Macro economics , GDP

and GNP
Syeda Zakia Minahil
What is macroeconomics?
• Definition: Macroeconomics is the branch of economics that
studies the overall economic performance of a country or region,
focusing on factors such as inflation, unemployment, GDP
growth, and government policies.

• Importance: Macroeconomics helps us comprehend and

analyze the broader economic picture, guiding policymakers in
making informed decisions for economic stability and growth.
Macroeconomic Metrics
5 indicators

Gross Domestic Unemployment Rate: Inflation Rate:

Product (GDP): Percentage of the labor Rate at which the general
Measure of a country's force without employment. level of prices for goods and
economic output. services rises.

Fiscal Policy: Government's Monetary Policy:

use of taxation and spending Control of money supply and
to influence the economy. interest rates by a central
bank.
GDP
The total monetary or market
value of all the finished goods
and services produced within a
country's borders in a specific
period.
Three approaches of calculating GDP
Importance of GDP
The Role and Significance of GDP in the National Economy
 GDP plays a crucial role in the nation's economy. It shows whether the
economy is expanding by producing more goods and services or
contracting due to a decrease in production. For example, during the
economic recovery following the 2008 financial crisis, the U.S. GDP's
steady growth signaled an improving economy.

How GDP Relates to Living Standards and Economic Health

 Higher GDP translates into a better standard of living and economic
health. For instance, countries with strong GDP growth, such as the
U.S. or Germany, tend to have higher living standards.
Conclusion
In conclusion, understanding Gross Domestic
Product and its calculation methods is vital for
any financial professional. It serves as a
measure of a nation's economic health and
performance, influencing investment decisions,
economic forecasting, and shaping the financial
market landscape.
By mastering these principles, private equity
professionals, investment bankers, and
corporate finance professionals can make more
informed decisions and achieve better
outcomes in their respective fields. In the
evolving world of finance, staying updated on
these macroeconomic fundamentals is not just
desirable, it is essential.
 GNP
Gross national product (GNP) is the
value of all goods and services made
by a country's residents and
businesses, regardless of production
location. GNP counts the investments
made by U.S. residents and
businesses—both inside and outside
the country—and computes the value
of all products manufactured by
domestic companies, regardless of
where they are made.
Difference between GDP and GNP
Market Failure and Free
Rider Problem
Syed Raza Hussain
Market failure
• Market failure occurs when
the allocation of goods and
services in a market
economy is not efficient.
This can result from
various factors such as
externalities, public goods,
and imperfect competition.
 Types of market failure
 Externalities: Unintended side effects affecting
third parties.
 Public Goods: Goods that are non-excludable and
non-rivalrous.
 Imperfect Competition: Lack of competition in
the market leading to suboptimal outcomes.
Externalities
Public goods and Private
goods
Tooba Khalil
Public goods

 Public goods are goods that are non-excludable and non-rivalrous.

 Non-exclusion means that individuals cannot be effectively excluded from
consuming or benefiting from the good, even if they do not contribute to its
provision.
 Non-rivalry means that one individual's consumption of the good does not
reduce its availability for others to consume
 These goods are often provided by the government or through
collective efforts
 Individuals can enjoy the benefits of a public good without paying for it.
Examples
• Street lighting
• National defense
• Clean air
• Public parks
Characteristics
Private goods
 Private goods are both excludable and rivalrous.
 Excludability means that individuals can be effectively excluded from
consuming or benefiting from the good if they do not pay for it.
 Rivalry means that one individual's consumption of the good reduces
its availability for others.
 Private goods are typically provided by private firms operating in a
market economy, where consumers pay for the goods and firms
compete to supply them.
 Private goods are the goods that can only consume by one party at a
time.
Examples
• Vehicles
• Clothing
• Food and Beverages
• Electronics
Characteristics
 They are privately owned.
 Their owner can dispose of them at his convenience.
 Its use is not public.
 They present rival consumption.
 They present exclusion.
 Generally, its consumption requires a certain economic contribution.
 They have exclusivity generally granted by a previous economic
contribution
Monopoly and Perfect
Competition
Abdullah Zahid
Perfect Competition and
Monopoly
Learn about the characteristics of perfect competition and monopoly in this
presentation. Discover how these two market structures differ and their impact
on consumers and producers.

by Usman Shafiq
What is Monopoly?

