basic (micro and macro, development) economic concepts

8/9/2019 Basic (Micro and Macro, Development) Economic Concepts

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Basic (Micro and Macro)

Economic Concepts & Theories

At

National Management College,Lahore

By

Prof !r "ais Aslam


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Micro Economic Concepts & application

• Concept of Cons#mer$s & Prod#cer$s%#pply & !emand & its application

Macro Economic Concepts

• Concept of Aggregate !emand &

%#pply• NP, !P & its application inEconomic o'ernance


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Micro 's Macro Economics

• Microeconomics is the st#dy ofho ho#seholds and rms ma*edecisions and ho they interact

in specic mar*ets• Macroeconomics is the st#dy of

the economy as a hole or ofAggregates thereforemacroeconomics is a economy+ide phenomena itho'ernment nter'entions &


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- Micro Economic Concepts


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.ealth

• oods and ser'ices prod#ced / .ealth

Characteristics of .ealth0

- %carcity0 The !iamond 1 .ater Parado2

3 Mo4ility0a) Territorial mo4ility

4) Legal mo4ility

c) Economic mo4ility

and

- 5tility0 Poer of a thing to satisfy a h#manneed


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6ationality

• t is ass#med that B#yers are rationalhen they ma*e decisions and thattheir preferences of more to less at a

gi'e price is the 4est 7#dge of hom#ch 4enets the cons#mers aregoing to recei'e from the goods that

they 4#y in the mar*et at a price


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6ational people Thin* at the Marginal• Economists ass#me that ordinary people thin*

rationally in ordinary 4#siness life 1 cons#merso#ld demand (d) more for less money ands#ppliers o#ld s#pply (s) less for more money

• Economists ta*e into consideration the small

incremental changes (ad7#stments) for e'ery actionand call them marginal changes

(∆x/ ∆y)

• Economists ass#me that rational people thin* on

the marginEqui-marginal Principle = The rate of

change of opposing forces ineconomics is equal

8


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Marginal6ational people thin* on the marginal / incremental

•marginal #tility,

•marginal re'en#e,•marginal cost,

•marginal prod#ct


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People 6espond toncenti'es

• Beca#se people ma*e decisions 4ycomparing costs (c) and 4enets, their4eha'ior may change hen costs or4enets change, therefore incenti'es

help change 4eha'ior of people• Incentives are reards or p#nishments

that ind#ce people to change 4eha'iors

• Change in costs or 4enets thro#ghincrease or decrease in Price o#ldchange demand or s#pply of di9erentgoods and ser'ices

:


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!emand and %#pply

• ;idden hand of the force of

!emand and s#pply ma*e

mar*et economies or*and determine the


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!emand

Act of B#ying in the mar*et

• "#antity demanded is the amo#nt ofgoods and ser'ices that 4#yers areilling to 4#y and a4le to p#rchaseith their money (reso#rces) andincl#des0

- need of p#rchaser

3 B#ying poer of the p#rchaser

= .illingness to p#rchase


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Negati'ely sloped !emandc#r'e

Price

"#antity demanded


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%hift of the demand c#r'ehift of the demand c#r'e is !ue to a change in other things

"ovement on the demand c#r'e is !ue to change in Price

Price (P)

q!#

q!$q!%


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6easons for negati'e relationship4eteen Price and !emand

-Price E9ect

3ncome E9ect (B#ying Poer)

=%#4stit#tion E9ect (Prices of otherCommodities)

•. Mar*et !emand C#r'e shos the

total


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%#pply

Act of %elling

• "#antity s#pplied is the amo#nt of goods thatsellers (and prod#cers) are illing and a4le tosell at a Price

• !eterminants of %#pply0- Price

3 np#t prices

= Technology le'els

> E2pectations

? Transport costs

@ %torage capicity


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La of s#pply

• ther things remaining the same (ceterispari4#s or ass#med to 4e constant)

• &'hen price of a commo!ity increases

its quantity supplie! (qs) also expan!san! hen Price of a commo!ity!ecreases its quantity supplie! (qs)also contracts*

r• There is a Positi'e relationship 4eteen

Price and


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6eason for positi'e relationship4eteen price and %#pply

• .hen Price increase Prots tendto increase therefore s#ppliers

increase s#pply 4eca#se they getincenti'e to sell and hen Pricesdecrease Prot margins tend to

decline therefore the incenti'e tosell diminishes and s#ppliers tendto decrease s#pply


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• The E2pectations

? Transport costs@ %torage facilities

Pro+t is the only motive to supply

goo!s an! services in the mar,et


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Elasticity of demand ands#pply

• Elasticity meas#res the responsi'eness of


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Meas#rement of Elasticity• ni-elastic or Price elasticity = #0 ith a

percentage change in Price the reciprocal percentagechange in


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ncome and Cross elasticity of

demand

• ncome elasticity of demandmeas#res ho m#ch


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Applications ofs#pply, demand and elasticity

• Elasticity of s#pply can 4e 'ery high at lo le'els of


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Normal, nferior, Complementary,%#4stit#te and in goods

• Normal goods are goods for hich, other things4eing e


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Mar*et E


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Mar*et Prices

• Mar*et Prices reect 4oth the 'al#e of a goodto the society as ell as the cost to thesociety of prod#cing that good

• Bothe ho#se holds and rms loo* at priceshen deciding to 4#y and sell

• They #n*noingly ta*e into acco#nt the social4enets and social costs of their actions , and

• therefore 4y trying to ma2imiDe their onelfare, they ma2imiDe the elfare of thesociety

3?


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Mar*et Price and e


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Price increases hen demand increases andprice decreases hen demand decreases,

ith s#pply remaining constant

Price (P)

5uantity 6eman!e! (q!) an! quantityupplie! (qs)

E

6#

6$

6%

P%P#

P$


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Price increases hen s#pply decreases andprice decreases hen s#pply increases

decreases, ith demand remaining constant

Price (P)

5uantity 6eman!e! (q!) an! quantityupplie! (qs)

E

6#

6$

6%

P%P#

P$


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• Mar*et e


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Cons#mer s#rpl#s

• Cons#mer s#rpl#s / a 4#yers illingness to paymin#s the amo#nt the 4#yer act#ally pays

• Cons#mer s#rpl#s meas#res the 4enet to4#yers of participating in a mar*et

• .hen the price falls the


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Prod#cer %#rpl#s

• Prod#cers s#rpl#s is the amo#nt a seller ispaid for a good min#s the sellers costs

