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Applied Economics
by R. Amin   

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Applied Economics
- A.K. Ruhul Amin


Applied economics involves economists taking generally accepted theory and applying those theories to something that is happening in the here and now, with an eye to determining what can reasonably be expected to happen next.

Applying economic theories to current economic conditions can be extremely helpful for three key reasons. First, applying economics to the status of the economy of a company, a household, or a country as it stands today helps to sweep aside all attempts to dress up the situation so that it will appear to be worse or better than it actually is. From this perspective, applied economics is a powerful tool that enables the true and complete picture to emerge, so that it becomes possible to decide what to do and where to go from the current position. Second, applied economics acts as a mechanism to determine what steps can reasonably be taken to improve the current economic situation. Each element that is relevant to the contemporary mode of operation of the entity, including the purchase and sale of goods and services, the usage of raw materials, and the division of labor within the entity come into play. Examining each aspect of the current economic condition will often yield sound ideas on how to maintain aspects that are working at a reasonable rate of efficiency, and strengthen areas where the performance is weak. Last, applied economics can teach valuable lessons in how to avoid the recurrence of a negative situation, or at least minimize the impact. Because applied economics is all about the application of theory to real life situations, the process can aid in the development of understanding of why a condition took place. This includes also reviewing what steps were taken to improve or correct similar situations, and how those strategies may be employed to keep the economy flowing in a direction that will preclude a repeat of the situation.

 Applied Economics
- A.K. Ruhul Amin


Applied economics involves economists taking generally accepted theory and applying those theories to something that is happening in the here and now, with an eye to determining what can reasonably be expected to happen next.

Applying economic theories to current economic conditions can be extremely helpful for three key reasons. First, applying economics to the status of the economy of a company, a household, or a country as it stands today helps to sweep aside all attempts to dress up the situation so that it will appear to be worse or better than it actually is. From this perspective, applied economics is a powerful tool that enables the true and complete picture to emerge, so that it becomes possible to decide what to do and where to go from the current position. Second, applied economics acts as a mechanism to determine what steps can reasonably be taken to improve the current economic situation. Each element that is relevant to the contemporary mode of operation of the entity, including the purchase and sale of goods and services, the usage of raw materials, and the division of labor within the entity come into play. Examining each aspect of the current economic condition will often yield sound ideas on how to maintain aspects that are working at a reasonable rate of efficiency, and strengthen areas where the performance is weak. Last, applied economics can teach valuable lessons in how to avoid the recurrence of a negative situation, or at least minimize the impact. Because applied economics is all about the application of theory to real life situations, the process can aid in the development of understanding of why a condition took place. This includes also reviewing what steps were taken to improve or correct similar situations, and how those strategies may be employed to keep the economy flowing in a direction that will preclude a repeat of the situation.

Type of Applied Economics

01. Agricultural Economics
02. Industrial Economics
03. Labour Economics
04. Health Economics
05. Financial Economics
06. Trade Economics
07. Welfare Economics

Agriculture Economics

# Water and Crop Production Management
# Demand of Fish

Water and Crop Production Management
The Water and Crop Production Management Programme provides a broad ackground in the interrelationship between water, plants, soil and the environment, along with the principles of irrigation system design and water management. An effective irrigation system and water management plan can enhance the quality of the land and conserve water resources. It can affect the crop production and food supply in given environments. Special attention is given to the design of irrigation systems and water management for different crops and income generation. It will focus on water resource management and in particular the use of waste water for irrigation. The Crop Production Management programme will focus on developing the tools needed by transitional countries to improve local conditions in supplying food for their country. Modern harvesting, post harvesting and shipping methods will be discussed in depth. It will discuss experience in this field and possible applications from local agriculture to the participants’ own countries.

Raw Crop Production
Different Irrigation Methods
Irrigation applications with different water
Rain Harvesting in Arid Zones
Marketing of Agricultural Products
Irrigation Systems Components
Hydraulics Considerations in Water Management
Integrated Pest Management
Integrated Nutrient Management
Soil Fertility Management
Soil - Plant - Water Relations
Water and Irrigation Methods in Different Crops
Harvesting, Post harvest Treatment and Storage
Agro Industries
Sustainable Agriculture in Arid land
Open Pasture Production

Demand of Fish

Demand for fish Fd may be expressed as follows :

Fd = f ( Fp ,NFp, H )

Where Fp = Price of fish
Fp = Price of non- fish
H = Household

Now we can write it as –
Fd = Fp + NFp + H
If we consider for every household we should differentciate it
dFd / dFp = d/dFp (Fp + NFp + H)
= 1 + N
Result is positive, so that it is assumed that, every household has demand for fish.

