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(i) To control and regulate the monetary structure. 

(ii) To stablise the banking system.

A type of tax under which rate of tax changes with change in income. For example, income tax.

Net national product at factor cost can be obtained from Net National Product at market price in the following manner.

Net National Product at Factor Cost = Net National Product at Market Price – Indirect Taxes + Subsidies.

Or

Net National Product at Factor Cost = Net National Product at Market Price – Net Indirect Taxes

Productive debt is used to purchase a productive asset: i.e.. one that will produce a profit while serv icing the debt. Debts used for the purchase of a rental property, equipment for a business, or perhaps dividend-paying stocks can be considered “productive” if they earn a profit. Unproductive debt is the debt used to finance activities that did not increase productivity.

Unproductive debt is that debt which is incurred to cover any budgetary deficits or for such purposes as do not yield any income to the government in times of war for example. The interest and sinking fund, if any, on this type of debt must be obtained from some other source of public income, generally from taxation and, since there is no corresponding asset created, there is no rule regarding the period of repayment.

Similarities between perfect and monopolistic competition. 

• Many numbers of sellers and buyers in both type of markets. 

• Free entry and exit of the firms.

(i) Circulating 

(ii) Circulating 

(iii) Circulating 

(iv) Fixed

Acid rain is caused due to high content of pollutants in the Air. Pollutant gases like CO₂ & SO₂ form Carbonic & Sulfuric acid when dissolved in Water and causes Acid rain.

Difference between Money costs and Real costs:

Two Factors Responsible for the Destruction of the Eco System: 

1. Population Growth: Population is growing rapidly but the land is static, which is a great threat to our eco system. This is resulting in deforestation, destruction of natural resources, soil erosion, falling water table, pollution of water sources and atmosphere. 

2. Industrialisation: Increase in the number of industries is a great danger to our eco system. It is resulting into deforestation to get more and more land for industries, contamination of water by industrial wastes, air pollution and sound pollution.

The 3 R's are: 

Reduce:

(1) We should avoid plastic bags and carry our own bags while going for shopping.

(2) We should avoid using disposable plastic and paper items.

(3) We should use both sides of a paper. 

(4) We should use paper products made from recycled paper.

Reuse: 

(1) We should reuse plastic items like bags, bottles, cups etc. 

(2) We should reuse empty glass bottles as containers for storing things.

(3) We should reuse you cloth, jute or paper bags instead of using new plastic bags. 

(4) We should donate rather instead of throwing aways clothing etc. We should donate than as these items can be reused.

Recycle:

(1) Old newspapers can be recycled to make tissue paper and cardboard. 

(2) Oganic waste (from plants/food sources) can be allowed to rot and manure can be prepared. 

(3) Recycling of glass, plastics, aluminum cans and other metals should be encouraged to produce useful products. 

The Law of supply states a positive relationship between the price of the commodity and the quantity supplied. It is indicated by a positively sloping curve. It rests on the celeries paribus’ (i.e., other things affecting the supply function remain unchanged) assumption. So the normal supply curves are called the ceteris paribus’ supply curve.

This Law assumes that:

• Prices of the factors of production remain unchanged. 

• Production technology remains the same. 

• The policies of the government (sav the tax and subsidy policy) remain unchanged. 

• The goals of the firm remain unattended. 

• The number of firms in the industry remains the same.

Improvement in techniques of production results in an increase in supply (rightward shift of supply curve) and use of inferior techniques of production results in a decrease in supply (leftward shift of supply curve.

While discounting a bill, the Bank buys the bill (i.e. Bill of Exchange or Promissory Note) before it is due and credits the value of the bill after a discount charge to the customer’s account. The transaction is practically an advance against the security of the bill and the discount represents the interest on the advance from the date of purchase of the bill until it is due for payment.

(i) Tropical evergreen forests are found in Andaman and Nicobar islands, Assam, Meghalaya, Nagaland, Manipur, Mizoram, Tripura, West Bengal and on the Western slopes of the Western ghats. 

(ii) Arid forests are found in Rajasthan and Southwest Punjab, Southwest Haryana and parts of Gujarat. 

(iii) Mountain forests are found in the hilly ranges of northeast India and the Himalayan parts of West Bengal, Bihar and Uttarakhand. 

(iv) Tropical monsoonal forests are found in the north-eastern parts of the peninsula, middle and lower Ganga valley and along the foothills of the Himalayas.

