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1 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER : EMAN esire + ability to ay+willing to buy emand Assumtions All the determinants of demand are assumed to be constant excet rice eterminants of demand rice of commodity( - ) rice of related commodities: - Substitutes ( - ) -Comlementaries ( - ) Income of consumers (I - ) Tastes & references of Consumers(Fav-, Unfav- ) oulation(o -,o - ) Climate & Weather (Fav-, Unfav- ) Gov't olicies(fav-, Unfav- ) Exectations about future rices Excetions rice demand rice emand Law of emand Giffen's aradox (Generally inferior goods) emand curve-back ward bending Articles of distinction (Veblen goods) emonstration effect Future exectations about rices Irrational consumer Suerior goods Income I I Income emand Tyes of emand Income demand Inferior goods Income emand emand Imortance Farmers I Useful to: Finance Minister Consumer Monoolist (In determination of rice) for downward sloing demand curve Income I I New Buyers ld Buyers I emand Income effect Substitution effect Substitutes rice of Tea rice of Tea Caused by Change in rice Extension & contraction Cross demand emand for coffee emand for Coffee Movement along the same demand curve Change in uantity demanded rice 0,0 Comlementaries rice of etrol Changes in demand rice emand for car Caused by Change in other factors Increase & ecrease Shift in the demand curve Change in demand Increase rice of etrol emand for Cars ecrease rice age on t dare to coy. Coy rights reserved.

the Commodity Ed0 3) Unitary elastic () emanded ) Relatively elastic (>) 5) Relatively In elastic (<) 8 Methods ) oint Method d E x d r Ed lower segment Uer segment Ed rice Ed> Ed Ed< Ed0 ) ercentage

2 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER : ELASTICIT F EMAN rice elasticity of demand Income elasticity of demand egrees ) erfectly elastic( ) rice of the Commodity emanded Ed ) erfectly inelastic (0) rice of the Commodity Ed0 3) Unitary elastic () emanded ) Relatively elastic (>) 5) Relatively In elastic (<) 8 Methods ) oint Method d E x d r Ed lower segment Uer segment Ed rice Ed> Ed Ed< Ed0 ) ercentage Method Ed % Change In demand % Change in rice 3) Arc Elasticity Method Ed - - d + + Factors ) Availability of Substitutes [If Available - Elastic If not Available - Inelastic] ) Tye of want [Necessary - Inelastic Comforts, luxuries - Elastic] 3) Consumer habits [Habitual consumers - Inelastic thers - Elastic] ) No of uroses (uses) [Can be used -elastic Can t be used -inelastic] 5) rice Range [Very high /low -inelastic Middle range-elastic] 6) ostonement [es- elastic No -inelastic] ) Total out lay Method 7) roortion of Exenditure [Small -inelastic rice - T.Ex High -elastic] (Ed >) (Ed <) Same (Ed ) Imortance/uses Useful to business firms etermination of rice & outut etermination of rices Useful to suer markets Useful to finance minister ricing factors of roduction Exlains the aradox of lain theory Useful in foreign exchange rates Nationalising an industry Granting rotection to Cross elasticity of demand industry E C x y Formula y x E I y % Change in demand of x % Change in rice of y Formula % Changein demand % Changein income y egrees Negative (<0) -Inferior goods ositive (>0) - Suerior goods 0 to - Necessaries > - comforts/ luxuries egrees Negative (<0) - Comlementaries ositive (>0) - Substitutes Zero - Unrelated goods/ Indeendent goods age on t dare to coy. Coy rights reserved.

3 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER 3: SUL & ELASTICIT F SUL SUL Elasticity of suly eterminants rices of roducts rices of related commodities rices of factor of roduction State of technology Government olicy Business olicy Time Agreement among roducers Excetions to law of suly Auction sale Fear of fall in rices in future Rare commodities Land Suly of labour egrees of rice elasticity of suly erfectly elastic suly ( ) erfectly inelastic suly (0) Relatively inelastic suly (<) Relatively elastic suly (>) Unit elastic suly () rice (0) (<) Nature of commodity Time eterminants Techniues of roduction Estimates of future ( ) (>) ( ) 8 Caused by change in rice Extension & contraction Movement along the same suly curve Change in uantity sulied Imortance Effect of rice uasi rent Better for Changes in suly Measurements oint elasticity E s Arc elasticity - + E s - + Caused by change in other factors Increase & decrease Shift in the suly curve Change in suly rice S S Increase S rice S S S rice S ecrease S S S age 3 on t dare to coy. Coy rights reserved.

