[11/16, 11:22 AM] Shantana Das Eea Maam: Chapter 2 : Demand and Supply

Q 1: *What do you mean by demand*?

Q 2 *Explain the Law of Demand with the help of a demand schedule and a diagram*.
Q 3 *What are the different types of demand*? *Explain*
Q 4 *What is "extension and contraction" of demand*?
Q 5 *Explain "Increase and Decrease in demand*?
Or
*Why demand curve shifts upward and downward directions*?
Q 6 *Concept on Elasticity of demand*.
[11/16, 11:34 AM] Shantana Das Eea Maam: *Answer to Question no 3 Chapter 2*
*TYPES OF DEMAND*
*1)Joint demand*
Joint demand is the demand for complementary products and services.
For example, Demand for a cup of tea makes the demand for some other goods like cup ,
Saucer,Tea leaf , Sugar , Milk , Water, Kettle , etc. These goods are needed jointly to make a
cup of tea.
*2) Composite demand*
Composite demand happens when there are multiple uses for a single product.
For example, Sheep can be used for many purposes , like meat as food, Fur for knitting
wollen garments , Coal as fuel , in thermal power project etc
.3) *Direct and derived demand*
Direct demand is the demand for a final good.
Food, clothing and cell phones are an example of this. Also called autonomous demand, it's
independent of the demand for other products.
4) *Derived demand*
It is the demand for a product that comes from the usage of others. For example, the demand
for brick ,cement, wood, Steel arise because of demand for house.
&&&&&&&&&&&&&&&&&&&&&
.
[11/16, 12:39 PM] Shantana Das Eea Maam: *Chapter 2, Answer to question no 1*
Demand means desire, willingness to have a thing backed by ability to purchase that
particular thing or good.
[11/20, 11:24 AM] Shantana Das Eea Maam: Example of Elastic Demand------Luxury goods like
diamond, washing machine,car, mobile etc.
Example of inelastic demand----- necessarily goods like food , clothing , bag, paper, pencils,
water bottle etc
Example of perfectly in elastic demand----- salt.
*You can include salt in inelastic demand also*
[11/20, 11:25 AM] Shantana Das Eea Maam: *CHAPTER 2*
*SUPPLY AND SUPPLY SCHEDULE*
Questions...
1) *What is supply?*
2) *Explain the law of supply with the help of a sypply schedule and a diagram*
3) *Write a short note on 'Supply and stock'*
[11/20, 10:40 PM] Shantana Das Eea Maam: *Answer to question no 2Chapter 2*
*Law of supply*
*Statement of law of supply*
Law of supply states that when the price of a commodity increases its supply also increases.
Similarly, when the price of a commodity decreases its supply also decreases. Hence, there is
a direct relationship between price and supply of a commodity.
*Explanation of law of supply*........
*CHAPTER 3*
Q 1 .. *What do you mean by factors of production*? 2 marks
Q 2...
*What is land*? *Write a short note on it* 2
marks
Q 3. *What do you mean by labour* ? *Explain the characteristics of labour* 2+3=5
Q 4 *Explain the factors, responsible for the increase in the efficiency of labour*. 5
Q 5 *What is capital* ? *Write some characteristics of capital* 1+3=4
Q 6 *Saving is the main source of capital* --- Explain 5 marks
*Or*
*Capital grows out of saving* *Explain* 5 marks
*Or*
*What is capital fo*-
*rmation* *Explain the mechanism or process of capital formation* 2+3= 5
*Q 7 What is production?*
*Q 8 What is production function?*
Answer: Factors of production is an economic term that describes the inputs used in the
production of goods or services in order to make an economic profit. These include any
resource needed for the creation of a good or service. The factors of production include land,
labor, capital, and entrepreneurship.....
Q2 *SHORT NOTE ON LAND*
In economics, land as a factor of production does not refer only to the
surface of land, but all the gifts of nature such as. ----- mountains, hills, valleys, oceans,
rivers, springs, lakes,mines forest etc.
