10Sep 2018 by admin

Useful Notes on the Expansion Path Theory of Production

Budget
So far we have assumed away the expansion of financial resources of the firm. As the producer becomes financially well-off, he has to change the factor combinations with the expansion of his output, given the factor prices.In Fig. 7.12, AB, CD, EF and GH are the four iso- cost lines representing different levels of total cost or outlay. All iso-cost lines are parallel to one-another indicating that prices of the two factors remain the same”. E1, E2, E3 and E4 are the points of producer’s equilibrium corresponding to the point of tangencies of the above four iso- cost lines with the highest possible isoquant in each case.The line joining the least cost combinations like E1, E2, E3 and E4 is called the expansion path. It is so called, because, it…
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10Sep 2018 by admin

Useful Notes on Iso-Cost Line of Optimum Combination of Factors (Consumer Theory)

Budget
The iso-cost line is the counterpart of the budget line or the price line of consumer theory. It shows all the combinations of the two factors (say, labour and capital) that the firm can buy with a given outlay for a given set of prices of the two factors.It plays an important part to determine the combinations of factors, the firm will choose for production ultimately to minimise cost.Fig. 7.9 shows the way iso-cost line is drawn. We measure the units of factor ‘X’ on the ADVERTISEMENTS: X-axis and those of factor ‘Y’ on the Y-axis. Suppose, the firm has at its disposal Rs. 200 for the two factors. The price of the factor ‘X’ is Rs. 10 per unit and that of factor ‘Y’ is Rs. 5 per unit.…
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10Sep 2018 by admin

3 Most Important Assumptions of Revealed Preference Theory

Budget
The revealed preference theory is based on the following assumptions: 1. Rationality: The consumer is assumed to behave rationally in the sense that he prefers bundle of goods that contains more quantities of the commodities. This assumption of rationality underlies all logical explanations of consumer’s behaviour. 2. Consistency: The revealed preference theory sets upon this basic assumption, which has been called as consistency postulate. It can thus be stated, “no two observations of choice behaviour are made which provide conflicting evidence to the individual’s preference”. ADVERTISEMENTS: In other words, if an individual chooses combination (or bundle) ‘A’ in one situation (given by his budget constraint) in which bundle ‘B’ was also available to him, he will not choose combination ‘B’ in any other situation (given by his new budget constraint)…
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09Sep 2018 by admin

What is the Difference between “Price Effect” and “Price Consumption Curve”? – Explained!

Budget
The consumer purchases such a combination of commodities on the budget line from which there is no tendency for change or rearrangement. However, if the price of only one commodity (say, ‘X’) changes, with everything else including consumer’s income remaining unchanged, the consumer equilibrium will shift to a new budget line.The point of equilibrium corresponding to each price change will be given by the point at which the corresponding budget line touches the highest possible indifference curve. With every change in the price of commodity ‘X’, the budget line changes its slope, but its starting point on the Y-axis remains the same, as the price of commodity ‘Y’ is assumed to be constant.In other words, the purchasing power of the consumer in terms of commodity ‘Y’ remains unchanged, equal to…
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09Sep 2018 by admin

8 Most Important Properties of a Budget Line

Budget
(i) Since budget line is derived from a linear budget equation M = XPx + YPy, so it is a straight line. The intercepts of this line with the axes show the maximum amount of one commodity that can be purchased, if none of the other is bought.(ii) Budget line has a negative slope, i.e., slopes downward from left to right. The negative slope of the budget line is mathematically established by noticing coefficient of ‘X’, i.e., – PX/PY when the budget equation is rearranged as(iii) Mathematically, the slope of the budget line is derivative ?Y/?X or coefficient of ‘X’ in the above equation. Thus, the slope of the budget line is negative of the price ratio, i.e., – Px/ Py. If prices of commodity ‘X’ and commodity ‘Y’ are…
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09Sep 2018 by admin

What is Circular Flow of Income in a Two Sector Economy?

