The Supply Curve

The Supply Curve MBA Economics Notes

Price
Quantity
Supplied
1
12
2
28
3
42
4
52
5
60
By graphing this data, one obtains the supply curve as shown below:
Supply Curve


As with the demand curve, the convention of the supply curve is to display quantity supplied on the x-axis as the independent variable and price on the y-axis as the dependent variable.
The law of supply states that the higher the price, the larger the quantity supplied, all other things constant. The law of supply is demonstrated by the upward slope of the supply curve.
As with the demand curve, the supply curve often is approximated as a straight line to simplify analysis. A straight-line supply function would have the following structure:
Quantity = a + (b x Price)
where a and b are constant for each supply curve.
A change in price results in a change in quantity supplied and represents movement along the supply curve.
Shifts in the Supply Curve

While changes in price result in movement along the supply curve, changes in other relevant factors cause a shift in supply, that is, a shift of the supply curve to the left or right. Such a shift results in a change in quantity supplied for a given price level. If the change causes an increase in the quantity supplied at each price, the supply curve would shift to the right:
Supply Curve Shift


There are several factors that may cause a shift in a good's supply curve. Some supply-shifting factors include:
Prices of other goods - the supply of one good may decrease if the price of another good increases, causing producers to reallocate resources to produce larger quantities of the more profitable good.
Number of sellers - more sellers result in more supply, shifting the supply curve to the right.
Prices of relevant inputs - if the cost of resources used to produce a good increases, sellers will be less inclined to supply the same quantity at a given price, and the supply curve will shift to the left.
Technology - technological advances that increase production efficiency shift the supply curve to the right.
Expectations - if sellers expect prices to increase, they may decrease the quantity currently supplied at a given price in order to be able to supply more when the price increases, resulting in a supply curve shift to the left
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Price Elasticity of Supply

Price Elasticity of Supply

This measures the % change in QS after a change in Price
PES = % change in QS
% change in Price

Inelastic Supply.

This means that an increase in price leads to a smaller % change in demand Therefore PES <1

Supply could be inelastic for the following reasons

1. Firms operating close to full capacity.
2. Firms have low levels of stocks, therefore there are no surplus goods to sell
3. In the Short term, capital is fixed in the short run e.g. firms do not have time to build a bigger factory.
4. If it is difficult to employ factors of production, e.g. if highly skilled labour is needed
5. With agricultural products supply is inelastic in the short run, because it takes at least 6 months to grow crops, in Sep the farmer cannot suddenly produce more potatoes if the price goes up
Elastic Supply

· This occurs when an increase in price leads to a bigger % increase in supply, therefore PES >1

Supply could be elastic for the following reasons:

1. If there is spare capacity in the factory
2. If there are stocks available
3. In the long Run supply will be more elastic because capital can be varied
4. If it is easy to employ more factors of production
Question on Price Elasticity of Supply Equation

PES is 2.0 for CDS: and the firm supplied 4,000 when the price was £30.

Q. If the price increased from £30 to £36, what will be the new Q?
QS increases by 6, therefore as a % 6/30 = 0.2 = 20%
2.0 = % change in QS /20
40 = % change in QS
Therefore new Q = 4000 *140/100 = 5,600

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What is meant by MBO?

What is meant by MBO?
MBO or Management By Objectives is a thorough and meticulous management process that is accoutred with all those main activities that are completely and consciously directed towards the efficient and effective achievement of objectives, both on an individual basis
as well as a collective basis.
In addition to that, this very approach comprises of a number of steps. Firstly the highest level involves setting goals and objectives. Secondly it deals with clarification of roles to those individuals who are working on the very project and are responsible for accomplishing it. Next comes the step of setting smaller objectives for the people at the sub-ordinate level of the organization who intend to adopt the procedure of MBO. Projects can be both verifiable (quantitative) and also they could be non-verifiable (qualitative) for line managers as well as for other personnel of the organization who are also connected to the process of Management By Objectives.
We can say the management by objectives as a comprehensive managerial system that integrates many key managerial activities in a systematic manner and is consciously directed towards the effective and efficient achievement of organizational and individuals’ objectives.

