NOTE: Do not rely on notes only do refer to class lectures and book or internet for proper study.

These
notes are for a brief overview and easy understanding. Detail schedules and graphs are in your class
notes.

How to prepare economics paper?

First go through notes provided to you, and then study lecture notes you have written in notebooks

And finally if you have time and want to have good marks in paper then study book too.

Most of the time economics final paper is from macro economics, however it is also possible that one or
two question is from microeconomic, so for that you should go through following topics present in your
note book.

i) Law of demand , supply, ,marginal utility , Production possibility curve

ii) Utility and its types , elasticity and its types and market equilibrium
How to attempt answer?
Proper attempt and presentation of paper is the key to grab high marks. Buy quality black
and blue marker, pen, and pointer. Write proper answer having following topics.
i) Introduction (it is your understanding of the topic and how you introduce the topic)
ii) Definition ( it is replication of book definition or definition available in notes , you
may also define in your own words )
iii) Explanation ( you extend the topic with illustration and examples )
iv) Schedule ( where required e.g law of demand etc)
v) Graph (graph is necessary draw proper graph with pencil as in case of laws, ppc etc)
vi) Conclusion ( sum up the whole idea in two three lines)

Elasticity of demand

Degree of responsiveness of the quantity demanded of a commodity to change in some market variables
e.g price ,income etc

Types of elasticityof demand

Price elasticity of demand

Degree of change in demand for a commodity in response to given change in price.

Elasticity of demand = percentage change in quantity demanded/ percentage change in price

There may be perfectly elastic demand and perfectly inelastic demand

i) Perfectly elastic demand is when all of the quantity of a commodity is demanded at

prevailing price or a little change in price of a commodity drops its demand to zero.
 ii) Perfectly inelastic demand is when it remain unchanged despite changes in price of a
commodity

How to measure price elasticity of demand

There are followings methods to measure price elasticity of demand

i) Total outlay /expenditure method

ii) Percentage method
iii) Point elasticity method
iv) Arc elasticity method

Determinants of elasticity of demand

i) Nature of commodity
ii) Fashion and habitual good
iii) High price and low price goods

Importance of elasticity of demand

i) Guide in imposing taxes

ii) Devaluation of currency
iii) Guide for monopolist
iv) Guide in wage payment

Income elasticity of demand

Rate of responsiveness of demand of a commodity due to change in income. OR
percentage change in demand due to percentage change in income.
Cross elasticity of demand
When the price of commodity B effects the quantity demanded of commodity A this relation
is known as cross elasticity. Or the rate of responsiveness of quantity demanded of good A
to change in price of good B.

Market Equilibrium
Price of commodities are determined by the force of demand and supply
The equilibrium of a market refers to a situation where the demand and supply balance
each other.
Some concepts to study for exam
National accounting
The process of estimating national income
Disposable income
Total net amount left with individual and household when they have paid direct taxes.
DI=PI-direct tax
Per capita income
To know the average income of a country per head of population it is obtained when we
divide NI by the population of a country we get PCI
PCI = NI/Population
Difficulties of barter system
i) Double coincidence of want
ii) Lack of common measure of value
iii) Indivisibility of goods
iv) Difficulty in storing of value
v) Difficulty in borrowing and lending

Unemployment and under employment

Unemployment is a situation where a person is mentally and physical competent to
have a job and still does not find a job.
Whereas underemployment is when a person get a job not in accordance to his
physical and mental capacities
Causes
i) Lack of education
ii) Lack of skill and training
iii) Small government and industrial sector
iv) Overpopulation
v) Corruption
Remedies
i) Extend education to people of Pakistan
ii) Foundation of training and skill institution
iii) Extend industrial sector
iv) Investment in e technology
v) Population control
vi) Meritocracy
Consumer behavior
The behavior of the people regarding to selection , purchasing, and
consumptions of goods and services for the satisfaction of their
wants is known as consumer behavior .
Indifference curve
A curve that show all the combination of two goods ( x and Y) which
give equal level of satisfaction to the consumer.
Assumptions of IC
I) Consumer must be rational
II) Consumer must tell which combination give higher
satisfaction

Properties of IC
I) Downward slope
II) Convex to the origin
III) Never intersect each other

Budget line/ budget constraint

Budget line or budget constraint show all combination of
two goods which a consumer buy within his given income at
a particular price.
Suppose income is 100
Price of x is 20
Price of y is 10
Good x good y income
0 10 100
1 8 100
2 6 100
3 4 100
4 2 100
5 0 100
Change in budget line
BL depend upon income and price any increase or decrease
in both there will be change in B.L.
Consumer equilibrium
When a consumer has chosen a combination which he think
has a highest satisfaction he is said to be in equilibrium .

Individual demand
Quantity demanded by a single buyer.
Market demand
Total demand of all the buyers in the market we get market
demand by adding all the individual deamand.
Demand curve
When negative /inverse relation of price and quantity
demand is shown on a graph this is known as demand
curve.