Extension Unit 6

Livestock Economics, Marketing & Business Management
Livestock
Economics,
Marketing &
Business
Management
VAE-321
Manuprabh Sharma
Livestock Economics, Marketing & Business Management (VAE-321)
CHAPTER-1: INTRODUCTION, DEFINITION AND SCOPE OF ECONOMIC PRINCIPLES AS APPLIED

TO LIVESTOCK
Learning objectives
 To explain the meaning of economics from different views of economists and their criticism.
 To illustrate the approaches to the study of economics.
 To discuss the different methods of investigation of economics.
To give in details about the economic system for the production and distribution of goods
DEFINITIONS
 Economics is the term derived from a Greek word, OIKOS (a house) and NEMEIN ( to manage ) which in
effect meant managing a household using limited funds available in the most economical manner possible.
 Four Important definitions are,
 Wealth definition of Adam Smith - Father of Economics
 Science of Material Welfare definition of Alfred Marshall
 Scarcity definition of Lionel Robbins
 Growth definition of Paul Samuelson
 Adam Smith defined economics as a science, which studies the nature and causes of wealth of nations.
 Criticism on wealth - Many philosophers like Dickens, Ruskin, Carlyle and Mathew Arnold strongly criticised
the wealth definition. They said that the science which concentrates only on the study of wealth is a “Selfish
Science”, “Mundane Science”, “Bastard Science”, “Bread and butter Science”, “The Science of getting riches”,
“the gospel of mammon” (song of the devil), “a science of illth and not wealth” etc. These philosophers were
highly critical of the wealth definition because they at that time were highly influenced by the religious
sentiments and spiritual values. They considered that mere acquisition of wealth is not the object of all
human activity and they looked at acquiring wealth with great contempt.
 Defects of wealth - Stress in the wealth definition is only on acquiring wealth. But in reality the human life
and activity consists of other considerations like love, affection, charity, social obligation, family obligation
etc. Wealth is only a means and not an end to human activity. End of human activity is his welfare i.e. welfare
of man. Wealth definition did not include the services of various professionals like teachers, doctors,
veterinarians, lawyers etc.
 Alfred Marshall (1819) defines economics as: "Political economy, or Economics is a study of mankind in the
ordinary business of life; it examines that part of individual and social action which is most closely connected
with the attainment and the use of material requisites of wellbeing."
 Marshall defined there is a shift of emphasis from wealth to human welfare. In his view wealth is not an end
by itself, it is the means to promote the economic well being of the people. The term ordinary business of life
denotes among various people and groups of society.
 Lionel Robbins (1931), defined economics as the science which studies human behaviour as a relationship
between ends and scarce means which have alternative uses.
Limitations of Scarcity definition
 Resources are limited, but scarcity definition has not taken into account the possibility of improving
resources due to scientific and technological development.
 Scarcity definition is silent about the role of resources towards human welfare.
 Problems can arise not necessarily due to scarcity of resources but also due to abundance. For example more
production of eggs and milk than the demand will bring down the price to such an extent that even the
production cost may not be met.
 Scarcity definition does not discuss about employment, economic growth, determination of value or price etc.
 Paul Samuelson defined "Economics is the study of how men and society choose with or without the use of
money, to employ scarce productive resources which could have alternative uses to produce various
commodities over time and distribute them for consumption now and in the future among various people
and groups of society.
APPROACHES TO THE STUDY OF ECONOMICS
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By- Manuprabh, Naveen, Pradeep
In Traditional approach, economics is studied under 5 major divisions.
Consumption
 Satisfaction of human want on use of goods and services is known as consumption.
Production
 It is the creation of utilities and values. This part of subject deals with economics of agents or factors of
production i.e. land, labour, capital or organisations, earning wealth for the purpose of satisfaction of human
wants.
 Marshall makes a distinction between two types of things i.e. material things and immaterial things.
Exchange
 It is the act of obtaining the desired object from some one by offering something in return.
 Goods produced are not for self-consumption alone. They are primarily for sale.
 They are sold in market where buyers buy the commodities and sellers sell the commodities in particular
price.
 Thus the process of buying and selling put together constitute exchange.
Distribution
 Production of any commodity requires land, labour, capital and management.

 These factors of production are to be rewarded for their services in the process of production.
 The landlord gets rent for land, labour earns wages. The capital is given with interest or manager is rewarded
with profit.
 Thus the process of determining wages, rent, interest and profit is known as distribution.
Public Finance
 Studies that how the Government gets money and how it spends money. Hence in public finance, taxation,
interest structure, Public expenditure etc., are dealt.
SUBJECT MATTER OF ECONOMICS
 Subject matter of economics is divided by modern approach in two as

o Micro economics
o Macro economics
Micro economics
 It is also called as Price Theory. Price theory explains the composition, or allocation, of total production- why
more of some things is produced than of others.
 The word Micro means a millionth part. When we speak of microeconomics or the micro approach, what we
mean is that it is some small part or component of the whole economy that we are analysing.
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 Thus, micro economic theory studies the economic behaviour of individual decision - making units such as
consumers, resource owners and business firms.
Macro economics
 It is also called as Income Theory. Income theory explains the level of total production and why the level rises
and falls.
 Macro - economics is concerned with aggregates and averages of the entire economy, such as national
income, aggregate output, total employment, total consumption, savings and investment, aggregate demand,
aggregate supply, general level of prices, etc.,
 It studies the behaviour of economic system as a whole or all the decision making unit combined together.
Positive or Normative Science
 Economics is both positive and normative science. Positive science deals with things as they are. Hence it
addresses what it is. Eg. The feed unit is sick.
 The normative science makes distinction between right and wrong of a thing.
 It prescribes what it should be. Positive science describes while normative science evaluates.
METHODOLOGY OF ECONOMICS
 Economics has certain method for discovery of laws and theories.

 There are two methods of investigation available to economics.
o Deductive method.
o Inductive method.
Deductive method (Analytical or Apriori method)
o It descends from "generals" to "particulars".

o This method starts with the few indisputable facts about human nature and draw inferences about
concrete individual cases.
Inductive method (Realistic or Historical)
o It goes up from "Particulars" to "generals".

o This method insists on the examination of facts and then laying down general principles.
 Modern economists use both methods and consider that induction and deduction are both needed for
scientific thought as the right and left foot are needed for walking. Which of the two methods is to be used in
particular situation depends upon the nature of inquiry the material on hand and stage at which inquiry has
reached.
 The deductive method seems to be more suitable in the field of pure theory and inductive method for
formulating practical policies.
ECONOMIC SYSTEMS
 Each economy is a system in which the production and distribution of goods are organised around people's
wants.
 There are three important alternative economic systems functioning in the world.
 They are,
o Capitalist economy
o Socialist economy
o Mixed economy
Capitalist economy
 The prominent characteristics of a capitalist economy are

o Right to private property.
o Prevalence of free enterprise commonly known as laissez faire that is, free play of price mechanism
in determining economic activity.
o Absence of government controls and of central economic planning.
o Profit motive being the moving force behind any economic activity.
o Full freedom for the consumer in the choice of consumption, which is popularly referred to by the
expression Consumer sovereignty.
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o USA and UK follow this system.
Socialist economy
 The cardinal characteristics of a socialist economy are bound to be the opposite of capitalism.
o All means of production and natural resources are socially owned.
o There is centralised economic planning .
o There are rigours controls, directing the entire gamut of trade (internal and international) and
production.
o This also means that there is no scope for free play of price mechanism or market forces. In brief, it is
a command economy.
o Consumer sovereignty is severely restricted by means of predetermined allotment of consumer goods
and rationing .
o Welfare is the main goal, all other factors becoming matter of less importance .
o This system took place in western countries after industrial revolution.
Mixed economy
 The features of mixed economy are

o Both private sector and public sector co-exist: supplementing efforts of each other in attaining
targeted economic goals.
o While the market forces are free, prices may still be administered by state intervention.
o Certain industries (especially monopolies) may be nationalised, areas such as agriculture may be left
in the hands of private enterprise.
o Again, works and services whose benefits are indivisible between different sections of the society (for
instance, the benefits of an army to the country as a whole) are taken care of by the government,
while operations in which cost-price relationship is straight and simple, are left in the hands of
private entrepreneurs.
o After independence , we follow this system with inclusion of public and private sectors.
CHAPTER-2: COMMON TERMS
Learning objectives
 To explain the meaning of common terms like consumption, wants, goods, wealth, value, price, income and
utility.
 To explore the classification and characteristics of wants
 To explain the different types of goods.
 To illustrate the types of income, wealth and utility.
CONSUMPTION
 World is at work, the farmers plough their land, factory workers control machines, feed them with raw
materials and transform into manufacture goods.
 Buyers and sellers are busy, thus economic activities are circling around.
 People want to earn money. They need money to satisfy their wants relating to food, clothing, shelter and
other necessities and luxuries.
 Thus wants make people to work, i.e. wants give rise to various kinds of economic activities.
 This is the starting point of all economic activities for the existence of human wants.
 Goods and services that satisfy our wants are to be produced.They are produced with the help of available
resources in nature.
 The resources that can be used for the production of goods and services are not available in plenty. They are
scarce. Hence the economic problems arise.
 The responsible factors for emergence of economic problems are
o The existence of human wants
o Scarcity of available resources
 Thus the sign of economics wonders around wants, efforts, and satisfaction.
WANTS
 In general, wants may be defined as desires of consumers to obtain and use various goods and services,
which give pleasure and satisfaction.
 However, more wish or desire to have goods and services in the economic sense is not a want.
 Therefore, wants can be defined as those effective desires for goods and services which are associated with
the following three essentials.
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o Desire to acquire goods or service.

o Ability to pay for the desired goods and
o Willingness to pay for those goods.
 The wants originate from one of the following sources
o Desire of the minimum of goods required for existence. Eg. Food, Clothes etc.
o Desire to maintain the standard of living, giving rise to conventional necessaries. E.g. Well equipped
house, membership of a club etc.
o Desire of distinction and excellence. Eg. Latest model of a car, dress of latest design etc.
CLASSIFICATION OF WANTS
 Wants can be classified as

o Necessaries
o Comforts
o Luxuries
Necessaries
 Necessaries are goods that are essential for human existence and to maintain our efficiency.
 Goods, which are used for our existence, are called necessaries for existence and goods that we use to
improve our efficiency are called necessaries for efficiency.
 E.g. Nutritive food. Goods, which are used out of habit or long established customs and conventions, are
called as conventional necessaries. Eg. Tea, Coffee.
Comfort
 Comforts are goods that lead to easy living and make our life pleasant.
 They also improve our efficiency, but improvement in efficiency is not in a proportion to the money spending
on them .eg. Car, Refrigerator, etc.
Luxuries
 Luxuries are goods and services, which are generally non- essential and very expensive.
 They do not improve the efficiency of the people.
 It is just meant for increasing the prestige of a person. Eg. Diamond ornaments.
CHARACTERISTICS OF WANTS
Wants are unlimited
 As soon as one want is satisfied another want comes up in it's place.
Wants vary in their intensity
 Wants differ in importance. Some wants are more urgent and others are less urgent wants.
Wants are satiable
 A single want can be satisfied at a particular time.

 If a person is hungry he can satisfy his want fully by taking sufficient amount of food.
Wants are recurrent
 Wants get themselves repeated at interval of short or long period.
Wants are alternative
 A person can substitute coffee in the place of tea.
Wants are competitive
 For a hungry person wants for food is more urgent than anything else.
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 The most urgent wants takes the first position with satisfaction and the less follows.
Wants are complementary
 To satisfy particular want we need several things.

 For eg. If a person wants to write a letter he needs pen, paper, ink etc.
Wants tend to become habits

GOODS AND ITS CLASSIFICATIONS
Classification of Goods
 Anything that satisfies human wants is called goods or commodity.

 Goods can be classified into
Free goods
 Air we breath has utility for us. So it is a commodity. For the use of this commodity we do not pay any price.
 Such goods are called free goods. Free goods are available in plenty and not in scarce.
Economic goods
 Milk is a commodity we have to pay price to get it.

 Such goods are called economic goods.
 They are available in scarce.
Visible goods and non-visible goods
 Egg can be seen and felt by touch. Such goods are called material or visible goods.
 Copy write of books or services of a doctor can be sold for money but they cannot be seen or felt, such types
of goods are immaterial or invisible goods.
Consumer and Producer goods
 We use goods like egg, pen etc. which satisfy our wants directly. They are called consumer goods.
 We use goods like machine to produce other goods. They do not satisfy our wants directly.
 Such goods are called producer goods or capital goods or investment goods.
Durable goods and perishable goods
 Goods, which decay quickly, are known as perishable goods. Eg. Milk.
 Goods which lasts for long period are called durable goods. Eg. Incubator, milking machine, etc.
Competitive goods
 Production of one good must be forgone in order to produce more of other good. For example for a given
level of maize, one has to give up a certain level of piggery production in place of increasing broiler
production.
Supplementary goods
 Some positive level of one good is produced without reduction in output of another good. For example,
women labourer employed in backyard poultry keeping.
Substitute goods
 If price of one good falls with consequent increase in demand for it, the demand for other related good
decreases and can act as substitute for the first one. Soya can be substituted for maize in feed ration.
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Complementary goods
 If production of one good causes the increased production of another goods. For example a legume in
rotation increase the production of grain crops in alternate years
WEALTH AND ITS CLASSIFICATION
Meaning
 It refers to the state of economic goods at a particular time, i.e. goods which are not transferable are not
included. E.g. personal skill and ability.
 However, it may not be true while calculating wealth of a country, which may include the skill and ability of
its citizens.
Classification of Wealth
 This can be classified into three forms

o Personal or individual wealth
 A common human being requires this wealth e.g. clothes, books, scooter etc.,
o Business wealth
 This is used for further production of goods and services, e.g. farms, industries, machines
etc.,
o National or Social Wealth
 This includes the goods owned by states or local bodies e.g. educational institutions, public
library, transport, electricity etc.,
VALUE, PRICE, INCOME AND UTILITY
Value
 In economics we use the term value in the sense of exchange.

 Value of commodity means purchasing power of the commodity.
Price
 The value is expressed in terms of money it is called price. Eg. A pack of rice.
Income
 Income is the remuneration paid to the service rendered by factors of production.
Real income and Money income
 Income can be expressed in terms of commodities or money.

 When we express income, the terms of commodities it is called real income.
 If we say that income of a person is five kg rice, he express his income in terms of commodity.
 When we express income in terms of money it is called money income.
Utility
 Utility means capacity to satisfy wants, i.e. want satisfying power of a commodity.
 Total utility may be defined as the total satisfaction derived from the consumption of all the goods or services
at the disposal of the consumer, i.e. aggregate utilities derived.
 Different types of utilities are
Form utility
 Form utility is added when the processor of the goods (such as milk, paddy and oilseeds) transforms the
material into finished products ready for consumption (such as cheese, rice and edible oil respectively).
 In doing so, he adds form utility to the raw products, i.e. form utility is created by the processing functions.
Time utility
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 Time utility is added when products are stored from the time of production to the time of consumption.
 Time utility is created by the operations like storage in ware houses and godowns.
Place utility
 Place utility is added by the transporting system which transfers the goods from one point where it is not
needed to another point where it is consumed.
 Hence, transporting agencies contribute to place utility.
Possession utility
 Possession utility is added to the product when its ownership is transferred to the final consumer.
 Thus, all the institutions and agents in the marketing chain which enable transfer of ownership are
contributing to possession utility.
CHAPTER-3: IMPORTANT FEATURES OF LAND, LABOUR, CAPITAL AND ORGANISATION
Learning objectives
 To discuss about the meaning of Land, Labour, Capital and Organisation

 To explore the characteristics of factors of production
 To explain the importance of factors of production in livestock farming activities
FACTORS OF PRODUCTION
 Production is the process by which resources are transformed into products usable by consumers either
directly or indirectly.
 Generally, resources or inputs of any production process are otherwise called as factors of production.
 These factors are broadly grouped into four viz.
o land,
o labour,
o capital,
o entrepreneurship management/Organisation.
FACTORS OF PRODUCTION - LAND,LABOUR AND CAPITAL
Land
 The term land has been given a special meaning in economics.

 Land does not mean soil surface alone as it is ordinarily understood, but it includes the materials and forces
which nature gives in land, water, air, light and heat.
 Land has some characteristic features. They are
o Land is fixed in quantity
o Land is immobile
o Land is permanent i.e. there are some inherent properties of land which are original and
indestructible.
o Land has infinite variation of degrees of fertility so that no two pieces of land on earth is same.
Rent
 It is a reward for land and refers to that part of payment by a tenant which is made only for use of land i.e
free gift of nature.
 It is of two types namely economic rent and contract rent.
 Economic rent is the payment made for the use of land only.
 Contract rent is total payment made by tenant to landlord.
Lease
 It is defined as an oral or written contract outlining how a tenant and landlord will do business and share
income, provide for expenses, improve the land and determine business program, practices and
compensation for demage to the land or termination of lease.
 It is of five types in order of risk and return to the tenant.
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o Cash lease - Direct cash payment at end of year

o Flexible cash lease - Hybrid of cash and crop share.
o Crop share lease - sharing only crop not cash deal
o Livestock share lease - Sharing livestock and its income.
o Labour share lease - Giving way for landlord to acquire extra labour and suitable for young farmer
without enough capital.
Labour
 Labour means any exertion of mind or body undertaken for a monetary consideration.
 Any work done for the sake of pleasure does not fall under labour in economic sense. Wage is known as
reward of labour.
Characteristics of labour
 Labour is perishable
o A day without work in worker’s life is lost forever. He cannot store his labour and deliver it
later.
 Labour has a poor bargaining power
o As labour is perishable, they accept even low wages.
 Labour is inseparable from labourers
o Labour is an integral part of the labourer’s personality.
 Supply of labour changes very slowly
o Supply of labour cannot be curtailed at once even if wages fall because the labourers must
earn their subsistence.
o It also takes time for children to grow up or people to get trained in order to increase the
supply of labour.
o Labour is not so mobile as capital – It happens due to differences in language, environment,
habit etc.
Wage
 It is a reward for labour. It means payment made for services of labour. It may be defined as a sum of money
paid under contract by an employer to a worker for his physical or mental service rendered.
 It is of two type namely nominal wage and real wage.
 Determinants of wages are efficiency, existence of non-competing groups, ability of learning trade, social
acceptance, hazardous and dangerous occupation, bargaining power.
Nominal Wage
 It is a wage paid or received in terms of money.
Real Wage
 It is not money wage but rather it represents that part of standard of living of labourer.
 It includes purchasing power of money and constitutes subsidiary earning, extra work without extra
payment, regularity or irregularity of employment, condition of work, future prospect, etc.
Capital
 Capital is a stock or fund existing at a given moment.

 Capital is man made. Man constructs capital equipment to help him in the production of other goods and
services. Hence capital is defined as produced means of production.
Characteristics of capital
 It is man - made and its supply is therefore, within the control of man.
 It involves the element of time as it renders its services over a period of time. Therefore payment to
capital is calculated in terms of so much per cent per annum.
 Production of wealth with the aid of capital has been called the round about process of production.
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 Labour can produce more with aid of capital than it was without it. Since capital is productive, there
is demand for capital.
 People look forward to getting an income by accumulating capital. Hence capital is prospective.
Functions of capital
 Capital increases productivity by enabling the entrepreneur to acquire the other factors of
production.
 It provides subsistence to enable workers to maintain themselves during the period of waiting for
marketing of goods.
 It provides appliances or auxiliaries of production to carry on production effectively on modern lines.
 It provides raw materials to feed the machines.
Interest
 It is a reward or payment for capital use.

 It is of two types ie. Gross interest and Net interest.
 Gross interest is the total payment which debtor pays to the creditor.
 Net or pure interest is the payment only for the services of capital as such or for the money borrowed.
 Gross interest include net interest, insurance against risk, wage for management, return for inconvenience.
FACTORS OF PRODUCTION-ORGANISATION
Meaning
 Organisation combines the other factors of production. Viz. Land, labour and capital and decides on what to
produce.
 A special skill is required to combine factors of production and accomplish the difficult task of production.
 This task is undertaken by organiser or entrepreneur. Profit is known as reward of management.
Types of Organisation
 There are five forms of organisations viz.

o Sole proprietor
o Partnership
o Joint stock company
o Co-operative societies and
o Public sector undertaking
Sole proprietor
 This is the oldest form of entrepreneurial organisation. Even today, from the point of view of numbers, small
firms are predominently sole proprieter firms. Such one person firms range from farmer, shop keeper and
small factory-owner who employ other workers and may even own many separate units.
 Nevertheless, all these businesses have the same characteristic of being owned and controlled by a single
person.
 It is this person's task to make all decisions regarding the policy of the firm and it is he alone who takes the
profit, bears the brunt of any losses made.
Disadvantages
 Development of such a firm must proceed slowly because the sources of capital are limited.
 In the event of failure, not only the assets of business but also the private assets and property of the
proprietor can be claimed against by creditors. In short there is no limited liability.
 There is lack of continuity; On retirement or death of the owner, a one-person firm may cease to
function.
 Because of these disadvantages, this type is confined to those businesses, which are just starting up
or to certain industries such as agriculture and retailing.
Partnership
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 A large amount of capital is available when persons combine together into a 'partnership'.
 Normally not more than twenty (ten in case of a banking) may so join.
 Each partner provides a part of capital required and shares the profit on an agreed basis.
Joint stock company
 Some kinds of business could not be conducted on a small scale, and these have to start as joint stock
companies, either sponsored by some important interests or else developed as subsidiaries of existing large
firms.
 The advantages are limited liability, continuity, and availability of capital and ease of expansion.
Co - operative societies
 They are a form of organisation where people work together or business people on the basis of natural
benefit.
 It is a voluntary organisation designated to promote economic interests of its members. Members have equal
right.
 Co-operative society has the motto of "each for all and all for each".
Public Sector Company
 A company undertaken and run by the local, state and central government are called as public sector
undertaking or a company.
 To promote people's welfare, government directly undertakes economic activities.
 Public undertakings have been started with the following reasons,
o To bring about rapid economic development.
o Benefits of development are shared by all the people and.
o Inability of private sectors to find huge amount of capital needed to take up large projects.
CHAPTER-4: LIVESTOCK PRODUCE AND PRODUCTS
Learning objectives
 To understand the importance of Indian livestock sector

 To explain livestock and poultry contribution to national economy
 To explore the growth dimension of the different livestock and poultry products
INTRODUCTION
 Indian livestock sector plays a critical role in welfare of rural population.

 It contributes 5.4 per cent to the total GDP and 27 per cent to the GDP from agriculture and allied activities
engaging 30 million small producers raising one or two cow or buffaloe.
 It is of special importance and a main source of family income in the arid and semi-arid regions of the
country.
 In the arid and semi-arid regions, the contribution of livestock to agricultural GDP is as high as 70 per cent
and 40 per cent, respectively.
 The sector has excellent forward and backward linkages, which promote many industries and increase the
incomes of vulnerable groups such as agricultural labourers and small and marginal farmers.
 In 2005-06, livestock sector produced 97.1 million tonnes of milk, 46.2 billion eggs, 44.9 million kg of wool
and around 2.31 million tonnes of meat from organized sector.
 All India Summary Reports of the 17th Livestock Census released in July 2006 points out that India
possesses the largest livestock populations in the world after Brazil.
 It accounts for about 56 per cent of the world’s buffalo population and 14 per cent of the cattle population.
 It ranks first in respect of buffalo and second in respect of cattle population, second in goat population and
third in respect of sheep in the world.
POULTRY
 Poultry sector, with total value of output exceeding Rs.26,000 crore and providing direct and indirect
employment to over three million people, produced around 1.9 MT of chicken-meat in 2005.
 Between the 1970 and 2006, the annual per capita availability of eggs has quadrupled from 10 to 41, while
the corresponding increase in chicken meat has been even faster from 146 grams to 1.6 kgs.
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 While India’s share of world trade in poultry and poultry products continues to be very small, in the last
decade the value of such exports has increased from Rs.11 crore in 1993-94 to Rs. 326 crore in 2005-06.
 Exports of products, such as live poultry, eggs, hatching eggs, frozen eggs, egg powder and poultry meat, to
countries including Bangladesh, Sri Lanka, Middle East, Japan, Denmark, Poland, USA and Angola augurs
well for the industry.
 Uninterrupted supplies of feed as well as preparedness for external shocks such as avian influenza are critical
for the continued robust growth of this sector.
DAIRYING
 India ranks first in the world in milk production, which rose from 17 MT in 1950- 51 to around 100 MT by
2006-07.
 Per capita availability of milk has also increased from 112 grams in 1968-69 to 230 grams per day in 2005-06
with ever increasing human population and is expected to reach about 245 grams per day in 2006-07.
 Presently, about 1.13 lakh village level co-operative societies spread over 265 districts in the country form
part of the National Milk Grid.
 The Grid links the milk producers throughout India with consumers in over 700 towns and cities smoothing
the seasonal and regional variations in the availability of milk, and ensuring a remunerative price to the
producers and a reasonable price for quality milk and milk products to the consumers.
 Under Integrated Dairy Development Project, 73 projects with an outlay of Rs.407.58 crore and spread over
25 States and 1 UT have been approved.
 Cumulative expenditure incurred up to end-March 2006 was Rs.274.33 crore.
 By end-March 2006, the programme had benefited 10.56 lakh farmers through 16,469 village-level dairy
cooperative societies procuring 13.6 lakh litres of milk per day.
CHAPTER-5: LIVESTOCK SECTOR IN TAMIL NADU
Learning objectives
 To discuss the status of livestock and poultry population in Tamil Nadu

 To explore the breedable female bovine population
 To view the per capita availability and milk production of milk in Tamil Nadu
 To understand the animal health care activities
INTRODUCTION
 Activities allied to agriculture viz. animal husbandry, fisheries and forestry have the potential for providing
significant employment opportunities to rural and urban population.
 Allied activities provide supplementary occupation to the people besides contributing to Gross State
Domestic Product.
 Dependence on the agricultural sector for supporting livelihood is well known while the allied sectors offer
scope for absorbing surplus labour from the agricultural sector.
 The allied sector has the potential for putting the State's rural economy on a higher growth trajectory.
ANIMAL HUSBANDARY
 Total livestock population of the State which stood at 307.59 lakhs in 2007 had increased by 1.01 per cent
when compared to the previous 2004 census.
 However, the total livestock population in the State as per the provisional figures of the Livestock Census
2007 was at 307.59 lakhs, recording a marginal decline of 3.85 per cent over that of 1997 census.
 The bovine (cattle and buffaloe) population in the State had witnessed a steady decline between 1982 and
2004.
 While sheep population showed signs of variation, the goat population had steadily increased during the
reference period.
 The poultry population at 1281 lakhs in 2007 had recorded an increase of 48 per cent over the previous
census.
 The State ranks second in poultry population in the country and accounts for 17.7 per cent of the total poultry
population in India. The details are given below.
Livestock Census: Tamil Nadu (Lakhs)

Year Cattle Buffaloe Sheep Goats Others Total Poultry
1982 103.66 32.12 55.37 52.46 18.26 261.87 182.84
(-4.03) (4.35) (4.69) (24.85) (135.31) (8.45) (27.44)
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1989 93.53 31.28 58.81 59.20 20.85 263.66 215.70

(-9.77) (-2.62) (6.21) (12.85) (14.18) (0.68) (17.97)
1994 90.96 29.31 56.12 58.65 21.75 256.79 238.54
(-2.75) (-6.30) (-4.57) (-0.93) (4.32) (-2.61) (10.59)
1997 90.47 27.41 52.59 64.16 24.76 259.39 365.11
(-0.54) (-6.48) (-6.29) (9.39) (13.84) (1.01) (53.06)
2004 91.41 16.58 55.93 81.77 3.73 249.42 865.9
(1.03) (-39.5) (6.35) (27.45) -- (-3.85) (137.16)
2004 91.41 16.58 55.93 81.77 3.73 249.42 865.9
(1.03) (-39.5) (6.35) (27.45) -- (-3.85) (137.16)
2007 111.89 20.09 79.91 92.72 2.95 307.59 1281.08
(22.00) (21.00) (43.00) (13. 00) (-21.00) (23.00) (48.00)
 As per 18th Quinquennial Livestock Census 2007, the cattle population is concentrated in 13 districts which
together accounted for more than 60 per cent of the total cattle population in the State.
 Of these districts, Villupuram topped the list and shared 9 per cent of the total cattle population followed by
Salem (6.5%) and Vellore (5.5%).
 Tamil Nadu Livestock Agency has brought all breeding activities under a single umbrella and artificial
insemination programme is carried out effectively.
 A decline in breedable population was noticed in 2007 Quinquennial Livestock Population – from 47.12
lakhs in 2001 to 41.17 lakhs in 2007 in respect of cattle and from 15.15 lakhs to 9.01 lakhs in case of buffaloes.
 The share of exotic and crossbred cattle accounted for 62.9 per cent and that of indigenous and native pure
worked out to 37.1 per cent of the total breedable cattle population of 41.17 lakhs.
 Among buffaloe population the share of the murrah and graded was 32.08 per cent while indigenous
buffaloes accounted for a higher share of 67.92 per cent.
Breedable Age Female Bovine Population(in Lakhs)

Category 1997 2001 2004 2007
Cattle 25.89
- Exotic and Cross 12.61 18.78 15.28 48.09
- Indigenous and 32.02 28.34
Native pure
Total 44.63 47.12 41.17 48.09
Buffaloe 2.89
- Murrah and Graded 3.74 4.97 6.12 9.00
- Indigenous 13.64 10.18
Total 17.38 15.15 9.01 5709
Milk Production and Per capita Availability
 Sustained initiatives to augment the production potential of livestock and poultry and to increase the
production of milk, egg and meat to cater to the increased demand were taken .
 Milk production rose from 47.53 lakh tonnes in 2003-04 to 47.84 lakh tonnes in 2004-05 and to 54.74 lakh
tonnes in 2005-06.
 The State's share in total milk production at the All India level was 5.38 per cent in 2004-05.
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 The per capita availability of milk per day which witnessed a marginal increase from 209 gms, in 2003-04 to
210 gms. In 2004-05 improved further to 234 gms in 2005-06.
 Tamil Nadu Cooperative Milk Producer's Federation procured milk through a chain of Primary Cooperative
Societies numbering 7431 in 2004-05 and 7701 in 2005-06 in the State.
Figure 1
 The milk production by societies rose by 5.6 per cent from 23.96 lakh litres per day (LLPD) in 2004-05 to
25.09 LLPD in 2005-06.
 The procurement price per litre of buffaloe milk and cow milk was at Rs.22.00 and Rs.20.00respectively.
 These societies procured more than 35 per cent of the total milk produced in the State. The quantity of milk
sold had improved from 20.53 LLPD in 2004-05 to 21.59 LLPD in 2005-06 Milk Production (lakh tonnes).
Milk Production and Availability

Year Tamil Nadu All India % Share of Percapita availability
Tamil Nadu (gms. per day)
(Lakhs tones)
Tamil Nadu All India

2003 - 04 47.53(2.8) 881 (1.6) 5.4 209(2.5 ) 231(0.4)
2004 - 05 47.84(0.7) 907 (2.9) 5.3 210(0.5) 232(0.4)
2005 - 06 54.74(14.4) - - 234(11.4) -
Per capita daily requirement 220 gram, (Figures in brackets indicates percentage change over the previous year)
Milk Yield
Average Yield Rate of Milk (Kgs., / Animal / day)

Breed 2004 - 05 2005 - 06
I. a. Cows
Exotic and Cross Bred 6.244 (1.1) 6.272 (0.4)
b. Indigenous 2.680 (0.6) 2.734 (2.0)
II Buffaloes 4.200 (1.8) 4.161 (-) 0.9
(Figures in brackets indicates percentage change over the previous
year)
 Gains from the White Revolution is reflected in the steady increase in average yield during the period 2002-
03 to 2005-06.
 The breeding policy, animal health care and fodder development together contributed to this achievement.
 Average daily yield of milk from exotic and crossbred cows had improved from 6.244 kgs. in 2004-05 to
6.272 kgs in 2005-06.
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 Average daily milk yield of indigenous cows rose from 2.680 kgs. in 2004-05 to 2.734 kgs in 2005-06. Thus,
there had been an overall improvement in the yield rate of cows.
 Average daily yield of milk from buffaloe marginally declined from 4.200 kgs in 2004-05 to 4.161 kgs. in
2005-06.
Veterinary Health Care - Veterinary Care Infrastructure
 In order to provide health care to animals, promote scientific breeding of cattle and control of diseases, the
State has put in place the requisite infrastructure.
Animal Care Institutions (Nos.)

