Glides Fintellect Private Limited

Subjects	Teachers
Accountancy	CA Gayatri Sengupta Sethy
Business Studies	CMA Ajay Deep Wadhwa
Economics	CMA Gour Bandhu Gupta
English	Anjana Gupta (M.A English) (B.ED)
Mathematics	CMA Gour Bandhu Gupta
Enterpreneurship	CMA Gour Bandhu Gupta
Co-ordinator	CA Gayatri Sengupta Sethy

Syllabus

SECTION-A :Reading Skills

I Reading Comprehension through Unseen Passage: 18 Marks

1. One unseen passage to assess comprehension, interpretation inference and vocabulary. The passage may be factual, descriptive or literary.

2. One unseen case-based passage with verbal/visual inputs like statistical data, charts etc.

Note: The combined word limit for both the passages will be 600-750.

Multiple Choice Questions / Objective Type Questions will be asked.

3. Note Making and Summarization based on a passage of approximately 200-250 words.

i. Note Making: 5 Marks

• Title

• Numbering and indenting

• Key/glossary

• Notes

ii. Summary (up to 50 words): 3 Marks

• Content

• Expression

V. Grammar and Creative Writing Skills (23 Marks)

SECTION-B:Grammer

II. Grammar: 7 Marks

4. Questions on Gap filling (Tenses, Clauses)

5. Questions on re-ordering/transformation of sentences

III. Creative Writing Skills: 16 Marks

6. Short Writing Tasks

Classified Advertisements up to 50 words. One out of the two given questions to be answered (3 Marks: Format : 1 / Content : 1 / Expression : 1)

7. Short Writing Task

Poster up to 50 words. One out of the two given questions to be answered.(3marks:Format : 1 / Content : 1 / Expression : 1)

8. Long Writing task:

Speech in 120-150 words based on verbal / visual cues related to contemporary / age-appropriate topic. One out of the two given questions to be answered. (5 Marks: Format: 1 / Content: 2 / Expression: 2)

9. Long Writing Task:

Debate based on visual/verbal inputs in 120-150 words, thematically related to contemporary, topical issues. One out of the two given questions to be answered. (5 Marks: Format: 1 / Content: 2 / Expression: 2)

Section C:Literature Textbook and Supplementary Reading Textbook

This section will have variety of assessment items including Multiple Choice Questions, Objective Type Questions, Short Answer Type Questions and Long Answer Type Questions to assess comprehension, analysis, interpretation and extrapolation beyond the text.

VI. Reference to the Context

10. One Poetry extract out of two from the book Hornbill to assess comprehension, interpretation, analysis and appreciation. (3×1=3 Marks)

11. One Prose extract out of two from the book Hornbill to assess comprehension, interpretation, analysis and appreciation. (3×1=3 Marks)

12. One prose extract out of two from the book Snapshots to assess comprehension, interpretation and analysis. (4×1=4 Marks)

13. Two Short answer type question (one from Prose and one from Poetry from the book Hornbill), out of four, to be answered in 40-50 words. Questions should elicit inferential responses through critical thinking. (3×2=6 Marks)

14. One Short answer type question, from the book Snapshots, to be answered I n 40- 50 words. Questions should elicit inferential responses through critical thinking. Any 1 out of 2 questions to be done. (3×1=3 Marks)

15. One Long answer type question, from Prose/Poetry Hornbill, to be answered in 120-150 words. Questions can be based on incident / theme / passage / extract / event as reference points to assess extrapolation beyond and across the text. The question will elicit analytical and evaluative response from student. Any 1 out of 2 questions to be done. (1×6=6 Marks)

16. One Long answer type question, based on the chapters from the book Snapshots to be answered in 120-150 words to assess global comprehension and extrapolation beyond the text. Questions to provide evaluative and analytical responses using incidents, events, themes as reference points. Any 1 out of 2 questions to be done. (1×6=6 Marks)

Prescribed Books

1. Hornbill: English Reader published by National Council of Education Research and Training, New Delhi

• The Portrait of a Lady (Prose)

• A Photograph (Poem)

• “We’re Not Afraid to Die… if we can be together

• Discovering Tut: the Saga Continues •The Laburnum Top (Poem)

• The Voice of the Rain (Poem) •Childhood (Poem)

• The Adventure

• Silk Road (Prose)

• Father to Son

2. Snapshots: Supplementary Reader published by National Council of Education Research and Training, New Delhi

• The Summer of the Beautiful White Horse (Prose)

• The Address (Prose)

• Mother’s Day (Play)

• Birth ( Prose)

• The Tale of Melon City

Internal Assessment for CBSE Class 11 English Core 2023-24

• Assessment of Listening Skills – 05 marks

• Assessment of Speaking Skills – 05 Marks

• Project Work – 10 Marks

Part-A Financial Accounting-1

Unit-1: Theoretical Frame Work

Introduction to Accounting

Accounting- concept, meaning, as a source of information, objectives, advantages and limitations, types of accounting information; users of accounting information and their needs. Qualitative Characteristics of Accounting Information. Role of Accounting in Business.

Basic Accounting Terms- Entity, Business Transaction, Capital, Drawings. Liabilities (Non Current and Current). Assets (Non Current, Current); Expenditure (Capital and Revenue), Expense, Revenue, Income, Profit, Gain, Loss, Purchase, Sales, Goods, Stock, Debtor, Creditor, Voucher, Discount (Trade discount and Cash Discount)

Theory Base of Accounting

Fundamental accounting assumptions: GAAP: Concept

Basic accounting concept : Business Entity, Money Measurement, Going Concern, Accounting Period, Cost Concept, Dual Aspect, Revenue Recognition, Matching, Full Disclosure, Consistency, Conservatism, Materiality and Objectivity

System of Accounting. Basis of Accounting: cash basis and accrual basis

Accounting Standards: Applicability in IndAS

Goods and Services Tax (GST): Characteristics and Advantages.

Unit-2: Accounting Process

Recording of Business Transactions

Voucher and Transactions: Source documents and Vouchers, Preparation of Vouchers, Accounting Equation Approach: Meaning and Analysis, Rules of Debit and Credit.

Recording of Transactions: Books of Original Entry- Journal

Special Purpose books

Cash Book: Simple, cash book with bank column and petty cashbook

Purchases book

Sales book

Purchases return book

Sales return book

Journal proper

Ledger: Format, Posting from journal and subsidiary books, Balancing of accounts

Bank Reconciliation Statement:

Need and preparation, Bank Reconciliation Statement

Depreciation, Provisions and Reserves

Depreciation: Meaning, Features, Need, Causes, factors

Other similar terms: Depletion and Amortisation

Methods of Depreciation:

i.Straight Line Method (SLM)

ii. Written Down Value Method (WDV)

Difference between SLM and WDV; Advantages of SLM and WDV

Method of recoding depreciation

i. Charging to asset account

ii. Creating provision for depreciation/accumulated depreciation account

Treatment of disposal of asset

Provisions, Reserves, Difference Between Provisions and Reserves.

Types of Reserves:

i. Revenue reserve

ii. Capital reserve

iii. General reserve

iv. Specific reserve

v. Secret Reserve

Difference between capital and revenue reserve

Trial balance and Rectification of Errors

Trial balance: objectives, meaning and preparation

Errors: classification-errors of omission, commission, principles, and compensating; their effect on Trial Balance.

Detection and rectification of errors;

(i) Errors which do not affect trial balance

(ii) Errors which affect trial balance

preparation of suspense account.

Part B: Financial Accounting – II

Unit 3: Financial Statements of Sole Proprietorship

Financial Statements

Meaning, objectives and importance; Revenue and Capital Receipts; Revenue and Capital Expenditure; Deferred Revenue expenditure. Opening journal entry. Trading and Profit and Loss Account: Gross Profit, Operating profit and Net profit. Preparation. Balance Sheet: need, grouping and marshalling of assets and liabilities. Preparation. Adjustments in preparation of financial statements with respect to closing stock, outstanding expenses, prepaid expenses, accrued income, income received in advance, depreciation, bad debts, provision for doubtful debts, provision for discount on debtors, Abnormal loss, Goods taken for personal use/staff welfare, interest on capital and managers commission. Preparation of Trading and Profit and Loss account and Balance Sheet of a sole proprietorship with adjustments.

Part C: Project Work (Any one)

1.Collection of source documents, preparation of vouchers, recording of transactions with the help of vouchers.

2.Preparation of Bank Reconciliation Statement with the given cash book and the pass book with twenty to twenty-five transactions.

3.Comprehensive project of any sole proprietorship business. This may state with journal entries and their ledgering, preparation of Trial balance. Trading and Profit and Loss Account and Balance Sheet. Expenses, incomes and profit (loss), assets and liabilities are to be depicted using pie chart / bar diagram.

LESSON PLAN:-01

History of Trade and Commerce in India

History of trade and Commerce in India

During the ancient times, India was the leading exporter of silk, cotton, sugar, precious stones. India was also the exporter of spices to the west and this was done through the spice route.

All these items were exported in exchange for gold and silver from other nations. The prosperity of Indian trade took a backseat with the starting of the Industrial Revolution in the west.

Trade and commerce played a significant role in the evolution of the economy of India. It was shown from the archaeological evidence that trade and commerce through land and sea played a very important role in the growth of the Indian economy.

In ancient times, India had trade relations with China, Ceylon & Egypt during Indus Valley Civilization, Silver, Animals &Precious stones were Traded, Later Vedic period(1500-500) BCE(before Christ) also experienced foreign trade with countries like Babylon.Alexander's invasion paved the way of trade between India and west asia(Iran,Oman Saudi Arabia etc).

The following are some of the factors that helped India become the most favoured nation for trade and commerce:

1. The Hindu mercantile community was known for their entrepreneurship, enterprising nature, resilience and trustworthiness.

2. Goods manufactured in India were known for their excellence as the goods produced in India were unique and were not available in any other part of the world.

3.The Hindus were very skilled at the art of building ships along with excellent knowledge of the sea routes, winds and other aspects of navigation. This enabled them to travel distant lands to perform trade.

Indigenous Banking System

In economics life of India the indigenous bankers have been playing a significant role . When commercial banking had not developed, they were the main source of finance for agriculturists, traders, businessmen, small industrialists, etc.

The activities of indigenous bankers was getting low but their importantance not. After nationalisation of commercial banks and the spread of banking in urban and rural areas, because the borrowers still facing problems to getting loans from the bank.

Indigeneous bankers doesn't have fixed hours and paper formalities that's why the borrowers approach them directly and informally and get loans promptly and easily. They are very popular with traders, businessmen, agriculturists, and ordinary people.

Indigenous bankers provide finance and remittance facilities to traders and small industrialists by advancing loans; writing, buying and selling hundis; writing finance bills and trade bills. Thus they help not only in financing internal trade but also in expanding it.

indigenous bankers combine banking with trading and agriculture help the farmers to raise production of crops. paying them in cash with no waste of time, and also giving them loans.

The indigenous bankers act as commission agents when they purchase agricultural products on behalf of firms, mills, and trading houses. In this way, they again help in the development of internal trade.

Intermediaries

Intermediaries are individuals or companies that behave as middlemen between parties for investment deals, business deals, negotiations, insurances, etc. They are commonly known as consultants or brokers and are specialised in a specific area.

They give all the required information about a product to the customers and also streamline a company’s processes. In other words, intermediaries are third-party agents or individuals between parties for a specific deal.

Types of Intermediaries

The four types of traditional intermediaries are as follows:

1.Brokers and Agents: Both of these intermediaries sell products and services on a commission or percentage basis. They are legally appointed to impart information about a product to the customers on behalf of the manufacturer or producer, but they never take the ownership of the product sold.

The key function of these intermediaries is to bring buyers and sellers together to make a deal. For example, an insurance or real estate agent gets a commission for their service or a sale, but does not take the ownership.

2.Wholesalers and Resellers: They typically buy goods from the manufacturer in bulk and resell them to the retailers or other businesses. They are independent businessmen and take ownership of the products purchased from the manufacturers or producers.

Some wholesalers also provide services such as order processing, storage, delivery, and participate in promotion as well.

3.Distributors: The distributors are selected by the manufacturers to distribute their products to the wholesalers or retailers in different locations.

The distributors are involved in many businesses and cover many geographical areas. A few services distributors offer to the wholesalers are delivery, maintenance of inventory, extension of credit, etc.

4.Retailers: Retailers are the mediators between wholesalers and customers. They purchase different goods from the wholesalers and sell them to the ultimate customers in small quantities from one place.