4 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER : THER F CNSUMER s BEHAVIUR UTILIT Cardinal (,,3...) Marginal Utility analysis develoed by Marshall rdinal (I, II, III...) Indifference curve Analysis develoed by Hicks & Allen MU Assumtions: Measurability of utility Marginal utility of money is constant Indeendent utility n TU n TU TU -TU n+ n- -TU n Assumtions Rational consumer Scale of reference iminishing marginal rate of substitution Assumtion of consistency More units, more reference Scale of reference is Marginal Utility Analysis roerties Indifference curve: - sloes downwards from left to right -are always convex to origin -can never intersect with each other -do not meet the axes -need not be arallel to each other -higher indifference curve gives higher level of satisfaction than lower one Law of iminishing Marginal Utility Law of Eui-Marginal Utility Theory of consumer s surlus MU Consumers surluswilling rice-actual rice a MUb MUn... MU of money Assumtions Imortance a b n Criticisms Imortance Standard Units rice determination Imaginary rice determination Identical Units Finance minister Assumtions Imortance Measures mental Useful to finance No time interval Exlains aradox of Indivisibility of goods Consumtion satisfaction minister ifficult to calculate willing No change in tastes & habits value Ignorance roduction rice discrimination rice in discriminating Some goods of secial Basis for economic Unlimited resources Exchange Marginal utility of money is monooly Nature laws Customs & fashions istribution not constant Understanding the Availability of substitutes & Advantage to Measurability of Utility Aly only in inflation Water-diamond Government Constant utility of money restigious goods aradox Assessment of Changes from erson to Sueriority Assumtions are near to reality Non measurability of utility Marginal utility of money is not constant Exlain cause for Giffen Goods Two commodity model Marginal rate of Substitution age on t dare to coy. Coy rights reserved.

5 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER 5: RUCTIN LAN Free gift of nature No cost of roduction Limited in suly ermanent Land has no mobility Land is heterogenous Land has multile uses Land is a secific factors of roduction Land is subject to law Savings Stages Mobilization of savings Investment of savings Caital is - result of labour - result of savings - roductive - temorary - mobile factor - a assive factor - not a free gift CAITAL Functions rovides subsistence rovides emloyment rovides raw materials rovides means of transort rovides tools & machines Increases labour roductivity ifferent ossible objectives rganic Economic Social Human RGANISER roblems relating to -objectives -location & size of lant -finance roblems -organization structure -marketing -legal formalities -industrial relations -selecting & organising hysical activities Caital formation Forms of Caital Functions Factors Ability to save Willingness to save a) Family affection b) rudence, c) Habit, d) Social status Facilities to save Security Rate of interest Taxation Real caital & human caital Individual caital & Social Caital Fixed caital & Circulating caital Tangible caital & Intangible caital Sunk caital & floating caital Internal caital & external caital Far- sightedness courage leadershi organising the labour exerience Knowledge of business Moral uality knowledge of Initiating a business enterrise & resource co-ordination Risk bearing or uncertainty bearing Innovations rganizing the business Managing the business Allocation of income ecision making ualities age 5 on t dare to coy. Coy rights reserved.

6 reared by Get More CA CT Udates From Cawinners.com For Master Minds, No. for CA/CWA, h: Labour Labour- - Means human exertion - ower is co-extensive - Is erishable -Involves intelligence and judgement -Is insearable from labourer -Has weak bargaining ower -ower differ s from labourer to labourer -Efficiency of labour can increased -Make choice between hours of labour & leisure -Is less mobile than other factors Tyes Mobility of Labour Tye Factors ccuational (ne job to another job in the same industry) Geograhical (ne lace to another lace) Family-bond Information & knowledge means of transort & communication Level Horizontal (In the same grade or at the same level) Vertical (Lower grade to higher grade) ivision of Labour of literacy overty of labour Factors affecting efficiency of Labour Racial ualities Health & strength of workers Standard of Living Education ersonal ualities Social & olitical security Chances of romotion Trade unions Labour Laws AVANTAGES ISAVANTAGES LIMITATINS rofessional secialisation (Auditors, octors, Engineers, Increases roduction Emloyment oortunities Monotony Loss of skill Extent of market Nature of demand Teachers, Carenters) Efficiency Mistake will multily Inventions Secialisation by rocess Saving in time (ins manufacturing) Loss of sense of resonsibility Caital availability Territorial secialisation (Cotton Mills in Gujarat, Cycle Saving in tools Large scale roduction Best uality of roduct ossibility of Mechanization Risk of job Hinders mobility of labour ifficulty in distribution of Technical knowledge Nature of Industry Labour availability age 6 on t dare to coy. Coy rights reserved.

7 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER 6: CST ANALSIS Imlicit costs (Earnings of factors of roduction belonging to organizer himself) Exlicit costs (Remuneration aid to outside factors of eterminants of cost Comonents of cost Relation between rices of factors of roduction (If high- cost, If low-cost ) Technology (Advanced-cost,If not-cost ) Size of lant (Big-cost, small-cost ) Caacity Utilization or outut level (utut level -cost, outut level -cost ) eriod (Short run-cost, long run-cost ) Stability of outut (If stable-cost, If unstable-cost ) Law of returns oerating (iminishing returns-cost, increasing returns-cost ) Managerial efficiency Accounting costs (All ayments made by the entrereneur to the suliers of various factors of roduction) Economic costs (Accounting cost {exlicit} rime cost (irect material+direct wages+direct exenses) roduction overheads (Indirect material+indirect wages+indirect exenses) roduction cost (rime cost+roduction over heads) Cost related to other functions (Administrative over heads+selling over heads+ distribution over heads) Total cost ifferent tyes of costs utlay costs (Actual outlay of funds like wages, material, rent) irect costs (Identified & traced to a articular roduct) oortunity costs Indirect costs (Cost related to foregone (Can not be identified & traced to a articular Shutdown costs (Cost incurred after closing down of the business) Abandonment costs (Cost related to retirement of fixed asset from use) Average cost & Marginal Cost Average cost and Marginal cost can be calculated from total cost When Average cost falls Marginal cost also falls When Average cost rises Marginal cost also raises Marginal cost cuts Average cost at its otimum Money costs (ayment made to factors of roduction & other exenses) Real costs (ains & sacrifices of labour or efforts & age 7 on t dare to coy. Coy rights reserved.