Further we may consider elasticity of fish demand –

(Fq2 – Fq1) x 100%
Elasticity of fish demand Fe =
(Fp2 – Fp1) x 100%

Where Fq1 = Primary fish demand = 5 units
Fq2 = Secondary fish demand = 2 units
Fp1 = Primary fish price = Tk.2
Fp2 = Secondary fish price = Tk.5

(2 – 5) x 100%
Elasticity of Fish demand Fe =
(5 – 2) x 100%

– 3
Or, Fe =

Or, Fe = - 1

Industrial Economics
# Consumer Behaviour
# Commodity Analysis
# Production
# Cost
# Budgeting
# Indifference Curve
# Market Research

Consumer Behaviour
Consumer behavior may be based on price, quantity, advantage, disadvantage, reason for using, duration of using, comparison with other competitor of commodity.

Questionnaire :
01. What soap are you using ?
02. Why this soap are you using ?
03. How many days before have you been using the same ?
04. What is the difference between the same soap & others ?
05. What is your comments regarding this soap ?

Data collection :
01. Decreasing the price of soap.
02. Creating a new quality
03. Getting more sweet smell in the soap.
04. Having more capacity of washing.
05. Getting small prize when buying the soap.

Questionnaire :
01. Is food value of bread appropriate ?
02. What is advantage for consuming ?
03. Price of bread is more higher than other ?
04. Is there any disadvantage containing in bread ?
05. Should We increase quality ?
Data collection :
01. Food value should be increased.
02. Always fresh item has to available in market.
03. Price should be decreased.
04. Sometimes dried bread is seen in market.
05. Fruit bread may be produced.

Questionnaire :
01. Do you purchase milk ?
02. Do you purchase our milk ?
03. If we increase price, will you further purchase ?
04. If we decrease weight but price keep remain same, will you further purchase ?
05. If we supply new milk product with high quality, will you further purchase ?

Data collection :
Consumer’s Comments Dhaka(%) Chittagong (%) Khulna (%) Rajshahi (%)
Purchasing milk 30% 40% 15% 15%
Purchasing brand 25% 15% 08% 12%
Supporting increasing price 06% 04% 02% 03%
Supporting decreasing weight 05% 05% 03% 04%
Supporting new product in high quality 55% 25% 11% 09%

SL Month Comments on price Comments on quality Comments on others
01 March’05 50% 40% 10%
02 April’05 30% 60% 10%
03 May’08 40% 40% 20%
04 Jun’08 20% 80% Nil

Consumer’s surplus

Profit may be realized through consumer surplus. There are two types of price in the market. They are Demand price and Market price. Demand price is determined by consuner on the other hand market price is determined by market. Demand price means consumer’s desire price, similarly market price is accepted price of market. Difference between demand and market price is called consumer’s surplus, which is analysied below :

Commodity Demand price
(DP) Market price
(MP) Consumer’s surplus
Watch Tk.720 Tk.560 Tk.160
Sheo Tk.525 Tk.375 Tk.150

Consumer’s surplus is one type profit of commodity. However, it is not seemed that, for obtaining profit consumer’s surplus is required. In that case, utility of consumer may be decreased.

Commodity Analysis
# Elasticity of Commodity
# Utility of commodity
# Break even point

Elasticity of Commodity
Rice – Inelastic (most essential)
Salt – Inelastic (no substitute)
Tea – Elastic (coffee is substitute, requirement for particular people)
Sugar – Elastic (molasses is substitute)
Pen - Elastic (pencil is substitute)
Watch - Inelastic (no substitute), sometimes elastic
(requirement for particular people)

Television – Elastic (not essential), sometimes inelastic (for rich man)
Car - Elastic (not essential), sometimes inelastic (for rich man)
Cigarette – Inelastic (for particular people)
Jute – Elastic (substitute pole-then)
Shoe – Elastic (substitute sandal)
Cosmetics – Elastic (not essential), inelastic (for particular people)
Shirt – Inelastic (not substitute, essential)
Medicine - Inelastic (not substitute, essential)
# Commodity should be select as per above condition.