• .hen price rises, the


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;o Prices allocate6eso#rces

• Mar*et orces harness the forcesof s#pply and demand toeciently allocate reso#rces and

determination of Prices of goodsand ser'ices as ell as Prices int#rn signal and g#ide the

allocation of reso#rces ecientlytoards prod#ction ofcommodities that are demanded

more aay from commodities


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Mar*ets are #s#ally ecient• Mar*et economy is a system thro#gh hich reso#rces are

allocated and decisions are decentraliDed thro#gh many rms and

ho#seholds as they interact in the mar*et for goods and ser'icesand factors of prod#ction (reso#rces)

• Mar*ets or* thro#gh the Fin'isi4le hand of self+interestG

• ncrease in !emand ind#ces Price to rise hile s#pply increasehen prices are high

• or increase in s#pply , prod#ction has to increase,• ncrease in prod#ction in t#rn needs higher demand of factors of

prod#ction,

• th#s increasing the price of factors in the mar*et and

• forcing the mo'ement of these factors (reso#rces from less paid

7o4s to higher paid 7o4s) and eciently re+allocating reso#rcesthro#gh the Price system of the mar*et,

• and increasing the incomes of the factors in the long r#n,

• hich in t#rn also in#ences an increase in cons#mptions andsa'ing patterns in the economy

• Th#s increasing the eciency of the economy thro#gh the mar*et(Price) system =>


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Eciency 's E


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o'ernments can sometimes impro'eMar*et o#tcome or to ens#re E


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Price oor and Price ceiling

• Price oor0 is a legalminim#m on the price at

hich goods can 4e sold• Price ceiling0 is a legal

ma2im#m at hich goodscan 4e sold


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;o Pricing ceiling E9ects Mar*et o#tcomes

• .ith a Price ceiling on a comparati'e mar*et, a shortage of

the goods arises and sellers m#st ration the scarce goodsamong the large n#m4er of potential 4#yers

• 6ationing mechanism is #ndesira4le, 4eca#se

- Long lines of 4#yers aste 4#yers time

3 !iscrimination according to sellers 4ias is 4oth inecientand potentially #nfair

= 6ed#ces the incenti'e in prod#cers to prod#ce and s#pply

> Altho#gh go'ernment pre'ents prices to rise for e


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;o Pricing loor E9ects Mar*et o#tcomes

• Binding price oor comes as a s#rpl#s

• .ith price oor some sellers are #na4le to sell andgo o#t of 4#siness

• %ellers ho appeal to personal 4ias of the 4#yersare 4etter a4le to sell

• Price oor is a minim#m age and the impact ofminim#m age depends #pon the s*ill of theor*er

• ;igher s*illed or*er are not e9ected 4y minim#m

age, 4#t lo s*illed or*ers, omen and teenagers #s#ally accept ages 4elo minim#m agein e2change for a 7o4 1 some economists thin* thatminim#m age is a poorly targeted policy


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• Price control are often aimed tohelp the poor

• B#t price controls often h#rt thepoor

• Economists s#ggest rent andage s#4sidies rather than pricecontrols in order to help the poor

• B#t s#4sidies increasego'ernment e2pendit#res,therefore re


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E2ternality•

E2ternality is the e9ect of one personsactions on the ell4eing of a 4ystander

- E2ha#st from a car is negati'e e2ternality

3 6estored historic 4#ilding is a positi'e

e2ternality= enerator creates a negati'e e2ternality

> 6esearch into ne technologies create

positi'e e2ternalities? Throing #ntreated aste in ri'ers creates

negati'e e2ternalities

@ Par*s and recreational facilities creates

positi'e e2ternality


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A Co#ntry$s standard of Li'ing !epends on itsa4ility to Prod#ce more goods and %er'ices

• !i9erence of li'ing standards aro#nd the orld arestaggering and

• Changes in li'ing standards o'er time is also large

• This is attri4#ted to Prod#cti'ity

• Prod#cti'ity + is the =

d i i i h i d i f h


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>>

• Prod#cti'ity is the primary determinant of theli'ing standard of each indi'id#al and ho#sehold,and th#s of the society

• Prod#cti'ity comes from s*ill enhancement of theindi'id#al and the capacity of the indi'id#al toor* ith modern machines and technology

• This capacity (s*ill enhancement or prod#cti'ity)

is enhanced 4y impro'ing the standard ofscientic and 'ocational ed#cation at all le'els 1primary to professional

• To enhance standard of li'ing, Policy ma*ers needto raise prod#cti'ity 4y ens#ring that or*ers areell ed#cated and ha'e the tools (technology)needed to prod#ce more, 4etter and cheapergoods and ser'ices


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Prod#ction #nction

• Prod#ction f#nction is the relationship4eteen


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total prod#ct, marginal prod#ct anda'erage prod#ct

• total prod#ct,

• marginal prod#ct and

• a'erage prod#ct

"P = 7P

"arginal pro!uct = 7veragepro!uct


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Cost of prod#ction

• Price of factors of prod#ction is the pri'ateCost of Prod#ction (inp#ts)

- Price of Land / 6ent

3 Price of La4or / .ages

= Price of Capital /nterest

> Price of Entreprene#r (rganiDation) / Nominal Prots

Private 8osts 9 Environmental 8osts = ocial 8osts

Private :ene+ts 9 Environmental ;ene+ts = ocial:ene+ts

M%C / M%BMarginal social Costs / marginal %ocial Benets

>8


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i2ed and 'aria4le cost

• i2ed Costs do no 'ary ith the


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7verage


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Least Cost Position

• MC / AC

• Marginal Costs / A'erage

Costs"8

78

5 of input

i d i i f


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Economies and !iseconomies of

scale

• Ecient scale0 the


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Economic and Acco#ntingProt

• Economists incl#des all opport#nitycosts hen analysing a rm

• acco#ntants meas#re only e2plicit costs

• therefore economic prots are smallerthan the acco#ntants prots

• mplicit costs0 e2ternal costs and

opport#nity costs• e2plicit cost0 costs of prod#ction

inc#rred 4y the prod#cer


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6e'en#e and Prots• A rms re'en#e is the amo#nt of money

recei'ed after selling a #nit of o#tp#t inthe mar*et

• irm e2ists in the mar*et only for prot

moti'e6e'en#e 1 Costs / Prots

• r

M6 / MC• .here the MC c#r'e intersects M6 from

4elo


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A'erage and marginal 6e'en#e

