Introduction to the Economics of Development

Topics: Supply and demand, Economics, Market Pages: 39 (10726 words) Published: May 8, 2013
Einstein College of Engineering

BA 912 ECONOMIC ANALYSES FOR BUSINESS Unit I DEVELOPMENT ECONOMICS.   Development economics or the economics of development is the application of economic analysis to the understanding of the economies of developing countries in Africa, Asia, and Latin America. It is the sub discipline of economics that deals with the study of the processes that create or prevent economic development or that result in the improvement of incomes, human welfare, and structural transformation from a predominantly agricultural to a more advanced industrial economy. The subfield of development economics was born in the 1940s and 1950s but only became firmly entrenched following the awarding of the Nobel Prize to W. Arthur Lewis and Theodore W. Schultz in 1979. Lewis provided the impetus for and was a prime mover in creating the sub discipline of development economics.

As a subfield concerned with "how standards of living in the population are determined and how they change over time" (Stern), and how policy can or should be used to influence these processes, development economics cannot be considered independently of the historical, political, environmental, and sociocultural dimensions of the human experience. Hence development economics is a study of the multidimensional process involving acceleration of economic growth, the reduction of inequality, the eradication of poverty, as well as major changes in economic and social structures, popular attitudes, and national institutions. Development economics covers a variety of issues, ranging from peasant agriculture to international finance, and touches on virtually every branch in economics: micro and macro, labor, industrial organization, public finance, resource economics, money and banking, economic growth, international trade, etc., as well as branches in history, sociology, and political science. It deals with the economic, social, political, and institutional framework in which economic development takes place. 1. The study of economic development has been driven by theories of economic development, which have developed along the lines of the classical ideas, the Marxist idea, or a combination of both. 2. Some approaches have focused on the internal causes of development or underdevelopment, while others have focused on external causes. 3. Economic growth increase in output and income has been used as a substitute for development and, in some cases, has been treated as synonymous with development. 4. Economic growth and economic development have been mostly studied by means of cross-country econometric analysis.

Einstein College of Engineering

ECONOMIC PROBLEMS 1. 2. 3. 4. 5. 6. Scarcity, choice and the basic economic problem Opportunity costs, allocation of resources Production possibility curve and productive efficiency Positive and normative statements Markets versus planning, free-market system, command economy Economic models.

Scarcity, choice and the basic economic problem  Inflation, unemployment, pollution, energy shortages and government deficits are some of the complex problems confronting an economy, which have an impact at the micro level also. These problems arise due to the fact that resources are limited while human wants are unlimited.  This leads to dissatisfaction, causing human being to look for ways to fulfill their needs. Thus scarcity leads to the necessity of making choices. Problems of choice arise at all levels - at the level of the individual, at the level of producers, and at the level of the overall economy.  Scarcity results when natural resources, human resources and capital resources are not available in sufficient quantity to satisfy all wants. So a producer has to decide what he wants to produce using a particular resource.  For example, if he chooses to produce paper for textbooks from a stand of trees, then no other product can be produced from that particular stand of trees. Yet, there are many...
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