issues in macroeconomics

Nayyab Arif BB14015Aqib javed BB14060

Naima Saeed BB14026Dua Fatima BB14007

Zaryab Tahir BB14058Zimran Ali BB14047

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Introduction of Economics.

The term “Economics” comes from ancient “GREEK”.

Adam smith was father of economics.

Economics is a study of how individuals, gournments ,businesses and other organizations make choices that effect the allocation and distribution of scarce resources.

There are two general areas of economics:

Micro-economics

Macro-economics

MICRO-ECONOMICS

oMicro-economics is the study of how individual , consumers and producers make the decisions.

o This include:

o Markets , production, cost and efficiency, specialization, demand and supply, firms, uncertainty and game theory, market failure and public sector.

MACRO-ECONOMICS. Macro-economics is a branch of

economics dealing with the performance, structure, behavior and decision making of an economy as a whole, rather than individual markets.

This include:

Growth, business cycle, unemployment, inflation and monetary policies.

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Demand

Willingness and ability to buy

Presenter by: Aqib javed

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Law of Demand :All other factors remaining constant, the quantity demanded of a good increases when its price also decreases.

This relationship can be shown by a demand schedule, a demand curve or a demand function.

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Demand Schedule

Demand Schedule shows the different quantities of goods that a consumer is willing to buy at various prices.

Prices and quantities normally move in opposite directions

Prices Quantity

4 28

8 15

12 5

16 1

20 0

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Curves,

Demand Curve

Movement Along with demand curve

Demand Curve Shifted Right ward

Demand Curve Shifted Down ward

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Relationship between the price and quantity demanded:

Curve showing the relationship between the

price of the good and the quantity demanded.

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Demand Function:

There is,

Qd (Dependent) Price (Independent)

Q = f(P)

Where Q=quantity and P = price of a good.

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The movement from A to B is due to the

change in price of the good all other factors

remaining unchanged

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Factors of Demand Primary Factor,

Price

Other Factors,

Weather

Trend

Advertisement

Income

Government policies

Price of Substitutions

Presenter by : Aqib Javed 17

Shift of the Demand Curve

( Shifting upward ) (Shifting downward )

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DEMAND ANALYSIS Demand analysis on Pepsi.

1. UPWARD SHIFT

2. DOWNWARD SHIFT.

When the demand of product increases, price being constant, due to change in other factor e.g; increase in income.

Q

P

O

Upward demand curve

Income of the consumer Increase Demand of Pepsi increase

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What do you mean by the term SUPPLY?

Supply is a schedule or curve showing thevarious amounts of a product that produces arewilling and able to make available for sale at each of aseries of possible prices during a specific period.

LAW OF SUPPLY:-

As price rises, the quantity supplied rises; as price falls, the quantity

supplied falls. This relationship between price and quantity, called the LAW OF SUPPLY.

“There is always a positive or direct relationship between price and quantity supplied.”

SUPPLY SCHEDULE:-

A table which contains values

for the price of a good and the quantity

that would be supplied

at that price.

SUPPLY CURVE:-

* Supply curve corresponds with the price and quantity supplied. And its an up sloping curve.

* Price is independent and located along Y-axis in the supply curve.

* Quantity supplied is dependent and located along X-axis in the supply curve.

EXAMPLE OF SUPPLY CURVE:-

FACTORS THAT AFFECT SUPPLY:-

Resource Prices. Technology. Taxes Producer’s Expectations. Number of sellers. And many others.

If any determinant changed, there is a shift in supply curve.

May be supply will increase or may be it will decrease.

If the price of the product is changed there

is a movement along the supply curve.

Presented BY:

Dua Fatima..

BB14007

What is market equilibrium???“A situation in which the supply

Of an item is exactly EQUAL to

Demand”

Equilibrium :Equilibrium point

Equilibrium price

Equilibrium quality

Graph..

Factors effecting market equ. :Surplus: Shortage:

Qs Qd Qs Qd

Price decrease price increase

Shifting of curves:

Price Factor: price floor: (min. price)

Price selling: (max. price)

Invisible Hand: Phrase intro by ADAM SMITH..

The un-observable force..

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How to use scarce resources to fulfill human needs?

Economic systems vary from country to country because of social and political policies Generally there are three categories of economic systems

1.private enterprise system

2.planned economies

3.combination of 1 and 2

Types of competitions between business firms: 1.Pure competition

2.Monopolistic competition

3.Oligopoly

4.Monopoly

Types of planned economies: Socialism

Communism

Presented By:

Zimran Ali

Roll no: BB14047

MacroeconomicsoMacroeconomics has been derived from Greek word “MAKROS”

which means “LARGE”.

oMacroeconomic is the study of large part of the economy. i.e. the whole country.

o The study of economic behavior of the economy as a whole & not the individual economic units of the economy.

MacroeconomicsProf. Boulding:

“Macroeconomics deals not only with individual

quantities but with the aggregates of these quantities, not with the

individual incomes, but with national income, not with individual

price, but with prices level, not with individual output, but with the

national output.”

Business Cycle “A trade cycle is composed of good trade characterized by rising prices

and low unemployment percentages, alternation with periods of bad trade characterized by falling prices and high unemployment percentages”.

Keynes

According to Joseph Business Cycle has 4 stepsExpansion: Increase in production and prices,

Low interests rates.

Recession: Drops in prices and in output high interests rates.

Depression: stock exchanges crash and multiple bankruptcies of firms occur.

Recovery/Revival: Stocks recover because of the fall in prices and incomes.

Business Cycle

Causes of Business CycleExternal factors

i. Inventions and innovation:

ii. Wars and political events:

Monetary policy Monetary policy is one of the ways that the U.S. Government attempts to

control the economy. If the money supply grows too fast, the rate of inflation will increase; if the growth of the money supply is slowed too much, then economic growth may also slow.

Fiscal policy Fiscal policy is the means by which a government adjusts its spending

levels and tac rates to monitor and influence a nation’s economy. It is the sister strategy to monetary policy through which a central bank influences a nation’s money supply.

Inflation, deflation and hyper inflation Inflation:

inflation means a sustained increase in the aggregate or general price level in an economy. Inflation means there is an increase in the cost of living.

Between August 1974 and August 1978, the rate of inflation feel from 25% to 8%.

Deflation:

deflation is a fall in the price level of the economy. It means there will be a negative inflation rate

Inflation, deflation and hyper inflation Hyper inflation:

this is generally considered to occur when inflation is greater than 1000%. With hyper inflation money loses its value so rapidly that nobody wants to use it as a medium of exchange

In 1920s Germany had inflation of 100 billion%

In 1946 Hungary had inflation of 42,000 billion

per cent

Unemployment Unemployment occurs when a person who is actively searching for

employment is unable to find work.

In simple words we can say measure the friction of labor force that is out of work is called unemployment.

Questions???