Transport

Transport by land and water was popular in the Ancient Times that helped in managing trade.The trade routes were structully wide and suitable for speed and safety.

Trading Communities

In Ancient India different communities dominated trade in different parts of the country.Northern region controlled by Punjabis and Multanies.TheBhats controlled the Gujrat and Rajasthan,

The other urban groups included professional classes like vaid/hakim,pandit/mulla,ukil,musicians,painters etc.

Merchant Corporation

Establishment of Guild. Guild was the basis of economic organisation. Each craft or industry was organised into a guild. It was also an association. Quality of the product, sale and its price were controlled by the Guild.The tax was collected through Octorai,ferry Tax and Customs duty.

Major Trade Centres

Pataliputra-Export Stones

Peshawar-Export wool import horses

Taxila-Financial and commercial Banks,Educational Hub

Indraprastha-commercial junction for all routes,market place

Major Imports and Exports

Imports: Horses ,Animalproducts,wine,gold,silver tin ,silk,linen etc

Exports :Spices,wheat,sugar,indigo,opium,cotton,parrot etc.

Position of Indian sub continent in the world economy

Between the 1st and the 7th centuries CE, India is estimated to have the largest economy of the ancient and medieval world, controlling about one-third and one-fourth of the world’s wealth (timeline). With the emergence of the British Empireroots in India the East India company used revenues generated by the provinces under its rule for purchasing Indian raw materials, spices and goods. This changed the condition of the Indian economy from being an exporter of processed goods to the exporter of raw materials and buyer of manufactured goods. After independence the process of rebuilding the economy started and India embarked on planned development with the objective of achieving a self-reliant socialistic pattern of society. The measures taken towards the same was characterised by centralised economic planning and emphasis on public investment in basic and key industries. Due importance was given to the establishment of modern industries, modern technological and scientific institutes, space and nuclear programmes. But lack of capital formation, rise in population, weak financial system, inadequate infrastructure and high huge expenditure on defence, high fiscal deficits and continuous deficits in balance of payments were evident and international community’s confidence in India’s ability to manage its economy was severely affected. The balance of payment situation was precarious. As a result, India agreed to economic liberalisation in 1991. The Indian economy is emerging as one of the faster growing economies in the world today and a preferred FDI destination. Rising incomes, savings, investment opportunities, increased domestic consumption and younger population ensures growth for decades to come. The high growth sectors have been identified, which are likely to grow at a rapid pace and the recent initiatives of the Government of India such as ‘Make in India’, Skill India’, ‘Digital India’ is expected to help the economy in terms of exports and imports with steady and sustainable trade balance.

LESSON PLAN:-02

Business: Meaning and Characteristic

Business is an economic activity that involves the exchange, purchase,promotion, sale and production of goods and services with a motive to earn profits and satisfy the needs of customers.

Characteristics of Business:

Economic activity: All business activities are economic activities and are done for the sole purpose of earning money.

Production and procurement of goods and services: A business activity involves production or procurement of goods and services. A manufacturer is involved in production, while a shopkeeper is involved in procurement.

Sale and exchange of goods and services for the satisfaction of human needs: Sale and exchange of goods and services is done to satisfy human needs.

Dealing in goods and services on a regular basis: One time dealing in goods or services cannot be termed as a business. The business should happen on a regular basis.

Profit earning: Profit earning is the fundamental motive of doing a business. Other motives are there but they depend on profit motive.

Uncertainty of returns: Returns can never be certain in business activity. This happens because of external factors which are outside the control of the business organization.

Element of risk: An element of risk is always present in business activity.

Business, profession and employment Concept

What is Business?

Business refers to the economic activities, which are connected with the production or the purchase of sale of goods or supply of services with the main objective of earning profit. People engaged in business earn income in the form of profit they make out of their venture. Examples: Grocery Shop, Hair Salons are the examples of Businesses.

Business is the act of making one's living or making money by producing or buying and selling products as well as service.

Business name won’t separate the business entity from the owner; this means that the owner of the business is responsible and is liable for debts incurred in his own business. If the business acquires debts, the creditors can go after the owner's personal possessions and have their dues in return. A business structure does not attract corporate tax rates. The proprietor of the business is personally taxed on all income from the business.

What is Profession?

Profession includes the activities, which is requisite of special knowledge and skill which is to be applied by individuals in their occupation. These activities are generally subject to the guidelines or codes of conduct laid down by the professional bodies. People who are engaged in professions are known as professionals.

Examples of Professionals: Doctors, Chartered Accountants etc.

A profession is neither a trade nor an industry, which is delved with three professions: divinity, medicine and law. They are called the “learned professions”.

What is Employment?

Employment is the occupation in which people work for others and get remuneration in return. Those who are employed by others are known as employees, and these employees are hired by the employers.

Example: Any person working for others on a salary basis such as an Accountant, Sales Manager or Peon etc.

Objectives of business

Since a business has to balance a number of needs and goals, it requires multiple objectives.

Business is dependent on many people’s satisfaction whose objectives for being involved in it are different and many times conflicting. Owners want profits, employees want good working conditions and remuneration, investors want good return and consumers want good quality product. Therefore, a business needs to have multiple objectives. Some of these objectives are given below:

Market standing: Business can survive for a longer period only if it is able to capture a big share in the market and has market standing.

Innovation: It means developing new products and their multiple uses. Old customers can be maintained and new can be attracted by innovation only.

Improving productivity: Every business enterprise must aim at greater productivity by making optimum use of available resources.

Earning profit: One of the objectives of business is to earn profits on the capital invested. Every business must earn a reasonable profit to survive and grow.

Optimum use of physical and financial resources: Every business requires physical (plant, machine, office etc) and financial resources (money or funds) to produce goods and services; the business enterprise must aim to use them efficiently.

Workers performance and attitude: Every business enterprise must aim at improving its workers performance and creating positive attitudes towards workers. It will boost the morale of the employees.

Social Responsibility: A business is a part of society and so it must meet the expectations of the society. It can set goals in the areas of environmental protection, supply of desired quality of products, employment generation etc.

Classification of business activities – Industry and Commerce

Business activities can be classified in the following ways: I.

Industry: Different types of industries are as follows:

Primary Industry: The primary industry includes those activities through which the natural resources are used to provide raw materials to other industries. Primary industries are of two types.

Secondary Industry: Under this industry new products are manufactured by using the previously produced things e.g., producing cotton is a primary industry and manufacturing cloth out of cotton is a secondary industry. It is of two types.

tertiary or Service Industry: It includes those services which help business to move smoothly e.g. transport, bank, insurance, storage and advertising. II.

Commerce: Commerce refers to all those activities which are concerned with the transfer of goods and services from the producers to the consumers. It embraces all those activities which are necessary for maintaining a free flow of goods and services. It includes trade and auxiliary to trade. Trade refers to buying and selling of goods and services with the objective of earning profit. It is classified into two categories.

Internal Trade: It takes place within a country. Internal trade is classified into two categories—retail trade and wholesale trade.

Retail Trade: It refers to buying of goods and services in relatively small quantities and selling them to the ultimate consumers.

(a) External Trade: It happens between two or more countries. External trade can be classified into three categories.

(b) Import Trade: If goods are purchased from another country, it is called import trade.

(c) Export Trade: If goods are sold to other countries it is called export trade.

(d) Entrepot Trade: Goods are imported for export to other countries e.g. Indian firm may import some goods from America and export the same goods to Nepal.

III. Auxiliaries to Trade: All those activities which help in removing various hindrances which arise in connection with the production and distribution of goods are called auxiliaries to trade. An overview of these activities is given below:

Transportation and Communication: The production of goods takes place at one place whereas these are demanded in different parts of the country. The obstacle of place is removed by the transport. Along with transport, communication is also an important service. It helps in exchange of information between producers, consumers and traders. The common communication services are postal service, telephone, fax, internet etc.

Banking and Finance: Business needs funds for acquiring assets, purchasing raw materials and meeting other expenses. Necessary funds can be obtained from a bank.

Insurance: It provides a cover against the loss of goods, in the process of transit, storage, theft, fire and other natural calamities.

Warehousing: There is generally a time lag between the production and consumption of goods. This problem can be solved by storing the goods in warehouses.

Advertising: Advertising brings goods and services to the knowledge of prospective buyers. It is through advertising that the customers come to know about the new products and their utility.

LESSON PLAN:-03

Industry-types: primary, secondary, tertiary Meaning and subgroups

Different types of industries are as follows:

1. Primary Industry: The primary industry includes those activities through which the natural resources are used to provide raw materials to other industries. Primary industries are of two types.

Extractive: It refers to those industries under which something is extracted out of the earth, water or air e.g., coal, iron, gas etc.

Genetic: It refers to those industries under which the breed of animals and vegetables are improved and made more useful e.g., poultry farms, tree planting etc.

2. Secondary Industry: Under this industry, new products are manufactured by using the previously produced things e.g., producing cotton is a primary industry and manufacturing cloth out of cotton is a secondary industry. It is of two types.

Manufacturing: These industries convert raw materials or semi finished products into finished products e.g., paper from bamboo, sugar from sugar cane. It is further being divided into four parts.

Analytical: Different things are manufactured out of one thing e.g., petrol, diesel, gasoline out of crude oil.

Processing: Those industries wherein useful things are manufactured by making the raw material to pass through different production process e.g., steel from iron ores.

Synthetic: Many raw materials are mixed to produce more useful product e.g., paints, cosmetics etc.

Assembling: The parts manufactured by different industries are assembled to produce new and useful product e.g., computers, watches etc.

Construction Industry: Such types of industries constructions of roads, bridges, buildings etc. are covered.

3. Tertiary or Service Industry: It includes those services which help business to move smoothly e.g. transport, bank, insurance, storage and advertising.

Commerce refers to all , those activities which are concerned with the transfer of goods and services from the producers to the consumers. It embraces all those activities which are necessary for maintaining a free flow of goods and services. It includes trade and auxiliary to trade.

Commerce = Trade + Auxiliary to Trade

Trade: Trade refers to buying and selling of goods and services with the objective of earning profit. It is classified into two categories.

Internal Trade: It takes place within a country. Internal trade is classified into two categories retail trade and wholesale trade.

Retail Trade: It refers to buying of goods and services in relatively small quantities and selling them.to the ultimate consumers.

(?) External Trade: It is done between two or more countries. External trade can be classified into three categories.

(b) Import Trade: If goods are purchased from another country, it is called import trade.

(c) Export Trade: If goods are sold to other countries, it is called export trade.

(d) Entrecote Trade: Where goods are imported for export to other countries e.g., Indian firm may import some goods from America and export the same goods to Nepal.

Auxiliaries to Trade: All those activities which help in removing various hindrances which arise in connection with the production and distribution of goods are called auxiliaries to trade. An overview of these activities is given below.

Transportation and Communication: The production of goods takes place at one place whereas these are demanded in different parts of the country. The obstacle of place is removed by the transport. Along with transport, communication is also an important service. It helps in exchange of information between producers, consumers and traders. The common communication services are postal service, telephone, fax, internet etc.

Banking and Finance: Business needs funds for acquiring assets, purchasing raw materials and meeting other expenses. Necessary funds can be obtained from a bank.

Insurance: It provides a cover against the loss of goods, in the process of transit, storage, theft, fire and other natural calamities.

Warehousing: There is generally a time lag between the production and consumption of goods. This problem can be solved by storing the goods in warehouses.

Advertising: Advertising brings goods and services to the knowledge of prospective buyers. It is through advertising that the customers come to know about the new products and their utility.

Business risk-Concept

The term business risk refers to possibility of inadequate profits or even losses due to uncertainties e.g., changes in tastes and preferences of consumers, strike, increased competition, change in Government policy etc. These are of two types—speculative and pure.

Nature of Business Risks

Business risks arise due to uncertainties: Natural calamities, change in demand and prices, change in technology etc. are some of the examples of uncertainty which create risks.

Risk is an essential part of every business: No business can avoid risk. Risk can be minimised but cannot be eliminated.

Degree of risk depends mainly upon the nature and size of business: For small scale business it is less and for large scale business it is more.

Profit is the reward for risk taking: An entrepreneur assumes risks and in consideration he gets reward which is called profit. Greater the risk higher is the chance of profit.

Causes of Business Risks:

Natural causes: The causes which are beyond human control e.g., flood, earthquake, heavy rains, famine etc.

Human causes: It includes carelessness or negligence of employees e.g., theft, strikes, riots, misappropriation of cash and products etc.