SI.No Items 2006 - 07
I. Veterinary Health Services
a. Polyclinics 6
b. Clinician Veterinary Units 22
c. Mobile Veterinary Units 55
d. Veterinary Hospitals 139
f. Veterinary Dispensaries 1207
g. Sub - Centres 1385
II Animal Disease Intelligence Units 20
III Cattle breeding and Fodder Development 20
IV Institute of Veterinary Preventive Medicine 1
V Poultry Disease Diagnostic Laboratory 2
VI Artificial Insemination Centres 3177
VII Frozen semen Production stations 3
VIII Frozen Semen Banks 12
Animal Health Care Activities
 Livestock health care prevents loss of lives and helps to improve productivity.
 Livestock Development Programmes like ‘Kalnadai Padhukappu Thittam’ is being implemented in the State.
 Livestock rearers get proper medical facilities at their doorsteps. The number of animals treated in the State
rose by 8.7 per cent from 186.15 lakhs in 2004-05 to 202.41 lakhs in 2005-06.
 Vaccination and deworming done put together had increased from 426.60 lakhs in 2004-05 to 635.92 lakhs
in 2005-06.
 Veterinary health services like vaccination and deworming and breeding coverage like artificial insemination
are provided to livestock in remote villages through Mobile Veterinary Units (55 Nos.) in the State.
The details of animal health care service provided are given below.
Animal Health Care Activities (lakh numbers)

SI.No. Item 2004 - 05 2005 – 06
1 Animals treated 186.15 202.41
2 Vaccination done 344.22 449.91
3 Deworming done 82.38 186.01
4 Castration done 6.58 6.44
5 Artificial Insemination Performed 29.23 32.87
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6 Calves born 11.09 11.40
MEAT PRODUCTION
 To ensure supply of good quality and hygienic meat to consumers, 123 registered slaughter houses have been
established and the animals like sheep, goat, cattle, buffaloe and pig were slaughtered in these houses.
 Number of animals slaughtered in these centres rose by 19.4 per cent from 26.29 lakhs in 2004-05 to 31.40
lakhs in 2005-06.
 Sheep and goat accounted for 94.4 per cent of the total animals slaughtered in the State.
 Meat production had gone up by 17.3 per cent from 425.44 lakh kgs. in 2004-05 to 499.11 lakh kgs. in 2005-
06.
SI. No. Item 2004 - 05 2005 - 06
1 Registered Slaughter House (Nos.) 123 123
2 Animal Slaughtered(lakhs)
a Sheep 11.29 15.71
b Goat 13.67 13.94
c Cattle 0.71 1.03
d Buffaloes 0.50 0.55
e Pig 0.13 0.16
Total 26.29 31.40
3 Meat Production ( lakh kgs.)
a Mutton 123.50 171.74
b Chevon 166.34 171.80
c Beef 72.14 86.09
d Cara Beef 58.70 63.33
e Pork 4.76 6.15
Total 425.44 499.11
Poultry
 Poultry farming provides livelihood support besides contributing to the nutritional requirements of the
human population.
 Poultry activity creates employment opportunities besides providing income to the workers.
 The State stands second in egg production at the All India level.
 The introduction of modern scientific techniques and California Cage system of poultry rearing in the
seventies has revolutionised poultry farming in the State.
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 Poultry Extension Centres, acts as demonstration farms and provide training to poultry rearers.
 The Government organises widespread immunisation campaigns against the diseases like Ranikhat.
 Poultry rearing has become a commercial activity in the districts of Namakkal, Salem, Erode and
Coimbatore.
 Namakkal district has become an ‘egg basket’ and accounts for 65 per cent of the total egg production in the
State and is a major foreign exchange earner too.
Egg Production and Per capita Availability
 Tamil Nadu is one of the leading States in egg production and export.
 The eco-friendly backyard poultry rearing is practised along with commercial poultry farming in the State.
 The egg production in the State which improved from 3784 million numbers in 2003-04 to 6395 million
numbers in 2004-05 and then marginally declined to 6223 million numbers in 2005-06.
 Consequently the per capita availability of egg per annum has declined from 102 numbers in 2004-05 to 97
numbers in 2005-06.
 A central-state shared poultry development programme (80 : 20) is being implemented in the Poultry Farm
at Kattupakkam with a total outlay of Rs.74.69 lakhs and at District Livestock Farm, Hosur with a total
outlay of Rs.85.00 lakhs.
Feed and Fodder
 Growth of the livestock and poultry industry depends on reliable and cost effective supply of fodder and feed.
 The uncertainties of agriculture and rising prices of feed affect the viability of such activities.
 Supply of green fodder is constrained by limited availability of land. However, total land available for grazing
in the State is only 1.13 lakh hectares.
 In addition, 16.99 lakh hectares of common property resources and 16.20 lakh hectares of open forest area
are available for grazing.
Achievement under Fodder Production Schemes

SI. No. Particulars 2004 – 05 2005 – 06 % Change in 2005 – 06
over 2004 - 05
1 Total area under cultivation(acres) 3450 1193 (-) 65.4
2 Fodder Seed Production Units (Nos) 7 7 -
3 Production of
- Slips (lakhs) 20.54 20.54 --
- Seeds (lakhs) 38.60 0.722 (-) 98.1
- Seedlings(lakhs) 0.27 - -
4 Minikits Distributed ( Nos) 10900 6812 (-) 37.50
LIVESTOCK SECTORS IN OTHER STATES
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For Livestock Sector in UP http://animalhusb.up.nic.in/

For Livestock Sector in Kerala http://ahdkerala.gov.in/overview.htm
For Livestock Sector in Andhra Pradesh
For Livestock Sector in Karnataka www.ahvs.kar.nic.in/about_us.htm
For Livestock Sector in Maharasta http://mahavet.mah.nic.in/
For Livestock Sector in Madhya Pradesh www.mp.gov.in/VeterinaryandDairy/
For Livestock Sector in Orissa www.orissaahvs.com
For Livestock Sector in Bihar www.biharonline.gov.in/Site/Content/.../Dept.aspx?typ..
For Livestock Sector in Gujarat http://www.gujaratstat.com/agriculture/2/animalhusbandrylivestock/48/stats.aspx
For Livestock Sector in Rajasthan http://animalhusbandry.rajasthan.gov.in/
For Livestock Sector in Punjab
http://punjabgovt.nic.in/Punjabrti/Departments/Animal_Husbandry_and_Dairy_Development/Department%20of
%20Animal%20Husbandry/01_Particulars%20of%20its%20organization,%20functions%20and%20duties.pdf
For Livestock Sector in Haryana http://pashudhanharyana.gov.in/
http://panipat.gov.in/animalhusbandry.htm
For Livestock Sector in Jammu and Kashmir http://www.jkanimalhusbandry.net/
http://jammukashmir.nic.in/view/april25.htm
For Livestock Sector in West Bangal
http://www.westbengalstat.com/agriculture/2/animalhusbandrylivestock/48/stats.aspx
http://wbgosampad.nic.in/about.htm
For Livestock Sector in Megalaya http://megahvt.gov.in/
http://meghalaya.nic.in/govt/dept/dept4.htm
For Livestock Sector in Nagaland http://vetyngl.nic.in/
http://www.nagalandstat.com/agriculture/2/animalhusbandrylivestock/48/stats.aspx
For Livestock Sector in Assam http://www.assamstat.com/agriculture/2/animalhusbandrylivestock/48/stats.aspx
http://assamagribusiness.nic.in/vety.htm
For Livestock Sector in Mizoram
http://www.ahvety.mizoram.gov.in/index2.php?option=com_content&do_pdf=1&id=44
http://www.indiastat.com/17/mizoramstat/agriculture/2/animalhusbandrylivestock/48/stats.aspx
http:/www.indiabudget.nic.in
CHAPTER-6: DEMAND PROJECTION OF LIVESTOCK PRODUCE
Learning objectives
 To define demand projection

 To show different methods for projection of the livestock products demand
INTRODUCTION
 Information regarding the future demand is essential for both new firms and those planning to expand the
scale of their production.
 It is much more important where large-scale production is being planned and where production involves a
long gestation period.
 Information regarding future demand is essential also for the existing firms to avoid under or over-
production.
 Accordingly they will have to acquire inputs both men and material, plan their production, advertise the
product and organize sales channels.
 The firms are hence required to estimate the future demand.
 As per capita incomes rise in Third World countries, the demand for livestock products - meat, milk, and
eggs - not only rises faster than that for cereals in these countries but also more rapidly than demand for
livestock products in the developed countries.
 This in turn influences the demand for cereals and other staple foods used as livestock feed.
 Livestock production is also an important source of income and employment in the rural sector; it helps to
meet equity objectives by contributing cash income to small farmers in the Third World.
 Besides providing draft power and manure, livestock in developing countries convert many agricultural
wastes and by-products into food. Finally, livestock products contribute to export earnings.
 Livestock sector plays a significant role in the welfare of rural population of India. Of the total households in
the rural area, about 73 per cent own livestock.
 More importantly, small and marginal farmers account for three quarters of these households.
 Income from livestock production accounts for 15-40 per cent of the total farm household’s income in
different states. Thus, an increase in demand for livestock products, can be a major factor in raising the
income and living standards of the rural households.
 In the low-income countries, the demand for livestock products is more elastic than the demand for cereals.
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 This implies that with the rise in per capita income, the demand for livestock products would rise faster in
the third world countries.
 The demand projections for livestock products corresponding to 5 per cent GDP growth rate, generally
regarded as closer to the realistic situation.
 The estimated consumption in the year 1993 was of 45.02 million tonnes milk, 0.78 million tonnes mutton
and goat meat, 0.49 million tonnes beef and buffalo meat and 0.25 million tonnes chicken and 0.54 million
tones eggs.
 In the year 2020, the demand would reach 147.26 million tonnes for milk, 12.72 million tonnes for mutton
and goat meat, 1.15 million tones for beef and buffalo meat, 0.81 million tones for chicken and 2.58 million
tonnes eggs.
 During 1993-2020, the average growth rate (weighted) for the total domestic demand of milk has been found
to be 4.9%.
 It is 13.7% for mutton and goat meat, 3.5% for beef & buffalo meat, 4.8% for chicken and 6.2% for eggs.
 These growth rates indicate that the meat industry has bright prospects in the country.
 Techniques of forecasting are many but the choice of a suitable method is a matter of experience and
expertise.
 To a large extent, it also depends on the nature of the data available for the purpose.
 In economic forecasting, the classical methods use the historical data in rather rigorous statistical manner for
making the future projection.
 Various methods of forecasting demand may be grouped under the following categories
o Survey methods
o Market studies and experiments
o Statistical or analytical methods and
o Other methods.
SURVEY METHOD,STATISTICAL METHODS AND OTHER METHODS
Survey Methods
 These methods are generally adopted in estimating short-term demand.

 These methods include direct interview, complete enumeration, sample survey, opinion survey, etc.,
 Survey methods include
o Survey of consumer’s plan through direct interview of consumers
o Collection of expert’s opinion and
o Collection of opinion of sales representatives.
Market studies and experiments
 Studies and experiments are carried out in consumer’s behaviour under actual, though controlled, market
condition.
 This method is known in common parlance as market experiment method. This method has the following
serious disadvantages.
o Experimental methods are very expensive and not affordable by small firms.
o Forceful generalization with a high degree of reliability from too small sample size.
o Results of controlled experiments are questionable in application to the uncontrolled long-term
condition of market.
o Changes in socio-economic conditions, political changes, natural calamities may invalidate the
results.
Statistical Methods
 Statistical methods utilize historical (time-series) data and cross-section data for estimating long term
demand.
 These methods are considered to be superior techniques of demand estimation because
o Element of subjectivity in this method is minimum.
o Method of estimation is scientific.
o Estimation is based on theoretical relationship between dependent and independent variables.
o Estimates are relatively more reliable and estimation involves smaller cost.
o Frequently used statistical methods for demand projections are
 Trend projection method which involves both graphical and fitting trend equation.
 Regression method.
Other methods of forecasting demand
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 There are several other methods available for forecasting demand. However the choice depends on the
availability of data, purpose and technical competence of forecaster.
 These methods include the end-use method, econometric methods like Barometric Forecasting, Delphi
Technique, Box-Jenkins method, moving average method, etc.,
DEMAND PROJECTION FOR MILK
 It accounts for 97.1 million tones in 2005-06 with 65 per cent of the total value of livestock output.
 Though India is the world’s top milk producer, the percapita milk availability remains low at 241 grams per
day (Economic Survey 2005-06) which is lower the minimum requirement of 250 grams per day as
recommended by Indian Council of Medical Research.
 The demand for milk is estimated to be 191.3 Mt by 2020 assuming the growth rate of the economy at 5 per
cent per annum.
 The milk supply projection have indicated a defit of 52.7 Mt by 2020.
 The impact of Agreement on Agriculture under globalization process has made the Indian dairy industry to
face several challenges, including structural changes in production and trade patterns.
 India has one of the largest livestock economies in the world sharing 53 per cent of world buffaloes, 20 per
cent of goats, 15 per cent of cattle, four per cent each of chicken and sheep and one per cent of pigs.
 Livestock production in India is predominantly supported with family labour and nearly 73 per cent of farms
own livestock for draught and production of milk, meat and mutton.
 Fifty per cent of the draught power in farms is provided by cattle and 25 per cent by buffaloes.
 In Tamil Nadu, according to 1994 livestock census, cattle account for 35 per cent, buffaloes 11 per cent, sheep
and goats 45 per cent and pigs around two per cent.
 During the past 30 years ending 1992, cattle population has grown annually at 0.3 per cent, buffaloes 1.4 per
cent, goats 2.2 per cent, and poultry 4.4 per cent.
 In the recent five years, however, in white cattle, exotic and cross breeds have increased by 64 per cent
whereas the indigenous cattle population has declined by 12 per cent, and black cattle has gone down by 6.3
per cent.
 Small farms, with less than two hectares in size hold 56 per cent of bovines and 62 per cent of small animals.
 Income from livestock is around one-third of farm income and approximately one-tenth of state domestic
income.
 In fact, the livestock generates continuous cash flow, unlike that of crops with seasonal incomes by harvests,
which introduce certain degree of stability in income and employment to farm households.
 The demand for livestock products has been increasing mainly due to changes in per capita income, in
population, in dietary habits, and market structure.
 Prospectively, the world bank estimates the demand for livestock products in the year 2020 as, (in million
tones)
Products Demand Supply Gap (%)
Milk 497.01 281.51 -43.4
Eggs 7.21 7.69 06.7
Beef 3.74 6.93 85.3
Mutton 2.57 3.09 20.2
Poultry meat 1.35 2.18 61.5
 The demand has been projected at an overall growth of 5.5 per cent annually in GNP while the supply
assumes its determinants would be stable over the last ten years.
 One could note that excepting milk all other products would be excess in supply.
 In actuals, there would be a supply gap of 216 million tones which needs to be bridged.
 The status of livestock development at the close of the current millennium indicates the existence of a small
number of large capital intensive and market oriented livestock and poultry farms.
 The state and parastatals have contributed significantly to the organization and growth of dairy farms
whereas private entrepreneurship and investment have shown the way poultry development could be.
 There are a number of issues one could identify for future actions.
 The focus is thus on productivity, trade and empowerment through structural, technological, market and
institutional changes.
 Livestock in India is the endeavor of large number of small growers and they are low productive across all
species.
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 They are scattered across the country and depended very much on livestock for employment, income and
continuous cash flows.
 Low capital output ratios and high employment absorption render the sector as a vehicle for rural
transformation with high income and employment growth. However, they reflect low productivity
warranting investment and technology in massive scale.
 A system of incentives for adoption of technology for higher productivity would immediately suggest a set of
subsidies and insurance.
 Subsidies for livestock production, processing and marketing are mostly indirect and invisible.
 They come through poverty alleviation and rural employment programmes.
 Focus could be on institutional susbsidies, on the lines of Self Help Group support programmes, to get small
livestock farmers get organized with seed money to support activities in production and processing.
 Disease control and hygiene are the major problems of livestock sector.
 Particular, India can not enter the world market as suppliers of livestock products unless and until the
country becomes disease free for the relevant products.
 The annual loss due to foot and mouth disease, in terms of milk, is estimated to be in the order of Rs. 1252
crores in foreign exchange and another Rs.1650- Rs.1873 crores as loss of domestic supplies.
 In addition, loss due to permanent disabilities, death etc., amounts to Rs.1800 crores.
 Disease management is thus most crucial and the state can not leave this vital task to the private trade as
disease prevention and control are in the public domain and form the public good for which little can be
expected from market driven private agencies.
PLANNING FOR THE LIVESTOCK SECTOR
 This exercise provides an opportunity to make use of the formulas uniting FV,PV, i and n in the context of
planning livestock production.
Problem - Hypothetical example
 You live in a state called Tamil Nadu and are employed by the Livestock Project Analysis and Planning
Section (LPAPS) of the Ministry of Agriculture as a Livestock Planning Officer (LPO).
 LPO office is based in the capital, Chennai, where together with the other livestock planning officers you are
faced with the following problem. The year is 2008.
 The Minister of Animal Husbandry has just given a speech, making promises as to the future contribution of
the country’s traditional livestock sector to the country’s consumption of meat and milk products.
 The next 5 year plan is due to start in 2010, and he has stated that by the year, 2015, the country’s traditional
cattle producers will make it possible to
o reduce country’s beef imports to one quarter of their present level
o reduce the country’s imports of milk and milk products to half their present level (in terms of raw
milk equivalent).
o Increase average per capita consumption of beef by 50%.
o Needless to say, you were not consulted before the Minister made his speech, and as good civil
servants you are now in the position of
o trying to work out whether it is possible to fulfil his promises
o trying to work out reasonable targets for livestock production and a reasonable strategy for achieving
these.
 As usual, if it all goes wrong, you will be blamed, so it is important that you make clear recommendations to
the Minister, indicating what he can safely promise, in your opinion, and what type of measures will be
needed to ensure that these promises become reality.
 Also, as usual the information is needed yesterday (if not last week) so you have to make use of the
information available at the moment in your office .
Information about Cattle Production
 The majority of Tamil Nadu's cattle (over 99%) are kept by traditional producers, under an extensive
management system.
 A few experimental dairy herds can be found on the outskirts of Chennai, and there is also a small fattening
unit, but this is also virtually at an experimental phase. For the time being, production goals and plans have
to be based on the traditional cattle producers.
 The cattle population in according to the 2005 census was 1.773 million. The 2008 vaccination returns
indicate a current population of about 2.1 million.
 A detailed survey of herds has come up with the following data.
o Offtake rate
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 The offtake rate for the whole herd is 10 %, 40 % are old cows, having an average carcass
weight of 100kg each and 60% are adult males, having an average carcass weight of 175 kg
each.
o Milk production
 About 23% of the national herd consists of cows in milk, the average annual milk yield is 275
litres per cow in milk.
Information about Meat and Milk Imports
 The figures for 2008 are not available yet, but 2007 meat imports were of 1,700 tonnes of beef, 131,200
tonnes of milk equivalent (imported milk and milk products in terms of their equivalent in raw cow’s milk)
o (1 metric tonne = 1000kg)
 Imports of animal products have been increasing at about 5 % per year in recent years.
Information about the Human Population
 The human population of Tamil Nadu was 6,346,281 according to the 2001 census. The annual growth rate
for the next decade was estimated at 3.1%.
Suggested Steps for Solving the Problem and Coming up with Suitable Recommendations
o Calculate the annual growth rate (%) expected from the traditional herd using the estimated results
form the 2005 and 2008 cattle population figures
o Treat 2008 as your ‘year 0’ and work out what local beef and milk production was, what was
imported and what consumption per head of the human population was.
o Now look at your Minister’s promises and work out what these require, in terms of growth rates of
local production.
o Compare them to the quantities that would be produced and required if current levels of productivity
and growth continue unchanged.
o Then, if you think the Minister’s promises can be fulfilled, indicate how (in terms of productivity
improvements, changes in offtake rates, carcass weights etc.). If not, indicate what you think might
be reasonable goals.
 Very briefly, what types of projects do you think would be needed to achieve these goals?
CHAPTER-7: THEORY OF CONSUMER BEHAVIOUR
Learning objectives
 To highlight the meaning of utility and law of diminishing marginal utility.

 To explain the indifference curve technique.
 To expose the assumptions and properties of indifference curve.
THEORY OF CONSUMER BEHAVIOUR
 Utility is a subjective term like pain or joy which can only be felt and which cannot be measured. Suppose a
person starts eating egg one after another.
 The first egg gives him great pleasure. By the time he takes the second it gives him less satisfaction as the
second egg is meeting with a less urgent want.
 The satisfaction of the third will be lesser than of second, that of the fourth is lesser than that of the third and
so on.
 The additional or incremental satisfaction i.e. the marginal utility with every successive unit of egg will go on
decreasing till it drops down to zero.
 If the consumer is forced to take more, the satisfaction becomes negative and the utility changes to dis-
utility.
 Marginal utility (MU) is defined as the change in total utility (TU) resulting from unit change in consumption
of commodity per unit time.
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Units (eggs) Total Utility Marginal Utility

(units of satisfaction) (units of satisfaction)
1 25 25
2 45 20
3 60 15
4 70 10
5 75 5
6 75 0
7 71 -4
 Total Utility curve increases at beginning and reaches maximum and decline eventually with increase in
quantity of goods consumed.
 Marginal utility slopes downward from left to right.
 It reaches zero when total utility reaches maximum and becomes negative if more of goods consumed after
that.
 It shows as the quantity of goods consumed increases marginal utility decreases.
 It is notable point that marginal utility is zero when total utility is maximum.
LAW OF DIMINISHING MARGINAL UTILITY (MARSHALLIAN APPROACH)
 "The additional benefit which a person derives from a given increase of his stock of a thing diminishes with
every increase in stock that he already has."
Assumptions
 The consumer is assumed to be rational.

 Cardinal utility – The utility of each commodity is measurable in monetary units.
 Money has a constant marginal utility.
 Utilities of different commodities are independent of one another.
 Taste and income of the consumer remains the same.
 Commodity is consumed in suitable size and in suitable time.
 There is no change in fashion.
Importance of the law
 The law helps us to derive the law of demand.

 Marginal utility of money to rich people will be smaller than the marginal utility of money to poor people.
 So, the income of the rich people is taxed at a progressive rate.
 Law of diminishing marginal utility is the basis for progressive tax system.
 This law governs our daily expenditure. Our purchase stop at a point where marginal utility equals price.
INDIFFERENCE CURVE TECHNIQUE
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 This technique has been developed by the modern economists J.R.Hicks and R.G.D.Allen for the analysis of
demand.
Assumptions
 Rationality - The consumer is assumed to be rational.

 Ordinal utility - Here the measure of utility is viewed as the level of satisfaction rather than the amount of
satisfaction.
 The levels of satisfaction are comparable rather than quantifiable i.e. consumer ranks his satisfaction derived
from different goods and he does not know precisely the amount of satisfaction.
 Consistency and Transitivity of choice – it is assumed that the consumer is consistent in his choice i.e. if he
chooses commodity A over B in one period, he would not choose B over A in another period. If A >B, then
B<A.
o Similarly it is assumed that consumer’s choices are characterised by transitivity.
o If A is preferred to B and B is preferred to C, then A is preferred to C. Symbolically if A>B and B>C,
then A>C
Indifference schedule
 An indifference schedule may be defined as a schedule of various combinations of two goods that would give
the same level of satisfaction to the consumer.
Indifference schedule –I
Combinations Kgs. of meat No. of eggs
I 1 20
II 2 15
III 3 11
IV 4 8
V 5 6
VI 6 5
 Assume a person has the choice of spending a part of his resources on two commodities, meat and eggs.
 The above table shows various combinations of meat and eggs, which give the consumer the same level of
satisfaction.
 Since all combination of meat and eggs give the consumer the same level of satisfaction, the consumer is
indifferent whether he gets the first or last of the two commodities.
Indifference curve (Click here to view the graph)
 The figures in the above table, if plotted on a graph give the Indifference curve.
 While the Indifference schedule is the tabular statement of different combinations of two commodities
yielding the same level of satisfaction, Indifference curve depicts the same on a graph.
 An Indifference curve may therefore defined as the locus of various combinations of two commodities which
yield the same total satisfaction to the consumer. This curve is also known as Iso-utility curve (Iso means
same).
Indifference map
 Consider another Indifference schedule which is as follows.
Indifference schedule –II

Combinations Kgs. of meat No. of eggs
I 1 22
II 2 17
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III 3 13
IV 4 10
V 5 8
VI 6 7
 Consumption of any combination of commodities in the second schedule would mean that the consumer is
on a higher level of satisfaction than with the previous schedule because the quantity of egg is higher in all
the corresponding combinations in the second schedule.
 Obviously any combination in the schedule II is superior to any combination in schedule I.
 Plotting the second schedule, we get an indifference curve above the first curve implying higher level of
satisfaction.
 In the same way, we can draw many similar curves representing greater or lesser satisfaction.
 Two or more indifference curves drawn on a same graph are collectively called as indifference map.
 In other words indifference map represents a collection of indifference curves where each curve shows a
certain level of satisfaction to the consumer.
 While the higher indifference curve implies higher level of satisfaction, lower indifference curve yield lower
utility.
Properties of indifference curves
 An indifference curve has a negative slope, which denotes that if the quantity of one commodity decreases the
quantity of the other must increase if the consumer is to stay on the same level of satisfaction.
 Indifference curves do not intersect each other.
 Indifference curves are convex to the origin. This is because as the consumer adds more of the commodity, he
gives up only less and less of the other.
 Any movement of the indifference curves to the right is a movement to greater total utility.
CHAPTER-8: THEORY OF DEMAND
Learning objectives
 To explain the meaning of demand

 To explore different types of demand
 To discuss various factors involved in the demand of commodities.
 To understand exceptional demand curve, extension and contraction and increase and decrease in demand
DEMAND
Meaning of Demand
 Demand in economics is the desire for something plus the willingness and ability to pay a certain price in
order to possess it.
Demand schedule
 Demand schedule is a statement which shows varying quantities of a commodity purchased at an alternative
prices at a given time.
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 Demand Schedule represents a functional relationship between price and quantity demanded. It is usually
represented in a form of a table.
Demand Curve (Click here to view graph)
 The graphical representation of demand schedule is demand curve.

 Usually the demand curves slopes downward from left to right indicating inverse relationship between price
and demand for the commodity.
Law of demand
 A greater quantity of a commodity is demanded at a lower price and a smaller quantity is demanded at a
higher price.
 This inverse relationship between price and quantity demanded is called as "Law of demand".
Reasons for the inverse relationship
 There are two reasons why demand curve slopes downwards (or why people buy more when the price falls).
o Consumer is able and willing to buy more of a good when its price falls. Because, a fall in the price of
a good is equivalent to an increase in the income of the consumer, i.e. with the commodity being
cheaper, the consumers’ real income increases which can be used for purchasing some more units of
the commodity. This is called as ‘income effect’.
o If the price of a good falls, it tends to be substituted wholly or partly for other commodities raising
the quantity demanded of this good. This is called as ’substitution effect’.
 The income and substitution effects combine to increase the ability and willingness of the
consumer to buy more of the commodity whose price has fallen.
TYPES OF DEMAND
 Price Demand: It refers to various quantities of a commodity or a service that a consumer would purchase at
a given time in a market at various prices.
 Income demand: It refers to various quantities of a commodity or a service that a consumer would purchase
at a given time in market at various levels of income.
 Cross demand: It means quantities of a good or service which will be purchased with reference to changes in
price not of this good but of other related goods. Eg. Changes in quantity demanded of coffee with respect to
changes in price of tea.
 Joint demand: Certain goods are to be used together to satisfy a particular want. Eg. Pen and Ink. The
demand for such commodities is known as Joint demand.
 Composite demand: A commodity can be put to several uses and that commodity may be demanded to satisfy
any want or more of such uses. The demand for such commodity is known as the composite demand. Eg.
Electricity may be demanded for household uses, industrial purpose etc.
 Derived demand and Direct demand: Demand for paddy grains is direct demand whereas the demand for
organic fertilizer to increase paddy grain production is derived demand.
EXCEPTIONAL DEMAND CURVE
 The demand curve instead of sloping downwards may rise upwards when there is an increase in price
showing that more quantity would be demanded when the price rises. (Click here to view graph)
 This tendency was first observed by Sir Robert Giffen in 19th Century.
 Hence this exceptional process is called Giffen paradox.
 The reason for such exceptional behaviour may be
 Fear of scarcity of goods in future
 Possession of a goods conferring distinction in the society.
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DETERMINANTS OF DEMAND
 Amount of a commodity or service that a consumer wishes to purchase is called as quantity demanded of that
commodity or service.
 Purchase of this quantity is influenced by several factors, which are called as determinants of demand.
 The relationship between the quantity demanded and its determinants are expressed in the form of a
functional equation known as demand function.
o Qd = f {Pi, Pj, Y, T, C, P, I...}
o Where Qd = Quantity demanded
o Pi = Price of that commodity
o Pj = Prices of related goods (substitutes and complements)
o Y = Income of consumer
o T = Tastes and preferences of consumer
o C = Climate or weather
o P = Size and composition of population
o I = Income distribution of the society
 Thus the quantity demanded of a commodity is determined jointly by all these factors indicated.
 Changes in any one or two or more of these factors listed above would become the causes for the changes in
demand.
EXTENSION AND CONTRACTION OF DEMAND
 Demand changes simply because of a change in price.(Click here to view graph)

 Though the consumer's demand schedule is fixed, he is solely led by price.
 He simply goes up and down in the same curve.
INCREASE AND DECREASE IN DEMAND
 The consumer fixes his own demand and

 increases or decreases his demand not with respect to the price but to the factors other than price like
income.It will shift the demand curve.
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 Now, there will not be a movement along the old curve but along a new curve altogether. (Click here to view
graph)
Consumer demand
 It refers to the quantity demanded for a good at a defined time period, in a defined geographical area, in a
defined marketing environment by a particular consumer.
 The determinants of consumer demand can be expressed as follows.
Qx = f (Px ,Pa---n, Y, Ax, T…..) Where
 Qx = the quantity of good 'X' demanded by the consumer

 Px = The price of the good
 Pa….n = The price of the other related goods 'a' to 'n'
 Y = Income of the consumer
 Ax = Advertising expenditure on good
 T = Consumer tastes and
 … = other, unspecified, explanatory variables
Market demand
 Market demand reflects total sales of a product at a specific point of time.

