Managerial EconomicsSS 301

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Question: What is Micro and Macro Economics? Discuss the

difference between Micro and Macro Economics.
Answer: The study of economics is broadly divided into two

categories:
1. Micro Economics
2. Macro Economics
Micro Economics:
It is small part of whole economics which deals with individuals, their
needs, their behavior, individual firms and its activities. This deals with
studies like incomes, capital spending on building, individuals who are
engaged in various products for building construction.
Microeconomics (from Greek prefix micro-meaning ‘small’+ ‘economic’) is a

branch of economics that studies the behavior of how the individual
modern household and firms make decisions to allocate limited resources.
Typically, it applies to markets where goods or services are being bought
and sold. Microeconomics examines how these decisions and behaviors
affect the supply and demand for goods and services, which determines
prices and how prices, in turn, determine the quantity supplied and
quantity demanded of goods and services.
Definitions:
According to Professor Mac Cannel, “Micro economics is a study of
specific economic units and a detailed consideration of the behavior
of these individual units.”
According to Professor Boulding, “Micro economic seeks to explain the

working of individuals, firms, households, individual prices, wages
and particular industries.”
Macro Economics:
It deals with aggregates and averages of entire economics like national
income, aggregates products, aggregate outputs, total employment, total
consumption, savings and investments, aggregate demand, aggregate
Prepared By: Hasan Bin Firoz(533)

Managerial Economics(SS-301)
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supply, general level of prices. Here it also studies how these aggregates are
fluctuating and affecting the economic growth of the country.
Macroeconomics (From Greek prefix ‘Macro’ meaning ‘large’ +

‘economic’) is a branch of economics dealing with the performance,
structure, behavior and decision making of the entire economy. This
includes a national, regional or global economy. With microeconomics,
macroeconomics is one of the two most general fields in economics.
Definitions:
Professor Boulding, “Macro-economic deals not only with individual

also
quantities but ^with the aggregates of national quantities, not with
individual income, but with national income; not with individual
prices, but with national prices level; not with individual output, but
with the national output.”
Subject matter/Importance of Micro Economics:

Microeconomics has occupied a very important place in the study of
economic theory. In fact, it is the stepping stone to economic theory. It has
both theoretical and practical implications.
Important points of its significance are mentioned as under:
1. Microeconomics is of great help in the efficient management of the

limited resources available in a country.
2. Microeconomics is helpful in understanding the working of free
enterprise economy where there is no central control.
3. Microeconomics is utilized to explain the gain form international
trade, balance of payments disequilibrium and determination of
foreign exchange rate.
4. It explains how through market mechanism goods and services
produced in the community are distributed.
5. It helps in the formulation of economic policies, which are meant for
promoting efficiency in production and welfare of the people.
6. Microeconomics is the basis of welfare economics.
7. Microeconomics is used for constructing economic models for better
understanding of the actual economic phenomena.

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Subject matter/Importance of Macro Economics:

1. It deals with total consumption, total savings, total investment, total
output, total or national income, inflation and deflation economic
growth etc.
2. It is concerned with the analysis of income and employment in the
economy as a whole.
3. It is the theory of income and employment.
4. Macroeconomics models and their forecasts are assists in the
development and evaluation of economic policy and business
strategy.
Difference between Micro and Macro Economics:

There are differences between microeconomic and macroeconomics
although at times, it may be hard to separate the functions of the two. First
and foremost, both of these terms mentioned are sub-categories of
economics itself. As the names of ‘micro’ and ‘macro’ imply,
microeconomics facilitates decisions of smaller business sectors and
macroeconomics focuses on entire economies and industries. These two
economies are mutually dependent and together they develop the strategy
for the overall growth of an organization. They are the two most important
fields in economics and are necessary for the rise in the economy.
The main features of micro economy and macro economy are given below
which are indicating the difference between them.
Micro Economics:
1. It deals with an individual’s economic behavior. It deals with the

pricing of a particular commodity in an industry.
2. It deals with the income of a particular set of people.
3. Study of microeconomics is important for resource utilization, public
finance and for taking business decisions.
4. The concepts of micro-economics are independent concepts.
5. The concepts were popularized by the famous Alfred Marshall.
6. These concepts have more theoretical value.
Macro Economics:

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1. It deals with aggregate economic behavior of the people in general.

2. It deals with the general price level in the economy, national income,
accounting etc.
3. Study of macro-economics is important for formulation of economic
policy of the whole nation.
4. The concept of macroeconomics is interdependent on one another.
5. The concepts were popularized by the famous Lord J.M. Keynes.
6. These concepts have more practical value.
So from the above features we can easily make the difference between
Micro economics and Macro-economics.
According to some eminent economists, the subject matter of economics

includes the Price Theory (micro economics), income theory (Macro-
economic), employment theory and growth theory. All these are
interdependent on each other.
Question: What is Globalization? Describe the causes of globalization.

Mention the characteristic of Globalization. Discuss the positive and
negative aspects of Globalization.
Answer: Globalization refers to the increasingly global relationships

of culture, people and economic activity. It is generally used to refer to
economic globalization. Globalization contributes to economic growth in
developed and developing countries through increased specialization.
Definition:
Globalization is the system of interaction among the countries of the world
in order to develop the global economy. Globalization involves
technological, economic, political and cultural exchanges made possible
largely by advances in communication, transportation and infrastructure.
Globalization is a process that has changed the outlook of the world. In a
very broad context, it is used to daily life to wide variety of political,
sociological, environmental and economic trends.

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Causes of Globalization:
Richard G. Harris indicates that three main factors contribute to
globalization. They are-
1. The reduction in trade and investment barriers in the post-world war

II period.
2. The rapid growth and increase in the size of developing countries
economics.
3. Changes in economics.
The most common causes of globalization are described below:
(a) Education: People have always been attracted to learn new things.
Centuries ago, wealthy families used to travel to specific countries for
education. Similarly, today many people have student visas that allow
them to stay in a particular country in order to gain education on a
specific subject. As a result, we know about their countries which
make globalization process faster.
(b) Technological development: Technological progresses have
quickened globalization with the development of the high tech
communication media and rapid transportation facilities. The world
has come closer with advancement in the field of technology.
Through the modern technology, such as internet the world has
become like a tennis ball in the palm of hand and that’s how world
has become a global village.
(c)Improved transportation system: Transportation is one of the least
visible but critical component of the globalization as well as global
economy by supporting a wide array of movements of passengers
and freight between nations. Improved transportation system has
made the global travel and business more convenient and causes
globalization.
(d) Growth of multinational companies: As countries are connected
to the rest of the world they immediately form what a business would
call a market. What this means is that a particular population
represents more people to buy a particular product or service. As
more and more markets are opening up, business people from

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around the globe are coming together to form multinational

companies in order to access to new markets.
(e) Growth of global media: There is no question that all the
globalization trends are made possible with the help of mass media
at both the domestic and international level. The process of
globalization is often portrayed as a positive force which is unifying
widely different societies, integrating them into a “global village” and
enriching all in the process.
(f) Culture: Every nation has its own culture. Visiting another country
we can meet with the new culture. The suitable part of their new
culture attracts us and we try to follow it to enrich our culture. That’s
cultural interaction as well as globalization happens.
(g) Industrialization: With the help of the modern technology
industrial sector is developing day by day. Now industrial world is
very competitive. To keep pace with the competitive world less
developed countries are trying to know the technique of the
developed countries. They are maintaining link with the different
countries of the world far export and import goods. As a result
developed and less developed countries are come closes to share
their market which plays a vital role in globalization.
(h) Diffusion of knowledge: The word ‘diffusion’ simply means to
spread out and that is exactly what any new found knowledge does.
When a new invention or way of doing something pops up, it does
not stay secret for long. In this process knowledge travels globally
and causes globalization.
In fine it can be said that globalization is the right process towards the
building of happy, prosperous and peaceful one world.
Characteristics of Globalization:
The main features of globalization is given below-
1. Liberalization: The freedom of the industrialist/businessman to

establish industry, trade or commerce either in his country or abroad is one
of the main characteristics of globalization. Globalization process is quite
impossible without free exchange of capital, goods, service and
technologies between countries.

