Agricultural Economics, Farm Management and Marketing
Agricultural Economics, Farm Management and Marketing - This domain tests cost of cultivation, returns, efficiency ratios, farm records, MSP and marketing channels.
Core rules
- Gross income = yield × price; net return = gross income − cost of cultivation.
- B:C ratio = gross income ÷ cost of cultivation; a ratio above 1 means profit.
- Fixed costs (land rent, depreciation) do not change with output; variable costs (seed, fertilizer, labour) do.
- Farm management decisions use records, budgeting and marginal analysis.
- MSP is announced by the government on CACP recommendations; procurement is done by agencies such as FCI and NAFED.
- Marketing channels move produce from farmer to consumer; cooperatives and regulated mandis reduce exploitation.
Worked example
A crop gives 40 quintals/ha at ₹2,000/quintal. Gross income = 40 × 2,000 = ₹80,000. Cost of cultivation is ₹50,000. Net return = 80,000 − 50,000 = ₹30,000. B:C = 80,000 ÷ 50,000 = 1.6. Reasoning: B:C uses gross income, not net return; a B:C of 1.6 means ₹1.60 gross income per ₹1 spent.
Traps
- Do not calculate B:C as net return ÷ cost.
- MSP is a support price, not a guarantee that every farmer sells at that price.
- Fixed costs are not zero when production is zero.
- Distinguish gross income from net profit.
- A higher yield does not always mean a higher net return if costs rise faster.