 The determinants of market demand can be expressed as follows.
Qx = f (Px ,Pa---n, Y, Ax, T…..) Where
 Qx = the quantity of good 'X' demanded by the market

 Px = Price of the good
 Pa….n = Price of the other related goods 'a' to 'n'
 Y = Incomes of the consumers
 Ax = Advertising expenditure on good
 T = Consumer tastes and
 … = other, unspecified , explanatory variables
CHAPTER-9: ELASTICITY OF DEMAND
Learning objectives
 To explain elasticity and magnitude of demand

 To understand the factors affecting elasticity of demand
 To discuss the concept of Engels law and consumer's surplus
ELASTICITY OF DEMAND
Defination
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 Elasticity of demand is defined as proportionate change in quantity demanded in response to proportionate

change in price.
Price elasticity of demand
 It is defined as relative responsiveness of quantity demanded of a commodity to the percentage change in its
price.
Measurement of price elasticity
 Elasticity of demand can be measured by three methods viz.

o Proportional method
o Total outlay method and
o Geometrical method
Proportional method
 In proportional method, price elasticity of demand is measured as below.

 Price elasticity of demand is the ratio of proportionate change in the quantity demanded to the proportionate
change in the price.
 Suppose price of an egg falls from Rs. 1.25 to Re.1 and as a result, the demand rises from 10 to 15 eggs, then
price elasticity of demand (Ep)
 This indicates that for one- percent decreases in price, there would be 2.5 per cent increase in the quantity
demanded.
Total outlay method
 In total outlay method, from the changes in the total expenditure made on a good as a result of changes in its
price, the price elasticity of demand for the good is measured.
 But with this method, we can know only whether the elasticity is equal to one, greater than one or lesser than
one and we cannot precisely work out the coefficient of elasticity.
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 If the total expenditure made on the good remains the same, when the price of a commodity consumed
changes, the elasticity of demand is equal to one.
 Because, the total expenditure made on the good can remain the same, only when the proportional change in
the quantity demanded is equal to the proportional change in price.
 When the total expenditure made on the good increases as a result of a fall in price or when the total
expenditure decreases as a result of a rise in price, then the price elasticity of demand will be greater than
one.
 When the total expenditure decreases as a result of a fall in price or when the total expenditure increases as a
result of a rise in price, then the price elasticity of demand will be less than one.
 Consider the following table, which gives quantity demanded of milk at various prices.
Total outlay and elasticity of demand
 Quantity demanded increases from 50 litres to 60 litres and total outlay increases from Rs. 725 to Rs. 855,
when the price decreases from Rs. 4.50 to Rs. 4.25 i.e. the quantity demanded increases so much that the
total outlay on milk increases indicating thereby that elasticity of demand is greater than one at these prices.
Price of milk (Rs.) per litre Quantity demanded in litres Total outlay (Rs.) Elasticity of demand
14.50 50 725.00 -
14.25 60 855.00 e>1
14.00 75 1050.00 e>1
13.75 80 1100.00 e=1
13.50 84 1134.00 e<1
13.25 87 1152.75 e<1
 When the price falls from Rs. 4.00 to Rs. 3.75, the quantity demanded increases from 75 to 80 litres so that
total outlay remains the same at Rs. 300.
 This shows that price elasticity of demand is unity. When the price of milk further falls from Rs. 3.75 to Rs.
3.50 and then to Rs. 3.25, total outlay spent on milk decreases in spite of the increase in the quantity
demanded.
 Thus, the elasticity of demand for milk at these prices is less than unity.
Geometrical method
 Geometrical method tells how to measure elasticity of demand at any point on a curve.
 Following is the straight demand curve DD'. Elasticity at a particular point is represented by a fraction -
distance from D' to that point divided by the distance from the other end.
 Thus elasticities of demand on the points P, Q, and R are D' P/DP, D' Q/DQ and D' R/DR respectively. Since
Q is in the middle of the curve, elasticity D' Q/DQ is equal to one.
 Any point above this point will have an elasticity of more than one and points below Q will have elasticity of
less than unity. Therefore, it can be concluded that elasticity of demand is different at different points of the
same curve.
 Elasticity calculated in this way can be called as point elasticity. (Click here to view graph)
 Point elasticity can be used only when the demand curve is known. However, often only scanty data on price
and quantity are available in which cases it will be difficult to find point elasticity.
 Instead, we shall have arc elasticity (an arc is a portion or a segment of a curve).
 Instead of using old and new price and quantity, here we take the average of both. Thus the arc elasticity is
the average elasticity which is equal to
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Income elasticity of demand
 It is the responsiveness of change in quantity purchased to change in income.

 Luxury goods will have high-income elasticity while the necessaries have low-income elasticity of demand.
Cross elasticity of demand
 It is a measure of responsiveness of demand for goods to given change in the price of related goods.
MAGNITUDE OF ELASTICITY
 On the basis of numerical value five types of elasticity of demand can be distinguished.
o Elastic Demand: When the coefficient of elasticity of demand exceeds one, the demand is elastic. The
percentage change in quantity demanded is more than that of the price. (Click to view graph)
o Inelastic demand: When the coefficient of elasticity of demand is less than one the demand is called
inelastic. The percentage change in quantity demanded is less than that of price. (Click to view
graph)
o Unitary elastic demand: When the coefficient of elasticity of demand is equal to one the demand is
said to be unitary elastic. That is percentage change in quantity demanded is equal to that of
price. (Click to view graph)
o Perfectly elastic demand: When the coefficient of elasticity of demand is infinite the demand is said
to be perfectly elastic. i.e. when the quantity demanded changes even when the price level remains
static, the demand is said to be perfectly elastic. (Click to view graph)
o Perfectly inelastic demand: When the coefficient of elasticity of demand is zero, the demand is said
to be perfectly inelastic. When the change in price does not result in change in quantity demanded,
the demand is said to be perfectly inelastic. (Click to view graph)
FACTORS AFFECTING ELASTICITY OF DEMAND
 Nature of commodity
 Availability of substitutes at ruling market price
 Number of possible substitute E.g. Uses of the plastics
 Proportion of income spent on the good.
 Period of time / range of commodity use.
 Possibility of new purchasers / consumption pattern.
 Proportion of market supplied at ruling price.
ENGEL'S LAW
 The 19th century statistician Engel noticed that any additional income is tended to be spent more on luxuries
and non essentials than on essentials and his observation is commonly known as Engel’s law which can be
postulated as follows.
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 “The proportion of personal expenditure devoted to necessities decreases as income rises”. It can be
illustrated with the help of following figure.
 The Engel’s law represented diagrammatically illustrates that expenditure on food and clothes form a larger
proportion of total expenditure of people with low incomes than of those with higher incomes. (Click to view
graph)
Practical Importance
 The concept of elasticity of demand figures predominantly in both the theoretical analysis of the economists
and the practical decision of the businessmen and the government.
Theoretical economics
 To define perfect competition in selling a good.

 As a helpful tool in analysing problems connected with changes in the conditions of supply.
Business decision
 Super market: When it cuts the price of a good the supermarket expects a considerable expansion in
demand by winning customers from retailers selling at a higher prices.
 Monopolists: A monopolist looks at the demand schedule for his good and fixes the quantity and
thus the price at which he makes profit.This is because he is not faced with the perfectly elastic
demand curve.
Government policy
 In fixation of sales tax.

 Imposition of selective tax or subsidy on goods will affect the size of the industry.
CONSUMER'S SURPLUS
 Consumer's surplus is based on diminishing utility.

 Concept of consumer surplus is defined as the excess of price, which a person would be willing to pay rather
than go without the good.
 In short Consumer's surplus is what we are prepared to pay minus what we actually pay or it is the difference
between total utility and the amount spent. (Click to view graph)
Consumer's surplus = Total Utility-Total price

No.of eggs Price (Rs) Total Cost Total utility Marginal utility Consumer's surplus
(1) (2) (3) (4) (5) (6) = (4 - 3)
1 25 25 100 -- 75
2 25 50 175 75 125
3 25 75 225 50 150
4 25 100 250 25 150
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 Consumer is prepared to pay OMPD for four eggs but as a buyer in the market, he pays only OMPK.
 Hence the consumer's surplus is given by OMPD - OMPK = DKP (selected area)
CHAPTER-10: SUPPLY
Learning objectives
 To define supply, supply curve and supply schedule.

 To know the factors affecting supply.
 To explain elasticity of supply
SUPPLY
Definition
 Supply of a commodity refers to the various amounts of commodities, which the producers are willing and
able to make available for sale at various prices during a given time.
SUPPLY SCHEDULE
 Supply schedule is a statement showing varying quantities of goods offered for sale at alternative prices at a
given time.
Price of egg Rs / 100 eggs Market supply
150 17,500
140 16,000
125 15,500
110 14,600
SUPPLY CURVE
 Supply curve is the graphical representation of the supply schedule which represent various amount of goods
that would be offered for sale at different prices during a particular period of time.
 Supply curve slopes upward from left to right because as the price rises the quantity supply increases.
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LAW OF SUPPLY
 Other things remaining constant (ceteris paribus), higher the price of a commodity, the larger will be the
quantity supplied and lower the price the smaller will be the quantity supplied.
 In mathematical terms supply is an increasing function of price.
Determinants of supply
 Price of the commodity – when price of a commodity increases, its supply also increases.
 Price of a related commodity – When price of a good increases , supply of its substitute declines e.g. mutton
and chicken.
 Cost of inputs of production – When cost of raw materials increases, supply decreases.
 State of technology – Improvement in technology lower the cost of production and increases the supply.
 Factors outside the economic sphere like flood, drought, fire etc.
 Tax and subsidy – Higher taxation will decrease the supply and granting subsidies will raise the supply.
Elasticity of supply (Click to view graph)
 It measures the rate at which the quantity supplied changes due to changes in price.
 Suppose the price of an egg rises from Rs. 1.00 to Rs. 2 and as a result the supply increases from 10 to 30
eggs.
 For 1 percent increase in price, there is 4 per cent increase (change) in quantity supplied.
Different types of elasticity of supply
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 Perfectly inelastic - Esp = 0

 Inelastic - Esp<1
 Unitary elastic - Esp = 1
 Elastic - Esp >1
 Perfectly elastic - Esp = Infinite
CHAPTER-11: COST CONCEPTS – PRINCIPLES OF FIXED AND VARIABLE COST
Learning objectives
 To explain meaning of various costs in animal husbandry practices.

 To discuss about various cost relationships.
 To clarify difference between fixed cost and variable cost.
 To show the relationship between Total Fixed Cost, Total Variable Cost and Total Cost.
 To explore the importance of unit cost curves.
COST CONCEPTS
Production costs
 Production costs play an important role in decisions making by the farmers.

 Cost of production often becomes a policy issue when producers complain that the prices they receive for
their product do not cover the cost of production.
 Cost of production here means the expenses incurred per unit of output.
 Costs in farming can be divided into two main categories
o Fixed cost
o Variable cost
Fixed cost (or) over head charges (or) sunk cost
 A resource or input is called a fixed resource if its quantity cannot be varied during the production period
and in general costs associated with fixed inputs are called fixed costs.
 Fixed costs have to be incurred even when the production is not undertaken.
 E.g., taxes, rent, electricity, water charges, insurance, depreciation, labour hired on a year -round basis,
interest on investment in equipment and livestock, etc
 In short run, some costs are fixed and others can be varied. However in long run, , all costs become variable.
Variable costs
 An input is a variable input if it’s quantity can be varied during the period of production and the costs
associated with variable inputs are called variable costs.
 Variable costs vary with the level of production.
 These costs will not be incurred in the absence of production.
 E.g., seed, tractor fuel, repairs, feed, fertilizer cost, etc.
 Labour if hired on daily basis, interest on current investment, hired machines and other services are also
included in variable costs.
Total costs
 Total costs of production will include both fixed and variable costs.
Cash costs (explicit cost)
 Cash costs are incurred when resources are purchased and used immediately in the production process.
 Cash costs result from purchases of non-durable inputs such as fertilisers, fuel, oil, and casual labour which
do not last more than one production process.
Non-cash costs (implicit costs),
 Non-cash costs consist of depreciation and payments to resources owned by the farmer.
 E.g., Depreciation on tractor, equipment, buildings, payments made to the farmer himself or family labour,
management and owned capital.
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Opportunity cost
 Opportunity cost of an output is defined to be the income that can be earned in the next best alternative use.
 For example, a farmer with 25 kg concentrate feed which can either be fed to his cows or sold.
 If he gives the feed to his cows, the opportunity cost is the amount of money for which the feed can sold to
others.
 If he sells the feed, the opportunity cost is the amount of extra income, which can be obtained by giving this
feed to his animals.
 Opportunity cost is defined to be the real cost of any input.
COST FUNCTION
 Production of output requires input, which cost money, and therefore there exist a relationship between
output and cost.
 Total cost curve or cost function represents the functional relationship between output and total cost.
 Cost function can be presented
o Arithmetically (tabular form)
o Geometrically (graphic form)
o Algebraically (equation form)
Tabular form
Output TFC TVC TC
0 10 0 10
2 10 2 12
5 10 4 14
9 10 6 16
13 10 8 18
17 10 10 20
22 10 12 22
Graphic form
 Nature of cost curve depends on nature of the corresponding production function.

 Hence, when cost is portrayed on X-axis and the product on Y-axis, the total cost curve will have the same
shape as total product curve.
Algebraic form
 C = f(Y). Where, C-total cost and Y-output

RELATIONSHIP BETWEEN TFC, TVC, AND TC
 Total fixed cost (TFC) is represented by a straight line parallel to X-axis and it remains unchanged for all
output levels in a time period.
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 TVC-is zero, when output is zero. It increases as output increases. The shape of TVC curve depends on the
shape of the production function.
 TC is the sum of TFC and TVC. When no variable output is added, TC is equal to TFC.
 The TC curve is shaped exactly like the TVC curve, but is placed above the total variable cost by the units of
total fixed cost. (Click to view graph)
Opportunity cost
 The income which an output can earn in the next best alternative use.
Physical risks
 Destruction of the product itself and are due to fire, accident, rain etc.
 Risk attached to such natural hazards is often transferred to institutions (Insurance companies) that
specialize in assuming such risk.
 Unit costs are
o Average Fixed Cost (AFC),
o Average Variable Cost (AVC),
o Average Total Cost or Average Cost (ATC or AC)
o Marginal Cost (MC).
 These unit costs are more important than total costs in decision making process. Plotting these, we get unit
cost curves. (Click to view graph)
Average Fixed Cost
 Average Fixed Cost is worked out by dividing the Total Fixed Cost by the amount of output.
 It is fixed cost/unit of output. AFC will vary for each level of output.
 As output increases, AFC continues to decline. When output is zero, AFC=TFC. AFC always slopes
downwards regardless of production function.
 AFC = TFC /Output
Average Variable Cost
 Average Variable Cost is calculated by dividing the Total Variable Cost by the amount of output.
 AVC decreases, reaches a minimum and increases thereafter. AVC cannot be computed when output is zero.
 AVC = TVC / Output
Average Total Cost
 Average Total Cost can be computed by dividing Total Cost by output.

 ATC, as AVC, first decreases, attains a minimum and increases thereafter.
 ATC is the cost of producing one unit of output.
 ATC = TC / Output
Marginal Cost
 Marginal Cost is the change in the Total Cost in response to a unit increase in output.
 It is found out by dividing change in total cost (or total variable cost because TFC is not going to change) by
change in output.
 MC curve decreases first, reaches its minimum point and then raises upwards and passes through AVC and
AC (ATC) at their minimum points.
 In other words, AVC and AC will slope downwards and keep falling as long as MC is below them.
BREAK-EVEN POINT
 Break-Even Point is the quantity of output corresponding to minimum of average total cost.
 Exactly at this point, the producer neither gains nor looses anything.
 Whatever income he gets above this point is his profit.
 Suppose the farmer is operating below this point he will be incurring loss towards his fixed cost.
 In short-run, the farmer continues to operate even below this profit. e.g., broiler farms.
 In the long run, the producer has to operate above this point to remain in the business.
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Shut-Down Point
 Shut-Down Point is the quantity of output corresponding to minimum point of average variable cost.
 Exactly at this point, the producer is in a position to meet the expenses towards the variable cost alone.
 If he operates below this point, he will not be in a position to meet even the variable expenses .
 In short run, the producer must be able to operate at least above this point in order to sustain in the
business.
Long run
 Long run is a period of time during which the quantities of all factors, both variable and fixed, can be
adjusted. Break Even Unit Cost Curve
Short run
 Short run is a period of time, within which the firm can vary its output by varying only the amount of variable
factors such as labour and raw materials.
 Fixed factors such as capital, equipment, top management personnel cannot be varied.
RELATIONSHIP BETWEEN AVERAGE VARIABLE COST AND AVERAGE PRODUCT
 AVC = TVC/Y = X . Px/Y = Px . X/Y = Px . 1/AP

 AVC * 1/AP
 Therefore, AVC is inversely related to AP, i.e., when AP increases, AVC decreases.
 When AP is maximum, AVC attains its minimum point and when AP decreases, AVC increases.
 As on a production function, AP measures the efficiency of variable input, for cost curves AVC provides the
same measure.
Relationship between marginal cost and marginal product

Marginal Product Marginal Cost
Increasing Decreasing
At maximum At minimum
Decreasing Increasing
RELATIONSHIP BETWEEN AVERAGE VARIABLE COST AND AVERAGE PRODUCT
 AVC = TVC/Y = X . Px/Y = Px . X/Y = Px . 1/AP

 AVC * 1/AP
 Therefore, AVC is inversely related to AP, i.e., when AP increases, AVC decreases.
 When AP is maximum, AVC attains its minimum point and when AP decreases, AVC increases.
 As on a production function, AP measures the efficiency of variable input, for cost curves AVC provides the
same measure.
Relationship between marginal cost and marginal product

Marginal Product Marginal Cost
Increasing Decreasing
At maximum At minimum
Decreasing Increasing
CHAPTER-12: THEORY OF PRODUCTION
Learning objectives
 To show relationship between a variable input and an output by use of production function and its types of
returns to scale.
 To illustrate Law of diminishing returns and its importance.
 To clarify the difference between short run and long run.
CONSTANT RETURNS PRODUCTION FUNCTION OR CONSTANT COST
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 There can be three types of input - output relationships in the production of commodities.
 Nature of the relationship between a single input and a single output can be either of the following or
combination of them.
Constant returns production function or constant cost (Click here to view graph)
 In constant returns, each additional unit of variable input produces an equal amount of additional product.
i.e., The amount of product increases by the same magnitude for each additional unit of input.
 However, this is not a very common relationship in Animal Husbandry but may be possible in other
industries. (Value of each Unit of input Rs. 1500)
Example
No. of units of Total output (Y) ∆ ∆ X MP ( ∆ Y/ ∆ X) Average Variable cost =
Input (X) Y Unit variable cost /AP
0 - - -
10 500 50 10 5 1500/50 = 300
20 1000 50 10 5 1500/50 = 300
30 1500 50 10 5 1500/50 =300
40 2000 50 10 5 1500/50 =300
50 2500 50 10 5 1500/50 =300
 The table and the graph show that every equal increase in the input results in a constant increase in the
output and hence, the given production function is known as a constant marginal returns function giving a
straight line production curve (TP curve) which is having the same slope throughout its entire range.
INCREASING RETURNS PRODUCTION FUNCTION OR DECREASING COST
 In this case, every additional or marginal unit of input adds more and more to the total product than the
previous unit. i.e., addition to total product is at an increasing rate.
 In actual practice, the cases of purely increasing returns are rarely available.(Value of one unit of input Rs
500).
Example
No. of units of Total ∆ X ∆ Y MP Average Variable cost
Input (X) output (Y) ( ∆ Y/ ∆ X) =Unit variable cost /AP
10 100 - - - 500/10 =50
20 110 10 10 1 500/5.5 = 90.90
30 190 10 90 9 500/6.33 =78.99
40 300 10 110 11 500/7.5 = 66.67
50 450 10 150 15 500/9.0 = 55.56
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 Shape of the curve will go steeper and steeper with added inputs.
DECREASING RETURNS PRODUCTION FUNCTION OR INCREASING COST
 “If increasing amounts of one input are added to a production process while all other inputs are kept
constant, the amount of output added per unit of variable input will eventually start decreasing”.
 In this type each additional unit of input add less and less to the total product than the previous unit.
Diminishing marginal product exist.
 This function exists in almost every practical situation in livestock production. .(Value of one unit of input Rs
500)
Example
No. of units of Total ∆X ∆Y MP Average Variable cost
Input (X) output (Y) ( ∆ Y/ ∆ X) =Unit variable cost /AP
0 50 - - -
10 140 10 90 9 500/14 =35.17
20 210 10 70 7 500/10.5 =47.62
30 260 10 50 5 500/8.6 = 58.14
40 300 10 40 4 500/7.5 =66.67
50 330 10 30 3 500/6.7 =74.63
60 350 10 20 1 500/5.9 =84.75
Elasticity of production
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 Elasticity of production can be defined as the percentage change in output in response to the percentage
change in input.
 A production function with an elasticity of 1 indicate constant returns and the elasticity of more than one and
less than one imply increasing and diminishing returns, respectively.
PRODUCTION FUNCTION, SHORT AND LONG-RUN PRODUCTION FUNCTION
 Production function is the relationship between inputs and outputs.

 Production function, which relates to factors and products where some resources are fixed can be termed as
short-run production function (Regardless of the number of fixed resources and level at which each is held
fixed).
 Those input-output relations which permit variation in all inputs or all factors (none is fixed) can be termed
as long run production function.
Law of Variable Proportion or Law of Diminishing Return
Definition
 “If the quantity of one productive service is increased by equal increments, with the quantity of other
resource services held constant, the increments to total product may increase at first but will decrease after a
certain point” – E.O.Heady
 “An increase in capital and labour applied in cultivation of land causes in general, less than proportionate
increase in the amount of product raised, unless it happens to coincide with an improvement in the arts of
agriculture” - Marshall.
 As the amount of variable resource used in production of a product is increased, the output of the product
will at first increase at an increasing rate, then increase at a decreasing rate and finally a point will be
reached, where further application of the variable resource will result in a decline in the total output of
production.
 In short, marginal product of variable input will first increase, then decrease and finally become negative.
Short Run and Long Run
 Short run refers to a period of time in which the supply of certain inputs (e.g. plant, building and machines,
etc.) is fixed or inelastic.
 In short run, therefore, production of a commodity can be increased by increasing the use of variable inputs,
like labour and raw materials.
 They do not refer to any fixed time period. While in some industries short term may be a matter of a few
weeks or a few months, in some others (e.g., electric and power industry), it may mean three or more years.
 Long run refers to a period of time in which the supply of all the inputs is elastic, but not enough to permit a
change in technology.
 In long run, the availability of even fixed factor increases. Therefore, in long run, production of commodity
can be increased by employing more of both, variable and fixed, inputs.
 Economists use another term, i.e., very long period which refers to a period in which the technology of
production is subject to change.
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 In the very long run, the production function also changes. The technological advances mean that a larger
output can be created with a given quantity of inputs.
Short run production with one variable input
 Laws of returns state the relationship between the variable input and the output in the short term.
 By definition, certain factors of production (viz., land and capital equipments such as plant and machinery)
are available in short supply during the short run. Such factors are known as fixed factors.
 On the other hand, the factors which are available in unlimited supply even during the short periods are
known as variable factors.
 In short run, therefore, the firms can employ a limited or fixed quantity of fixed factors and an unlimited
quantity of the variable factor.
 In other words, firms can employ in the short run, varying quantities of variable inputs against a given
quantity of fixed factors. This kind of change in input combination leads to variation in factor proportions.
 The laws which bring out the relationship between varying factor proportions and output are therefore
known as the Law of Variable Proportions, or what is more popularly known as the Law of Diminishing
Returns.
Long term production with two variable inputs
 We shall now discuss the relationships between inputs and output under the condition that both the inputs,
capital and labour, are variable factors. This is a long run phenomenon.
 In the long run, supply of both the inputs is supposed to be elastic and firms can hire larger quantities of both
labour and capital. With large employment of capital and labour, the scale of production changes.
 The technological relationship between changing scale of inputs and output is explained through the
production function and isoquant curves techniques.
Production rules for the short run
 There are three rules for making production decisions in the short run. They are
o Expected selling price is greater than minimum ATC (or TR greater than TC). A profit can be made
and is maximized by producing where MR = MC.
o Expected selling price is less than minimum ATC but greater than minimum AVC (or TR is greater
than TVC but less than TC). A loss cannot be avoided but will be minimized by producing at the
output level where MR=MC. The loss will be somewhere between zero and the total fixed cost.
o Expected selling price is less than minimum AVC (or TR less than TVC). A loss can not be avoided
but is minimized by not producing. The loss will be equal to TFC.
 Application of these rules is as follows. With a selling price equal to MR1, the intersection of MR and MC is
well above ATC, and a profit is being made.
 When the selling price is equal to MR2, the income will not be sufficient to cover total costs but will cover al
variable costs, with some left over to pay part of fixed costs. In this situation, the loss is minimized by
producing where MR=MC, because the loss will be less than TFC.
 Selling price should be as low as MR3, income would not even cover variable costs, and the loss would be
minimized by stopping production. This would minimize the loss at an amount equal to TFC.
Production rules for the long run
 There are only two rules for making production decisions in the long run.
o Selling price is greater than ATC (or TR greater than TC). Continue to produce, because a profit is
being made. This profit is maximized by producing at the point where MR=MC.
o Selling price is less than ATC (or TR less than TC). There will be a continuous loss. Stop production
and sell the fixed asset(s), which eliminate the fixed costs.Money received should be invested in a
more profitable alternative.
 This does not mean that assets should be sold the first time a loss is incurred. Short-run losses will occur
when there is a temporary drop in the selling price.
 The second long-run rule should be invoked only when the drop in price is expected to be long lasting or
permanent.
CHAPTER-13: ECONOMICS OF DISEASE LOSSES
Learning objectives
 To discuss economic consequences of animal disease loss.

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 To explore methods of measuring economic benefits of disease control.

ECONOMICS OF DISEASE LOSSES AND MECHANISM OF DISEASE ON ALTERED PRODUCTIVITY
 At present, animal health management becomes more complex phenomenon involving multiple issues in
order to optimize livestock production.
 In dealing with animal health issues, economic evaluation has become increasingly important as the effects
of diseases which remain to be controlled are far more subtle than was the case for epidemic problem.
 It is necessary to define the ways in which a particular disease lower productive efficiency.
 Over the years it has become clear from many studies that typically animal health measures yield very high
economic return to livestock producers.
 In order to explain unusual nature of effects of disease on animal and hence to show how economic studies
on animal disease should be carried out .
 It is necessary to define the exact mechanism by which a disease can influence productivity.
Mechanism of Disease on Altered Productivity
 Infectious and parasitic diseases cause diversion of feed resources to growth and multiplication of causative
agents.
 Non-infectious disease can affect in a different manner. These disease may cause direct or indirect effect.
Effect of ingestion
 Most infectious and non-infectious diseases cause major effect of reduced feed intake with rare incidence of
increased intake.
 Reduced feed intake is often called as anorectic effect. Its effect on feed conversion efficiency is known as
specific effect.
 This specific effect is of economic relevance and is of two types.
 Since lower production is achieved from same feed intake and efficiency of production process is adversely
affected.
 Anorectic effect reduces both intake and output without altering efficiency of production.
 This is an important consideration as variable cost in purchased feed and a fixed cost in feed and fodder
establishment.
Effect of Disease on Physiological Process
 Diseases generally modify different physiological processes such as nutrition, metabolism , respiration and
excretion.
 Mainly protein metabolism is highly affected by many diseases compared to other every metabolism.
 Altered protein metabolism results in depletion of protein in the body of host leading to weight losses, and
production loss.
 In rare cases, every metabolism impairment occurs as secondary to protein metabolism.
 This results in every costs of tissue regeneration. Other mineral and micronutrient metabolisms are also
alterd by disease process.
 Cobalt, copper, zinc and vitamins status have all been affected by protein metabolism.
 Since lung diseases can adversely affect productivity, another mechanism by which disease might impair
physiological function is a production respiratory function.
 Similarly altered kidney function and liver function can cause production deficiency.
MEASURABLE EFFECTS OF DISEASES ON LIVESTOCK PROFITABILITY
Premature Death
 This is the easiest of all consequences of diseases.

