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ECO2117 midtermDeveloping world:group of countries with low and middle incomes-Population approx. 5 billion-Disparities between high-income and developing is highDevelopment economics:the study of how economies are transformed from stagnation to growth and from low-income to high-income status and how they overcome problems of absolute povertyAbsolute poverty:a situation of being unable to meet the minimum levels of income, food, clothing, health care, shelter and other essentialsDeveloping countries:Countries of Asia, Africa, the Middle East, Latin America, Eastern Europe and the former Soviet Union that are presently characterized by low standards of living and other development deficitsMore developed countries:the now economically advanced capitalist countries of Western Europe, North America, Australia, New Zealand and JapanSubsistence economy:an economy in which production is mainly for personal consumption and the standard of living yields little more than basic necessities of life (food, shelter, clothing)Development:process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem and freedomPolitical economy:attempt to merge economic analysis with practical politics- to view economic activity in its political context-Social and institutional processes through which certain groups of economic and politicalelites influence the allocation of scarce resources-Concerned with the relationship between politics and economics, with a special emphasis on the role of power in economic decision makingEconomics:study of how society manages its scarce resources-Concerned primarily with the efficient, least-cost allocation of scarce productive resources and the optimal growth of these resources overtime -Deals with advanced capitalist world of perfect market, consumer sovereignty and automatic price adjustment. Decisions made on the basis of marginal, private profitand utility calculations as well as equilibrium outcomes in all product resources markets-Assumes economic rationality and a purely materialistic, individualistic, self-interested orientation toward economic decision-makingDevelopment economy-Concerned with efficient allocation of existing scarce productive resources and with theirsustained growth over time-Also deals with economic, social, political and institutional mechanisms both public and private necessary to bring rapid large-scale improvements in standards of livingEconomies as social systemsSocial systems:interdependent relationships between economic and non economic factors (values, attitudes, power structures and traditions)
-Success or failure of development policy, the importance of taking account of institutional and structural variables with more traditional economic variablesTraditional economic measures:-GNI-Income per capita-Utility of incomeThe new economic view of development leads to improvement in wellbeing, more broadly understoodAmartya Sen’s “capability” approach-