Economic causes: It is related to a chance of loss due to change in market condition e.g., fluctuations in demand and prices, competition, change in technology etc.

Physical causes: Mechanical defects or failures which may also lead to losses e.g., bursting of boiler or machine, may cause death or destruction.

Other causes: These include unforeseen events like political disturbances, fluctuation in exchange rates etc.

Relevant Questions and Answers:

Question 1. State the different types of economic activities?

Answer: Different types of economic activities are of three types:

Business refers to those economic activities which are concerned with the production or purchase and sale of goods or supply of services with the main object of earning profits.

Profession refers to those activities which require special knowledge and skill to be applied by individuals in their occupations.

Employment refers to the occupation in which people work for others and get remunerated in return.

Question 2. Why is business considered an economic activity?

Answer: Any activity is called an economic activity when it is done with a view to earning money. The motive of a business is to earn profit primarily. However, there are some other objectives as well like increasing market share, improvement in productivity, employee satisfaction, consumer satisfaction, social objectives but the main and basic objective of a business is to make profits. Therefore, it is called economic activity.

Question 3. What is the role of profit in business?

Answer: Profits play a vital role in any business. Earning of profits is essential for any business because of the following reasons given below:

Means of Livelihood: Profits act as a means of livelihood for the entrepreneurs. Without profits, entrepreneurs cannot continue with the business.

Rewards for taking risks: It provides returns for taking risks.

Funds for Growth: It would provide funds for growth of the business.

Symbolic of efficiency and efficacy: Profits symbolise that management is efficient and business is operating in a healthy manner.

Enhancement in goodwill: A business making higher profits has a better goodwill and reputation in the market.

Question 4. What factors are important to be considered while starting a business? Explain.

Answer: Following factors are considered while starting a new business:

Selecting the line of business: The first thing to be decided by the entrepreneur is the line and type of business to be undertaken.

Scale or size of business: After deciding the line of business the businessman must decide whether he/she wants to set up large scale or small scale business.

Choice of form of business organization: The next decision must be taken is to finalise the form of business i.e., to set up sale, proprietorship, partnership or joint stock company.

Location of business enterprise: The entrepreneur has to decide the place where the business will be located. Before taking this decision he/she must find out availability of raw materials, power, labour, banking, transportation etc.

Financial requirement: The businessman must analyse the amount of capital he/ she might require to buy for fixed assets and for working assets). Proper financial planning must be done to determine the amount of funds needed.

Physical facilities: It includes machinery, equipment building etc. This decision depends upon the size, scale and type of business activities he/she wants to carry on.

Plant layout: Showing the physical arrangement of machines and equipment needed to manufacture a product.

Competent and committed workforce: The entrepreneur must find out the requirement of skilled and unskilled workers and managerial staff to perform various activities.

Tax planning: The entrepreneur must try to analyse the types of taxes, because there are a number of tax laws in the country which affect the functioning of business.

Setting up the enterprise: After analysing the above mentioned points carefully the entrepreneur can start the business which would mean mobilising various resources and completing legal formalities.

LESSON PLAN:-04

Sole Proprietorship-Concept, merits and limitations.

The sole proprietorship is a form of business that is owned and managed by a single individual. That single individual has to supply capital owned or borrowed to the business.

As ownership belongs to one individual, it is both the prerogative and the responsibility of that individual to manage the affairs of business. He has to take decisions managerial, technical, financial, others to ensure efficient, effective, and profitable conduct of his business.

This form is also known as the proprietorship, single proprietorship, individual proprietorship, sole ownership, individual enterprise, and sole trader.

Characteristics of sole proprietorship:

1. Individual ownership and control.

2. Undivided responsibility of business obligations.

3. No (or minimal) government regulation.

4. Complete fusion of ownership and control.

Merits/Advantages of Sole Proprietorship:

1. Ease of formation and dissolution:

The sole proprietorship is the simplest form of business ownership. There is hardly any formality involved in setting up this type of organization. This ownership organization is not governed by any special Act.

However, general laws like Law of Contracts, Sale of Goods Act, etc., are applicable. Dissolution, or sale of business, is equally convenient in most cases. Satisfaction of creditors’ claims is usually the only restriction in winding up the business.

2. Simplicity of operation and flexible management:

A sole trader need not consult anyone, refer to others, discuss with anybody, or take the opinion of any person, before he decides the affairs of his organization. In addition to this, the owner is not required to submit the results of the business to the prescribed authorities. Quick decision and prompt action enable him to take advantage of business opportunities.

3. Sole claim on profits:

The sole trader is the only person to whom the profits belong. This always acts as a stimulant to personal incentive.

4. Favourable credit standing:

Since the owner is personally liable for all debts of the proprietorship, this form often enjoys a favorable rating among creditors. When creditors know that a proprietor has valuable personal assets, they can anticipate satisfaction from these sources if the business fails or debts remain unpaid.

5. Preferential treatment by Government:

Not only that it is free from government regulations, it also gets subsidies, concessions, and a host of facilities from the government being socially useful, it gets loans on concessional rates, liberal repayment schedule, etc.

6. Social usefulness:

The sole proprietorship is often organised as a small business. Thus, it affords opportunities of the widest possible dispersal of ownership, more opportunities for employment — self and public, wider distribution of the giants of industrial development, prevention/reduction in the formation of monopolies, etc.

7. Tax advantage:

A sole proprietor pays income tax the same as any individual, and the business is not taxed. Under the Income Tax Act, 1961, an individual assessed does not pay any tax if his or her income does not exceed a particular limit (called tax exemption limit), and beyond this the tax is levied on the basis of income slabs. As such, the burden of tax on smaller amount of profit is less in sole proprietorship as compared to other forms of ownership organization.

Because of these advantages found in a small business, William Basset once remarked, “The one-man control is the best in the world, if that man is big enough to manage everything.”

Limitations of Sole Proprietorship:

1. Limitations of management:

The proprietor has certain limitations, for example, he/she must rely upon his/her own skills and judgement in managing the business. Few proprietors have all of the management skills required for financing, marketing, purchasing, supervising personnel, and related functions. Not only does this limit the size of the business, but it also contributes to the relatively high rate of failure among sole proprietorships.

2. Unlimited liability:

Since the owner takes all the profits, he must also accept full personal responsibility for all the losses, even to the extent of his personal possessions. Because in the eyes of law, the firm (sole proprietorship business) and sole proprietor are one and the same and not two different entities, and therefore, the liabilities of the business are the personal liabilities of the proprietor.

3. Lack of continuity:

An enterprise that depends on one man comes to a close if that man becomes seriously ill or dies. Such a situation, arising out of lack of continuity, proves disastrous for employees and all those persons and institutions who had business relations with such a business.

4. Limitations of size:

Since a sole proprietary business is conducted on a small scale, it poses- certain problems, especially in raising sufficient financial resources to support expansion, modernization, and diversification plans of business, and also providing meaningful opportunities and welfare measures to employees.

Suitability of the Sole Proprietorship Form:

This form of business ownership is most suited in cases, where:

(a) The amount of capital needed is small and the quantum and extent of risk are not heavy.

(b) Direct contact with the customers is essential.

(c) The size of demand is not very large.

Obviously these conditions are present in a small business. Thus, the majority of sole proprietorships are found in retail businesses, the professions, and personal service trades. In retail businesses (grocery stores, for instance), sole proprietorship is suitable because it needs small amount of capital and carries with it low amount of risk.

As far as professions go (like tax consultants, management consultants, lawyers, architects, etc.), the call for individual skill and the need for the secrecy in regard to the affairs for clients are the dominant reasons that favour sole proprietorship. In personal (or direct) service trades like hair dressers, tailoring, beauty parlours, interior decorators, etc. the factor of direct contact with the customer favours sole proprietary business.

LESSON PLAN:-05

Partnership

Partnership is a relationship between persons who have agreed to share profits and losses of business carried on by all or any of them acting for all.

Characteristics of a partnership:

1.Sharing of profits and losses

2.Mutual agency

3.Unlimited liability

4.Lawful business

5.Contractual relationship

The three different types of partnership are:

General partnership :A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly-owned business.

Limited partnership :A limited partnership (LP) exists when two or more partners go into business together, but the limited partners are only liable up to the amount of their investment.

Limited liability partnership : A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence.

Partnership – advantages and disadvantages

Advantages of a partnership include that:

1. two heads (or more) are better than one

2. your business is easy to establish and start-up costs are low

3.more capital is available for the business

4.you’ll have greater borrowing capacity

5.high-calibre employees can be made partners

6.there is opportunity for income splitting, an advantage of particular importance due to resultant tax savings

7.partners’ business affairs are private

8.there is limited external regulation

9.It’s easy to change your legal structure later if circumstances change.

Disadvantages of a partnership include that:

1.the liability of the partners for the debts of the business is unlimited

2.each partner is ‘jointly and severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the partnership debts as well as being liable for all the debts

3.there is a risk of disagreements and friction among partners and management

4.each partner is an agent of the partnership and is liable for actions by other partners

5.if partners join or leave, you will probably have to value all the partnership assets and this can be costly.

Need for registering a partnership firm

Partnership firms in India are registered, regulated and governed under the Partnership Act, 1932. The registration of a partnership firm is not obligatory; however, forming a Partnership Deed is beneficial and gives the power to sue and be sued by other members. Also, you can register your partnership firm at any point in time, but it is advisable to register your firm before starting its operations.

Requirements for registering a Partnership Firm

The minimum number of members in a Partnership Firm should be two, and the maximum should be one hundred according to the new amendment in the act.

How to register a partnership firm?

You need to make an application for the registration of the partnership firm and submit it to the Registrar of Firms of your state along with the prescribed fees. Furthermore, the application must contain signatures of all the partners or agents.

Required documents

The documents required to certify a partnership firm is a few, namely;

As identity and address proof of the Partners, any of the following two documents can be submitted:

•PAN Card

•Passport

•Drivers License

•Aadhar Card

•Voters ID

Proof of the principal place of business can be established by submitting the following documents:

•Sale deed in case one of the partners owns the place of business

•Rental agreement copy if the premises are rented

•Copy of latest electricity bill or water bill or property tax receipt

Partnership firm registration in India is provided as per the Partnership Act, 1932. Partnership firms are registered with the registrar of firms of your respective state. Also, you need to form a partnership deed between the partners of the firm to determine the responsibilities, profit share, rights, etc. of each member. The partnership act also provides other regulations for the registration of partnership firms in India.

Partnership Deed

The agreement between the partners stating all responsibilities, rights, duties, profit shares, and other details of each partner should be formed at the beginning. Such an agreement is called a Partnership deed. Furthermore, the Partnership deed can be written or oral, but it is always advised to form a written agreement to use it as proof of partnership.

Details included in the Partnership Deed

The following information should be included in the partnership deed of a firm;

General Details:

•Address and name of the firm and of all the partners

•Kind of business

•The Date of starting of business

•The Capital contributed by each partner

•The ratio of Profit and loss sharing among the partners

Specific Details:

Also, apart from these, certain specific clauses may be mentioned to avoid any conflict at a later stage:

•The Rights of each partner, including additional rights to be enjoyed by the active partners

•The Interest on Capital invested, drawings by partners or any loans provided by partners to the firm

•The details of the Commissions, Salaries, or any other amount to be paid to partners

•Duties and obligations of all partners

•Processes or Adjustments or to be followed on account of the retirement or death of a partner or dissolution of the firm.

•Other clauses as partners may decide by mutual discussion

Types of Partners

Active Partner/Managing Partner/ Ostensible Partner :An active partner is an effective partner who is involved in the daily operations of the partnership firm.

Dormant/Sleeping Partner :This partner does not participate in the day-to-day functioning activities of the partnership firm.

Nominal Partner :Generally, a nominal partner is a well known, well connected individual whose name lends credibility and recognition to the firm. A nominal partner is paid a fee for this service. A nominal partner is a partner in the business who has no actual interest in the trade or its profits.

Partner by Estoppel :A partner by estoppel is someone who is not a partner of a firm, but allows others to think that he is a partner, through his behaviour or conduct.

Partner by holding out :A partner by holding out is someone who is not a partner of a firm, but knowingly allows the firm to project to others that he is a partner of the firm.

Partner in Profits Only :A partner sharing the profits of the business without making himself responsible for losses, if any, is known as partner in profits only. He contributes capital and is also liable to the third parties like other partners.

Minor Partner : A person who is under the age of 18 is regarded as a minor. Generally, a minor cannot be appointed as a partner. But with the consent of all the partners, a minor may be admitted for sharing profits of the firm. Such a partner, if admitted, is called a minor partner.

