EconDev Notes Chapter 1
EconDev Notes Chapter 1
Economics
• Study of scarcity
• Household management
• Study of production and distribution of goods and services
Economy
Economic Growth
Economic Development
Market Value
• Market value is the price a good or service fetches when bought or sold
• Used to measure national income and output
• Price multiplied by the number of products available for sold
1. Product Method
o Evaluates the economy industry-by-industry
o Measures value-added tax through the product chain
o Example: Selling rice grain
▪ Harvest to Manufacturing = 20 pesos
▪ Manufacturing to Retail = 35 pesos
▪ Retail to Consumer = 50 pesos
▪ GDP = 50 pesos (20 + 15 + 15)
2. Expenditure Method
o Based on the idea that all products are purchased by someone
o Formula: GDP = Consumption + Investments + Government Expenditure + Net
Export (Export – Import)
o Used by the government to compute GDP
3. Income Method
o Sums all producers’ incomes within a country’s boundaries
o Formula: GDP = Compensation of Employees + Proprietorship Income + Corporate
Profit + Rental Income + Net Interest
World Population
• 8.2 billion
• Increasing at a decreasing rate
Indicators of Development
b. Knowledge, measured by adult literacy and number of years children are enrolled
at school
c. Standard of living, measured by real GDP per capita at purchasing power parity