 In economic studies, death loss can be measured as a difference between the potential market value and its
value when dead ( which may not be zero), less the costs which would have been incurred in obtaining
market value (extra feed, care to market age, marketing cost etc.).
Changed value of animal and products from slaughter animal
 Diseased animals may have lower marketing value either due to visible lesions or due to indirect changes in
appearance or body confirmation which make them less attractive.
 This reduced value may be due to changes in the ratio of meat to fat or meat to bone.
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 Presence of lesions of zoonotic diseases may render animal totally unfit for consumption from aesthetic point
of view.
 Some external parasitic diseases cause reduction value of skin/hides to their uses.
Reduced Live weight Gain
 It is well known fact that diseased animal gain weight more slowly than equivalent disease free animals.
Reduced Yield and Quality of Products from Live Animals
 Yield of animal products like milk, wool and meat may be reduced by disease.
 Quality of these products may also be reduced in term of change in milk composition (in mastitis) and
change in wool quality.
 In case of yield reduction, price of commodity will fall and livestock producer will suffer. But in case of
quality change, consumer will suffer the loss.
Reduced Capacity for works
 Most important use of animal in developing country is as a source of traction. There are certain disease like
FMD causing reduced capacity to work.
 Disease can severely curtail rice paddy field preparation and other task for which animals are essentials. So
this is essential economic loss of producing field.
Altered production of dung for fuel and fertilizer
 Dung is used as cooking fuel in most developing countries, apart from using it as fertilizer.
 Disease which cause high metabolic rate will indirectly influence rumen metabolism by reducing the supply
of dung.
Altered feed conversion efficiency
 Feed conversion efficiency is the ultimate measure of influence of disease on the production process, but its
measure require accurate measurement of feed intake which is possible only under controlled feeding.
 In grazing system, it is reasonable to take changes in feed as an adequate indication of change in feed
conversion efficiency when comparing diseased and disease free animals kept under identical condition.
Effect of Disease on herd productivity
 Effect of disease spreads from individual animal to broader extent of herd management.
Reduced Productive life of animal
 Reduced productive life of animal is due to increased culling which might be due to reason of low
yield or disease or unawareness of facts to farmers.
Less accurate genetic selection
 If a disease alters any of the components of productivity which are the subject of genetic selection
pressure in the herd (milk or wool yield), it will affect efficiency with which animals of superior
genetic merits are identified.
Effect on capacity to maintain and improve the herd
 If less progeny born, fewer animals are available as herd replacement or for sale to market products.
 Thus not only livestock sale income reduced but also management flexibility for herd improvement will be
curtailed.
 It will lead to the purchase of breeding animals with all the additional risks that exists.
 For example, liver fluke and other gastro-intestinal parasites have been shown to affect reproductive
performance in ewes.
 In cattle, bovine leucosis and ephemeral fever have been reported to affect reproduction.
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Effects of disease control measures on productivity of animals
 In evaluating economic benefit of disease control, it is necessary to consider not only the difference in
productivity between diseased and healthy animals, but also the change in productivity following elimination
of a disease from an affected animal i.e. as in mastitis and worm infestation.
 Thus selection of an economically optimal control strategy will be strongly influenced by this consideration.
EFFECT OF ANIMAL DISEASE ON HUMAN AND ANIMAL WELFARE
Effect on human nutrition
 Major direct effect on human welfare is through reduced supply of high quality animal protein to young
children and adolescents.
 Thus animal diseases reduce their nutritional value.
Effects on Community Development
 Animals are source of supply of traction power and dung material in most developing countries.
 Further, they are sources of products like wool, hair, hide, feather, fur etc., used for clothing, decoration,
manufacture of utensils. Animal disease may cause reduced supply of these products.
 Another effect of animal disease which are zoonotic is to cause disease in human as well as the animal
population, thus amplifying their impact.
Cultural significance of animal
 In most countries animals serve functions far beyond the utilization roles.
 In our country, cow is considered as saint and buffaloe is considered as vehicle of Emedharmaraja (God for
killing).
Animal Welfare
 Animal disease control is an important issue in protecting the welfare of managed animals.
 There have been surprisingly few efforts to qualify welfare effects of diseases and most of the information
available is opinion rather solid evidence.
 Greater biological understanding will be required before quantitative assessments of effects of disease on
animal welfare.
METHODS OF MEASURING THE ECONOMIC BENEFITS OF ANIMAL DISEASE CONTROL
 Main function of measuring benefits of animal disease control is on estimating benefits of action against
disease rather than on economics.
 The simplest approach is to compare alternative control programme within farms.
 Ideally large number of farms should be included in such study to obtain estimates of variation in outcome
between farms.
 In some cases, it may be necessary to conduct a comparison solely between farms because the farm is the
smallest feasible unit.
 It requires large number of farms because of the extent of variation in controlled factors between farms.
 There are standard economic techniques which should be used to describe and summarize the outcome of
economic studies.
 The most common ones are partial budgeting, cost-benefit analysis and decision analysis.
 The focus of economic studies must be on estimating the benefit of action against a disease rather than just
on the economic impact of the presence of a disease.
 Although it is not possible to get all of the economic data using other analytical procedures of which
computer modeling is among the most useful .
 There are standard economic procedures to include an evaluation of risk of each of alternative course of
action.
 A rational approach to provision of health care requires that the product and welfare significance rather than
pathological severity of the disease should be the measuring yardstick for livestock.
 In this way health and production issue can be brought together for the benefit of livestock producer and
equally of the consumer.
Reference
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1. Prabu, M., A.Md.Safiullah and S.Selvam.2004. Evaluation of Economic Losses due to Foot and Mouth
Disease in Bovines of Salem District. Agricultural Economics Research Review.17(1):77-84.
2. Md Safiullah, A.,R.Prabaharan and P.Sadasivam. 2001.Economic Analysis of Calving Interval of Hungarian
Dairy Cattle.Journal of Applied Nutrtion. (19) 237-246.
3. Md Safiullah, A.,E.Cenkvari, S.Selvam and N.Meganathan.1997. An Economic Analysis of losses of dairy
cattle in Hungary. Indian Journal of Animal Sciences. 67(9)739-743.
4. Md Safiullah, A., Imre Tell and Eva Cenkvari.1994.Economic Analysis of productive lifespan of Dairy Cattle.
Acta Agronomica Ovariensis.36(1-2) 83-94.
5. Ganeshkumar B., P.K.Joshi, K.K.Datta and S.B.Singh.2008. Economic Losses due to Avian Flue in Manipur.
Agricultural Economic Research Review. 21(1):37-47.
6. Kumar S.,V.S. Vihar and P.R. Deoghare.2003. Economic Implication of disease in goats in India with
reference to implementation of a health plan calendar.Agricultural Economic Research Review. 47:159-164.
7. John Christy, R and M.Thirunavukkarasu.2006. Emerging importance of Animal Health Economics - A note.
Tamil Nadu Journal of Veterinary and Animal Sciences 2(3):113-117.
8. Jeyakumari M., M.Thirunavukkarasu and G.Kathiravan.2003. Economic impact of post-partum reproductive
disorder on dairy farms. Indian Journal of Animal Sciences.73(12):130-132.
9. Chauhan, S.K., R.K.Sharma and M.Gupta.1994. Economic losses due to disease and constraints for dairy
development in Kangra district of Himachal Pradesh. Indian Journal of Animal Sciences 64(1):61-65.
10. Dijkhuizen, A.A. and Roger S.Morris.2000. Animal Health Economics - Principles and Application.
University of Sydney.Australia.
CHAPTER-14: LIVESTOCK BUSINESS
Learning objectives
 To understand concepts, nature and scope of livestock business.

 To illustrate characteristics of small livestock business.
CONCEPTS, SCOPE AND CHARACTERISTICS OF LIVESTOCK BUSINESS
Concepts
 Livestock business includes both livestock and its products under business transaction.
 Livestock generally includes all domestic animals which are meant for human welfare.
 It includes primary activities of rearing all kinds of animals for food and other uses.
 Business of livestock and its products encomposes various activities involved in directing the resources from
point of production to consumption point. It includes various forms of utilities.
 Livestock business includes all operation involved in movement of animals, raw materials and the effect of
such operation on livestock farmer, middlemen / traders, butchers and consumers.
 Livestock business comprises all activities, agencies and policies involved in the procurements of all inputs
by livestock producers and movement of livestock and its products from livestock farmers to consumers.
 Livestock business is the link between livestock farmers and non-farm sectors.
 Further it includes organization of all material supply to processing of finished products, their demand and
policy relating to farm products.
Scope
 Livestock business in a broader sense is concerned with livestock and its products by farmers / traders and of
inputs required by them in production of these animals and their products. This subject of livestock business
includes product marketing as well as input marketing.
 Livestock rearing is a age old practice even before existence of agricultural farming with seed.
 Traditionally nomadic farmer reared their livestock wherever the feed and water were available.
 Now days modern animal husbandry activities attract usage of more scientific knowhow on breeding, feeding
and animal health care. Modern practices are more input intensive.
 Thus the scope of livestock business includes both input and output trading.
 These are subject mater of livestock marketing includes marketing function, agencies / traders, channels,
efficiency and costs, price spread, market integration, production surplus, government policy and research,
training and market statistics.
 Business of livestock products is a complex process.
 It includes all the functions and processes involved in the movement of produce from livestock farmers to
consumers.
 Neither producers nor consumers of livestock products are located at one place. They are spread all over the
country.
 Time wise, too, the production and consumption of livestock products do not coincide.
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 Moreover, farm products are produced in a form which is different from the one in which they are consumed.
They move in different ways and at different places and times.
 The number and type of functions, the cost of performing these functions, the margins or profits of those
who perform these functions, and the competition in the trade – all these vary from commodity to
commodity, from time to time and from place to place.
Characteristics of livestock business
A good developed livestock business possess the following characteristics
 A good livestock business should provide livestock and livestock products which the consumers want and are
ready to pay for.
 It should provide a wide variety of products to consumers so that they may easily choose for themselves. The
variety should not be so wide as to create a confusion for him.
 No harmful products should be offered for sale in the market, precautions should be taken to protect
consumers.
 Information on the presence of products in the market and their relative merits should be available to all the
prospective consumers.
 There should not be any sort of pressure on the consumers to buy products from a particular trader or class
of traders.
 Retailing services should be available in the market for small consumers.
 Prices should be fair and uniform for the products for all categories of consumers.
 There should not be any inefficiency or waste in the market.
Marketed and Marketable Surplus
 Marketed surplus is the actual quantity marketed in the market by the producer.
 Marketable surplus is the quantity which can be delivered by the producer to the market after his on-farm
consumption. It represents the excess quantity affordable to the market and it creates the market for certain
commodity.
 Marketable surplus is expressed as follows
M=Q-C
 Where M - Marketable surplus.

 Q - Out put ( Old stock + Current stock)
 C - On-farm consumption
 To understand this concept at farm level, the following example may be attempted
 A farmer has two cows each yielding 25 litres daily. His family composition is with his wife and two children.
Adult members of his family consume 500ml of milk daily. But each of his children consumes 750 ml daily.
What is his marketable surplus?
 His marketable surplus = 2*25- (0.500*2 +0.750*2) = 47.5 litres daily.
CHAPTER-15: MARKETABLE LIVESTOCK COMMODITIES
Learning objectives
 To know marketable and marketed surplus

 To make clear about relationship between marketed and marketable surplus in livestock production
MARKETABLE LIVESTOCK COMMODITIES
Producer’s Surplus
 Producer’s surplus is the quantity of produce which is, or can be, made available by the livestock farmers to
the nonfarm population.
 Producer’s surplus is of two types:
o Marketable surplus
o Marketed surplus
Marketable surplus
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 Marketable surplus is that quantity of produce which can be made available to non-farm population of a
country. It is a theoretical concept of surplus.
 Marketable surplus is the residual left with producer-farmer after meeting his requirements for family
consumption, payment to labour, payment to landlord as rent, and social and religious payments in kind.
This may be expressed as follows
MS = P – C Where,
 MS = Marketable surplus
 P = Total production and
 C = Total requirements (family consumption, farm needs, payment to labour, landlord and
payment for social and religious work).
Marketed surplus
 Marketed surplus is that quantity of the produce which the producer-farmer actually sells in the market,
irrespective of his requirements for family consumption, farm needs and other payments. Marketed surplus
may be more, less or equal to the marketable surplus.
 Whether the marketed surplus increases with the increase in production has been under continual
theoretical scrutiny.
 It has been argued that poor and subsistence farmers sell that part of the produce which is necessary to
enable them to meet their cash obligations.
 This results in distress sale on some farms. In such a situation, any increase in the production of marginal
and small farms should first result in increased on-farm consumption.
 An increase in the real income of farmers also has a positive effect on on-farm consumption because of
positive income elasticity. Since the contribution of this group to the total marketed quantity is not
substantial, the overall effect of increase in production must lead to an increase in the marketed surplus.
Relationship between marketed surplus and marketable surplus
 Marketed surplus may be more, less or equal to the marketable surplus, depending upon the condition of the
farmer and of the produce.
 The relationship between the two terms may be stated as follows
Marketed surplus < or > or = Marketable surplus
o Marketed surplus is more than marketable surplus when the farmer retains a smaller quantity of the
products than his actual requirements for family and farm needs. This is true especially of small and
marginal farmers, whose need for cash is immediate. This situation of selling more than the
marketable surplus is termed as distress or forced sale. Such farmers generally buy the produce from
the market in a later period to meet their family and /or farm requirements. The quantity of distress
sale increases with the fall in the price of the product. A lower price means that a larger quantity will
be sold to meet some fixed cash requirements.
o Marketed surplus is less than the marketable surplus when the farmer retains some of the surplus
produce. This situation holds true under the following conditions:
 Large farmers generally sell less than the marketable surplus because of their better
retention capacity. They retain extra produce in the hope that they would get a higher price
in the later period.
 Farmers may substitute one product for another product either for family consumption
purpose and the variation in prices.
 Marketed surplus may be equal to marketable surplus when farmer neither retains more nor
less than his requirement. This holds true for perishable commodities of the average farmer.
CHAPTER-16: CONCEPT OF MARKET
Learning objectives
 To define market and marketing.

 To explain various concepts in livestock marketing.
 To know outline of marketing process
MEANING, CONCEPT AND NEEDS FOR MARKETING
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Meaning of Market
 Market is a derivative of Latin word 'marcatus' meaning merchandise, wares, traffic, trade or place where
business is conducted.
 It may mean and include a place as an open space (in village) or a larger building where actual buying and
selling takes place.
 An assembly or a meeting together of people for their private purchases and sale of goods at a stated time
and place e.g. village fairs or periodical markets.
 An area of operation or geographical or economic extent of commercial demand for commodities. The course
of commercial activity by which exchange of commodities is affected. It may mean all inhabitants of an area.
Marketing
 American committee on marketing has defined marketing from the following three viewpoints
o Legalistic view: Marketing includes all activities, which are concerned with effecting changes in
ownership and possession of goods and services.
o Economic view: Marketing is that part of economics, which deals with the creation of time, place and
possession utilities.
o Descriptive view: Marketing is the performance of business activities that direct the flow of goods
and services from the producer to the final user or consumer.
 Philip Kotler has defined, "Marketing, as the set of human activities directed at facilitating and
consummating exchanges".
o In simple words, it is defined that the marketing is the process of providing the right product in the
right place at the right price and at the right time.
Concepts of marketing
 Sales concept and marketing concept are clearly distinct from each other.
Sales concept
 Starts with the firm's existing products and considers the task as one of using selling and promotion
to stimulate a profitable sales.
Marketing concept
o Starts with firm's existing and potential consumers and their needs; it plans a coordinated set of
products and programmes to serve these needs; and it hopes to build its profits on creating
meaningful value satisfactions.
o In the words of Philip Kotler, the marketing concept is a customer orientation backed by integrated
marketing aimed at generating customer satisfaction and long-run customer welfare as the key to
satisfying organizational goals.
o Integrated marketing means an intelligent adaptation and coordination of four P's viz., Product,
Price, Place and Promotion.
 Price should be made consistent with quality.
 The channels of distribution made consistent with price and quality
 The promotion made consistent with channels, price and product quality.
o To achieve this type of integration, many companies have created product managers and market
managers.
Based on the new concept of marketing, the marketing process can be illustrated below:
 Here, the marketing process starts with the consumer and ends, with the consumer.
 After knowing consumer needs and wants, appropriate products and services are developed and demand for
these products and services is stimulated and created by implementing suitable promotional polices.
 Then the said demand is satisfied through an optimum distribution strategy.
 Finally, by organizing appropriate marketing information system, feedback is collected and in the light of this
information, appropriate changes are initiated so as to adopt the marketing elements to the changing
situation in the market place.
Needs for marketing
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 In developing countries, it is the least developed part of the economy probably, because of the strong,
pervasive prejudice against the middleman.
 Marketing would make the producers capable of producing marketable products by providing them with
standards, with quality demands and with specifications for their products.
 Marketing is the most easily accessible, "multiplier" of managers and entrepreneurs in an "underdeveloped"
growth area and they are the critical needs of these countries.
 Marketing can covert latent demand into effective demand. It cannot by itself, create purchasing power, but
it can uncover and channel all the purchasing power that exists. So it can create conditions for higher level of
economic activity in the developing countries.
 Marketing in a developing country is the 'developer of standards' for product and services as well as of
conduct, integrity, reliability, foresight and of concern for the basic long-range impact of decisions on the
customer, supplier, economy and the society.
 Whether the economy developed or developing is immaterial as far as marketing is concerned because the
basic functions of marketing (buying, selling, transporting , storing, grading, financing, risk bearing and
marketing information ) and the utilities (Time, Place and possession utilities) created by them are a
necessity for any social system.
 Marketing provides wide employment opportunity.
CHAPTER-17: CLASSIFICATION OF MARKET
Learning objectives
 To explain the different classification of market

 To know the various types of market
CLASSIFICATION OF MARKETS
 Markets can be classified on the basis of nature of commodity, time and nature of business, area, nature of
competition etc.
On the Basis of Location
 On the basis of the place of location or operation, markets are of the following types:
Village market
 A market which is located in a small village, where major transactions take place among the buyers
and sellers of a village, is called a village market.
Primary markets
 These markets are located in big towns near the centres of production of commodities.
 In these markets, a major part of the produce is brought for sale by the producer-farmers
themselves.
 Transactions in these markets usually take place between the producers/farmers and traders.
Secondary wholesale markets
 These markets are located generally at district headquarters or important trade centres or near
railway junctions.
 Major transactions in commodities take place between the village traders and wholesalers.
 Bulk of the arrivals in these markets is from other markets.
 Produce in these markets is handled in large quantities.
 There are, therefore, specialized marketing agencies performing different marketing functions such
as those of commission agents, brokers, weighmen etc.
Terminal market
 A terminal market is one where the produce is either finally disposed of to the consumers or
processors or assembled for export.
 Merchants are well organized and use modern methods of marketing.
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 Commodity exchanges exist in these markets which provide facilities to forward trading in specific
commodities.
 Such markets are located either in metropolitan cities or in sea-ports.
 Delhi, Mumbai, Chennai, Kolkatta and Cochin are terminal markets for many commodities.
Seaboard Markets
 Markets which are located near the seashore and are meant mainly for the import and / or export of
goods are known as seaboard markets. These are generally seaport towns.
 Examples of these markets in India are Mumbai, Chennai, Kolkatta and Cochin.
On the Basis of Area/Coverage
 On the basis of the area from which buyers and sellers usually come for transactions, markets may be
classified into the following four classes
Local or Village Market
 A market in which the buying and selling activities are confined among the buyers and sellers drawn
from the same village or nearby villages.
 The village markets exist mostly for perishable commodities in small lots, e.g., local milk market or
vegetable market.
Regional market
 A market in which buyers and sellers for a commodity are drawn from a larger area than the local
market.
 Regional markets in India usually exist for foodgrains.
National market
 A market in which buyers and sellers are at the national level.

 National markets are found for durable goods like jute and tea.
World market
 A market in which the buyers and sellers are drawn from the whole world. This is the biggest market
from the area point of view.
 This market exists in the commodities which have a world-wide demand and /or supply, such as
coffee, machinery, gold, silver, etc.
 In recent years many countries are moving towards a regime of liberal international trade in
agricultural produce like raw cotton, sugar, rice and wheat.
 It is expected that the international trade in such commodities will become free from many
restrictions as they exist now.
On the Basis of Time Span
 On the basis of time span, markets are of the following types:
Short-period markets
 Markets which are held only for a day or few hours are called short period markets.
 Products dealt within these markets are of a highly perishable nature, such as fish, fresh vegetables,
and liquid milk.
 In these markets, the prices of commodities are governed mainly by the extent of demand for, rather
than by the supply of, the commodity.
Long-period markets
 These markets are held for a longer period than the short period markets.
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 Commodities traded in these markets are less perishable and can be stored for some time; these are
foodgrains and oilseeds.
 Prices are governed both by the supply and demand forces.
Secular markets
 These are markets of a permanent nature. Commodities traded in these markets are durable in
nature and can be stored for many years.
 Examples are markets for machinery and manufactured goods.
On the Basis of Volumes of Transactions
 There are two types of markets on the basis of volume of transactions at a time.
Wholesale market
 A wholesale market is one in which commodities are bought and sold in large lots or in bulk.
 These markets are generally located in either towns or cities.
 Economic activities in and around these markets are so intense that over time the population tends
to get concentrated around these markets.
 These markets occupy an extremely important link in the marketing chain of all the commodities
including farm products.
 Apart from balancing the supply and demand and discovery of the prices of a commodity, these
markets and functionaries in them serve as a link between the production system and consumption
system.
Retail markets
 A retail market is one in which commodities are bought by and sold to the consumers as per their
requirements.
 Transactions in these markets take place between retailers and consumers.
 Retailers purchase the goods from wholesale market and sell in small lots to the consumers in retail
markets. These markets are very near to the consumers.
On the Basis of Nature of Transactions
 The markets which are based on the types of transactions in which people are engaged are of two types
Spot or Cash markets
 A market in which goods are exchanged for money immediately after the sale is called the spot or
cash market.
Forward markets
 A market in which the purchase and sale of a commodity takes place at time t but the exchange of the
commodity takes place on some specified date in future i.e., time t+1.
 Sometimes even on the specified date in the future (t+1), there may not be any exchange of the
commodity.
 Instead, the differences in the purchase and sale prices are paid or taken.
On the Basis of Number of Commodities in which Transaction takes place
 A market may be general or specialized on the basis of the number of commodities in which transactions are
completed.
General markets
 A market in which all types of commodities, such as food grains, oilseeds, fibre crops etc., are bought
and sold is known as general market. These markets deal in a large number of commodities.
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Specialized markets
 A market in which transactions take place only in one or two commodities is known as a specialized
market.
 For every group of commodities, separate markets exist. The examples are foodgrain markets,
vegetable markets, wool market and cotton market.
On the Basis of Degree of Competition
 Each market can be placed on a continuous scale, starting from a perfectly competitive point to a pure
monopoly or monopsony situation.
 Extreme forms are almost non-existent. Nevertheless, it is useful to know their characteristics.
 In addition to these two extremes, various midpoints of this continuum have been identified.
 On the basis of competition, markets may be classified into the following categories.
Perfect markets
A perfect market is one in which the following conditions hold good
 There is a large number of buyers and sellers;

 All the buyers and sellers in the market have perfect knowledge of demand, supply and
prices;
 Prices at any one time are uniform over a geographical area, plus or minus the cost of getting
supplies from surplus to deficit areas;
 The prices are uniform at any one place over periods of time, plus or minus the cost of
storage from one period to another;
 The prices of different forms of a product are uniform, plus or minus the cost of converting
the product from one form to another.
Imperfect market
 Markets in which the conditions of perfect competition are lacking are characterized as imperfect
markets.
 The following situations, each based on the degree of imperfection, may be identified.
Monopoly market
 Monopoly is a market situation in which there is only one seller of a commodity. He

exercises sole control over the quantity or price of the commodity. In this market, the price
of a commodity is generally higher than in other markets.
 Indian farmers operate in monopoly market when purchasing electricity for irrigation (Tamil
Nadu Electricity Board). When there is only one buyer of a product the market is termed as a
monopsony market.
Duopoly market
 A duopoly market is one which has only two sellers of a commodity. They may mutually
agree to charge a common price which is higher than the hypothetical price in a common
market (Bus transport -Private and Public sector).
 Market situation in which there are only two buyers of a commodity is known as the
duopsony market.
Oligopoly market
 A market in which there are more than two but still a few sellers of a commodity is termed as
an oligopoly market. A market having a few (more than two) buyers is known as oligopsony
market.
Monopolistic competition
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 When a large number of sellers deal in heterogeneous and differentiated form of a

commodity, the situation is called monopolistic competition. The difference is made
conspicuous by different trade marks on the product.
 Different prices prevail for the same basic product. Examples of monopolistic competition
faced by farmers may be drawn from the input markets.
 For examples, they have to chose between various makes of insecticides, pumpsets,
fertilizers and equipments.
On the Basis of Nature of Commodities
 On the basis of the type of goods dealt in, market may be classified into the following categories
Commodity markets
 A market which deals in goods and raw materials, such as wheat, barley, cotton, fertilizer, seed, etc.,
are termed as commodity markets. Specific commodities are bought and sold in these markets.
 These may either be production goods or consumption goods. In such markets, transactions of
specialized commodities take place.
 E.g. Mumbai cotton market, Punjab wheat market etc.
Produce exchange
 Produce exchanges are the big and well organized markets for raw produce like wheat,
cotton, jute etc. and are found in cities or developed industrial centres of a country.
 One exchange deals in one specialized product.
 Typical examples of such exchanges are the wheat exchange, Cotton exchange and Jute
exchange.
Manufactured and semi-manufactured goods market
 In these markets, different types of manufactured and semi-manufactured commodities are

bought and sold. E.g. Leather goods market, Kanpur.
Bullion Market
 Bullion markets are concerned with the purchase and sale of gold, silver and other precious
stones.
 These are highly specialized and well organized markets of the world and are localized in
civilized as well as industrially developed centres of a country.
 Bullion markets of Bombay, Calcutta, Delhi and Chennai etc., are of a few examples of such
markets.
Capital markets
 Capital market is responsible for meeting the financial requirements of big industrial and
commercial concerns.
 Capital is required at every stage of business which comes from the money market, stock exchange
and foreign exchange.
Money market
 It includes a number of agencies providing finance to business and industrial concerns.

 Such markets, on one hand, help the people to invest or deposit their surplus funds either in
industrial concerns or in banks and on the other, allow those who are in need of money to
take loans through banks for a reasonable remuneration in turn by way of interest.
Stock exchange market
 In this market, shares are purchased and sold in different parts of the country. Ex. BSE, NSE
 These markets are highly specialized and command a very wide area of operation.
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 Main purpose of such markets is to make investments in public and private sector
undertakings.
Foreign exchange market
 It is a market for buying and selling of foreign currencies. It can also be called as an
international market concerned with the export and import trade of a country.
 Mumbai, London, New Delhi are examples of such markets.
On the Basis of Stage of Marketing
 On the basis of the stage of marketing, markets may be classified into two categories
Producing markets
 Those markets which mainly assemble the commodity for further distribution to other markets are
termed as producing markets.
 Such markets are located in producing areas. Ex. Uthukkuli Butter Market, Rasipuram Ghee Market.
Consuming markets
 Markets which collect the produce for final disposal to the consuming population are called
consumer markets.
 Such markets are generally located in areas where production is inadequate, or in thickly populated
urban centres.
On the Basis of Extent of Public Intervention
 Based on the extent of public intervention, markets may be placed in any one of the following two classes
Regulated markets
 In these markets, business is done in accordance with the rules and regulations framed by the
statutory market organization representing different sections involved in markets.
 The marketing costs in such markets are standardized and practices are regulated.
Unregulated markets
 These are the markets in which business is conducted without any set rules and regulations.
 Traders frame the rules for the conduct of the business and run the market.
 These markets suffer from many ills, ranging from unstandardised charges for marketing functions
to imperfections in the determination of prices.
On the Basis of Type of Population Served
 On the basis of population served by a market, it can be classified as either urban or rural market
Urban market
 A market which serves mainly the population residing in an urban area is called an urban market.
 Nature and quantum of demand for agricultural products arising from the urban population is
characterized as urban market for farm products.
Rural market
 The word rural market usually refers to the demand originating from the rural population.
 There is considerable difference in the nature of embedded services required with a farm product
between urban and rural demands.
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On the Basis of Visibility
Black Market
 In black markets, scarce commodities are sold at a very high price not openly but in a secret manner.
 The situation arises on account of excess of demand over limited supply.
 Black market is an anti-social activity which gives way to black money.
 Black money, hidden money or unaccounted money then passes into the money market where it is
invested in different trades and business activities.
 The interest and profits so earned on the unaccounted money go on accumulating, till it attracts
attention of the income tax authorities.
On the Basis of Accrual of Marketing Margins
 Markets can also be classified on the basis of as to whom the marketing margins accrue.
 Over the years, there has been a considerable increase in the producers or consumers co-operatives or other
organizations handling marketing of various products.
 Though private trade still handles bulk of the trade in farm products, the co-operative marketing has
increased its share in the trade of some agricultural commodities like milk, fertilizers, sugarcane and sugar.
 In the case of marketing activities undertaken by producers or consumers co-operatives, the marketing
margins are either negligible or shared amongst their members.
TYPES OF MARKET
 Based on number of sellers/buyers in the market

o Monopoly - Only one seller
o Oligopoly - Few number of sellers
o Monopsony - Single buyer
o Oligopsony - Few number of buyers
o Perfect/Pure competition - large number of sellers and buyers
o Bilateral monopoly - single seller and single buyer
CHAPTER-18: SHORT–RUN EQUILIBRIUM AND LONG–RUN EQUILIBRIUM
Learning objectives
 To know the definition of market and normal price.

 To illustrate the equillibrium price determination under perfect competition in short and long run.
SHORT-RUN EQUILIBRIUM PRICE WITH ABNORMAL LOSS
Short- Run Equilibrium price and output under perfect competition
 Show the determination of short run equilibrium price and output under perfect competition.
 In this figure, we show the average cost curve (AC) and marginal cost curve (MC) of the firm, together with
its demand curve. We said that the demand curve is also the average revenue curve is also the average
revenue curve and the marginal revenue curve of the firm, in a perfectly competitive market.
 The firm is in equilibrium at point E where MR = MC, i.e., MC curve intersects the MR curve at the point E.
The equilibrium price is OP and equilibrium output is OQ.
 Profit per unit of output is the difference between average revenue or price and average cost. Average
revenue or price is QE or OP. Average cost is QS.
 Therefore, profit per unit of output is ES. Total profit earned the firm will be equal to LPxES. Thus, the total
profit earned the firm is PESL.
Abnormal Loss (Click here to view graph)
 Figure shows the abnormal loss of a firm, where prevailing market price of the product is such that the price
line average and marginal revenue curves lies below the average throughout.
 In the figure, the equilibrium price and output are determined when MC interest MR at point E. OQ is the
equilibrium output and OP is the equilibrium price.
 QE is the average revenue and NQ is the average cost. Since average revenue or price (QE) is less than
average cost (NQ), the loss per unit of output is equal to NE and total loss will be equal to PENM. This is
known as abnormal loss.
 Hence, the conditions of firm’s equilibrium under perfect competition are:
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o MC=MR = Price
o MC curve must cut MR curve from below
SHORT-RUN EQUILIBRIUM WITH NORMAL PROFIT
 Figure shows that E is the equilibrium point, where MC curve cuts the MR curve from below.
 OQ is the equilibrium level of output and OP is the equilibrium price level.
 AC curve is tangent to the AR curve at the point E, Where the firm incurs normal profit, when P=AR = MR =
AC =MC.
Normal profits (Click here to view the graph for "Short-Run Equilibrium with Normal profit")
 Just as land has rent, labour wages, capital rate of interest, the reward for entrepreneur, under perfect
competition, is normal profit.
 Thus, normal profits are the remuneration for the entrepreneur, under perfect competition.
 Normal profits are those profits which are not large enough to attract any new entrepreneur into the business
nor are they small enough to make the existing entrepreneurs quit the business.
LONG RUN EQUILIBRIUM PRICE AND OUTPUT UNDER PERFECT COMPETITION
 First condition for equilibrium of a firm is that marginal cost must be equal to marginal revenue and the
condition is that marginal cost curve should cut the marginal revenue curve from below.
 The condition is that average revenue or price should equal average cost. In the short run there is abnormal
profits quit business.
 This period of entry and by firms is by itself long run. The industry attains equilibrium when AR or Price =
AC.
 Price is also equal to marginal cost and revenue. Shows that point E is the long run equilibrium output.
CHAPTER-19: PROBLEMS OF PECULIARIES OF DEFECTS IN LIVESTOCK MARKETING
Learning objectives
 To understand functioning of the marketing of livestock, perishable and non perishable livestock goods.
 To expose to various channels involved in the livestock and livestock products marketing.
PROBLEMS IN LIVESTOCK AND LIVESTOCK PRODUCT MARKETING
Lack of producer's organization
 The farming community is more or less disorganized at the village level.