What are the failings of MBO?
An MBO system has a number of weaknesses. Most are due to shortcomings in applying the MBO concepts. Failure to teach the philosophy of MBO is one of the weaknesses of certain programs. Managers must explain to subordinates what it is, how it works, why it is being done, what part it will play in appraising performances, and above all, how participants can benefit. The philosophy is built on the concepts of self-control and self-direction.
Failure to give guidelines to goal setters is often another problem. Managers must know what the corporate goals are and how their own activities fit in with them. Managers also need planning premises and knowledge of major company policies. There is also the difficulty of setting variable goal with the right degree of flexibility. Participants in MBO report at time that the excess results with the economic results puts pressure on individuals that may encourage questionable behaviour.
To reduce the probability of restoring to unethical means to achieve results, top management must agree to responsible objectives, clearly state behavioural expectations, and give high priority to ethical behaviour, rewarding it as well as punishing unethical activities. In addition, emphasis on short-run goals can be done at the expense of the longer-range health of the organization. Moreover, the danger of inflexibility can make managers hesitate to change objectives, even if a changed environment would require such adjustment

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Optimization

Optimization :
In mathematics, the simplest case of optimization, or mathematical programming, refers to the study of problems in which one seeks to minimize or maximize a real function by systematically choosing the values of real or integer variables from within an allowed set. This (a scalar real valued objective function) is actually a small subset of this field which comprises a large area of applied mathematics and generalizes to study of means to obtain "best available" values of some objective function given a defined domain where the elaboration is on the types of functions and the conditions and nature of the objects in the problem domain.
History :

The first optimization technique, which is known as steepest descent, goes back to Gauss. Historically, the first term to be introduced was linear programming, which was invented by George Dantzig in the 1940s. The term programming in this context does not refer to computer programming (although computers are nowadays used extensively to solve mathematical problems). Instead, the term comes from the use of program by the United States military to refer to proposed training and logistics schedules, which were the problems that Dantzig was studying at the time. (Additionally, later on, the use of the term "programming" was apparently important for receiving government funding, as it was associated with high-technology research areas that were considered important.)

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The Production Possibility Frontier

Consider the case of an island economy that produces only two goods: wine and grain. In a given period of time, the islanders may choose to produce only wine, only grain, or a combination of the two according to the following table:
Production Possibility Table

Wine
(thousands of bottles)
Grain
(thousands of bushels)
0
15
5
14
9
12
12
9
14
5
15
0
The production possibility frontier (PPF) is the curve resulting when the above data is graphed, as shown below:
Production Possibility Frontier


The PPF shows all efficient combinations of output for this island economy when the factors of production are used to their full potential. The economy could choose to operate at less than capacity somewhere inside the curve, for example at point a, but such a combination of goods would be less than what the economy is capable of producing. A combination outside the curve such as point b is not possible since the output level would exceed the capacity of the economy.
The shape of this production possibility frontier illustrates the principle of increasing cost. As more of one product is produced, increasingly larger amounts of the other product must be given up. In this example, some factors of production are suited to producing both wine and grain, but as the production of one of these commodities increases, resources better suited to production of the other must be diverted. Experienced wine producers are not necessarily efficient grain producers, and grain producers are not necessarily efficient wine producers, so the opportunity cost increases as one moves toward either extreme on the curve of production possibilities.
Suppose a new technique was discovered that allowed the wine producers to double their output for a given level of resources. Further suppose that this technique could not be applied to grain production. The impact on the production possibilities is shown in the following diagram:
Shifted Production Possibility Frontier