Planning as a Function of Management: In the world of management, planning is as fundamental as it gets. If you recall, the first of the managerial function is planning. Many believe planning is the most fundamental of the managerial functions because all other functions, including organizing, leading, controlling and staffing, stem from the planning function. Planning prepares organizations for tomorrow today by assessing what an organization wants to accomplish and how it will go about achieving that goal.

Managers will spend much of their time planning for all sorts of things that may or will occur in the organization. Typically a manager will create a plan that is aimed at accomplishing some organizational goal such as increasing sales or improving customer service. However, it is important to note that planning is an ongoing step that can be highly specialized based on an organization’s goals, division goals, departmental goals and team goals. It is up to the manager to recognize what goals need to be planned within their individual area.

For example, let’s say Erin the enrollment manager has noticed a steady decline in the number of students enrolling in the business program, so she creates a goal to increase enrollments in that area. Erin must first spend time mapping out the necessary steps she and her team of enrollment advisors need to take to increase the enrollment numbers of undergraduate business students. These steps might include things like increasing online advertisements on business-related sites, creating a new advertisement for television or radio, asking current business students to talk to their friends and family about enrolling in the program or going out to local high schools or community colleges to speak directly with students who may be enrolling at the university in the next semester. The steps are then organized into a logical pattern so that Erin and her team can follow it.

Physiological needs include the most basic needs that are vital to survival, such as the need for water, air, food, and sleep. Maslow believed that these needs are the most basic and instinctive needs in the hierarchy because all needs become secondary until these physiological needs are met.

For example, an employer provides lunch breaks, rest breaks, and wages that are sufficient to purchase essentials. These address an employee’s physiological needs.

Here is another example. Have you ever had a hard time paying attention to what the professor is saying when you are hungry? Some students may not have had breakfast or even dinner the night before. Free and reduced breakfast and lunch programs have been implemented in schools to help students meet some of their physiological needs.

The next level of needs is safety needs. These include needs for safety and security. These are important for survival, but they are not as demanding as physiological needs.

An example in the business world is when employers provide a safe working environment, retirement benefits, and job security. In schools, an example of addressing safety needs include providing a safe and secure classroom and having a school resource officer on grounds. This reduces threats to student’s physical, mental, and emotional security.

We now come to our third level, social needs. Sometimes these are referred to as the love and belonging needs. These include needs for belonging, love, and affection. Maslow considered these needs to be less basic than physiological and security needs.

Relationships such as friendships, romantic attachments, and families help fulfill this need for companionship and acceptance, as does involvement in social, community, or religious groups. In the workplace, employers help fulfil these needs by creating a sense of community via team-based projects and social events. When people’s social needs are not met, they tend to be unhappy. This leads to loneliness, social anxiety, and depression.

After the first three needs have been satisfied, esteem needs become increasingly important. These include the need for things that reflect on self-esteem, personal worth, social recognition, and accomplishment.

1. Identification and Division of work: The organising function begins with the division of total work into smaller units. 

Each unit of total work is called a job.

And an individual in the organisation is assigned one job only. The division of work into smaller jobs leads to specialization because jobs are assigned to individuals according to their qualifications and capabilities. The division of work leads to systematic working. 

For example, in a bank, even an individual is assigned a job. One cashier accepts cash, one cashier makes payments, one person issues cheque books, one person receives cheques, etc. With the division of work into jobs, the banks work very smoothly and systematically.

2. Grouping the Jobs and Departmentalisation: After dividing the work in smaller jobs, related and similar jobs are grouped together and put under one department. The departmentation or grouping of jobs can be done by the organisation in different ways. 

But the most common two ways are:

(a) Functional departmentation: Under this method, jobs related to common function are grouped under one department. 

For example, all the jobs related to production are grouped under the production department; jobs related to sales are grouped under the sales department and so on.

(b) Divisional departmentation: When an organisation is producing more than one type of products then they prefer divisional departmentation. Under these jobs related to one product are grouped under one department. 

For example, if an organisation is producing cosmetics, textile and medicines then jobs related to production, sale and marketing of cosmetics are grouped under one department, job related to textile under one and so on.

3. Assignment of Duties: After dividing the organisation into specialised departments each individual working in different departments are assigned a duty matching to his skill and qualifications. The work is assigned according to the ability of individuals. Employees are assigned duties by giving them a document called job description. This document clearly defines the contents and responsibilities related to the job.

