Explore topic-wise InterviewSolutions in Current Affairs.

(i) Obsolescence of technology

(ii) Increase in the prices of substitute

(ii) lncrease in factor prices

(iv) Increase in taxation or withdrawal of subsidy

(v) Decrease in the number of firms in the market

Decrease in supply means decrease in supply due to factors other than price change. The causes are:

(i) The supply of a commodity will decrease when prices of inputs inverse. This leads to an increase in cost of product. In this case, producer will be able to produce less number of goods with a given amount of capital.

(ii) The supply of a commodity will decrease if there is an increase in the price of other goods. Because in such a case, firms will start producing more of the other good whose price has increased.

(iii) Taxation policy of the government also affect the supply of a good. Increase in excise daily on a particular good, will lead to an increase in its marginal cost thereby leading to a decrease in its supply.

(i) Fall in the price of competing for product

(ii) Fall in the price of factors of production

(iii) Improvements in technology

(iv) Increase in the number of firms in the market

(v) Reduction in taxes or grant of subsidy

Change in supply means the shift of supply curve. With increase in supply, supply curve shifts to the right and with decrease in supply, the supply curve shifts to the left. The following factors cause a change in supply:

(i) Technological Change: When there is technological improvement, output is produced at lower cost. Lower cost of production increases the supply of the commodity. The supply curve shifts to the right.

(ii) Price of Other Goods: When price of a substitute good increases, the quantity supplied of the concerned good decreases and there is backward shift of the supply curve. Supply curve shifts forward in case price of the substitute good decreases.

(iii) Price of Factors of Production: If factor price decreases, cost of production also decreases. Accordingly, supply increases and the supply curve shifts to the right. If factor price increases, supply tends to decline and there is a backward shift in supply curve.

(iv) Number of Firms: Increase in the number of firms implies increase in market supply and conversely, decrease in number of firms reduces the market supply of the commodity.

Other things being constant, supply increases with rising in price and supply decreases with fall in price.

(i) The price of the commodity

(ii) Price of related goods

(iii) Price of factor inputs

(iv) Goal of the firm

(v) Technical know-how

(vi) Expected change in Price

(vii)Number of firms in the industry

(viii) Government policies.

Factors Affecting Supply

The various factors affecting supply of a commodity are:

(i) Own Price of a Commodity (P_x): There is a direct relationship between own price of a commodity and its quantity supplied. Higher the price, higher the quantity supplied and vice-versa.

(ii) Price of Related Goods (P_R): The supply of a particular commodity is inversely related with the price of its substitute commodities, such as the supply of wheat will fall with rise in the price of ice, i.e., supply decreases and vice-versa.

In case of complementary goods, supply is directly related with the price of complementary goods. With rise in price of petrol, supply of cars will rise, i.e., supply increases and vice-versa.

(iii) Goal of the Firm (G):The goal of the firm is to maximise profits, more quantity of the commodity will be offered only at a higher price. On the other hand, if goal of the firm is to maximise sales, more will be supplied even at the same price and same will be supplied even at a reduced price. Sales maximiser firm supplies greater quantity than a profit maximiser firm.

Change in price of raw material and remuneration of factors (rent, wages, interest, etc.) influence the cost of production of a commodity and thereby supply.

Suppose, when prices of inputs fall, cost falls. Price of the product remaining unchanged fall in cost of production leads to rise in profits. Rise in profit induces the producer to supply more.

Similarly, a rise in prices of inputs will lead to fail in supply.

Increase in taxes raises the cost of production and thus, reduces the supply, due to lower profit margin. On the other hand, tax concessions increase the supply as they make it more profitable for the firms to supply goods.

Suppose price of other products rises. It makes production of these products more profitable because their cost is unchanged.

As a result, the firm shifts its resources from the given product to the production of other products.

Supply of the given product falls.

Similarly, fall in the price of other products increases the supply of the given product.

In comparison, it also marks the given product less.