 Except for a few, till now no such organization has developed which may prove a sound basis for
strengthening the bargaining power of the farmers.
 An individual deals in his own product, he sells his surplus produce in the village or at the primary market
level with his low bargaining power and hence, he is always at a disadvantage against the organized trading
community.
Forced sale
 In a country like India, majority of subsistence producers are compelled to sell their produce immediately
after harvest in order to meet the pressing claims of their lenders even if the prices are not remunerative.
 Most producers sell their product, repay debts, face a shortage, and fall in debt again. Thus they sell to repay
debt only to fall in debt again.
Superfluous middlemen
 Since the farmer sells a substantial portion of his surplus produce in the village and nearby markets, there is
always intervention of a number of middlemen between him and the consumer and naturally share of the
consumer's price received by the producer is reduced.
Malpractices in the market
 Malpractice arises on account of multiplicity of market charges, spurious deductions, unfair weighment and
undesirable mode of sale.
 Weight and scales are manipulated against the seller.
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 There are all kinds of arbitrary deductions for religious and charitable purpose.
 The burden falls entirely on the seller and he has no effective means to protect himself against such practices.
 Some quantity is taken away from the producer's produce as sample.
 This varies from produce to produce. The producers are not paid for this even when no sales are effected.
Absence of grading and standardization and inadequate storage facilities
 Many state governments have not so far prescribed grades and standards for many livestock products.
 A good number of farmers have little knowledge of grading their produce and usually mix up good and bad
quality product into a single lot which secures them a lower price for their produce in the market.
 There is general inadequacy of good storage facilities both in urban as well as in rural areas.
 The indigenous methods of storage adopted in village do not adequately protect the produce.
 As a result, physical losses go on increasing if the period of storage is lengthened.
Undeveloped modes of transportation
 Without a good transporting system, no individual will have the incentive to produce or to purchase more
than minimum.
 Unless it is reasonably convenient for the farmer to exchange his surplus produce for consumer goods or
farm production requisites, he is lacking an important incentive to exploit the full potentials of his animals.
 Lack of an efficient transport network is the real limiting factor in the attempts to increase livestock
production in our Country.
Variability in Output
 The quantity of farm products available depends upon several factors.

 With the gambling nature, one cannot forecast the quantity of products that would be produced as livestock
production is mainly biological depending on weather, rainfall etc for its main inputs like feed, fodder etc.,
Seasonality in production
 Much of farm production is highly seasonal. The production varies from one season of the year to another.
 Hence, storage facilities must be made ready to hold the product until it is consumed.
 This seasonality in production thus, raises costs of marketing through demand storage facilities.
 The seasonal variability in production of items like milk, egg, butter etc is not as acute as it used to be a few
years ago.
 The widespread use of rapid transportation and refrigeration has tendered to reduce the seasonality.
Raw materials
 Farm out put which mainly sold in the farm of raw materials is used subsequently for processing.
 Sugarcane is to be converted into sugar, oils seeds into oil, animals in to meat, wool in to cloth before all
these are used for consumption.
 Hence the raw materials produced by the farmers are to be processed at once stage or the other before final
consumption.
Perishability
 In relation to other products, agricultural products by nature are perishable. All products ultimately
deteriorated.
 Eggs, mutton, and milk must move into the place of consumption very quickly, otherwise they would
completely lose their value.
 These perishable products require speedy handling and often-special refrigeration, which raises the cost of
marketing.
Others
 The differences in variety, colour, palatability, nutritive value, size, quality etc. of the products are the other
determinants of a good market for these products.
MARKETING OF LIVESTOCK AND LIVESTOCK PRODUCTS
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Perishable Goods (Click here to view graph)
 Marketing of livestock and livestock products is different from manufactured or industrial goods.
 Most of the livestock products are perishable in nature and the period of perishability varies from a few hours
to few months.
 Most of the farmers are landless, marginal or small. Therefore the produce of individual is very less.
 Lastly, most of the farm products are processed before they are used, purchased and consumed by the
ultimate consumers.
 Selling of perishable products like fruits, vegetables, and livestock products (milk, meat, and egg) require fast
movement of the commodities from the producers to the ultimate consumers.
Non-Perishable Goods
 Non-perishable goods are goods that can be used again and again in the process of production. They are
tangible goods that normally survive many uses. They don't loose their utility or shape after their first use.
 They continue to provide utility over a long period of time, of course their utility over a long period
diminishes in value and utility.
 Example factory buildings, machines and equipment are durable. Refrigerators, machine tools and clothing
are non perishable.
 Nonperishable goods normally require more personal selling and services command a higher margin and
require more seller guarantees.
 The perishable goods as used for the smaller period of time are not having any guarantee.
 Whereas the Non perishable goods (Radio, TV, Refrigerator) are usually provided with guarantee
period.They can classified as M
Durable - TV, Refrigerator
Industrial goods - Milking Parlour, Feed Mill, Machines in Automobile industry, etc.,
CHAPTER-20: MERCHANDISING
Learning objectives
 To know definitions of merchandiding

 To furnish in detail about product planning and development
 To understand the PERT and CPM method in product development.
MERCHANDISING-PRODUCT PLANNING AND DEVELOPMENT
Merchandising
 It is the barometer of efficiency in buying and selling and it is closely related to several aspects of buying and
stock management.
Product Planning and Development
 Product planning covers a broad area of decisions including product-line planning, introduction of new
products, deletion of the product from product-line, product modification, packaging, labeling, branding etc.,
Alternative growth stages
 Marketers have four alternative ways for growth in sales and profits
o Market penetration
o Market development
o Product development and
o Product diversification.
New product development process
 Most of the successful companies employ one or more of the following alternatives in locating organizational
responsibility for new product development.
o New product committees / departments
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o Product mangers/ venture teams.

 There are seven stages for new product development process such as Idea generation, Screening, Concept
development and testing, Business analysis, Product development, Test marketing and Commercialization.
Product Development programme
 This is an important stage in atleast three ways i.e.

o It marks the first attempt to develop the product in a 'concrete form'
o It represents a huge investment for developing a technically feasible product.
o Lastly, it provides an answer as to whether the product idea can be translated into a
technical and commercially feasible product.
 Primarily there are four steps involved in the product development stage: (i.e) Engineering,
Consumer testing, Branding and Packaging.
 Other activities involved in the product development stage are
 formulation of preliminary advertising and promotion programme,
 trade merchandising programme,
 application for patent and copy rights etc.
 Systematic planning of all phases of new product development and introduction can be
accomplished through the use of such scheduling methods as the
 Programme Evaluation and Review Technique(PERT) and
 Critical Path Method (CPM)
CHAPTER-21: MARKETING FUNCTIONS
Learning objectives
 To understand different approach to marketing

 To illustrate the primary and secondary functions of livestock marketing
 To summarize the marketting information and marketting intelligence
APPROACHES TO STUDY OF MARKETING
Approaches to study of marketing
 Marketing can be studied through any one of the following four approaches.
o Functional approach
o Institutional approach
o Commodity approach
o Behavioural system or decision making approach.
Functional approach
 Here the entire marketing process is broken down into many functions.
 A marketing function may be defined as a specialized activity performed in accomplishing the marketing
process.
 The marketing functions are classified into three
Exchange Functions
 Exchange functions are those activities involved in the transfer of ownership of goods. There are two
exchange functions viz. buying and selling.
 Buying and selling are the complementary functions around which all marketing efforts revolve and
they are basic to the entire marketing process.
Physical functions
 Physical functions are those activities that involve handling of the products, storage, movement and
processing of the goods.
 Storage, transportation and processing functions are primarily concerned with making the goods
available at the desired time, at the proper place and in the correct form.
Facilitating functions
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 Facilitating functions are those which make possible the smooth performance of the exchange and
physical functions.
 These activities are not directly involved in either the exchange or the physical handling of products.
 However, without them, the modern marketing system would not be possible.
 They might correctly be designated as the grease that makes the wheels of the marketing machines
go round. They are
 Standardization and grading

 Financing
 Risk bearing
 Market intelligence
Standardization and grading
 It is the establishment and maintenance of uniform measurements of both quality and

quantity. This function simplifies the process of buying and selling.
 It establishes a rational relationship between price and quantity and hence gains the
consumer’s confidence. It takes into account size, shape, form, composition, weight etc.
Financing
 It is concerned with advancing of money to the marketing functionaries to carry out various
functions of marketing.
Risk bearing
 It is concerned with the acceptance of the possibility of loss in the marketing of a product.
These risks are classified as physical risks and market risks.
 The physical risks are those which occur from destruction or deterioration of the product
itself by fire, accident, wind, earthquakes, cold, heat, etc.
 Market risks are those which occur because of the changes in the value of the product as it is
marketed.
 Changes in prices, tastes and preference of the customers may lead to losses and they come
under market risks.
Market intelligence
 This is the job of collecting, interpreting and disseminating a variety of data necessary for the
smooth operation of the marketing process.
Institutional approach
 In this approach, principles of marketing are formulated around the instiutions performing the marketing
functions. This approach considers the nature and character of various middlemen and related agencies and
also the arrangement and organization of the marketing machinery.
 In this approach, the human element receives primary emphasis and hence institutional approach is simply
the study of middlemen.
Commodity approach
 In this approach, specific commodities are selected and they are followed through from the producer to the
consumer.
 For study of marketing of milk, it begins by examining the sources of supply, volume and nature of demand,
different marketing functions involved etc.
Behavioural systems approach or decision making approach or management approach
 Marketing process is continuously changing in its organizational and functional combinations.

 Understanding and predicting these changes are a major problem in marketing.
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 Every marketing system is composed of people who are making decisions in an attempt to solve problems in
marketing.
 They take decisions on the product to be handled, the distribution polices, pricing, advertising, selling etc.
 In this approach, an attempt is made to find out how marketing decisions are made and should be made.
 In transferring the product from producer to consumer various functions are carried out by different
marketing functionaries and they are called as marketing functions.
 They are, buying, selling, standardizing, grading, transports, storage and risk bearing.
BUYING AND SELLING
PHYSICAL FUNCTIONS-GRADING, TRANSPORTATION,STORAGE AND WAREHOUSING
Buying and Selling
 Buying and selling are the complimentary functions, around which all marketing efforts revolve and they are
basic to the entire marketing process and these two are known as exchange functions which are involved in
the transfer of ownership of goods.
Physical functions
 Standardizing
 Grading
 Transport
 Storage and
 Risk bearing
 These are essential to the main functions of marketing (Assembling, Processing and Dispersion).
 Standardizing and Grading imply setting up of the basic measures which the goods must conform.
 A standard specifies what basic quality a product must have to be consistent with the established
characteristics.
 Standards are set with regard to the shape, size, colour, flavour, composition, weight etc.
Grading
 Grading is the act of separating goods into different lots according to established specifications.
 Purpose of grading is to establish a common language easily understood by buyers and sellers as the basis of
judging the quality of the product in relation to its price.
 Grading and standardization also help to cater to the special tastes and liking of different section of buyers.
Transport
 It is one of the most important functions of the modern marketing system. This function is primarily
concerned with making goods available at the proper place resulting in creating place utility of the products.
 Transportation is necessary not only to provide the goods to the consumers in time, but also to find
remunerative markets at far away places.
 An efficient transport system enables the goods to reach the markets far and wide without losing the precious
time.
 Special type of transport is highly essential for the transportation of livestock products.
 E.g. Refrigeration facility is essential for the transportation of milk and meat.
Storage
 It is the process of holding and preserving goods. Storage creates time utility whereby goods are made more
useful.
 Farm products are stored to make them available throughout the year to balance the periods of plenty and
periods of scarcity.
 Reasons for storing farm products:
o To even out the seasonal fluctuation in production
o To lengthen the shelf life of the farm products which are mostly perishable
o To improve the quality as well as the value of the products.
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FACILITATIVE FUNCTIONS - STANDARDISATION,RISK BEARING, MARKET INFORMATION AND

MARKET INTELLIGENCE
Risk Bearing
 It is accepting the possibility of loss when marketing a product.
Physical risks
 Physical risks are those results in the destruction of the product itself and are due to fire, accident,
rain etc.
 Risk attached to such natural hazards is often transferred to institutions (Insurance companies) that
specialize in assuming such risk.
Market risks
 Market risks are those which occur due to the changes in product prices and changes in consumer
demand for the products.
 Market risks can be reduced through accurate forecasting and market research.
Marketing Information
 In the field of marketing, information is of great importance. Like men, money, machines and materials and
information is also a vital input.
 As defined by Philip Kotler, Marketing information system is continuing & interacting structure of people,
equipment & procedure designed to gather, sort, analyze, evaluate, distribute, pertinent, timely and accurate
information for use by marketing decision makers, to improve their marketing planning, execution and
control.
 Three type of information come out of the systems are
 Recurrent information
 Monitored information
 Requested information
Sources of marketing information
 Sources of marketing information are

o Exeutive experience
 It is the direct counter part of the casual experience that we accumulate from the process of
every body living.
o Internal reports
 Come from the authorities that work as specialists for the firms.
o Marketing research
 Studies are conducted using methods of enquiry, observation and experimentation and by
using available internal reports.
o Marketing models
 At a general level, sources may include for example, daily news papers, technical journals,
hand books, and reference materials, government publication, corporation annual reports
and computer data bases.
Functions of Marketing Information System (MKIS):
 MKIS should perform the following six functions.

o Assembly -Searching and gathering marketing data
o Processing - Editing, tabulating and summarizing data
o Analysis - Computation (percentages and ratios), combining sales and costs data and other
mathematical tasks.
o Storage and retrieval - Indexing, filing and locating data.
o Evaluation - Determining the accuracy of information.
o Dissemination - Routing useful information to appropriate decision-makers.
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Marketing Intelligence
 A marketing intelligence system is a set of procedures and sources used by managers to obtain their everyday
information about pertinent developments in marketing environment.
 It is a product of market research and marketing research. In marketing intelligence, marketing managers
scan the environment in four ways.
o Undirected viewing
o Conditioned viewing
o Informal search
o Formal search
 Marketing managers carry on marketing intelligence mostly on their own by reading books,
news papers and trade publications, talking to customers, suppliers and other outsiders and
talking with other managers, personnels within the company.
 Well-recognized companies take additional step to improve the quality and quantity of
marketing intelligence. First they train and motivate the 'sales force' to spot and report new
development. Sales representatives are company's " eyes and ears".
 They are in an excellent position to pick up information missed by other means. The
company must sell its sales force on their importance as intelligence gatherers. The sales
force should be provided with easy reports to fill out. Sales representatives should know
which type of information to be sent to different manager.
 Secondly, the company motivates distributors, retailers and other middlemen to pass along
important intelligence.
Marketing Cost
 It is the actual expense incurred in buying goods and services from producers to ultimate consumer.
 It is the difference between final price paid by consumer for a commodity and price received by the primary
producer.
 It includes assembling charges, handling charges, transport and storage cost, processing cost, profit margin
to different intermediaries, etc.
Market (Price) Spread
 Marketing cost is measured by the concept called market or price spread .

 Price spread is the difference between price paid consumer and price received by producer.
 Market spread is expressed in percentage of consumer's rupee.
Marketing Channel
 Marketing channel can be defined as path through which a product moves from producer to consumer.
 There are mainly tow types of marketing channel i.e Organized and Unorganized.
 Organized marketing channel involve participation of government institution or co-operative federation.E.g
Tamil Nadu Co-operative Milk producer's Federation. It is basically a service motive organization where
consumer price will not have any violent fluctuation.
 Unorganized marketing channel has many participation of private traders having profit motive e.g. Private
milk vendors.
Factor affecting marketing channel
1. Consumer distribution
2. Product characteristics
3. Characteristics of consumer
4. New marketing technologies
5. Changes in management
6. Changes in policies of government
7. Cost requirement
Value chain
 Marketing channel adds value to commodities when goods pass through. To reduce exorbitant price rise in
the value chain, market integration is carried out. There are two types of market integration namely vertical
or horizontal .
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 Vertical integration occur when firms confine activities of different channel. e.g. wholesaler doing functions
of both retailer and wholesaler.
 Sometime producers convert their produce from raw material ready to cook or to ready eat forms.In this case
value chain is maintained with heavy investment on value addition process , cold chain, specialized
transportation vehicle, etc.,
 Horizontal integration occur when firms gain control over other firms by performing similar activities at
same level in marketing channel.
CHAPTER-22: MARKETING OPPORTUNITIES
Learning objectives
 To highlight concepts of marketing opportunities

 To understand various principles in consumer behaviour during the buying process
 To explain the the different pathway of livestock products
MERKETING OPPORTUNITIES
 Companies must look internally for strength and weakness and externally to the environment for
opportunities and threats. Most opportunities and threats evolves from
o Changes in the demographic, economic, political, legal and cultural environment.
o Change in the competitive environment, such as a technological break through by a computer.
o Events that may or may not be under the company's control such as strike by the work force or a
serious fire in an industrial plant.
 New market opportunities are determined by discovering customer groups with unmet
needs.
 The new market opportunities arise for a variety of reasons in industrialized societies. One is
geographical mobility.
 People live where they did not live before and thus create new markets.
 The aggressive business firms recognize these new markets and builds new super markets,
new discount houses etc.
 Another source of new market is social mobility.
 As people become more educated and acquire more sophisticated social environment their
interest change frequently resulting in markets for new products.
 Yet another cause of new market is psychic mobility, when people change the conception of
themselves and their environment along with physical and social mobility.
CONSUMER BEHAVIOUR
 Consumer behaviour refers to those acts of individuals directly involved in obtaining and using economic
goods and services, including the decision processes and determines these acts.
 Consumer behaviour may be analyzed from the three principal angles as detailed below :
Steps in the buying process
 Broadly, a buying decision involves the following steps/stages

o Decision that there is a need for a product
o Pre-purchase search about its relevant particulars
o Analyzing the importance of different factors involved (i.e.) price, utility, durability and the like,
o Weighing the pros and cons of alternative products
o Selection of the best available product in the context
o Use of the product and
o Post use review
Role of individuals in the buying process
 There are five different roles that persons play in a buying decision process.
o Initiator: The person who first suggests or thinks of buying the particular product.
o Influencer: A person who explicitly /implicitly carries some influence on the final decision.
o Decider: A person who ultimately determines any part or the whole of the buying decision -
Whether/What/ How/ When/ Where to buy?
o Buyer: The person who makes the actual purchase.
o User: The person (s) who consume or use the product or services
Determinants of buyer behaviour

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 In a broad sense the determinants of buyer / consumer behaviour may be divided into two groups as follows:
o Marketing channel can be defined as a path through which product moves from producer to
consumer.
o Hence a short channel of distribution will be an effective tool to reach the target consumers.
o However, distribution of products having lower unit value and high turn over like eggs involves a
large number of middlemen.
o The channels of distribution serve as a network, which creates value for the consumer by generating
possession, time and place utilities.
o There are number of middleman and merchants, including Government and co-operative agencies,
who act as links between the producers and consumers.
o The possible visible channels of distribution for few selected livestock products (Milk, egg) are given
below.
CHAPTER-23: IMPORT AND EXPORT OF ANIMAL AND ANIMAL PRODUCTS
Learning objectives
 To understand the world trade of livestock and livestock products.

 To explore the potential for import and export of animals and animal products in India.
 To show the value of export and import of livestock and livestock products.
IMPORT AND EXPORT OF ANIMAL AND ANIMAL PRODUCTS
 India is known for its livestock wealth and ranks high among the nations having bovine population.
 However, despite having huge livestock population, India stands insignificant in the world trade of livestock
products.
 The recent concerted efforts made by the government in the era of liberalization after opening up of the
national economy to the international market have certainly boosted India’s export trade of livestock
products to newer heights.
 The dairy industry of India is already at a take-off stage and the entry of the corporate sector following the
liberalized policies of government is bound to complement the efforts of National Dairy Development Board
(NDDB) to usher in a white revolution.
 The most important achievement of the dairy industry is the near-self sufficiency in milk production.
 Nonetheless, the possibility of India emerging as a potential exporter of various livestock products will
largely depend on India’s own ability to exploit her potential in this sector and generate exportable surplus of
these commodities, aside her competitive strength in the world market.
Import Procedure for Livestock Products
 Livestock products include meat and meat products of different types that comprise fresh, chilled and frozen
meat as well as tissue or organs of poultry, pig, sheep and goat.
 It also consists of egg and egg powder; milk and milk goods; pet foods of animal origin and embryos, ova or
semen of cows, sheep and goats.
 No livestock product may be imported into India without a valid sanitary import permit.
VALUE OF IMPORT OF LIVESTOCK AND LIVESTOCK PRODUCTS DURING 1997-98 to
2002-03.
( Rs. million)
Broad Groups 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Livestock 28 14.7 18.8 13.5 17 36.5
Meat and Edible Meat Offals - 0.3 2.6 4.3 5.9 3.7
Dairy and Poultry Products and 300.2 424.3 1811.3 535.7 393.1 946.9
Honey
Animal Fodder and Feed 413.5 499.4 668.5 818.5 1227.7 12941.37
Leather 5343.1 6142.1 6587.9 8730.6 10330.2 9735.2
Raw Wool and Animal Hair 6127.7 4979.9 4969.4 4686.8 6339.3 8957.3
All Groups (Total) 12212.5 12060.7 14058.5 14789.4 18313.2 32620.97
Source - Directorate General of Statistics&Commercial Intelligence, Calcutta , (DGCIS, Calcutta )
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PROCEDURE FOR IMPORT OF LIVESTOCK PRODUCTS INTO

INDIA
 All live-stock products shall be imported into India subject to the following conditions, namely:
 No live-stock product shall be imported into India without a valid sanitary import permit issued under clause
(3).
 All applications for a permit to import consignments by land, air or sea shall be made in either Form A
(Application For Permit To Import Live-Stock Products For Personal Consumption) Or Form B(For Trading
/ Marketing ) whichever is relevant, and sent in triplicate to the Joint Secretary, Trade Division, Department
of Animal Husbandry and Dairying, Ministry of Agriculture, Government of India .
o The sanitary import permit shall be issued for import of livestock products if, after a detailed import
risk analysis, the concerned authorities are satisfied that the import of the consignment will not
adversely affect the health of the animal and human populations of this country.
o The import risk analysis shall be conducted by the concerned officers of the Department on the basis
of internationally recognised scientific principles of risk analysis and the analysis shall be conducted
with reference to the specific product and the disease situation prevailing in the exporting country
vis-a-vis the disease situation in India .
o The issue of permits shall be refused if the results of the import risk analysis show that there is a risk
of the specific product bringing in one or more specific diseases, which are not prevalent in the
country and which could adversely affect the health and safety of the human and animal populations
of this country.
o The import permit shall lay down the specific conditions that will have to be fulfilled in respect of the
consignment, including pre-shipment certifications and quarantine checks.
o The permit shall also specify the post-import requirements with regard to quarantine inspections,
sampling and testing.
o The import permit issued under this clause shall be valid for a period of six months, but can be
extended by the concerned authority for a further period of six months, on request from the importer
and for reasons to be recorded in writing.
 All livestock products shall be imported into India through the seaports or airports located at Delhi, Mumbai,
Kolkata and Chennai, where the Animal Quarantine and Certification Services Stations are located.
o On arrival at the entry point, the livestock product shall be inspected by the Officer-in-charge of the
Animal Quarantine and Certification Services Station or any other veterinary officer duly authorised
by the Department Of Animal Husbandry and Dairying, wherever required, in accordance with the
specific conditions laid down in the sanitary import permit and with general guidelines issued by the
Department of Animal Husbandry and Dairying from time to time.
o After inspection and testing, where-ever required, the concerned quarantine or veterinary authority
shall accord quarantine clearance for the entry of the livestock product into India or, if required in
public interest, order its destruction or its return to the country of origin.
o Where ever disinfection or any other treatment is considered necessary in respect of any livestock
product , the importer shall, on his own or at his cost through an agency approved by the
Department of Animal Husbandry and Dairying, arrange for disinfection or other treatment of the
consignment, under the supervision of a duly authorised quarantine or veterinary officer.
 It shall be the responsibility of the importer.
o To bring the livestock product to the concerned Animal Quarantine & Certification Services Station,
or to the place of inspection, disinfection or treatment or testing as directed by the Quarantine or
veterinary officer duly authorized on this behalf;
o To open, repack and load into or unload from the Animal Quarantine Station and seal the
consignment; and
o To remove them after inspection and treatment or testing, according to the directions of the
Quarantine or veterinary officer duly authorized by the Department.
 The Central Government may, in public interest, relax any of the conditions specified under this Schedule
relating to the permit in relation to the import of any live-stock product .
EXPORT PROCEDURES
VALUE OF EXPORT OF LIVESTOCK AND LIVESTOCK PRODUCTS DURING 1997-98 to 2002-03
( Rs.million)
Broad Groups 1997-98 1998-99 1999-2000 2000-01 2001-02 2002-03
Livestock 13.3 47.5 58.9 76.3 90.41 62.82
Meat and Edible Meat Offals 8022.9 7721.3 7964.3 14568.6 11828.4 13575.5
Dairy and Poultry Products and Honey 1155.5 859 1142.9 2081.6 3524.8 3567
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Animal Fodder and Feed 653.06 671.5 418 543.6 973.2 322.41
Leather 11006 11292.7 10384.1 17455.7 21971.4 24705.4
Raw Wool and Animal Hair 64.11 63 38.7 34.2 18.8 22.8
All Groups(Total) 20914.87 20655 20006.9 34760 38407.01 42255.93
Source - Directorate General of Statistics&Commercial Intelligence, Calcutta , (DGCIS, Calcutta )
 Certain documentation takes place while exporting from India. Special documents may be required
depending on the type of product or destination.
 Certain export products may require a quality control inspection certificate from the Export Inspection
Agency.
 Some food and pharmaceutical product may require a health or sanitary certificate for export.
Shipping Bill/ Bill of Export is the main document required by the Customs Authority for allowing shipment.
 Usually the Shipping Bill is of four types and the major distinction lies with regard to the goods being subject
to certain conditions which are mentioned below
 Export duty/ cess
 Free of duty/ cess
 Entitlement of duty drawback
 Entitlement of credit of duty under DEPB Scheme
The following are the documents required for the processing of the Shipping Bill:
 GR forms (in duplicate) for shipment to all the countries.

 4 copies of the packing list mentioning the contents, quantity, gross and net weight of each package.
 4 copies of invoices which contains all relevant particulars like number of packages, quantity, unit rate, total
f.o.b./ c.i.f. value, correct & full description of goods etc.
 Contract, L/C, Purchase Order of the overseas buyer.
 AR4 (both original and duplicate) and invoice.
 Inspection/ Examination Certificate.
The formats presented for the Shipping Bill are as given below:
 White Shipping Bill in triplicate for export of duty free of goods.