LESSON PLAN:-04

Hindu Undivided Family Business: Concept

An HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters.

Until January 2016, a woman could not be the HUF Karta. But in a landmark case, the Delhi High Court ruled in favour of a female being the Karta of a HUF.

Features of a HUF

•Formation: To begin a Hindu Undivided Family there must be a minimum of two related family members. There must be some assets, business or ancestral property that they have inherited or will eventually inherit. The formation of a HUF does not require any documentation and admission of new members is by birth.

•Liability: The liability of all the various co-parceners is only up to their share of the property or business. So they have limited liability. But the Karta being the head of the HUF has unlimited liability.

•Control: The entire control of the entity lies with the Karta. He may choose to confer with the co-parceners about various decisions, but his decision can be independent. His actions will be final and also legally binding.

•Continuity: The HUF can be continued perpetually. At the death of the Karta, the next eldest member will become the Karta. However, keep in mind a Hindu Undivided Family can be dissolved if all members mutually agree.

•Minority: As we saw earlier the members are eligible to be co-parceners by the virtue of their birth into the family. So minor members will be a part of the HUF. But they will enjoy only the benefits of the organisation.

Advantages of the HUF

•A Hindu Undivided family is comprised of family members running a business. Like any other organisation, there is scope for disagreements and conflicts. But since the Karta has absolute power and takes all decisions by himself, it will lead to effective management.

•Just like a company, the existence of a HUF is perpetual. The death or retirement of one member of even the Karta will not affect it, and it will continue on.

•Since the co-parceners do not have any effective control over the management of the HUF, and all power lies with the Karta, the liability of the members has also been limited to only their share of the property. This keeps the balance between power and responsibility.

•Also since all members of the HUF are relatives and members of the same family, there is a sense of loyalty and cooperation. The trust among members is also there and leads to overall cooperation.

Disadvantages of the HUF

•No outside members other than family members can be introduced to the HUF. This makes it very difficult to get additional capital from the market. With limited capital, the chances of expansion are very low. It limits the scope of business.

•While the Karta has all the power he also has the burden of unlimited liability. This may make him overly cautious and timid in his business dealings. In turn, the business could suffer. Another factor is that he may even be held responsible for the actions of other members.

•Also, the absolute dominance of the Karta overall business and financial decisions make cause conflict among the HUF. His decisions and business acumen may be questioned by other members, and cause issues within the HUF.

•Another issue may be that the Karta may not be the most qualified person to lead the business. The position is given to the senior most family member, whether he is the most qualified or not is not taken into consideration.

Cooperative Societies-Concept, merits, and limitations:-

A co-operative society is a voluntary association of individuals having common needs who join hands for the achievement of common economic interest. Its aim is to serve the interest of the poorer sections of society through the principle of self-help and mutual help. Cooperative Societies Act is a Central Act.

Features of Cooperative society:

1. As it is a voluntary association, the membership is also voluntary. A person is free to join a cooperative society, and can also leave anytime as per his desire. Irrespective of their religion,gender & caste, membership is open to all.

2. It is compulsory for the co-operative society to get registration. The co-operative society is a separate legal identity to the society.

3. It does not get affected by the entry or exit of its members.

4. There is limited liability of the members of co-operative society. Liability is limited to the extent of the amount contributed by members as capital.

5. An elected managing committee has the powers to take decisions. Members have the right to vote, by which they elect the members who will constitute the managing committee.

6. The cooperative society works on the principle of mutual help & welfare. Hence, the principal of service dominates it’s working. If any surplus is generated, it is distributed amongst the members as a dividend in conformity with the bye-laws of the society.

Advantages of a Cooperative Society:

(i) Equality in Voting Status – The principle of ‘one man one vote’ governs the cooperative society. Irrespective of the amount of capital contribution by a member, each member is entitled to equal voting rights.

(ii) Limited Liability – The liability of members is limited to the extent of their capital contribution. The personal assets of the members are, therefore, safe from being used to repay business debts.

(iii) Stable Existence – Cooperative Society existence isn’t affected by death, bankruptcy or insanity of the members. A society, therefore, operates unaffected by any change in the membership.

(iv) Economy in Operations – Cooperative society is generally managed by the members themselves on an honorary basis. The focus is on elimination of middlemen, which helps in reducing costs. The customers or producers themselves are members of the society, which also reduces the risk of bad debts.

(v) Support from Government – As it is based on democratic pattern, the cooperative society enjoys support from the Government in the form of low taxes, subsidies, and low interest rates on loans.

(vi) Ease of Formation – The cooperative society can be started with a minimum of ten members. The registration is simple involving a few legal formalities. Its formation is governed by the provisions of Cooperative Societies Act, 1912.

Disadvantages of a Cooperative Society:

(i) Limited Resources – A cooperative society faces shortage of resources as it is run by members, who have limited means. The low rate of dividend offered on investment also acts as an obstacle in attracting membership or more capital from the members.

(ii) Inefficiency in Management – Cooperative societies are unable to attract and employ expert managers because of their inability to pay them high salaries. The members who offer honorary services on a voluntary basis are generally not professionally equipped to handle the management functions effectively.

(iii) Lack of Secrecy – Affairs of cooperative society are openly discussed in the meetings of members and its accounts are published. So, it is difficult to maintain secrecy about the operations of a cooperative society.

(iv) Government Control – Cooperative societies have to comply with several rules and regulations related to auditing of accounts, submission of accounts, etc.

(v) Differences of Opinion – There are often internal quarrels due to differences of opinions and lack of cooperation among members. It leads to difficulties in decision-making. Some members attempt to give preference to personal interest at the cost of welfare motive.

Types of co-operatives in India

The six major types of co-operatives that exist in India.

1. Consumer Cooperative Society

These societies are primarily for consumers who wish to buy household goods at lower prices. The society buys goods or products in bulk amounts directly from the producer on wholesale rates and sells them to the members, thus eliminating the need for a middleman. The purchased goods are sold to members and non-members in cash. Capital is raised by issuing low denominational shares to the members who also get dividends on the shares. Consumer co-operatives do not use advertising but rely on word-of-mouth. They ensure a regular supply of goods at reasonable rates. They set up stores or outlets to sell goods and avail huge trade discounts from producers. Some of the best examples of a consumer co-operative society are Super Bazar and Apna Bazar.

2. Producer Cooperative Society

Also known as industrial co-operatives, these types of societies look out for the small-scale producers in a cut-throat market scenario. Production and distribution are handled from within the co-operative. These producers could be farmers, ayurvedic herbal medicine producers, organic produce sellers, handicraft or handloom producers, artisans, etc. Raw materials, ingredients, tools, processing units, etc. needed for the manufacturing or producing the goods are obtained by the members directly, provided to the producers and the final output is distributed to the buyers/non-members without a middle link. Producers pool in their resources, increase production volumes and minimise risk in the face of the competitive capitalistic markets. Best examples are dairy, fish farmers, weavers and artisans and tribal co-operatives.

3. Co-operative Credit Societies

These are urban and rural financial societies that provide loans to members at low rates of interest, protecting the members from massive debts to traditional moneylending agencies. They serve a basic but highly personalised banking role in a sense. They have deposit schemes in forms of saving accounts, FD, RD, pension schemes, etc. The money procured is then given on loans to members as personal loans, agricultural loans, housing or vehicle loan, etc. These societies are regularly aided by state and national government subsidies and funding. Some examples are Teachers Co-op Credit society, State Electric Board Employee Co-op Credit Society.

4. Marketing Cooperative Society

Mostly for the benefit of farmers, these societies function to market the produce profitably at the best possible prices, increase the bargaining strength of the farmers and protect them from the trials of individual selling and market exploitation. The profits are distributed on the basis of the contribution of produce made. They also educate the farmers on market prices, stabilise supply against demand, help them get loans, and help with grading, pooling, processing and procurement of produce and provide safe storage and reliable transportation facilities. Some good examples are Milk Co-operatives in Gujarat, Maha Grape, Cotton Marketing Co-ops.

5. Housing Cooperative Society

These are a type of society that provides affordable housing to the middle and low-income groups. One becomes a member by purchasing shares in the co-operative. Instead of owning the real estate, the members own a share in the entire corporation, which in turn gives them a house to reside in. Such societies are commonly found in urban and semi-urban cities. They construct the residences or flats and provide them to the members to live in and collect the money in instalments. In other cases, they provide the land to the members who themselves construct their own residences.

6. Co-operative Farming Societies

The financially challenged farmer may not be able to maximise his agricultural output individually and earn optimum profits. Farming co-ops are a way for farmers to retain the right to their land, yet pool together and consolidate land, livestock and equipment while earning a share in the total output as per the contribution made. In better farming co-ops, members co-operate for pre-sowing, seeds, fertilisers and equipment, and joint selling, but cultivate the land separately. In joint farming, they pool in the land as well. Co-op tenant farming is the type in which the society leases the land to the farmers and collects the rent. In collective farming co-ops, farmers are members for life and cannot remove their land but can transfer the land rights to another.

LESSON PLAN:-07

A company, is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals.

Characteristics of a company:

1. Artificial legal person- It is created by law and controlled by the people elected for it.

2. Common seal-It should have a common seal of its own. It is similar to the signature of a natural person.

3. Perpetual Succession- As it is an artificial person so it cannot die.The death or insolvency of members do not affect the corporate existence of the company.

4. Limited liability – The liability of the members are limited to the extent of the face value of the shares held by them.

5. Transferability of shares – Shares of a company are freely transferable except in case of a private company.

6. Separation of Management from Ownership – Shareholders are the true owners of a Company, but usually, the number of shareholders is quite large, and as such it is neither possible nor desirable for each member to take part in the day-to-day management of the Company. Therefore, the Company is managed by a ‘Board of Directors’ elected by the shareholders.

Merits of a company include that:

•liability for shareholders is limited

•it's easy to transfer ownership by selling shares to another party

•shareholders (often family members) can be employed by the company

•the company can trade anywhere in Australia

•taxation rates can be more favourable

•you'll have access to a wider capital and skills base.

Limitations of a company include that:

•the company can be expensive to establish, maintain and wind up

•the reporting requirements can be complex

•your financial affairs are public

•if directors fail to meet their legal obligations, they may be held personally liable for the company's debts

•profits distributed to shareholders are taxable.

Types of Company

On the basis of members company can be classified as three types:

1. One person companies

2. Private limited companies

3. Public limited companies

One person companies

One person company (OPC) means a company formed with only one (single) person as a member.

Charateristic of OPC

1. Require only one person as a Subscriber.

2. A Person not eligible for formed more than one OPC.

3. The nominee to the memorandum of one person company shall not be eligible to become a nominee for more than one such company.

Steps to form a one person company

Step 1 : Apply for DSC(Digital signature certificate) of the proposed director with requisite documents.

Step 2 : Apply for DIN(Director Identification number) after receiving DSC.

Step 3 : Name Approval application( XYZ(OPC) Private Limited)

Step 4 :ROC filing with MOA,AOA,proof of registered office,declaration of director.

Step 5 : Filing of all SPICe (Simplified Proforma for Incorporating a Company Electronically) forms alongwith DSC will be uploaded to the MCA(Ministry of Corporate affairs) site for approval.

Step 6: Issue of Certificate of Incorporation : After proper verification,ROC(Registrar of Companies will issue a certificate of Incorporation for the commencement of the business.

Advantages of OPC

a)Limited liability

According to the Companies Act, the liability of the single shareholder in an OPC is limited to the unpaid subscription money in his/her name. This means that his/her personal property is completely safe from creditors of the business.

b)Minimum Requirement

Minimum one Subscriber,Minimum one director,minimum one nominee and no minimum limit for share capital.

Enjoying corporate status in the society and among the business community.

Easy Credit Facilities

The legality of this type of business, and also the perpetual succession clause, makes it popular among banks and financial institutions.

Easier Returns Filing

Disadvantages of an OPC

a)Tax Rate

Since the firm is treated in the same way as a private company, the tax slab applicable is the same. That would mean an OPC would have to pay 30% tax on all profits. There are no exemptions.

b)Need for Change

An OPC will only support small businesses. If the turnover crosses Rs 2 crores, on average, for three consecutive years, the OPC must convert to a private limited company, public limited company, or LLP.

c)Only One

A person can only register only one OPC.

d)Private limited company

A private company is owned entirely by a relatively small group of individuals or other entities providing capital.

Features of private limited company:-

1) Members: Minimum 2 maximum 50

2) Limited Liability: The liability of the members is limited to the number of shares held by them.