Utility of commodity

Data Collection :–

Price of commodity 625 500 400 320 200
No of consumer 2200 3650 4000 5750 6100

Price of commodity 600 575 400 300 280
No of producer 0120 0080 0040 0300 0100

Break even point:

Consumer’s price 625 500 400 320 200
Producer’s price 600 575 400 300 280

If consumer will give Tk.320 as price of commodity, producer will not accept. On the other hand, if producer will take Tk.575, consumer will not give. In this regard, the price will be accepted Tk.400, which is called Break even point or Utility of Commodity.

Tea production are expanding sectors of Sylhet's diverse agriculture. Production of tea a consumer demand is shown below.

Figure 1. Production of tea (in thousands) by year.

Production of tea farm depends upon an increased supply of tea leaf. Many of Sylhet's tea gardens are less than 10 acres in size and are operated as secondary income enterprises. Those who aspire to establish small tea gardens typically own their land and may have some of the equipment needed for tea garden operation. Large tea gardens would likely profit from the reduction in hand labor costs afforded by such machinery.

Production Volume
Production volume is two type they are – Large scale & Small scall

Large scale
Adventage – skill labour, Availibality of material & product, Lack of risk
Disadvange – Lack of management, Trade union, Unhyeinic,

Small scale
Adventage – Self management, Low advertisement cost, Low transportation cost
Disadvange – Lack of capital, Surplus production cost, Lack of modern machine

Each production has cost either fixed or variable cost.

Fixed cost :
land, equipment, insurance, tax, depreciation.

Variable cost :
Rent, Stationary, Salary, Advertisement, Entertainment, Communication

Fixed cost can not be deceased, on the othe hand variable cost can be deceased.
1 2 3 4 5 6 7 8 9 10
Production (Tons) 0 0 3.50 5.60 5.60 5.60 5.60 5.60 5.60 5.60
Price (Tons) 0 0 1,300 1,300 1,300 1,300 1,300 1,300 1,300 1,300
Total Revenue 4,550 7,280 7,280 7,280 7,280 7,280 7,280 7,280

Operating Expenses
Soil Preparation 199
Tea garden layout 139
Plantation 3,211
Frame Material 2,241
Construction 694
Replanting 61
Fertilization 46 50 46 46 46 46 46 46 46
Covering 232 386 347 347 347 347 347 347 347 347
Disease Control 112 265 398 398 398 398 398 398 398 398
Labor cost 350 560 560 560 560 560 560 560
Machinery 663 189 268 291 291 291 291 291 291 291
Safety Equipment 386 162 162 162 162 162 162 162 162 162
Hand Tools 618

Ttl Operating Expenses 8,990 1,276 3,091 2,860 2,346 2,346 2,346 2,346 2,346 2,346

Interest capital 0 809 997 955 643 257

Total Expenses 8,990 2,085 4,087 3,815 2,989 2,603 2,346 2,346 2,346 2,346

Cash Flow (8,990) (2,085) 463 3,465 4,291 4,677 4,934 4,934 4,934 4,934

Indifference Curve

Hour Sammy's Chris's
Worked Production Production
1st 90 30
2nd 60 30
3rd 30 30
4th 15 30
5th 15 30
6th 10 30
7th 10 30
8th 10 30

Market Research
Market research is the process of systematically gathering, recording and analyzing data and information about customers, competitors and the market. Its uses include to help create a business plan, launch a new product or service, fine tune existing products and services, and expand into new markets. Market research can be used to determine which portion of the population will purchase a product/service, based on variables like age, gender, location and income level.

Type of market research
Qualitative marketing research, such as focus groups
Quantitative marketing research, such as statistical surveys
Experimental techniques such as test markets
Observational techniques such as ethnographic (on-site) observation

Market quesionnare
What is happening in the market?
What are the trends?
Who are the competitors?
How do consumers talk about the products in the market?
Which needs are important?
Are the needs being met by current products?

Market information
Market information is making known the prices of the different commodities in the market, the supply and the demand. Information about the markets can be obtained in several different varieties and formats.
Examples of market information questions are:

Who are the customers?
Where are they located and how can they be contacted?
What quantity and quality do they want?
When is the best time to sell?