In the above diagram, the new technique results in wine production that is double its previous level for any level of grain production.
Finally, if the two products are very similar to one another, the production possibility frontier may be shaped more like a straight line. Consider the situation in which only wine is produced. Let's assume that two brands of wine are produced, Brand A and Brand B, and that these two brands use the same grapes and production process, differing only in the name on the label. The same factors of production can produce either product (brand) equally efficiently. The production possibility frontier then would appear as follows:
PPF for Very Similar Products


Note that to increase production of Brand A from 0 to 3000 bottles, the production of Brand B must be decreased by 3000 bottles. This opportunity cost remains the same even at the other extreme, where increasing the production of Brand A from 12,000 to 15,000 bottles still requires that of Brand B to be decreased by 3000 bottles. Because the two products are almost identical in this case and can be produced equally efficiently using the same resources, the opportunity cost of producing one over the other remains constant between the two extremes of production possibilities
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Supply and Demand

Supply and Demand


The market price of a good is determined by both the supply and demand for it. In 1890, English economist Alfred Marshall published his work, Principles of Economics, which was one of the earlier writings on how both supply and demand interacted to determine price. Today, the supply-demand model is one of the fundamental concepts of economics. The price level of a good essentially is determined by the point at which quantity supplied equals quantity demanded. To illustrate, consider the following case in which the supply and demand curves are plotted on the same graph.
Supply and Demand


On this graph, there is only one price level at which quantity demanded is in balance with the quantity supplied, and that price is the point at which the supply and demand curves cross.
The law of supply and demand predicts that the price level will move toward the point that equalizes quantities supplied and demanded. To understand why this must be the equilibrium point, consider the situation in which the price is higher than the price at which the curves cross. In such a case, the quantity supplied would be greater than the quantity demanded and there would be a surplus of the good on the market. Specifically, from the graph we see that if the unit price is $3 (assuming relative pricing in dollars), the quantities supplied and demanded would be:
Quantity Supplied = 42 units
Quantity Demanded = 26 units
Therefore there would be a surplus of 42 - 26 = 16 units. The sellers then would lower their price in order to sell the surplus.
Suppose the sellers lowered their prices below the equilibrium point. In this case, the quantity demanded would increase beyond what was supplied, and there would be a shortage. If the price is held at $2, the quantity supplied then would be:
Quantity Supplied = 28 units
Quantity Demanded = 38 units
Therefore, there would be a shortage of 38 - 28 = 10 units. The sellers then would increase their prices to earn more money.
The equilibrium point must be the point at which quantity supplied and quantity demanded are in balance, which is where the supply and demand curves cross. From the graph above, one sees that this is at a price of approximately $2.40 and a quantity of 34 units.
To understand how the law of supply and demand functions when there is a shift in demand, consider the case in which there is a shift in demand:
Shift in Demand


In this example, the positive shift in demand results in a new supply-demand equilibrium point that in higher in both quantity and price. For each possible shift in the supply or demand curve, a similar graph can be constructed showing the effect on equilibrium price and quantity. The following tablesummarizes the results that would occur from shifts in supply, demand, and combinations of the two.
Result of Shifts in Supply and Demand

Demand
Supply
Equilibrium
Price
Equilibrium
Quantity
+
+
+
-
-
-
+
-
+
-
+
-
+
+
?
+
-
-
?
-
+
-
+
?
-
+
-
?
In the above table, "+" represents an increase, "-" represents a decrease, a blank represents no change, and a question mark indicates that the net change cannot be determined without knowing the magnitude of the shift in supply and demand. If these results are not immediately obvious, drawing a graph for each will facilitate the analysis
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Opportunity Cost