• A'erage re'en#e (A6) / totalre'en#e di'ided 4y = ∆T>/∆5


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Mar*et %tr#ct#re

• Perfect competition

• Monopoly

• Monopolistic Competition

• ligopoly


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Perfect competition

• A Mar*et here many 4#yersand sellers (small rms)trade identical prod#cts , ith

perfect information andperfect mo4ility of factors of

prod#ction and that each4#yer and seller is a priceta*er determined 4y the

e


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7> =">

E

P

"8

5

78# ?oss (78 .">)

78% normal pro+t 78=">)

78$ supernormal Pro+t

(78 ">)


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Monopoly

• s a mar*et sit#ation here the sole seller of aprod#ct and has no close s#4stit#tes

• Monopsony is here there is a sole 4#yer in themar*et

• Nat#ral monopoly arises 4eca#se a singl rm cans#pply goods or ser'ices to an entire mar*et at asmaller cost than to or more rms this happenshen a rms a'erage+total+costs c#r'e declines

o'er a longer period of time• o'ernment created monopolies arise 4eca#sego'ernment ha'e gi'en one rm the e2c#si'e rightsto sell some goods or ser'ices


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.elfare cost of monopolies

• A rm charges monopoly price hich is o'er and a4o'ethe marginal costs and monopoly prots arise

• At monopoly price not all cons#mers ho 'al#e the

goods at more than its costs 4#y it and this red#ces thecons#mer s#rpl#s

• The


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Prots #nder mperfect mar*et


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">

7>(6)

78

"8

Prots

!emandandre'en#e

Costs

Prots #nder mperfect mar*etconditions

P d t di9 ti ti d P i


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Prod#ct di9erentiation and Pricediscrimination

• Prod#ct di9erentiation0 irms change the shape,color, fragrance, 4rand name, shape, rappingof the prod#ct to charge di9erent prices atdi9erent mar*ets

• Price !iscrimination0 irms charge di9erentprices for the same prod#ct in di9erent mar*ets

• Ad'ertisement0 Ad'ertisement and mar*etingare tools of monopolistic rms to attract 4#yers

toards their prod#cts Ad'ertisements increasere'en#es 4#t increase costs also

• in*ed demand c#r'e0

Ten Principles of Economics


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Ten Principles of Economics

- People ace Tradeo9$s

3 There are pport#nity Costs to e'ery !ecision

= 6ational People thin* on the Margin

> People 6espond to ncenti'es

? Trade ncreases .elfare of all

@ Mar*ets are ecient

8 o'ernments can increase eciency of themar*et

Prod#ction of oods and ser'ices increasesncomes and ealth

: ncrease in incomes increases ination and prices

-%hort+term tradeo9$s ha'e to 4e made 4eteenination and employment

@?


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3 Macro Economic Concepts

8ircular


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8ircular


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NP (National Employment, ncome, or

e2pendit#re le'els)

NP is

- The %#m Total of All the factors of Prod#ctionemployed in a co#ntry in a year

3 The %#m Total of All the ncomes of actorsof Prod#ction in a co#ntry in a year

= The %#m Total of All the e2pendit#res of the

ho#se holds on their nal p#rchase of goodsand ser'ices in a co#ntry in a year

•. !P / NP 1 oreign Payments

•. NNP / NP 1 !epression alloance@


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!P, NNP, Od

!P / NP 1 oreign Payments

NNP / HNP 1 !epreciation

Alloance O / national ncome

Od / Personal disposa4le

ncome

or O+ ta2es

@:


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;5%E ;L!%6M%

BAN%

IE6NMENT

ACT6% P6!5CTN

(O)

NCME

(C )

CN%5MPTN !% & %E6ICE%

(%)

%AIN%

()

NIE%TMENT%

(T) TAE%

()

IT EPEN!T56E

Circu

larF

lowofN

atio

na

lIncom

e

8


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E = 4 =8 9 I 9 @ B T 9 Cn

• E / Employment

• O / National ncome (NP)

• C / Cons#mption

• / n'estments

• / o'ernment e2pendit#res

• T / Ta2es

• n / net e2ports (E2ports 1 imports)

rE = 4 =(#/ # - ∆c/∆4 )(a 9 I 9 @ B T

9 Cn)

83

• O / C H %


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O / C H %

• O 1 C / %

• C / a + 4Od

• a / a#tonomo#s cons#mption (a R O)

• 4 / mpc (KcJKO) / marginal propensity tocons#me

• Mps / -+ mpc or (- + KcJKO / KsJKO) / marginalpropensity to sa'e

• Od / O+ta2es

• / n'estment m#ltiplier or -J - + KcJKO

• n'estment m#ltiplier or -J - + KcJKO• / o'ernment spending at -J - + KcJKO

• T / ta2es at +mpc J - + mpc

8=

Change in O (National


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Change in O (Nationalncome)

∆4 = (#/#-mpc) (a 9 I 9 @ 9 Cn B ;T) ∆

.here

∆ / Change

a / a#tonomo#s cons#mption or -SaS

mpc or (4) / marginal propensity to cons#me (KcJ KO)I / a#tonomo#s n'estment ( R O)

@ / a#tonomo#s o'ernment %pending ( R O)

T / a#tonomo#s Ta2es ( T R O)

Cn / E2ports 1 mports (foreign earnings) also not a

f#nction of domestic income-J-+mpc / mps or marginal propensity to sa'e (KsJ KO)

Pl#s / increase in national income (O)

Min#s / decrease in national income (O)

8>

ncome+Cons#mption & ncome


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ncome+Cons#mption & ncome 1%a'ings 6elationship

• ncome (Od) / Cons#mption (c ) H %a'ings (s)

• r

• Od / c H s

• .hen Od / O + ta2es• ;o#seholds spend most of their income on

cons#mption and sa'e after a certain le'el ofincome

• Note0 >? degree line / line of e


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Cons#mption sched#le

• Cons#mption sched#le or Cons#mptionf#nction reects the direct cons#mption(disposa4le) income relationship of

ho#seholds in the co#ntry• n the aggregate, ho#seholds increase

their spending as disposa4le incomeincreases and spend larger portion of asmaller disposa4le income than a largerpart of a larger disposa4le income


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%a'ing %ched#le

• %a'ing %ched#le or sa'ing f#nction isderi'ed hen e s#4tract cons#mptionle'els from Personal disposa4le incomes ateach le'el of disposa4le income (s / Od 1c)

• !is+sa'ing ill occ#r hen cons#mption ismore than Od (c S yd)

• %a'ing occ#rs hen cons#mption is lessthan Od (c U Od)

• Brea* e'en is hen c / Od

i i h

Od


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Cons#mption+%a'ing graph

%

C

a

! i s + s

a ' i n g

s ( c S

O d )