4. Establishing Reporting Relationship: After grouping the activities in different departments the employees have to perform the job and to perform the job every individual needs some authority. So, in the fourth step of the organising process all the individual’s arc assigned some authority matching to the job they have to perform.

The assignment of the authority results in the creation of the superior-subordinate relationship and the question of who reports to who is clarified. The individual of higher authority becomes superior and with less authority becomes the subordinate. With the establishment of authority, the managerial hierarchy gets created (chain of command) and principle of scalar chain follow s this hierarchy. The establishment of authority also helps in the creation of managerial level.

The managers with maximum authority are considered as top-level managers, managers with little less authority become part of middle-level management and managers with minimum authority are grouped in lower-level management. So with the establishment of the authority the individuals can perform their jobs and everyone knows who will report to whom.

The three factors are : 

1. Terrain: The plains have encouraged higher density of population as compared to mountain region. The steep slope of the Himalayas restrict the availability of land for agriculture, development of transport, industries and other economic activities which may tend to discourage concentration of population and its proper growth. So, the great plains of North India is a land of extremely gentle slope and offers great opportunities for the growth of agriculture, transport and industries.

2. Industries: Industrial growth offers massive employment opportunities and acts as a great magnet to attract people. This results in higher population density. Industrial areas are invariably associated with areas of high population densities. One of the major causes of population density in West Bengal, Gujarat and Maharashtra is the phenomenal growth of industries.

3. Urbanization: Urbanization and population concentration go hand in hand and are closely related to each other. Agricultural based rural areas do not provide employment to all the people living there. Even small scale cottage industry fails to provide employment to the entire rural folk. Urban areas provide vast scope for employment in industries, trade, transport and services.

A market is any place where the sellers of a particular good or service can meet with the buyers of that goods and service where there is a potential for a transaction to take place. The buyers must have something they can offer in exchange for there to be a potential transaction.

Steps in organization function of management: Identification and classification of required activities Grouping of activities necessary for the attainment of objectives Assigning each group to a manager with the authority (delegation) necessary to supervise it. The provision for coordination horizontally (on the same organizational level) and vertically (in various division and departments)

Factors determining the price of a product are: 

Cost: While fixing the prices of a product, the firm should consider the cost involved in producing the product. This cost includes both the variable and fixed costs. Thus, while fixing the prices, the firm must be able to recover both the variable and fixed costs.

Competition: While fixing the price of the product, the firm needs to study the degree of competition in the market. If there is high competition, the prices may be kept low to effectively face the competition, and if competition is low, the prices may be kept high.

(i) Creation of savings 

(ii) Mobilisation of savings 

(iii) Investment of savings

Cumulative preference shares are those preference shares which earn the right to receive arrears of dividend before a dividend is paid to the equity shareholders. 

For example, a company has 10,000. 8% of preference shares of Rs 100 each and dividend for the years 20013-2014 which has not been paid up. Now the company has earned sufficient profits in 2015. Now the company shall pay Rs 2,40,000 as a dividend for three years to the preference shareholders.

The term monopoly is derived from two Greek words, namely, ‘Moms’ and “polus’. ‘Monos’ means single, and ‘polus’ means a seller. Thus, monopoly is a market structure in which there exists only a single seller of a product who is the sole producer of the product which has no close substitutes.

For example – we get our electricity supply from one agency, that is, State Electricity Board like Punjab Electric Board in Punjab. Similarly, we travel by railway trains owned and run by the Government of India. All these are examples of monopoly.

Like an individual, companies too, set aside a part of their profit to meet future requirements. The portion of profits not distributed among the shareholders but retained and used in business is called retained earnings. It is also referred to as ploughing back of profit. This is one of the important sources of internal financing used for fixed as well as working capital. Retained earnings increase the value of shareholders in case of a growing firm.

Merits: 

Cheaper Source of Financing: The use of retained earnings does not involve any acquisition cost. The company has no obligation to pay anything in respect of retained earnings.

Financial Stability: Retained earnings strengthen the financial position of a business and thereby give financial stability to the business.

Demerits: 

Improper Utilization of Funds : If the purpose for utilization of retained earnings is not clearly stated, it may lead to careless spending of funds.

Over-capitalization: Conservative dividend policy leads to huge accumulation of retained , earnings leading to over-capitalization.

Components of Budget: 

The budget has two broad components 

(1) Revenue budget 

(2) Capital budget.

(1) Revenue budget includes revenue receipts and expenditure of the government. 