But it is to be noted that although land covers all the gifts of
nature; yet the study of those goods will be a part of the subject matter of economics which
are free goods but at the same time create *economic problem or problem of choice*.
*Chracteristics of land* ---1) Land is the gift of nature ,so it does not have cost of
production
2) Land is *wealth* ,because it possesses utility, scarce in nature , transferable
from one hand to another and external.
**** *If you are asked to write a short note on LAND ,you add these 2 characteristics*
LABOUR
Labour
Labour means or Implies the Physical and mental exertion of an
individual related to earning of income. Labour is necessary to
produce both material and non-material goods. All Labour is
economic sense is productive.
Characteristics of Labour :-
un seperable
1) Labour is inspirable from the labourer. The labourer's work has to be delivered
in person. A doctor has to attend to his patients in person. A labourer cannot
supply labour from a distance.
2) Labour is more perishable than any other commodity. A day lost without work
means a days work gone forever. Hence, labour cannot be stored up.
3) Labourers do not have same power of bargaining as their employers have. This
is because labour can not be stored up and labourers are poor and ignorant.
There is no scope for labourers, unless there is demand for labours from the
producers. The bargaining power of labour can be replaced by machines also.
4) A labourer differs from a machine in that, he has feelings and linkings. He works
best when he is Happy. Rest, leisure, healthy surroundings, recreation and
above all, a fair treatment from officers add to his efficiency.
5) The supply of labour is almost independent of its demand. Labourers cannot be
"made-to-orders" as other goods. If there is sudden increase in demand for
labourers, as during a war, the supply of labourer cannot be quickly increased.
Factors Affecting Efficiency of Labour
Efficiency of labour is one of the factors that determines the extend of
contribution of labour to the level of production of a commodity. Efficiency of
labour is largely dependent on the following factors,
9
1) Inherent qualities or the racial stock:- The efficiency of labour is influenced by
national characters or the racial stocks or qualities of the workers. A man
inherent some qualities from the racial stock from which be belongs. People of
some races are known to be hardworking people than others. For example,
the Ramghariars in Punjab for instance, are people with such racial qualities.
2) Acquired quality :- Efficiency of Labour is related to the workers education and
training. The educated and trained worker is much more well-informed,
competent and productive. He has self-confidence. He can easily adjust himself
through new techniques of production.
3) Earnings:- The wage rate is an important determinant of efficiency of labour. If
a worker is getting good food and other necessaries of life, it would add to his
health and he would undoubtedly become a better worker.
4) Factory Environment and Equipment :- if a factory is neat and well-ventilated
and surroundings are sanitary and attractive, the workers will be able to do
better work. Similarly, if the machine is modern and up-to-date, if the raw
materials are of good quality, if the manager is competent, the output of labour
will be increased.
5) Hours of work:- The length of the working hour affects the efficiency of labour.
When the working hour is too long and the worker has no time for leisure and
recreation, his efficiency will suffer. If the working day is of a reasonable
duration and there is proper rest, the worker will be able to put in better work.
6) Climatic condition :- The climate of a country affects the efficiency of labour. In
extremely humid and damp climate, the worker cannot work for long at a
stretch. But in moderate temperature climate the worker can easily work for
longer time.
Q 5 *What is capital? Write some characteristis of capital*
1) Capital is the produced means of production, it is not a gift of nature. Capital goods can
be used in the production of consumption goods. Example: - machineries, tools, a hammer to
a large sophisticated machines.
2) Capital goods satisfy our wants indirectly. So demand for capital good is derived
demand.
3)Capital is wealth , because all the characteristics of wealth ....Utility, Scaracity,
Transferability, Externality are present in capital.
4) Capital is productive, the use of capital increases production. Labour helped by
capital can produce a large no of outputs within a short period.