O2 / c / nosa'ings

Od/c

O 2 S c

/ s a ' i n

g s

+a

A'erage & Marginal


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A'erage & Marginalpropensities

• APC / a'erage propensity to cons#me /cJOd

• AP% / a'erage propensity to %a'e / sJOd

• MPC / marginal propensity to Cons#me /change in cons#mptionJ change in income

• MP% / marginal propensity to sa'e / changein sa'ings J change in income

• MPC H MP% / -• MPC / KcJ Kyd

• MP% / KsJ Kyd or - 1 mpc or - + KcJ Kyd

5 l


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5nemployment

• s the ratio of then#m4er of people

#nemployed to the totaln#m4er of people in the

la4or force

!i9erent *inds of


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!i9erent *inds of5nemployment

• Nat#ral 5nemployment

(a) rictional 5nemployment

(4) str#ct#ral

• Cyclic 5nemployment

• ;idden (!isg#ised) 5nemployment

• !epressed 5nemployed

-

N t l 5 l t


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Nat#ral 5nemployment

• Nat#ral 5nemployment e2ists at f#llemployment and incl#des0 (total of Vpermissi4le)

(a) rictional 5nemployment 1 the portion of#nemployed ho lea'e one 7o4 to loo* foranother 4oth horiDontally and 'ertically (>V)

(4) str#ct#ral 5nemployment 1 are

#nemployed d#e to changes in the str#ct#reof the economy and introd#ction of netechnologies (>V)

3

ther forms of


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ther forms of5nemployment

• Cyclic 5nemployment 1 d#e to therecession and depression in theeconomy

• ;idden (!isg#ised)5nemployment 1 here the MP of

la4or employed is Dero or nearDero

• !epressed 5nemployed 1 ho

ha'e stopped loo*ing for or*=


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C f ti


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Ca#ses of nation

Printing of notes increases money s#pplymore than money demand and thereforeraise o'er all prices of goods and ser'icesand reso#rces in the economy ,hich is

nationnation red#ces cons#mer s#rpl#s

nation increase costs of prod#ction

therefore red#ces prod#cers s#rpl#s Therefore ination decreases groth and

society$s elfare

?

B * 4 i


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Ban* 4orroing

• Ban* 4orroing 4y theo'ernment increases thecost of loans (interest rates)for 4#sinessmen in themoney mar*et and decreases

the money s#pply in theeconomy, th#s red#cing them#ch needed 4y pri'ate

@

T


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Ta2es

Ta2es increases prices and 4ringsdon the aggregate demandc#r'e th#s red#cing the

employment, income and groth(!P) le'els,

Therefore ta2es sho#ld 4ered#ced and ta2 net idened formore re'en#e to the o'ernment

8

Ccons#mer Price nde2 (CP)


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Ccons#mer Price nde2 (CP)

• CP 1 is a price inde2 comp#ted

each month #sing a 4#ndle that ismeant to represent the Wmar*et4as*et$ p#rchases monthly 4y the

typical #r4an cons#mer• The


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!P !eator• !P deator is a price meas#re, meas#ring ho

o'erall price le'el changes along ith changes inreal o#tp#t (!P)

• irstly, 2ed astage proced#re and - year as 4aseyear is #sed to calc#late the changes in prices in

s#4se


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6ierence ;eteen @6P!eDator an! 8PI

• CP co'ers only cons#mergoods and ser'ices

• !P deator co'ers allgoods and ser'ices

prod#ced in the economy

:

Types of nation


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Types of nation

• !emand P#ll ination 1 that is instigated 4y anincrease in aggregate demand

• Cost+p#sh nation (s#pply side ination) 1 hich isca#sed 4y an increase in costs of prod#ction

• %tagation 1 cc#rs hen o#tp#t is falling increasing#nemployment, and at the same time o'erall pricele'els are rising

• %#stained nation 1 occ#rs hen the o'erall pricele'els contin#e to rise o'er some fairly long period oftime

• ;yperination 1 a -V or more increase in prices ayear ('ery 'ery 4ad)

:-

Trade can ma*e e'ery one 4etter o9


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ree Tra!e gi'es greater access to mar*ets, 4rings in competition,red#ces costs, help increase


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Balance f Payments

Balance of payments are acomprehensi'e record of all thetransactions of the people of a

co#ntry ith the rest of the orldand of all the transactions of the restof the orld ith the people of that

co#ntryBalance of payments incl#de

• C#rrent Acco#nts

• Capital acco#nts :=

!ecit & %#rpl#s


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!ecit & %#rpl#s

in C#rrent Acco#nts of Balance of Payments

• !ecit in C#rrent Acco#nts / henthe people of the co#ntry oe moreto the orld than hat the orld

oes the people of that co#ntry• %#rpl#s in c#rrent Acco#nts / hen

the orld oes the people of the

co#ntry more than hat the peopleof that co#ntry oe to the orld

:>


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Economic e9ects of %#rpl#s


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Economic e9ects of %#rpl#s

- Appreciation in local c#rrency againstforeign c#rrency

3 E2ports 4ecome e2pensi'e & imports4ecome cheaper

= !omestic prod#ction of e2ports fallEmployment decreases if demand fore2ports falls

> ncomes decrease

? Cons#mption decrease

@ %#rpl#s in BP tends to decrease

:@


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oals of Macroeconomic


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Policy

• Lo #nemployment

• Price %ta4ility (lo ination)

• Economic roth (increase in

national ncome)

• E2ternal Balance (%ta4ility in BP)

• %ta4le E2change rates

• %ocial .elfare

:

Policy nstr#ments


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Policy nstr#ments

• iscal Policy

• Monetary Policy

• Commercial (Trade) Policy

::

iscal Policy


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iscal Policy

• iscal Policy is the policy of theederal go'ernment in order tocollect re'en#e and mange

go'ernment p#rchases ande2pendit#res iscal policy ise2pressed in the ederal B#dget

!oc#ment

-

Tools of iscal Policy


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Tools of iscal Policy

• o'ernment %pending () as part ofa#tonomo#s e2pendit#re (aggregate!emand) of national ncome (O) is

ass#med to 4e controlled 4y policyma*ers and therefore is a policy'aria4le

• Ta2es (T) as part of a#tonomo#s

sa'ings (aggregate %#pply) is alsocontrolled 4y the policy ma*ers, hoset the ta2 rate, and ta2 receipts'ary ith income