3) Perpetual Succession:as it is an artificial legal person so death, insolvency or bankruptcy of any of its members does not effect.

4) Directors Requirement: Minimum 1

5) Name: The private limited company must use the word “PRIVATE LIMITED ” or ‘’ Pvt. Ltd.’’ at the end.

Advantages of private limited company

1. No Minimum Capital- No minimum capital is required for private limited company.

2. Separate Legal Entity.

3. Limited Liability.

4. Fund Raising –Enjoys better avenues for borrowing funds.

5. FDI Allowed.

Disadvantages of a Private Limited Company

1. It restricts the transferability of shares by its articles.

2. No of memberscannot exceed 50.

3. It cannot issue prospectus to the public.

4. In the stock exchange shares cannot be quoted.

Public limited company

A Public Limited Company is a company that has limited liability and offers shares to the general public. Its stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market.

Characteristics of a Public limited company

1. Directors- Minimum three and no maximum limit.

2. Limited liability- Liability limited upto the value of shares.

3. Minimum paid up capital is Rs. 5 lakh.

4. Issue of prospectus is mandatory for subscription.

5. Name- Add the word ‘Limited’ after the name of the company.

Advantages of public limited company

•The company can raise capital through public subscription.

•The risk of ownership can be minimise due to large number of members.

•Transferability of shares.

•Listing on the stock market can increase company reputation and prestige

•Sense of transparency can improve customer perception of brand

Disadvantages of public limited company

•Two number of directors minimum.

•Certificate of commencement of Business is required to start the business.

•Shareholders can be anyone who chooses to purchase, which can dilute a unified company vision

•Qualified Company secretary is mandatory.

•A public limited company must hold an annual general meeting.

Documents required for the formation of a Company

The formation of a company goes through a number of steps, starting from idea generation to commencing of the business. This whole process can be broken down into 4 major phases or steps, which we will be discussing in the lines below.

The major steps in formation of a company are as follows:

1.Promotion stage

2.Registration stage

3.Incorporation stage

4.Commencement of Business stage

Promotion Stage: Promotion is the first step in the formation of a company. In this phase, the idea of starting a business is converted into action with the help of promoters of the business.

In this stage the ideas are executed. The promotion stage consists of the following steps:

1.Identification of business opportunity.

2.Feasibility study.

3.Technical and legal aspect.

4.Capital requirement .

Registration stage: Registration stage is the second part of the formation process. In this stage, the company gets registered, which brings the company into existence.

In order to get a company registered, some documents need to be provided to the Registrar of Companies.

There are several steps involved in the registration phase, and are as follows:

1.Memorandum of Association: Signed by the members of the company.(for Pvt ltd minimum 2 for Ltd. Minimum 7).The MoA must be properly signed and stamped.

2.Article of Association: Signed by all the members.

3.List of directors with their consent declaration, which should be filed with the Registrar of Companies.

4.Address of the registered office needs to be filed.

5.A statutory declaration should be made by any advocate of either the High Court or Supreme Court, or a person of the capacity of Director, Secretary or Managing Director. This declaration shall be filed with the RoC.

Certificate of Incorporation: Certificate of incorporation is issued when the registrar is satisfied with the documents provided. This certificate validates the establishment of the company in the records.

Certificate of commencement of business: Certificate of commencement of business is required for a public company to start doing business, while a private company can start business once it has received the certificate of incorporation.

•Choice of forms of business organization :-

Various forms of business organisations from which one can choose the right one include:

(a) Sole proprietorship:-

The sole proprietorship is a form of business that is owned and managed by a single individual. That single individual has to supply capital owned or borrowed to the business.

As ownership belongs to one individual, it is both the prerogative and the responsibility of that individual to manage the affairs of business. He has to take decisions managerial, technical, financial, others to ensure efficient, effective, and profitable conduct of his business.

This form is also known as the proprietorship, single proprietorship, individual proprietorship, sole ownership, individual enterprise, and sole trader.

(b) Hindu Undivided Family:-

An HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters.

Until January 2016, a woman could not be the HUF Karta. But in a landmark case, the Delhi High Court ruled in favour of a female being the Karta of a HUF.

(c)Partnership:-

Partnership is a relationship between persons who have agreed to share profits and losses of business carried on by all or any of them acting for all.

(d) Cooperative societies:-

A co-operative society is a voluntary association of individuals having common needs who join hands for the achievement of common economic interest.

(e) company:-

It means a Company registered under the companies Act 1956 or registered under any previous Act.

(f) Corporation:-

It means company but incorporated outside India.

(g) Limited Liability Partnership:-

It is an alternative form of business organisation which is the mixing of a company and partnership.

LESSON PLAN:-08

All types of business regardless of its being large or small, manufacturing or trading, privately or government-owned exists in India and across the globe that affects a country’s economy. Indian economy is an amalgamation of both private and government business enterprises, popularly known as the mixed economy. Therefore, the economy is further classified into the private and public sectors.
Private sector enterprises: Private Sector includes those companies, enterprises, or businesses that are owned by Private Individuals or Private Companies. The companies in the Private Sector are controlled, managed and operated by Private Individuals/Private Entities.Companies owned, controlled, managed, and is operated by Private Companies/Private Individuals comes under the private sector.

Features:

•The government cannot interfere in the functions of private enterprises as it has no control over it.

•It is that type of business units which are carried on with the motive of earning profits.

•It can be small in size or large in size.

Example: ICICI Bank Limited, ITC Limited, HDFC Bank Limited, Wipro etc

Types of Organisation under Private sector:

1. Sole Proprietorship

2. Partnership

3. Hindu undivided family.

4. Cooperative

5. Company (Private, Public and multinational)

Public Sectorenterprises :Public Sector encompasses the companies, enterprises, or businesses wherein the Government is the owner of the business by way of a majority shareholding in the business. These businesses are controlled, managed, and operated by the Government.

Companies owned, controlled, managed, and is operated by Government/Government Bodies come under the public sector.

Features

•The public sector consists of various organizations owned and managed by the government.

•These organizations may be either partly or wholly owned by the central or state government.

•The government can participate in economic activities through these enterprises of the country.

Companies such as National Thermal Power Corporation, Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited, State Bank of India, National Highway Authority Limited are an example of public sector companies operating in power, Oil & Gas, Banking, Roads sectors in India.

Different kinds of organizations that come under the public sector:

1.Departmental Undertaking

2. Statutory corporation

3. Government company

Departmental undertaking: The departmental undertaking is the oldest and traditional form of an organization of the public sector enterprise.It is fully control by the Government.

The undertaking is under the control of a minister who is responsible to the parliament. Some example of departmental undertakings is Indian Railways, Post and Telegraph, All India Radio, Doordarshan etc.

Features of Departmental Undertaking

1. Audit and Accounting: Audited by CAG.

2. Managed by Civil Servants: Managed by the civil servants.

3. Sovereign Immunity: Without the consent of the government, a departmental undertaking cannot be sued at all.

Advantages

1. Provides easy information: Departmental undertaking is created by an administrative decision of the government, involving no legal formalities for its formation.

2. Direct control over Parliament or State Legislature: The departmental undertaking is directly responsible to the parliament or the state government through its overall head i.e. the minister concerned.

3. Tax on the Public is lesser :Earnings in this department are paid into government treasury, resulting in the lesser tax burden on the public.

4. Tool for social change: It can be used by the government, as a tool for social change.

5. Avoid misuse of Government Treasury: It isunder the direct administrative control of the ministry. They are guided by the rules and regulations of the ministry, framed with a focus on public welfare.

Disadvantagesof departmental undertakings

Answer:

•Lack of flexibility: the departmental undertakings are strictly under the control of parliament. The minister and the top financial managers also interfere frequently in its working.

•Lack of motivation: In the absence of competition and profit motive, there is little incentive for hard work and efficiency.

•Financial dependence: the departmental undertaking deposits its earnings into the government treasury.

Statutory corporations: Statutory corporations are body corporates formed by a special act of parliament or by the central or state legislature. It is fully financed by the government. Its powers, objects, limitations etc. are also decided by the act of the legislature. Examples include State Bank Of India,Life Insurance corporation of India etc.

Features of Statutory Corporations

The main characteristics of the statutory corporation are:

1. It is a Corporate Body

It is an artificial person created by law & is a legal entity. Managed by the board of directors constituted by the government.

2. Owned by Central Government/State Government

Full capital subscribed by the Government.

3. Answerable to the Legislature

A statutory corporation is answerable either to parliament legislature or state assembly whosever creates it.

4. Own Staffing System

Employees are not government servants, even though the government owns & manages a corporation.

5. Financial Independence

A statutory corporation is not subject to the budget, accounting & audit controls.

Advantages of Statutory Corporations

The main advantages of the statutory corporation are:

•Initiative & flexibility: Operations & management of a statutory corporation is done independently, without any government’s interference, with its own initiative & flexibility.

•Administrative autonomy: A public corporation is able to manage its affairs with independence & flexibility.

•Quick decisions: A public corporation is relatively free from red-tapism, as there is less file work & less formality to be completed before taking decisions.

•Service motive: The activities of the public corporation are discussed in parliament. This ensures the protection of public interest.

•Easy to raise capital: As such corporations are fully owned by the government, they can easily raise required capital. Disadvantages of Statutory Corporations

•Autonomy on paper only: The autonomy & flexibility of public corporation is only for name’s sake. Practically ministers, government officials & political parties often interfere with the working of these operations.

•Lack of initiative: Public corporations do not have to face any competition & are not guided by a profit motive. So the employees do not take initiative as a result most of the public corporations are loss making.

•Rigid structure: The objects & powers of public corporations are defined by the act & these can be amended only by amending the statute or the act. Amending the act is a time-consuming & complicated task.

•Clash amongst divergent interests: The government appoints the board of directors & their work is to manage & operate corporations. As there are many members, it is quite possible that their interests may clash. Because of this reason, the smooth functioning of the corporation may be hampered.

•Unfair practices: The governing board of a public corporation may indulge in unfair practices. It may charge an unduly high price to cover up inefficiency.

Government Company

Government Company is a company or an organization in which at least 51% of the paid up share capital is held by the central government or the state government or by both.Examples are Steel Authority of India Limited, Bharat Heavy Electricals Limited, Coal India Limited, State Trading Corporation of India, etc.

Features of a Government Company

•It is a separate legal entity.

•It is incorporated under Companies Act 1956 & 2013.

•The management is governed and regulated by the provisions of Companies Act.

•The Memorandum of Association and Articles of Association govern the appointment of employees.

•A government company gets its funding from government shareholding and other private shareholdings. The company can also raise money from the capital market.

•A government company is audited by Comptroller and Auditor General of India (C&AG).

Advantages of Government Company

i. Easy Formation

A Government company can be easily formed under the Companies, Act, just by an executive decision of the government.

ii. Internal Autonomy

A government company can manage its affairs independently.

iii. Private Participation

Through Government company device, the government can avail of the management skills, technical know- how and expertise of the private sector and foreign countries.

iv. Easy to Alter

Objectives and powers of the Government Company can be changed by simply altering the Memorandum of Association of the company, without seeking the approval of the Parliament.

v. Public Accountability

The Annual Report of a Government company is presented to the Parliament/ State Legislature. These reports can be discussed and debated there.

Disadvantages of Government Company

i. Board of Directors Packed with ‘Yes-Men’

On the Board of Directors of a government company, there are Government appointed directors; who are ‘yes-men’ of the Government. They are unable to run the company, in a businesslike manner.

ii. Autonomy Only in Name

Independent character of a Government company exists only in name. In reality, politicians, ministers, Government officials, interfere excessively in the day-to-day working of the government company.

iii. A Fraud on Companies Act and Constitutions

A Government company is criticized as being a ‘fraud on the Companies Act and on the Constitution. This criticism is valid on the ground that the Government can exempt a Government company from application of several provisions of the Companies Act.

iv. Fear of Exposure

The annual report of the government company is placed before the Parliament/ State Legislature. The working of the company is exposed to Press criticism: Therefore, management of the Government Company often gets demoralized and may not take initiative to come out with and implement something innovative.

vi. Egocentric Functioning

The Government Company works neither for the government nor for the public at large. It serves the personal interests of people who work in the company and who dictate policies of the company.

