Economic Development

Economics - social science that focuses on how products and services are produced
- focuses on efficiency in production and exchange
- study of scarcity and its effects on the use of resources

Microeconomics – economics is personal

- covers a small part of the economy

Microeconomics – economics is universal

- study of how the economy operates as a whole

FOUR KEY CONCEPTS

1. Scarcity - a good or service is in more demand than it is offered, the supply is
inadequate
- pertains to our limited supply of resources
2. Supply and Demand - market's ability to generate a good/service is referred to as
supply
- market's desire to purchase the good/service is referred to as demand
3. Cost and Benefit - Businesses utilize a cost-benefit analysis as part of a systematic
procedure to determine which options to take and which to disregard
4. Incentives - a reward or kind of motivation offered in money terms.
- modifies the parties' innate behavior to achieve the desire response
a. Intrinsic – sense of satisfaction and personal fulfillment, picking up a new skill for fun
b. Extrinsic – offering tangible incentive for completing task, money

Economic Categories
THE PROCUCTION POSSIBILITIES FRONTIER (PPF) - graphed curve that shows the potential
output of two items when they both rely on the same scarce commodity to be manufactured
- Also known as the Production Possibility Curve

SUPPLY AND DEMAND THEORY - interaction between supply and demand has an impact on
pricing
- equilibrium price is the one at which supply and demand are balanced.

Economic Development - growth in a nation's wealth and standard of living

- implies better real earnings, higher life expectancy, and etc.
- describes the process the general population's health status, wellbeing, and academic
performance improves
OBJECTIVES OF ECONOMIC DEVELOPMENT
1. To reduce unemployment
2. Achieve economic stability
3. Increase the standard of living for all citizens

NATURE OF ECONOMIC DEVELOPMENT

1. Traditional Economics - choices like production and distribution are influenced by tradition
2. Political Economics - combined when we analyze modern society from a political and economic
perspective
3. Development Economics - focuses on enhancing living standards in the world's poorest nations
while taking into account variables

PRINCIPLES OF ECONOMIC DEVELOPMENT

- SET THE RIGHT GOALS
- GROW FROM WITHIN
- BOOST TRADE
- INVEST FROM PEOPLE AND SKILLS
- CONNECT PLACE

MEASURES OF ECONOMIC DEVELOPMENT

1. Gross Domestic Product (GDP) - Measures the value of goods and services produced by a nation
2. Gross National Product (GNP) - total cost of all finished goods and services produced by all of a
nation's residents during a specific fiscal year, regardless the place they were produced
3. The Consumer Price Index (CPI) - measure of the average change overtime in the prices paid by
urban consumers for a market basket of consumer goods and services

SUSTAINABLE DEVELOPMENT GOALS

1. NO POVERTY
2. ZERO HUNGER
3. GOOD HEALTH AND WELL-BEING
4. QUALITY EDUCATION
5. GENDER EQUALITY
6. CLEAN WATER AND SANITATION
7. AFFORDABLE AND CLEAN ENERGY
8. DECENT WORK ANDECONOMIC GROWTH
9. INDUSTRY INNOVATION AND INFRASTRUCTURE
10. REDUCED INEQUALITY
11. SUSTAINABLE CITIES AND COMMUNITY
12. RESPONSIBLE CONSUMPTION AND PRODUCTION
13. CLIMATE ACTION
14. LIFE BELOW WATER
15. LIFE ON LAND
16. PEACE, JUSTICE, AND STRONG INSTITUTIONS
 17. PARTNERSHIPS FOR THE GOALS
COMPARATIVE ECONOMIC DEVELOPMENT

The best-known system is that of the International Bank for Reconstruction and Development (IBRD),
more commonly known as the World Bank

FOUR INCOME CLASSIFICATIONS

1. Low-Income Countries - having a per capita gross national income of $1,025 or less
2. Lower-Middle Countries - per capita gross national income between $1,026 and $4,035
3. Upper-Middle Countries - per capita gross national income between $4,036 and $12,475
4. High-Income Countries - per capita gross national incomes of $12,476 or more

BASIC INDICATORS OF DEVELOPMENT: REAL INCOME, HEALTH, AND EDUCATION

1. GROSS DOMESTIC PRODUCT (GDP)
2. GROSS NATIONAL INCOME (GNI) - the total domestic and foreign value added claimed by the
country's residents GNI = GDP+ (Exports- Imports)
3. PURCHASING POWER PARITY (PPP) - the amount of a nation's currency that is required to
purchase an identical basket of goods/services as $1 in the U.S.

HOLISTIC MEASURES OF LIVING LEVELS AND CAPABILITIES

Human Development Index (HDI) – means of measuring socioeconomic development based on
measures of health, income, and education Index= (Actual Min.) / (Max. – Min.)

PRICES: FREE, CONTROLLED, AND RELATIVE

PRICE - the amount of money expected, required, or given in payment for something
- serves as rationing device
- a transmitter information that often relates to the relative scarcity of a good
RATIONAL DEVICE - means for deciding who gets what of variables resources and goods

FREE PRICE - an economic system where prices are decided by exchange of demand and supply and the
prices resulting from it is taken as a signal

PRICE CEILING - a government-mandated maximum price above which legal trades cannot be made
PRICE FLOOR – a government-mandated minimum price above which legal trades cannot be made
ABSOLUTE PRICE - The price of a good in money terms.
RELATIVE PRICE - Opportunity cost, The price of a good in terms of another good