Opportunity Cost


Scarcity of resources is one of the more basic concepts of economics. Scarcity necessitates trade-offs, and trade-offs result in an opportunity cost. While the cost of a good or service often is thought of in monetary terms, the opportunity cost of a decision is based on what must be given up (the next best alternative) as a result of the decision. Any decision that involves a choice between two or more options has an opportunity cost.
Opportunity cost contrasts to accounting cost in that accounting costs do not consider forgone opportunities. Consider the case of an MBA student who pays $30,000 per year in tuition and fees at a private university. For a two-year MBA program, the cost of tuition and fees would be $60,000. This is the monetary cost of the education. However, when making the decision to go back to school, one should consider the opportunity cost, which includes the income that the student would have earned if the alternative decision of remaining in his or her job had been made. If the student had been earning $50,000 per year and was expecting a 10% salary increase in one year, $105,000 in salary would be foregone as a result of the decision to return to school. Adding this amount to the educational expenses results in a cost of $165,000 for the degree.
Opportunity cost is useful when evaluating the cost and benefit of choices. It often is expressed in non-monetary terms. For example, if one has time for only one elective course, taking a course in microeconomics might have the opportunity cost of a course in management. By expressing the cost of one option in terms of the foregone benefits of another, the marginal costs and marginal benefits of the options can be compared.
As another example, if a shipwrecked sailor on a desert island is capable of catching 10 fish or harvesting 5 coconuts in one day, then the opportunity cost of producing one coconut is two fish (10 fish / 5 coconuts). Note that this simple example assumes that the production possibility frontier between fish and coconuts is linear.
Relative Price

Opportunity cost is expressed in relative price, that is, the price of one choice relative to the price of another.
For example, if milk costs $4 per gallon and bread costs $2 per loaf, then the relative price of milk is 2 loaves of bread. If a consumer goes to the grocery store with only $4 and buys a gallon of milk with it, then one can say that the opportunity cost of that gallon of milk was 2 loaves of bread (assuming that bread was the next best alternative).
In many cases, the relative price provides better insight into the real cost of a good than does the monetary price.
Applications of Opportunity Cost

The concept of opportunity cost has a wide range of applications including:
Consumer choice
Production possibilities
Cost of capital
Time management
Career choice
Analysis of comparative advantageqx6fH6Y

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Market Research

Market Research
Market research is generally either primary or secondary. [1] In secondary research, the company uses information compiled from other sources that appears applicable to a new or existing product. The advantages of secondary research are that it is relatively cheap and easily accessible. Disadvantages of secondary research are that it is often not specific to your area of research and the data used can be biased and is difficult to validate. Primary market research involves testing such as focus groups, surveys, field tests, interviews or observation, conducted or tailored specifically to that product.
A list of questions that can be answered through market research:
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 research for business/insurance planning

Market research is for discovering what people want, need, or believe. It can also involve discovering how they act. Once that research is complete it can be used to determine how to market your specific product.
Examples of market research would be questionnaires and surveys.
For starting up a business there are a few things that are important:
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?
Market segmentation

Market segmentation is the division of the market or population into subgroups with similar motivations. Widely used bases for segmenting include geographic differences, personality differences, demographic differences, use of product differences, and psychographic differences.
Market trends

The upward or downward movements of a market, during a period of time. The market size is more difficult to estimate if you are starting with something completely new. In this case, you will have to derive the figures from the number of potential customers or customer segments. [Ilar 1998]
But besides information about the target market you also need information about your competitor, your customers, products etc. Lastly, you need to measure marketing effectiveness. A few techniques are:
Customer analysis
Choice Modelling
Competitor analysis
Risk analysis
Product research

Advertising the research
Marketing mix modeling

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Income Elasticity of Demand YED

Income Elasticity of Demand YED
This measures the responsiveness of demand to a change in income.
e.g. if your income increase by 5 % and your demand for mobile phones increased 20% then the YED = 20/ 5 = 4.
YED = % change in Q.D
% change in Income

INFERIOR GOOD
This occurs when an increase in income leads to a fall in demand. Therefore YED<0.
E.g. clothes from charity shops, cheap bread
When your income increase you buy better quality goods
NORMAL GOOD
This occurs when an increase in income leads
To an increase in demand for the good, Therefore YED>0
LUXURY GOOD
This occurs when an increase in demand causes a bigger
% increase in demand, therefore YED>1.
Luxury goods will also be normal goods and we can say
They will be income Elastic
Income inelastic This means an increase in income leads to a smaller % increase in demand. Therefore 0> YED <1
Firms will make use of YED by producing more luxury goods during periods of economic growth, similarly there will be less demand for inferior goods.