Multinational Company
Any company that is registered and operates in more than one country at a time. Generally the corporation has its headquarters in one country and operates wholly or partially owned subsidiaries in other countries.
In economic terms, a firm’s advantages in establishing a multinational corporation include both vertical and horizontal economies of scale (i.e., reductions in cost that result from an expanded level of output and a consolidation of management) and an increased market

Global Enterprises

Global enterprises are the companies that operate around the world. There are categories based on their huge size, a large number of products, advance in technology, marketing, strategy and network of operations all over the world. On other words, Global enterprises are those enterpriseswhich has its headquarters in one country but operate their business in many countries. Global enterprises are also called as multinational companies or transnational corporation. For example Coca-Cola, Hyundai, Nike and so on.

Features of Global Enterprises are:-

1)Huge Capital Resources:-

These enterprises have huge financial resources. They have the ability to raise funds from different sources. Funds are raised by the issue of issuing equity shares, debentures, etc to the public. The investors of the host countries are always willing to invest in them because of their high credibility in the market.

2)Foreign Collaborations:-

With companies of the host countries, these enterprises enter into agreements. These agreements are made in respect of the sale of technology, production of goods, patents, resources, etc.

3)Advanced Technologies:-

These enterprises use advanced technology for production, hence goods/services provided by the MNCs conform the international standard and quality specifications.

4)Product Innovations:-

These enterprises have efficient teams doing research and development at their own R &D centres. The main task is to develop new products and design existing products into new shapes in such a manner as to make them looks and new and attractive and also creates satisfies the demands of the customers.

5)Expansion of Market Territory:-

They expand their market territory when the network of operations of these enterprises extends beyond their existing physical boundaries. They occupy dominant positions in various markets by operating through their branches, subsidiaries in host countries.

6)Centralized Control:-

Despite the fact the branches of these branches of these enterprises are spread over in many countries, they are managed and controlled by their Head Office (HO) in their home country only. All these branches have to work within the broad policy framework of their parent company.

Public-Private Partnership (PPP)

A Public-Private Partnership (PPP) is a partnership between the public sector and the private sector for the purpose of delivering a project or a service traditionally provided by the public sector. The advantage of a PPP is that the management skills and financial acumen of private businesses could create better value for money for taxpayers when proper cooperative arrangements between the public and private sectors are used.

PPP can increase the quality, the efficiency and the competitiveness of public services. It can supplement limited public sector capacities and raise additional finance in an environment of budgetary restrictions. The best use of private sector operational efficiencies can increase quality to the public and the ability to speed up infrastructure development.

LESSON PLAN:-09

Business Services : Business services are these services which are used by business enterprise to carryon business activities more smoothly.

Various Categories of Business Services are

(i) Banking

(ii) Insurance

(iii) Communication

(iv) Warehousing

(v) Transportation

NATURE OF BUSINESS SERVICES:

1. Intangibility: Cannot be seen, touched or smelled. Just can only be felt, yet their benefits can be availed of e.g. Treatment by doctor.

2. Inconsistency: Different customers have different demands &expectation.e.g. Mobile services/Beauty Parlour.

3. In Separability: Production and consumption are performed simultaneously.For e.g. ATM may replace clerk but presence of customer is must.

4. Inventory Loss: Services cannot be stored for future use or performed earlier to be consumed at a later date. e.g. underutilized capacity of hotels and airlines during slack demand cannot be stored for future when there will be a peak demand.

5. Involvement: Participation of the customer in the service delivery is a must e.g. A customer can get the service modified according to specific requirement.

A bank is a financialinstitution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank is the connection between customers that have capital deficits and customers with capital surpluses.

FUNCTIONS OF COMMERCIAL BANKS

Commercial banks have to perform a variety of functions which are common to both developed and developing countries. These are known as ‘General Banking’ functions of the commercial banks. The modern banks perform a variety of functions. These can be broadly divided into two categories: (a) Primary functions and (b) Secondary functions.

A. Primary Functions

Primary banking functions of the commercial banks include:

1. Acceptance of deposits

2. Advancing loans

3. Creation of credit

4. Clearing of cheques

5. Financing foreign trade

6. Remittance of funds

1. Acceptance of Deposits: Accepting deposits is the primary function of a commercial bank mobilise savings of the household sector. Banks generally accept three types of deposits viz., (a) Current Deposits (b) Savings Deposits, and (c) Fixed Deposits.

2. Advancing Loans: The second primary function of a commercial bank is to make loans and advances to all types of persons, particularly to businessmen and entrepreneurs.

3. Creation of Credit: A unique function of the bank is to create credit.

4. Promote the Use of Cheques:

5. Financing Internal and Foreign Trade: The bank finances internal and foreign trade through discounting of exchange bills.

6. Remittance of Funds: Commercial banks, on account of their network of branches throughout the country, also provide facilities to remit funds from one place to another for their customers by issuing bank drafts, mail transfers or telegraphic transfers on nominal commission charges.

B. Secondary Functions

Secondary banking functions of the commercial banks include:

1. Agency Services

2. General Utility Services

These are discussed below.

1. Agency Services: The various agency services rendered by banks are as follows:

(a) Collection and Payment of Credit Instruments

(b) Purchase and Sale of Securities

(c) Collection of Dividends on Shares

(d) Acts as Correspondent

(e) Income-tax Consultancy

(f) Execution of Standing Orders

(g) Acts as Trustee and Executor

2. General Utility Services: In addition to agency services, the modern banks provide many general utility services for the community as given.

(a) Locker Facility

(b) Traveller’s Cheques and Credit Cards

(c) Letter of Credit

(d) Collection of Statistics

(e) Acting Referee

(f) Underwriting Securities

(g) Gift Cheques

(h) Accepting Bills of Exchange on Behalf of Customers

(i) Merchant Banking

Types of Bank Account

Traditionally banks in India have four types of deposit accounts, namely Current Accounts, Saving Banking Accounts, Recurring Deposits and, Fixed Deposits. However, in recent years, due to ever increasing competition, some banks have introduced new products, which combine the features of above two or more types of deposit accounts. These are known by different names in different banks, e.g 2-in-1 deposits, Smart Deposits, Power Saving Deposits, and Automatic Sweep Deposits etc.

The major type of Bank account and deposits are following:-

Savings Account

These are the simplest of deposits. You deposit money into your account and you can withdraw it anytime. There would be a small limitation on the number of times you can withdraw money from your account.

These deposits accounts are one of the most popular deposits for individual accounts. Interest rate is between (1-4)% of average deposits. It provides cheque facilities. There is restriction on maximum number of withdrawals after that charges been imposed.

Current account

Current account –It is a type of account which are basically meant for businessmen and are never used for the purpose of investment or savings. These deposits are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day. Most of the current account are opened in the names of firm / company accounts. Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties. No interest is paid by banks on these accounts. On the other hand, banks charges certain service charges, on such accounts.

Fixed Deposit/Term deposit

This is a deposit product where you deposit a certain sum of money with the bank for a specific duration of time. Hence the interest offered on such deposits is higher than normal deposits. Also you will attract a penalty charge for pre-closing such deposits.

Recurring Deposits

These are similar to fixed deposits with a difference being, you deposit a small amount of money every month into this account for a specified duration of time and the bank would compound the interest every month and pay you in lump at the end of the tenure.

Multiple Option Deposit Account

It is a type of saving Bank A/c in which deposit in excess of a particular limit get automatically transferred into fixed Deposit. On the other hand, in case adequate fund is not available in our saving Bank Account so, as to honour a cheque that we have issued the required amount gets automatically transferred from fixed deposit to the saving bank account. Therefore, the account holder has twin benefits from this amount (i) he can earn more interest and (ii) It lowers the risk of dishonouring a cheque.

Other Banking Services:

Bank Draft: It is a financial instrument with the help of which money can be remitted from one place to another. Anyone can obtain a bank draft after depositing the amount in the bank. Bank charges are applicable for issuing a bank draft.

Banker’s cheque or Pay Order: It is almost like a bank draft. It refers to that bank draft which is payable within the town. In other words banks issue pay order for local purpose and issue bank draft for outstation transactions.

ELECTRONIC BANKING SERVICES/E-BANKING

Use of computers and internet in the functioning of the banks is called electronic banking. Because of these services the customers don’t need to go to the bank every time for every transaction. They can make transactions with the bank at any time and from any place.

Types of Digital payments

1. Electronic. Fund Transfer: An electronic funds transfer is a widely used method for moving funds from one account to another using a computer network. Electronic funds transfers replace paper-based transfers and human intermediaries, but provide the customer with the convenience of doing her own banking.Under it, a bank transfers wages and salaries directly from the company s account to the accounts of employees of the company. The other examples of EFTs are online payment of electricity bill, water bill, insurance premium, house tax etc.

2. Automatic Teller Machines: (ATMs) ATM is an automatic machine with the help of which money can be withdrawn or deposited by inserting the card and entering personal Identity Number (PIN). This machine operates for all the 24 hours.

3. Debit Card: A Debit Card is issued to customers in lieu of his money deposited in the bank. The customers can make immediate payment of goods purchased or services obtained on the basis of his debit card provided the terminal facility is available with the seller.

4. Credit Card: A. bank issues a credit card to those of its customers who enjoy good reputation. This is a sort of overdraft facility. With the help of this card ,the holder can buy goods or obtain services up to a certain amount even without having sufficient deposit in their bank accounts.

5. TeleBanking: Under this facility, a customer can get information about the account balance or any other information about the latest transactions on the telephone.

6. Core Banking Solution Centralized Banking Solution: In this system customer by opening a bank account in one branch (which has CBS facility) can operate the same account in all CBS branches of the same bank anywhere across the country. It is immaterial with which branch of the bank the customer deals with when he/she is a CBS branch customer.

7. National Electronic Fund Transfer: NEFT refers to a nationwide system that facilitate individuals, firms and companies to electronically transfer funds from any branch to any individual, firm or company having an account with any other bank branch in the country.

8. Real Time Gross Settlement: RTGS refers to a funds transfer system where transfer of funds takes place from one bank to another on a Real-time and on Gross basis. Settlement in Real-time means transactions are settled as soon as they are processed and are not subject to any waiting period. Gross settlement means the transaction is settled on one to one basis without bunching or netting with any other transaction. This is the fastest possible money transfer system through the banking channel.

Benefits of E-Banking to Customer:

1. E-Banking provides 24 hours a day X 365 days a year services to the customers.

2. Customers can make transactions from office or house or while travelling via mobile telephone.

3. There is greater customer satisfactions through E-banking as it offers unlimited access and great security as they can avoid travelling with cash.

Benefits of E-Banking to Banks:

1. E-Banking lowers the transaction cost.

2. Load on branches can be reduced by establishing centralized database.

3. E-Banking provides competitive advantage to the bank, adds value to the banking relationship.

LESSON PLAN:-10

Insurance

Life is uncertain, there are no guarantee or prediction about what will happen in one's life. similarly business also don't have any guarantee as they face many expected losses or damages in the long run. Assets like cars, bikes, etc also don't it have any certainty in their lifetime. They can get stolen or damage in the long run. One can fight all these risk with an insurance cover.

Insurance is generally define as a contract which is also called a policy .An insurance policy is a contract in which an individual or an organisation gets financial protection and compensation for any damages by the insurer of the insurance company.In simpler words, one can answer what is insurance policy as a form of protection from any expected loss or damage.

Principle of Insurance

The basic principle of insurance is that an entity will choose to spend small periodic amounts of money against a possibility of a huge unexpected loss or damage. Basically, all the policyholder covers their risk against periodic premium amount. Any loss that they suffer will be paid out of their premiums which they pay.

Principles of Insurance

As we discussed before, insurance is actually a form of contract. Hence there are certain principles that are important to ensure the validity of the contract. Both parties must abide by these principles.

1] Utmost Good Faith

A contract of insurance must be made based on utmost good faith . It is important that the insured disclose all relevant facts to the insurance company. Any facts that would increase his premium amount, or would cause any prudent insurer to reconsider the policy must be disclosed.

If it is later discovered that some such fact was hidden by the insured, the insurer will be within his rights to void the insurance policy.

2] Insurable Interest

This means that the insurer must have some financial interest in the subject matter of the insurance. This means that the insurer need not necessarily be the owner of the insured property but he must have some vested interest in it. If the property is damaged the insurer must suffer from some financial losses.

3] Indemnity

Insurances like fire and marine insurance are contracts of indemnity. Here the insurer undertakes the responsibility of compensating the insured against any possible damage or loss that he may or may not suffer. Life insurance is not a contracts of indemnity.

4] Subrogation

Subrogation in insurance is a term used to describe a legal right the insurance company holds to legally pursue a third-party responsible for the damages caused to the insured. In simple language, when an insurance company pays you the amount you claimed in a situation where the third party was responsible for the damage in question, you subrogate your rights to the insurance company. This means you give the insurance company the legal right to sue the person who caused the accident to recover the money paid to you for the damages.