Definition Example
Monopoly refers to a market structure where a single Electricity markets are often considered examples of
seller controls the market with no close substitute for monopolies, with one provider controlling the market.
its product.
Characteristics of Monopoly

1 Single Seller 2 No Close Substitute

Monopolies have a single seller, giving them There are no close substitutes for the product
complete control over the market, including offered by the monopoly, making it difficult
the price they charge. for consumers to switch to other options.

3 High Entry Barriers 4 Abnormal Profit

The barriers to entry for new firms are high, Because monopolies have sole control of the
making it difficult for new firms to enter the market, they can charge higher prices and
market and compete. enjoy higher profits than firms in a competitive
market.
What is Perfect Competition?
Definition Examples
Perfect competition refers to
a market structure where
The stock market and
there are many buyers and
agriculture markets are
sellers, with homogeneous
considered examples of
products and free entry and
perfect competition.
exit from the market.
Characteristics of Perfect Competition

1 Many buyers and sellers

There are numerous buyers and sellers in the market, making it impossible for any individual to
influence the market price.

2 Homogeneous products
All products are identical or similar, so buyers have no preference for one product over another.

3 Free entry and exit

New firms can easily enter the market when profits are being made, and existing firms can leave
if they are incurring losses.

4 Perfect information
All market participants have access to the same information, allowing them to make informed
decisions.
What Does it Mean for Consumers?

Perfect Competition Monopoly

Consumers benefit from lower prices, greater choice, Consumers may pay higher prices for lower quality
and better quality products in a competitive market. products due to the lack of competition and sole
control over the market.
Monopolistic competition
and oligopoly
Muhammad Usman Shafiq
Monopolistic
Competition and
Oligopoly
Welcome to my presentation on the characteristics of monopolistic
competition and oligopoly. Today, we'll explore these two types of
market structures and explain the main features that differentiate
them.
Monopolistic Competition
Product Differentiation
Monopolistic competition is
characterized by a large
number of firms that offer
differentiated products.
Companies use advertising to
create a unique identity and
distinguish their product
from competitors.
Many Sellers
In this market structure,
there are many firms
competing with each other.
No company has a dominant
share of the market, and
firms have little control over
the price of the product.
Relatively Easy Entry
and Exit
Another characteristic of
monopolistic competition is
that it's relatively easy for
firms to enter and exit the
market. This means that
there are no significant
barriers to entry, and new
companies can easily start
competing with existing
ones.
Examples of Monopolistic Competition
The restaurant industry is a
common example of
monopolistic competition,
as each restaurant has a
unique atmosphere, menu,
and overall experience that
sets it apart from its
competitors.
Clothing stores such as
The electronics market is
outfitters store is another
also an example of
example of monopolistic
monopolistic competition,
competition. Each store has
as each company has its
its own brand, style, and
own brand, product
selection, which can attract
features, and design, which
customers who resonate
can appeal to different
with their unique offerings.
customer preferences and
needs.
Oligopoly

1 Few Large Firms 2 Interdependence Among Firms

Only a few large companies dominate Oligopolistic firms are interdependent,
the market, producing and selling a anticipating and closely watching the
significant share of the total output. actions of their competitors.

This graph illustrates the market structure of

oligopoly, where a few large firms control the
market and compete with each other. The
interdependence among these firms is shown
through the strategic decision-making process.
Oligopoly Example: Car Manufacturing
Industry

The car manufacturing industry is a prime example of an oligopolistic market. Only a few large
firms dominate the market and produce the majority of cars sold worldwide. This concentration of
power among a select few companies leads to interdependence and strategic decision-making.
THANK YOU