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2. Free Trade: Free trade between countries is also an important

characteristic of globalization. Absence of excessive governmental control
over trade is also a prerequisite of globalization process.
3. Globalization of Economic Activities: Control of economic activities by

domestic market and international market is one of the main features of
globalization. Globalization is responsible for the coordination of national
economy and world economy.
4. Connectivity: Localities are being connected with the world by breaking

national boundaries. Now links are being forged between one society and
another, and between one country and another through international
transmission of knowledge, literature, technology, culture and information.
5. Borderless: Globalization is about an increasingly borderless world and

its societal consequences. The causes of globalization are technological,
economic and ideological. The societal consequences are very much in
terms of the diminishing capacity of governance by governments and in
relation to that the rebound against aspects of globalization; against the
dominance of the market, against Americanization and in reaction to the
diminishment of quality of life.
6. International cooperation: The increasing of the multinational
corporations, regional and global organizations leads to the members of the
international community expanding from a single nation to the
transnational corporations, international organizations, and international
non-governmental organizations. In these three groups of actors, except for
the individual international military treaty organization, only the country
and country alliance have the capability of "plate movement".
7. A Composite Process: Globalization is a composite process. Integration

of nation-states across the world by common economic, commercial,
political, cultural and technological ties, creation of a new world order with
no national boundaries are also main features of globalization.
8. A Multi-dimensional Process: Economically, it means opening up of

national market, free trade and commerce among nations, and integration
of national economies with the world economy. Politically, it means limited
powers and functions of state, more rights and freedoms granted to the
individual and empowerment of private sector; culturally, it means
exchange of cultural values between societies and between nations; and
ideologically, it means the spread of liberalism and capitalism.

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9. A Top-Down process: Globalization originates from developed

countries and the MNCs (multinational corporations) based in them.
Technologies, capital, products and services come from them to developing
countries. It is for developing countries to accept these things, adapt
themselves to them and to be influenced by them.
As a result, the values and norms of developed countries are gradually

rooted in developing countries. This leads to the growth of a monoculture -
the culture of the north (developed countries) being imposed on the South
(developing countries). This involves the erosion and loss of the identity
and the cultures of developing countries. Globalization is thus a one-way
traffic: it flows from the North to the South.
Positive Effects:
1. Employment: Considered as one of the most crucial advantages,
globalization has led to the generation of numerous employment
opportunities. Companies are moving towards the developing countries to
acquire labor force. This obviously caters to employment and income
generation to the people in the host country. Also, the migration of people,
which has become easier has led to better jobs opportunities.
2. Education: A very critical advantage that has aided the population is the
spread of education. With numerous educational institutions around the
globe, one can move out from the home country for better opportunities
elsewhere. Thus, integrating with different cultures, meeting and learning
from various people through the medium of education is all due to
globalization. Developing countries or labor-intensive countries have
benefited the most.
3. Product Quality: The onset of international trade has given rise to
intense competition in the markets. No longer does one find limited
number of commodities available. A particular commodity may fetch
hundreds of options with different prices. The product quality has been
enhanced so as to retain the customers. Today the customers may
compromise with the price range but not with the quality of the product.
Low or poor quality can adversely affect consumer satisfaction.
4. Cheaper Prices: Globalization has brought in fierce competition in the
markets. Since there are varied products to select from, the producer can
sustain only when the product is competitively priced. There is every
possibility that a customer may switch over to another producer if the
product is priced exorbitantly. 'Customer is the King', and hence can dictate

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the terms to a very large extent. Therefore, affordable pricing has benefited
the consumer in a great way.
5. Free Movement of Capital: Capital, the backbone of every economy, is
of prime importance for the proper functioning of the economy. Today,
transferring money through banks is possible just by the click of a button,
all due to the electronic transfer that has made life very comfortable. Many
huge firms are investing in the developing countries by setting up
industrial units outside their home country. This leads to Foreign Direct
Investment, which helps in promoting economic growth in the host
country.
6. Communication: Information technology has played a vital role in
bringing the countries closer in terms of communication. Every single
information is easily accessible from almost every corner of the world.
Circulation of information is no longer a tedious task, and can happen in
seconds. The Internet has significantly affected the global economy,
thereby providing direct access to information and products.
7. Transportation: Considered as the wheel of every business
organization, connectivity to various parts of the world is no more a serious
problem. Today with various modes of transportation available, one can
conveniently deliver the products to a customer located at any part of the
world. Besides, other infrastructural facilities like, distribution, supply
chain, and logistics have become extremely efficient and fast.
8. International Trade: Purchase and sale of commodities are not the only
two transactions involved in international trade. Today, international trade
has broadened its horizon with the help of business process outsourcing.
Sometimes in order to concentrate on a particular segment of business it is
a practice to outsource certain services. Some countries practice free trade
with minimal restrictions on EXIM (export-import) policies. This has
proved beneficial to businesses.
9. GDP Increase: Gross Domestic Product, commonly known as GDP, is the
money value of the final goods and services produced within the domestic
territory of the country during an accounting year. As the market has
widened, the scope and demand for a product has increased. Producers
familiarize their products and services according to the requirements of
various economies thereby tapping the untapped markets. Thus, the final
outcome in terms of financial gain enhances the GDP of the country. If
statistics are of any indication, the GDP of the developing countries has
increased twice as much as before.

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Negative Effects:
1. Health Issues: Globalization has given rise to more health risks and
presents new threats and challenges for epidemics. A very customary
example is the dawn of HIV/AIDS. Having its origin in the wilderness of
Africa, the virus has spread like wildfire throughout the globe in no time.
Food items are also transported to various countries, and this is a matter of
concern, especially in case of perishable items. The safety regulations and
the standards of food preparation are different in different countries, which
may pose a great risk to potential health hazards.
2. Loss of Culture: Conventionally, people of a particular country follow its
culture and traditions from time immemorial. With large number of people
moving into and out of a country, the culture takes a backseat. People may
adapt to the culture of the resident country. They tend to follow the foreign
culture more, forgetting their own roots. This can give rise to cultural
conflicts.
3. Uneven Wealth Distribution: It is said that the rich are getting richer
while the poor are getting poorer. In the real sense, globalization has not
been able to reduce poverty. Instead it has led to the accumulation of
wealth and power in the hands of a few developed economies. Therefore
the gap between the elite and the underprivileged seems to be a never
ending road, eventually leading to inequality.
4. Environment Degradation: The industrial revolution has changed the
outlook of the economy. Industries are using natural resources by means of
mining, drilling, etc. which puts a burden on the environment. Natural
resources are depleting and are on the verge of becoming extinct.
Deforestation is practiced owing to the non-availability of land, thereby
drastically reducing the forest cover. This in turn creates an imbalance in
the environment leading to climate change and occurrence of natural
calamities.
5. Disparity: Though globalization has opened new avenues like wider
markets and employment, there still exists a disparity in the development
of the economies. Structural unemployment owes to the disparity created.
Developed countries are moving their factories to foreign countries where
labor is cheaply available. The host country generates less revenues, and a
major share of the profits fall into the hands of the foreign company. They
make humongous profits thereby creating a huge income gap between the
developed and the developing countries.
6. Cut-throat Competition: Opening the doors of international trade has
given birth to intense competition. This has affected the local markets