5] Contribution

This principle applies if there are multiple insurers. In such a case, the insurer can ask the other insurers to contribute their share of the compensation. If the insured claims full insurance from one insurer he loses his right to claim any amount from the other insurers.

6] Proximate Cause

This principle states that the property is insured only against the incidents that are mentioned in the policy. In case the loss is due to more than one such peril, the one that is most effective in causing the damage is the cause to be considered.

Types of Insurance Policy

Basically of four types:-

1. Life Insurance

2. Health Insurance

3. Fire Insurance

4. Marine Insurance

Life Insurance

Life Insurance is a financial product that pays you or your dependants/nominee a sum of money either after a set period or upon your death as the case may be.

Features:

•The policyholder pays the insurer a premium, which is generally paid on an annual basis. The amount of this premium depends on a variety of factors such as the age of the policyholder, occupation, medical history, and many such factors.

•The insurance company pays the “sum assured” to the beneficiaries of the policy at the death of the insured, or at the end of the term.

•The insured can also borrow money against his own life policy.

1.Term Life Insurance or Term Plan

Term insurance is widely considered to be the simplest form of life insurance. It is a pure cover plan which offers protection for a specified time period. If the life insured passes away during that period, the nominee receives the predetermined death benefit. One can also increase the amount of coverage offered by a term plan by opting for additional benefits, such as Accidental Death Benefit or Child Support etc.

2. Whole-Life Insurance Plan

Unlike term insurance, wherein the insured has coverage only for a specified period of time, whole life insurance offers coverage right until the death of the policyholder.

3. Unit Linked Insurance Plan (ULIP)

A portion of the premiums paid towards ULIPs is directed towards ensuring insurance coverage, while the rest of the premium is invested into a bouquet of investment instruments, which can include market-backed equity funds, debt funds and other securities. ULIPs are extremely flexible instruments since investors can easily switch or redirect their premiums between the different funds available. ULIPs are also touted as having an edge over other market instruments in terms of tax-saving benefits, since their proceeds are exempted from LTCG (Long Term Capital Gains).

4. Child Insurance Plan

It is ideal for ensuring the future needs of the child are well taken care of, even in the absence of the life insured. Parents can invest in the best child insurance plans, in order to meet the financial requirements for their child’s education, marriage or to fulfill a multitude of other financial goals their child might have.

5. Endowment Plan

Endowment plans aim to provide maturity benefits to the life insured, in the form of a lump sum payment at the end of the policy tenure, even if a claim hasn’t been made. Endowment plans are ideal for people looking to get maximum coverage alongside having a sizable savings component.

6. Money Back Plan

Being one of the best types of life insurance policies, a money back policy offers policyholders a percentage of the total sum assured at periodic intervals in the form of Survival Benefits. Once the policy reaches maturity, the remaining amount of the Sum Assured is handed over to the policyholder. However, if the policyholder dies while the term is ongoing, their dependents are given the entire Sum Assured without any deductions.

7. Retirement Plan

A retirement plan is a type of life insurance that focuses on providing you financial stability and security post your retirement. After you retire, you lose your regular income from employment. Investing in retirement plans can help you create a stable regular income stream. If you continue to invest until retirement, the plan will help you take care of your expenses after retirement. A retirement plan requires you to invest a certain part of your income regularly during your working life. At the time you retire, the amount that you create over the years will be converted into a regular income stream.
Retirement plans also involve death benefits. Thus, if the policyholder passes away during the course of the policy, their beneficiaries will be provided with an assured sum.

8. Group Insurance Plan

A group life insurance policy covers a group of people inside a single plan. Unlike individual life insurance policies, which cover one person for a period, group insurance covers a minimum of 10 members.

Employers, banks, corporates, and other homogeneous groups of persons can buy group Life Insurance policies for their employees and customers. While employers would want to offer financial protection to their employees' families banks and lending institutions aim to keep the debt off the borrowers’ family after their death.

Health Insurance

Health insurance is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. It may be for Individuals, Family or Group Insurance. Normally identification card is issued to each insured. In some specified hospitals or nursing home the medical expense is cashless otherwise the expenses will be reimbursed by insurance company.The yearly premium amount is directly related to Age,more age more premium.In family floater health insurance the age of the most senior member is taken for the premium calculation.

Types of Health Insurance

1. Individual Health Insurance

You can purchase an individual health insurance policy to provide cover for yourself, your spouse, your children and your parents. These policies typically cover all kinds of medical expenses, including hospitalisation, daycare procedures, hospital room rent and more. let's say you've taken an individual plan for yourself, your spouse and both your parents with a sum insured of INR 8 lakhs. Each of you will be able to claim a maximum amount of 8 lakhs per policy year against your health insurance.

2. Family Floater Health Insurance

A family floater plan allows you to cover your family members under a single policy and everybody shares the sum insured amount. These plans are typically more affordable than individual plans since the sum insured is shared. Let's say you purchase a family floater plan for you and your spouse with a sum insured of INR 8 lakhs. In a single policy year, you can make claims worth only INR 8 lakhs. Your spouse may make claims worth INR 6 lakhs and you could make claims worth INR 2 lakhs or vice-versa. Typically, family floater plans are ideal for young nuclear families.

3. Senior Citizens Health Insurance

These health plans have been designed specifically keeping the medical needs and requirements of senior citizens in mind. Most senior citizens policies offer additional cover, such as domiciliary hospitalisation and even some psychiatric benefits. Since older citizens are more likely to have health issues, these policies may require a full medical check-up beforehand and could be more expensive than regular insurance policies.

4. Critical Illness Insurance

There are a number of lifestyle-related diseases that are on the rise. Health issues such as cancer, stroke, kidney failure and cardiac diseases can be very expensive to deal with and manage long-term. This is precisely why critical illness insurance policies have been created. They can either be purchased as a rider or add-on with your regular health insurance plan or separately as their own plan. These policies offer cover for very specific issues and often provide claim payouts as a single lump sum payment after the diagnosis of a critical illness.

5. Group Health Insurance

Unlike individual and family floater policies, group health insurance plans can be purchased by a group manager for a large number of individuals. For example, an employer can purchase group insurance for all their employees or a building secretary may purchase such a plan for all the residents of the building. These plans are fairly affordable, but they often only provide cover for basic health issues. Employers often purchase these plans as an additional benefit for employees.

Benefits of Health Insurance

Purchasing health insurance is crucial for a number of reasons. Let's take a look at the most important benefits of our health insurance policies:

1. Helps Deal with Rising Medical Costs

People purchase health insurance policies to safeguard their finances against ever-rising medical costs. An accident or medical emergency could end up costing you more than a few thousand rupees. With a medical insurance plan, you enjoy cover for everything from ambulance charges to daycare procedures, making it easier for you to get the care you need to recover.

2. Critical Illness Cover

Many health insurance policies will also offer cover for critical illnesses at an additional cost. Given the rising incidence of lifestyle-related diseases today, this is another crucial cover to have. You will be provided with a lump sum payout in case you are diagnosed with any of the covered critical illnesses. These issues are often very expensive to deal with and manage, so critical illness cover is another vital benefit of having health insurance.

3. Easy Cashless Claims

Every health insurance provider will tie-up with a number of network hospitals where you can enjoy cashless claims.

4. Added Protection

If you enjoy cover under a group health insurance plan, you may wonder why you should purchase your own health insurance policy. Well, individual health insurance plans offer provider more and better cover than group plans. Additionally, if you happen to leave the group at any time, you risk losing the cover, which could make you and your finances vulnerable.

5. Tax Savings

Under Section 80D of the Income Tax Act, 1961, premiums paid towards the upkeep of health insurance policies are eligible for tax deductions. For a policy for yourself, your spouse, your children and parents below the age of 60, you can claim a deduction of up to INR 25,000 per year from your taxable income. If you've also purchased a policy for a parent who is over the age of 60, you can claim an additional deduction of INR 50,000.

Fire Insurance

Fire insurance is a contract where the insurer undertakes to pay the insured in case of damage caused by fire upto agreed amount. For claim settlement two things are very important one is the damage must be caused by fire another is the fire must be accidental.

Characteristics of Fire Insurance

•Insurable Interest. Fire insurance demands the insured to have an insurable interest in the property to be insured. ...

Utmost Faith. The highest level of good faith in fire insurance has two components: first, the disclosure of relevant evidence, and second, the protection of the insured property. Both the insurer and the insured must have clear details on the subject matter of the loss. ...

•Contract of Indemnity. . The theory of indemnity seeks to compensate the insured for a loss suffered, and the reimbursement should be designed to put him in as close to the same financial condition after the loss as he was before the incident...

•Proximate clause: An actual cause that is also legally sufficient to support liability.

•Personal Right. ... The person whose name is mentioned in the fire insurance contract as the policyholder is eligible to receive the insured amount in case of any loss or damage.

•Description of Property : Details description of the property under coverage.

Marine Insurance

A type of insurance designed to provide coverage for the transportation of goods either on the ocean or by land as well as damage to the waterborne instrument of conveyance and to the liability for third parties arising out of the process.

Types of Marine Insurance

Ship or hull insurance: As the ship is exposed to many dangers at the sea, the insurance covers for losses caused by damage to the ship.

Cargo Insurance: The ship carrying cargo is subjected to many risks which can be theft of cargo, lost goods at port or during the voyage. Therefore, insuring the cargo is essential to cover for such losses.

Freight Insurance: In the event of cargo not reaching the destination due to any kind of loss or damage during transit, the shipping company does not get paid for the freight charges. Freight insurance helps in reimbursing the loss of freight caused due to such events.

Marine insurance is a contract of indemnity where the insured can recover the cost of actual loss from the insurer in event of any loss occurring to the insured item.

•Postal Service:-

A postal service is a system used to send mail (letters and packages) from one place to another. Today people can send mail nearly anywhere in the world.

i)Mail - The mail or post is a system for physically transporting postcards, letters, and parcels.

ii)Registered post- a way of sending letters or parcels by using a service that deals with them in a special way and makes sure they do not get lost.

iii)Parcel- an object, article, container, or quantity of something wrapped or packed up; small package; bundle ;

iv)Speed post:- It is the market leader in the domestic express industry, provides express and time-bound delivery of letters and parcels weighing up to 35 kg in India. It is an affordable service and delivers across the country @ INR 15.00 for consignments up to 50 grams.

v) Courier:-A courier is a person who is paid to take letters and parcels direct from one place to another. He worked as a motorcycle courier. The cheques were delivered to the bank by a private courier firm. Synonyms: messenger, runner, carrier, bearer More Synonyms of courier.

LESSON PLAN:-11

Emerging modes of Business

E-Business

The conduct of business activities, transactions, and processes via the internet is called e-business (electronic business). This e-business definition includes activities and processes such as customer servicing, production control, business partnering, buying and selling goods and services, processing payments, employee services, and information transfer.

Notably, e-business encompasses a range of services and functions. Modern corporations continually seek strategies to redefine their business approach. Internet platforms allow these enterprises to enhance the availability and accessibility of their products and services. Conducting business over the internet also allows companies to overcome geographical barriers and reach a wide market.

The term "e-business" was first used in the 1990s following the launch of the first web browser. The 1990s were characterized by the emergence of the internet, which led to the emergence of e-commerce platforms such as eBay and Amazon. These two companies are excellent examples of e-businesses.

E-Commerce Business Definition

The best e-commerce definition states this business model is conducted through the internet. E-commerce (electronic commerce) businesses transfer money, sell goods, buy products and share information through the internet and social media platforms. It is important to note the similarity between e-commerce and e-business as both are executed online. Electronic commerce is part of the larger e-business industry. However, e-commerce business focuses more on buying and selling goods and services while e-business deals with all activities of running an online enterprise.

Also known as internet commerce, this business model can be conducted through smart devices such as smartphones and computers. Over the years, e-commerce has expanded exponentially. As such, the modern consumer can buy virtually everything through the internet, including electronics, cars, tickets, books, food, and music. The business model has expanded into the financial sector. Today, online banking and stock investing are also transacted via internet platforms.

E-commerce is an efficient substitute for traditional physical stores. These physical stores, also known as brick-and-mortar stores, are geographically limited. However, some businesses maintain both business models. One of the biggest advantages associated with internet commerce is increased distribution efficiency. Essentially, the business model supports four primary market segments, namely, Business to Business (B2B), Business to Consumer (B2C), Consumer to Consumer (C2C), and Consumer to Business (C2B). The market segments are categorized according to the seller and the buyer.