False, when price of other goods rise, it becomes more profitable to produce them in place of the given good, so supply curve will shift to left.

Two causes of decrease in supply are:

(i) Imposition of Unit Tax: It raises cost. Price remaining unchanged, profits fall. This leads to ‘decrease’ in supply.

(ii) Rise in Prices of Inputs:  It raises cost. Price remaining unchanged, profits fall. This leads to ‘decrease’ in supply.

Causes of rightward shift of supply curve are:

(a) Use of improved technology: It reduces cost. Price remaining unchanged, profit rise. This leads to shift of supply curve to the right.

(b) Fall in prices of inputs: It reduces cost. Price remaining unchanged, profits rise. This leads to shift of supply curve to the right.

When percentage change in supply is equal to percentage change in price, it is a situation of unitary elastic supply.

When percentage change in quantity supplied is more than percentage change in price, it is called elastic or more than unitary elastic supply.

When any quantity of a commodity can be supplied at a given price.

When the supply of a good does not change despite a change in its price.

Price elasticity of supply is equal to unity, if a straight line supply curve passes through the origin.

The stone age is divided into three parts : 

1. Paleolithic age 

2. Mesolithic age 

3. Neolithic age.

In the ‘Dharm Sutra‘literature and the Smiriti granthas, we read about the Ashram system. Human life, in an ideal perimeter has been divided into four Ashrams – Brahmcharya Ashram, Grihastha Ashram, Vanprastha Ashram and Sanyas Ashram. It was expected of man that after passing through these four stages, he would attain “moksh”the highest aim of his life. Human service and the ideals of the Ashrams are related to each other.

The four varnas of people the Brahmin, the Khatriya, the Vaishya, the Shudras are mentioned in the Rigveda.

Correct Answer is : (c) Family

These essential five mahayajnas are.

1. Brahma or rishi yajna – To indulge in self – study and to ponder over the ideas and follow the idea imparted by the rishis. 

2. Deo yajna – To worship the gods and goddesses by offering them yajna and prayers. 

3. Parents yajna -To serve the parents and to offer proper regard to the gurus, teachers and the elderly persons. 

4. Ghost yajna -To satisfy the hunger of cattle viz cows, buffaloes and other animals, birds, cows, dogs ants etc. and to serve the guests. 

5. Nrip (nrap) yajna – To work for the benefit of all human beings.

1. Historian Mayour has written, “Nothing in the world can equal the glory of natural beauty, its variety and the growth of Indian vegetation.” 

2. Sir Walter Raleigh has written, “The first man on the.earth was born on Indian soi.” 

3. Colonel Ulkott opines that, “India is the spring source of human culture.” 

4. When The French philosopher Voltair was presented a copy of Rigveda, he expressed his feelings, “This offering is so priceless that the Western nations shall always be indebtr to the East.”

Central problem of economy means the problems that are common and fundamental to all economies. These problems are various manifestations of the basic problem of scarcity of resources.

The differences between micro and macro-economics are given below:

(d) All of these

Micro and macro-economics complement each other because its value depends on the demand of the whole economy at the time of purchase of raw materials or machines, etc. Apart from this, to influence the behaviour of different units, the general application of the economic knowledge of the principles is required to acquire the knowledge of its nature.

Economics is related to the study of the economic aspect of the behaviour of economics of an individual or countries.

(d) All of these

Merits of a Mixed Economy:
A mixed economy possesses the following merits:

(i) Proper Allocation of Resources : Economic planning ensures that economic resources of the economy are used in the best possible way.

(ii) Economic Stability : A mixed economy ensures economic stability. It tries to avoid fluctuations in the economy through planning and state regulation. It eliminates over¬production and under-production.

(iii) Advantages of the Market System : The system of mixed economy has all the advantages of both capitalist and socialist economies. It retains most of the institutions of capitalist economy by maintaining private property, inheritance rights, competition, profit motive, value system, independence of enterprise, private initiative, etc.

