EconAir

  The Agricultural Revolution - settled farming, domestication of animals, irrigation - started about 10,000 years ago. The technology changed little until the beginning of the Industrial Revolution in the 1700s. Because of the Industrial Revolution, agriculture has been radically transformed.  A consequence of the “industrialization” of agriculture has been that farming has changed from subsistence farming (raising food to feed the farming family) to commercial farming (growing crops to sell in markets). Because of the reduction in transportation costs, markets for farm products are now global. Like other industries, agriculture has gone through waves of absorbing innovation and new technology developed by input suppliers. Agriculture, especially grain production, has been transformed by   steel plows and implements.  animal-drawn harvesters and combines.  tractors and other mechanized equipment. chemical fertilizers. pesticides. herbicides. irrigation systems....

    Introduction We now take a look at what is behind supply-side decision-making, how corporations decide how much to produce and sell.  Keep in mind that economic theory assumes that producers are profit-maximizers. This means that producers will expand output only if they expect this action will increase profit. Production Function What is a production function? A production function is a general statement about how a company turns inputs into output. Inputs In some textbooks, inputs are grouped into three categories – land, labor and capital. Land is shorthand for land and natural resources. But land is not an economic resource until farmers use energy, tools, machines, skills and knowledge to turn it into farmland to grow food. Natural resources are also not economic resources. Trees have to be processed to become timber and paper. Iron ore has to be mined and smelted (removed from rocks) and turned into steel. Crude oil, a polluter of water until 1859 (first oi...