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dramatically. In recent times the standard of living has improved. People

are therefore ready to shell out extra money for a product that may be
available at a lower price. This is because of the modern marketing
techniques like advertising and branding. The local players thereby suffer
huge losses as they lack the potential to advertise or export their products
on a large scale. Therefore the domestic markets shrink.
7. Conflicts: Every economy wants to be at the top spot and be the leader.
The fast-paced economies, that is the developed countries are vying to be
the supreme power. It has given rise to terrorism and other forms of
violence. Such acts not only cause loss of human life but also huge economic
losses.
8. Monopoly: Monopoly is a situation wherein only one seller has a say in a
particular product or products. It is possible that when a product is the
leader in its field, the company may begin to exploit the consumers. As
there exists no close competitors, the leader takes full advantage of the sale
of its product, which may later lead to illegal and unethical practices being
followed. Monopoly is disastrous as it widens the gap between the
developed and developing countries.
Question: Define Demand. Express law of demand. Show demand

curve expression. Discuss the determiners of demand and exception of
law of demand.
Answer: Generally a desire for a good or service is called demand.
Definition:
Demand may be defines as desire of a consumer to own for a good. But in
economics a desire will be treated as demand if three conditions are
fulfilled-
(a) Desire for a thing

(b) Enough money to pay for it
(c) Willingness to spend the money
According to Penison, “The desire for any commodity backed by ability

and willingness to spend is considered as demand in economics.”
According to Marshall, “The amount demanded increases with a fall in

price and diminishes with a rise in price.”

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According to R.F. Benham, “Desire for any things at a given price is the
amount of it which will be bought per unit of time at that price.”
Law of Demand:
The law of demand state that, “If the price of a commodity rises, demand
falls and if the price falls demand rises.”
In case of this law other conditions about demand should remain

unchanged.
Demand curve from a hypothetical Demand schedule:

Demand schedule refers to the schedule where various quantities of a
commodity or service at various prices for a certain period are presented.
This demand schedule is the base of demand curve. In this case any
demand curve is drawn with the help of a demand schedule. A hypothetical
demand schedule is given below and with the basis of it a demand curve is
drawn later.
Rice Price (Taka) Quantity Demanded (Kilogram)

10.00 20
8.00 40
6.00 60
4.00 80
Above demand schedule shows that if the price of the rice falls the demand
of rice increases. Consumers demand 20kd rice at Tk 10; the demand of rice
increases to 60kg when price is 6.00 Tk
per kg and Tk 4.00 when the demand is
80kg. So, a fall in price increases the
demand and rise in price decreases the
demand.
A demand curve is drawn below with the

help of the hypothetical demand
schedule.
In the figure OX axis indicates the

quantity of demand and OY axis indicates
the price of rice. When price of rice is
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10.00 tk per kg then the quantity of rice is 20 kg. We draw a perpendicular

line form the 10.00 point of OY axis and from 20 point of OX axis and they
meet at the point A. ‘A’ point will be a point of demand curve. Similarly by
joining the other points B, C, D are found. Now by joining A, B, C, D is the
points we get the DDʹ line and this is the demand curve. This is how a
demand curve can be drawn on the basis of a hypothetical demand
schedule.
Determiners of Demand:
The determiners of demand are stated below:
1. Price of a product: Demand of any good directly depends upon that

good’s price. If price increases, demand decreases and if price
decreases, demand increases.
2. Consumer income: One of the most important determiners of
demand is the income of the consumer. If the income increases, then
demand increases and if income decreases the demand also
decreases.
3. Related commodity price: Demand of any commodity not only
depends upon it but also depend on its related products. For example
if the price of paddy is increased then the price of rice, chira, muri etc.
will also raise.
4. Number of sellers and buyers: If number of buyers increases with
the decrease of sellers then demand increases. But if the number of
buyers decreases with the increase of sellers then demand decreases.
5. Climate and weather: Demand also changes with the change of
weather. Example: In summer the demand of cold drinks increases,
but in winter it decreases. In the same way the demand of winter
clothing increases while it is winter but decreases in summer.
6. Distribution of resources: Demand also depends on the distribution
of resources. For example if any society’s most of the resources are
possessed by the higher class family then the demand of luxurious
things increases. But of the resources are possessed by mass people
then the demand of necessary daily goods will increase.
In fact demand depends upon not only in the income of buyer but also
depend upon the related commodity price, buyer’s habit and taste, number

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of buyers, climate weather and distribution of assets. These are the

determiners of demand.
Exception of the law of demand:

1. Change of habit and taste: If the habit and taste of people is
changed then the law of demand doesn’t act here. For an example,
people desire for television, computer, smart phone for the change of
habit and taste. So in spite of increasing the price of these things the
demand doesn’t reduce.
2. Income difference: The law is not in act due to change income such
as if the consumer income increases, demand doesn’t reduce inspite
of increasing the product price.
3. Situational cause: Sometimes demand doesn’t increase ever after
the decreasing of price for situational causes. If any epidemic like
Cholera spreads out in any area then demand will not increase with
the decreasing price of fish.
4. Inferior goods: There are some inferior products such as thick cloth,
thick rice, dal, potato etc. If price of these goods increase then the
amount of demand will not change and it the price decreases then the
amount of demand will not change.
5. Substitute products: In case of changing the price of the substitute
goods of a product then the law of demand doesn’t act. If the price of
wheat increase with the increasing price of rice then demand of rice
will not decrease with the increasing price.
6. Possibility of price rise in future: In primary stage when the price
of goods are high then consumers tend to buy inspite of high price as
there is possibility of price rise in near future.
7. Luxurious goods: There are some goods which people buy to
achieve social pride and honor. For example diamond, gold, high
priced car, luxurious house etc. Economics has described this as a
conspicuous consumption. In this case the law of demand doesn’t
applicable.

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Question: Define Production. Describe four elements of production.

Explain the theory of marginal production return and limitation of
marginal production return.
Answer: Man can neither create matter nor can destroy it. Man only
can create additional utility. This creation of additional utility is called
production.
Definition:
In economics production is generally understood as the transformation of
inputs into output. Production is mainly defined as the creation of utility or
the creations of want satisfying goods and services.
According to Marshall, “In this world human being only can increase the
utility of any object by rearranging it and this process is called
production.”
According to Karl Marks, “In social science, particularly sociology

production is a fundamental concern of the classical theorists of
sociology particularly and most famously in the work.”
Eraser said, “If consumption means extracting utility from, production

means putting utility into.”
Element of Production:
The elements of production have been traditionally classified as Land,
Labour, Capital and Organization. They are discussed below:
1. Land: The main factor of production is land. Normally by means of

land we mean the earth surface. But in economics it is used in vast
sense. In economics land implies all the natural resources. Weather,
climate, light, air, wind, hills, rivers, forests, fishery, sea etc. natural
resources all are included into the land. Land is the basic element of
production.
2. Labour: Second element of production is labour. In general sense
labour implies only the physical labour. But in economics labour
refers to as all those works which are engaged in production process.
Labour can be physical and mental both without labour. This is why