Marketing Management
Marketing management is a business discipline focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities. Marketing management functions and activities include the Marketing research and analysis. Marketing analysis was structured into three areas: Customer analysis, Company analysis, and Competitor analysis (so-called "3Cs" analysis). More recently, it has become fashionable in some marketing circles to divide these further into certain five "Cs": Customer analysis, Company analysis, Collaborator analysis, Competitor analysis, and analysis of the industry Context.

Nature of Market

Market Characteristics Example
Monopoly - One producer
- Many consumers
- Average capital
- High profit Munnu Ceramic
Bata Shoe Company
Grameen Phone
Singer Bangladesh
Parfect Competition - Many producers
- Many consumers
- High capital
- Average profit Olympic Industries
Kashem Dry Cell
Apex Tannary
Al-Amin Food Product

Duration of Market

Market Characteristics Period Example
Short Term - Small capital
- Low profit
- Inelasticity of demand
01 or 02 days Vegetable
Long Term - Large capital
- High profit
- Elasticity of demand
More than 01 or 02 days Cloth

Considerable Factors :
01. For creating monopoly, try to keep lowest price, instead of accepted price. After creating monopoly may return accepted price.
02. Should maintain long term period.
03. Producing new quality, as it will be inelastic.
04. To develop quality of commodity, as it will be highest.
05. To pay attention for advertisement.

Inferential techniques

Inferential techniques involve generalizing from a sample to the whole population. It also involves testing a hypothesis. A hypothesis must be stated in mathematical/statistical terms that make it possible to calculate the probability of possible samples assuming the hypothesis is correct. Then a test statistic must be chosen that will summarize the information in the sample that is relevant to the hypothesis. A null hypothesis is a hypothesis that is presumed true until a hypothesis test indicates otherwise. Typically it is a statement about a parameter that is a property of a population. The parameter is often a mean or a standard deviation.

Not unusually, such a hypothesis states that the parameters, or mathematical characteristics, of two or more populations are identical. For example, if we want to compare the test scores of two random samples of men and women, the null hypothesis would be that the mean score in the male population from which the first sample was drawn, was the same as the mean score in the female population from which the second sample was drawn:

H0:μ1 = μ2
H0 = the null hypothesis
μ1 = the mean of population 1, and
μ2 = the mean of population 2.

The equality operator makes this a two-tailed test. The alternative hypothesis can be either greater than or less than the null hypothesis. In a one-tailed test, the operator is an inequality, and the alternative hypothesis has directionality:
H0:μ1 = or < μ2

These are sometimes called a hypothesis of significant difference because you are testing the difference between two groups with respect to one variable.
Alternatively, the null hypothesis can postulate that the two samples are drawn from the same population:
H0:μ1 − μ2 = 0

Marketing Report : Soap

Many soap industries are being maintained to produce the major quality of soap for local market. Movement of commodity to local market has been increased in May’97 compared to previous months. Laundry soap is the main commodity. Some toilet soap, detergent & other foreign soap also are moving to local market.

As for example, the sopa market of Chittagong has been improved. Competitors have been running major quality of soap., they run more quality. Main competitors for Dhaka are “Uniliver Bangladesh Ltd” & “ Square Toiletories”.

Competitors’ statistics is spended below :
Competitor Brand Price Quality Consumer % Nature of Market
Uniliver Bangladesh Lux 50.00 Best (100) 55 % Monopoly
Square Toiletories Meril 35.00 Good (50) 30 % Monopolistic
Kohinoor Chemical Tibet 30.00 Good (50) 25 % Perfect Competition
Lalbagh Chemical Nirala 20.00 Below (20) 10 % Perfect Competition

It has been seen in the above statistics that, Lux of Unilever Bangladesh is going to create monopoly market. It may say that, as the quality of Lux is highest, it caught 55 % consumers. On the other hand price of Meril has been made difference with Tibet. However, quality is same and also nature of market is different. Nirala could not progress. The price and quality of Nirala both are below.

Labour Economics
Labour economics seeks to understand the functioning of the market and dynamics for labour. Labour markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demanders of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income. It is an important subject because unemployment is a problem that affects the public most directly and severely. Full employment (or reduced unemployment) is a goal of many modern governments. Other often studied markets are financial market and product market.