5) Capital grows out of saving. Saving is that part of income, which is not spent
on consumption. *Saving is converted into capital by making investment*.
6) There are two types of capital. a) *Fixed capital* like machineries, toos
equipments which are one time investment.
b) *Varible capital* like raw materials, electricity,water, vehicle expenses
and other goods which are required for production of goods.
*It is to be noted that more the production of goods, more will be the requirement of
variable capitals*
#####$$$$$$$$$$$$$$####
Q 6 *Capital grows out of saving* Explain.
Or
*Saving is the main source of capital* Explain.
Or
*What is Capital formation* * *Explain the mechanism or processes of capital formation*.
5 marks
Ans *Capital formation means increasing the stock of real capital in a country*. In other
words , capital formation involves production of more capital goods such as machineries,
tools, factories, transport, electricity etc, which are all used for the future production of
capital goods.
Both saving and investment are essential for capital formation. *Saving must be
invested in order to have capital goods*
*Investment means a net addition to the real capitals assets*
Again saving to be utilised for investment purposes, they must be mobilised in
banks and
financial institutions.
 The businessmen, producers and the farmers invest these community savings
on capital goods by taking loans from banks and financial institutions. This is called capital
formation.
The mechanism or process of capital formation involves three steps------
1) *Creation of saving*
2) *Mobilisation of saving through financial and credit institutions*
3) *Investment of saving*
Explanations 1) *Creation of savings*
Saving is a person's part of income which is not spent on consumption.
If , 'Y' is income
'C' is consumption
' S' is saving, then------
*S*= *Y*-- *C*
Again saving depends on two factors------ *Power to save and willingness to save.*
Power to save of the community depends on the *size of the average income*, *size
of the average family* and *the standard of living of the people of the family*
Again willingness to save of the people depends on different factors like------ *Love for
the family*,
*Security for the life and property* ,
*The feeling pride for having emmense bank deposits*,
*Services of the banks and financial institutions*
*Rate of interest paid by the banks and financial institutions*,
*Liquidity preference of the people of the community*
2) *Mobilisation of saving* The second step of the processes of capital formation is
mobilisation of saving ; where saving of the community and other enterprizes are mobilised
in the banks and financial institutions , in order to give them to the businessmen to invest
them to capital goods. In the capital market, funds are supplied ( mobilised) by the individuals
investors directly by purchasing ,--- the shares, securities, debentures , issued by the
companies ; in banks, insurance companies, financial corporations etc.
3) *Investment of the savings*
The third step in the process of capital formation is "Investment of Saving" in
creating real capital asset. *Here investment means a net addition to the real capital assets*
In order that the investment of saving should take place, there must a good number of
honest and dynamic entrepreneurs / producers in the country who are able to take risk and
bear the uncertanities.
*So we can conclude that capital formation takes place through investment and
investment to take place saving is essential*
&&&&&&&&&&&&&&&&&&&&&&&
*Answer to question No 7 & 8*
Production
Production: Combining inputs in order to get the output is production. It is the conversion of
inputs into output.
Production Function: It is the functional relationship between inputs and output in a given
state of technology. Q= f(L,K) Q is the output, L: Labor, K: Capital
Fixed Factor: The factor whose quantity remains fixed with the level of output.
Variable Factor: Those inputs which change with the level of output.
[11/22, 8:30 AM] Shantana Das Eea Maam: *What do you mean by the word supply* ?
Or
*What is supply* ?
*Supply*----- Supply is the different quantities of a good, that seller is willingness and able to
sell at different prices prevailing in the market
[11/22, 8:35 AM] Shantana Das Eea Maam: *Answer to question no 2Chapter 2*
*Law of supply*
*Statement of law of supply*
Law of supply states that when the price of a commodity increases its supply also increases.
Similarly, when the price of a commodity decreases its supply also decreases. Hence, there is
a direct relationship between price and supply of a commodity.
*Explanation of law of supply*........