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labour is also referred as the basic element of production as like as

land.
3. Capital: The third element of production is capital. Normally capital
implies the money which are invested into business. But in
economics this term is used with very special meaning. Capital refers
to that part of a man’s wealth which is used in producing further
wealth or which yields an income. Raw materials, machineries etc.
are included into this section. It is a produced mean of production.
4. Organization: Organization is the fourth element of production. To
run the production process accumulating land, labour and capital is
called organization. In present age the importance of organization is
unbelievably huge. Because if the other elements are not
accumulated with care then the probability of production is nothing
but building a castle in the air.
Law of Diminishing Marginal Return:

The law of diminishing return states that,"as producer increases one input
and hold other inputs constant, the marginal product of the varying input
will at least after some point decline. "
In the view of ancient economists, this law is specially applicable for

agriculture sector. Because in agriculture sector amount of land is limited
but the population is on the increase. So, on order to meet the demand of
food supply more and more labour and capital is employed in same land.
So, the total production increases. But production doesn’t increase
proportionally to the increased labour and capital. In which rate labour and
capital is invested, production increases less than that rate.
An example of diminishing marginal returns law of production with table is

stated below:
Amount of Labour and Total Average Marginal

land capital(tk) production production production
1 unit 100 15 15 15
1 unit 200 32 16 17
1 unit 300 42 14 10
1 unit 400 48 12 6

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From above table it is seen that if any farmer invests labour and capital
amount 100 tk in 1 unit land and gets 15 unit rice in 1st year then in 2nd
year he invests labour and capital of amount 200 tk in same land. As a
result total production becomes 32 unit and extra or marginal production
becomes 17 unit. Here extra production has increased in compare to
expenses. Then in 3rd year when the farmer invests 300 tk, then the total
production becomes 42 unit and marginal production becomes 10 unit.
Here extra production amount is less than the ratio of labour and capital. In
4th year in same land 400 tk is invested and total production is 48 unit and
marginal production is 6 unit. Here it is seen that in same land if more
labour and capital is invested then production increases diminishingly.
If more and more labour and capital is invested then production increases,
but marginal production decreases gradually. This is known as the law of
diminishing.
Marginal Return Law:

From the figure given below, the law can be explained:
In the above figure in OX axis labour and capital has been indicated and in
OY axis marginal production has been indicated. MP is the marginal
production curve. If in any land 1 unit means OA amount of labour and
capital is invested then Aa amount of marginal return is found. If AB

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amount of labour and capital is employed then the amount of marginal

return will be Bb. Third case, if BC amount of labour and capital is
employed then the amount of labour return is Cc. In the fourth case when
CD amount of labour and capital is invested then the amount of marginal
return will be Dd.
From above it is seen that, after second stage the marginal return is
gradually decreasing. In figure after b point of MP curve the diminishing
marginal return has been shown. So, if any definite land labour and capital
are invested gradually in large amount, then total production increases but
marginal production decreases. It is the law of Diminishing Marginal
Return.
Limitation of the Law of Marginal Return:

It may, however, be noted that the law of Diminishing Returns is based on
the following limitations and assumptions:
1. At primary stage: In the very early stage of production the

diminishing marginal return law may not be applicable. If in the first
stage of production the amount of labour and capital is not enough
and if extra labour and capital is employed later then the production
will increase instead of decreasing of extra production.
2. Modernization of cultivation process: If the process of cultivation
is improved by introducing scientific method then the law of
diminishing marginal return law will not applicable.
3. Using the improved seeds and pesticides: If the agriculture sector
is developed by increasing the use of higher quality seeds, applying
chemical fertilizer and pumping process then this law won’t be
applicable.
4. Natural causes: If for any natural cause the fertility of land increases
instead of decreasing, the marginal production increases but doesn’t
decrease.
5. Assumption: The law is also based on the assumption that the
technology and the techniques of production remain unaltered but if
better methods of production are used, the stage of diminishing
return can be postponed.

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Apart from all these limitations, the law of Diminishing Marginal has
universal applicability and stands as a landmark in the history of economic
doctrines.
Question: What is economic development? Describe the indicators of

economic development.
Answer: Development is essential to change and enrich our life.

Development in the field of economy is very much needed to improve the
quality of people’s life.
Definition:
Economic development is the increase in the standard of living in a nation’s
population with sustained growth from a simple low income economy to
modern high income economy. So that’s why Rugner Nurks describes
economic development as follows, “Economic development is that which
has much to do with human endowment, social attitude, political
condition and historical accident.”
Economic indicators of development:

Economic indicator: Economic indicator is simply any economic
statistic such as the unemployment rate, GDP, NDP or the inflation rate that
indicate how well the economy is doing and how well the economy is going
to do in the future.
Economic indicators of development are described below:
1. Real national income: Real national income measures the money

value of the flow of goods and services produced within in country.
Measuring the level and rate of growth of national income is very
much important in the field of economic development of a country.
2. GDP per capita: GDP per capita is the total value of goods and
services produced within a country divided by the total population.
As by this, development is measured, it seems to be the most
important indicator.

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3. Economic welfare: Basically economic welfare implies that how well

people are doing. It is usually measured in terms of Real Income real
GDP. Equal allocation of resources, an increase in real output and real
incomes suggest people are better off and therefore there is an
increase in economic welfare. Such in this way, economic welfare acts
as an indicator of economic development.
4. Increase in standard of living: If GDP per capita increases, rate of
education is on the increase, market price is stable, average income
increases, morality rate decreases, unemployment problem is solved
then automatically the standard of living of people will increase. In
such a way it is also a standard indicator of economic development.
5. Natural resources: Natural resources are main things of any country
in the field of economy to be developed. If the countries blessed with
natural resources can work hard, they can bring economic
development. For example China has vast natural resources and so
the economic development is growing rapidly.
6. Human resources: If people of any country can be trained and make
skilled properly then they turned into skilled human and this type of
human sources are very much essential to bring economic
development. For example Japan, Russia, United States. All of the
citizens of Japan are skilled and trained and so they have become the
human resource of that country.
7. Capital accumulation: For any production process in order to bring
economic development needs mostly capital accumulation. If the
capital of production are scattered here and there, they are like
valueless things. But if they are accumulated then this will surely
change the economy.
8. Organizer: Organizer is also vital index of economic development as
he accumulates all the elements of production. If production is
successfully increased then economic development will be easy to
achieve.
9. Technology: Day by day our technology is becoming more
convenient to use. So, if by using technology the development process
of a country can be accelerated then the development in the field of
economy must be changed.
10. Division of labour: Division of labour is mostly important in
production process as production is the vital factor to achieve
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economic development. If division of labour is successfully done then

the work of production will get the proper speed and accuracy.
11. Political factors: Political unrest is very much harmful for any kind
of economic development. So, if the political unrest is less than the
production as well as economic development will be in the right way.
At last it can be said that, the indicators of economy suggest that the
economy is going to do better or worse in current and future time.
Question: Define National Income. What is the importance of national

income?
Answer: National income measures the money value of the flow of

output of goods and services produced within an economic over a period of
time. National income is very important for the citizen of a country. It has a
great impact on products market value.
Definition:
National income can be defined as the total value of all the goods and
services produced within a country plus income from abroad in a particular
time period usually one year.
The total net value of all goods and services produced within a nation over
a specified period of time, representing the sum of wage profit, interest and
pension payment to the residents of a nation.
It is also the value of all income account over a specified period to residents
of a country and consisting of wages.
According to AC Pigou, “national income is the part of the objective

income of a community including of course, income derived from
abroad which can be expressed in money.”
According to Hanson, “National income is the sum of all personal

income derived from economic activity.”
According to P.A. Samuelson, “National income is the money value of

the annual flow of goods and services in an economy.”