--

iscal %ta4iliDation Policy


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iscal %ta4iliDation Policy

• Beca#se e


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Y1=C+I+G

Y2=C+I+G+G2

E1

Y1

E2

Y2

E3

Y3

Y3=C+I-T

->


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Y3=C+I+T

Y2=C+I-G2

E3

Y3

E2

Y2

E f

Y f

Y1=C+I+G

-@

ederal B#dget & iscal %ta4iliDers


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ederal B#dget & iscal %ta4iliDers

ederal 4#dget contains To types ofitems that e9ect macroeconomicgoals

- o'ernment p#rchases ande2pendit#res ()

3 Ta2es (T)

-8

Concept of A#tomatic iscal %ta4iliDers


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Concept of A#tomatic iscal %ta4iliDers

As income (O) rises net ta2 collectionincreases and the go'ernment 4#dgets#rpl#s increases (or decit declines)

Therefore at a higher le'els of economicacti'ity, more ta2 re'en#e ill 4e collectedat any gi'en set of ta2 rates

n the e2pendit#re side of the 4#dget,

go'ernment spending () #s#ally do notrespond to changes in le'el of nationalincome and economic acti'ity,a#tomatically They ha'e to 4e changed

thro#gh policy-

Conse


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Conse


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t

• A change in the in t (the intercept ofthe ta2 f#nction) ill 4e opposite in signfrom the e9ect of a change in go'ernmentspending (),

Therefore

• an increase in t ill ca#se the e


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Types of Ta2es

• !irect Ta2es• ncome Ta20 ;ighly recommended, 4eca#se it is

progressi'e and meas#res the elasticity ofdemand

• ndirect ta2es• eneral %ales Ta2 (%T)0 highly recommended,

4eca#se it is progressi'e and meas#res theelasticity of demand

%T can 4e le'ied #p to =?V of the price of acommodity sold in the mar*et

All other Ta2es e2cept local ta2es are no notrecommended #nder .T regime

---

P#4lic Choice Iie


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P#4lic Choice Iie

• Policy ma*ers act to ma2imiDe their onelfare or #tility, rather than the socialgood ordon T#lloc* Ff Policyma*ers areordinary men, they ill ma*e most (not all)

their decisions in terms of hat 4enetsthem, not society as a holeGY or them itis not a


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Monetary Policy

• Monetary Policy is managed ande2ec#ted 4y the Central Ban* inorder to control money s#pply and

ination in the economy• Tools of "onetary Policy

- pen mar*et perations

3 !isco#nt rate Policy= 6e


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pen mar*et perationso'ernment %ec#rities constit#te a ma7or part of

the Central Ban*$s assets The p#rchase of the additional sec#rities ill

increase the go'ernment sec#rities on the assetsside of the central 4an*$s 4alance %heet To payfor the sec#rities the Central Ban* rites a chec*

dran on itself and simply creates a ne lia4ilityagainst itself The chec* o#ld 4e deposited intothe commercial 4an*ing system, therefore

• A p#rchase of sec#rity 4y the Central Ban* fromthe open mar*et o#ld increase the Commercial4an*s reser'e deposits 4y an e


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!isco#nt 6ate Policy

!isco#nt rate is the interest rate charged 4ythe Central Ban* on its loans to the

commercial Ban*s

• An increase in the disco#nt rate o#lddecrease the 4orroing 4y the CommercialBan*s and

Th#s decreases the Money %#pply

• A decrease in the disco#nt rate o#ldincrease the 4orroing 4y the CommercialBan*s and

Th#s ncreases the Money %#pply --?

6e


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6e


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Macroeconomic pro4lems

No one policy can 4e #sed to sta4iliDe thee2ternal and internal im4alances in an

economy

E2ternal im4alances incl#de0

- !ecit or %#rpl#s in Balance of Payments

3 !epreciation or Appreciation in E2changerate

nternal m4alance incl#de

= 5nemployment or #ll employment

> nation (Price 6ise) or !eation (all in

Prices)--8

Policy Mi2or nternal & E2ternal E


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or nternal & E2ternal E


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The Central Ban* can pre'ent or mitigatethe #pard or donard mo'ements ofinterest rates only 4y changing themonetary 4ase and hence the money

s#pply

M s (money s#pply) / M d (money demand)

• f M s S M d, or if M d U Ms,

Then interest rates fall• f M s U M d, or if M d S M s,

Then interest rates rise -3

= roth and !e'elopment


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= roth and !e'elopment

.hat is Economic roth


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.hat is Economic roth

• Todaro F Economic roth is asteady process 4y hich theprod#cti'e capacity of the economy

is increased o'ertime 4y 4ringinga4o#t rising le'els of national o#tp#tand incomeG

• Economic roth is increasingnational o#tp#t ith e2isting le'el oftechnology, stoc* of capital andinfrastr#ct#res

Elements of Economic th


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roth

- Long+Term roth Process3 6ise in 6eal per+capita income

(Per capita income / !PJpop#lation)

= 6ise in Prod#cti'ity

> reater e


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%o#rces of Economic roth

• %#pplying actors of Prod#ction more eciently andprod#cti'ely

• !emanding of more factors of Prod#ction

• 5sing more eciently the e2isting le'els of technology

• mpro'ing #pon the techni


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roth

• ;elp rise the standard of li'ing of thepeople

• Allos the economy to ha'e more

cons#mer goods, prod#cer goods,and intermediary goods

• ncreases employment opport#nities

• 6ed#ces go'ernment$s costs relatedto social sec#rities and #pliftschemes

Costs of economic roth


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Cos s o eco o c o

• 'er #se of nat#ral reso#rces• ncrease in poll#tion and noise le'els

• 5r4aniDation of r#ral areas, congestion

and trac 7ams• 6ed#ction in nat#ral landscape and

increase in man+made str#ct#res

• !ecrease in 4io+di'ersity• ncrease in cons#mption spending on

non+necessary goods

.hat is Economic! l t


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!e'elopment• Mair & Baldin FEconomic !e'elopment is the

process here4y an economy$s real national incomeincreases o'er long period of time & if the rate ofde'elopment is greater than the rate of groth ofpop#lation, then the per capita income ill increaseG

• Todoro F!e'elopment m#st 4e concei'ed of as am#lti+dimensional process in'ol'ing ma7or changes insocial str#ct#res, pop#lar attit#des and nationalinstit#tions as ell as the acceleration of economic

groth, red#ction of ine


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Economic roth & Economic

!e'elopment


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!e'elopment

ood

yJactor

ood 2J actor L

(PP$s) of Nation A #nderEconomic !e'elopment and


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Economic !e'elopment and

introd#ction of ne technologies"#antity of y prod#cts

prod#ced

"#antity of x prod#ct prod#ced

:

8

47ecti'e of Economic !e'elopment


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- Pro'ision of 4asic needs

3 6aising standard of li'ing

= E2panding of range ofeconomic and social

choices

Characteristics of Economic

!e'elopment


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!e'elopment

- Changes in occ#pational str#ct#res3 Changes in sectorial str#ct#res of national o#tp#t

= Changes in str#ct#res of ind#strial prod#ction

> Changes in str#ct#res of foreign trade

? Changes in technological progress@ Changes in social attit#des

8 nstit#tional changes in the economy

Changes in thin*ing processes and

: Changes in ed#cational le'els of the people

-Changes in li'ing standards and 4eha'iors

Main meas#res of Economic

!e'elopment


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!e'elopment

- ncrease in real !P3 ncrease in real per capita income

= 6ise in o'erall ell4eing of the people

> %atisfaction of 4asic needs of the people? Better social and economic indicators

and h#man de'elopment nde2

@ ncrease in technological de'elopmentand *no ho

8 nstit#tional de'elopment

6e+ning Poverty


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g y

• a) A4sol#te Po'erty• 4) 6elati'e Po'erty

a) A4sol#te Po'erty


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y

• Po'erty is common to dene as an ins#ciency of means relati'e toneeds, or as a condition of MNEOLE%%NE%% Po'erty in the sense ofmoneylessness is not having enough of the basic medium ofexchange in order to satisfy elementary human needs and to functioneconomically and socially This is also called ncome po'ertyAccording the Economic %#r'ey of Pa*istan 3+3-, F6ecent

estimates s#ggest that po'erty has f#rther increased from =3@V in-::+-::: to ==?V in -:::+3G

• erald Meier denes po'erty Fas the ina4ility to attain a minim#mstandard of li'ingG

• 6ontee denes po'erty, Fas a le'el of total earnings ins#cient too4tain the minim#m necessities for the maintenance of Wmerely

physical eciency$, incl#ding food, rent, and other items

Economic %#r'ey of Pa*istan, 3+3-, o'ernment of Pa*istan, slama4ad, p 2'ii

Meier, M & 6a#ch, Z E Leading ss#es in Economic !e'elopment 8th Edition, 2ford 5ni'ersity Press, NO 3, p -

G .orld Ban* 6eport 3+3-, Attac*ing Po'erty, 2ford 5ni'ersity Press, .ashington !C, p -8

MNEOLE%%NE%% can 4e impro'ed4y ta*ing into acco#nt I56NABLTO


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4y ta*ing into acco#nt I56NABLTO

• According to the .orld Ban* 6eport 3+3-, FI#lnera4ility is the ris* thata ho#se hold or indi'id#al ill e2perience an episode of income or healthpo'erty o'er time B#t I#lnera4ility also means the pro4a4ility of 4einge2posed to a n#m4er of other ris*s ('iolence, crime, nat#ral disasters, 4eingp#lled o#t of school)G or e2ample a person ho has a 7o4 that pays himprecisely the minim#m needed to f#nction accordingly to c#rrent standards,4#t ho cannot 4e certain that he or she ill ha'e eno#gh to get tomorro if

his or her$s income falls or his or her$s needs increase is therefore is at ahighly '#lnera4le position That person may 4ecome poor at any moment

This limits his or her$s range of choices and a9ects his or her$s 4eha'ior inlife Moneylessness is a 'ital aspect of poerlessness The concept of po'ertyas poerlessness #nderlines the importance of economic '#lnera4ility Thepoor are separated from the non+poor not only 4y their c#rrent standard ofli'ing, 4#t also 4y their greater '#lnera4ility to economic catastrophe + A

'#lnera4ility that limits their choices and hence the freedom of the poor• .orld Ban* 6eport 3+3-, Attac*ing Po'erty, 2ford 5ni'ersity Press,

.ashington !C, p -:


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• Po'erty is also dened as PIE6LE%%EN%% The poor do notdi9er from their fello men or omen merely in the siDe of their

paychec*s Many of the poor are dependent psychologically asell as economically Poor people ha'e higher than a'erage rateof criminality, s#icide, narcotic addiction, physical and mentalillnesses, alcoholism, prostit#tion and 'iolence They are moreli*ely to li'e in #nhealthy s#rro#ndings and in physically #nsafestr#ct#res %ocial and family disorganiDation is endemic to the

poor A pathological feeling of poerlessness compo#nds thesepro4lems The poor lead li'es that are, or seem to 4e, orderedlargely 4y forces o#tside their control 1 4y people in position ofa#thority or ealth, 4y percei'ed e'il forces, 4y 4ad l#c*, orsimply as the ill of od n ords of Professor .arren

;aggstrom, The poor are faced ith Fa partic#lar dic#lt 'arietyof sit#ational dependency, a helplessness$ to e9ect manyimportant social factors in their li'es, the f#nctioning or p#rposeof hich they do not #nderstand, and hich are essentially#npredicted to themG


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• Po'erty as poerlessness ismeas#red in terms of lac* of poeras ell as money Powerlessness in

other words is the lack of controlover one’s own destiny Poerlessness is a lac* ofEMP.E6MENT


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• According to the .orld Ban* 6eport 3+3-,FEmpoerment means enhancing the capacity ofpoor people to in#ence the state instit#tions thata9ect their li'es, 4y strengthening theirparticipation in political processes and localdecision ma*ing And it means remo'ing the4arriers 1 political, legal, and social 1 that or*against partic#lar gro#ps and 4#ilding the assets ofpoor people to ena4le them to engage e9ecti'ely

in mar*etsG• .orld Ban* 6eport 3+3-, Attac*ing Po'erty,

2ford 5ni'ersity Press, .ashington !C, p =:


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• n short moneylessness andeconomic '#lnera4ility are forms ofpoerlessness, and Absolute poverty

can be dened as a state ofmoneylessness and powerlessness

6elati'e Po'erty


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• family 4e classied as poor if its income as less than half of the medi#mfamily incomeG The 4est ay to nd a relative measure of poverty is totake into account the position of various groups on a scale of income thatmust compare the income share of those at the bottom to that of thoseat the top .ith complete income e


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• Economic,• Ed#cational

• ;ealth

• political,• social,

• ender

• En'ironmental

• ;#man

Poverty has an Economic dimension.


