Economics 1st Year ICOM Book PDF Download (Punjab Board)

Economics 1st Year (Class 11) is published by the Punjab Curriculum and Textbook Board (PCTB), Lahore. Approved by the Federal Ministry of Education, this is the standard ICOM Part 1 Economics textbook used in Punjab Board colleges. It covers twelve chapters introducing the core concepts of microeconomics including demand, supply, market equilibrium, production, and factor pricing.

For ICOM Part 1 students, Economics is one of the most important subjects in the programme. This book introduces economic theory in a clear and structured way, starting from basic concepts and building up to production, cost analysis, and market structures. The PDF makes it easy to revise definitions, diagrams, and theory before the final board exam.

Book Overview

Class	11 (ICOM Part 1 / First Year)
Subject	Economics
Category	ICOM
Board	Punjab Board (PCTB, Lahore)
Medium	Urdu
Edition	2016–17
Total Chapters	12
Total Pages	272
Format	PDF

Chapter List

Chapter 1 – Nature and Scope of Economics (معاشیات کی نوعیت اور وسعت)

This chapter introduces the basics of economics by starting with human wants, dividing them into non-economic wants (available free, like water and sunlight) and economic wants (requiring money, like food and clothing), and explaining seven characteristics of economic wants such as being unlimited, competing with each other, recurring, and having alternative means of satisfaction. It then covers goods (economic, non-economic, consumer, capital, public, private, necessities, comforts, luxuries) and services, followed by utility and its seven characteristics, and scarcity. The final major section presents and critiques the definitions of economics given by Adam Smith, Alfred Marshall, and Lionel Robbins, along with the scope of economics.

Important Questions:

• What is Lionel Robbins’ definition of economics? Robbins defined economics as a science that studies human behaviour as a relationship between multiple (unlimited) ends and scarce means, which have alternative uses.
• What are the two main kinds of human wants described in the chapter? Human wants are divided into non-economic wants, which are satisfied without spending money (e.g., water, sunlight, friendship), and economic wants, which require money to satisfy (e.g., food, clothing, shelter).
• What is meant by “scarcity” according to the chapter? Scarcity means a thing is less in quantity compared to its demand; a good is scarce only if its demand exceeds its supply, not merely because its quantity is small.
• How does the chapter differentiate micro economics from macro economics? Micro economics studies individual parts of the economy separately, such as consumer behaviour and firm pricing, while macro economics studies the economy as a whole, such as national income, aggregate demand and supply, and employment.

Chapter 2 – Analysis of Consumer Behavior (رویۂ صارف کا تجزیہ)

This chapter explains consumer behavior — how a consumer with limited resources allocates spending to maximize satisfaction. It defines core terms (value, price, wealth, consumption, utility) and distinguishes total utility, marginal utility, and initial utility, illustrated through a water-glass schedule showing the point of satiety and negative utility. It presents the Law of Diminishing Marginal Utility, with its assumptions and limitations, and its practical importance for demand and taxation. It then covers the Law of Equi-Marginal Utility (also called the Law of Maximum Satisfaction or Law of Substitution), consumer’s equilibrium, and indifference curves, including the marginal rate of substitution.

Important Questions:

• What is the Law of Diminishing Marginal Utility? It states that when a consumer continuously consumes successive units of a commodity (other things being equal), the marginal utility of each additional unit keeps falling until it reaches zero and then becomes negative.
• What is meant by the “point of satiety”? It is the point where total utility is at its maximum and marginal utility equals zero, as shown in the water-glass example where the fifth glass gives zero marginal utility while total utility peaks at 40.
• What is the Law of Equi-Marginal Utility, and by what other names is it known? It states that a consumer maximizes total satisfaction by allocating limited money across goods so that the marginal utility obtained per unit of money spent on each good is equal; it is also called the Law of Maximum Satisfaction and the Law of Substitution.
• What is an indifference curve? It is a curve showing all combinations of two goods that give a consumer equal satisfaction, so the consumer remains indifferent between any point on it; indifference curves have a negative slope, are convex to the origin, and never intersect each other.

Chapter 3 – Basic Mathematical and Statistical Tools in Economics (معاشیات میں شماریات اور ریاضی کے بنیادی آلات)

Chapter 3 introduces the basic mathematical and statistical tools used in economic analysis. It explains variables (continuous and discontinuous, independent and dependent), constants, and parameters, then defines a function as the relationship between independent and dependent variables, distinguishing increasing functions (like price and supply) from decreasing functions (like price and demand). It covers equations in detail, including linear equations, quadratic equations solved by factorization and by formula, their graphical representation, and simultaneous equations solved through elimination and substitution methods, along with statistical data collection and tabulation.

