ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Business Administration)

ECONOMIC ANALYSIS (522)

CHECKLIST

SEMESTER: SPRING, 2010

This packet comprises the following material:

1. Text Book (one)

2. Course Outline
3. Assignment No. 1, 2
4. Assignment Forms ( 2 sets )

In this packet, if you find anything missing from the above mentioned material,
please contact at the address given below:

Mailing Officer
Services Block No. 28
Allama Iqbal Open University
H-8, Islamabad.
Phone Nos. 051-9057611-12

Humaira Jahanzeb
Course Coordinator
 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Business Administration)

WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING
THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD
OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM
OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN
“AIOU PLAGIARISM POLICY”.

ASSIGNMENT No. 1
(Units: 1–4)
Course: Economic Analysis (522) Semester: Spring 2010
Level: MBA Total Marks: 100
Pass Marks: 40
Note: Attempt all questions.
Q. 1 Discuss in detail the term economic resources with reference to service industry.
Explain the link between scarcity, choice and opportunity cost. (20)

Q. 2 Why do consumers, producers and governments have to make choices? (20)

Q. 3 What is meant by a production possibility frontier? Illustrate your answer. What

other names are used instead of production possibility frontier? (20)

Q. 4 Discuss the contrasting features of a market based economy to a command

economy and give their advantages and disadvantages. (20)

Q. 5 According to the central deduction of economic theory, under certain conditions

markets allocate resources efficiently. “Efficiency” has a special meaning in this
context. This theory suggests that markets will produce an outcome such that,
given the economy’s scarce resources, it is impossible to make anybody better off
without making somebody else worse off. Economic theory, in other words, offers
a proof of Adam Smith’s big idea: in a market economy, if certain conditions are
met, an invisible hand guides countless apparently un co-coordinated individuals to
a result that is, in one plausible sense, the best that can be done.
In rich countries, markets are too familiar to attract attention. Yet certain awe is
appropriate. When Soviet planners visited a vegetable market in London during the
early days of Perestroika, they were impressed to find no queues, shortages, or
mountains of spoiled and unwanted vegetables. They took their hosts aside and said:
“we understand, you have to say it’s all done by supply and demand. But can you tell
us what is really going on? Where your planners and what are their methods?
1. Explain what is meant by efficiency.
2. Market economy.
3. Comment on two conditions which have to be met for a market economy to work
efficiently.
4. Explain what is meant, in the context of the extract, by “its all done by supply and
demand”.
5. What was the role of Soviet planners in the former Soviet Union? (4 x 5 = 20)

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GUIDELINES FOR ASSIGNMENT # 1:
You should look upon the assignments as a test of knowledge, management skills, and
communication skills. When you write an assignment answer, you are indicating your
knowledge to the teacher:
 Your level of understanding of the subject;
 How clearly you think?
 How well you can reflect on your knowledge & experience?
 How well you can use your knowledge in solving problems, explaining
situations, and describing organizations and management?
 How professional you are, and how much care and attention you give to what you
do?
To answer a question effectively, address the question directly, bring important related
issues into the discussion, refer to sources, and indicate how principles from the course
materials apply. The student must also be able to identify important problems and
implications arising from the answer.
For citing references, writing bibliographies, and formatting the assignment, APA format
should be followed.

ASSIGNMENT No. 2
Total Marks: 100
Pass Marks: 40
This assignment is a research-oriented activity. You are required to obtain information
from a business/commercial organization and prepare a report of about 1000 words on
the issue allotted to you to be submitted to your teacher for evaluation.

You are required to select one of the following issues according to the last digit of your
roll number. For example, if your roll number is P-3427180 then you will select issue No.
0 (the last digit):-
Issues:
0. Define each of the following terms carefully and give examples PPF, scarcity,
productive efficiency, input and output. Relate these terms to examples in the local
environment.
1. Many scientists believe that we are rapidly depleting our natural resources. Assume
that there are only two inputs (labour and natural resources) producing two goods
(musical concerts and gasoline) with no improvement in society over time. Show
what would happen to the PPF over time as natural resources are exhausts. How
would invention and technological improvements modify your answer? On the
basis of this example, explain why it is said “economic growth is a race between
depletion and invention.”
2. What is the social responsibility of mangers? Comment on social responsibility as a
growing trend in your paper.
3. Contrast command versus market economy? Give examples for your answer.
4. Give three examples of specialties that a manager has to face in an organization
and also comment on how these responsibilities have changed over time?

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5. Discuss the social responsibilities that a manger has to face in an organization and
also comment on how these responsibilities have changed over time?
6. “Lincoln freed the slaves. With one pen stroke he destroyed much of the capital,
the South had accumulated over the years.” Comment.
7. What importance does the 4economic environment have for a business or non
business enterprise? Please discuss while giving clear and concrete arguments and
justification.
8. Define carefully what is meant by a demand schedule or curve. State the law of
downward sloping demand. Illustrate the law of downward sloping demand with
two cases from your own experience.
9. Define the concept of a supply schedule or curve. Show that an increase in supply
means a rightward and downward shift of the supply curve. Contrast this with the
right ward and upward shift in the demand curve implied by an increase in demand.
What does you, experience suggest?

