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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

The preparation of GDB should be As;

1st introduction of ADBP and development roll in agricultural sector

2nd explanation regarding Scale or Marginal

3rd reasons .........

4th conclusion .......

I hava done this GDB in the following way: Please comment either if you agree or disagree with me.... Plz join time is thora....

After a deep go through into whole provided scenario about ADBP I have concluded that The concept of Economies of Scale is applied in case of ADBP

Explanation:

Economies of Scale is referred to reduction in cost with expansion in operation. In banking sector Economies of Scale take place when all the services at the same infrastructure with the help of same available resources are provided.

Reasons:

There is no doubt in this regard the if we conduct a business on large scale that it would take low cost and would be more beneficial. Banking sector is not immune from that benefits. Anyhow followings are the main cause of applying Economies of Scale in ADBD:

  1. Advance Marketing
  2. Low Cost
  3. Hire high skilled staff
  4. Capacity to bear loss
  5. Lend Money at low interest rate
( Please explain each point at your own discretion )
Conclusion:
Keeping in view above mentioned merits it is intelligible that the concept of Economies of scale is perfectly suits to ADBP.


Solution idea

Explanation 
After analyzing the above case of ADBP carefully, it is said the economies of scale and economies of scope concepts are being applied in this case, because when branches quantity increases in size for both loan and deposit accounts and expand its operations at declining average cost then ADBP enjoys economies of scope .
Further as marginal costs of servicing both loan and deposit accounts decline dye to bank branches quantity increase which reduce operation cost ,leads towards greater cost efficiency for serving loan and deposit accounts, and enjoys economies of scale

Economics of scale

In this case, Economics of scale and economics of scope concepts are applied. as per my knowledge, While bank branches in all size categories enjoy economies of scale, the extent of such economies is larger for branches operating at a smaller scale of production.
When branches quantity increases in size for both loan and deposit accounts and expand its operations at declining average cost then ADBP enjoys economies of scope.

as per economies of scale which gives rise to cost savings through the joint production of loan and deposit accounts.

Marginal cost

Further as marginal costs of servicing both loan and deposit accounts decline dye to bank branches quantity increase which reduce operation cost, leads towards greater cost efficiency for serving loan and deposit accounts, and enjoys economies of scale.

all of uuuuuuu

confused personalities

main point is only one in this GDB i.e.

The study implies that the marginal costs of servicing both loan and deposit accounts decline as bank branches grow larger

Acha G, share your idea fully 

What's confusion?

Q.1: Ist he has asked about the concept that name the concept which is applied?

Ans: Economies of scale

Q.2: 2nd he asked that explain that concept?

Ans: Give one or two of definition of economies of scales from any web or hand out.

Q.3: .Thirdly he asked that Justify the reason of applying the concept?

Ans: Give some reason with benefits of economies of scale like

  • Advance Marketing
  • Low Cost
  • Hire high skilled staff
  • Capacity to bear loss
  • Lend Money at low interest rate
and give brief detail of each point and finally conclude. That's all

kindly explain this point 

  • Lend Money at low interest rate???how???

MoonaButt(Mass Commu)1stSemester to ap bta den na k knsa concept hai ta k sb ki confusion doro ho jae....jst dont point out, sow way too...

one point you missed and that is:  analyze the above case of ADBP carefully

   Please anyone help me i can't understand the above solution ideas. please 

so simple

explain it 

economic of Scale

define marginal

then close it

                               . جزاک الله خیرا

                                            

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