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• In economic terms a country region or househol!are poor hen the per capita income of a country orthe income of a househol! is very loF 'hen the;uying poer of the economy or of the househol! is;elo a certain minimum stan!ar!sF 'hen there are

in a nation region or a househol! lo me!ical carean! health facilitiesF 'hen the pro!uctivity of thenation a group or an in!ivi!ual in the nation is veryloF 'hen there is illiteracy lac, of ;asic e!ucationan! lac, of ,nole!ge a;out the peopleGs physicalintellectual spiritual an! moral environmentF 'hena maHority or a minority of the people in a communityare hungry venera;le an! poerless to ma,e theirlife ;etter for the present or for the futureF


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Poverty has a Social dimensionF


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• n social terms po'erty in a co#ntry, region orho#sehold 4reeds all types of socially#naccepta4le 4eha'iors li*e dr#g addiction,crime, prostit#tion, 'iolence in a family or in

the comm#nity and terrorism, all of hichdegrade h#man self respect, moral and social

'al#es of the society as a hole, hen moreand more people in the comm#nity 4ecome

intolerant of each other and are r#de toardseach other in their day to day life

Poverty has an Environmental

dimension


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dimension

• n its en'ironmental terms, po'erty destroys the li'ingen'ironment not only of those that li'e in po'erty 4#t of all othersh#mans and non h#man species that depend on the samereso#rces and ecosystem on hich those li'ing in po'erty dependand s#r'i'e #pon People li'ing in po'erty can not change their4eha'iors easily, not only 4eca#se of lac* of reso#rces, 4#t also

4eca#se of lac* of *noledge a4o#t their on s#rro#nding ands#r'i'al techni


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• Po'erty in its h#man dimension is the most important of all, 4eca#se poor peopleli'e in conditions that are misera4le, conditions in hich they or some mem4ersof their family die of h#nger, disease, famine, or of 'iolence .hen a child isdon ith a c#ra4le disease and the parents ha'e to ta*e a decision hether tota*e the child to a doctor and 4#y e2pensi'e medicines for that child hich o#ldta*e #p a ma7or portion of the family$s income or to spend that m#ch neededmoney on the food of the other children in that family Po'erty has a h#mandimension hen the parent of a child sells his or her child into sla'ery orprostit#tion 4eca#se of lac* of reso#rces to feed or care for that child and itssi4lings Po'erty has a h#man dimensions hen go'ernment instit#tions not onlyfail to protect the poor, these #pholders of la, freedom and h#man rightscommonly a4#se the poor thro#gh the 'ery instit#tions that ha'e 4een created ina ci'ic society to protect them Po'erty has a h#man dimension hen the fe#dallord or some person ith political and economic poer a4d#ct the da#ghter orife of those that ser'e #nder him or ta*es the poor into 4onded la4or and theaggrie'ed are poerless to do anything Po'erty has a h#man dimension hengo'ernments, instit#tions, gro#ps, indi'id#als in that society or nation ha'e4ecome inh#mane toards those that are more #nfort#nate than them 1 omen,children, religio#s or political minorities, economically poor, etc

Poverty has a human dimension


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• Po'erty in its h#man dimension is the most important of all, 4eca#se poor peopleli'e in conditions that are misera4le, conditions in hich they or some mem4ersof their family die of h#nger, disease, famine, or of 'iolence .hen a child isdon ith a c#ra4le disease and the parents ha'e to ta*e a decision hether tota*e the child to a doctor and 4#y e2pensi'e medicines for that child hich o#ldta*e #p a ma7or portion of the family$s income or to spend that m#ch neededmoney on the food of the other children in that family Po'erty has a h#mandimension hen the parent of a child sells his or her child into sla'ery orprostit#tion 4eca#se of lac* of reso#rces to feed or care for that child and itssi4lings Po'erty has a h#man dimensions hen go'ernment instit#tions not onlyfail to protect the poor, these #pholders of la, freedom and h#man rightscommonly a4#se the poor thro#gh the 'ery instit#tions that ha'e 4een created ina ci'ic society to protect them Po'erty has a h#man dimension hen the fe#dallord or some person ith political and economic poer a4d#ct the da#ghter orife of those that ser'e #nder him or ta*es the poor into 4onded la4or and theaggrie'ed are poerless to do anything Po'erty has a h#man dimension hengo'ernments, instit#tions, gro#ps, indi'id#als in that society or nation ha'e4ecome inh#mane toards those that are more #nfort#nate than them 1 omen,children, religio#s or political minorities, economically poor, etc

"easuring poverty


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• ead !ount Approach• "iological Approach

• #ne$uality Approach

• %elative &eprivation

• 'alue (udgment Approach

• A Policy &enition• Poverty )ine

• Purchasing Power Parity *PPP+

• %elative Purchasing power Parity

• )oren, !urve and -ini !oecient

• #nverted / ypothesis of #ne$uality

• eynesian Minim#m s#4sistence Le'els

• !P Per capita le'els

ead !ount Approach


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• E'en after the poor ha'e 4een identied and specied, the conceptof po'erty is concerned ith the condition of the poor, there is thepro4lem of aggregation o'er the gro#p of the poor, and this in'ol'esmo'ing from description of the poor to some o'erall meas#re ofpo'erty as s#ch n some traditions, this is done 'ery simply 4y 7#stco#nting the n#m4er of the poor, and then e2pressing po'erty as the

ratio of the n#m4ers of the poor to the total n#m4er of people in thecomm#nity in


151/163

• %ee4ohm 6ontee (-:-) in the Po'erty in NO dened families as 4eing in Wprimarypo'erty$ if their total earnings are ins#cient to o4tain the minim#m necessitiesfor the maintaince of merely physical eciency %tar'ation clearly is the mosttelling aspect of po'erty The criticism of the 4iological approach is that, rst, thereare signicant 'ariations related to physical feat#res, climatic conditions and or*ha4its of di9erent regions n fact, e'en for a specic gro#p in a specic region,n#trition re


152/163

•Po'erty may loo* 'ery li*e ine8) and 6o4y (-:@8) state,hich casting the iss#e of po'erty in terms of stratication leads toregarding po'erty as an iss#e of ine


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• The concept of relati'e depri'ation has 4een fr#itf#lly #sed in theanalysis of po'erty, especially in the sociological literat#re Beingpoor has clearly m#ch to do ith 4eing depri'ed, and it is nat#ral,for a social animal, the concept of depri'ation ill 4e relati'e oneB#t ithin the #niformity of the term Wrelati'e depri'ation$ thereseem to e2ist some distinct and di9erent notion, li*e feelings of

depri'ation and condition of depri'ation A second contrastconcerns the choice of reference gro#ps for comparison Again,one has to loo* at the gro#p ith hich the people in