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According to Simon. S Kujnet, “National income is the net output of

commodities and services flowing during the year from the countries
productive system in the hands of the ultimate consumers.”
Importance of National Income:

The computation of national income is one of the very important statistics
for a country. It has several uses and therefore there is a great need for its
regular preparation. The following are some of the important uses of
national income:
1. Level of Economic Welfare: The national income estimate reveals

the overall performance of the country during a given financial year.
With the help of this statistics the per capita income is calculated. It is
obtained by dividing the total national income by the total
population. With this we can do the economic welfare in terms of
standard living.
2. Role of Economic Growth: With the help of national income
statistics we can know whether of the economy is growing or
declining. It helps us to know the conditions of a country economy. If
the national income is growing over a period of year it means that the
economy is growing and if the national income has reduced as
compare to the previous it means that the economy is detraining.
3. Distribution of Wealth: One of the most important objectives that is
achieved after calculating national income is to check it’s distribution
arranged in different categories of income such as wages, profits,
rents and interest. It helps to understand that how well the income is
distributed among the various factors of the economy and their
distribution among the people as well.
4. Ease in Planning: Since national income estimates also contain the
figure of saving consumption and investment in the economy, it
proves to be a valuable guide to economic policy relating to planning
and active government intervention in the economy. The estimates
are used as a data for future planning also.
5. Formulation of Budget: Budget is an effective tool for planning and
control. It is prepared in the light of the information regarding
consumption, saving and investment which are all provided by the
national income estimates.
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6. Alarming about Economic Problem: National income statistics also

help us to know about the economic problems of underdeveloped
countries.
Question: Write short notes on GNP, GDP and NNP. Discuss about
the problems on measuring national income.
Answer: Short notes on GNP, GDP and NNP are given below:
GNP:
GNP refers to Gross National Product. GNP is the total value of all final
goods and services produced within a nation in a particular year, plus
increase income earned by its citizens, minus income of non-residents
located in that country. So,
GNP= GDP+( X-M)
Here, GDP = Gross Domestic Product
X = Income earned by its citizens
M = Income of non-residents
GNP is one that measures the economic condition of a country; a higher

GNP leads to a higher quality of living.
GDP:
GDP refers Gross Domestic Product. It is a measure of all of the services and
goods produced in a country over a specific period, classically a year. It
includes all of private and public consumption, government outlays,
investments and exports less imports that occur within a defined territory.
So,
GDP= C+G+NX+I
Here, C = Private consumption
G = Government outlays
I = Sum of all the country’s business spending on capital

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NX = Exports-imports
NNP:
To create GNP we use many technical instruments through a year. For
using these instruments we get some losses. By subtracting these losses
form GNP we get the NNP which refers Net National Product. So, we can
write,
NNP= GNP-L
Here, L = Amount of GNP required to purchase new goods to maintain

existing stock.
Problems of measuring national income:

Problems of measuring national income are divided into three methods.
They are:
1. Production method
2. Income method
3. Expenditure method
They are described below:
1. Facing problems in production method: The total produced goods

refer to national income. But some problems arise when the
produced goods are counted. They are:
(a) Frequent count of same product: Sometimes it appears that
when national income is measuring many products and goods,
some of them are counted two or three times. For this we cannot
get the actual amount of goods. It is a great problem in measuring
national income.
(b) Counting problem of foreign exchange: Sometimes it is hard
to account the foreign exchange because many of us do not give
the real information and sometimes we do not get the exact
amount of money which is sent in abroad. So, we can’t count the
national income properly.
(c) Dual counting problem: It refers to the counting the same
product in different stages. For an example, let a farmer produced
wheat, someone demolishes it in rice mill, after that the bread
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maker makes breads with it. When the national income is

counted, that time the value of same wheat is counted in three
stages which makes the national income wrong.
2. Facing problems in income method: In measuring time of national
income we face the problems described below:
(a) Black marketing: Many people work without recording by
the authorities. Basically many of them work in black markets.
For this reason the authority cannot get the actual amount of
national income.
(b) Problems to detect passive taxes: We should disregard the
passive taxes in measuring national income but we always stay
in smoke about it because we can’t detect it appropriately. So
this is another problem of measuring national income.
(c)Disregarding problem of extra income: It is hard to detect
the unemployment pay, help by money, relief, beggar’s income.
So, we cannot attach or detach it actually form national income.
So it varies day to day.
(d) Unproductive interest problem: Sometimes government
gives loan to the poor or to the people who are interested to
take loan with a low interest. So, if this interest is counted with
national income, we can’t get the actual figure of our national
income.
3. Problems in expenditure method: Problems in expenditure
method are as follows:
(a) Problem to measure actual spent: In Bangladesh for many
problems like corruption, we don’t get the true information and
actual figure of spent national income. For this we get the
problem to measure the national income.
(b) Problems to count interest: The government gives the loan
many productive places but sometimes many people do not
back the loan because of losses. So this is the loss of national
income and it is a curse for national income.
(c)Lagging of non-government expenditure: Sometimes the
combination of government and non-government expenditure
is very poor. For this government does not get the exact
information of the expenditure of non-government. So the
national income gets fault.
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So, in fine it is obvious that government and people both should be serious
to take effective steps to measure national income accurately.
Question: Define Market Economy. Write down the Characteristics,

advantages and disadvantages of Market Economy.
Answer: Market economy is an important part of economics. Mainly

market economy is a capitalistic economic system in which there is free
competition and prices are determined by the interaction of supply and
demand.
Definition of Market Economy:

A market economy is a system in which decision regarding resource
allocation, production and consumption and price levels and competition
are made by the collective actions of individuals or organizations seeking
own advantage. In its pure form, a market economy is an economy absent
of government subsides, incentives or regulations. No economy of the
world is a complete market economy. Most countries have a market
economy combined with greater or lesser government regulation.
Characteristics:
A market economy has seven main characteristics:
1. People buy what they want but only if they can pay for it.
2. Money becomes necessary for life.
3. People are forced to do anything and to sell anything in order to get
money.
4. Maximizing profit rather than satisfying social needs is the aim of all
production and investment.
5. Discipline over those who produce the wealth of society is no longer
exercised by other people (as in slavery and feudalism) but by money
and the conditions of work that one must accept in order to earn
money.
6. Rationing of scarce goods takes place through money (based on who
has more than others) rather than through coupons (based on who
has worked harder or longer or has a greater need for the good).

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7. Since no one is kept from trying to get rich and everyone is paid for
what they do, people acquire a sense that each person gets (and has
got) what he deserves economically, in short, that both the rich and
the poor are responsible for their fates.
Advantages of Market Economy:

Whether the society is developed or underdeveloped, a market economy
has several important advantages and several major disadvantages. Among
the advantages, we find the following:
1. Competition between different firms leads to increased efficiency as

firms do whatever is necessary-including laying off workers-to lower
their costs.
2. Most people work harder (the threat of losing one’s job is a great
motivator).
3. There is more innovation as firms look for new products to sell and
cheaper ways to do their work.
4. Foreign investment is attracted as word gets out about the new
opportunities for earning profit.
5. The size, power and cost of the state bureaucracy is correspondingly
reduce as various activities that are usually associated with the
public sector are taken over by private enterprises.
6. The forces of production or at least those involved in making those
things people with money al home or abroad want to buy undergo
rapid development.
7. Many people quickly acquire the technical and social skills and
knowledge needed to function in this new economy.
8. A great variety of consumer goods become available for those who
have the money to buy then; and
9. Large parts of the society take on a bright, merry and colorful air as
everyone busies himself trying to sell something to someone else.
These are the main advantages of the market economy and in his article
Professor Kang gives a good account of them.
Disadvantages of Market Economy:

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There are also major disadvantages. Among the disadvantages we find the
following:
1. Distorted investment priorities: As wealth gets directed into what

will earn the largest profit and not into what most people really need
(so public health, public education and even dikes for periodically
swollen rivers receive little attention);
2. Worsening exploitation of worker: Since the harder, faster and
longer people work- just as the less they get paid- the more profit is
earned by their employer (with this incentive and driven by the
competition, employers are forever finding new ways to intensify
exploitation);
3. Overproduction of goods: Since workers as a class are never paid
enough to buy back in their role as consumer the ever growing
amount of goods that they produce.
4. Unused industrial capacity: The amount of unsold goods has
resulted in a large percentage of machinery of all kinds lying idle,
while many pressing needs-but needs that the people who have them
can’t pay for-go unmet.
5. Growing unemployment: Machines and raw materials are available
but using them to satisfy the needs of the people who don’t have the
money to pay for what could be made would not make profits for
those who own the machines and raw materials and in a market
economy profits are what matters.
6. Growing social and economic inequality: The rich get richer and
everyone else gets poorer, many absolutely and the rest in relation to
the rapidly growing wealth of the rich.
7. Increase in corruption in all sectors of society: The corruption in
all sectors of society is on increase which further increases the power
of those with a lot of money and puts those without the money to
bribe officials at a severe disadvantages.
8. Increase in all kinds of economic crimes: Economic crimes are
increasing with people trying to acquire money illegally when legal
means are not available and sometimes even when they are.
9. Reduced social benefits and welfare: Since such benefits are
financed at least in part by taxes, extended benefits generally means
reduces profits for the rich. Furthermore any social safety makes

29
workers less fearful of losing their jobs and consequently less willing
to do anything to keep them.
10. Worsening ecological degradation: Since any effort to improve the
quality of the air and of the water costs the owners of industry money
and reduces profits, our natural home becomes increasingly
unlivable.
Market economy is one of the two pure models of economic organization,

the other one being command economy or centrally planned economy. In
market economy the business firms are run and managed as independent
business organizations that compete with each other.
Question: What is disaster management? Discuss the various kinds of

disaster. Discuss the different stage of disaster management. Find out
the main problems of disaster management in Bangladesh.
Answer:
Disaster Management:
Management means the act of dealing with people or situation in a
successful way. Disaster management is an applied science that includes
the systematic observation and analysis of disasters to improve measures
relating to prevention, mitigation, preparedness, emergency, response and
recovery. It means to introduce proper planning so that probable disasters
can be avoided easily. It also includes preparing necessary steps to make
people understand the alarming situation that may occur for natural
disaster.
Aim of Disaster Management:

There are three main aims behind disaster management. They are-
(i) To avoid and minimize the loss to the lives, properties, and
environment that occurs during natural disaster.
(ii) To ensure proper distribution for every kind of relief goods and
rehabilitation for the affected people within a short time if
possible.

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(iii) To complete the recovery activities properly. However, to reduce

the possibility of disaster and minimize the loss should also be the
aim of disaster management.
Types of Disaster:
According to UNITAR (United Nations Institute for Training and Research),
there are four kinds of Disaster .They are –
1. Natural disaster
2. Prolonged disaster
3. Man-made disaster
4. Accident disaster
Details about the above disasters are given below:
Natural disaster: Natural disaster–is a disaster caused by the impact of a
natural hazard. There are some disasters that happen naturally. Here
people have nothing to do. These disasters are flood, cyclone, tornado, river
erosion, earthquake etc. These disasters bring untold sufferings and
miseries to millions of people.
Prolonged disasters: This kind of disasters is very harmful for its
character. Prolonged disasters undoubtedly under economic development
and destroy infrastructures. Drought is an example of prolonged disaster.
Man-made disaster: War, unplanned town, polluted environment are
man-made disasters. Tough natural disasters or prolonged disasters can’t
be avoided easily man-made disasters can easily be avoided if man wants.
Accidental disaster: Another kind of disaster is accidental disaster. This
kind of disaster generally happened through different kinds of accidents.
Stages of Disaster Management:

Prevention, mitigation, preparedness are the main elements of disaster
management. The total implementation of these elements should be
ensured before disaster. If any element becomes incomplete, proper
disaster management will be hampered.
There are three stages of disaster management. They are-

1. Pre-disaster stage
2. Disaster stage and
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3. Post-disaster stage
Now the details about the above stages are given below:
1. Pre-disaster stage: When necessary steps are adopted before occurs
any disaster, it is called pre-disaster stage. This stage can play an important
role in minimizing losses that happen for disasters. For this reason, some
effective measures should be taken in this stage. The measures should be
taken in this stage are given below:
(i) To make people conscious about disaster,
(ii) To introduce plans for making blocks against disaster,
(iii) To train the concerned officers, representatives,
(iv) To stock sufficient relief for the affected people and to distribute
the relief goods property,
(v) To protect the shelter centers,

(vi) To telecast the news regarding disaster by using radio and
television.
2. Disaster stage: In this stage, some measures should be taken
immediately or a great loss to properties may happen. The following
measures should be taken in this stage.
(i) Try to save lives and properties
(ii) To investigate into the losses.
(iii) To give relief goods to the affected people.
(iv) To do rehabilitation works.
(v) To give proper medical treatment.
3. Post disaster stage: In this stage, measures are taken to rebuild the
affected infrastructures. That are taken are given bellow:
(i) To plan for agriculture.
(ii) To give lone for agriculture.
(iii) To repair the affected living places.
(iv) To repair mills and factories.
(v) To repair roads.
Problems of Disaster Management: There are some problems being

encountered during the management of disaster. If these constraints are

32
not addressed in time, it may greatly affect the disaster management

operation and thereby reduce the capability of the organizations/ agencies
including Armed Forces.
1. Absence of Common Forum: In our country, there is less opportunity to
exchange views among the agencies involved that hinders mutual
understanding and cooperation.
2. Lack of Co-ordination: Sometimes the works of different agencies are
not well co-ordinated and may turn into an utter failure.
4. Lack of Public Awareness: People of our country are not fully aware of
the destructive effects of natural disaster. That’s why the loss of lives in our
country is so high. So the people of our country specially the people of the
areas which are mostly vulnerable to the natural disaster should be made
aware of natural disaster.
5. Lack of Skilled People: Disaster management is the task of skilled
personnel. But the people who are appointed to do the task are not
properly trained.
3. Confusion about Jurisdiction of Work: In all situations, the role of each
agency should be clearly defined. Without it destroys the congenial
atmosphere.
4. Lack of Mutual Respect: In most cases officers of civil and military
administration suffer from ego-centric complexities. These create rigidity
and hinder smooth functioning.
Question: Discuss the functions of marketing.
Answer: Marketing is important to every small business, helping

companies increase revenue and profit by meeting customers’ needs
effectively. Although one person or one department is generally
responsible for managing the seven functions of marketing, it’s important
for all employees to understand customer needs so they can develop the
right products and provide the highest standards of customer service.
1. Marketing Information Management