In economics, labour is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have created a concept called human capital (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms. Wage is a basic compensation for labour, and the compensation for labour per period of time is referred to as the wage rate. The two terms are sometimes used interchangeably.
Other frequently used terms include :

wage = payment per unit of time (typically an hour)
earnings = payment accrued over a period (typically a week, a month, or a year)
total compensation = earnings + other benefits for labour
income = total compensation + unearned income
economic rent = total compensation - opportunity cost
Economists measure labour in terms of hours worked, total wages, or efficiency.
total cost = fixed cost + variable cost

Analysing labour markets
There are two sides to labour economics. Labour economics can generally be seen as the application of microeconomic or macroeconomic techniques to the labour market. Microeconomic techniques study the role of individuals and individual firms in the labour market. Macroeconomic techniques look at the interrelations between the labour market, the goods market, the money market, and the foreign trade market. It looks at how these interactions influence macro variables such as employment levels, participation rates, aggregate income and Gross Domestic Product. (Morendy Octora)

Let w denote hourly wage.
Let k denote total waking hours.
Let L denote working hours.
Let π denote other incomes or benefits.
Let A denote leisure hours.

The utility function and budget constraint can be expressed as following:
max U(w L + π, A) such that L + A ≤ k.

This can be shown in a that illustrates the trade-off between allocating your time between leisure activities and income generating activities. The linear constraint line indicates that there are only 24 hours in a day, and individuals must choose how much of this time to allocate to leisure activities and how much to working. (If multiple days are being considered the maximum number of hours that could be allocated towards leisure or work is about 16 due to the necessity of sleep) This allocation decision is informed by the curved indifference curve labelled IC. The curve indicates the combinations of leisure and work that will give the individual a specific level of utility. The point where the highest

indifference curve is just tangent to the constraint line (point A), illustrates the short-run equilibrium for this supplier of labour services.

The Income/Leisure trade-off in the short run

If the preference for consumption is measured by the value of income obtained, rather than work hours, this diagram can be used to show a variety of interesting effects. This is because the slope of the budget constraint becomes the wage rate. The point of optimisation (point A) reflects the equivalency between the wage rate and the marginal rate of substitution, leisure for income (the slope of the indifference curve). Because the marginal rate of substitution, leisure for income, is also the ratio of the marginal utility of leisure (MUL) to the marginal utility of income (MUY), one can conclude:

Health economics

Health economics is a branch of economics concerned with issues related to scarcity in the allocation of health and health care. Broadly, health economists study the functioning of the health care system and the private and social causes of health-affecting behaviors such as smoking.

Health care is demanded as a means for consumers to achieve a larger stock of "health capital." The demand for health is unlike most other goods because individuals allocate resources in order to both consume and produce health. Let the optimal level of investment in health occurs where the marginal cost of health capital is equal to the marginal benefit. With the passing of time, health depreciates at some rate δ. The interest rate faced by the consumer is denoted by r. The marginal cost of health capital can be found by adding these variables:


The marginal benefit of health capital is the rate of return from this capital in both market and non-market sectors. In this model, the optimal health stock can be impacted by factors like age, wages and education. As an example, increases with age, so it becomes more and more costly to attain the same level of health capital or health stock as one ages. Age also decreases the marginal benefit of health stock. The optimal health stock will therefore decrease as one ages.
Someone applying for health insurance knows more about their health than the insurance company does. People who have health care may act more recklessly than if they didn't have it resulting in higher costs for the insurance company. Someone who applies for health insurance as an individual will usually pay higher rates than group plans for an equal level of insurance. Statistically, people who apply individually are more likely to need health care than those with group plans. Healthy people can't get health care via a group plan are more likely to go without any insurance at all. The higher rates for individuals and the low risk of a healthy person needing medical treatment that costs more than their deductible makes insurance more expensive than its worth. Thus individuals are perceived as more risky, individual plans are made more expensive and the rate of healthy people falls further as they decide that it isn't worth the expense.

Financial Economics

# Capital Market
# Taxation
# Exchange Rate

Capital market
The capital market is the market for securities, where companies and governments can raise longterm funds. The capital market includes the stock market and the bond market.

Stock market
A stock exchange, share market or bourse is a corporation or mutual organization which provides "trading" facilities for stock brokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets is driven by various factors which, as in all free markets, affect the price of stocks.
There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

History of stock exchanges
In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers. Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.
However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighbouring counties and "Bourses" soon opened in Ghent and Amsterdam. In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.
The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London.