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• Many a#thors ha'e recently presented the 'ie of the 'al#e 7#dgmentapproach forcef#lly t seems nat#ral to thin* of po'erty as somethingthat is disappro'ed of, the elimination of hich is regarded as morallygood Mollie rshans*y arg#es, that po'erty, li*e 4ea#ty, lies in the eyesof the 4eholder t is important to disting#ish 4eteen di9erent ays inhich the role of morals can 4e accommodated into the e2ercise ofpo'erty meas#rement or the person st#dding and meas#ring po'erty,

the con'entions of society are matters of fact as contemporarystandards, and not iss#es of morality or of s#47ecti'e search as hatsho#ld 4e the contemporary standards and to 4e the person$s on 'al#eand feeling Adam %mith (-88@) clearly stated, Fthat 4y necessities #nderstood not only the commodities hich are indispensa4ly necessaryfor the s#pport of life, 4#t hat e'er the c#stom of the co#ntry renders it

indecent for credi4le people, e'en the loest order, to 4e itho#t[ Thepoorest credi4le person of either se2 o#ld 4e ashamed to appear inp#4lic itho#t themG n the similar 'ein arl Mar2 (-@8) said, Fhilehistorical and moral elements enter the concept of s#4sistence,ne'ertheless, in a gi'en co#ntry, at a gi'en period, the a'erage


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• The meas#rement of po'erty may 4e 4ased on certain gi'en standards,4#t hat *inds of these standards themsel'es ma*e, there seems to e2ista certain amo#nt of conf#sion on the s#47ect too The 5% president$sCommission on ncome Maintaince (-:@:) ga'e a policy denition in itsreport Po'erty amid Plenty Ff society 4elie'es that people sho#ld not 4epermitted to die of star'ation or e2pos#re, than it ill dene po'erty asthe lac* of minim#m food and shelter necessary to maintain life f the

society feels some responsi4ility for pro'iding to all persons anesta4lished meas#re of ell+4eing 4eyond mere e2istence, for e2amplegood physical health, than it ill add to its list of necessities thereso#rces re


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• All the meas#res are 7#dged in relation to some norms ore2ample, e dene life e2pectancy in some co#ntries to 4e lo inrelation to those attained 4y other co#ntries at a gi'en date Thechoice of the norm is partic#larly important in the case of thecons#mption+4ased meas#res of po'erty A cons#mption 4asedpo'erty line can 4e tho#ght of as comprising to elements0 the

e2pendit#re necessary to 4#y a minim#m standard of n#tritionand other 4asic necessities and a f#rther amo#nt that 'aries fromco#ntry to co#ntry, reecting the cost of participating in thee'eryday life of society

• As a r#le of th#m4, Wpo'erty line$ regardless of the family siDe, theage of its mem4ers, or their place of residence is a 2ed po'ertyline of a minim#m here total income e


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• The %#mmer and ;anston (-:) recalc#lation of income per capitaapproach 4ased on p#rchasing poer parity (PPP) shos that theincome g#res m#st 4e treated ith a good deal of circ#mspection The ad7#stment for PPP is only one of the many pro4lems associatedith comparing incomes across co#ntries, 4#t ma*ing 7#st this onechange can ha'e 'ery s#4stantial e9ects Changes at the 4ottom end

are partic#larly dramatic China, ndia and Pa*istan are all ran*edfairly closely #nder con'entional national income meas#res, here asin the %#mmers and ;enston data the per capita income of Pa*istanis more than ? per cent a4o'e that of ndia and the per capitaincome of China is more than tice of that of Pa*istan Than there ism#ch more to standard of li'ing than income The great 'ariety of

conditions in de'eloping co#ntries is f#rther ill#strated in some of theother dimensions #rther, the 'ariations in other indicators are farfrom perfectly correlated ith income per capita hether meas#redin the standard or PPP manner

%elative Purchasing power Parity


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•n co#ntry comparisons of le'els of income are often misleadinghen they are made 4y con'erting the income of 'ario#sco#ntries into common c#rrencies (5%\) thro#gh the #se of ociale2change rates These nominal e2change rates do not reect therelati'e p#rchasing poer of di9erent c#rrencies, and th#s errorsare introd#ced into the comparison The depression of per capita

income is e2aggerated 4y systematically #nderstating those poorco#ntries PPP, rather than e2change rates are the correctcon'erter for translating !P from national c#rrencies to dollarsn recognition of comparati'e national price le'els, st#dies 4yr'ing ra'is and his associates ha'e therefore attempted toad7#st international comparisons for the real p#rchasing poer

parities of national c#rrencies Nominally the p#rchasing poer ofthe c#rrencies of a less de'eloped co#ntry (L!C) tends to 4egreater than is s#ggested 4y ocial e2change rates

)oren, !urve and -ini !oecient


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• The ini Coecient is a single meas#re of relati'e po'erty and the most fre


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Than* Oo#


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• Te2t0• Man*i, N , ans, Z, ing, % (-:::) Principles of

Microeconomics, ;ar*ot, nternational Edition

• royen, T 6 (-:::) Macroeconomics Theories &

Policies, Printice ;all, nternational Edition• Meier, erald M -::?, Leading ss#es in

Economic !e'elopment %i2th edition, 2ford5ni'ersity Press Ne Oor*, 2ford

-@-


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• ield, C Barry & Martha ield 33 En'ironmental Economics 1 Anntrod#ction Third Edition Mc ra+;ill ;igher Ed#cation nternational


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Edition, NO

• ;yman, !a'id N -::: P#4lic inance0 A Contemporary application of Theory and Policy %i2th Edition, The !ryden Press, ;arco#rt BraceCollege P#4lishers Ne Oor*, London, To*yo

• Mo#nt7oy, Alan B -:3 nd#strialiDation and !e'eloping Co#ntries ? th Edition, ;#tchinson 5ni'ersity Li4rary, London, %ydney, Zohannes4#rg

• chs, Zac* -:8> P#4lic inance ;arper & 6o P#4lishers NO, London

• 6ay, !e4ra7, -::, !e'elopment Economics, Princeton 5ni'ersity,Press, Princeton, Ne Zersey

• .ood, Ellen M 5nhappy amilies0 lo4al Capitalism n The .orld fNation %tates 0onthly %eview1 Iol#me ?- N#m4er = Z#ly A#g#st-:::, Monthly 6e'ie o#ndation, NO

• .orld !e'elopment 6eport, -:::J3, Entering The 3-st Cent#ry,.orld Ban* 2ford 5ni'ersity, Press, .ashington !C

basic (micro and macro, development) economic concepts

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