8 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER7: RUCTIN ANALSIS RUCTIN FUNCTIN utut Short-Run Law of variable roortions [Fixed factors -constant Variable factors-vary] Assumtions State of technology is constant Some inuts are ket to be fixed Law does not aly if they Stage I Stage II Stage III oint of Inflexion Amount of variable factor st stage Law of increasing returns I R Invisibility of fixed Factor of roduction ivision of work & M N T A M nd stage st stage outut > Inut Indivisibility Secialization imensional Law of diminishing returns istributing otimum roortion Imerfect substitutability (All factors are variable) Law of returns to scale nd stage outut Inut Exists in short eriod only Balancing Long Run Increasing returns to scale will not continue 3rd stage outut < Inut Exansion Entrereneur ecreasing returns 3rd stage Law of negative returns Too much of variable factors in relation to uantity of fixed Factor Internal Inefficient management Technical difficulties roduction Financial iseconomies External ollution Strains on infrastructure High factor Substitutability Comlementary Internal Technical : -Big machines -Bye- roducts -Research -Secilisation -Linking rocess -Workshos Managerial Economies Assumtions of roduction function Caital can be increased or decreased roduction function imlies to a given Cheaer source of raw materials & caital euiment Technical economies eveloment of skilled labour Growth of ancillary industries External Better transortation & age 8 on t dare to coy. Coy rights reserved.

9 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER8: MARKETS & CHATER 9 : RICE &UTUT ETERMINATIN Every market have some commodities Cometition Area n the basis of area Local market ( buyers & sellers carry on business in a articular locality) National market (commodity is demanded and sulied all over the country) International market ( commodity is demanded and sulied all over the Tyes Basis of Basis of eriod cometition of time erfectly cometitive Very short eriod Market Market (suly is more or less (large number of sellers selling homogeneous roducts) Monooly (single seller of the Commodity having full control over the entire market) Imerfect Cometition (It is a combination of monooly & erfect cometition) fixed) Short eriod market (one can change variable factors only but not fixed factors) Long eriod market (both fixed and variable factors can be changed) Secular eriod Market (changes can take lace even in factors of ligooly (only few sellers of a commodity each seller can influence the riceoutut olicy of other Factors effecting size of market Wide demand (If - es, If -No ) Adeuate suly (If - es, If -No ) urability (If - es, If -No ) ortability(if - es, If -No ) Grading and samling (If - es, If -No ) Transort and communications (If - es, If -No ) Level of income(if - high, If -low ) eveloment of financial institutions (If - es, If -No ) -Availability of banks and other financial Institutions -Credit and banking habits of eole etc age 9 on t dare to coy. Coy rights reserved.

10 Get More CA CT Udates From Cawinners.com reared by For Master Minds, No. for CA/CWA, h: CHATER 0: RICE & UTUT ETERMINATIN UNER IFFERENT MARKETS erfect Cometition Monooly Monoolistic cometition ligooly Large number of buyers & Large number of sellers roducts are homogeneous Free entry and free exist of firms erfect knowledge of the market conditions erfect mobility of factors of roduction Single seller of the roduct No close-substitutes Restrictions to entry rice maker Can t control suly & rice ownward sloing demand ifference in elasticity of demand Market imerfections Legal sanction Existence of monooly Sources Immobility of factors of roduction Ignorance Indivisibility eliberate olicy of iscriminating Monooly st egree egrees Interdeendence Imortance of advertising and selling costs Grou behaviour Indeterminateness of demand curve (In this the monoolist is able to sell each searate unit of his roduct at different rices) nd degree Large number of Buyers and seller roduct differentiation Control over rice Freedom of entry or exit (In this buyers are divided into different grous and different rice will be charged to different grous) 3rd degree (In this seller divides his buyers into two or more than to sub markets & from each sub market a different rice is charged) age 0 on t dare to coy. Coy rights reserved.

Resource Allocation and Decision Analysis (ECON 8010) Spring 2014 Alternative Competitive Environments portions for Exam 1

Resource Allocation and Decision Analysis (ECON 8010) Spring 2014 Alternative Competitive Environments portions for Exam 1 Resource Allocation and ecision Analysis (ECON 81) Sring 214 Alternative Cometitive Environments ortions for Exam 1 efinitions and Concets: Profit Total Revenues us Total. Primary objective of most rivate