Income elasticity of demand (YED)
In economics, the income elasticity of demand measures the responsiveness of the quantity demanded of a good to the change in the income of the people demanding the good. It is calculated as the ratio of the percent change in quantity demanded to the percent change in income. For example, if, in response to a 10% increase in income, the quantity of a good demanded increased by 20%, the income elasticity of demand would be 20%/10% = 2.
Interpretation


Inferior good's demand falls as consumer income increases.
A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the quantity demanded and may lead to changes to more luxurious substitutes.
A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in the quantity demanded. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.
A zero income elasticity (or inelastic) demand occurs when an increase in income is not associated with a change in the quantity demanded of a good. These would be sticky goods.
Mathematical definition

More formally, the income elasticity of demand, , for a given Marshallian demand functionfor a good is

or alternatively:

This can be rewritten in the form:

With income I, and vector of prices . Many necessities have an income elasticity of demand between zero and one: expenditure on these goods may increase with income, but not as fast as income does, so the proportion of expenditure on these goods falls as income rises. This observation for food is known as Engel's law
.

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Import and Export

Export and Import

Export


In economics, an export is any good or commodity, transported from one country to another country in a legitimate fashion, typically for use in trade. Export is an important part of international trade. Its counterpart is import.
Export goods or services are provided to foreign consumers by domestic producers. Export of commercial quantities of goods normally requires involvement of the Customs authorities in both the country of export and the country of import.
The advent of small trades over the internet such as through Amazon, e-Bay and the like, have largely by-passed the involvement of Customs in many countries due to the low individual values of these trades. Nonetheless these small exports are still subject to legal restrictions applied by the country of export, particularly in respect of strategic export limitations.



Import :


In economics, an import is any good or commodity, brought into one country from another country in a legitimate fashion, typically for use in trade. Import goods or services are provided to domestic consumers by foreign producers. Import of commercial quantities of goods normally requires involvement of the Customs authorities in both the country of import and the country of export.

Read more: MBA notes Import and Export Notes http://www.friendsmania.net/forum/mba-economics-notes/86794.htm#ixzz1LqnqjPAI

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Demand-pull inflation

Demand-pull inflation

Demand-pull inflation arises when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as "too much money chasing too few goods". More accurately, it should be described as involving "too much money spent chasing too few goods", since only money that is spent on goods and services can cause inflation. This would not be expected to persist over time due to increases in supply, unless the economy is already at a full employment level.
How it happens :

According to Keynesian theory, the more firms will employ people, the more people are employed, and the higher aggregate demand will become. This greater demand will make firms employ more people in order to output more. Due to capacity constraints, this increase in output will eventually become so small that the price of the good will rise. At first, unemployment will go down, shifting AD1 to AD2, which increases Y by (Y2 - Y1). This increase in demand means more workers are needed, and then AD will be shifted from AD2 to AD3, but this time much less is produced than in the previous shift, but the price level has risen from P2 to P3, a much higher increase in price than in the previous shift. This increase in price is called inflatio
n

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The Demand Curve

The Demand Curve
The quantity demanded of a good usually is a strong function of its price. Suppose an experiment is run to determine the quantity demanded of a particular product at different price levels, holding everything else constant. Presenting the data in tabular form would result in a demand schedule, an example of which is shown below.
Demand Schedule

