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• Economics


  Branch of social science that deals with the allocation of resources, production, distribution, and consumption of goods and services
• Branches of economics

  • Macroeconomics
  • Microeconomics
• Economic factors

  • Land (natural resources)
  • Labor (manpower)
  • Capital (goods produced used as resources)
  • Entrepreneurship (act of organizing)
• Key concepts of economics

  • Opportunity cost
  • Marginal benefit
  • Marginal cost
  • Efficiency
  • Incentive
  • Exchange
  • Market
  • Theory
• Development economics


  Study of how economies are transformed from stagnation to growth, from low income to high income status
• Absolute poverty


  Being unable to meet minimum level of income, food, clothing, healthcare and other essentials
• Reasons to study economics


  • Concerned with economic, cultural and political requirements for effecting rapid structural change in a manner that will efficiently bring the fruits of economic development to the masses
  • To help people understand developing economies in order to help improve the material lives of the majority of the global population
• Scope of development economics


  • Traces the current state of developing nations, from what they have and what they have not, and apply the theories of development applicable to each
• Poverty equilibrium


  Poverty itself maintains the forces that lead to its perpetuation
• The structure of third world economies


  • Size of the country (geographic area, population, and income)
  • Historical and colonial background
  • Endowments of physical and human resources
  • Relative importance of its public and private sectors
  • Nature of its industrial structure
  • Degree of dependence on external economic
  • Distribution of power and the institutional structure
• Characteristics of the developing world

  • Lower levels of living and productivity
  • Lower levels of human capital
  • Higher levels of inequality and absolute poverty
  • Higher population growth rates
  • Greater social fractionalization
  • Larger rural population
  • Low levels of industrialization
  • Adverse geography
  • Underdeveloped financial
  • Lingering colonial impact
• Indicators of development


  • Income
  • Health
  • Education
• Human Development Index


  Socioeconomic measure based on income per capita, education, and health
• Institution


  Economic institutions are humanly devised constraints (norms, rules of conduct)
• Gross National Income


  Total domestic and foreign output claimed by residents
• Less Developed Countries


  Other term for developing countries
• Traditional economics


  Approach to economics that emphasize utility, profit maximization, market efficiency, and determination of equilibrium
• Attitude


  States of mind or feelings of an individual
• More Developed Countries


  Economically advanced capitalist countries
• Freedom


  Society has disposable a variety of alternatives to satisfy its wants and individuals enjoy real choices
• Development


  Process of improving the quality of life
• Functioning


  What people do or can do with commodities of given characteristics
• Developing Countries


  Characterized by low level of living
• Structure of developing nations

  • Size of country including geographic area, population, etc.
• Characteristics of developing world

  • Higher level of inequality and absolute poverty
• Poverty


  Condition in which a person or community lacks the financial resources and essential needs
• Globalization


  Increasing integration of national economies into expanding international markets
• Values


  Qualities, principles or standards that a society or groups within it considers worthwhile/desirable
• Income per capita


  Total gross national income of a country divided by the total population
• Social system


  Organizational and institutional structure of a society, including its values, attitudes, power structure, and traditions
• Capabilities


  Freedom that people have given their personal features and their command over commodities
• Gross Domestic Product


  Total final product of goods and services produced by a country's economy within the country's territory
• Indicators of development


  • Health
  • Education
• Subsistence economy


  Economy in which production is mainly for personal consumption and standard of living
• Political economy


  Attempt to merge economic analysis with practical politics
• Linear stages theory


  • Development undergoes stages of growth in achieving development
  • Advocated by the American economic historian Walt W. Rostow, according to him there is a series of steps that is undergone by a country in achieving growth and this is called "takeoff into self-sustaining growth"
  • Important factor is having a sufficient fund, done through the mobilization of both foreign and domestic savings
• Harrod-Domar growth model


  Functional economic relationship in which the growth rate of gross domestic product (g) depends directly on the national net savings rate (s) and inversely on the national capital-output ratio (c)
• GDP (Gross Domestic Product)


  Summation of all final goods and services produced by a country for one year
• Capital-output ratio


  Ratio that shows the units of capital required to produce a unit of output over a given period of time
• Net savings ratio


  Savings expressed as a proportion of disposable income over some period of time