The role of stock exchanges
01. Raising capital for businesses
02. Mobilizing savings for investment
03. Facilitating company growth
04. Redistribution of wealth
05. Corporate governance
06. Creating investment opportunities for small investors
07. Government capital-raising for development projects
08. Barometer of the economy

Major stock markets
Twenty Major Stock Exchanges In The World: Market Capitalization & Year-to-date Turnover at the end of October 2007

Region Stock Exchange Market Value
(trillions of US dollars) Total Share Turnover
(trillions of US dollars)
Africa JSE Securities Exchange
$0.940 $0.349
Americas NASDAQ
$4.39 $12.4
Americas São Paulo Stock Exchange
$1.40 $0.476
Americas Toronto Stock Exchange
$2.29 $1.36
Americas/Europe NYSE Euronext
$20.7 $28.7
Asia-Pacific Australian Securities Exchange
South Asia Bombay Stock Exchange
$1.61 $0.263
Asia-Pacific Hong Kong Stock Exchange
$2.97 $1.70
Asia-Pacific Korea Exchange
$1.26 $1.66
South Asia National Stock Exchange of India
$1.46 $0.564
Asia-Pacific Shanghai Stock Exchange
$3.02 $3.56
Asia-Pacific Shenzhen Stock Exchange
$0.741 $1.86
Asia-Pacific Tokyo Stock Exchange
$4.63 $5.45
Europe Frankfurt Stock Exchange (Deutsche Börse)
$2.12 $3.64
Europe London Stock Exchange
$4.21 $9.14
Europe Madrid Stock Exchange (Bolsas y Mercados Españoles)
$1.83 $2.49
Europe Milan Stock Exchange (Borsa Italiana)
$1.13 $1.98
Europe Moscow Interbank Currency Exchange (MICEX)
Europe Nordic Stock Exchange Group OMX1
$1.38 $1.60

Bond market
The bond market (also known as the debt, credit, or fixed income market) is a financial market where participants buy and sell debt securities, usually in the form of bonds.

Market structure
Bond markets in most countries remain decentralized and lack common exchanges like stock, future and commodity markets. This has occurred, in part, because no two bond issues are exactly alike, and the number of different securities outstanding is far larger.

Types of bond markets
Government & agency
Mortgage backed, asset backed, and collateralized debt obligation

Bond market participants
Bond market participants are similar to participants in most financial markets and are essentially either buyers (debt issuer) of funds or sellers (institution) of funds and often both.
Participants include:

Institutional investors


Bond market volatility
For market participants who own a bond, collect the coupon and hold it to maturity, market volatility is irrelevant; principal and interest are received according to a pre-determined schedule. But participants who buy and sell bonds before maturity are exposed to many risks, most importantly changes in interest rates. When interest rates increase, the value of existing bonds fall, since new issues pay a higher yield. Likewise, when interest rates decrease, the value of existing bonds rise, since new issues pay a lower yield. This is the fundamental concept of bond market volatility.

Economists' views of economic indicators versus actual released data contribute to market volatility. A tight consensus is generally reflected in bond prices and there is little price movement in the market after the release of "in-line" data. If the economic release differs from the consensus view the market usually undergoes rapid price movement as participants interpret the data. Uncertainty (as measured by a wide consensus) generally brings more volatility before and after an economic release. Economic releases vary in importance and impact depending on where the economy is in the business cycle.

According to much national or state legislation, a large array of fiscal obligations are taxed for capital gains. Taxes are charged by the state over the transactions, dividends and capital gains on the stock market, in particular in the stock exchanges. However, these fiscal obligations may vary from jurisdiction to jurisdiction because, among other reasons, it could be assumed that taxation is already incorporated into the stock price through the different taxes companies pay to the state, or that tax free stock market operations are useful to boost economic growth.

Forms of taxation
In monetary economies prior to fiat banking, a critical form of taxation was seigniorage, the tax on the creation of money. Other obsolete forms of taxation include:

Scutage - paid in lieu of military service; strictly speaking a commutation of a
non-tax obligation rather than a tax as such, but functioning as a tax in
Tallage - a tax on feudal dependents
Tithe - a tax-like payment (one tenth of one's earnings or agricultural produce),
paid to the Church (and thus too specific to be a tax in strict technical
terms). This should not be confused with the modern practice of the same
name which is normally voluntary, although churches have sought it
forcefully at times.
Aids - During feudal times a feudal aid was a type of tax or due paid by a vassal to
his lord.
Danegeld - medieval land tax originally raised to pay off raiding Danes and later
used to fund military expenditures.