Trade
Modern economy is a money economy. Money is used in the process of exchange and it has removed the difficulties of barter system. As we know money acts as a medium of exchange.In an economy, households supply factors to the firms (producing units). Finns pay for the use of factors. So households receive payments from firms for their services in terms of money.So in money economy there is a flow of productive resources or factors and there is a flow of money corresponding to the flow of economic resources (or factors) and flow of goods and services produced by economic resources. Circular Flow of Income in a Two Sector Economy: ADVERTISEMENTS: As we know resources like land, labour, capital and entrepreneurial ability flow from households to firms, the producing units.…
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08Sep 2018 by admin

32 MCQs (Objective Type Questions) on “Poverty in India”

Economic Development
1. Who advocated that India would be truly independent only when the poorest of its people become free of human suffering?(A) Mahatma Gandhi ADVERTISEMENTS: (B) Indira Gandhi(C) Jawahar Lai Nehru(D) Subhash Chandra Bose.2. Which one of the following states in India has focused more on human resource development? ADVERTISEMENTS: (A) Punjab(B) Karnataka(C) Kerala(D) Tamil Nadu ADVERTISEMENTS: 3. Which of the following programme was launched in the year of 2000?(A) National Rural Employment Guarantee Act.(B) Prime Minister Rozgar Yojana(C) Swarna Jayanti Gram Swarozgar Yojana(D) Pradhan Mantri Gramodaya Yojana. 4. Who conducts the periodical sample survery for estimating the poverty line in India?(A) National Survery Organisation(B) National Sample Survey Organisation(C) Sample Survey Organisation(D) None of the above.5. Which scheme was started in 1993 to create self-employment opportunities for educated unemployed youth in…
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08Sep 2018 by admin

Sample Application to College Principal for the Change of Subjects

Economics
To The Principal, (College Name) (Address) (Date)Sir,I took admission in your college in first year of Bachelors degree of ____________ (Year). At the time of joining the college, I selected Economics and Political Science as my optional subject but now I don’t feel interested in political Science any more, on the other side I made thorough inspection of Home Science. And now I have decided to change my subject from Political Science to Home Science. ADVERTISEMENTS: At the time of Admission we have been told that within one month, if we don’t feel attracted to any of the subjects chosen, we can change them. Thus, with humble submission I request you to grant me permission for the change.Thanking you in anticipation,Yours obediently, (Your Name)
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07Sep 2018 by admin

Rising Prices in India – Causes, Consequences and Remedies

Inflation
Indian economy is one of the largest economies in the world. It isn’t surprising that India rank 11th in terms of nominal GDP (Gross Domestic Product) and 3rd in terms of PPP(Purchasing Power Parity). But this stupendous growth is accompanied by the emergence of new problems and challenges.And one of the most grave of them all is that of price rise. There has been widespread uproar regarding the skyrocketing prices of commodities of daily use. Both the government and the citizens have been facing a hard time due to its inability to put a check on the rising inflation rates. Causes: To analyze the causes we need to look at the internal and external factors. External factors include global inflation. For example, if an item is imported to India from…
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06Sep 2018 by admin

Sample Job Application for the Post of Accounts Assistant

Taxation
To (Manager Name -Personnel and Administration)Dear Sir, ADVERTISEMENTS: SUB: Appointment in Your Firm as an Account Assistant____________ JOB CODE:This is reference to the advertisement issued by you in the Pioneer, ____________ (Date) regarding the post of an Account Assistant. I would like to be considered for the aforesaid position and submit my particulars in brief as under.I am ____________ (Name), B Com (Honours), MA (Economics) and have a Diploma in Computer Application from ____________ (Place). I completed my post-graduation in ____________ (Date) and was selected by a charted accountancy firm through campus interview. ADVERTISEMENTS: I joined the company for brief period and then shifted to ____________ (Company Name) as Accounts Assistant (Trainee) on ____________ (Time) was confirmed in ____________ (date) and was accepted as Accounts Assistant with independent charge of…
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