 Green Shipping Bill in quadruplicate for the export of goods which are under claim for duty drawback.
 Yellow Shipping Bill in triplicate for the export of dutiable goods.
 Blue Shipping Bill in 7 copies for exports under the DEPB scheme.
 Documents Required for Post Parcel Customs Clearance
 In case of Post Parcel, no Shipping Bill is required. The relevant documents are mentioned below:
Customs Declaration Form
o It is prescribed by the Universal Postal Union (UPU) and international apex body coordinating
activities of national postal administration. It is known by the code number CP2/ CP3 and to be
prepared in quadruplicate, signed by the sender.
 Despatch Note, also known as CP2. It is filled by the sender to specify the action to be taken
by the postal department at the destination in case the address is non-traceable or the parcel
is refused to be accepted.
 Prescriptions regarding the minimum and maximum sizes of the parcel with its maximum
weight
Minimum size: Total surface area not less than 140 mm X 90 mm.
Maximum size: Lengthwise not over 1.05 m. Measurement of any other side of
circumference 0.9 m./ 2.00 m.
Maximum weight: 10 kg usually, 20 kg for some destinations.
Commercial invoice
 Issued by the seller for the full realisable amount of goods as per trade term.
INTERIM GUIDELINES FOR EXPORT/IMPORT OF BOVINE GERMPLASM
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 The import and export of the cattle/ buffalo germplasm is under restricted list and is allowed against the
license issued by Directorate General of Foreign Trade, Ministry of Commerce on the recommendation of
this Department.
 Introduction of temperate dairy breeds in the country for cross-breeding indigenous non -descript cattle has
been accepted for quite some time now.
 In pursuance to this, the need has been felt by number of State Governments/ Organisations to import exotic
germplasm to produce the quality cross-bred animals.
 With the extension of the breeding programme and the artificial breeding network, a surge in the demand for
the exotic germplasm is also expected.
 There is a definite demand for the germplasm of Indian breeds of cattle and buffalo, in South America, South
Asia and other countries. Keeping in view our responsibility towards conservation of the rich diversity, it is
important to broadly categorize the germplasm of cattle and buffalo meant for breeding purposes and further
for the export purposes.
 Imposing a complete ban on the export of Indigenous germplasm because of conservation concern would
actually be counterproductive.
 Such a ban will only encourage the flow of germplasm through illegal trade and in a country with such huge
land border it will be impossible to control such flow through illegal trade.
 It can be used for the up gradation of the indigenous stock.
o Accordingly, it has been felt that some guidelines should be put in place for processing such
applications for import and export of germplasm.
o Interim Guidelines for export /import of bovine germplasm
Guidelines for the Import of bovine germplasm
 Import of live animals (bovine) and bovine germplasm will be permitted for breeding purpose only.
 Eligibility of Importers
o The institutes/Organizations capable of keeping and maintaining the performance records 'of exotic
germplasm should only be permitted to import bovine germplasm and these institutions will be
evaluated by the Department of Animal Husbandry. Dairying and Fisheries(DADF) for grant of
permission.
o Complete genetic and production data /information with respect to the germplasm should be
submitted to this Department before the actual imports.
o Post import information from the date of import to the date of disposal in prescribed proforma must
be maintained and submitted to Department of Animal Husbandry, Dairying and Fisheries and State
Governinents on six monthly basis.
o The feeding schedule from the import'ing country should be supplied along with other documents
o The import should be based on the fat % and lactation yield in addition to other milk component
character standards. The type evaluation should form the integrated component of selection.
o The guidelines formulated by OlE, Codex Alimentarius and lETS should be strictly adhered to while
importing the genetic material.
o The pre and post import quarantine measures for live animals and germplasm should be strictly
adhered to according to GOI health protocols.
o The justifications for import and future roadmap for utilization of imported germplasm should be
supplied with other documents.
o No objection certificate from the concerned State Government should be submitted before the actual
imports.
 Screening Committee
o All the applications for the import of germplasm will be examined. by .the Department of Animal
Husbandrx Dairying and Fisheries (DAD F).
 Veterinary Certificates
o The imports should be regulated as per the provision of Livestock Importation Act, 1898 amended
from time to time and as per the protocols/ veterinary certificates
 Order of import
o For import of germplasm, the order of preference should be frozen semen, frozen embryos, and live
animals, which shall be based on the assessment of the domestic requirement of bulls and bull
mothers and their availability in the country.
 Standards for Import of Germplasm
o Semen from progeny tested sires with +ve sire indices/breeding values (with reliability of> 85%)
should only be allowed for importation.
o The selection criterion for milk fat should be a minimum of3.5% in HF and 5% in Jersey. Semen
should be procured from the bulls with daughters average lactation yield ( in 305 days) above 9000
liters in HF and 6000 liters in Jersey.
o Bulls should be improver for type characters like udder and feet conformation.
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o Donor bull should be free from genetic disorders like bovine leukocyte adhesion disease (BLAD),
deficiency of uridine mono-phosphate synthetase (DUMPS), citrulinemia (deficiency of argino-
succinate synthetasea) and Factor XI
o Embryos should be procured from the donor dams -HF with minimum lactation yield of'l 000 Its
with minimum of 3,5% fat. Sire should be progeny tested with sire indices/breeding value of higher
order (with reliability of> 85%).
o Embryos should be procured from the donor dams- Jersey with minimum
o lactation yield of 7000 Its with minimum of 5% fat. Sire should be progeny tested with sire
indices/breeding value of higher order (with reliability of> 85%),
o In case of import of indigenous germplasm, average of top 20% of genetic
o Material on current animal register of the exporting country shall be considered for import.
o Import of germplasm of other exotic breeds will be allowed only for experimental purpose subject to
condition that the semen is from progeny tested.
o For import of live animals/ Semen! Embryos of other bovine breeds, the DADF shall consider and
recommend case-to-case basis.
CHAPTER-24: GUIDELINES FOR EXPORT OF BOVINE GERMPLASM
Learning objectives
 To explain the guidelines involved in the export of bovine germplasm

 To discuss the status of livestock, livestock products and poultry products in export
GUIDELINES FOR EXPORT OF BOVINE GERMPLASM
 Export of live animals (bovine) and bovine germplasm will be permitted for breeding purposes only.
 The export of germplasm will be allowed subject to the fulfillment of following conditions:-
o For export of'germplasm, order '"of preference should be frozen semen, frozen embryos and lastly
live animals.
o Animal should conform to breed characteristics.
o Milk production records of breed averages will be considered during export of live animals.
o However elite animals (top 20% of the production level) of each breed having best milk product(on
level should not be exported.
o The export component should not exceed 5% of animals of the concerned breed estimated as
qualified for export per year.
o However, export of live anImals of some of the Indigenous breeds categorised as threatened/
endangered shall not be allowed.
o Countries which are interested in importing bovine germplasm (live animals,
o semen, ova, embryo and gonads) will provide their import policy documents and health protocols to
Govt. of India.
o The exporting agency from India will comply with the rules and regulations as intimated by DADF.
o The export of germplasm (semen, ova & embryos) of all the breeds may only be permitted to only
those countries, which are willing to have similar arrangements on reciprocal basis.
o The health certificate requested by the importing authorities will be provided by the registered
Veterinarian authorized by DADF.
o Exporting agency/ State Government will keep the detailed data on the exported animals and shall
regularly inform DADF.
o For export of Embryo/ ova, the collection and processing techniques as stipulated under section 3.3
Appendix 3.3.1.1 to 3.3.1.13 and micro- manipulation of the Bovine Embryos at Appendix 3.3.3.1 to
3.3.3.5 of the DIE Terrestrial Anima1.Health code (2005). as amended from time to time may be
adhered to. ..
o Similarly the collection and processing procedure of semen as per section 3.2,Appendix 3.2.1.1 to
3.2.1.10 of the DIE Terrestrial Animal Health code (2005) as amended from time to time may be
complied.
o The animals with National Institute/NDDB, registered animals with CHRS or State Government or
Livestock Development Boards, shall be eligible for Consideration for export of germ-plasm.
o Preferential treatment shall be given to the SAARC countries in terms of the number of animals and
breeds to be exported especially from Central Cattle Breeding Farms (CCBFs). .
 Although India is a world leader in the production of Dairy Animal Products.
 India's exports of Animal products has increased from 1266333.38 MT with the value of Rs. 4109.93 Crores
in 2006-07 to 2101759.49 MTwith the value of Rs.5104.63 Crores in 2007-08.
 India’s exports of poultry products has increased from Rs. 318.17 Crores in 2006-07 to Rs 441.09 Crores in
2007-08.
 Birds, eggs, in shell, fresh, preserved or cooked constitute the largest segment with about 50% share.
Processed egg products accounted for about 48% of the exports.
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 India's export of Buffalo meat and sheep/goat meat products reached 483478.29 MT and 8908.72 MT with
the value of Rs. 3549.78 Crores and Rs. 134.10 Crores during 2007-08.
 Frozen bovine meat dominated the exports with a contribution of over 97%. The demand for bovine meat in
international market has sparked a sudden increase in the meat exports from India. The main markets for
Indian bovine meat are Malaysia, Philippines, Mauritius, and Gulf countries.
 Concentrated Dairy products such as skimmed milk continues to be the largest item of export, which
together accounts for nearly 78% of net milk and milk products exports during the year 2006-07.
 The exports of Dairy Products reached. 69415.44 MT with the value of Rs.866.58 Crores in 2007-08 as
against Rs. 434.58 Crores in 2006-07.
 On the other hand butter, butter oil, ghee and other milk fat together accounted for just over 10% of the net
milk and milk product exports from India during 2006-07.
 India ’s exports of Processed Meat and Natural honey attained 1245.47 MT and 12231.19 MT with the value of
Rs. 12.96 Crores and Rs. 93.30 Crores in 2007-08.
BUFFALO, SHEEP AND GOAT MEATS AND THE AREAS OF PRODUCTION
Buffalo Meat
 India's livestock population includes, 88 million buffaloes, which is 58 per cent of the world's buffalo
population.
 Animals which are generally used for production of meat comprise of sheep and goats, pigs and poultry.
 Besides about 3600 slaughter houses, there are live modern abattoirs and
POULTRY PRODUCTS,DAIRY PRODUCTS AND THE AREAS OF PRODUCTION
Poultry Products
 Poultry is one of the fastest growing segments of the agricultural sector in India today. While the production
of agricultural crops has been rising at a rate of 1.5 to 2 percent per annum, that of eggs and broilers has been
rising at a rate of 8 to 10 percent per annum.
 As a result, India is now the world's fifth largest egg producer and the eighteenth largest producer of broilers.
 The Potential in the sector is due to a combination of factors - growth in per capita income, a growing urban
population and falling real poultry prices.
 Poultry meat is the fastest growing component of global meat demand, and India, the world's second largest
developing country, is experiencing rapid growth in its poultry sector.
 In India, poultry sector growth is being driven by rising incomes and a rapidly expanding middle class,
together with the emergence of vertically integrated poultry producers that have reduced consumer prices by
lowering production and marketing costs.
 Integrated production, market transition from live birds to chilled and frozen products, and policies that
ensure supplies of competitively priced corn and soybeans are keys to future poultry industry growth in
India. There are number of small poultry dressing plants in the country.
 These plants are producing dressed chickens. In addition to these plants, there are five modern integrated
poultry processing plants producing dressed chicken, chicken cut parts and other chicken products. These
plants will manufacture egg powder and frozen egg-yolk for export.
Areas of Production
 Over all, Tamil Nadu counts for maximum egg production. In Andhra Pradesh, Hyderabad is the city with
maximum poultry and hatcheries.
 Besides the state of Andhra Pradesh, Vishakhapatnam, Chittoor, Karnataka, Tamil Nadu, Maharashtra,
Gujarat, Madhya Pradesh, Orissa and North Eastern States are the major egg contributors
 The individual products under this sub-head are as below
o Live Poultry <=85 Gram
o Other Live Poultry <=185 Gram
o Live Poultry > 185 Gram
o Other Live Poultry >185 Gram
o Edible Poultry Meat (Fresh)
o Edible Poultry Meat (Frozen)
o Other Poultry Meat Not Cut In Pieces
o Cuts & Offals Excluding Livers
o Eggs In Shell
o Other Eggs
o Egg Yolks Dried
o Other Egg Yolks
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o Eggs Not In Shell (Dried/Cooked)

o Eggs Not In Shell (Frozen/Preserved)
o India Facts and Figures
o India’s export of poultry products has increased from Rs. 318.17 Crores in 2006-07 to Rs 441.09
Crores in 2007-08 .
 Major Export Destinations (2007-08)
o Kuwait, Afghanistan, Oman, Japan, Denmark.
Dairy Products
 India now has indisputably the world's biggest dairy industry—at least in terms of milk production; last year
India produced close to 100 million tonnes of milk, 15% more than the US and three times as much as the
much-heralded new growth champ, China.
 Appropriately, India also produces the biggest directory or encyclopaedia of any world dairy industry.
 The dairy sector in the India has shown remarkable development in the past decade and India has now
become one of the largest producers of milk and value-added milk products in the world.
Butter Fresh Butter MilK
Butter Oil Fresh Cheese
Milk & Cream in Powder Milk for Babies
Other Fat Skimmed milk powder
Other milk power Whole Milk
Ghee
Areas of Production
 Maharashtra , Himachal Pradesh , Madhya Pradesh , Punjab , Rajasthan , Tamil Nadu are the major
production area of Dairy Products in India .
India Facts and Figures
 Concentrated Dairy products such as skimmed milk continues to be the largest item of export, which
together accounts for nearly 78% of net milk and milk products exports during the year 2007-08.
 The exports of Dairy Products reached. 69415.44 MT from 45371.84 MT . India’s export of Dairy
products has increased from Rs. 434.58 Crores in 2006-07 to Rs 866.56 Crores in 2007-08 .
Major Export Destinations (2007-08)
 Bangladesh, UAE, Egypt, China, Algeria.

ANIMAL CASING,PROCESSED MEAT AND THE AREAS OF PRODUCTION
Animal Casing
 India, being a country with numerous states and vast area , has resources for production of animal casings of
high quality with excellent calibration and shining colour .
 This makes India one of the major exporter of animal casing in the world.
 Animal products including the products or animal casing like Bladders and Stomachs of Animals, Casings of
Other animals, Cattle Casings, Guts for Animal Casings, Sheep Casings etc.
o Cattle Casings
o Sheep Casings
o Casings of other animals
o Guts for animal casings
o Bladders and stomach of animals
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 India’s export of Animal Casing products has reached to Rs 6.84 Crores in 2007-08
 Vietnam, Italy, South Africa, Portugal , Spain.
Processed Meat
 The total processing capacity in India is over 1 million tons per annum, of which 40-50 percent is utilized.
India exports more than 500,000 tons of meat, mostly buffalo meat.
 Indian buffalo meat is witnessing strong demand in international markets due to its lean character and near
organic nature.
 Unlike cow slaughter, there is no social taboo in killing buffalo for meat. Goat and lamb meat are relatively
small segments where local demand is outstripping supply.
 The production levels in these two categories have been almost constant at 950,000 tons with annual exports
of less than 10,000 tons.
 The recent trend in India is to establish large abattoirs-cum-meat processing plants with the latest
technology.
 India has already established ten state-of-art mechanized abattoirs-cum-meat processing plants in various
states based on slaughtering buffaloes and sheep.
 These plants are environmentally friendly, where all the slaughterhouse byproducts are utilized in the
production of meat-cum-bone meal, tallow, bone chips and other value-added products. Several more are
under construction.
 The plants follow all the sanitary and phyto-sanitary measures required by the International Animal Health
code of World Organization for Animal Health (O.I.E.). These plants mostly produce buffalo meat for export.
 India is becoming a major buffalo meat producing country and will be a main player in the international
market with additional establishment of the state-of-art-abattoirs cum meat processing plants.
Areas of Production
 Andhra Pradesh , West Bengal , Maharashtra , Kerala, Delhi , Uttar Pradesh , Rajasthan are the key areas of
Processed meat production in India.
o Sausages & Canned Meat
o Homogenized Meat Preparations
o Preserved Meats
o Other Poultry Meat
o Preserved Meat Of Bovine Animals
o Meat Extracts & Meat Juices
 India export of Processed Meat production has increased from Rs. 7.13 Crores in 2006-07 to Rs.12.96 Crores
in 2007-08 and from 860.69 Qty (Mt) in 2006-07 to 1245.47 Qty (Mt) in 2007-08.
 Vietnam, Malaysia, Australia, New Zealand, and Ghana

CHAPTER-25: RESOURCE MANAGEMENT
Learning objectives
 To give in details about resource management.

 To explain organisational aspects of livestock farms.
 To describe sources, procurement of inputs and financial resources.
ORGANIZATIONAL ASPECTS OF LIVESTOCK FARMS
Organizational aspects of livestock farms
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 Promotion of the welfare of the people is one of the major objectives of the modern livestock farming. For the
attainment of this objective the state attach high priority on their economic development.
 The economic development in turn depends on human, natural and financial resources. Since in most of the
developing countries these resources are not available in abundance, every care should be taken to make
proper use of these resources to obtain best possible results.
 Hence the management of various types of resources assumes special importance in the developing
countries.
Management of human resources
 Management of human resources is of vital importance for every country and organization, A pertinent
question which deserves our consideration is as to what is the process of management of human resources.
 This process comprises of four things, acquisition (getting the people), development (preparing the people),
motivation (activating the people) and maintenance (keeping them).
Management of natural or material resources
 Material or the natural resources also play an important role in the economic development of a country.
 Effective management of natural or material resources is of prime importance.
Management of financial resources
 Financial resources are as important for the economic development of the country as natural and human
resources.
 It is of vital importance that the limited financial resources should be utilized with utmost care and all
wasteful expenditure be avoided.
 Financial management, according to Hiwad and Uptron "involves the application of general management
principles to a particular financial operation."
Sources and procurement of materials
 Purchasing procedures of materials include various stages: First, the need is to be ascertained and
recognised.
 Accurate statement of quality and quantity of material needed with full descript is to be prepared.
 Purchase requisitions and negotiations with possible sources of supplies are made.
 This is important in the business, as it is more concerned with the economy of the company or the firm.
Requirement of materials
 Type of the material to be used in the production process is generally determined by the production
department (engineering dept.) of the company, since it has necessary knowledge and equipment to check
the real physical characteristics.

Making/Buying
 Usually the top management does this. It depends how highly integrated and the diversified the company is.
Advantages of Making
 Delivery on time in right quantity and quality

 Cost consideration, less inventory
 Emergency
Advantges of Buying
 Less investment in machines and equipment

 Simpler to manage in smaller and less diversified companies
Source selection
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 Procedure involved in the source selection is the preparation of and exhaustive list of supplies and then
sorting them out the one or ones with when to do the business.
 To prepare the list, a buyer can use the following type of supplier information
o Past experiment with the supplier
o Interview with the sales man
o Technical and descriptive catalogues
o Trade fairs and conventions
o Trade directories and journals
o Trade representatives and agencies
o Periodical advertisement in the press
PROCUREMENT OF INPUTS AND FINANCIAL RESOURCES
Material procurement activities
 Procurement is a generic term, which includes the purchasing and related activities.
 Procurement activities are the selection of the vendors, establishing prices and services, preparation of
orders and supply contracts, arrangement of scheduled delivery of the materials, proper maintenance of the
records and relation with suppliers.
 Procurement activity also includes effective communication with the user and other services department as
also with the supplier.
 Frequently, however materials management procedures require direct communication and discussions
between the user and the supplier for technical reasons.
 The heart of the industrial management function is the procurement circle, which may be depicted as shown
below
Financial resources
 Resources are the inputs we give to the enterprise. Land, labour and capital are the basic resources. Any form
of the capital can be considered as the financial resources.
Types of Financial Resources
Share Capital
 A Company issues shares of its capital to raise the fund for its business.
 This is done at the time of incorporation of the company and also subsequently as and when the need
arises.
 There are two types of share capital
o Preference capital
o Equity capital
 Capital of the company is called the share capital. Those who acquire shares are called as the
shareholders.
 They are the owners of the company. Shareholders cannot withdraw any part of the capital except
under appropriate legal customeric provisions.
 Shareholders can transfer shares held by them to other persons.
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Dividends
 Payment of dividend by a company to its shareholders is similar to the withdrawal made by the
owner partners from the business.
Debentures and Bonds
 When large amount of money is required which cannot be obtained from a single source small amounts are
borrowed from large number of people. This is done by issuing debentures/bonds.
 Each debenture has a face value which is the amount supposed to be borrowed from the debenture holder.
 Rate of interest, date of issue and date of maturity are indicated on the debentures.
Borrowings
 Based on the purpose and duration of the borrowings agricultural credits may be divided into
o Short term credit: Loan for paying wages, hiring labour, purchasing feeds, seeds and fertilizers. They
are payable out of the income of the next immediate harvest.
o Medium term loan: Comparatively bigger loans required for the purchase of cattle, pump sets,
implements etc., spanning 2-7 years for repayment. Repayment cannot be made at the next harvest.
o Long term credit: Still larger sums to purchase land, wells, etc., It will take many years to repay.
Sources of Agriculture finance
 Finance for agriculture can be obtained from

o Money lender
o Credit co-operatives
o Commercial banks
o Government
o Regional Rural Banks
CHAPTER-26: GATT, WTO AND AGRICULTURE
Learning objectives
 To discuss about the functioning of GATT, ITO and WTO.

 To explain in detail about different negotiation and rules in WTO.
GATT,WTO AND AGRICULTURE
 To facilitate increased flow of commodities across international border is to eliminate completely some of the
non-tariff barriers. Non-tariff barriers (NTB) in AoA are quantitative restriction, giving preference to
domestic supplies in government purchases, providing subsidy or advantageous taxation allowance to
domestic producer, minimum import prices, discretionary licensing, variable import levies, voluntary export
restrictions, etc.,
GATT
 General Agreement on Tariffs and Trade (typically abbreviated GATT) was the outcome of the failure of
negotiating governments to create the International Trade Organization (ITO).
 GATT was formed in 1947 and lasted until 1994, when it was replaced by the World Trade
Organization during the final round of negotiations in early 1990s.
 The history of the GATT can be divided into three phases:
o The first, from 1947 until the Torquay Round , largely concerned which commodities would be
covered by the agreement and freezing existing tariff levels.
o A second phase, encompassing three rounds, from 1959 to 1979, focused on reducing tariffs.
o The third phase, consisting only of the Uruguay Round from 1986 to 1994, extended the agreement
fully to new areas such as intellectual property, services ,capital , and agriculture . Out of this round
the WTO was born.
WTO
 World Trade Organization (WTO) is the only global international organization dealing with the rules of trade
between nations.
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 At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and
ratified in their parliaments.
 The goal is to help producers of goods and services, exporters, and importers who conduct their business
 In 1993 the GATT was updated (GATT 1994) to include new obligations upon its signatories.
 One of the most significant changes was the creation of the World Trade Organization (WTO). The 75
existing GATT members and the European Communitiesbecame the founding members of the WTO on 1
January 1995.
 The other 52 GATT members rejoined the WTO in the following two years (the last being Congo in 1997).
 Since the founding of the WTO and 21 new non-GATT members have joined, 29 are currently negotiating
membership. There are a total of 153 member countries in the WTO.
 Whereas GATT was a set of rules agreed upon by nations, the WTO is an institutional body. The WTO
expanded its scope from traded goods to trade within theservice sector and intellectual property rights .
 Although it was designed to serve multilateral agreements, during several rounds of GATT negotiations
(particularly the Tokyo Round) plurilateral agreements created selective trading and caused fragmentation
among members. WTO arrangements are generally a multilateral agreement settlement mechanism of
GATT.
Agriculture
 The WTO’s Agriculture Agreement was negotiated in the 1986–94 Uruguay Round and is a significant first
step towards fairer competition and a less distorted sector.
 It includes specific commitments by WTO member governments to improve market access and reduce trade-
distorting subsidies in agriculture.
 These commitments are being implemented over a six year period (10 years for developing countries) that
began in 1995.
 Participants have agreed to initiate negotiations for continuing the reform process one year before the end of
the implementation period, i.e. by the end of 1999.
 These talks have now been incorporated into the broader negotiating agenda set at the 2001 Ministerial
Conference in Doha, Qatar.
 WTO members agreed to initiate negotiations for continuing the agricultural trade reform process one year
before the end of the implementation period, i.e. by the end of 1999.
 These talks began in early 2000 under the original mandate of Article 20 of the Agriculture Agreement.
 At the November 2001 Doha Ministerial Conference, the agriculture negotiations became part of the single
undertaking in which virtually all the linked negotiations were to end by 1 January 2005.
Tariff Barriers
 Tariff is a set of proportion of the price of good to increase the price at the border of importing countries. Aim
of levying tariff is to stimulate in import-competing industries and depressing demand by reducing imports.
This is needed to safeguard the domestic producer. It is specified in money term per unit in the form of
excise and custom duties.
 This is of two type ie. optimum tariff and prohibitive tariff.
o Optimum tariff - Tariff which maximizes country's welfare.
o Prohibitive tariff - It is the increased level of tariff when there is no trade.
 Tariff rate Quota (TRQ) - is two tiered tariff structure where minimum access quantity is charged a low tariff
(within quota tariff) while imports above minim access quota are charged higher tariff (out of quota tariff)
which experience prohibitive tariff.
 Special Safeguard Clause (SSC) provides imposition of additional import duty if import exceeds their average
of three preceding years by no more than 5% or if CIF import price of shipment falls below 90% of average
reference price.
Non-Tariff Barriers
 Changes in the form of fees for loading and unloading important products, port charges, custom processing
fees, consular charges to imports are in the form ofnon-tariff barriers.
 Other specific type of non-tariff barriers are technical barrier to trade (TBT) and sanitary and phyto-sanitary
(SPS) measure.
 TBT covers all technical regulations, voluntary standards and conformity assessment procedures. Many TBT
can result in unnecessary costs increase to exporters.TBT measures focus on ensuring imported products
satisfy domestic taxes, preferences and requirements with respect to quality, safety or appropriate
consideration of environmental concern during manufacturing, processing and or shipment of product.
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 SPS covers all measures whose purpose is to protect human or animal health from food borne risks, human
health from animal or plant carried diseases.
 Remedy for this barrier is to harmonise such requirements or standards within union members.
CHAPTER-27: BREAK EVEN ANALYSIS
Learning objectives
 To define and calculate break-even output and margin of safety.

 To explain importance of break even and shut down point.
BREAK EVEN ANALYSIS
Break-even point
 Break-even point is the output level corresponding to minimum point of average total cost.
 A farmer must produce at least this amount of product to cover the total cost of production.
 Whatever is produced above this point will be the profit for the farmer.
 Point where the farmer recoups his investment is the Break-even point.
 Investment is in the form of fixed cost and variable cost, which constitutes the total cost.
 When the total cost is equal to total revenue it is Break-even point. It can be calculated by,
Service charge = How much one gets by selling an individual unit of output.
 Break-even point nearer to the origin indicates less loss and more profit zones.
 Break-even point away from the origin indicates more and more loss zone and less and less profit zone.
 Nearness of Break even point to the origin also indicates whatever the farmer is producing is market
worthwhile.
 Due to this the farmer will recoup his investment even by producing less number of units of output.
 Break even point away from the origin indicates to recoup the investment the farmer has to produce larger
number of units of output which is an indication that whatever the farmer is producing is not so market
worthwhile.
 Find out the break even point of a sheep herd with following information.
o Total fixed cost =Rs.10000, Number of sheep =100. Variable cost of production = Rs.60000, Gross
return =Rs.100000
o Break Even point or output= 10000/{(100000/100)-(60000/100)}= 25 sheep.
Shut down point
 Shut down point is the output level corresponding to minimum point of average variable cost.
 A farmer must produce at least this amount so that he will be able to cover the variable cost of production.
 If the total revenue curve goes below this point, it is better to close the business instead of incurring losses.
So this point is called as Shut down point.
Margin of Safety = Output – BEO

Particulars Problem 1 Problem 2 Problem 3 Problem 4 Problem 5
Total Variable Cost Rs.16,000 Rs.40,000 Rs.60,000 Rs.6
Total Cost Rs,24,000 Rs.30,000 Rs.50,000 Rs.8,000
Total Fixed Cost Rs.10,000 Rs.10,000
Milk Production 3,000 lts 3,500 lts
Gross Income Rs.30,000 Rs.35,000 Rs.60,000 Rs.1,00,000
Meat Production 500 Kg. 100
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Number of sheep 100

Service charge Rs.15/unit
CHAPTER-28: ACCOUNTING
Learning objectives
 To know importance of accounting

 To explore definition of accounting
AIM OF ACCOUNTING
 The following are the main objectives of accounting:
To keep systematic records
 Accounting is done to keep a systematic record of financial transactions.
To protect business properties
 Accounting provides protection to business properties from unjustified and unwarranted use.
To ascertain the operational profit or loss
 Accounting helps in ascertaining the net profit earned or loss suffered on account of carrying the business.
 This is done by keeping a proper record of revenues and expenses of a particular period.
 The profit and loss account is prepared at the end of a period and if the amount of revenue for the period is
more than the expenses incurred in earning that revenue, then it is said to be a profit. In case the expenditure
exceeds the revenue, there is said to be a loss.
 Profit and loss account will help the management, investors, creditors, etc. in knowing whether running the
business is remunerative or not.
To ascertain the financial position of business
 The profit and loss account gives the amount of profit or loss made by the business during a particular
period. However it is not enough.
 The businessman must know about his financial position i.e, where he stands: what he owes and what he
owns? This objective is served by the balance sheet or position statement.
 The balance sheet is a statement of assets and liabilities of the business on a particular date.
To facilitate rational decision making
 Accounting these days has taken upon itself the task of collection, analysis and reporting of information at
the required points of time to the required levels of the authority in order to facilitate rational decision
making.
ACCOUNTING DEFINITION
 The American Accounting Association has defined accounting as the process of identifying, measuring and
communicating economic information to permit informed judgements and decisions by users of the
information.
 Accounting may be defined as the process of recording, classifying, summarizing, analyzing and interpreting
the financial transactions and communicating the results thereof to the persons interested in such
information – Shukla et al(1993).
 An analysis of the definition brings out the following functions of accounting.
Recording
 This is the basic function of accounting. It is essentially concerned with ensuring that all business
transactions of financial character are recorded in an orderly manner.
 Recording is done in the book- journal.
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Classifying
 It is concerned with the systematic analysis of the recorded data, with a view to group transactions or entries
of one nature at one place.
 The work of classification is done in the book termed as ledger.
Summarizing
 This involves presenting the classified data in a manner, which is understandable and useful to the internal
as well as external end users of accounting statements.
 This process leads to the preparation of following statements:
o Trial balance,
o Income statement,
o Balance sheet.
Deals with financial transactions
 Accounting records only those transactions and events in terms of money which are of financial character.
 Transactions which are not of a financial character are not recorded in the books of account.
Analysis and Interprets
 This is the final function of accounting.

 The recorded financial data are analyzed and interpreted in a manner that the end users can make a
meaningful judgment about the financial condition and profitability of the business operations.
Communications
 The accounting information after being meaningfully analyzed and interpreted has to be communicated in a
proper form and manner to the proper person.
 This is done through preparation and distribution of accounting reports.
BRANCHES OF ACCOUNTING
 Accounting has three main branches, viz.,

o financial accounting.
o cost accounting.
o management accounting.
Financial Accounting
 Financial accounting is primarily concerned with record-keeping directed towards the preparation of profit
and loss account and balance sheet.
 The main purposes of financial accounting are
o Recording of the transactions concerning and affecting the business
o Preparation of necessary accounts and balance sheet as required by statutes and
o Apprising the owners of the business about the results of the business over a period of time.
Cost Accounting
 Cost accounting is the process of accounting for costs.

 It is a systematic procedure for determining the unit cost of output produced or services rendered.
 The primary functions of cost accounting are to ascertain the cost of a product and to help the management
in the control of cost.
 Both financial accounting and cost accounting are concerned with the accumulation and presentation of
information to serve the needs of management.
Management Accounting
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 Management accounting is the term used to describe the accounting methods, systems and techniques
which, coupled with special knowledge and ability, assist management in its task of maximizing profit or
minimizing losses.
 Hence, it is the reproduction of final accounts in such a way as will enable the management to take decisions
and to control activities.
COMMON TERMS
Business
 It is an establishment for the conduct of trade or commerce.

 It denotes activities of person or group of persons, undertaken to exchange goods and/or services with a view
to earn income and profit.
 Example:
o A manufacturing business,
o Banking business
o Insurance business, etc.
 Business is a semi-agent or a medium which accepts money from the proprietor or investor, pays him if
profit is earned and demands from him, if loss is incurred.
Proprietor
 He is the owner of the business.

 He invests capital in the business with the invention of earning profit.
 He undertakes all risks involved in the business.
 He enjoys all the incomes and profits and bears all expenses and losses if any.
 He has the claims against net assets of the business i.e., total assets minus liabilities to outsiders.
Assets
 These are the material and non-material things or possessions or properties of the business including the
amounts due to it from others.
 E.g: Land, buildings, furniture, equipment, plant, machinery, fixtures, cash, bank balance, debtor’s bills
receivable, stock of goods, investments, etc., are all assets.
Tangible assets
 These are assets having physical existence like cash, furniture, land, building etc.
Intangible assets
 These are assets with no physical existence. But, their possession gives rise to some benefits to owners. E.g.
Goodwill, Patents, Trademarks, etc.
Liabilities
 These denote the amounts, which a business owes to others (other than the proprietor/s) on different
accounts such as;
o Loan from bank
o Loan from other persons,
o Creditors for goods supplied
o Creditors for services rendered to the business, etc.
 Liabilities are also called creditors equity i.e., Creditors claims on assets.
Capital
 It is the amount invested by the proprietor/s in the business.

 For the business capital is a liability towards the owner. It is also called net worth or net assets, i.e., Assets –
Liabilities = Capital.
 Capital is also called owner’s equity or owner’s claim against assets.
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Assets = Capital + Liabilities
Or
Capital = Assets - Liabilities
 Residual value of assets is called capital

 Reserves and undistributed profits increase the capital
 Losses (which are not transferred to capital) also increase capital.
Equity
 Any rights or claims to assets or any interest in property or in a business is known as equity. Therefore, it
denotes liabilities.
 An equity holder may be a creditor, a partner, a shareholder or a proprietor. Therefore, all liabilities of a
business are the creditors equity and the capital is owner’s equity.
Therefore, Assets = Capital + Liabilities
= Owners equity + Creditors equity
Accounting equation
 It is a mathematical form of saying that in any business the total assets always equal to owners equity +
creditors equity.
Assets = Owners equity + Creditors equity
Balance sheet
 It is a statement of financial position of a business at any given time. It discloses the assets, liabilities and
owners equity or capital of a business at a given time.
 The equation i.e., accounting equation is sometimes referred to as Balance Sheet equation.
 This balance sheet equation is always maintained in the accounts book keeping.
 That is a position of equality (in values) between assets on one hand and capital and liability on the other
hand.
Debtor
 One who owes debt or money is a debtor, i.e., one who owes money to a business is a debtor.
Creditor
 One to whom a debt is owed or creditor is a person to whom some money is to be paid for the loan taken or
service obtained or goods bought.
Drawings
 It is the value of the cash or goods withdrawn by the owner or proprietor for his personal or domestic
purposes or use. It is opposite of capital.
Revenue and income
 Sales of products, merchandise (goods for sales and services) earnings by way of interest, rents, wages,
salaries, commission, etc., are revenues.
 ‘Revenue’ is the gross money receipts which increases owners equity (capital) on one hand and also the assets
(cash or account receivables) on the other hand.
 ‘Income’ is the money or money’s equivalent earned or accrued during an accounting period increasing the
total of previously existing net assets (net worths) and arising from the sales and rentals of any types of goods
or services.
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 Example: When goods of Rs.10,000/- are sold to Rs.15,000/-, the sum of Rs.15,000/- is the revenue,
whereas Rs.5,000/- is earned over and above the original asset value of Rs.10,000/- is the income. Similarly
the receipts and amounts receivable for services rendered like rent, wages, salary, interest, commission,
dividend, etc. are income.
Expense
 It is the money spent in conducting business activities.