Important Questions:

• What is a variable, according to the chapter? A variable is a symbol that can take on different values or a set of admissible values during a discussion, unlike a constant which stays fixed; examples given include price, demand, supply, income, and savings.
• What is the difference between an increasing function and a decreasing function? In an increasing function two variables move in the same direction, as with price and supply; in a decreasing function they move in opposite directions, as with price and demand.
• What is the general form of a quadratic equation, and how can it be solved? Its general form is ax² + bx + c = 0 (with a ≠ 0), and it can be solved either by factorization or by the formula x = [-b ± √(b²-4ac)] / 2a.
• What are the two main methods of solving simultaneous equations described in the chapter? They are the elimination method, where one unknown is removed by multiplying and subtracting the equations, and the substitution method, where one variable’s value is found and substituted into the other equation.

Chapter 4 – Demand (طلب)

Chapter 4, Demand, distinguishes a mere want from economic demand, which requires both desire and purchasing power. It explains the Law of Demand — the inverse price-quantity relationship — through individual and market demand schedules and curves, its assumptions, and exceptions such as inferior goods, prestige goods, and hoarding. It covers changes in demand, separating extension/contraction (movement along the curve) from shifts caused by income, fashion, population, or season. Finally, it explains elasticity of demand — percentage, total-expenditure, point, and arc methods — along with income elasticity, cross elasticity, and the demand function.

Important Questions:

• What is the difference between a “want” and “demand” in economics? A mere desire for something is only a want; it becomes demand when the person also has the purchasing power (money) and willingness to buy the good at a given price.
• Why does the demand curve slope downward (negatively)? Because of the price effect, the substitution effect, and the entry of new buyers — as price falls, consumers’ purchasing power rises, they shift from substitutes to the now-cheaper good, and previously priced-out buyers begin purchasing, all increasing quantity demanded.
• What is meant by extension and contraction of demand? Extension is a rise in quantity demanded caused solely by a fall in price, and contraction is a fall in quantity demanded caused solely by a rise in price; both are shown as movement along the same demand curve.
• What is elasticity of demand? Elasticity of demand is the rate or degree of change in quantity demanded of a good that occurs in response to a change in its price.

Chapter 5 – Supply (رسد)

Chapter 5 explains supply, the quantity of a good sellers offer at a given price during a specific time, and distinguishes it from stock. It covers market, short-period, and long-period supply, states the Law of Supply — that price and supply move in the same direction, other conditions constant — along with its assumptions and exceptions, and illustrates supply schedules and upward-sloping supply curves. It explains movement along the curve (extension and contraction) versus shifts in the curve (rise and fall) caused by cost, technology, and other factors, then covers elasticity of supply, its measurement, and influencing factors.

Important Questions:

• What is the difference between supply and stock? Stock is the portion of a commodity’s total production that a trader keeps in godowns or shops for future sale, without reference to price, while supply is the quantity brought to the market for sale at a specific price during a specific time period.
• Why does the supply curve slope upward from left to right? Because price and supply have a direct relationship — as price rises, sellers increase supply to earn more profit, so the supply curve rises from bottom-left to top-right.
• State any two exceptions (limitations) to the Law of Supply. The law does not hold during dangers and political instability (such as war or floods), when sellers are forced to sell even at low prices; and during seasonal conditions, such as sellers reducing warm-clothing prices as winter turns to summer regardless of demand for a higher price.
• What is meant by elasticity of supply being equal to, greater than, or less than unity? Elasticity of supply equals one when the percentage change in quantity supplied equals the percentage change in price; it is greater than one when quantity supplied changes by a larger percentage than price; and it is less than one when quantity supplied changes by a smaller percentage than price.

Chapter 6 – Market Equilibrium (منڈی کا توازن)

Chapter 6, Market Equilibrium, explains equilibrium as the state where two opposing forces exactly balance each other. It applies this to a market, where the law of demand (price and demand move inversely) and the law of supply (price and supply move together) pull in opposite directions until they meet at one point, giving the equilibrium price and equilibrium quantity. Using a sugar-price schedule and demand/supply curves intersecting at point E, the chapter shows equilibrium at Rs. 3 with 30 kg. It then examines how equilibrium shifts when demand alone, supply alone, or both change, and demonstrates finding equilibrium algebraically.

Important Questions:

• What is meant by market equilibrium? Market equilibrium is the condition in which the demand for and supply of a commodity become equal, i.e., the price at which buyers are willing to buy and sellers are willing to sell the same quantity of the good.
• In the chapter’s worked example, how are the equilibrium price and quantity found from the equations Qd = 60 – 10P and Qs = 10P? By setting Qd equal to Qs (60 – 10P = 10P), solving gives P = 3, and substituting P = 3 back into either equation gives Q = 30; so the equilibrium price is Rs. 3 and the equilibrium quantity is 30 kg.
• What happens to equilibrium price and quantity when demand and supply increase by equal amounts? The equilibrium point shifts to a new point, the equilibrium quantity increases, while the equilibrium price remains unchanged.
• What happens to equilibrium price and quantity when demand decreases and supply increases by the same amount? The equilibrium price falls, while the equilibrium quantity remains unchanged.

