In our last topic we learnt the various approaches to the definition of agricultural economics by different authors. We also learnt from those definitions that the ultimate aim of agricultural economics is to assist farmers optimize their farm resources. We further learnt that agricultural economics has wide scope, as wide as the economics itself. We finally identified the areas in which economics are useful to agricultural production. 

In this topic, you will learn about the meaning of production economics, meaning of agricultural production economics and the scope of agricultural production economics. 


  • define production economics 

  • outline the four major areas of production economics 

  • state the meaning of agricultural production economics 

Meaning of Production Economics 

We already explained the meaning of agricultural economics and the uses of economics in agriculture; we also need to know the meaning of production before we can attempt the definition of production economics. 

Production can be defined as the transformation of one thing into another. For example, when one puts flour, sugar etc together to make cakes, this is called production. In strict economic sense, production is more than putting things together. It is concerned with the whole process of making goods and services available to customers i.e. it is the creation of utility to satisfy human wants. 

There are basically three types of production viz: primary production, secondary production and tertiary production. 

In the process of producing agricultural commodities, resources (inputs) which are not only limited in both quantity and quality but also have alternatives and often conflicting uses, are employed. The main focus of production economics therefore, is the management of resources (land, labour, capital and entrepreneur) in the process of producing commodities. Included in this goal of resource management are choice and decision making among the alternative uses and alternative end (product/output). The two major goals of production economics are: 

a. Provision of guidance to individual farmers for efficiency in resource use in production, and 

b. Provision of guidance to customers for efficiency in resource use, consumption and process. 

Meaning of Agricultural Production Economics 

Agricultural production economics is an applied field of economic science which is essentially concerned with the application of the principles of choice to the utilisation of capital, labour, land, water and management resources in the farming industry (Olayide and Heady, 1982). This definition shows that as a study of resource efficiency, agricultural production economics is specifically concerned with the conditions under which the ends of objectives of farm operators/managers, farm families and the consumers can be attained to the greatest degree possible. The definition also implies an involvement of technical science in the specification of the physical relationships between resources and product. It connotes that the problem of choice involved should be one of economics just as is the problem of how resources have to be employed to maximize the profit of the farm-firm. 

Scope of Agricultural Production Economics 

Agricultural production economics is a branch of applied economics where economic principles are applied in the use of land, labour, capital and management on farms and in agricultural industry. The concept of the theory of firm and the principles of resource allocation are the core of agricultural production economics. Production economics variables, unlike those of consumption are real and can be measured in tangible physical terms. Measurement of variables in this branch of economics is therefore more exact than other branches of economics. Research can therefore be conducted in a controlled manner as in the case of physical sciences. 

Agricultural production economics is based on the principles of optimization i.e. maximization and minimization. It is concerned with the conditions which are necessary to be fulfilled if a producer has to satisfy his objectives such as profit maximization or wants to produce a given level of output with minimum cost or resources. 

Although the main concern of agricultural production economist is to attain economic efficiency in the use of resources, he has to be knowledgeable and familiar with the physical production information, factors of production, products, marketing conditions, government policies and administration. He should be concerned with the factors relating to economic efficiency in the use of agricultural resources in different locations and regions around him. It is the task of agricultural production economist to provide guidance and advice to farm families and agricultural industry on how to use their resources including time, most efficiently in production in order to achieve their objectives and welfare. 

According to Olayide and Heady (1982), the field of agricultural economics involves four main issues: 

  1. Maximization of some objective functions such as net revenue and gross margin and minimization of the cost of production; 

  2. Choice in terms of resource allocation; 

  3. The role of choice indicator i.e. yardstick for comparing alternatives; 

  4. The economic implications of each of the three facets of the field of economics. 


i. Differentiate between agricultural economics and production economics 

ii. List four areas of production economics 


This topic has introduced you to the meaning of production economics and agricultural production economics. Essentially we can conclude that production is one of the major economic activities which consist of production, consumption and distribution. 


The main points in this unit are: 

a. Production is the process of changing goods and services into different ones. 

b. The purpose of the production process is to produce goods that have more utility or value to the society than the goods used in the production process. 

c. Production economics represent the sets of rules that must be mastered before embarking on a production process 

d. The field of agricultural production economics involves four main goals: 

- Maximization or minimization of some objective functions 

- Choice in terms of resource allocation 

- Yardstick for comparing alternatives, and 

- Economic implications of the above objectives. 


1 (a) Explain the meaning of the followings:  (i) Production (ii) Production Economics (iii) Agricultural Production Economics 

(b) What are the goals of agricultural production economics?