(a) Revenue Receipts: It refers to those receipts of the government which neither create a liability nor leads to a reduction in assets.

Tax Revenue: It consists of the proceeds of taxes and other duties levied by the government.

Non Tax Revenue: It includes receipts from sources other than tax. 

(b) Revenue Expenditure:

• It refers to all those expenditures of the government which do not result in the creation of physical assets. 

• Capital Budget includes capital receipts and expenditure of the government. 

• Capital Receipts: It is defined as any receipts of the government which either create liability or reduce assets. 

• Capital Expenditure: An expenditure which either creates assets or reduce liabilities.

By imposing direct taxes which are progressive in nature, rich people are subjected to a higher rate of taxation as compared to poor people. Higher taxes on luxuries and low taxes on essential commodities also helps in removing inequalities of income. Inequality of income can be further reduced by using the tax proceeds in providing social services which benefit poor people.

Lender of the Last Resort:

The Central Bank acts as the lender of the last resort. When commercial banks fail to meet their financial requirements from other sources, they can approach the Central Bank which provides them with loan and advances as lender of the last resort.

The Central Bank provides this facility to protect the interest of the depositors and to prevent possible failure of the bank.

MPC = 0.9. 

We know, 

MPC + MPS = 1

and Multiplier K = \(\frac {1}{MPS}\)

MPS = 1 – 0.9 = 0.1.

and K = \(\frac {1}{0.1}\) = 10

Social cost refers to the cost that the society has to bear on account of the production of a commodity. For example, a manufacturing firm produces chemical products, may pour industrial wastes in river water, without proper treatment, thus, saving private costs, but polluting the river water. So, the people taking bath in that river, or fishermen catching fishes from that river, would suffer. This is the social cost of producing chemical products. Several other examples are possible.

GNPFC is the sum total of factor income earned by normal residents of a country, inclusive of depreciation during an accounting year.

GNPFC = NNPFC + Depreciation Whereas, National Income (NNPFC) is the sum total of factor income earned by normal residents of a country during an accounting year.

NNP FC = NDP FC + Net factor income from abroad GNP FC includes depreciation but NNPFC (National Income) does not include depreciation.

The upward slope of the supply curve can be explained as: 

(i) Price level determines the number of profits: Higher the price, larger is the profit that can be earned, ceteris paribus. This gives producers’ incentives to produce more and offer for sale, that is, supply in the market.

(ii) The marginal cost of production: It increases because of the law of diminishing returns, that is, increasing cost with an increase in production. Hence, the producer will be prepared to produce and supply more only at a higher price, so as to cover the higher cost of production. 

(iii) An increasing cost industry: In the long run, higher prices may attract new firms in an industry. However, input costs may also increase. So, the new firms would be willing to supply more only at higher prices to cover higher costs of production. So, at higher prices, more firms produce well.

(a) Consumers are exploited in the market in the following ways : 

1. By giving defective goods : The consumers can be exploited by the seller of the product by giving defective goods, i.e., which are not upto mark. 

2. Charging high prices : The consumers can be exploited by charging high prices. Prices can be charged high when customer is not aware or shortage of product prevails. Reasons for consumers exploitation are : 

1. Shortage of supply : In most of the developing or under-developing economies population is very high. So demand for the products is also very high. But due to under-development of industry there is a shortage of supply. This gives rise to hoarding and price rise. 

2. Limited competition : Due to under-development of industry there is lack of competition in the market. This may lead to exploitation of the consumer. 

3. Illiteracy and ignorance of the consumers : In most of the developing and under-developed economies illiteracy rate is very high so consumers can be easily cheated by the producer. 

(b) Four principle reasons for increase in public expenditure are as follow : 

(i) Defence : An important factor responsible for increase in public expenditure is the large defence expenditure that the government allocates to defend its country from the attack of other countries so as to maintain its sovereignty 

(ii) Population growth : In India, the population has increased at an alarming rate. It has increased from 36 crores in 1951 to 125 crore in 2011. As a result, the government has to incur great expenditure to meet the requirements of increasing population. 

(iii) Developmental work : Modem state has also taken up developmental work in addition to their primary functions of administration and defence. It require huge public expenditure. 

(iv) Rise in price level : As a result of the rise in price level, the public expenditure has gone up everywhere. The reason is that, the private individuals and also the government have to buy goods and services from the market at higher prices.