Taxes are most often levied as a percentage, called the tax rate. An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective rate. The effective rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned. For example, if income is taxed on a formula of 5% from $0 up to $50,000, 10% from $50,000 to $100,000, and 15% over $100,000, a taxpayer with income of $175,000 would pay a total of $18,750 in taxes.

Tax calculation
(0.05*50,000) + (0.10*50,000) + (0.15*75,000)) = 18,750
The "effective rate" would be 10.7%:
(18,750/175,000) = 0.107
The "marginal rate" would be 15%.

Kinds of taxes
01. Capital gains tax
02. Consumption tax
03. Corporation tax
04. Excise duty
05. Income tax
06. Inheritance tax
07. Poll tax
08. Property tax
09. Retirement tax
10. Sales tax
11. Tariffs
12. Toll
13. Transfer tax
14. Value Added Tax
15. Wealth tax

Exchange rate
Using direct quotation, if the home currency is becoming more valuable then the exchange rate decreases. Conversely if the foreign currency is strengthening, the exchange rate increases and the home currency is depreciating. Currency is determined by the market forces of supply and demand. Exchange rates for such currencies are likely to change almost constantly as quoted on financial markets, mainly by banks, around the world.
Balance of payment model holds that a foreign exchange rate must be at its equilibrium level. A nation with a trade deficit will reduction in its foreign exchange reserves which ultimately lowers (depreciates) the value of its currency. The cheaper currency renders the nation's goods (exports) more affordable in the global market place while making imports more expensive.
Exchange rate is known as the foreign-exchange rate, forex rate or FX rate between two currencies specifies how much one currency is worth in terms of the other. The foreign exchange market is one of the largest markets in the world.

Type of exchange rate
Spot exchange rate, Forward exchange rate, Nominal exchange rate & Real exchange rate
The spot exchange rate refers to the current exchange rate.
Forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.
Nominal exchange rate e is the price in domestic currency of one unit of a foreign currency.
Real exchange rate (RER) is defined as , where P is the domestic price level and P * the foreign price level. P and P * must have the same arbitrary value in some chosen base year. Hence in the base year, RER = e.

Trade Economics
The creation of trade is important to the nation entering the customs union in that increased specialization may hurt other industries. Arguments for protectionism, such as the infant industry argument, national defense, outsourcing, and issues with health and safety regulations are brought to mind. However, customs unions are typically formed with friendly nations, eliminating the national defense argument, and in the long run serves to create more jobs and output due to specialization. When a customs union is formed, the member nations establish a free trade zone amongst themselves and a common external tariff on non-member nations. As a result, the member nations establish greater trading ties between themselves now that protectionist barriers such as tariffs, quotas, and non-tariff barriers such as subsidies have been eliminated. The result is an increase in trade among member nations in the good or service of each nation's comparative advantage. When a country applies the same tariff to all nations, it will always import from the most efficient producer, since the more efficient nation will provide the goods at a lower price. With the establishment of a bilateral or regional free trade agreement, that may not be the case. If the agreement is signed with a less-efficient nation, it may well be that their products become cheaper in the importing market than those from the more-efficient nation, since there are taxes for only one of them. Consequently, after the establishment of the agreement, the importing country would acquire products from a higher-cost producer, instead of the low-cost producer from which it was importing until then. In other words, this would cause a trade diversio.

The gravity model of trade in international economics, similar to other gravity models in social science, predicts bilateral trade flows based on the economic sizes of (often using GDP measurements) and distance between two units. The model was first used by Walter Isard in 1954. The basic theoretical model for trade between two countries (i and j) takes the form of :

Welfare Economics
# Theory of welfare economics
# Social welfare maximization
# Implementing Project for Welfare

Welfare Economics
Welfare economics is a branch of economics that uses microeconomic techniques to simultaneously determine allocative efficiency within an economy and the income distribution associated with it. It analyzes social welfare, however measured, in terms of economic activities of the individuals that comprise the theoretical society considered. As such, individuals, with associated economic activities, are the basic units for aggregating to social welfare, whether of a group, a community, or a society, and there is no "social welfare" apart from the "welfare" associated with its individual units. Here, 'welfare' in its most general sense refers to well-being.
Welfare economics typically takes individual preferences as given and stipulates a welfare improvement in “Pareto’s efficiency” terms from social state A to social state B if at least one person prefers B and no one else opposes it. There is no requirement of a unique quantitative measure of the welfare improvement implied by this. Another aspect of welfare treats income/goods distribution, including equality, as a further dimension of welfare.