Chapter 7 – Theory of Production (نظریہ پیدائش دولت)

Chapter 7, Theory of Production, explains that production means creating not just utility but value in goods and services. It examines the four factors of production — land, labour, capital, and organization (the entrepreneur) — detailing each factor’s meaning, characteristics, and importance, along with labour’s forms of mobility. The chapter also covers the Malthusian Theory of Population, including its main points, criticism, and application to Pakistan; capital formation and the factors slowing and speeding it in Pakistan; the main kinds of business organization (sole proprietorship, partnership, joint stock company, cooperative society); and the relative importance of the four factors of production.

Important Questions:

• According to the chapter, what does “production” really mean in economics? Production means not only creating utility in a thing but also creating value in it — for example, driving one’s own car for personal pleasure creates utility but not value, while driving it as a taxi creates both, making it production.
• What are the four factors of production named in the chapter? The factors of production are land (natural resources), labour (human resources), capital (monetary resources), and organization (entrepreneurial resources) — together the elements that are the source of all production.
• State any two characteristics of land mentioned in the chapter. Land is a free gift of nature and has a fixed/limited supply, and it differs in fertility, location, and efficiency from place to place; it is also a non-active (passive) factor.
• What does the Malthusian Theory of Population state, and how does the chapter say it applies to Pakistan? Malthus held that population grows in geometric ratio while food supply grows only in arithmetic ratio, threatening poverty unless checked; the chapter argues this still applies to Pakistan, citing its high population growth rate, low per-capita income, and food shortages.

Chapter 8 – Scale of Production and Laws of Returns (پیانہ پیدائش اور قوانین حاصل)

Chapter 8 explains what determines a firm’s scale of production — financial resources, techniques of production, extent of market, entrepreneur’s ability, and transport facilities — and distinguishes internal economies (technical, administrative, financial, commercial, and risk-bearing), specific to one firm, from external economies shared by all firms in an industrial area. It details the advantages and disadvantages of large-scale and small-scale production, then covers the three laws of returns — increasing returns, constant returns, and diminishing returns — illustrated with schedules and diagrams, along with the law of variable proportions and its three stages of production.

Important Questions:

• What is meant by scale of production? Scale of production refers to the size or level at which an entrepreneur decides to run a business; a firm with limited financial resources produces on a small scale, while one with abundant resources uses modern machinery to produce on a large scale.
• Name any two factors that determine the scale of production. According to the chapter, financial resources and techniques of production are two key factors (extent of the market, entrepreneur’s ability, and transport facilities are also listed as determinants).
• What is meant by internal and external economies? Internal economies are advantages specific to one particular firm, such as technical, administrative, financial, commercial, and risk-bearing economies, while external economies are benefits shared by all firms in an area, arising from things like auxiliary industries, transport, banking, and research facilities.
• Why is the law of diminishing returns also called the law of increasing cost? Because once variable factors (labour and capital) are added beyond the optimum combination with the fixed factor, marginal output keeps falling while the cost per unit of the variable factor stays the same, causing marginal cost per unit of output to rise.

Chapter 9 – Cost of Production (مصارف پیدائش)

This chapter explains the concept of cost of production — all expenses a producer bears to produce a commodity, including normal profit. It distinguishes short-run costs (fixed/overhead costs like rent and interest on capital, which stay unchanged even at zero output; and variable/prime costs like raw material and wages, which rise and fall with output) from long-run costs, where all factors become variable. It defines total, average, and marginal cost with a numerical schedule and diagrams showing U-shaped short-run curves, and explains how the long-run average cost curve is derived as an “envelope curve” tangent to short-run average cost curves.

Important Questions:

• What is meant by cost of production? Cost of production refers to all the expenses a producer has to bear in order to produce a commodity, including payments to factors of production (rent, wages, interest, profit) and other costs like raw material, machinery, taxes, and normal profit.
• What is the difference between fixed and variable costs? Fixed costs, such as building rent and interest on capital, remain unchanged whether output is zero or high; variable costs, such as raw material and wages, rise as output increases and fall as output decreases.
• What is meant by the short run? The short run is a period during which a firm’s productive capacity or size is limited and cannot be quickly increased — output can only be raised by increasing raw material and labor, not by adding new machines.
• Why is the long-run average cost (LAC) curve called an envelope curve? The LAC curve is derived from and is tangent to all the short-run average cost (SAC) curves, enveloping all of them, which is why it is called the envelope curve.

