Resources for veterinary work

Henk Hogeveen

Jonathan Rushton

This presentation was developed within the frame of the NEAT project, funded with support from the European Commission under the Lifelong Learning Programme (Grant no. 527 855). Please attribute the NEAT network with a link to www.neat-network.eu. Except where otherwise noted, this presentation is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

2

Learning objectives

In the next 45 minutes we will examine:

What resources are? Which resources are available to the veterinarian and their clients How resources are valued and how this relates to their availability in

society

You will be given information to help understand these different issues and an exercise to reinforce your understanding of the information.

Chapter 4

What are resources?

Resources things that can be used to generate a “benefit”

They can include:

Physical items – such as land, water Human time – could be as labour or it can be intellectual Specialised equipment – for example an X ray machine in a

veterinary practice ………

3

Chapter 4

Definition 1: Cost factors

Land: includes renewable (forests) and non-renewable (minerals) resources

Labour: all owner and hired labor services, excluding management

Capital: necessary for manufactured goods such as fuel, chemicals, tractors and buildings

Management: production decisions designed to achieve specific economic goal

Chapter 4

Use of resources

When we work we mix (manage) resources into products (good and services)

When we relax we use resources to gain pleasure (that is the “product”)

Our goods and services are core to what we want to achieve in terms of improving animal health and welfare

They are also core to what the clients need to use to obtain benefits from their animals, that can either be monetary benefits from a food animal excitement from a sport animal comfort and love from a pet pleasure from wild animals

5

Chapter 4

What are resources? Classroom input

Help me with examples of resources for

A veterinary practise A farmer A citizen

6

Chapter 4

Transferring resources into products (veterinarian)

7

Resources•Labour

•Land

•Capital

Products-Drugs-Advice-Surgery-Diagnostics-Feed-……..

Chapter 4

Transferring resources into products (farmer)

8

Resources•Labour

•Land

•Capital

Products-Milk-Eggs-Meat-Animals-Wool-……..

Chapter 4

Transferring resources into products (citizen)

9

Products-Pleasure-Feeling good-……..

Chapter 4

Your products are a resource for your clients

They have to see the value of your products

10

Chapter 4

Value

Value (economic definition): “something” has value when it contributes to fulfillment of goals/needs

As a business

As a person

Goals/needs differ between persons

If you had a veterinary practise, what would be the goal of your practise?

11

Chapter 4

Value

Value (economic definition): “something” has value when it contributes to fulfillment of goals/needs

As a business (profit maximisation, shareholder value maximisation, utility)

As a person (utility)

Goals/needs differ between persons

If you had a veterinary practise, what would be the goal of your practise?

12

Chapter 4

So…

If a product adds much to reach your goal, you give it a high value

Thus you are willing to pay much for it

13

But… You may not have enough resources to reach your goal completely (maximum utility)

Scarcity

Choices

Chapter 4

What is scarcity: an example

Free resources vs scarce resources

E.g., River

Few people: water is free More people: water is scare Choices have to be made Water for drinking Water for industry Etc. Economic scarcity ≠ shortage

Chapter 4

What are costs?

Costs exist if “something” is used that has value and is scarce

Opportunity costs: the lost value if you had used that resource for the second best purpose.

Chapter 4

Costs ≠ expenditures

We have not talked (yet)about money

16

Chapter 4

Definition 2: Fixed and variable costs

Total costs = fixed costs + variable costs Fixed costs

Determined by production capacity (land, buildings, machines, labour) and do not vary with the level of production

Variable costs

Costs vary with the level of production, within a certain production capacity

Chapter 4

Variable costs

Feed

Drugs

Materials for diagnostic equipment

…....

Chapter 4

Rule of thumb When production level changes, the

fixed costs remain the same and variable costs change

0

2

4

6

8

10

12

0 1 2 3 4 5 6 7 8 9 10

Nr of produced units

Eu

ro's

returns

Consequences? [1]

Consequences? [2]

0

2

4

6

8

10

12

0 1 2 3 4 5 6 7 8 9 10

Nr of produced units

Eu

ro's Returns

fixed costs

Consequences? [3]

0

2

4

6

8

10

12

0 1 2 3 4 5 6 7 8 9 10

Nr of produced units

Eu

ro's

Returns

Fixed costs

Variable costs

Break even point

Chapter 4

But:

Rule off thumb: with increasing production, the fixed costs remain the same.

There is a maximum. At a certain moment you have to increase fixed costs: large step.

Quasi-fixed costs

Chapter 4

Definition 3: Types of costs

Payments

Depreciation

Interest

Chapter 4

Depreciation

Compare with savings for replacement

Calculation (linearity principle):

Replacement (or purchase) value (A) Lifespan (n) Rest value (R) (A - R)/n

Linear depreciationA = 20.000

R = 5.000

N = 10

0

5000

10000

15000

20000

0 1 2 3 4 5 6 7 8 9 10

Jaar

Chapter 4

Interest

Determined by:

Value of assets Price of capital (%) Interest may differ:

Short term: 7 % Long term (mortgage): 5 % Land: 2 % Not only paid interest

Calculated over everything (opportunity costs)

Interest fixed assets

Varying over timeAverage: (A-R)/2 * r

0

5000

10000

15000

20000

0 1 2 3 4 5 6 7 8 9 10

Jaar

Chapter 4

In summary

Basic resources: labour, land, capital

Management mixes these resources to produce products

In such a way to maximal fulfill goals/needs A product that is important in reaching the goal has a high value

Products of a veterinarian are resources for clients

There are fixed costs and variable costs

There are different types of costs: payments, depreciation and interest

Costs ≠ expenditures (at least not always)

Contact

Henk Hogeveen

Wageningen University

Henk.Hogeveen@wur.nlhttp://www.neat-network.eu

31