Price
Quantity
Demanded
5
10
4
17
3
26
2
38
1
53

The demand curve for this example is obtained by plotting the data:
Demand Curve


By convention, the demand curve displays quantity demanded as the independent variable (the x axis) and price as the dependent variable (the y axis).
The law of demand states that quantity demanded moves in the opposite direction of price (all other things held constant), and this effect is observed in the downward slope of the demand curve.
For basic analysis, the demand curve often is approximated as a straight line. A demand function can be written to describe the demand curve. Demand functions for a straight-line demand curve take the following form:
Quantity = a - (b x Price)
where a and b are constants that must be determined for each particular demand curve.
When price changes, the result is a change in quantity demanded as one moves along the demand curve.
Shifts in the Demand Curve

When there is a change in an influencing factor other than price, there may be a shift in the demand curve to the left or to the right, as the quantity demanded increases or decreases at a given price. For example, if there is a positive news report about the product, the quantity demanded at each price may increase, as demonstrated by the demand curve shifting to the right:
Demand Curve Shift


A number of factors may influence the demand for a product, and changes in one or more of those factors may cause a shift in the demand curve. Some of these demand-shifting factors are:

Customer preference
Prices of related goods

Complements - an increase in the price of a complement reduces demand, shifting the demand curve to the left.
Substitutes - an increase in the price of a substitute product increases demand, shifting the demand curve to the right.
Income - an increase in income shifts the demand curve of normal goods to the right.
Number of potential buyers - an increase in population or market size shifts the demand curve to the right.
Expectations of a price change - a news report predicting higher prices in the future can increase the current demand as customers increase the quantity they purchase in anticipation of the price change
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The State Bank of Pakistan(SBP), Functions of SBP, What is Central Bank Read more: MBA Notes The State Bank of Pakistan(SBP), Functions of SBP, What is Central Bank http

Central Bank :
A central bank, reserve bank, or monetary authority is the entity responsible for the monetary policy of a country or of a group of member states. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized-loaninterest rates, and acting as a "bailout" lender of last resort to the banking sector during times of financial crisis (private banks often being integral to the national financial system). It may also have supervisory powers, to ensure that banks and other financial institutions do not behave recklessly or fraudulently.
Most richer countries today have an "independent" central bank, that is, one which operates under rules designed to prevent political interference. Examples include the European Central Bank, the U.S.Federal Reserve, the Banco Central de Chile, the Reserve Bank of Australia, the Reserve Bank of India, the Bank of England, the Bank of Canada, Sveriges Riksbank, the Banco de la República de Colombia, Norges Bank, State Bank of Pakistan, National Bank of Azerbaijan, and the Banco Central de Bolivia (BCB). Some central banks are publicly-owned, and others are, in theory, privately-owned. In practice, there is little difference between public and private ownership, since in the latter case almost all profits of the bank are paid to the government either as a tax or a transfer to the government.
The State Bank of Pakistan (SBP) is the central bank of Pakistan. While its constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until January 1, 1974, when the bank was nationalised, the scope of its functions was considerably enlarged. TheState Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. The headquarters are located in the financial capital of Pakistan, Karachi with its second headquarters in the capital, Islamabad.
Functions of SBP : Under the State Bank of Pakistan Order 1948, the state bank of Pakistan was charged with the duty to "regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage".
A large section of the state bank's duties were widened when the State Bank of Pakistan Act 1956 was introduced. It required the state bank to "regulate the monetary and credit system of Pakistan and to foster its growth in the best national interest with a view to securing monetary stability and fuller utilisation of the country’s productive resources". In February 1994, the State Bank was given full autonomy, during the financial sector reforms.
On January 21, 1997, this autonomy was further strengthened when the government issued three Amendment Ordinances (which were approved by the Parliament in May 1997). Those included were the State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 and Banks Nationalisation Act, 1974. These changes gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy and to set limit on government borrowings from the State Bank of Pakistan. The amendments to the Banks Nationalisation Act brought the end of the Pakistan Banking Council (an institution established to look after the affairs of NCBs) and allowed the jobs of the council to be appointed to the Chief Executives, Boards of the Nationalised Commercial Banks (NCBs) and Development Finance Institutions (DFIs). The State Bank having a role in their appointment and removal. The amendments also increased the autonomy and accountability of the chief executives, the Boards of Directors of banks and DFIs.
The State Bank of Pakistan also performs both the traditional and developmental functions to achieve macroeconomic goals. The traditional functions, may be classified into two groups:
The primary functions including issue of notes, regulation and supervision of the financial system, bankers’ bank, lender of the last resort, banker to Government, and conduct of monetary policy.
The secondary functions including the agency functions like management of public debt, management of foreign exchange, etc., and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions.