(iv) Rapid Economic Growth : From the perspective of the underdeveloped economies, the mixed economy pattern is important because it ensures faster economic growth. Mixed economy uses combined resources and energy of private resources and public communes to promote economic resources, achieved with social justice.

(v) Check the Concentration of Economic Power : A mixed economy is capable of examining the concentration of economic power: Monopoly control of industries and their exploitative tendencies are barred. Also, the inequality of government’s income is kept in check through the use of progressive taxation.

Demerits of a Mixed Economy:

A mixed economy suffers from various shortcomings. The main drawbacks of mixed economy are given below:

(i) Conflict Between the Two Regions : One of the serious setbacks of mixed economy is that there can be a competition bitterness and non-co-operation between private and public sectors. In the case of mistrust and non-cooperation, the mixed economy may not work correctly.

(ii) Short term Nature : A mixed economy runs the risk of being short-lived. It cannot continue for a long time. During this time, each of the two areas could try to expand at the cost of each other. If the public sector extends to such an extent that it is able to acquire the private sector, the mixed economy can become a socialist economy.

(iii) Inadequate Operations : The risk of a mixed economy being driven in an inefficient way always esists. Due to excessive regulation and control of the government, the private sector has not been able to function effectively. On the other hand, the government sector is not working efficiently due to lack of initiatives from the bureaucrats and lack of responsibility.

(iv)Poor Performance of the Public Sector : In the mixed economy, the record of poor performance of the public sector makes the economic system suffer from inertia, inefficiency and red tapism. Experience of Indian economy testifies to this fact.

(v) Excessive Rules : A mixed economy is highly likely to give rise to a system of controls and rules. The government wants to regulate private sector by applying excessive control, licensing system, monetary and fiscal control. These excessive controls can be inconvenient, rigid and can promote economic inefficiency.

The difference between capitalist and socialist economics is given below:

Total utility refers to the entire amount of satisfaction obtained from consuming a given quantity of a commodity. According to Lipsey, “Total utility refers to the total satisfaction from the amount of the commodity consumed.”

Marginal utility is the additional utility which results from a unit increase in consumption. According to Prof. Boulding, “The marginal utility is the utility which results from a unit increase in consumption.”

Two basic properties of PPC are given below:

1. Production possibility curve slopes downward.
2. Production possibility curve is concave to the point of origin.

John Maynard Keynes.

This is the problem of putting resources to their best possible use.

Economic problems arise from the scarcity of resources relative to human wants. Since the society cannot satisfy all its wants due to limited availability of goods and services, it must make a choice as to which wants are to be satisfied and which wants need to be left unfulfilled for the time being. Since resources are limited, society has to choose between the alternative uses of the available resources. This is known as the Problem of Choice or economic problem.

Choice is the consequence of scarcity: Choice emerges when limited resources are to be used for the satisfaction of unlimited wants. A rupee cannot buy ten things when the price of each thing is Rs.1 You have to choose the thing you would prefer to have; you have to forego nine things in favour of the one thing you choose to have. Choosing one alternative and not choosing others is a problem of choice. It is also called Economic Problem; it stems out of scarcity.

Positive Economics:

1. Positive economics is that science in which analysis is confined to cause and effect relationship.
2. Positive economics is concerned with the facts about the economy.

Normative Economics:

1. Economics as a normative science is concerned with what ‘ought to be’.
2. Normative economics deals primarily with economic goals of a society and the policies adopted to achieve certain goals.

Economic growth is generally defined as the process whereby real per capita income of a country increases over a long period of time. Economic growth has been defined in terms of national income aggregate. Everybody agrees that a necessary requirement of economic growth is an increased output of goods and services. Output is conveniently measured in terms of national income. It is with this idea that economic growth is defined in terms of national aggregates.

Unlike, economic growth, it is difficult to give a precise definition of economic development. Economic development is multi-dimensional in nature. Economists have defined economic development differently, depending upon which aspect of economic development they want to emphasize – output, distribution of income, standard of living, etc.

