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Graded Discussion Board Economics (ECO401) will open June 03, 2015 to June 05, 2015

Important announcement

Graded Discussion Board

Economics (ECO401)

 

Dear Students!

This is to inform that Graded Discussion Board (GDB) No. 01 will be opened on June 03, 2015 for discussion and last date for posting your discussion will be June 05, 2015. This Graded Discussion Board will cover Lessons 1-15.

Question:

Case 01

 

The Agriculture Development Bank of Pakistan (ADBP) was established in 1961 by the merger of the Agriculture Finance Corporation and the Agriculture Bank of Pakistan with the primary objective of providing credit and other financial services to the agriculture sector. With a 64 percent share in total institutional lending to the agriculture sector in 1995, the ADBP has emerged as the country’s largest single supplier of agriculture credit. A study was carried on the bank which shows that in order to expand its operations while remaining economically viable, the bank must exploit any cost advantages that are available to it by adopting the most cost-efficient size and product mix. The study implies that the marginal costs of servicing both loan and deposit accounts decline as bank branches grow larger in size in terms of either the number of loans or the number of deposits. This confirms that the branches operating at a larger scale of production have attained greater cost efficiency in terms of servicing loan and deposit accounts.

 

Requirement:

 

Being a student of economics, analyze the above case of ADBP carefully. Identify which concept of economics is applied in this case. Explain that concept and justify the reason of applying that concept.

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Replies to This Discussion

Please Discuss here about this GDB.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

Case of Agriculture Development Bank of Pakistan

Case 01

 

The Agriculture Development Bank of Pakistan (ADBP) was established in 1961 by the merger of the Agriculture Finance Corporation and the Agriculture Bank of Pakistan with the primary objective of providing credit and other financial services to the agriculture sector. With a 64 percent share in total institutional lending to the agriculture sector in 1995, the ADBP has emerged as the country’s largest single supplier of agriculture credit. A study was carried on the bank which shows that in order to expand its operations while remaining economically viable, the bank must exploit any cost advantages that are available to it by adopting the most cost-efficient size and product mix. The study implies that the marginal costs of servicing both loan and deposit accounts decline as bank branches grow larger in size in terms of either the number of loans or the number of deposits. This confirms that the branches operating at a larger scale of production have attained greater cost efficiency in terms of servicing loan and deposit accounts.

 

Requirement:

 

Being a student of economics, analyze the above case of ADBP carefully. Identify which concept of economics is applied in this case. Explain that concept and justify the reason of applying that concept.

KEY POINTS

Primary objective of providing credit and other financial services to the agriculture sector.

With a 64 percent share in total institutional lending to the agriculture sector in 1995, the ADBP has emerged as the country’s largest single supplier of agriculture credit.

marginal costs of servicing both loan and deposit accounts decline as bank branches grow larger in size in terms of either the number of loans or the number of deposits.

This confirms that the branches operating at a larger scale of production have attained greater cost efficiency in terms of servicing loan and deposit accounts.

Economies of scales 

Thanks...you got it, I was getting a bit confused...

Regards...

I hate economies because what i have notice in all lectures are very easy but when the graph and numerical equation are used i m bit confuse.... and now this gdb :( 

I can assume without having the subject guideline as a citizen and cost analysis individual as branches grows larger in size means no. of employee increase, spreading of building or with in same area let decrease the profermance due to law of diminishing of marginal returns

graphically he to bat hoti ahi economics me

JazakAllah sis its my idea, now u explain please 

As in given study about ADBP that cost of servicing both loan & deposit account decline as bank branches increases & one more thing is mentioned that larger scale of production have attained great cost efficiency So, in my stand point

The concept of INCREASING RETURNS TO SCALES is applied because if we take a glimpse over INCREASING RETURNS TO SCALES it describes that 1% increase in the amount of all the factors employed causes a >1% increase in output & per unit cost also falls.

This is my genuine opinion please don’t copy as same as it is.

I am much confused, please come & join me & try to solve this GDB.

On the other side economies of scale may also look fit into given situation of ADBP because The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.

So economies of scale may also seem to be fitted.

Please Guide & Join me guys!!! Time is thora....

You are right bro., I also mentioned above that I was a bit confused; this was among economies of scale and increasing returns to scale, but after repeatedly reading the case I think that economies of scale is appropriate in this case...but its only an opinion...

Thanks for sharing your view...

Good Luck...

Regards...

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