Pak eco lecture

Pakistan Economy

Chapter 1

10/09/12 RAZA LILANI . razamr@hotmail.com

• Economics is the social science that studies
the choices that individuals, businesses,
governments, and entire societies make as
they cope with scarcity and the incentives that
influence and reconcile those choices.


The subject has two parts:
■ Microeconomics
■ Macroeconomics


• Microeconomics is the study of the choices that
individuals and businesses make, the way these
choices interact in markets, and the influence of
governments.
 Examples of microeconomic questions are: Why are
people downloading more movies? How would a tax
on e-commerce affect eBay?
• Macroeconomics is the study of the performance of
the national economy and the global economy.
 Examples of macroeconomic questions are: Why is the
Pakistan unemployment rate so high? Can the State
Bank of Pakistan can make our economy expand by
cutting interest rates?

Microeconomics:
1. Theory of Individual/Market
Demand
2. Theory of Production and Cost
3. Theory of Markets and Price
4. Theory of Profit.

Macroeconomics:
1.Theory of total output and
employment.
2.General Price level.
3.Theory of Inflation
4.Theory of trade cycles
5.Economic Growth

Measures of Economic Development
1. Increase in real GNP
2. Increase in real per capita income
3. Rise in overall wellbeing of the people.
4. Basic Needs approach
5. Human Development Index


Economic Growth
• An increase in the capacity of an economy to produce
goods and services, compared from one period of time
to another.
• Economic growth can be measured in nominal terms,
which include inflation, or in real terms, which are
adjusted for inflation.
• For comparing one country's economic growth to
another, GDP or GNP per capita should be used as
these take into account population differences
between countries.


Economic Growth
• By Economic Growth we simply mean increase
in per capita income or increase in GNP. In
recent literature, the term economic growth
refers to sustained increase in a country's
output of goods and services, or more
precisely product per capita. Output is
generally measured in terms of GNP.


Economic Development
It implies progressive changes in the socio-economic
structure of a country. Viewed in this way economic
development Involves a steady decline in agricultural
shares in GNP and continuous increase in shares of
industries, trade banking construction and services.

•Further whereas economic growth merely refers to
rise in output; development implies change in
technological and institutional organization of
production as well as in distributive pattern of income.


Economic Development
• In the words of Amartya Sen "Development
requires the removal of major sources of
unfreedom poverty as well as tyranny, poor
economic opportunities as well as systematic
social deprivation neglect of public facilities as
well as intolerance or over activity of
repressive states."


Production Possibility Curve
• Production possibilities is an analysis of the
alternative combinations of two goods that an
economy can produce with existing resources
and technology in a given time period. This
analysis is often represented by a convex
curve.


PPC


PPC and Economic Growth
• As a introductory model of the economy, the
production possibilities curve is commonly
used to illustrate basic economic concepts,
including full employment, unemployment,
opportunity cost, economic growth, and
investment.


PPC and Economic Growth
1. Opportunity Cost
2. Full Employment
3. Unemployment
4. Investment
5. Growth


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