Economic development is the process whereby the real per capita income of a country increases over a long period of time, along with reduction of poverty, inequality and unemployment. It includes increase in income, reduction in economic inequality, improvement in material welfare, eradication of poverty, reduction of unemployment along with elimination of illiteracy, disease and early death.

Difference Between Economic Growth and Economic Development

The distinction between economic growth and economic development can be made on the following bases:

(i) Economic growth is a narrow concept, while economic development is a more comprehensive term. Economic development denotes growth plus change.

(ii) Economic growth refers to more output, resulting from use of more inputs and greater efficiency of inputs. Economic development goes beyond this to include composition of output, allocation of resources to different sectors of the economy like agriculture, industry, and bringing about structural changes.

(iii) Economic growth involves a rise in income. Economic development, on the other hand, involves not only rise in income, but also reduction of poverty, inequality of income and unemployment. .

(iv) Economic growth is defined strictly in terms of economic indicator, i.e., income. Economic development involves not only economic indicators, but also non-economic indicators like literacy, health services, etc.

(v) Economic growth is entirely a quantitative concept. Economic development involves not only quantitative, but many qualitative changes as well.

(vi) Economic growth is easier to realize. It is possible to increase output and income by using larger quantity of inputs and increasing their efficiency. The process of economic development is far more extensive. It involves a whole lot of changes in the society- changes in the social structure, attitudes, institutions as well as acceleration of economic growth, eradication of poverty and reduction of income inequalities. Therefore, attainment of economic development is a more difficult task.

(vii) Economic growth relates to the problems faced by the developed countries, while economic development relates to the problems faced by the present day developing countries.

(viii) Economic growth differs from economic development in terms of degree of involvement and intervention by the government. Economic growth does not require much of government intervention. However, economic development demands active involvement of the government. The government in the developing countries are expected to assume an active responsibility for promoting economic development.

The element which gives rise to economic problem is that resources are scarce in relation to wants. If the resources, like wants, were unlimited, no economic problem would have arisen because in that case all wants would have been satisfied and there would have been no problem of choosing between all wants and allocating the scarce resources between them.

Because the resources are scarce, all wants cannot be satisfied. Therefore, human beings have to decide that for the satisfaction of which wants the resources should be used and which wants should be left unfulfilled. It should be noted that means or resources here refer to natural productive resources, man-made capital goods, consumer goods, money and time available with man, etc. If the means or resources were unlimited, then we would have obtained goods in the desired quantities because in that state of affairs goods would have been free goods. But in actual life, we cannot obtain goods freely or without price. We have to pay a price for them and make efforts to obtain them.

Resources or means have various alternative uses. In other words, the resources can be put to various uses. For instance, coal can be used as a fuel for the production of industrial goods, it can be used for running trains, it can be used for domestic cooking purposes and for so m.any other purposes. Likewise, monetary resources can be utilized for the production of essential consumer goods, for the production of capital goods and so many other goods. It has to be decided how the resources have to be allocated among different uses. The man or society has, therefore, to choose the uses for which resources have to be employed. If the resources had a single use only, the question of choice would not have arisen at all. In the case of single use of resources, they would have been employed for the uses for which they are meant. It is because of the various alternatives uses of the scarce resources that we have to decide about the best allocation of resources.

Thus, economic problem is the problem of scarcity and economics is the logic of choice. It is a challenge to scarcity. It tells us how man can use the best choice tackling the problem of scarcity of resources.

It is the method which drives economic theories on the basis of observation and experiment.

Economic development has been defined as a sustained increase in real per capita income.

Marginal opportunity cost refers to the amount of a good sacrificed in order to- produce a single additional unit of another good.

It is the summary of income and expenditure for the accounting year. It is just like a profit and loss account prepared on accrual basis in case of the business organisations. It includes only revenue items and the balance at the end represents surplus or deficit. The Income and Expenditure Account serves the same purpose as the profit and loss account of a business organisation does.

