Production Economics and Farm Management




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Course Name: 

 Production Economics and Farm Management

Course Teacher:

Rupashree Senapati

Course Objectives

  • 1. To know the way forward for an efficient production.
  • 2. To determine the the combinations of most profitable amount of inputs.
  • 3. To estimate how the production will respond to a change in the price of output

Learning Outcomes

  1. Assist farm managers in determining the best use of resources, given the changing needs, values and goals of the society.
  2.  Assist policy makers in determining the consequences of alternative public policies on output, profits and resource use on farms.
  3. Evaluate the uses of theory of firm for improving farm management and understanding the behaviour of the farm as a profit maximizing entity.
  4. Evaluate the effects of technical and institutional changes on agricultural production and resource use. 5. Determine individual farm and aggregated regional farm adjustments in output supply and resource use to changes in economic variables in the economy.

Course Syllabus


Meaning and concept of farm management, objectives and relationship with other sciences. Meaning and definition of farms, its types and characteristics, factor determining types and size of farms. Principles of farm management: concept of production function and its type, use of production function in decision-making on a farm, factor-product, factor-factor and product-product relationship, law of equimarginal/or principles of opportunity cost and law of comparative advantage. Meaning and concept of cost, types of costs and their interrelationship, importance of cost in managing farm business and estimation of gross farm income, net farm income, family labor income and farm business income. Importance of farm records and accounts in managing a farm, various types of farm records needed to maintain on farm, farm inventory, balance sheet, profit and loss accounts. Meaning and importance of farm planning and budgeting, partial and complete budgeting, steps in farm planning and budgeting. appraisal of farm resources, selection of crops and livestock’s enterprises. Concept of risk and uncertainty occurs in agriculture production, nature and sources of risks and its management strategies, Crop/livestock/machinery insurance – weather based crop insurance, features, determinants of compensation. Concepts of resource economics, differences between NRE and agricultural economics, unique properties of natural resources. Positive and negative externalities in agriculture, Inefficiency and welfare loss, solutions, Important issues in economics and management of common property resources of land, water, pasture and forest resources etc.


Computation of depreciation cost of farm assets. Application of equi-marginal returns/opportunity cost principle in allocation of farm resources. Determination of most profitable level of inputs use in a farm production process. Determination of least cost combination of inputs. Selection of most profitable enterprise combination. Application of cost principles including CACP concepts in the estimation of cost of crop and livestock enterprises. Preparation of farm plan and budget, farm records and accounts and profit & loss accounts. Collection and analysis of data on various resources in India.

Session 1

Session 2

Session 3

Session 4

Session 5

Session 6

Session 7

Session 8

Session 9

Session 1O

Session 11

Session 12

Session 13

Session 14

Session 15

Session 16

Session 17

Session 18

Session 19

 Question Bank





Reference Books

1. Johl, S.S. and Kapoor, T.R. (1973), Fundamentals of Farm Business Management,
Kalyani Publishers, Ludhiana.
2. Sankhayan, P.L. (1988), Introduction to the Economics of Agricultural Production,
Prentice Hall of India Private Limited, New Delhi-110 001.
3. Raju, V.T. and Rao, D.V.S. (1990), Economics of Farm Production and Management,
Oxford & IBH Publishing Co. Pvt. Ltd., New Delhi-110 001.
4. Dhondyal, S.P. (1985), Farm Management, Friends Publication Meerut (India).
5. Kahlon, A.S. and Karam Singh (1992), Economics of Farm Management, Allied
Publishers, New Delhi.
6. Doll, John P. and Orazem. F. (1984), Production Economics: Theory with Application,
John Wiley and Sons, New York.

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