The report should have the following format:

1. Title page
2. Acknowledgements
3. An abstract (one page summary of the paper)
4. Table of contents
5. Introduction to the issue (brief history & significance of issue assigned)
6. Practical study of the organization (with respect to the issue)
7. Data collection methods
8. SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to the
issue assigned.
9. Conclusion (one page brief covering important aspects of your report)
10. Recommendations (specific recommendations relevant to issue assigned)
11. References (as per APA format)
12. annexes (if any)
GUIDELINES FOR ASSIGNMENT No. 2
 1.5 line spacing
 Use headers and subheads throughout all sections
 Organization of ideas
 Writing skills (spelling, grammar, punctuation)
 Professionalism (readability and general appearance)
 Do more than repeat the text
 Express a point of view and defend it.

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 ECONOMIC ANALYSIS
Course Outline (522)
Unit 1: Nature of Economics and Basic Economic Concepts
• Economic: Micro and Macro Economics
• Positive and Normative Economics
• Is Economics Science or an Art?
• Basic Economic Concepts:
• Resources and its scarcity
• Scarcity and Choice
• Opportunity Cost and its uses
• Production Possibility Frontier
• Law of increasing cost or diminishing return
• The concept economic efficiency and growth
Types of Economies
• Command Economy
• Market Economy
• Mixed Economy
• Islamic Economic System
• Prices System and Resource Allocation

Unit-2: Analysis of Demand and Supply

• Utility Analysis
• Consumer Behavior
• Cardinal and Ordinal Utility
• Marginal Utility
• Law of Diminishing Marginal Utility
• Law of Equi-marginal Utility
• Limitations of this Law
• Utility and Demand
• Meaning of Demand
• Types of Demand
• Law of Demand
• Limitations of Law of Demand
• Derivation of Individual and Market Demand Curve and the Concept of
Consumer Surplus
• Law of Supply
• Derivation of Individual and Market Supply Schedule
• Equilibrium of Supply and Demand Curves
Elasticity of Demand and Supply
• Measurement of the elasticity of demand
• Price elasticity of demand

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 • Income elasticity of demand and cross-price elasticity of demand
• The determinants of the price elasticity of demand
• Relationship between elasticity of demand and the revenue
• Price elasticity of supply in the short and long run
• The applications of and the uses of elasticity of demand and supply
• Supply and demand analysis and the intervention of the government
Indifference Curve Analysis
• Scale of preferences
• Indifference curves
• Properties of indifference curve
• Marginal rate of substitution
• Budgetary constraint and the determination of consumer equilibrium
• Income substitution, price effects and derivation of demand curve
• Superiority and weaknesses of indifference curve technique
• Applications and uses of indifference curve technique

Unit 3: Forms of Business Organizations and the Theory of Production

• The nature of the firm
• Sole proprietorship
• Partnership
• Private and public limited companies
• Production Function
• Total, average and marginal product
• Law of diminishing return
• Returns to scale
• Analysis of costs: Fixed, variable and total costs
• Average fixed, average variable, average total costs and marginal costs
• Relationship between production and costs
• Derivation of average fixed cost, average variable costs, average total costs
and marginal cost curves
• Efficient level of production
• Long-run costs: Economies and diseconomies of scale
• Firm demand curve and the market demand curve

Unit 4: Market and Market Structures

• Market: meaning and classification of markets
• Perfect and imperfect markets
• Forms of market structures: perfect competition, monopolistic competition,
monopoly and oligopoly
• Conditions for the determination of price and output relationship of the firm
in each market in the short run and long-run

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Unit 5: Pricing of Factors of Production
• Factor markets
• Factor supply and the concept of marginal factor cost
• Firm demand for factors of production
• Labour, labour supply and demand curve and the equilibrium in the labour
market
• Determination of equilibrium wage rate under perfect and imperfect market
conditions
• Interest, rent and profit
• Supply of capital
• Interest, credit market, rate of interest
• Rent, pure and economic rent
• Profit: sources of economic profit
• Concept of externalities and the need for government intervention in
imperfectly competitive market conditions.

Unit 6: The Measurement of National Income and the Determination of Equilibrium

Level of Income
• Concept and measurement of national income
• Gross national output and gross national expenditure
• Difficulties in the measurement of national income
• National income and circular flow of income and expenditure
• Consumption function and the determination of equilibrium level of income
and output.
• Inflationary and deflationary gap
• Determinants of investment and the marginal efficiency of capital

Unit 7: Fiscal and Monetary Policy

• Public versus private finance
• Government spending: taxes and transfer
• Government and aggregate demand
• Effect of government spending on output
• The effects of taxation on output
• The combined effects of spending
• Money: definition and functions of money
• Functions of central bank and commercial banks
• Money demand, money supply and the determination of interest rate
• Monetary policy, instruments and objectives of monetary policy

Unit 8: Inflation and Unemployment

• Different types of inflation, causes and consequences
• Different types of unemployment and causes

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• Relation between inflation and unemployment
• Methods of controlling inflation and unemployment

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Unit 9: International Trade, Balance of Payments & International Financial System
• Need for international trade
• International trade theory
• Principle of absolute and comparative advantage
• Structure of balance of payments
• Equilibrium in the balance of payments
• Causes and consequences of balance of payments dis-equilibrium
• Methods of controlling balance of payments dis-equilibrium
• Relationship between international trade, balance of payments and the
determination of exchange rate
• Types of foreign exchange rate determination system
• Fixed, floating and flexible exchange rates and their advantages and
disadvantages
• International Monetary Fund: structure, functions and role in the
determination of exchange rate system
• World Bank: functions and role in development of less developed countries
• GATT, rounds of GATT and the New World Order, World Trade
Organization (WTO).

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