The factor of production that cannot be changed with changes in the level of production during the short run, is called a fixed factor. However, the factors of production which changes with change in the level of production both during the short run and long run, are known as variable factors of production. For instance, during the short run, the plant and machinery are regarded as a fixed factor while raw materials and labour are considered as variable factors.

(a) The state of technology is given and remains unchanged. 

(b) All the variable factors are equally efficient.

(a)

A production function shows the maximum quantity of a commodity that can be produced per unit of time with the given amount of inputs when the best production technique available is used.

Two criticism of law of variable proportion is: 

Homogeneity of Variable factors: The assumption of homogeneous or equally efficient variable factors is criticized as it is not practical. 

Unchanged technologies: Law of variable proportions assumes technology to be given and remain unchanged which makes it unrealistic.

(i)  Single Producer : In this type of market , there is only one producer of the commodity, therefore that producer is supplying 100 % of that commodity, means he is controlling the entire supply of the market. Therefore that firm can effect the Price and Supply of the Market .

(ii)  No close substitute available in the market : In monopoly market, we can not see any close substitute of the commodity. Substitutes are possible but close substitutes are not  possible. For example Railways. Govt. of India has monopoly in running the trains in India. There are other means of transportations available in the market. They are substitute to it but not close substitute. Therefore cross elasticity of demand is zero.

(iii)  Selling Cost exist but less important :  In monopoly market selling cost exist and included in cost of production. Advertisements are given to introduce the commodity in the market and to recall the memory of the consumers. But the expenses made by the firm on the selling techniques is very less because there is no other close competitor of the existing firm in the market.

(iv)  Restrictions in Entrance and Exit of Firms : In monopoly market there is physical, legal, social, political or other type of restriction due to which new firm cannot enter in the market. These restrictions are applied in order to maintain the monopoly in the market.

(a) In economics, the word ‘land’ is defined to include not only the surface of the earth but also all other free gifts of nature. For instance, mineral resources, forest resources and, indeed, anything that helps us to carry out the production of goods and services, but is provided by nature, free of cost. In fact, ‘Land is a stock of free gifts of nature.’ 

The features of land are as follows: 

1. Supply of land is fixed: The supply of land is fixed. It is given by nature. It is true that, from time to time, we can increase the quantity of operational land available in the country by clearing forests. However, the potentially available amount of land in the country is fixed. 

2. Production of land is costless: Another peculiarity of land is that, it does not have any cost of production. It is already there, ready to be used. All other agents of production have to be produced at a cost. For instance, labour has to meet his cost of living and his cost of training and education has also to be accounted for. Land, however, is a free gift of nature. 

3. Land is immobile: A third peculiarity of land is that, it is immobile. Land can not move in the sense in which labour or capital can. Therefore, there are persistent differences between the rent of land in different regions. Such differences may be caused by differences in fertility, location etc. 

4. Land is heterogeneous: Different types of land indicate wide variations in productive capacity. It depends on the chemical composition of the soil, availability of irrigatiorihl facilities, climatic conditions etc. Hence, some plots of land may be so infertile that cultivation is not worthwhile in such cases, while some other plots of land may be very fertile. 

(b) Efficiency of labour implies the quality and quantity of goods and services which can be produced within a given time and under certain conditions. In other words, productive capacity of a worker is termed as efficiency of labour. By ‘efficiency of labour1 means the productive capacity or productivity of labour. 

The efficiency of labour depends on the following factors: 

1. Climatic Factors: Climatic differences also affect the efficiency of labour. Working under extreme climatic conditions is always more difficult than working in the temperate zones. 

2. Geographical differences: Locational differences also sometimes play a significant role. A person who has been bom and brought up in the plains, will find it hard to display much efficiency if he is forced to work at high altitudes hilly areas. 

3. Mental abilities: Mental abilities are also important. General training helps a worker in assimilating new skills and technical knowledge. Moral qualities also play a role in this connection. A worker is likely to be more efficient, the greater is his Sense of discipline, self respect, self-sufficiency, punctuality etc. 

4. Favourable Working conditions: A healthy and conducive work environment increases the level of efficiency. The facilities enjoyed by the worker determine labour efficiency to a significant extent. Employer-employee relations also plays an important part of the work environment. An employer, therefore, can contribute to labour efficiency by building a cordial relationship with his workers.

