ABSTRACT
This chapter aims to help the reader acquire some of the important skills needed for policy analysis. Much of economic analysis emphasizes positivism. Decision makers who utilize economic models expect these tools to provide reliable insights into how markets work. Scarcity is the fundamental concept that underlies all economics. Scarcity necessitates choice, and choice creates opportunity cost. The equi-marginal principle examines how an economy achieves the best overall gain in efficiency. A competitive market is also a mechanism that balances out benefits and costs. Markets are a key allocator for food, agriculture, and entire US economy. The supply-and-demand model predicts that opposing but rational behaviors of buyers and sellers ultimately produce an equilibrium price and quantity that clear the market of any surpluses or shortages. Elasticity measurements can help relevant economic participants more accurately gauge market responsiveness to changing conditions. The price elasticity of demand is for understanding the "cost-price squeeze" that continually challenges participants in food and agricultural markets.