Theory of welfare economics
The basic welfare economics problem is to find the theoretical maximum of a social welfare function, subject to various constraints such as the state of technology in production, available natural resources, national infrastructure, and behavioural constraints such as consumer utility maximization and producer profit maximization. In the simplest possible economy this can be done by simultaneously solving seven equations. This simple economy would have only two consumers (consumer 1 and consumer 2), only two products (product X and product Y), and only two factors of production going into these products (labour L and capital K). The model can be stated as:

Where F is the trade flow, M is the economic mass of each country, D is the distance and G is a constant. Using logarithms, the equation can be converted to a linear form for econometric analysis.

Trade between these two entities can be done after they each produce at their optimal and then exchanging goods at a fair ratio. The result of fair exchange is the bold line connecting them.

maximize social welfare: W=f(U1 U2) subject to the following set of constraints:
K = Kx + Ky (The amount of capital used in the production of goods X and Y)
L = Lx + Ly (The amount of labour used in the production of goods X and Y)
X = X(Kx Lx) (The production function for product X)
Y = Y(Ky Ly) (The production function for product Y)
U1 = U1(X1 Y1) (The preferences of consumer 1)
U2 = U2(X2 Y2) (The preferences of consumer 2)
The solution to this problem yields a “Pareto’s optimum”. In a more realistic example of millions of consumers, millions of products, and several factors of production, the math gets more complicated. Also, finding a solution to an abstract function does not directly yield a policy recommendation! In other words, solving an equation does not solve social problems. However, a model like the one above can be viewed as an argument that solving a social problem (like achieving a Pareto-optimal distribution of wealth) is at least theoretically possible.

Social welfare maximization
Utility functions can be derived from the points on a contract curve. Numerous utility functions can be derived, one for each point on the production possibility frontier. A social utility frontier (also called a grand utility frontier) can be obtained from the outer envelope of all these utility functions. Each point on a social utility frontier represents an efficient allocation of an economy's resources; that is, it is a Pareto optimum in factor allocation, in production, in consumption, and in the interaction of production and consumption (supply and demand). In the diagram below, the curve MN is a social utility frontier. Point E lies inside the social utility frontier indicating inefficiency.

Although all the points on the grand social utility frontier are Pareto efficient, only one point identifies where social welfare is maximized. This is point Z where the social utility frontier MN is tangent to the highest possible social indifference curve labelled SI.

Implementing Project for Welfare

Area of project

01. Education – Non-formal education, Mass
Education, Legal Education
02. Health - Family planning, AIDS, Sanitation,
Nutrition, Mother & child Health
03. Agriculture – Poultry firm, Fisheries, Dairy firm,
Agriculture Firm, Sewing
Machine, Handicrafts, Vehicles
Health Project

A.Program Goals
- Program must share demand for medical services.
- Program is directed at Healthy People .
- Cost reduction must be included as a major program element.

B. Program Features:
- Program must possess reasonable approaches for cost reduction
- Program must include reasonable approaches for behavioral change - Program must be in operation at least two years.

C. Program Evaluation:
Evaluation studies that measure program results are crucial;
programs must provide evidence for health improvement or risk reduction and for
cost-savings. Community programs, may justify cost savings on the basis of future projected illness reduction based upon documented changes in health behaviors.

Method of approach
01. Baseline survey
02. Advocacy
03. Training
04. Launching
05. Evaluation

Roles of volunteer
01. Making survey for people.
02. Discussion & group discussion with people.
03. To arrange project workshop.
04. Participation of meeting.
05. Making program schedule.
06. Distributing materials
07. Publishing leaflet & magazine
08. Project monitoring & evaluation

Education Project
01. Learning environment
02. Condition of classroom
03. Curriculum Method
04. subjects
05. Learning materials
06.Teacher Training

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