 It is the expenditure in return for which some benefit i.e., service is received.
 Exampe: Expenditure on clerk’s salary for clerical services, money spent to pay the wages to labourers for the
labour received to the business.
Loss
 It is depletion or decrease in the value of any asset without resulting in any revenue or benefit.
Service
 It is the work performed by the business to get revenue or the work obtained from others by spending for the
same.
 Thus, rendering the service results in income and receiving service results in expense.
Goods
 These are articles bought for resale to earn profit.
Transaction
 It is the exchange of cash, goods or services in a business.

o Cash transactions: is one where cash receipt or payment is involved in any exchange.
o Credit transaction: It is the transaction wherein cash is neither received nor paid at the time of
transaction, but involves exchange on credit or debit.
o Non cash transaction: is one where the question of receipt of cash or payment of cash does not arise
at all. Eg. Depreciation, return of goods, etc.
Books of accounts and entry
 The various books wherein transactions of varied nature of a business are entered are the books of account.
Entry
 Entry is the record of a transaction of a business in a journal.
Gross profit
 Difference between selling price and the cost price of the goods is the gross earning or gross profit of the
businessman.
Gross loss
 Difference between cost price and selling price of goods.
Net profit (net income)
 Surplus remains after charging against gross profit all expenses including depreciation and other provisions
properly attributable to the normal activities of the particular group.
Account
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 Summary of similar elements in the transactions relating to a person, thing or service.

 Example:Cash account, goods account, persons account, income and expenses account, etc., short form A/c
or a/c.
Debit and credit
 These are symbols used while recording transactions. Debit (Dr) refers to the receiving account and credit
(Cr) to giving account.
 If any benefit is received or a person is a receiver of benefit the receiving or receivers account is said to be
debited.
 If benefit is given or a person is a giver of benefit, the giving account or givers account is said to be credited.
Voucher
 It is a written document in support of a business in respect of a transaction, represented on a carbon or

counter copy of a cheque or a receipted bill or an acknowledgement receipt received.
Receipt
 It is a written acknowledgement of a receipt of cash/money/goods, etc.

 It is an accounting document recording physical receipt of something acquired/got.
Folio
 It means the page (number) of a journal or a ledger (J.F and L.F)

CHAPTER-29: PERSONNEL MANAGEMENT
Learning objectives
 To discuss about personnel management.

 To explain the identification of work study and work measurement.
 To highlight the importance of supervision and division of labour.
INTRODUCTION-PERSONNEL MANAGEMENT
 A manager gets things done through other people. These people (human resources) use material resources
such as land, money, machinery, equipments, materials, etc.It is the responsibility of managers to ensure
that the employees utilize these resources in optimum manner.
 There is minimum wastages of resources and maximum returns on investment made in resources.
 Similarly an enterprise spends considerable amount of money on acquit ion, training, remuneration,
motivation etc., of its employee.
 Unless the employee work with devotion, their performance will be poor. They will not make effective
utilization of material resources.
 Therefore, the effective utilization of human resources is even more important.
 Management is said to be effective, of when enterprise is utilizing its human and natural resources effectively
to achieve its objectives.
 But at the same time it does not mean that human resources should be utilized only as a resources.
 Employees are human being with emotions and aspirations of their own.
 It is also the duty of management to treat employees with dignity and sense of belongings.
Personnel management
 Personnel management is the sub area of the general management.

 It concentrates on the human activity element of the general management.
 It is concerned primarily with manpower resource or inputs.
 "Personnel management is the planning, organizing, directing and controlling of procurement, development,
compensation, integration and maintenance of people for the purpose of contributing to organisation,
individual and social goals."
Functions of Personnel Management
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 Personnel manager has to perform the managerial functions such as planning, organising, directing,
motivating and controlling personnel working in his department.
 In addition to these managerial functions he has to perform the following operative functions also.
o Procurement - recruitment, selection, placement and induction of the new employees
o Development - performance appraisal, promotion, transfer of employees
o Compensation - remuneration in the form of wages, salaries, bonus
o Integration - integrating the organizational, social and individual goals
o Maintenance - health and safety, favourable work environment, employee benefits and services,
labour welfare work, worker participation in management.
 Every work whichever type it may be, to whichever category it may belong is characterized by certain
inherent criteria known as work specifications.
 Procedure for securing, organising and combining the important facts related to work enable the personnel
department to assess the quality and characteristics of the operator in performing the same, is regarded as an
essential basis of work analysis.
 The man entrusted with this work is popularly known as work analyst.
IDENTIFICATION OF WORK-TYPES OF STUDY,LABOUR INPUT
Identification of work
 Organization structure is developed to achieve objectives. Therefore works necessary for the accomplishment
of objectives are determined.
 Total work is classified or divided systematically because no one can handle total work alone.
 Identification and classification of work enables managers to concentrate attention on important works, to
avoid duplication of work and to avoid overlapping or wastage of efforts.
 While identifying and classifying works, management must ensure that
o All necessary works are performed
o There is no unnecessary duplication in performing activities and
o Different workers are performed in a co-ordinated manner.
Work Study
 Work-study can conveniently be defined as the tool in the hands of the management for achieving higher
productive efficiency in the organisation.
 Work-study can be broadly classified into
o Methods study and
o Work measurement
Methods Study
 This can be defined as the systematic procedure for analysing the existing methods of doing work including
the various human movements involved in it with the main objective of evolving the best or the most
economical methods of doing the work.
 Procedure adopted can be categorized stage by stage as follows:
o Selection of the work to be studied
o Collection of data and recording of the relevant facts about the existing methods
o Critical examination of the data collected
o Development of most practical, economic and effective method, having due regard to all contingents
circumstances.
o Installation of the new methods and maintaining it by regular routine check.
Techniques followed in Methods Study
 Operation Process Chart - graphical representation by linear diagrams

 Flow Process Chart - shows in addition to above the transportation required, distance travelled storage and
delays.
 Flow Diagram - same as above but here symbols are used
 String Diagram - using string and pins on the template models
 Multiple Activity Charts - also known as simo chart (simultaneous motion chart)
Work Measurement
 This is the technique of assessing the time content of the work performed by an operator.
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 The technique involves the determination of the proper time required for the work and so popularly known
as time study.
Optimization of labour input
 Optimization of labour in the actual sense means to obtain the most efficient or optimum use of labour.
 Labour must be confined with the other factors of production and cannot be discussed in isolation.
 Proper labour management policy will depend on particular farming situation.
 According to Alfred Marshall " labour is any exertion of mind or body undergone partly or wholly with a view
to earning some good or other than pleasure derived directly from work.
o Labour is not a commodity
o Labour is inseparable from the labourer
o Labour is more perishable than any other commodity
o Labour is less mobile
o Supply of labour is independent of its demand
o It is difficult to calculate the cost of production of labour
o Labourer sells his service and not himself
o Labourer does not have same bargaining power as their employers
o Labourer is not a machine - have ones own liking , feelings , wishes, thoughts etc.,
o Labourers differ in efficiency
Types of Labour
 Hired/Casual - Seasonal
o For special jobs
 Temporary - Skilled
o Unskilled
 Permanent - Skilled (e.g. Milkers, Clerks,)
o Unskilled (eg.workers, attendants)
SUPERVISION OF LABOUR AND SUPERVISORS - DIVISION OF LABOUR
Supervision of labour and supervisors
Supervision
 Supervision is referred to as " the key stone in the organizational arch", supporting the structural member
which ties together the management and workers (Keith Davis).
 Supervisors are so to speak, the ligaments and tendons and so views of an organization (Peter Drucker).
 Supervision is a part of a manager's job at all levels. The vertical relationship among the different kind of
mangers is called the management level.
 The top and middle management is considered to be the upper level management and first level managers
are referred as supervisors (lower level management).
Supervising the supervisors
 Since the first line management play an important role in the organization their supervision is also
important.
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 This is carried out by the middle level management - called the "supervisor of the supervisors".
 Middle management is the link between the top management where the policies are framed and the
operators' level.
Functions of Management by levels
 Division of labour means dividing large tasks into smaller packages of work to be distributed among several
people. This work specialisation allows an employee to master a task in the shortest time with a minimum
skill.
Division of labour
 Making of an article is split up into several processes and each process is entrusted to a separate set of
workers. This is known as division of labour.
 It is simply a form of specialisation of labour. The division of labour is associated with efficiency of labour.
 There are 3 types of division of labour. They are,
Simple division of labour
 A work is done by the combined efforts of a group of workers. It is difficult to say how much Work each one
did. Ex. carrying a heavy object, led by a number of people.
Complex division of labour
 Work is split up into different processes and each worker is assigned a definite part of the work.
 This is the division of labour proper. Ex. Manufacturing of pins, making of bread etc.,
Territorial division of labour
 This term refers to certain localities or cities or towns specialising in the production of some commodities.
 Eg. Lock -making in Dindugul and match factories in Sivakasi.
Advantages of division of labour

Advantages to the producer Advantages to the workers
Increase in mechanisation Reduction in training period
Increase in production Allocation of work according to ability
Increase in inventions Increase in workers efficiency
Reduction in production cost Increase in mobility of labour
Economic use of machinery Organization of workers
Savings of time
Advantages of specialization
Disadvantages of division of labour

Disadvantages to the worker Disadvantages to the society
Monotony of work Exploitation of women and children
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Narrow outlook of workers Physical and moral deterioration of workers

Decline in mobility of labour Struggle between workers and employers
Sense of irresponsibility Sense of irresponsibility
MERITS AND DEMERITS OF JOB SPECIALISATION - LABOUR
EFFECIENCY
 The word specialization is frequently used with the division of labour and essentially both means the same.
 Both mean that each unit of the productive input - each person, each piece of land, and each machine - does
only a part of the total production job.
Merits of Job Specialisation
 Employing high grade and experienced men for more specialised work is economical in the long run.
 Lightens the workload on each labourer - making him more physically and mentally acquainted with the job.
 Make the worker to be more skilled and increase his efficiency in the job he does.
 Streamlining the capital investment in labour by actually knowing the skill and specialization of the worker.
 Management is easier, so also the supervision.
 Increase in production is probably the most important advantage.
 Time saving .
 Doing the work more times make the worker to know the minutes detail which may instil new ideas for the
modification of the product or the process.
 Helps to find out the job of ones taste.
 Possibility of employing the right man at the right place.
 Maximum exploitation of the skill is possible, enabling to produce good quality products/services.
Demerits of Job Specialisation
 Risk of unemployment
 Monotony of the work
 Monopoly of the power
 Brings stratification in the society, creating inequality among the individuals
 Profit is stipulated as one is concentrating on one product
Labour Efficiency (Qualitative aspect of labour)
 Efficiency means the ability to do work so that the productivity is increased with minimum cost.
 Efficiency of labour is a great national asset. The following are some important factors, which affect efficiency
of labour.
Racial qualities
 Efficiency of labour depends on hereditary and racial stocks to which he belongs.

 Punjabis work harder than other Indians.
Natural and climatic factors
 A cool bracing climate is more conducive to work hard than tropical climate.
 Hence a labourer in Europe will be more efficient than a labourer in Asia.
Education
 Education stimulates and strengthens the right type of instincts and builds up character.
 A technically trained man is naturally more efficient.
Personal qualities
 If a worker has a strong physique, is mentally alert and intelligent, his efficiency will be greater.
 Resourcefulness and initiative also increases efficiency.
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Organisation and equipment
 Labour efficiency also depends on how labour is organised and what quality of machinery is placed at his
disposal.
 First-rate work cannot be expected from a third-rate labourer using second-rate equipment.
Environment
 If the surroundings are depressing, labour efficiency is bound to low.

 On the other hand, cheerful and bright environments are conducive to better work.
Working hours:
 Workers must have sufficient intervals for relaxation.

 Long working hours with no suitable rest or recreation will reduce the efficiency of labour.
Fair and prompt payment
 A well-paid worker is generally contended and puts his heart and soul into his job.
 He must also be paid promptly.
Labour organisation:
 An organised effort is more effective.

 If labourers are properly organised both inside and outside the place of work in the form of strong trade
union, their efficiency will undoubtedly go up.
Social and political factors:
 Social security scheme guaranteeing freedom from want and fear, and sympathetic state attitude towards
labourer will go long way in improving labour efficiency.
CHAPTER-30: BOOK KEEPING
Learning objectives
 To explain the meaning of systems of book keeping

 To discuss the difference between single and double entry systems of book keeping
 To highlight the advantages of doble entry system
MEANING,SINGLE ENTRY AND DOUBLE ENTRY SYSTEMS OF BOOK KEEPING
Meaning
 Book keeping is an art of recording pecuniary or business transactions in a regular and systematic manner.
 This recording of transactions may be done by the following two systems
Single Entry System
 An incomplete double entry can be termed as a single entry system.

 It is a system of book keeping in which only records of cash and personal accounts are maintained, it is
always incomplete double entry, varying with circumstances.
 This system has been developed by some business houses, who keep only essential records.
 Since all records are not kept, the system is not reliable and can be used only by small business firms.
Double Entry System
 This system is believed to have originated with the Venetian merchants of fifteenth century and it is the only
system of recording two – fold aspect of transaction.
 This system recognises that every transaction has a two – fold effect.
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 If someone receives something then either some other person must have given it, or the first mentioned
person must have lost something, or some service etc. must have been rendered by him
ADVANTAGES OF DOUBLE ENTRY SYSTEM
 Complete record of transactions: Double entry system records both aspects of a transaction. Thus, a complete
and reliable record of all business transactions is provided.
 Arithmetical accuracy: As both debit and credit aspects of a transaction are recorded, a trial balance can be
prepared and arithmetical accuracy can be easily verified.
 Ascertainment of financial result: Profit and loss account can be prepared to find out profit earned or loss
suffered during a given period.
 Ascertainment of financial position: Balance sheet of business can be prepared to ascertain financial position
on a particular date, i.e., amount of assets, liabilities and capital.
 Helps in comparison: Double entry system enables businessmen to ascertain purchases, sale, expenditure,
income, assets, liabilities of the current year as well as those of previous years to make simple comparison
which helps management to take appropriate decisions.
 Detection of frauds if any: Double entry system is a scientific and reliable system. It prevents commission of
frauds, but if it has been committed, it can be easily detected.
DISTINCTION BETWEEN DOUBLE ENTRY AND SINGLE ENTRY SYSTEM
 Distinction between double entry system and single entry system is as follows:
 Under double entry system both the aspects, i.e., debit and credit, of all the transactions are recorded. But
under single entry system, there is no record of some transactions, some transactions are recorded only in
one of their aspects whereas some other transactions are recorded in both of their aspects.
 Under double entry system, various subsidiary books like sales book, purchases book, etc. are maintained.
 Under single entry system, no subsidiary books except cash book which is also considered as a part of ledger
is maintained.
 Under double entry system there is a ledger which contains personal, real and nominal accounts. But under
single entry system, the ledger contains some personal accounts only.
 Under double entry system preparation of trial balance is possible.
 It is not possible to prepare a trial balance under the single entry system. Hence, accuracy of work is
uncertain.
 Under double entry system, Trading and Profit and Loss Account and Balance Sheet are prepared in a
scientific manner.
 Under single entry system, it is not possible; only a rough estimate of profit or loss is made and a Statement
of Affairs is prepared which resembles a balance sheet in appearance but which does not present an accurate
picture of the financial position of the business.
CHAPTER-31: VARIOUS TYPES OF ACCOUNT
Learning objectives
 To understand different types of account books.

 To know about the various entries in account books.
BOOK OF ACCOUNTS
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
DIFFERENT BOOKS USED IN ACCOUNTANCY
Journal
 Journal is the primary or original book of entry in which all transactions are recorded in the form of ‘entries’.
 These entries are entered in the order of their happening of occurrence in a chronological order. From these
journals, entries are transferred to ledger.
Ledger
 It is a book of final entry wherein the transactions that are finally entered in Memorandum book or journals
are finally entered in ledger.
 It is also called the ‘Principal Book of Accounts’.
 Transactions relating to different persons are recorded separately in the name of each person in a ledger.
Cash book
 This is an account book where only cash transactions i.e., both receipts and payments of cash are recorded.
 Purchase book or Purchase Day book or Daybook of purchase, Bought Daybook, Invoice book, Credit
Purchase book, Purchase journal, Purchases register
 This book records only credit purchase of goods in which trends deals.
Sales book or Daybook of sales or Sales daybook
 In this book only credit sales of goods dealt by the traders are entered.
Purchase returns book
 It contains the records of returns of goods purchased by the trader for which no cash is received.
 This happens when the goods are purchased but, the purchased goods are;
o Defective
o Damaged during transit
o Qualities delivered or received may not agree with invoice
o The price charged may be too high
o Goods may have been received quite later
o Substandard
o Terms and conditions may not be suitable
Sales returns book
 It records the goods returned by customers out of the sales already made and for which no cash is paid.
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Bills payable book
 In this book bills passed or pronotes passed or accepted are recorded.
Bills receivable book
 In this book bills already drawn or acceptance received are entered.
Journal Proper
 This is the journal in which (this is like miscellaneous journals) those entries are entered, which cannot be
entered in any of the above listed subsidiary journals or books.
SIMPLE CASH BOOK
Simple cash book
 Simple cash book is like an ordinary cash account. Its proforma is given below.
Dr. Cr.
Date Particulars L.F. Amount Date Particulars L.F. Amount
0
0
Exercise 1:
 Record the following transactions in Simple Cash book.

 Jan. 1 Opening cash balance Rs.5,000
 Jan. 4 Rent paid Rs.2,000
 Jan. 6 Interest received Rs.3,000
 Jan. 15 Cash purchases Rs.4,000
 Jan.25 Cash sales Rs.8,000
 Jan.31 Salaries paid Rs.2,000
Solution
Dr. Cr.
Date Particulars L.F. Amount Date Particulars L.F Amount
Jan. 1 To balance b/d 5,000 Jan. 4 By Rent 2,000
Jan.6 To Interest 3,000 Jan.15 By Purchases A/c

4,000
Jan.25 To sales 8,000 Jan.31 By salaries A/c
2,000
To balance b/d _______ Jan.31 By Balance c/d
8,000 ______
16,000
16,000
8,000
CASH JOURNAL OR CASH BOOK
 Cash book is meant for recording all cash transactions. It is a very important journal of business on account
of the following reasons:
o Number of transactions is quite large in every business.
o Chances of fraud being committed regarding cash are higher as compared to other assets.
o Strict control is, therefore required. Properly maintained cash book helps in attaining this objective.
o Cash is nerve centre of business. Timely payment to its creditors increases the reputation of the
business.
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o Similarly timely payments from its debtors improve the financial position of the business.
 Cash book can be any one of the following types:
o Simple cash book
o Two columnar cash book
o Three columnar cash book
o Multi columnar cash book
o Cash receipts book
o Cash payments book
THREE COLUMNAR CASH BOOK
 This type of cash book contains the following three columns on each side:
o Cash column for cash received and cash paid
o Discount column for discount received and discount paid
o Bank column for money deposited and money withdrawn from the bank.
o The proforma of such a Cash book is given below.
Dr. Cr.
Dt. Particulars L.F. Discount Cash Bank Dt. Particulars L.F. Discount Cash Bank
Exercise 3
 1. Prepare a three column cash book from the following particulars.
1998
 Jan. 1 Cash in hand Rs.1,600 and Bank overdraft Rs.1,000.

 7 Discounted a bill for Rs.5,000 at 1 % through Bank.
 9 Paid into Bank Rs.1,000.
 11 Joginder who owed us Rs.2000 became bankrupt and paid us 50 paise in the rupee.
 15 Withdrew from Bank for private expenses Rs.100.
 20 Received repayment of loan Rs.3,000 and deposited out of it Rs.2,000 in the Bank.
Solution
Dr. Cr.
Date Particulars L.F Disc. Bank Cash Date Particulars L.F Disc. Bank Cash
Jan.1 To Balance b/d
4,950 1,600
7 To Bill receivable 50
1,000 --
9 To Cash (C)
11 To Joginder 100
____ 2,000
20 To loan repaid 3,000
50 ____ ____
To cash ( C )
7,950
____
To balance b/d 6,850
TWO COLUMNAR CASH BOOK
 It has two columns:

o Cash Column, and
o Discount Column
Page | 93
 Cash Column is meant for recording cash receipts and payments while discount column is meant for
recording discount received and the discount allowed.
 The discount column on the debit side represents the discount allowed while discount column on the credit
side represents the discount received.
 Cash column of the cash book serves both the functions of a book as well as an account but discount column
does not serve the function of a discount account.
 A separate discount account has to be opened in the ledger in which total debits and credits from the cash
book are posted.
 Sometimes, two separate discount accounts are kept in the ledger-one for discount allowed and the other for
discount received.
Dr. Cr.
Dt. Particulars L.F. Discount Cash Dt. Particulars L.F. Discount Cash
0
Exercise 2
 Enter the following items in the two-column cash book.
2010
 August 1 Rahul commences business with cash Rs.10,000.

 He pays Rs.2,300 for goods purchased; Rs.500 for furniture purchased; Rs.400 for office equipment
 2 He pays rent Rs.100; pays legal cost Rs.10.
 3 He sells goods for cash Rs.1,800.
 4 He sells goods to Naveen on 5 days’ credit Rs.800
 5 He pays wages Rs.15; cartage Rs.5
 6 He buys goods for cash Rs.700 and pays a creditor Suresh Rs.425 in settlement of a claim of Rs.430.
 7 He receives cash from Naveen Rs.798 in full settlement of debt.
 8 He sells goods for cash Rs.50.
Solution
Dr. Cr.
Date Particulars L.F. Discount Cash Date Particulars L.F Discount Cash
Aug.1 To Capital 2 10,000 Aug 1 By Purchases 5 2,300
3 To Sales _____ 1,800 2 By Furniture _____ 500
7 To Naveen 2 798 5 By Office equipment 5 400

_____ _____
8 To Sales 50 6 By Rent
5 100
Aug 9 To balance b/d 8 By Legal Expenses
_____ 10
By Wages
12,648
_____ By Cartage 15
8,193 By purchases 5
By Suresh 700
By balance c/d 425
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8,193
_____
12,648
____
CHAPTER-32: CLASSIFICATION OF ACCOUNTS
Learning objectives
 To know rules for debit and credit in accountancy

 To explain different types of accounts
RULES FOR DEBIT AND CREDIT
 Transactions in journal are recorded on the basis of rules of debit and credit.
 For this purpose, business transactions have been classified into three categories:
o Transactions relating to persons – Personal Accounts
o Transactions relating to properties and assets – Real Accounts
o Transactions relating to incomes and expenses – Nominal Accounts.
Personal Real Nominal
Natural Personal A/C Tangible Expenses and Losses
Artificial Personal A/C Intangible Incomes and Gains
Representative personal A/C
PERSONAL ACCOUNTS
Personal Accounts
 It includes the accounts of persons with whom the business deals. There are three categories.
Natural Personal Accounts
 The term ‘Natural Persons’ means persons who are creation of GOD. For e.g. Raja’s account, Kumar’s
account.
Artificial Personal Accounts
 These accounts include account of corporate bodies or institutions which are recognised as persons in
business dealings. E.g. The account of a club, the account of Government, the account of an insurance
company etc.
Representative Personal Accounts
 These are accounts which represent a certain person or group of persons.

 E.g: For salaries due to employees (not paid), an outstanding salaries account will be opened. This
outstanding salaries account represents the accounts of the persons to whom the salaries have to be paid.
 The rule is
o Debit the receiver
o Credit the giver
 E.g: Ravi is giving cash to Rama.
 Then the account of Ravi will have to be credited and Rama’s account will have to be debited.
REAL ACCOUNTS
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 Real accounts may be of the following types.
Tangible real accounts
 Tangible real accounts are those which relate to such things which can be touched, felt, measured etc.
 E.g. Cash account, building account, furniture account, stock account etc.
Intangible real accounts
 These accounts represent such things, which cannot be touched, though they can be measured in terms of
money.
 E.g. patient’s account, good will account etc.
 The rule is
o Debit what comes in
o Credit what goes out
 E.g. when furniture is purchased for cash, furniture account should be debited while the cash account should
be credited
NOMINAL ACCOUNTS
 These accounts are opened in the books to simply explain nature of transactions.
 They do not really exist. For e.g. in a business, salary is paid to manager, rent is paid to landlord, while
salary, rent as such do not exist.
 The accounts of these items are opened simply to explain how the cash has been spent.
 In the absence of such information, it may be difficult for a person concerned to explain how cash was
utilised.
 Nominal accounts include accounts of all expenses, losses, incomes and gains.
 The examples of such accounts are rent, insurance, dividends, and loss by fire etc.
 The rule is
o Debit all expenses and losses
o Credit all gains and incomes
FARM CREDIT SYSTEM
 Livestock farming in the country today is moving towards high level of intensification.
 In this context, introduction of high yielding breeds which demand a high dosage of biological inputs such as
concentrate feed and fodder, medicines, growth promoters etc. have increased the demand for money very
tremendously.
 Since a majority of farmers are engaged in small scale farming, they need money from outside sources to
meet their cash requirements for various farm operations.
 They obtain such additional funds in the form of loans from private moneylenders, cooperative credit
societies, or commercial banks etc.
CHAPTER-33: RECORDING OF BUSINESS TRANSACTIONS
Learning objectives
 To explain nature of business transactions.

 To understand meaning and entry of ledger.
NATURE OF BUSINESS OPERATIONS
 Whatever may be the form of organization business operations follow a certain common pattern.
 Operations are all directed towards the accomplishment of pre-determined business goals.
 To achieve these goals the firm requires economic resources or assets, as they are called in accounting
terminology.
 Cash is an important asset. Assets are economic resources which a firm acquires in the course of its
operations for the accomplishment of its goals.
 Liabilities are the equity or interests of the creditors in the assets of a firm. Assets are equal to capital plus
liabilities.
BUSINESS TRANSACTIONS
 A business transaction is an economic event that has some effects on the resources of a firm or on the sources
of a firm’s assets.
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 These economic events are important and therefore must be recorded and reported to decision makers.
 The following list summarises the business transactions that a firm might have.
 Observe the cycle of business operations reflected in these transactions.
o A firm acquires assets from its owners.
o The firm acquires assets from creditors.
o The firm invests resources in buying assets needed to produce goods or services
o The firm uses the resources to produce goods or services.
o The firm sells the goods or services produced.
o The firm returns assets to the creditors.
o The firm returns assets to the owner’s.
SOURCE DOCUMENTS
 Documents on the basis of the above transactions are recorded in the books of account are known as source
documents.
 Examples of source documents are bills, invoices, receipts, cash memos, vouchers etc.
 These documents provide written evidence of a transaction or event that has taken place.
Accounting Equation
Assets = Equities
 The properties owned by business are called “Assets”.

 The rights to properties are called “Equities”.
 Equities may be subdivided into two types: the rights of creditors and the rights of the owners.
 The equity of creditors represents debts of the business and are called liabilities.
 The equity of the owner is called capital.
o So,
 Assets = Liabilities + Capital (or)
 Assets – Liabilities = Capital.
 The Accounting Equation can be understood with the help of following transactions.
Transaction 1
 A starts a business with a capital of Rs. 10,000.

 There are two aspects of transactions. The business has received a cash of Rs. 10,000.
 It is its asset but on the other hand it has to pay a sum of Rs. 10,000 to A. Thus:
Capital and Liabilities Rs. Assets Rs.
Capital 10,000 C ash 10,000
Transaction 2
 A purchases furniture for cash worth Rs. 2,000. The position of his business will be as follows:
Capital 10,000 Cash 8,000
Furniture 2,000
10,000 10,000
Transaction 3
 A purchases cotton bales from B for Rs. 5,000 on credit.

 He sells for cash cotton bales costing Rs. 3,000 for Rs. 4,000 and Rs. 1,000 for Rs. 1,500 on credit to P.
o As a result of these transactions the business makes a profit of Rs 1,500 (i.e. Rs.5,500 - Rs.4,000),
this will increase A’s Capital from Rs.10,000 to Rs.11,500.
o The business will have a liability of Rs.5,000 to B and two more assets in the form of a debtor P for
Rs.1,500 and stock of cotton bales of Rs.1,000. The position of his business will now be as follows:
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Creditor (B) 5,000 Cash(Rs.8000+4000) 12,000

Capital 11,500 Stock of cotton bales 1000
Debtor (P) 1500
Furniture 2000
16,500 16,500
Transaction 4
 A withdraws cash of Rs 1,000 and cotton bales of Rs 200 for his personal use.
 The amount and the goods withdrawn will decrease relevant assets and A’s capital. The position will be now
as follows.
Creditor (B) 5,000 Cash (Rs 12000-Rs 1000) 11,000
Capital 10,300 Stock of cotton sales
(Rs 11500-Rs 1200 Debtor (P) Furniture 800
___________ 1,500
15,300 2,000
___________
15,300
 The result of applying the system of double entry system may be summarized in the following rule:
o “For every debit there must be equivalent credit and vice versa.”
Journal
 Journal records all daily transactions of a business into the order in which they occur.
 A journal is defined as a book containing a chronological record of transactions.
 It is the book in which transactions are recorded under the double entry system. Thus journal is the books, of
original record.
 The journal does not replace but preceds the ledger.
 The process of recording transaction in a journal is termed as Journalising. A proforma of Journal is given
below.
Journal
Date Particulars L.F Debit Rs Credit Rs
(1) (2) (3) (4) (5)
 Date: The date on which the transaction was taken place is recorded here.
 Particulars: The two aspects of transaction namely debit and credit are recorded here.
 L.F: It means Ledger Folio. The transactions entered in the journal are later on posted to the ledger.
 Debit: In this column the amount to be debited is entered.
 Credit: In this column the amount to be credited is shown.
Closing of accounts: (Closing entries)
 Closing entries are entries passed at the end of accounting year to close different accounts.
 These entries are passed to close accounts relating to incomes, expenses, gains and losses.
 In other words, these entries are passed to close the different accounts pertaining to Trading and Profit and
Loss account.
 The accounts relating to assets and liabilities are not closed but they are carried forward to next year.
 Hence no entries are to be passed regarding those accounts which relate to the balance sheet.
 The principle of passing a closing entry is very simple.
 In case an account shows a debit balance, it has to be credited in order to close it.
 For e.g. if the Purchases Account is to be closed, the Purchases Account will have to be credited so that it may
be closed because it has a debit balance.
 The closing entries are passed in the journal proper.
LEDGER
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 Ledger is a book, which contains various accounts.

