1.

(a) Distinguish between simple division of labour and complex division of labour.(b) What is meant by expenditure tax? Give an example.(c) How does money solve the problem of lack of a common measure of value that existed under the barter system?(d) How does the nature of a good affect its elasticity of demand?(e) Mention two agency functions of a Commercial Bank.

Answer»

(a)

Simple Division of LabourComplex Division of Labour
1. It is the system in which each individual takes up one specific job depending upon his ability and aptitude such as carpenter, dentists etc.In this, the total work is divided into small steps and individual is assigned a job according to his aptitude and qualifications. For example—Teacher of Physics.
2. In this type, the individual is responsible for whole job.Job is divided among many persons
3. The worker remains less skilled.The worker becomes more skilled.
4. More training period is required.Less training period is required.

(b) Expenditure tax is a taxation plan that replaces the income. Instead of applying a tax based on the income earned, tax is allocated based on the rate of spending. This is different from a sales tax which is applied at the time the goods or services are provided and is considered a consumption tax. 

(c) Money is accepted as a common measure of value. Under the barter system, the value of a commodity were expressed in terms of other commodity. The value of rice could have been expressed in terms of piece of cloth but after the evolution of money, the problem get resolved as now price of any commodity can be expressed in terms of money. 

(d) The nature of good affect its elasticity of demand in following manner— 

1. The demand for necessity items is generally less elastic. Such commodities are bought in certain fixed quantities irrespective of their prices. 

2. The demand for comfort items are relatively elastic. 

3. The demand for luxuries items are highly elastic. 

(e) Two agency functions of a Commercial Bank— 

1. Collection and Making payments for credit Instruments—The bank collects the payment of the bills of exchange, promissory notes, cheques, etc. on behalf of its customers. 

2. Collection of Dividend—The bank collects the dividends, and interests on shares and debentures as per instructions of its customers.


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