All the revenue items relating to the current period are shown in this account, the expenses and losses on the expenditure side and incomes and gains on the income side of the account. It shows the net operating result in the form of surplus (i.e. excess, of income over expenditure) or deficit (i.e. excess of expenditure over income), which is transferred to the capital fund shown in the balance sheet.

It is prepared at the end of the accounting year on the basis of cash receipts and cash payments recorded in the cash book. It simply is a summary of cash and bank transactions under various heads. Receipt and Payment Account gives summarised picture of various receipts and payments, irrespective of whether they pertain to the current period, previous period or succeeding period or whether they are of capital or revenue nature. It may be noted that this account does not show any non-item like depreciation.

The opening balance in Receipt and Payment Account represents cash in hand/ cash at bank which is shown on its receipts side, and the closing balance of this account represents cash in hand and bank balance as at the end of the year, which appear on the credit side of the Receipt and Payment Account.

(i) Annual subscription : 

• Actual subscription received during an accounting year are shown on debit side of receipts and payment a/c. 

• Later subscription transfered to income and expenditure account to the extent of current year amount. Such transfer shown on credit side of inc.ome and expenditure a/c 

• Subscription received, which is related to previous year should deducted from balance sheet assets side amount shown.

• Subscription received for next year should be shown an balance sheet liabilities side as received in advance. 

• Subscription due but not received should be added to subscription received on income and expenditure a/c credit side and the same to be shown on assets side of the balance sheet under‘Receivables or amount due but not received’.

(ii) Specific donation – The fund received for specific purpose From the donors called special funds or special donation. 

The accounting treatment of special donation:-

• Amount received as specific donation should be shown on receipts side or debit side of receipts and 

• Specific donation capital receipts in its nature so it should be shown on balance sheet liability side. 

• Any payment made for that specific purpose to that extent should deduct from balance of amount shown in previous year balance sheet. 

• Any amount received during the year should added to previous year balance amount.

(iii) Sale of fixed assets – The assets in the business should be sale for many reasons. In case of such sales doing the year, the accounting treatment is as follows.

• Sale of assets is the receipt such receipt should be shown on debit side of receipt and payment a/c. 

• Sale of assets receipt is a capital receipt. The book value should be deducted from the existing assets balance. 

• In case of any loss on sale of fixed assets should be debited to income and expenditure account. Any profit on sale of fixed assets. Shown on credit side of income and expenditure a/c.

(iv) Sale of old periodicals 

• The-receipt out of sale of newspaper and periodicals should be shown oh debit side of receipt and payment a/c 

• Sale of newspaper and periodicals is the revenue, it should be transfer to income and expenditure a/c credit side as income.

(v) Sale of sports materials – Sale of sports materials dr items are’ capital receipts. The accounting treatment is as treatment of sale of fixed assets. Sports materials is a part of fixed assets. 

(vi) Life membership fee: 

• The person normally paid fees to the organization foe the intention to become life member of the organization. It is the revenue of the organization, shown an debit side of receipt and payment a/c. 

• Life membership fees is the capital receipt in its nature. These fees amount are added to the capital fund on the liability side of the balance sheet.

Specific fund or special donational are received by the non-profit organisations for specific reasons.

These receipts are capital receipts. Example of such funds are donations, Government funds/ grands.

The specific fund is normally a Capital Receipts any Payment out of such fund should reduced from balance sheet and normally any expenditures related to such fund should be debited to Income and Expenditure Accounts. Special fund kept aside for special event and such fund should be in balance sheet liability side and reduction or any reduction should be reduced in balance sheet through the Income and Expenditure.

This statement is True. 

1. Physical proximity is essential for a primary group. Permanent close relations and smallness of the primary group create more solidarity among the members. 

2. The relationship in a primary group is not a means to fulfil any kind of objective and is based on emotional bonds. 

3. There is similarity of objectives, goals among the members of primary group which leads to group solidarity hence Primary groups are inclusive and permanent in nature