Holt 7525-9 S15_IT

Chapter 30 Agriculture and Health Care
The basic economic problem is scarcity. Human wants are unlimited. Resources are limited. The
basic goal in dealing with the problem of scarcity is to produce as much consumer satisfaction as
possible with the limited resources available. For most of history, the majority of resources have
been devoted to food production. In less developed countries, food production still requires a
large percentage of the available resources. In developed countries, agricultural productivity has
increased greatly. Thus, food production has required a steadily shrinking percentage of the
available resources in developed countries.
Example 1: The table below indicates per capita GDP for three developed countries and for three
less developed countries. The table also details the percentage of each country’s labor force
devoted to agriculture. The information is for 2013, and is from the “CIA World Factbook”.
Nation per capita GDP % of Labor Force in Agriculture
Canada 43,100 2%
Australia 43,000 4%
France 35,700 4%
India 4,000 49%
Nigeria 2,800 70%
Tajikstan 2,300 47%
The decrease in the percentage of resources devoted to food production has freed resources for
other types of production. The increasing production of housing, clothing, transportation, medical
care, education, recreation, etc. has been made possible by increases in agricultural productivity.
Good News about U.S. Agriculture
Agricultural markets are among the most competitive of all U.S. markets. Most agricultural
markets are very large and have a large number of relatively small producers.
Example 2: In 2013, there were about 2.1 million farms in the U.S. containing about 914 million
acres of agricultural land. In 2013, U.S. farmers planted about 97 million acres of corn, about 10
million acres of cotton, about 78 million acres of soybeans, and about 57 million acres of wheat.
The average farm size was 435 acres.
Agricultural producers are producing essentially identical products to those of their competitors.
Most producers have no market power (ability to affect market price) and must compete in terms
of productivity and cost efficiency, both of which have been improving in agriculture.
Example 3: The table below details yields per acre for seven important agricultural commodities
for 1954 and 2013, and indicates the percentage increase in the yield per acre over this fifty-nine
year period. Information is from the USDA National Agricultural Statistics Service.
Commodity 1954 Yield per acre 2013 Yield per acre Percentage increase
Corn 39.4 bushels 158.8 bushels 303%
Cotton 341 pounds 826 pounds 142%
Oats 34.8 bushels 64.0 bushels 84%
Peanuts 727 pounds 4,006 pounds 451%
Rice 2,517 pounds 7,694 pounds 206%
Soybeans 20 bushels 43.3 bushels 117%
Wheat 18.1 bushels 47.2 bushels 161%
FOR REVIEW ONLY - NOT FOR DISTRIBUTION
Given these desirable characteristics, one might expect little or no government intervention in
agricultural markets. But the opposite is true. The federal government has played a large role in
agricultural markets for many decades. The federal government’s farm policies have been aimed
at helping farmers deal with their long run problem (falling farm prices and total revenue) and with
30 - 1 Agriculture and Health Care