputs and outputs
  > total inputs X input price
  > total outputs X output price
• difference between value of outputs and inputs is profit
• economic optimum is where profit is maximised*

Question 11

What is profit and how is it maximised?

Answer 11

• difference between total revenue and total costs
  BREAK EVEN POINT = total revenue equals total costs
• maximised when slope if total revenue line equals slope of total cost line (= point where there is greatest distance between the lines)

Question 12

How do total costs relate to total revenue graphically?

Answer 12

• total costs usually linear increase

- total revenue differs in 3 stages curvilinearly

Question 13

How are technical and economic optimums related?

Answer 13

NOT THE SAME

• depends On costs of inputs
• the lower the unit price of an input relative to an output the closer the technical and economic optimums

Question 14

Where is profit maximised

Answer 14

• furthest point between input costs and outputs on the graph

Question 15

How does changing input costs change the shape of the graph?

Answer 15

Decreases gradient of the line, moves economic optimum towards technical optimum

Question 16

Where can you find which inputs to livestock system are important?

Answer 16

• John Nix farm management handbook (published annually, up to date important outputs and variable)
• Agriculture budgeting and costing book (Agro business consultants) gross margins with different prices and outputs

Question 17

How does health change productivity?

Answer 17

Moves total revenue line and cost line affecting productivity

• small proportion of cost structure of livestock systems
• medicines can influence efficacy of feed and forage (esp sheep) and overall productivity of unit
• vet advice will have impact on labour and skill needs, and equipment

Question 18

How does vet advice impact productivity?

Answer 18

• impacts health and welfare
• use of other farm resources (be aware of resource competition within the farm esp labour and capital)
• how efficicently key resources are itilised (understand impact on feed utilisation on environment or poorer communities)

Question 19

LOs

Answer 19

• understand concept productivity
• differentiate economic and technical optimum
• identify critical resource constraints
• different points of view for assessing underperformance (technical advisor, livestock, society)