Chapter 10 – Analysis of Revenues (وصولیوں کا تجزیہ)

Chapter 10, Analysis of Revenues, explains how a firm’s earnings from selling output are measured and analyzed. It defines Total Revenue (TR = P × Q), Average Revenue (AR = TR/Q, which equals price), and Marginal Revenue (MR, the addition to total revenue from selling one more unit), illustrated with tables and diagrams. It contrasts revenue behavior under perfect competition, where AR and MR remain constant and equal to price, with monopoly, where AR and MR both slope downward. Using the MC = MR equilibrium rule, the chapter covers firm and industry equilibrium in the short run and long run, distinguishing normal profit, super normal profit, losses, and the shutdown point.

Important Questions:

• What is total revenue? Total revenue (TR) is the amount a firm receives from selling a given quantity of output at a given price, expressed as TR = P × Q.
• What is average revenue, and how does it relate to price? Average revenue (AR) is revenue per unit, found by dividing total revenue by quantity (AR = TR/Q); since TR = P × Q, average revenue is always equal to price.
• When is a firm forced to shut down in the short run under perfect competition? A firm reaches the shutdown point when price falls to the level of average variable cost, so it covers only its variable costs and its loss equals total fixed cost; if price falls further, it stops production.
• Why does a firm earn only normal profit in the long run under perfect competition? In the long run, free entry attracted by super normal profit and free exit caused by losses adjust supply and price until AC = AR = MC = MR = P for every firm, leaving only normal profit.

Chapter 11 – Market (منڈی)

This chapter explains the concept of a market as an institution or mechanism that brings together buyers and sellers of particular goods and services, citing definitions by Professor Benham, Professor Lipsey, and Alfred Marshall, along with the essentials of a market and the factors determining its size and significance. It then classifies markets by degree of competition into Perfect Competition, marked by numerous buyers and sellers, a homogeneous product, and free entry and exit of firms, and Monopoly, where a single seller controls price and may practice price discrimination. The chapter also distinguishes day-to-day, short-run, and long-run markets by time period.

Important Questions:

• What is a market, according to the definitions given in this chapter? A market is an institution or mechanism that brings together buyers and sellers of particular goods and services; Professor Benham defined it as an area where buyers and sellers are in such close touch that prices in one part of the market affect prices paid in other parts.
• What are the two main kinds of market discussed in this chapter, classified by degree of competition? Perfect Competition and Monopoly are the two kinds of market covered in the chapter.
• What is meant by price discrimination? Price discrimination means a monopolist charges different prices to different consumers for the same commodity, rather than keeping one uniform price for all buyers.
• What are the essential conditions (assumptions) of perfect competition? They are a large number of buyers and sellers so no single one can change the price, product homogeneity, free entry and exit of firms, perfect knowledge of market conditions, and perfect mobility of factors of production.

Chapter 12 – Distribution: Factor Pricing (تقسیم: عاملین پیدائش کے معاوضوں کا تعین)

This chapter explains the theory of distribution — how the four factors of production (land, labour, capital, and organization) earn their respective payments: rent, wages, interest, and profit. It covers rent’s determination through land’s fixed supply and demand, kinds of rent, and Ricardo’s classical theory of rent. It explains money and real wages, factors determining real wages, the marginal productivity theory of wage determination, and the advantages/disadvantages of minimum wages. It further discusses kinds of interest, Keynes’ liquidity preference theory of interest, and profit’s definition, role, kinds, and its differences from interest.

Important Questions:

• What is rent, according to the chapter’s definition? Rent is the amount a person regularly pays to the owner of land in exchange for using it; Adam Smith described it as the reward for land’s use based on its productive power and location.
• What is the difference between money wage and real wage? Money wage (nominal wage) is the compensation paid to a worker in cash for labour, while real wage additionally includes other facilities the employee receives, such as free medical aid, housing, and transport.
• What are the kinds of interest, and what does gross interest include? Interest is of two kinds — net interest, the pure payment for the use of capital, and gross interest, which equals net interest plus reward for risk, reward for facing difficulties, and accounting expenditures.
• How does gross profit differ from net profit? Net profit is the reward an entrepreneur earns purely for services and bearing the risk of loss, while gross profit adds to net profit other amounts such as wages for the entrepreneur’s own labour, interest on his own capital, and windfall or speculative gains.

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Who Should Read This

This book is for ICOM Part 1 (First Year) students preparing for the Punjab Board annual Economics exam. It is also useful for FA students who have chosen Economics as an elective. Students planning to pursue BBA, B.Com, or Economics at university level will find this book an important introduction to microeconomic theory.

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Applicable Boards

This textbook is published by PCTB and is used in Punjab Board ICOM colleges. Students from the Federal Board (FBISE) and AJK Board can also use it for reference, as the ICOM Economics syllabus is largely the same. Students from other provincial boards will find most chapters relevant.

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