The non-traditional or promotional functions, performed by the State Bank include development of financial framework, institutionalisation of savings and investment, provision of training facilities to bankers, and provision of credit to priority sectors. The State Bank also has been playing an active part in the process of islamisation of the banking system.
What is the Function of the Central Bank?
The first and most important function of a central bank is to accept responsibility for advising the government on the making of the country’s financial policy, and thus to see that it is carried out. The government must decide how much money there shall be in the country at a given time, and the central bank must take steps to increase or decrease the supply accordingly.
This was by no means clear when the bank of Somaliland was founded.
The specific reason then for its formation was to provide money for the government during the time when public expenditure had become too expensive to be financed out of current taxation. Its business at first was the receiving of money on deposit and lending of money against satisfactory security.
At first this lending was nearly all to the government, and gradually the bank of Somaliland came to perform other services on behalf of the government, and so to become regarded as “banker to the government”. Thus it undertook on the government’s behalf the circulation of payment vouchers, which were simply promissory notes of the government.
Accordingly, the bank of Somaliland was empowered to open regional branches for the purpose of restoring confidence by issuing its notes in the country.
As the central bank of the country, the bank of Somaliland must:
Stand ready to take prompt and decisive action to prevent any spreading loss of confidence
Implement the monetary policy of the government.
Act as banker to the government
Manage the exchange equalization account.
Is the note issuing authority;
Acts as registrar of government and nationalized industry.
Act as banker to the deposit banks
Have about hundred (100) accounts for overseas, central banks and for such bodies as the International Monetary Fund and The International Bank for Reconstruction and Development (the World Bank).
Replace worn-out and distorted bank-notes.

The Bank of Somaliland needs foreign experts to properly function and become a real central bank.
Banking
The Stat Bank of Pakistan looks into a lot of different ranges of banking to deal with the changes in economic climate and different purchasing and buying powers. Here are some of the banking areas that the state bank looks into;
State Bank’s Shariah Board Approves Essentials and Model Agreements for Islamic Modes of Financing
Procudure For Submitting Claims With Sbp In Respect of Unclaimed Deposits Surrendered By Banks/Dfis.
Banking Sector Supervision in Pakistan
Micro Finance
Small Medium Enterprises (SMEs)
Minimum Capital Requirements for Banks
Remittance Facilities in Pakistan
Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme.
Handbok of Corporate Governance
Guidelines on Risk Management
Guidelines on Commercial Paper
Guidelines on Securitization
SBP.Scheme for Agricultural Financing

Bank Assets and Liabilities

This is a chart of trend of major assets and liabilities reported by scheduled commercial banks to the State Bank of Pakistan with figures in millions of Pakistani Rupees
Year
Deposits
Advances
Investments
2002
1,466,019
932,059
559,542
2006
2,806,645
2,189,368
799,285

Activities and responsibilities
Functions of a central bank (not all functions are carried out by all banks):
implementation of monetary policy
controls the nation's entire money supply
the Government's banker and the bankers' bank ("Lender of Last Resort")
manages the country's foreign exchange and gold reserves and the Government's stock register;
regulation and supervision of the banking industry:
setting the official interest rate - used to manage both inflation and the country's exchange rate - and ensuring that this rate takes effect via a variety of policy mechanisms
.

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