The features of monopoly market are as follows:

(i) Single seller and a large number of buyers: A monopoly has a single seller or a group of sellers that together sell a good. Therefore, a monopoly has a single firm. However, there are a large number of buyers in a monopoly market. The buyers cannot influence the price of the product.

(ii) Barriers to entry: A monopoly market has high barriers or restrictions on the entry of the new firm. This is because monopolies tend to have exclusive rights over certain resources or patent rights.

(iii) Unique goods: The goods supplied by a monopolist are unique, and there are no close substitutes of these goods.

(iv) High control over prices: As a monopoly market has a single seller, the seller has a high degree of control over the price.

(v) Price discrimination: A monopolist can undertake price discrimination to earn higher profits. Price discrimination refers to charging different price from different consumers for the same good. 

For example: the price of an amusement park’s ticket can be different for children, adults and elderly people.

(i) Restriction on Entry and Exit: There exist strong barriers to entry of new firms and exit of existing firms. As a result, a monopoly firm can earn abnormal profits in the long run. These barriers may be due to legal restrictions like licensing or patent rights or due to restrictions created by firms in the form of a cartel. 

(ii) Price Discrimination: A monopolist may charge different prices for his product from different sets of consumers at the same time. It is known as ‘Price Discrimination’

The principal features of oligopoly are as under: 

(1) Small Number of Big Firms: Oligopoly market is the one in which a small number of big firms dominate the market for a product. Market dominance is retained through intense advertising. Advertising generates brand loyalty. Established brand loyalty enables the producer to exercise partial control over price. It makes demand for the product as relatively less elastic. Accordingly, firms are able to generate extranormal profits.

(2) Difficult to Trace Firm’s Demand Curve: It is not possible to determine firm’s demand curve under oligopoly. This is because of high degree of interdependence among the competing firms. Thus, when a firm lowers its price, demand for its product may not increase, because the rival firms may lower the price more, because of which the buyers shift to the rival firms. Implying that there is no specific response of quantity demand to change in price. This makes it impossible to draw any specific demand curve for a firm under oligopoly.

(3) Entry Barriers: There are barriers to the entry of new firms. These are created largely through patent rights. Because of these barriers, the existing firms are not much worried about the entry of new firms in the market. They continue to earn extra-normal profits even in the long run.

(4) Non-price Competition: Under oligopoly, firms tend to avoid price competition. Instead, they focus on non-price competition. 

Example: In India, both Coke and Pepsi sell their product at the same price. But, in order to increase its share of the market, each firm takes to the aggressive non-price competition. Coke and Pepsi sponsor different games and sports; they also offer lucrative schemes (like of maintenance of school garden) if their product is patronised.

(a) An oligopoly market-Price maker. Justification: An oligopoly is a market structure dominated by the small number of large firms and several of these firms are large enough to influence the market price, hence they are Price Maker.

(b) A perfectly competitive market-Price taker. Justification: Every firm in perfect competition is very small compared to the overall size of the market. Only those firms which can cover their cost can survive. The market price will allow only for normal profits, which means that the individual firms cannot lower its prices to attract the customers. The individual firms also cannot raise their prices, because it will lose its customers to the competition. With each firm selling identical products, there is no customer loyalty. The customers will migrate to firms with lower price. Hence, all the firms in a perfectly competitive market are a price taker.

The relationship between goods X and Y is substitute goods. 

For example: If the price of Tata Tea (X) rises, many people will shift from the consumption of Tata Tea to the consumption of Halmira Tea (Y) because the latter has become relatively cheaper. The demand for Halmira Tea (Y) will increase and that of Tata Tea will decrease. Hence the demand for Halmira Tea (Y) has increased because of increase in price of its substitute Tata Tea (X).

(a) Definition of Supply: “Supply refers to the quantity of a commodity offered for sale at a given price in a given market at a given time.” In simple words, supply means that quantity of a particular commodity which a seller is ready to sell at a given price. It is the price which vitally affects the supply of goods. 

The rightward shift of the supply curve denotes the increase in supply. Increase in supply is a situation when quantity supplied increases due to the favourable changes in factors other than price. 

The reasons for rightward shift of the supply curve are as under: 

1. Fall in the price of factors of Production: When prices of factors of production (wages, cost of raw material etc.) decreases, it increases the profit margin of produce seller which induces him to increase the supply. 

2. Increase in the number of firms in the Market: When new firms enter into the market then total supply increases. 

3. When the firm expects a fall in the Price of the Commodity: If firms expects that in near future prices are going to be decreased then they increase their present supply at higher prices in order to fetch out more and more profits.