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Managing marketing information helps you understand your customers’

needs. You can gather information by reviewing published market research
reports, asking your sales team for feedback or carrying out a survey using
a market research firm. You should also monitor product review sites and
social media, such as Facebook and Twitter, where you can find
information on consumers’ needs and attitudes toward products.
2. Distribution
Your distribution strategy determines how and where customers can
obtain your products. If you market products to a small number of business
customers, you may deal with them directly through a sales team. If your
business expands to other regions or countries, it may be more cost
effective to deal with customers through local distributors. Companies
marketing consumer products distribute them through retail outlets or,
increasingly, via the Internet.
3. Product/Service Management
Marketing provides valuable input to product and service development.
Information on customers’ needs helps to identify the features to
incorporate in new products and product upgrades. Marketing also
identifies opportunities to extend a product range or launch existing
products into new sectors.
4. Pricing
Pricing plays an important role in determining market success and
profitability. If you market products that have many competitors, you may
face strong price competition. In that situation, you must aim to be the
lowest-cost supplier so you can set low prices and still remain profitable.
You can overcome low price competition by differentiating your product
and offering customers benefits and value that competitors cannot match.
5. Promotion
Promotion makes customers and prospects aware of your products and
your company. Using promotional techniques, such as advertising, direct
marketing, telemarketing or public relations, you can communicate product
benefits and build preference for your company’s products.
6. Selling

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Marketing and selling are complementary functions. Marketing creates

awareness and builds preference for a product, helping company sales
representatives or retail sales staff sell more of a product. Marketing also
supports sales by generating leads for the sales team to follow up.
7. Financing
Successful marketing provides a regular flow of revenue to pay for business
operations. Marketing programs that strengthen customer loyalty help to
secure long-term revenue, while product development programs open new
revenue streams. Financing also plays a role in marketing success by
offering customers alternative methods of payment, such as loans,
extended credit terms or leasing.
Question: What is market segmentation? Discuss the importance of

market segmentation.
Market Segmentation:
It may be defined as a process of splitting or dividing potential customers
into certain groups or segments sharing similar levels of needs. The
definition explains that the process is simply a division of markets into
target groups. It is creating sub-sets of a market based on similar
characteristics of consumers with similar demands and providing them
with a product to satisfy their need in a much better way than it could have
been otherwise. In this article, we explain the importance of the concept
giving examples wherever necessary.
According to Philip Kotler, market segmentation means "the act of

dividing a market into distinct groups of buyers who might require
separate products and/or marketing mixes."
According to William J. Stanton, "Market segmentation in the process of

dividing the total heterogeneous market for a good or service into
several segments. Each of which tends to be homogeneous in all
significant aspects."

35
Advantages/Significance of Market Segmentation:

1. Facilitates consumer-oriented marketing: Market segmentation
facilitates formation of marketing-mix which is more specific and
useful for achieving marketing objectives. Segment-wise approach is
better and effective as compared to integrated approach for the
whole market.
2. Facilitates introduction of suitable marketing mix: Market
segmentation enables a producer to understand the needs of
consumers, their behavior and expectations as information is
collected segment-wise in an accurate manner. Such information is
purposefully usable. Decisions regarding Four Ps based on such
information are always effective and beneficial to consumers and the
producers.
3. Facilitates introduction of effective product strategy: Due to
market segmentation, product development is compatible with
consumer needs as there is effective crystallization of the specific
needs of the buyers in the target market. Market segmentation
facilitates the matching of products with consumer needs. This gives
satisfaction to consumers and higher sales and profit to the
marketing firm.
4. Facilitates the selection of promising markets: Market
segmentation facilitates the identification of those sub-markets
which can be served best with limited resources by the firm. A firm
can concentrate efforts on most productive/ profitable segments of
the total market due to segmentation technique. Thus market
segmentation facilitates the selection of the most suitable market.
5. Facilitates exploitation of better marketing opportunities:
Market segmentation helps to identify promising market
opportunities. It helps the marketing man to distinguish one
customer group from another within a given market. This enables
him to decide his target market. It also enables the marketer to utilize
the available marketing resources effectively as the exact target
group is identified at the initial stage only.
6. Facilitates selection of proper marketing programme: Market
segmentation helps the marketing man to develop his marketing mix
programme on a reliable base as adequate information about the
needs of consumers in the target market is available. The buyers are
introduced to marketing programme which is as per their needs and
expectations.
7. Provides proper direction to marketing efforts: Market
segmentation is rightly described as the strategy of "dividing the

36
markets in order to conquer them". Due to segmentation, a firm can

avoid the markets which are unprofitable and irrelevant for its
marketing purpose and concentrate on certain promising segments
only. Thus due to market segmentation, marketing efforts are given
one clear direction for achieving marketing objectives.
8. Facilitates effective advertising: Advertising media can be more
effectively used because only the media that reach the segments can
be employed. It makes advertising result oriented.
9. Provides special benefits to small firms: Market segmentation
offers special benefits to small firms. The resources available with
them are limited as they are comparatively new in the market. Such
firms can select only suitable market segment and concentrate all
efforts within that segment only for better marketing performance.
Such firms can compete even with large firms by offering personal
services to customers within the segment selected.
10. Facilitates optimum use of resources: Market segmentation
facilitates efficient use of available resources. It enables a marketing
firm to use its marketing resources in the most efficient manner in
the selected target market. The marketing firm selects the most
promising market segment and concentrates all attention on that
segment only. This offers best results to the firm in terms of sale,
profit and consumer support as compared to the results available
from spending such resources on the total market.
In conclusion, it can be said that market segmentation offers benefits not

only to marketing firms but also to customers. The marketing job will be
conducted efficiently and the available resources will be utilized in a better
mariner. These advantages also suggest the importance of market
segmentation and make a case in its favor.
Question: Discuss the relation between technological change and

Importance of Technology: In the present age technology is playing very

effective role in increasing the rate of economic growth. Today each
country considers it is the basic tool of economic development. Only capital
cannot bring development in the country. It is technical progress along
with capital which can boost the rate of economic growth. The impact of
technology can be judged by the following facts:

37
1. Use of Natural Resources: In the developing countries there are large

numbers of natural resources like land and minerals which are not utilized
properly. Technology helps to utilize these resources more effectively.
2. Best Use of Capital: Technology improves the marginal efficiency of

capital. The output rate of capital increases. It makes the capital more
productive and profitable.
3. Saving of Time: Due to technological progress goods can be produced in

a minimum time. As the demand of any commodity increases, the supply
can be produced in short period of time. So it has saved the time of the
producer.
4. Specialization: Technological progress has increased the specialization

and division of labour in all the sectors of the economy. Now due to this
goods are produced on large scale.
5. Improvement in Quality: Technology has improved the quality of goods

and services. Now the goods have also been standardized. Now the goods
are available in the best packing according to their quality.
6. Expansion of Industry: The use of technology has expanded the

industry. It has reduced the cost of production. The goods are now
available on lower possible prices while the profit of the producer is also
normal.
7. Improvement in Labour Efficiency: Technology has also improved the

efficiency of labour. It has increased the labour output per hour. The labour
is getting better reward. Now basic facilities like food, clothing, housing and
education are improving.
8. International Trade: Information technology has brought great

revolution in the international trade. Due to internet facility market has
expanded. The business is flourishing developing countries should adopt
the technology according to their stage of development and within the
frame work of their economic policy. People may purchase or sell anything
from any country.