 In other words, Ledger is a set of accounts. It contains all accounts of the business enterprise whether Real,
nominal or Personal.
 It may be kept in two forms
o Bound Ledger
o Loose leaf Ledger
 The term posting means transferring the debit and credit items from the journal to their respective accounts
in the Ledger.
 Book keeping is mainly concerned with recording of financial data relating to business operations in a
significant and orderly manner.
 A bookkeeper may be responsible for keeping all records of a business or only of a minor segment, such as a
position of Customers’ accounts in a departmental store.
 A substantial portion of bookkeepers work is of a clerical nature and is increasingly being accomplished
through the use of mechanical and electronic devices.
CHAPTER-34: ANALYSIS OF FINANCIAL STATEMENT AND TRADING, PROFIT AND LOSS
ACCOUNT
Learning objectives
 To know various concepts of income and expense

 To understand income statement
 To explain the trading, profit and loss account
INCOME STATEMENT,REVENUE AND EXPENSES
Income statement
 Simply stated, income statement is a statement showing excess of revenue over expenses.
 If expenses exceed revenues, the result is a loss to farm. Income statement is generally prepared for one
agricultural year, i.e. at the end of year.
 However it may also be prepared over a period of time, so that one can know the trend in receipts and
expenses which indicates success or failure of farm business. It shows whether farm is running under loss or
profit.
 Hence it is also called as Profit and Loss Statement.
 It is different from balance sheet in that balance sheet indicates about assets and liabilities but not about the
operational efficiency of farm business in terms of receipts, expenses, profit and losses.
 The objective of preparing Income Statement is to summarise income and expenses incurred in farm
throughout year and present them in a schematic picture. This statement lists all farm expenses on one hand
and all receipts on the other.
Revenue
 In the revenue realized through the sale of following items are included.
A. Operating Receipts
 Crops and feed

 Livestock and Poultry sold
 Livestock and Poultry Products sold
 Custom work- cash
 Government payments and patronage dividends, gifts etc.
B. Capital Receipts
 Breeding stock
 Machinery and equipment
 Appreciation in the value of assets
C. Non Farm Income
 Interest and dividends
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Expenses
 Under the expenses column the following items are included.
A. Operating Expenses
 Labour charges
 Repairs
 Rents and Leases
 Seed and Fertilizer
 Chemicals
 Livestock expenses (Breeding Vet., etc)
 Gas Fuels, Oil
 Insurance
 Utilities (Electricity, Gas, Telephone)
 Marketing and transport expense
 Interest on working capital
B. Live stock and Feed Purchase
C. Capital Expenditure/ Fixed expenses
 Machinery and Equipment

 Building and Improvement
 Depreciation
 Interest on fixed Capital
 Rental value of owned land
D. Other expenses
 By subtracting the expenses from the receipts “Net income” for a year can be calculated.
o Operating ratio= Total Operating expenses / Gross income
o Fixed ratio = Total Fixed expenses / Gross income
o Gross ratio = Total expenses / Gross income
TRADING,PROFIT AND LOSS ACCOUNT
 ‘Final Accounts’ is the general name given for the Trading and Profit and Loss Account and Balance Sheet.
o Trading Account is prepared to find out the Gross Profit or loss during the period.
o Profit and loss Accounts is prepared to find out the net profit/ loss for the period and
o Balance sheet indicates the overall position of the business at the every end of period.
Procedure for the preparation of Trading Account
 Debit Trading Account with the opening stock, net purchases and their direct expenses on the goods by
transfer of balances from the respective ledger accounts. Thus, Trading Accounts will be debited with the
total cost of the goods sold and unsold.
 Credit the Trading Account for the transfer of net sales from the sales Account.
 Since the profit can be found out only in regard to goods sold, the stock at close is credited to Trading
Account on the basis of an Adjusting Journal Entry.
 The Profit and Loss (gross) on the Trading Account is transferred to the Profit and Loss Account by means of
a Journal Entry.
List of Expenses chargeable under Trading Account or Profit and Loss Account:
 Wages: Productive and Manufacturing.

 Freight: Freight Inwards and Freight on Purchases
 Carriage: Carriage Inwards, Carriage on Purchase coal gas and water, oil, grease and waste.
 Customs duties, airport duties, dock dues and clearing charges, all factory or manufacturing expenses.
Procedure for preparing profit and Loss Account

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 Gross Profit or Loss will be brought down from the Trading Account to the Credit or Debit side respectively
of Profit and Loss Account.
 Debit the Profit and Loss Account and Credit the various nominal Accounts for bringing the various expenses
of the business proper into the Profit and Loss Account.
 Credit the Profit and Loss Account and Debit the various nominal Accounts for bringing the various business
incomes into the Account.
 The difference between the two sides of Profit and Loss Account will represent the Profit or Loss Account and
since the Losses and Gains have to be borne by the proprietor, Profit and Loss Account will be closed by
means of credit (net profit) and a debit (net loss).
 It is most important to note that all business expenses other than those transferred to Trading Account will
have to be transferred to the Profit and Loss Account.
 Likewise, all business incomes will have to be brought into profit and Loss Account after making adjustments
and Provisions if any.
 The indirect or selling expenses which find a place in profit and Loss Account after include, among others,
the following:
o Unproductive wages, wages and Salaries, Carriage on sales, Carriage outwards, Freight on sales/
outwards, all office expenses, trade expenses not accompanied by office expenses, export duties and
taxes other than income tax.
EXERCISE
 Prepare Trading and Profit and Loss Account of Mr. Kumar for the year ending 31 st March 2007.
 Stock – 1st April, 2006
Sales 50,000
Sales returns 2,89,600
Purchases 9,600
Purchases returns 2,43,000
Freight inwards 3,000
Carriage outwards 4,000
Salaries and wages 6,000
Bank interest paid 30,000
Printing and stationery 2,000
Discount received 7,000
Discount allowed 900
Audit fees 3,000
Insurance premium 600
Trade expenses 2,500
Stock on 31st March 2007 was 70,000
Particulars Rs Rs Particulars Rs Rs
To Stock – Opening 2,43,000 50,000 By Sales 2,89,600 2,80,000
To Purchases 3,000 2,40,000 Less: Returns 9,600 70,000
Less: Returns 4,000 By stock – Closing ________
To Freight inwards 56,000 By Gross Profit b/d 3,50,000
To Gross profit c/d ________ By Discount ________
(Transferred to Profit and Loss A/C) 3,50,000 56,000
To salaries and wages ________ 900

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To Bank interest 30,000 _______
To Carriage outwards 2,000 56,900
To Printing and stationery 6,000 ______
To Discount 7,000
To Audit fees 600
To Insurance premium 3,000
To Trade expenses 600
To Net profit 2,500
(Transferred to Capital A/c) 5,200
_______
56,900
_______
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Glossary
A
Account
:
Account is the summary of similar elements in the transactions relating to a person, thing or service
Accounting
:
Accounting is the process of recording, classifying, summarizing, analyzing and interpreting the financial
transactions and communicating the results thereof to the persons interested in such information
Accounting equation
:
Accounting equation is a mathematical form of saying that in any business the total assets always equal to owners
equity + creditors equity
Altered feed conversion efficiency

:
Feed conversion efficiency is the ultimate measure of influence of disease on the production process, but its
measure requires accurate measurement of feed intake which is possible only under controlled feeding.
Altered production of dung for fuel and fertilizer

:
Dung is used as cooking fuel in most developing countries, apart from using it as fertilizer. Disease which cause
high metabolic rate will indirectly influence rumen metabolism by reducing the supply of dung.
Animal health economics

:
At present, animal health management become more complex phenomenon involving multiple issues in order to
optimize livestock production. In dealing with animal health issues, economic evaluation has become increasingly
important as the effects of diseases which remain to be controlled are far more subtle than was the case for
epidemic problem. It is necessary to define the ways in which a particular disease lowers productive efficiency.
Animal Welfare
:
Animal disease control is an important issue in protecting the welfare of managed animals. There have been
surprisingly few efforts to qualify welfare effects of diseases and most of the information available is opinion rather
solid evidence. Greater biological understanding will be required before quantitative assessments of effects of
disease on animal welfare.
Artificial Personal Accounts

:
These accounts include accounts of corporate bodies or institutions which are recognised as persons in business
dealings
Page | 103
Assets
:
Assets is the material and non-material things or possessions or properties of the business including the amounts
due to it from others
B
Balance sheet
:
Balance sheet is a statement of financial position of a business at any given time
Bills payable book

:
In this book bills passed or promotes passed or accepted are recorded.
Bills receivable book

:
In this book bills already drawn or acceptance received are entered
Book keeping
:
It is mainly concerned with recording of financial data relating to business operations in a significant and orderly
manner
Books of accounts and entry

:
Books of accounts and entry is the various books wherein transactions of varied nature of a business are entered
are the books of account
Break even output

:
In any business, there is a point where total costs become equal to total revenues and that point is called as Break
Even Point and the corresponding output is known as Break even output.
Break-Even point
:
Output corresponding to minimum of average total cost
Buyer
:
The person who makes the actual purchase.
Page | 104
C
Capital
:
Capital is a stock or fund existing at a given moment. Capital is man made. Man constructs capital equipment to
help him in the production of other goods and services. Hence capital is defined as produced means of
production. Interest is known as reward of capital.
Cash book
:
Cash book meant for recording all cash transactions
CCBFs
:
Central Cattle Breeding Farms
Closing Entries
:
Closing Entries are entries passed at the end of the accounting year to close different accounts. These entries are
passed to close the accounts relating to incomes, expenses, gains and losses
Comfort
:
Goods that lead to easy living and make our life pleasant
Commercial invoice
:
Issued by the seller for the full realisable amount of goods as per trade term.
Complex division of labour

:
The work is split up into different processes and each worker is assigned a definite part of the work. This is the
division of labour proper. Eg. Manufacturing of pins, making of bread etc.,
Constant returns
:
An each additional unit of the variable input produces an equal amount of additional product. i.e. The amount of
product increases by the same magnitude for each additional unit of input.
Consumer behaviour
:
Page | 105
It refers to those acts of individuals directly involved in obtaining and using economic goods and services,
including the decision processes and determines these acts.
Consumer’s surplus
:
Consumer’s surplus is the excess of price, which a person would be willing to pay rather than go without the good
CPM
:
Critical Path Method
Credit
:
In this column the amount to be credited is shown
Creditor
:
Creditor is one to whom a debt is owed or creditor is a person to whom some money is to be paid for the loan taken
service obtained or goods bought
Customs Declaration Form

:
It is prescribed by the Universal Postal Union (UPU) and international apex body coordinating activities of
national postal administration. It is known by the code number CP2/ CP3 and to be prepared in quadruplicate,
signed by the sender.
D
DADF
:
Department of Animal Husbandry. Dairying and Fisheries
Debit
:
In this column the amount to be debited is entered
Debit and credit

:
Debit and credit are symbols used while recording transactions. Debit (Dr) refers to the receiving account and
credit (Cr) to giving account
Debtor
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Debtor is one who owes debt or money is a debtor, i.e., one who owes money to a business is a debtor
Decider
:
A person who ultimately determines any part or the whole of the buying decision -Whether/What/ How/ When/
Where to buy?
Decreasing returns
:
An each additional unit of input add less and less to the total product than the previous unit.
Demand
:
Demand is the desire for something plus the willingness and ability to pay a certain price in order to possess it
Division of labour
:
It means dividing large tasks into smaller packages of work to be distributed among several people. This work
specialisation allows an employee to master a task in the shortest time with a minimum skill.
Double Entry System

:
 This system recognises that every transaction has a two – fold effect.
 If someone receives something then either some other person must have given it, or the first mentioned person
must have lost something, or some service etc. must have been rendered by him
Drawings
:
Drawings is the value of the cash or goods withdrawn by the owner or proprietor for his personal or domestic
purposes or use. It is opposite of capital
E
Elasticity of Demand
:
Elasticity of Demand is the proportionate change in quantity demanded in response to proportionate change in
price
Elasticity of production
:
Page | 107
Elasticity of production can be defined as the percentage change in output in response to the percentage change in
input.
Elasticity of supply
:
It measures the rate at which the quantity supplied changes due to changes in price
Engel’s Law
:
Proportion of personal expenditure devoted to necessities decreases as income rises
Entry
:
Entry is the record of a transaction of a business in a journal
Equilibrium price
:
The price at which the quantity demanded and quantity supplied in a given time are equal to each other
Equities
:
Equities is the rights to properties
Equity
:
The any rights or claims to assets or any interest in property or in a business is known as equity
F
Financial accounting
:
Financial accounting is primarily concerned with record-keeping directed towards the preparation of profit and
loss account and balance sheet
Financial resources
:
 Financial resources are as important for the economic development of the country as natural and human
resources.
 It is of vital importance that the limited financial resources should be utilized with utmost care and all wasteful
expenditure be avoided.
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 Financial resources are sources for the purchase of capital goods. These may include share capital, debentures,
bonds, loans, etc.,
Fixed costs
:
Costs associated with fixed inputs
Fixed ratio
:
Total Fixed expenses / Gross income
Folio
:
Folio means the page (number) of a journal or a ledger (J.F and L.F)
Forced sale
:
Majority of subsistence producers are compelled to sell their produce immediately after harvest in order to meet
the pressing claims of their lenders even if the prices are not remunerative. Most producers sell their product,
repay debts, face a shortage, and fall in debt again. Thus they sell to repay debt only to fall in debt again.
Form utility
:
Form utility is added when the processor of the goods transforms the material into finished products ready for
consumption
G
GATT
:
General Agreement on Tariffs and Trade was formed in 1947 has three major objects i) to reduce existing trade
barriers ii) to eliminate discrimination in international trade and iii) to prevent the establishment of further trade
barriers.
Giffen paradox
:
Giffen paradox is the demand curve instead of sloping downwards may rise upwards when there is an increase in
price showing that more quantity would be demanded when the price rises
Goods
:
It refers to those material and non-material objects which satisfy human wants. Free goods do not command any
value. Economic goods command money value
Page | 109
Grading
:
Grading is the act of separating goods into different lots according to established specifications
Gross loss
:
Gross loss is the difference between cost price and selling price of goods
Gross profit
:
Gross profit is the difference between selling price and the cost price of the goods is the gross earning or gross
profit of the businessman
Gross ratio
:
Total expenses / Gross income
H
Human resources
:
Human resources comprises of four things, acquisition (getting the people), development (preparing the people),
motivation (activating the people) and maintenance (keeping them).
I
Income effect
:
Income effect defines consumer is able and willing to buy more of a good when its price falls. Because, a fall in the
price of a good is equivalent to an increase in the income of the consumer, i.e with the commodity being cheaper,
the consumer's real income increases which can be used for purchasing some total satisfaction to the consumer
Income Statement
:
Income Statement is to summarise the income and expenses incurred in the farm throughout the year and present
them in a schematic picture. This statement lists all the farm expenses on one hand and all the receipts on the
other
Increasing returns
:
An every additional or marginal unit of input adds more and more to the total product than the previous unit. i.e.,
addition to total product is at an increasing rate.
Indifference curve
Page | 110
Indifference curve is the locus of various combinations of two commodities which yield the same total satisfaction
to the consumer. This curve is also known as iso-utility curve (Iso means same)
Influencer
:
A person who explicitly /implicitly carries some influence on the final decision.
Initiator
:
The person who first suggests or thinks of buying the particular product.
Intangible assets
:
Intangible assets are assets with no physical existence. But, their possession gives rise to some benefits to owners
Intangible real accounts

:
These accounts represent such things, which cannot be touched, though they can be measured in terms of money
ITO
:
International Trade Organization
J
Journal
:
It is defined as a book containing a chronological record of transactions. It is the book in which transactions are
recorded under the double entry system. Thus journal is the books, of original record.
Journalising
:
It is the process of recording transaction in a journal is termed as Journalising
L
Labour
:
Labour defines any exertion of mind or body undertaken for a monetary consideration. Any work done for the sake
of pleasure does not fall under labour in economic sense
Labour efficiency
Page | 111
Efficiency means the ability to do work so that the productivity is increased with minimum cost. The efficiency of
labour is a great national asset. The following are some important factors, which affect efficiency of labour.
Lack of producer's organization

:
Farming community is more or less disorganized at the village level. Except for a few, till now no such organization
has developed which may prove a sound basis for strengthening the bargaining power of the farmers.
Law of Demand
:
Greater quantity of a commodity is demanded at a lower price and a smaller quantity is demanded at a higher
price. This inverse relationship between price and quantity demanded is called the law of demand
Law of diminishing marginal utility

:
Additional benefit which a person derives from a given increase of his stock of a thing diminishes with every
increase in stock that he already has
Law of Diminishing return

:
If the quantity of one productive service is increased by equal increments, with the quantity of other resource
services held constant, the increments to total product may increase at first but will decrease after a certain point
Law of supply
:
Law of supply means Other things remaining constant (ceteris paribus), the higher the price of a commodity, the
larger will be the quantity supplied and lower the price the smaller will be the quantity supplied
Ledger
:
It is a book, which contains various accounts. In other words, Ledger is a set of accounts
Less accurate genetic selection

:
If a disease alters any of the components of productivity which are the subject of genetic selection pressure in the
herd (milk or wool yield), it will affect efficiency with which animals of superior genetic merits are identified.
Liabilities
:
Liabilities denote the amounts, which a business owes to others (other than the proprietor/s) on different accounts
Page | 112
Liability
:
Liability is equity of creditors which represents debt of the business
Livestock business
:
It includes both livestock and its products under business transaction. Livestock generally includes all domestic
animals which are meant for human welfare. It includes primary activities of rearing all kinds of animals for food
and other uses. Business of livestock and its products encomposes various activities involved in directing the
resources from point of production to consumption point.
Livestock business process

:
It includes all the functions and processes involved in the movement of the produce from the livestock farmers to
the consumers.
Livestock business scope

:
It includes both input and output trading. These are subject mater of livestock marketing includes marketing
function, agencies/ traders, channels, efficiency and costs, price spread, market integration, production surplus,
government policy and research, training and market statistics.
Long Run
:
It refers to a period of time in which the supply of all the inputs is elastic, but not enough to permit a change in
technology. That is, in the long run, the availability of even fixed factor increases. Therefore, in the long run
production of commodity can be increased by employing more of both, variable and fixed, inputs.
Long-run production function

:
Those input-output relations which permit variation in all inputs or all factors (none is fixed) can be termed as
long run production function.
Loss
:
Loss is depletion or decrease in the value of any asset without resulting in any revenue or benefit
Luxuries
:
Goods and services, which are generally non-essential and very expensive
M
Management accounting
:
Page | 113
Management accounting is the reproduction of final accounts in such a way as will enable the management to take
decisions and to control activities
Margin of Safety
:
Margin of safety means the output minus Break even output
Marginal utility
:
Change in total utility resulting from unit change in consumption of commodity per unit time
Market
:
'Market' is a derivative of latin word 'marcatus' meaning merchandise wares, traffic, trade or place where business
is conducted
Market Price
:
Market price is determined by the equilibrium between demand and supply in a market period of very short -run.
The market period is a period in which the maximum supply is limited by the existing stock. This period may be an
hour, a day or a few days or even a few weeks depending upon the nature of the product.
Market risks
:
Market risks is the risks which occur due to the changes in product prices and changes in consumer demand for
the products
Marketable surplus
:
Marketable surplus is that quantity of produce which can be made available to non-farm population of a country. It
is a theoretical concept of surplus. The marketable surplus is the residual left with producer-farmer after meeting
his requirements for family consumption, payment to labour, payment to landlord as rent, and social and religious
payments in kind.
Marketed surplus
:
Marketed surplus is that quantity of the produce which the producer-farmer actually sells in the market,
irrespective of his requirements for family consumption, farm needs and other payments.
Marketing channel
:
Page | 114
It can be defined as a path through which product moves from producer to consumer. Hence a short channel of
distribution will be an effective tool to reach the target consumers. However, distribution of products having lower
unit value and high turn over like eggs involves a large number of middlemen.
Marketing Opportunities
:
It means, companies must look internally for strength and weakness and externally to the environment for
opportunities and threats. Most opportunities and threats evolve from Changes in the demographic, economic,
political, legal and cultural environment.
Merchandising
:
It is the barometer of efficiency in buying and selling and it is closely related to several aspects of buying and stock
management.
Methods Study
:
This can be defined as the systematic procedure for analysing the existing methods of doing work including the
various human movements involved in it with the main objective of evolving the best or the most economical
methods of doing the work.
Money Income
:
Income expressed in terms of money
N
Natural or material resources
:
Effective management of natural or material resources is of prime importance. Natural resources compirse land,
water, air and other material resources.
Natural Personal Accounts

:
The term ‘Natural Persons’ means persons who are creation of GOD
Necessaries
:
Necessaries are goods that are essential for human existence and to maintain our efficiency
Net profit
:
Net profit is the surplus remains after charging against gross profit all expenses including depreciation and other
provisions properly attributable to the normal activities of the particular group
Page | 115
Nominal accounts
:
These accounts are opened in the books to simply explain the nature of transactions. They do not really exist
Non perishable goods

:
Non-perishable goods are goods that can be used again and again in the process of production. They are tangible
goods that normally survive many uses. They don't loose their utility or shape after their first use. They continue to
provide utility over a long period of time, of course their utility over a long period diminishes in value and utility.
Example factory buildings, machines and equipment are durable. Refrigerators, machine tools and clothing are
non perishable.
Normal price
:
Normal price or Natural value of a commodity is that which economic forces would tend to bring about in the long
run. Normal prices are those prices to which one may expect the actual price to tend. They will not only be
influenced by fortuitous fluctuations and oscillation, but will also take into account of the general trend towards
the "normal price".
O
O.I.E
:
International Animal Health code of World Organization for Animal Health.
Opening ratio
:
Total Operating expenses / Gross income
Optimization of labour input

:
Optimization of labour in the actual sense means to obtain the most efficient or optimum use of labour. Labour
must be confined with the other factors of production and cannot be discussed in isolation. Proper labour
management policy will depend on particular farming situation.
Organisation
:
Organisation combines the factors of production. Viz. Land, labour and capital and decides on what to produce
P
Perishable goods
:
Page | 116
Most of the livestock products are perishable in nature and the period of perishability varies from a few hours to
few months. Selling of perishable products like fruits, vegetables, and livestock products (milk, meat, and egg)
require fast movement of the commodities from the producers to the ultimate consumers.
Personal Accounts
:
It includes the accounts of persons with whom the business deals
Personnel management
:
It is the sub area of the general management. It concentrates on the human activity element of the general
management. It is concerned primarily with manpower resource or inputs. Personnel management is the planning,
organizing, directing and controlling of procurement, development, compensation, integration and maintenance of
people for the purpose of contributing to organisation, individual and social goals.
PERT
:
Programme Evaluation and Review Technique
Possession utility
:
Possession utility is added to the product when its ownership is transferred to the final consumer
Posting
:
Posting means transferring the debit and credit items from the journal to their respective accounts in the Ledger
Price
:
Value is expressed in terms of money it is called price
Producer’s Surplus
:
Producer’s surplus is the quantity of produce which is, or can be, made available by the livestock farmers to the
non farm population.
Product planning
:
It covers a broad area of decisions including product-line planning, introduction of new products, deletion of the
product from product-line, product modification, packaging, labeling, branding etc.,
Production function
Page | 117
Production function is the relationship between inputs and outputs.
Profit and loss accounts

:
Profit and loss accounts is prepared to find out the net profit/ loss for the period
Purchase returns book

:
It contains the records of returns of goods purchased by the trader for which no cash is received
R
Real income
:
When we express income in terms of commodities, it is called real income
Receipt
:
Receipt is a written acknowledgement of a receipt of cash/money/goods, etc. It is an accounting document

recording physical receipt of something acquired/got
Reduced Capacity for works

:
The most important use of animal in developing country is as a source of traction. There are certain disease like
FMD causing reduced capacity to work.
Reduced Live weight Gain

:
It is well known fact that diseased animal gain weight more slowly than equivalent disease free animals.
Reduced Productive life of animal

:
Reduced productive life of animal is due to increased culling which might be due to reason of low yield or disease
or unawareness of facts to farmers.
Representative Personal Accounts

:
These are accounts which represent a certain person or group of persons
S
Sales book
:
Page | 118
In this book only credit sales of goods dealt by the traders are entered
Sales return book

:
It records the goods returned by customers out of the sales already made and for which no cash is paid
Seasonality in production
:
Much of farm production is highly seasonal. The production varies from one season of the year to another. This
seasonality in production thus, raises costs of marketing through demand storage facilities. The seasonal
variability in production of items like milk, egg, butter etc is not as acute as it used to be years ago.
Service charge
:
How much one gets by selling an individual unit of output.
Short Run
:
The short run refers to a period of time in which the supply of certain inputs (e.g. plant, building and machines,
etc.) is fixed or inelastic. In the short run, therefore, production of a commodity can be increased by increasing the
use of variable inputs, like labour and raw materials.
Short -run production function

:
Production function, which relates to factors and products where some resources are fixed can be termed as short-
run production function (Regardless of the number of fixed resources and level at which each is held fixed).
Shut down point

:
Shut down point is the output level corresponding to minimum point of average variable cost . A farmer must
produce at least this amount so that he will be able to cover the variable cost of production. If the total revenue
curve goes below this point, it is better to close the business instead of incurring losses. So this point is called as
Shut down point.
Shut-Down point
:
Output corresponding to minimum point of average variable cost
Simple division of labour

:
A work is done by the combined efforts of a group of workers. It is difficult to say how much Work each one did.
Ex. carrying a heavy, lead by a number of people.
Page | 119
Single Entry System

:
 It is a system of book keeping in which only records of cash and personal accounts are maintained, it is always
incomplete double entry, varying with circumstances.
 This system has been developed by some business houses, who keep only essential records.
Substitution effect
:
If the price of a good falls. it tends to be substituted wholly or partly for other commodities raising the quantity
demanded of this good
Superfluous middlemen
:
Since the farmer sells a substantial portion of his surplus produce in the village and nearby markets, there is
always intervention of a number of middlemen between him and the consumer and naturally share of the
consumer's price received by the producer is reduced.
Supervision
:
Supervision is referred to as the key stone in the organizational arch, supporting the structural member which ties
together the management and workers (Keith Davis). Supervisors are so to speak, the ligaments and tendons and
so views of an organization (Peter Drucker).
Supply
:
The various amounts of commodities, which the products are willing and able to make available for sale at various
prices during a given time
T
Tangible assets
:
Tangible assets are assets having physical existence like cash, furniture, land, building etc
Tangible real accounts

:
Tangible real accounts are those which relate to such things which can be touched, felt, measured etc
Territorial division of labour

:
Page | 120
This term refers to certain localities or cities or towns specialising in the production of some commodities. Eg.
Lock -making in Dindugul and match factories in Sivakasi.
Time utility
:
Time utility is added when products are stored from the time of production to the time of consumption
Trading account
:
Trading account is prepared to find out the Gross Profit or loss during the period.
Transaction
:
Transaction is the exchange of cash, goods or services in a business
U
User
:
The person (s) who consume or use the product or services.
Utility
:
Utility means capacity to satisfy wants, i.e. want satisfying power
V
Variability in Output
:
The quantity of farm products available depends upon several factors. With the gambling nature, one cannot
forecast the quantity of products that would be produced as livestock production is mainly biological depending on
weather, rainfall etc for its main inputs like feed, fodder etc.,
Variable costs
:
Costs associated with variable inputs
Voucher
:
Voucher is a written document in support of a business in respect of a transaction, represented on a carbon or

counter copy of a cheque or a receipted bill or an acknowledgement receipt received
W
Wants
Page | 121
Desires of consumers to obtain and use various goods services, which give pleasure and satisfaction
Wealth
:
The state of economic goods at a particular time
Work Measurement
:
This is the technique of assessing the time content of the work performed by an operator. The technique involves
the determination of the proper time required for the work and so popularly known as time study.
Work Study
:
Work-study can conveniently be defined as the tool in the hands of the management for achieving higher
productive efficiency in the organisation.
WTO
:
The World Trade Organization was established in January 1st, 1995 to make international trade smooth and
without hindrance. It is the only global international organization dealing with the rules of trade between nations.
At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified
in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their
business
Thank You
Page | 122

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Livestock Economics, Marketing & Business Management

CHAPTER-1: INTRODUCTION, DEFINITION AND SCOPE OF ECONOMIC PRINCIPLES AS APPLIED

Limitations of Scarcity definition

In Traditional approach, economics is studied under 5 major divisions.

 Satisfaction of human want on use of goods and services is known as consumption.

 Production of any commodity requires land, labour, capital and management.

 Subject matter of economics is divided by modern approach in two as

Positive or Normative Science

 Economics has certain method for discovery of laws and theories.

Deductive method (Analytical or Apriori method)

o It descends from "generals" to "particulars".

Inductive method (Realistic or Historical)

o It goes up from "Particulars" to "generals".

 The prominent characteristics of a capitalist economy are

o USA and UK follow this system.

 The features of mixed economy are

o Desire to acquire goods or service.

 Wants can be classified as

Wants are unlimited

 As soon as one want is satisfied another want comes up in it's place.

Wants vary in their intensity

Wants are satiable

 A single want can be satisfied at a particular time.

Wants are recurrent

 Wants get themselves repeated at interval of short or long period.

Wants are alternative

 A person can substitute coffee in the place of tea.

Wants are competitive

Wants are complementary

 To satisfy particular want we need several things.

Wants tend to become habits

 Anything that satisfies human wants is called goods or commodity.

 Milk is a commodity we have to pay price to get it.

Visible goods and non-visible goods

Consumer and Producer goods

Durable goods and perishable goods

 This can be classified into three forms

 In economics we use the term value in the sense of exchange.

 Income is the remuneration paid to the service rendered by factors of production.

Real income and Money income

 Income can be expressed in terms of commodities or money.

CHAPTER-3: IMPORTANT FEATURES OF LAND, LABOUR, CAPITAL AND ORGANISATION

 To discuss about the meaning of Land, Labour, Capital and Organisation

 The term land has been given a special meaning in economics.

o Cash lease - Direct cash payment at end of year

 It is a wage paid or received in terms of money.

 Capital is a stock or fund existing at a given moment.

 It is a reward or payment for capital use.

 There are five forms of organisations viz.

Joint stock company

Public Sector Company

 To understand the importance of Indian livestock sector

 Indian livestock sector plays a critical role in welfare of rural population.

 To discuss the status of livestock and poultry population in Tamil Nadu

Livestock Census: Tamil Nadu (Lakhs)

1989 93.53 31.28 58.81 59.20 20.85 263.66 215.70

Breedable Age Female Bovine Population(in Lakhs)

Milk Production and Per capita Availability

Milk Production and Availability

Tamil Nadu All India