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Benefits of Allocating More Resources to Agriculture
Discuss whether or not an economy would benefit from allocating more of its resources to agriculture.
Economic Growth and Development
CIE O LEVEL November 2021
(Step 1: Introduction)
Primary-sector output is concerned with the extraction of raw materials and other natural resources. Employment in this sector includes work in agriculture, fishing, mining and oil exploration. The primary sector tends to dominate in less economically developed countries. Allocating more of its resources to agriculture can have several benefits as well as drawbacks.
(Step 2: Discuss how an economy would benefit from allocating more of its resources to agriculture.)
There are several ways an economy would benefit from allocating more of its resources to agriculture;
(1)🌽Allocating more resources towards agriculture can allow the country to specialize in agriculture and enjoy comparative advantage.
The possibility of increased production and consumption through specialisation is made possible because countries can make use of differences in quantities and quality of factors of production, as well as levels of technology, which altogether are called ‘factor endowments’. For example, a country with a tropical climate will find it less costly to produce crops such as coffee or cocoa. Mountainous countries are less well suited to agriculture than countries with fertile plains. Since benefits of specialization include increase in efficiency and productivity, the country can produce more output at competitive prices. This will help boost a country's exports, reducing a current account deficit
(2)🌽 A country can reduce its reliance on importing food items and become self-sufficient in providing food, which is a basic necessity.
Agriculture can be important for developing countries in several ways; where food security is weak it can be a vital source of nutrition, it provides income for farmers and farm workers and thus revenues for rural areas, job opportunities in related areas such as processing and in some cases export revenue and thus foreign exchange for governments. A country can also safeguard itself from international price volatility associated with agricultural products.
In developing countries the agricultural sector dominates economic activity. The agricultural sector in developing countries is labour intensive. Thus the expansion of the agricultural sector can increase employment, enable people to earn a higher income and improve living standards
(Step 3: Discuss the drawbacks to an economy from allocating more of its resources to agriculture.)
There are several drawbacks to an economy from allocating more of its resources to agriculture;
(1)🌽Allocating more resources towards agriculture entails an opportunity cost in terms of fewer resources spent on manufacturing sector.
For economies to expand, diversifying into the secondary / manufacturing sector is important as manufactured goods are of high value added. As compared to the manufacturing sector, wages in the agricultural industry tend to be relatively low.
(2)🌽 The supply of agricultural products can fluctuate significantly due to changes in weather conditions.
(Step 4: Conclude)
To conclude a developing economy would most from allocating more of its resources to agriculture. As economies grow, fewer and fewer people are needed to work in the primary sector. The raw materials needed can he produced by a much smaller number of people, using machines, which over time get bigger and do more. The economy will be better off to allocate it's resources to the primary and secondary sector.
In assessing each answer, use the table opposite.
Why it might:
• specialisation may increase efficiency, raise output,
• may improve the current account of the balance of
• imports of food may be reduced, reduced reliance on
other countries for basic necessities
• health and safety standards may be maintained
• the industry is labour intensive in some countries and so
may reduce unemployment
Why it might not:
• wages in the industry tend to be relatively low
• the supply of agricultural products can fluctuate
significantly due to changes in weather conditions
• opportunity cost of fewer resources for manufacturing
goods and for services
• demand for manufactured goods and for services tend to
rise more as income increases
• agriculture uses up considerable amounts of water