(b) Public Debt: Public Debt refers to “Obligation of Government particularly those evidenced by securities, to pay certain sums to the holders at some future date. In,simple words, Public Debt can be defined as the amount of debt taken by government from internal as well as external sources to meet out its deficit. Government needs to borrow when current revenue falls short of public expenditure. 

Types of Public Debt 

1. Internal and External Debt: Public loans floated within the country, are called Internal Debt. Public borrowings from other countries, are referred to as External Debt. External debt permits import of real resources. It enables the country to consume more then it produces. The sources of internal debts are RBI, commercial banks, etc. and of external debts are loans from foreign government, IMF, World Bank etc. 

2. Productive and Unproductive Debt: When government borrows for development expenditure like on power projects, establishing heavy industries, etc. so that it generates revenue then the debt is productive. When government borrows for non-development uses, such as war finance, etc. the debt becomes unproductive as it does not create any income in return. 

3. Compulsory and Voluntary Debt: When government borrows from people by using coercive methods, loans so raised are referred to as compulsory public debts, e.g. Tax. When government floats loans by issuing securities, the members of the public and institutions like commerial banks may subscribe to them. e.g. Public Borrowings. 

4. Redeemable and Irredeemable Debt: Loans which the govt, promises to pay off at some future date are called redeemable debts. Loans for which no promise is made by the government regarding the exact date of maturity and all that the govt, does is to agree to pay interest regularly for the bonds issued, are called irredeemable debts.

Two primary functions of money are as follows:

1. Medium of Exchange—Money acts as a medium of exchange. Hence, it has removed the problem of double coincidence of wants faced under the Barter System. Money has general acceptability and purchasing power so nobody refuses to accept money in exchange for goods and services. As a medium of exchange, money helps us to purchase all goods and services from the market.

2. Measure of Value—Money acts as a common measure of value. The value of every thing can be expressed in terms of money and is known as its price, when we say that the price of one metre of cloth is Rs. 15/-, this means that in order to obtain one metre of cloth, we have give up 15 units of money.

Direct taxes refer to taxes that are imposed on property and income of individuals and companies and are paid directly by them to the government.

• They are imposed on individuals and companies. 

• The ‘liability to pay’ the tax (i.e. impact) and ‘actual burden’ of the tax (i.e, incidence) lie on the same person, i.e. its burden cannot be shifted to others. 

• They directly affect the income level and purchasing power of people and help to change the level of aggregate demand in the economy. 

• Examples: Income tax, Corporate tax, Interest tax, Wealth tax, Death duty, Capital gains tax, etc.

The quantitative change in the output of a firm or industry resulting from a proportionate increase in all inputs. If the quantity of output rises by a greater proportion e.g. if output increases by 2.5 times in response to a doubling of all inputs-the production process are said to exhibit increasing returns to scale. Such economies of scale may occur because greater efficiency is obtained as the firm moves from small to large-scale operations.

The short-run is defined in economics as a period of time where at least one factor of production is assumed to be in fixed supply i.e., it cannot be changed. We normally assume that the quantity of capital inputs (e g., plant and machinery) is fixed and that production can be altered by suppliers through changing the demand for variable inputs such as labour, components, raw materials and energy inputs. Often the amount of land available for production is also fixed. The time periods used in textbook economics are somewhat arbitrary because they differ from industry to industry. The short-run for the electricity generation industry or the telecommunications sector varies from that appropriate for newspaper and magazine publishing and small-scale production of foodstuffs and beverages. Much depends on the time scale that permits a business to alter all of the inputs that it can bring to production.

Long-run production – returns to scale: In the long run, all factors of production are variable. How the output of a business responds to a change in factor inputs is called return to scale.

Increasing returns to scale occur when the % change in output > % change in inputs. Decreasing returns to scale occur when the % change in output < % change in inputs.

Short-run is a period of time when production can be increased only by increasing the application of variable factor(s). Fixed factor, by definition, remains constant. When one factor is a fixed factor and the other is a variable factor, production function may be specified as under:

Qx = f(L, K)

Here, Qx = Output of Good – X

L = Labour, a variable factor 

K = Capital, a fixed factor

Difference: 

1. Short run production function is ‘variable proportions type production function’ while the long period production function is ‘constant proportions type production function’.

2. Short run production function exhibits constant scale of output, while long run production function exhibits change in the scale of output.