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9. Importance for Research: Technology has led to increases of huge

investments in scientific research in various fields. Due to this high degrees
of technical capabilities have been achieved by the various countries.
10. Saving of Labour: Technology has also reduced the burden of work
from labour with the help of computers and machines now the time of
labour has been saved.
11. Increase in National Income: Technology is very useful in getting the

more output from the same resources. It increases the production and real
income of the country.
12. Development of all the sectors: Now developed and underdeveloped

countries are trying to install improved technology in all the sectors, like
agriculture, industry, education, transport, banking etc.
It stimulates the long term economic growth. Technology has pivot role in
all the countries of the world.
Question: Discuss the difference between growth and development in

economics.
Answer:
Economic Growth Economic Development

1. Economic growth is a quantitative1. Economic development is a
term. qualitative term.
2. Economic growth refers to an 2. Economic development implies
increase in the real output of goodschanges in income, savings and
and services in the country. investment along with progressive
changes in socio-economic structure
of country.
3. It is less important due to the 3. It is more important because it
attachment with income level only. discusses an economy in wider
sense.
4. Economic growth is less wide and 4. Economic development is wider
less comprehensive than economic and more comprehensive than
development. economic growth.
39
5. Growth relates to a gradual 5. Development relates to growth of

increase in one of the components of human capital indexes, a decrease in
Gross Domestic Product: inequality figures and structural
consumption, government spending, changes that improve the general
investment, net exports. population’s quality of life.
6. Economic growth is a more 6. Economic development is more

relevant metric for progress in relevant to measure progress and
developed countries. But it’s widely quality of life in developing nations.
used in all countries because growth
is a necessary condition for
development.
7. Growth is concerned with 7. Development is concerned with
increase in the economy’s output. structural changes in the economy.
8. Economic growth can be 8. The most accurate method of
measured by an increase in a measuring development is the
country’s GDP. Human Development Index.
9. Economic growth is the key issue 9. Economic development is the
under traditional economics. main issue under modern economics
According to this approach “take literature. Accordingly, “take care of
care of growth and poverty would poverty and growth would take care
eliminate automatically”. of itself.”
10. In case of economic growth 10. In case of economic development
strong and effective institutional efficient institutional set-up is
set-up is not necessary. necessary. Effective and strong
institutional revolution is the sign of
11. Economic growth is a short-term 11. Economic development is a long
process. We can measure income term process about 20 to 25 years.
changes yearly. So, its time span Because it takes years to change
may be of one year. social, economic and institutional
set-up.
12. Economic growth is the problem 12. Economic development is the
of developed countries of the world. problem of developing countries.
13. Economic growth is not 13. The concept of economic
concerned with the political development is incomplete without

40
stability. political stability.

14. Economic growth does not 14. In case of economic development
ensure the freedom from the out dependence on other countries
dependence of foreign countries.
reduces and country adopts the self-
reliance policy.
15. In economic growth, use of 15. For the economic development
advanced technology is not use of modern technology is
appreciated. compulsory.
Question: Define Managerial Economics.
Answer:
Managerial Economics may be defined as the study of economic theories,

logic and methodology which are generally applied to seek solution to the
practical problems of business. Managerial Economics is thus constituted of
that part of economic knowledge or economic theories which is used as a
tool of analysing business problems for rational business decisions.
Managerial Economics is often called as Business Economics or Economic
for Firms.
DEFINITION OF MANAGERIAL ECONOMICS:

According to Haynes, Mote and Paul-“Managerial Economics is
economics applied in decision making. It is a special branch of
economics bridging the gap between abstract theory and managerial
practice.”
According to McNair and Meriam-“Business Economics consists of
the use of economic modes of thought to analyse business situations.”
According to Spencer and Seegelman-“Business Economics
(Managerial Economics) is the integration of economic theory with
business practice for the purpose of facilitating decision making and
forward planning by management.”
According to Mansfield-“Managerial economics is concerned with
application of economic concepts and economic analysis to the
problems of formulating rational managerial decision.”

41
Question: What is “Law of Supply”?

Answer: The law of supply is a fundamental principle of economic theory
which states that, all else equal, an increase in price results in an increase
in quantity supplied. In other words, there is a direct relationship between
price and quantity: quantities respond in the same direction as price
changes. This means that producers are willing to offer more products for
sale on the market at higher prices by increasing production as a way of
increasing profits.
In non-differential terms, the law of supply can be expressed as:
(p-p´)(y-y´) 0
Where, y is the amount that would be supplied at some price p and y´ is the
amount that would be supplied at some other price p´.
Thus for example if p p´ then y y´.
Question: What is opportunity cost?

Answer: In microeconomic theory, the opportunity cost of a choice is the
value of the best alternative forgone, in a situation in which a choice needs
to be made between several mutually exclusive alternatives given limited
resources. Assuming the best choice is made, it is the "cost" incurred by not
enjoying the benefit that would be had by taking the second best choice
available.
The New Oxford American Dictionary defines it as "the loss of potential
gain from other alternatives when one alternative is chosen".
Opportunity cost is a key concept in economics, and has been described as
expressing "the basic relationship between scarcity and choice". The notion
of opportunity cost plays a crucial part in ensuring that scarce resources
are used efficiently. Thus, opportunity costs are not restricted to monetary
or financial costs: the real cost of output forgone, lost time, pleasure or any
other benefit that provides utility should also be considered opportunity
costs.


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1

Question: What is Micro and Macro Economics? Discuss the

Answer: The study of economics is broadly divided into two

Microeconomics (from Greek prefix micro-meaning ‘small’+ ‘economic’) is a

According to Professor Boulding, “Micro economic seeks to explain the

Prepared By: Hasan Bin Firoz(533)

Macroeconomics (From Greek prefix ‘Macro’ meaning ‘large’ +

Professor Boulding, “Macro-economic deals not only with individual

Subject matter/Importance of Micro Economics:

Important points of its significance are mentioned as under:

1. Microeconomics is of great help in the efficient management of the

Prepared By: Hasan Bin Firoz(533)

Subject matter/Importance of Macro Economics:

Difference between Micro and Macro Economics:

1. It deals with an individual’s economic behavior. It deals with the

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1. It deals with aggregate economic behavior of the people in general.

According to some eminent economists, the subject matter of economics

Question: What is Globalization? Describe the causes of globalization.

Answer: Globalization refers to the increasingly global relationships

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1. The reduction in trade and investment barriers in the post-world war

The most common causes of globalization are described below:

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around the globe are coming together to form multinational

1. Liberalization: The freedom of the industrialist/businessman to

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2. Free Trade: Free trade between countries is also an important

3. Globalization of Economic Activities: Control of economic activities by

4. Connectivity: Localities are being connected with the world by breaking

5. Borderless: Globalization is about an increasingly borderless world and

7. A Composite Process: Globalization is a composite process. Integration

8. A Multi-dimensional Process: Economically, it means opening up of

Prepared By: Hasan Bin Firoz(533)

9. A Top-Down process: Globalization originates from developed

As a result, the values and norms of developed countries are gradually

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dramatically. In recent times the standard of living has improved. People

Question: Define Demand. Express law of demand. Show demand

Answer: Generally a desire for a good or service is called demand.

(a) Desire for a thing

According to Penison, “The desire for any commodity backed by ability

According to Marshall, “The amount demanded increases with a fall in

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In case of this law other conditions about demand should remain

Demand curve from a hypothetical Demand schedule:

Rice Price (Taka) Quantity Demanded (Kilogram)

A demand curve is drawn below with the

In the figure OX axis indicates the

10.00 tk per kg then the quantity of rice is 20 kg. We draw a perpendicular

1. Price of a product: Demand of any good directly depends upon that

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of buyers, climate weather and distribution of assets. These are the

Exception of the law of demand:

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Question: Define Production. Describe four elements of production.

According to Karl Marks, “In social science, particularly sociology

Eraser said, “If consumption means extracting utility from, production

1. Land: The main factor of production is land. Normally by means of

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labour is also referred as the basic element of production as like as

Law of Diminishing Marginal Return: