1.

Lewis Model (2-Sector Model)

2. What is the meaning of disguised unemployment?
3. How does the existence of disguised unemployment affect the rural economy?
4. Which economy gains more from the migration of labor from the rural economy to the urban economy in the
process of development envisaged by Lewis: rural economy or urban economy?
5. How does the process of development end prematurely?
6. Mature ending: All surplus labor is fully absorbed by the industrial sector, and competition emerges in the
labor market between agricultural and industrial sectors.
7. Premature ending: Surplus labor is only partially absorbed, leaving unemployment in the economy.
8. Reasons for premature ending:

Use of capital-intensive Capitalists do not invest the Capital flight Political and economic uncertainty
technologies by the capitalist whole amount in the
sector process
Policies unfavorable to capitalists Existence of trade unions Rise in prices of agricultural products (food inflation)

9. How to measure surplus labor in the rural economy?

10. Show graphically and explain surplus labor in the rural economy.
11. Discuss the salient features of the model of complementarity between agricultural and industrial sectors.
12. What is the meaning of terms of trade between agricultural and industrial sectors?
13. Harrod-Domar Growth Model
14. Input-Output Table (IOT)
15. Social Accounting Matrix (SAM): Structure and purpose
16. Linear Programming
17. Project planning: NPV, IRR, and BCR
18. Balanced vs. Unbalanced growth strategies: Which is better for Pakistan, and which sector should Pakistan
focus on?
19. Basic Needs Approach (BNA) and Growth with Equity (GWE)
20. "Grow first, then distribute" vs. "Distribute first, then grow" strategies.
21. Poverty Reduction Strategy Papers (PRSP)
22. Indivisibilities in economic development: Definition and examples.
23. Problems of Least Developed Countries (LDCs), with a focus on Pakistan’s economic development context.
24. What sequence of development is better for LDCs like Pakistan? (e.g., Social Overhead Capital to Direct
Productive Activities and vice versa).
25. Calculate/compute backward, forward, and total linkages (inducement effects).
26. Difference between aij and rij elements in the Input-Output Table.
27. Similarities and differences between Social Accounting Matrix (SAM) and Input-Output Table (IOT).
28. How does the industrial sector expand?
29. How does the Lewis Model process affect income distribution in Least Developed Countries (LDCs)? Does it
worsen or improve inequality?
30. Write a short note on the Lewis Model and the complementary method.
31. How and why are both sectors in the Lewis Model interrelated? (Include a graph).
32. Define equilibrium and disequilibrium in the Lewis Model. First, define the terms of trade.
33. How to escape the vicious circle of poverty (VCP)?
34. What is the Big Push Theory?
35. Why do projects fail in Pakistan?
36. Describe disguised unemployment with a figure.
37. Critique the mature and premature endings of the Lewis Model.
38. Difference between Hershman and Rodan growth strategies.
Lewis model: The Lewis model (or the Lewis two-sector model) explains how countries move from being poor and
agricultural-based to richer and industrialized. It was developed by economist Arthur Lewis in 1954.

Two parts of the economy:

1. Traditional sector: Mostly farming, with a lot of workers and low productivity.
2. Modern sector: Factories and industries that are more productive and generate higher income.
3. Surplus labor: In poor economies, there are too many people working on farms, so some workers don’t add much
value. This is called surplus labor—workers who could leave the farm without reducing farm output much.
4. Shift to industry: These extra workers move from farms (traditional sector) to factories (modern sector) where they
can be more productive and earn higher wages.
5. Economic growth: Over time, as industries grow, more people move to cities and work in better-paying jobs. The
country becomes richer, and farming becomes more efficient because fewer people are needed to produce food.

Conclusion: The Lewis model describes how developing countries grow by moving workers from low-productivity farming
to high-productivity industries.

Q2. What is the meaning of disguised unemployment?

Disguised unemployment means there are more people working in a job than actually needed. Even if some people stop
working, the output or productivity wouldn’t change. This is common in places like farms or small family businesses, where
extra workers don’t really add to efficiency but stay involved because there’s no other work available.

Q3. How does the existence of disguised unemployment affect the rural economy?

Disguised unemployment happens when more people work on a task than needed, like in farming, where extra workers
don't add much value. In rural areas, this is common because families work on small farms with limited land.

This affects the rural economy by:

1. Low Productivity: Too many people working on the same land means the output per person stays low, leading to
inefficiency.
2. Hidden Poverty: People appear employed but earn very little, so poverty persists.
3. Missed Opportunities: These extra workers could be doing other jobs or learning new skills that could boost the
economy, but instead, they remain stuck in unproductive work.

In short, disguised unemployment slows down growth and wastes potential in the rural economy.

Q4. Which economy gains more from the migration of labor from the rural economy to the urban economy in the
process of development envisaged by Lewis: rural economy or urban economy?

In the development model by W. Arthur Lewis, the urban economy gains more from the migration of labor. Here's why:

Workers move from the rural economy, where they often have low productivity and limited opportunities, to the
urban economy, where industries can use their labor to increase production and profits. The urban economy grows
as these workers help create goods, services, and wealth, which fuels further industrial development.
The rural economy benefits less because it loses workers, which can reduce agricultural output if labor becomes too
scarce. However, it might gain slightly through remittances (money sent back by workers in cities) or from improved
productivity if fewer people work the land more efficiently.

So, overall, the urban economy is the bigger winner in this process.
Q5.How does the process of development end prematurely?

The process of development can end prematurely when something stops it before reaching its full potential. This can
happen for various reasons, such as:

1. Lack of resources: Not having enough money, time, or materials to continue.

2. Conflicts or disagreements: People involved in the development may argue or have opposing goals, causing progress
to stop.
3. Environmental factors: Changes in surroundings, like natural disasters, war, or disease, can disrupt development.
4. Loss of motivation: If people lose interest or don't see progress, they may stop trying.
5. Unforeseen obstacles: Unexpected problems, like technology failure or strict rules, might block further development.

It’s like starting to build a house but stopping halfway because of running out of money, bad weather, or disagreements
about the design.

Q6. Mature ending: All surplus labor is fully absorbed by the industrial sector, and competition emerges in the labor
market between agricultural and industrial sectors?

A balanced ending: The industrial sector grows enough to employ all extra workers, and both the agricultural and
industrial sectors start competing to attract workers.

Q7. Premature ending: Surplus labor is only partially absorbed, leaving unemployment in the economy.

"Not all extra workers find jobs, so unemployment remains in the economy."

Q8. Reasons for premature ending:

 The capitalist sector relies on expensive technologies that are hard to sustain.
 Capitalists don’t reinvest all their profits back into the system.
 Money flows out of the country instead of being invested locally.
 Political and economic instability discourages investment.
 Policies that are not favorable to businesses make them less likely to invest.
 Trade unions push for better wages and conditions, which can increase costs.
 Rising food prices make it harder for workers and businesses to thrive.

Q9. How to measure surplus labor in the rural economy?

Surplus labor in the rural economy refers to the situation where there are more workers than are needed for the available
jobs. In simple terms, it means people are working but not fully utilizing their skills or not contributing enough to the
economy because the demand for labor is lower than the supply.

Here’s how to measure it:

1. Identify the total working population: Count all the people who are working in the rural area.
2. Determine the ideal number of workers: Figure out how many workers are actually needed for the existing
agricultural or rural tasks to run efficiently. This is the number of workers required to meet the demand in that area.
3. Compare supply and demand for labor: If the number of workers exceeds the needed number, the difference
represents surplus labor.
4. Measure productivity: Check how much each worker is producing in terms of goods or services. If workers are not
producing much (or if they are underemployed), this indicates surplus labor.

Conclusion: surplus labor can be measured by looking at the difference between the number of workers available and the
number needed to efficiently run the rural economy, as well as by evaluating how much each worker is actually
contributing to production.
Q10. Show graphically and explain surplus labor in the rural economy.

Surplus Labor in the Rural Economy – Lewis Model: In the Lewis Model, surplus labor means that in rural areas
(agriculture), there are too many workers, and some workers produce little or no extra output (Marginal Product of
Labor = 0). This is called disguised unemployment.

Agricultural Sector (Rural):

 Too many workers share limited land.

 Extra workers don’t increase production.
 These workers can move to cities without reducing farm output.
 Industrial Sector (Urban)
 Factories and businesses need workers.
 They offer higher wages, attracting surplus labor from villages.
 Industry expands, increasing national income.

Result:

 Rural areas lose excess workers but still produce the same output.
 Cities grow, creating jobs and improving the economy.
 Over time, surplus labor disappears, and wages rise in both sectors.

This shift is key for economic development, as it moves workers from low productivity (farming) to high productivity
(industry).

Q11. Discuss the salient features of the model of complementarity between agricultural and industrial sectors?

The model of complementarity between the agricultural and industrial sectors highlights how these two parts of the
economy can work together and support each other. Here are the key points of this model in simple terms:

1. Mutual Benefit: The agricultural and industrial sectors help each other grow. Agriculture provides raw materials (like
cotton, wheat, etc.) to the industries, while industries provide machinery, tools, and fertilizers that help farmers
increase their productivity.
2. Supply and Demand: Agriculture provides food and raw materials, which are important for industries to produce
goods. On the other hand, industries create products that are necessary for improving agricultural methods (like
tractors or pesticides) and for processing agricultural products (like turning sugarcane into sugar).
3. Employment Opportunities: Both sectors create jobs, though in different ways. Agriculture offers jobs directly in
farming and related activities, while industries offer jobs in factories, transportation, and services related to
manufacturing. As industries grow, they can create more demand for agricultural goods, leading to more jobs in
farming as well.
4. Increased Productivity: Industrial growth can lead to improvements in agricultural techniques. For example, factories
producing fertilizers or machinery help farmers become more efficient, which increases food production.
5. Economic Growth: When both agriculture and industry grow together, the overall economy benefits. Agriculture
provides the necessary food and raw materials, while industry adds value by turning those materials into finished
goods that can be sold or used.

Conclusion: The agricultural and industrial sectors support each other, with agriculture providing raw materials and food,
while industries provide tools, machinery, and goods that enhance agricultural productivity and contribute to economic
development.
Q12. What is the meaning of terms of trade between agricultural and industrial sectors?

The terms of trade between the agricultural and industrial sectors refer to the ratio at which one sector's goods can be
exchanged for the goods of the other sector, it shows how much agricultural products (like crops or livestock) can be
traded for industrial products (like machinery or electronics). For example, if the terms of trade are favorable to
agriculture, farmers can get more industrial goods in exchange for their agricultural products. If it's favorable to industry,
agricultural products will be exchanged for fewer industrial goods.

It's a way to measure the relative value of what each sector can get from trading with the other.

Q13. Harrod-Domar Growth Model?

The Harrod-Domar Growth Model is a simple way to understand how an economy grows over time. It shows how
investment (money spent on things like factories, machinery, etc.) and savings (money that people save instead of
spending) drive economic growth. In basic terms, the model says that:

 Investment is key: If people or businesses invest in things that will help produce more goods and services, the
economy grows.
 Savings matter: If people save a portion of their income, it creates the funds for investment.

The model uses a formula to show the relationship between the level of savings, the amount of investment, and how
quickly the economy grows.

The main takeaway is that for the economy to grow at a steady pace, there must be enough investment and savings to
match that growth. If there’s too much investment compared to savings, the economy can grow too quickly, leading to
inflation. If there’s not enough, the economy can slow down or even shrink.

Q14. Input-Output Table (IOT)

Intermediate Final Demand
Input-Output Table in Development Economic Planning: An demand
Input-Output (I-O) Table is a way to show how different
sectors of the economy are connected. It helps governments
and planners understand how changes in one sector affect Primary Input to Primary Input to
others.
Production Final Demand
Key Features: Sector
 Rows (Outputs) → Show what each sector produces and where its goods/services go.
 Columns (Inputs) → Show what each sector uses to produce its goods/services.
 Final Demand → shows how much of the total output is consumed by households, businesses, and exports.

Why is it Useful?

 Helps in economic planning by showing how different industries depend on each other.
 Assists in policy decisions (e.g., if the government invests in agriculture, how will it impact manufacturing and
transport?).

Supports resource allocation to maximize economic growth.

Example: If the steel industry grows, it affects:

 Construction (more buildings and bridges)

 Automobile industry (more vehicles produced)
 Employment (more jobs in related industries)
Q15. Social Accounting Matrix (SAM): Structure and purpose

A Social Accounting Matrix (SAM) is a tool used by economists to understand and represent how money flows through an
economy. It’s a detailed table that shows the connections between different sectors, institutions, and agents within a
country or region.

Structure:

 Households: The people who earn income and spend money.

 Firms: Businesses that produce goods and services.
 Government: Public sector that collects taxes and spends on services.
 Rest of the World: Foreign countries that interact with the economy through imports, exports, and investments.
 Factors of Production: This includes labor, capital, and land, which are used in production by firms.
 Goods and Services: Products that are bought and sold within the economy.

Purpose:

 Analyze Economic Activity: SAM helps understand how income is generated and spent in an economy. It tracks things
like wages, profits, taxes, and investments.
 Policy Analysis: Governments use SAM to assess the impact of different policies (like tax changes or government
spending) on various groups in society.
 Development Planning: It helps in planning economic development by showing how different sectors of the economy
are connected.

In simple terms, SAM is like a map that shows how money circulates within an economy, helping economists understand
the flow of resources and design better economic policies.

Q16. Linear Programming?

Linear programming is a method used to find the best outcome in a mathematical model with certain constraints. It's
often used to maximize or minimize something, like profit, cost, or time, under given conditions or limitations.

Imagine you're trying to allocate resources (like money, time, or materials) to different activities (like producing products
or scheduling tasks) in the most efficient way possible. Linear programming helps you figure out the best way to do that.

Key points:

 You have a set of variables (things you control, like how many products to produce).
 You have a goal (like maximizing profit or minimizing cost).
 You have limitations (like limited resources, or constraints, such as a maximum number of workers or materials).

Linear programming uses mathematical equations to describe the situation and finds the best solution within those limits.

Q17. Project planning: NPV, IRR, and BCR?

1. Net Present Value (NPV): This measures the difference between the present value of cash inflows (money the project
will generate) and the present value of cash outflows (money spent on the project).
 If NPV is positive (+), it means the project is expected to make money and is a good investment.
 If NPV is negative (-), the project is expected to lose money and may not be worth pursuing.
2. Internal Rate of Return (IRR): This is the rate at which the NPV of a project becomes zero. In other words, it’s the
return percentage the project is expected to generate.
 If the IRR is higher than the required rate of return (or the company's cost of capital), the project is considered
good because it’s expected to bring in more money than it costs to run.
 If the IRR is lower than the required return, the project might not be worthwhile.
3. Benefit-Cost Ratio (BCR): This compares the benefits of the project (how much money it will generate) to its costs
(how much it will take to carry out). It is calculated as:
𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠
𝐵𝐶𝑅 = 𝐶𝑜𝑠𝑡𝑠
 If BCR is greater than 1, it means the benefits balance the costs, and the project is likely a good idea.
 If BCR is less than 1, the costs are higher than the benefits, suggesting it might not be worth it.

In simple terms:

 NPV helps you see if the project will make or lose money.
 IRR tells you the percentage return the project will give.
 BCR compares the benefits to the costs to show if it's a good deal.

Q18. Balanced vs. Unbalanced growth strategies: Which is better for Pakistan, and which sector should Pakistan focus
on?

Balanced Growth means developing multiple sectors (like agriculture, industry, and services) at the same time. This
creates a stable economy and reduces dependence on any one sector.
Unbalanced Growth focuses on developing one sector first, often the most promising one, to boost the economy
quickly. It can be risky if that sector faces problems later.

For Pakistan, a Balanced Growth Strategy might be better. This approach can help strengthen different parts of the
economy, making it more resilient to shocks. However, Pakistan should especially focus on agriculture, manufacturing,
and technology. Improving these sectors can create jobs, boost exports, and reduce poverty.

Q19. Basic Needs Approach (BNA) and Growth with Equity (GWE)

The Basic Needs Approach (BNA) focuses on ensuring that everyone has access to the important things needed for a
decent life, like food, shelter, healthcare, and education. The idea is that poverty is not just about lack of income but
also the inability to meet these basic needs.
The Growth with Equity (GWE) approach, on the other hand, aims for economic growth while ensuring that the
benefits are distributed fairly among all people, especially the poor. It emphasizes reducing inequality and making
sure that even those at the bottom of the economic ladder can benefit from growth.

In short, BNA is about meeting people's basic needs, and GWE is about creating a fairer society where economic growth
helps everyone.

Q20. Grow first, then distribute" vs. "Distribute first, then grow" strategies.

Feature Basic Needs Approach (BNA) Growth with Equity (GWE)

Focus Meeting basic human needs (food, health, Economic growth while ensuring fair income
education, shelter) distribution
Main Goal Reduce poverty by providing essentials Achieve growth without increasing inequality
Strategy Direct provision of services and goods Balanced development—growth with social justice
Who Benefits? Poor and weak groups Whole society, especially lower-income groups
Government Role Strong intervention in welfare programs Policy reforms to ensure fair economic opportunities
Economic View Social welfare over pure economic growth. Growth and equality go hand in hand
Q21. Poverty Reduction Strategy Papers (PRSP)?

Poverty Reduction Strategy Papers (PRSPs) are documents prepared by developing countries to outline their plans for
reducing poverty and boosting economic growth. These strategies are created with input from governments, civil society,
and development partners. PRSPs help countries secure financial support from international organizations like the World
Bank and the IMF. They focus on key areas such as education, healthcare, infrastructure, and job creation to improve living
conditions for the poor.
Q22. Indivisibilities in economic development: Definition and examples?

Indivisibilities in Economic Development refer to situations where certain investments or resources cannot be divided into
smaller, manageable parts. These require large-scale investment upfront, and without them, development may be slow
or inefficient.

Examples:

 Infrastructure: Roads, bridges, and power plants need big investments; small, separate projects won’t work efficiently.
 Industries: Some industries, like steel or automobiles, need a large production scale to be profitable.
 Technology & Education: A country needs widespread education and innovation to boost overall economic growth.

These indivisibilities can create barriers to development but can also lead to rapid progress if properly addressed.

Q23. Problems of Least Developed Countries (LDCs), with a focus on Pakistan’s economic development context.

Problems of Least Developed Countries (LDCs) – Focus on Pakistan’s Economic Development: Least Developed Countries
(LDCs) face many challenges that slow down their growth. Some major problems include:

1. Low Income and Poverty: Many people in LDCs earn very little, making it hard to improve living conditions. In Pakistan,
poverty remains a major issue, with many struggling to afford basic needs.
2. Weak Infrastructure: Roads, electricity, and clean water are not available everywhere. Poor infrastructure affects
industries, businesses, and daily life.
3. Unstable Economy: LDCs often face economic crises, high inflation, and low foreign investment. Pakistan has struggled
with a weak currency, high debt, and rising prices.
4. Low Education and Skills: Many people in LDCs, including Pakistan, do not have access to quality education. This limits
job opportunities and slows progress.
5. Political Instability and Corruption: Frequent political changes, weak governance, and corruption reduce trust in
institutions and discourage investment.
6. Unemployment and Underemployment: There are not enough jobs, and many people work in low-paying or informal
jobs, limiting economic growth.
7. Dependence on Agriculture: LDCs rely heavily on farming, but poor technology, water shortages, and climate change
make it difficult to grow enough food. Pakistan faces similar issues, with agriculture being affected by floods and
droughts.
8. Trade Deficit: Many LDCs import more than they export, leading to economic problems. Pakistan struggles with a high
trade deficit, increasing its financial difficulties.

To overcome these challenges, Pakistan and other LDCs need better policies, investment in industries, education, and
infrastructure to achieve sustainable economic growth.

Q24. What sequence of development is better for LDCs like Pakistan? (e.g., Social Overhead Capital to Direct Productive
Activities and vice versa)?

For less developed countries (LDCs) like Pakistan, the better development sequence is Social Overhead Capital (SOC) first,
then Direct Productive Activities (DPA).

This means investing in infrastructure like roads, energy, education, and healthcare first. These create a strong foundation
for businesses and industries (DPA) to grow efficiently. Without proper infrastructure, direct production may struggle due
to high costs and inefficiencies.

However, a balanced approach is ideal—basic industries should develop alongside infrastructure to ensure steady
economic progress.
 Q25. Calculate/compute backward, forward, and total linkages (inducement effects)?

Backward, forward, and total linkages measure how industries are connected in an economy:

Backward Linkages: Show how much an industry relies on inputs from other sectors. High backward linkage means
an industry depends heavily on suppliers.
Forward Linkages: Indicate how much an industry provides inputs to other sectors. High forward linkage means many
industries depend on its output.
Total Linkages: Sum of backward and forward linkages, showing an industry's overall impact on the economy.

To compute them, input-output tables are used. The Leontief inverse matrix helps determine backward linkages, while
the Ghosh inverse matrix is used for forward linkages

Q26. Difference between aij and rij elements in the Input-Output Table?

Element Meaning Formula Interpretation

𝑎 (Technical Shows input required from sector 𝑖 to 𝑋 Measures direct input
𝑎 =
Coefficient) produce one unit of output in sector 𝑗. 𝑋 dependency.
𝑟 (Total Requirement Shows total input (direct + indirect) 𝑟 = 𝐸𝑙𝑒𝑚𝑒𝑛𝑡𝑠 Measures full economy-
Coefficient) required from sector 𝑖 for one unit of 𝑜𝑓 (𝐼 − 𝐴) wide impact.
final demand in sector 𝑗.
Q27. Similarities and differences between Social Accounting Matrix (SAM) and Input-Output Table (IOT).

Similarities:

 Economic Analysis: Both SAM and IOT are used to study economic interactions within an economy.
 Data Structure: Both present data in a matrix format, showing how different sectors are connected.
 Interdependencies: They highlight relationships between industries, households, and institutions.

Differences:

 Scope: IOT focuses mainly on production sectors, while SAM includes households, governments, and factors of
production.
 Income Distribution: SAM tracks income flows between economic agents, unlike IOT, which focuses on product flows.
 Detail Level: SAM provides a broader view of the economy, while IOT is more specialized in production and trade.

Q28. How does the industrial sector expand?

The industrial sector expands when businesses grow, new factories are built, and production increases. This happens due
to higher demand, better technology, investment, and government support. Skilled workers and improved infrastructure
also help industries expand.

Q29. How does the Lewis Model process affect income distribution in Least Developed Countries (LDCs)? Does it worsen
or improve inequality?

The Lewis Model explains how workers move from low-productivity agriculture to higher-productivity industry as a
country develops. Initially, this shift can worsen inequality because industrial workers earn more than agricultural workers.
Over time, as more workers join industries and wages rise in both sectors, income inequality may decrease. However, if
the benefits of growth are unevenly distributed, inequality could persist or worsen, especially in Least Developed
Countries (LDCs).
Q30. Write a short note on the Lewis Model and the complementary method.

The Lewis Model explains economic growth by dividing the economy into two sectors: a traditional, low-productivity
sector (like farming) and a modern, high-productivity sector (like factories). Surplus labor from the traditional sector moves
to the modern sector, leading to higher productivity and growth.

The complementary method focuses on how the two sectors work together. It highlights that the modern sector grows
faster when supported by resources and workers from the traditional sector, creating a balance for overall economic
development.

Q32. Define equilibrium and disequilibrium in the Lewis Model. First, define the terms of trade.

Terms of Trade (TOT): The terms of trade refer to the ratio of a country's export prices to its import prices. It shows how
much a country can import in exchange for its exports. A favorable TOT means a country gets more imports for the same
amount of exports.

Equilibrium in the Lewis Model: In the Lewis Model, equilibrium occurs when labor moves from the agricultural
(subsistence) sector to the industrial (modern) sector without reducing agricultural output. The industrial sector expands,
and wages remain stable until surplus labor is fully absorbed.

Disequilibrium in the Lewis Model: Disequilibrium arises when there is either insufficient labor transfer or over-transfer
of labor. For example:

 If labor remains stuck in agriculture, the industrial sector can't grow.

 If too much labor leaves agriculture, food production may drop, leading to economic instability.

Q33. How to escape the vicious circle of poverty (VCP)?

To escape the vicious circle of poverty (VCP):

1. Education: Gain skills and knowledge to improve job opportunities.

2. Employment: Focus on stable, better-paying jobs or entrepreneurship.
3. Savings: Save and invest even small amounts to build financial security.
4. Access to Resources: Seek support like loans, grants, or community programs.
5. Health and Stability: Maintain good health to stay productive and avoid medical debts.
6. Break the Cycle: Educate the next generation to ensure long-term change.

Start small, stay consistent, and seek opportunities to grow.

Q34. What is the Big Push Theory?

The Big Push Theory suggests that underdeveloped economies need a large-scale investment effort across multiple sectors
at once to break out of poverty. The idea is that small, isolated investments won’t be enough to trigger significant growth,
but a coordinated "big push" can create the momentum needed for economic development.

Q35. Why do projects fail in Pakistan?

Projects in Pakistan often fail due to poor economic planning caused by several issues. These include corruption, lack of
proper funding, weak management, political instability, and unrealistic goals. Delayed approvals, inefficient use of
resources, and lack of accountability further contribute to project failures. Additionally, poor coordination between
government departments and changing policies disrupt project progress.
Q37. Critique the mature and premature endings of the Lewis Model.

The Lewis Model of economic development describes how a traditional, labor-intensive economy transitions into a
modern industrial one.

Mature Ending: In a "mature" ending, surplus labor is fully absorbed into the industrial sector. Wages rise as labor
becomes scarce, leading to increased productivity and economic growth. However, this assumes all workers transition
smoothly and does not account for inequalities or regional imbalances, which might persist despite growth.

Premature Ending: A "premature" ending occurs when industrialization stalls before all surplus labor is absorbed. This can
happen due to limited investment, technological stagnation, or poor policy decisions. It leaves a large portion of the
workforce in low-productivity sectors, causing economic stagnation and inequality.

Both endings highlight the importance of balanced policies to ensure sustainable growth and equal opportunities during
industrialization.

Q38. Difference between Hershman and Rodan growth strategies.

Aspect Hershman Strategy Rodan Strategy

Focus Emphasizes balanced growth across sectors. Focuses on big investments in key areas.
Approach Promotes gradual, widespread Encourages rapid, targeted growth
development.
Investment Spread across various industries. Concentrated in a few priority sectors.
Goal Steady, long-term economic stability. Quick economic transformation.
Risk Lower risk due to diversification. Higher risk but potentially higher rewards.

𝑇𝑜𝑡𝑎𝑙 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠 − 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡 = 𝑁𝑒𝑡 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠

𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒 − 𝑇𝑜𝑡𝑎𝑙 𝐶𝑜𝑠𝑡𝑠 = 𝑁𝑒𝑡 𝑅𝑒𝑣𝑒𝑛𝑢𝑒

𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 ℎ𝑎𝑠 𝑡ℎ𝑟𝑒𝑒 𝑐𝑜𝑚𝑝𝑜𝑛𝑒𝑛𝑡𝑠: 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑠𝑡𝑜𝑐𝑘 𝑜𝑓 𝑚𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 + 𝑓𝑖𝑛𝑎𝑙 𝑠𝑡𝑜𝑐𝑘 𝑜𝑓 𝑜𝑢𝑡𝑝𝑢𝑡
+ 𝑤𝑜𝑟𝑘 𝑖𝑛 𝑝𝑟𝑜𝑔𝑟𝑒𝑠𝑠

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑜𝑠𝑡𝑠 ℎ𝑎𝑠 𝑡𝑤𝑜 𝑐𝑜𝑚𝑝𝑜𝑛𝑒𝑛𝑡𝑠: 𝑓𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡 + 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡

𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡 ℎ𝑎𝑠 𝑡ℎ𝑟𝑒𝑒 𝑐𝑜𝑚𝑝𝑜𝑛𝑒𝑛𝑡𝑠: 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 + 𝑟𝑒𝑝𝑙𝑎𝑐𝑒𝑚𝑒𝑛𝑡 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 + 𝑟𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑣𝑎𝑙𝑢𝑒

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑜𝑠𝑡𝑠

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡 + 𝑤𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡

𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 = 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡 + 𝑤𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑐𝑜𝑠𝑡 + 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑐𝑜𝑠𝑡𝑠

Pakistan Five-Year Planning: Pakistan's Five-Year Plans are strategies made by the government to improve the country's
economy, infrastructure, and people's lives over a five-year period.

Objectives

 Improve the economy and reduce poverty

 Build better roads, hospitals, and schools
 Develop industries like agriculture, energy, and manufacturing
 Create more jobs for people
 Improve education and healthcare
 Increase exports and reduce imports

Targets

 Increase economic growth

 Reduce unemployment and poverty
 Develop better electricity and water supply
 Improve transportation and communication networks
 Support the education system
 Promote industrial and agricultural development

Development Model / Strategies / Policies

 Public and Private Partnership: Government and private companies work together
 Industrial Growth: Support factories and businesses to produce more
 Agriculture Development: Help farmers with better technology and seeds
 Infrastructure Development: Build roads, bridges, and transport systems
 Energy Production: Increase electricity supply through dams, coal, and solar power
 Education and Health: Open more schools and hospitals
 Export Promotion: Encourage businesses to sell products to other countries

Success / Failure

Successes

 Some improvement in roads, electricity, and industries

 Growth in agriculture and small businesses
 Better education and health facilities in some areas

Failures

 Many projects delayed or not completed

 Corruption and misuse of funds
 High inflation and unemployment still a problem
 Dependence on foreign loans increased

Short Notes

 MTDF (Medium-Term Development Framework): MTDF is a three to five-year economic plan used to set goals for
Pakistan’s development. It focuses on economic growth, social progress, and reducing poverty. The government
uses MTDF to decide what projects to invest in and how to use resources efficiently.
 PSDP (Public Sector Development Program): PSDP is a government program that funds big projects in Pakistan, such
as roads, dams, power plants, and schools. It aims to improve infrastructure, boost the economy, and provide jobs.
Every year, the government decides how much money will be given to different projects under PSDP.