Examples of E-commerce and E-business are Amazon, Flipkart, Ola etc.

Scope of E-business

E-business includes the management functions of planning, organising, marketing and production conducted electronically. The other functions that are covered under e-business include inventory management, product development, human resource management and accounting and finance.

Types of E-business

B2B Commerce

Business-to-business (B2B), also called B-to-B, is a form of transaction between businesses, such as one involving a manufacturer and wholesaler, or a wholesaler and a retailer. Business-to-business refers to business that is conducted between companies, rather than between a company and individual consumer.

•Example Turtle.com,Walmart

B2C Commerce

refers to the process of selling products and services directly between a business and consumers who are the end-users of its products or services. Most companies that sell directly to consumers can be referred to as B2C companies.

Examples: Flipcart,Amazon

Intra-B Commerce

refers to business where parties involved in the electronic transactions are from within a given business firm. It is largely due to use of intra-B commerce that today it has become possible for the firms to go in for flexible manufacturing.

Example: Dbrand

C2C Commerce

It is a business model that facilitates the transaction of products or services between customers using a third party platform.

Example: Ebay,Alibaba

Benefits of E-Business

1.Easy to Set Up:

If we have the necessary software, a device, and access to the internet, we can start an online business from the comfort of our own homes.

2.Cheaper than Traditional Business:

The cost taken to set up any business is cheaper. In addition, the transaction costs are effectively lower.

3.No Geographical Boundaries:

Anyone from anywhere can order anything at any time. On the one hand it allows the seller and access to the global market, on the other hand It offers the buyer freedom to choose products from almost any part of the world.

4.Flexible Business Hours:

The internet is available at all times. The time barrier that location-based firms face is broken by e-business.

5.Speed and Efficiency:

Online ordering systems scans process payment and orders in real-time, usually faster, more accurately and cheaper than human workers.

6.Movement towards Up Paperless Society:

Use of the internet has considerably reduced dependence on paperwork. In fact, administrative reforms are attracting E-Commerce solutions to speed up the process of giving rights, approvals, and licenses.

Limitation of E-Business

1.Lack of Personal Touch:

•Unlike traditional business, you cannot touch and feel the product. So it is difficult for the consumers to check the quality of the product, until the order has been delivered.

•Traditional businesses have contact with the salesperson in the traditional way, and there is a sense of humanity and trustworthiness as a result of this. It also fosters customer confidence. Such characteristics will always be absent from an e-business paradigm.

2.Delivery Time:

•The delivery of the products takes time in e-business. This lag time often discourages customers.

•However, these days, e-businesses are trying to resolve such issues by promising very limited time. For example Amazon now guarantees delivery within one day.

3.Security Issues:

•Many people are capable of conducting online business. Additionally, hackers have an easier time obtaining one’s financial information. It has a few concerns with security and integrity. This creates skepticism among potential clients.

4.Technology Capability and Competency of E-business Participants are Required:

•E-business necessitates a high level of computer literacy among the parties involved. This obligation can also be blamed for the so-called digital divide.

•The term "digital divide" refers to the separation of society based on one's familiarity or lack thereof with digital technologies.

5.Ethical Fallouts:

•Companies utilise an 'electronic eye' to keep track on your computer files, email account, and internet visits, among other things, so as to gain knowledge about your interests, preferences etc. It’s unethical in a number of ways

Process of Online Trading

Registration ? Placing an order ? Payment mechanism

Step 1: Registration:

•When you register with an online retailer, you create an 'account’, by filling up the registration form.

• A "password" must be entered among the numerous details since the areas relating to an individual’s "account" and "shopping basket" are password protected.

Step 2: Placing an Order:

•You can add products to the shopping cart by dragging and dropping them.

•A shopping cart is an online record of what an individual has added to his cart while visiting an online store.

•Once you've decided what you want to buy, you may 'checkout.'

Step 3: Payment Mechanism:

Purchases through online shopping may be done in a number of ways.

•Cash-on-Delivery: Payment for things ordered online can be made in cash when the goods are delivered physically.

•Cheque: The online merchant may arrange for the customer's cheque to be picked up. After realisation, product delivery may be attempted.

•Net-banking Transfer: Modern banks provide to their customers the facility of electronic transfer of funds over the Internet using Immediate Payment Service (IMPS), NEFT and RTGS.

•Credit or Debit Cards: The holders of credit cards can enjoy making purchases on credit. The amount owed by the cardholder to the online seller is assumed by the card issuing bank, which then transfers the transaction's amount to the seller's credit.

A debit card permits the holder to make purchases up to the amount of money in the linked account. The moment a transaction is made, the amount due as payment is deducted electronically from the card.

•Digital Cash: This type of currency has no physical qualities, but it allows you to utilise real money in an electronic format, such as through e-wallets or PayTm.

E-Business Risks

a.Transaction Risks:

•Either the seller or the customer may refuse an order being made or placed. This might be cited as 'default on order taking/giving.

•The supposed delivery doesn't take place, or is delivered at the incorrect address, or product apart from ordered is delivered. This can be thought of as "default on delivery."

•The vendor doesn't get payment for the things provided, despite the fact that the customer states that payment was created. This might be cited as 'default on payment'.

•As a result, order taking/giving in e-business may pose a danger to the vendor or the client.

b. Data storage and Transmission Risks:

•Data in the systems and on the way is vulnerable to a variety of threats.

•Important data may be stolen or altered for nefarious purposes or merely for fun/adventure

•Antivirus softwares installed and updated on a regular basis prove useful in scanning files and discs, protecting data files, folders, and systems against virus attacks.

•Data could be intercepted during transmission. Cryptography can be used for this. It refers to the process of encrypting data and transforming it to cyphertext, an unreadable format. Only those with a secret key may decipher (or decrypt) the message into 'plaintext.'

c.Risks of Threats to Intellectual Property and Privacy Include:

•Once the material is available on the internet, it is no longer considered private. It got more difficult to protect it from being copied after that.

•Data provided during online transactions may be shared with others, who may begin flooding one’s inbox with advertising and promotional materials.

Outsourcing

It refers to the long-term outsourcing of non-essential and, more recently, key functions to captive or third-party specialists in order to take advantage of their expertise, efficiency, and, in certain situations, investment.

Feature of Outsourcing

•Activities that are Interchangeable or Fungible: Activities that are not distinguishable can be outsourced, whereas unique activities cannot.

•Requiring Explicit Knowledge which is Formal and Codifiable: Although an IT programmer's job can be outsourced to a third party, a CEO's position requires management, technical, and human relations skills.

•Measurable Activity: You can't outsource something you can't quantify.

•Activity is not Interconnected to other Jobs: If a fungible, specialized, and measurable position is linked to other key operations within the organization, it cannot be outsourced.

Need of Outsourcing:

•Business firms are realising the usefulness of focusing on just a few areas where they have distinct capabilities or core competence, and contracting out the rest of the activities to their outsourcing partners.

•By limiting the scope of their business, they may concentrate their attention and resources on a few key operations, improving efficiency and effectiveness.

1.Quest of Excellence

•Outsourcing allows the company to strive for excellence. One, due to their narrow focus, individuals excel in the activities that they can do best.

•They also succeed by increasing their capabilities by outsourcing out the remaining tasks to people who excel at them.

2.Cost Reduction

•Division of labour and specialization improve quality while also lowering costs.

•This occurs when outsourcing partners benefit from economies of scale by providing the same service to multiple organisations.

•Cost reduction is also aided by differences in the prices of various production inputs across countries.

3.Growth Through Alliance

Your investment requirements are minimised to the extent that you can utilise the services of others; others have already invested in such activities for you.

•As a result, you can grow quickly because the same quantity of investible funds creates a big number of firms.

•Inter-organizational information sharing and collaborative learning are facilitated by outsourcing.

4.Fillip to Economic Development

•Outsourcing, particularly offshore outsourcing, encourages entrepreneurship, job creation, and exports in the host countries (i.e., the countries from where outsourcing is done).

Concern Over Outsourcing

1.Confidentiality

•Outsourcing necessitates the exchange of a great deal of critical information and knowledge.

•It can harm the interest of the party that outsources its processes and even has a risk of competitor firms getting information about that company.

2.Sweat Shopping

•Outsourcing aims to reduce expenses by maximising the use of low-cost labour.

•So, the firms that go in for outsourcing look for the 'doing' skills rather than development of the 'thinking' skills.

3.Ethical Concerns

•In order to cut the cost, the companies outsource the work to some other country where the work is done in an unethical way.

•For example work is accomplished by doing child labour.

4.Resentment in the Home Countries

•In the course of contracting out manufacturing, marketing, research and development or IT based services, what is ultimately contracted out is 'employment' or jobs from one country to another.

•This may cause resentment back in the home country if the home country is suffering from the problem of unemployment.

LESSON PLAN:-12

Social Responsibility

Social responsibility is an ethical theory in which individuals are accountable for fulfilling their civic duty, and the actions of an individual must benefit the whole of society. In this way, there must be a balance between economic growth and the welfare of society and the environment.

Social Responsibility of Business

Social responsibility means that besides maximizing shareholder value, businesses should operate in a way that benefits society. Socially responsible companies should adopt policies that promote the well-being of society and the environment while lessening negative impacts on them.

Need

1. Self enlightment

2. Improving Image

3. Increasing customer participation: A company's social responsibility policy may impact customers' purchasing decisions.

4. Improving employees morale: Many employees desire to be a part of something bigger than themselves.

5. Brand Loyality :Put an induction effect on monopoly.

Case for Social Responsibilities:

Protagonists of social responsibility put forward the following arguments in favour of the assumption of social responsibilities by the businessmen:

(i) Creation of Society:

A business enterprise is a creation of society. It gets all inputs-men, money, materials, technology, information etc. from society; and unloads its output onto society by marketing goods and services in society. Therefore, it must be loyal to society; and perform its social responsibilities.

(ii) Theory of Trusteeship:

Mahatma Gandhi evolved the theory of trusteeship, according to which businessmen are the trustees of the wealth of society; and should not use this wealth for their self-enrichment, at the cost of society. Hence, businessmen must perform social responsibilities to justify their role as trustees of the wealth of society.

(iii) Long – Term Interest of Business:

Fulfillment of social responsibilities is in the long-term best interest of business. Performance of social responsibilities will help in the survival and growth of business enterprises.

For example, if the business sector helps in spreading education in society; in the long-run, it will get more skilled and educated manpower for its functioning. If, it takes care of employees; it will get a loyal and dedicated work-force, as a reward for performing social responsibilities.

(iv) ‘Joint-Venture’ Concept:

A business enterprise is not an exclusive creation of owners, who provide funds for its functioning. Rather, it is run on a joint-venture concept i.e. employees, consumers, suppliers etc. all support the functioning of the enterprise, in their own ways.

Therefore, the business should adopt a balanced approach and meet the expectations of various segments of society rather than be only concerned with making profits to meet the needs of owners.

(v) Public Image:

Performance of social responsibilities makes for the image of business in society. Such public image, is, yet another name for the goodwill of business. Creation of business goodwill pays huge rewards to business, in many ways.

(vi) Government Intervention:

Businessmen should perform social responsibilities voluntarily. In case otherwise, the government might intervene and force businessmen to perform social responsibilities through enactment and enforcement of suitable legislation vis-a-vis social responsibilities.

(vii) Ample Financial Resources:

There is no doubt that the ‘business-class’ is the richest class of society, endowed with huge financial resources. This class is the fittest agency to perform social responsibilities, by virtue of, its financial powers.

(viii) Business Leadership Needed:

Business leadership is very powerful and dynamic. Such leadership is needed to solve those social problems, which even the government cannot solve.

Hence, business should make a available to society the advantage of its talented leadership, through undertaking critical social responsibilities like controlling environmental pollution, promoting rural development, generation of employment opportunities in society etc.

(ix) No Law for all Situations:

Government cannot enact legislations covering all aspects and spheres of social responsibilities. The business should morally undertake to perform social responsibilities in those areas which are not regulated or guided by any of the governmental legislations e.g. eradication of poverty, holding the price-line, giving up cut-throat competition and so on.

Arguments against Social Responsibility:

1. Violation of Profit Maximisation

2. Burden on Consumers

3. Lack of Social Skills

4. Lack of Broad Public Support

Kinds of Social Responsibility

1. Economic Responsibility

The primary social obligation of a business enterprise is the economic responsibility, i.e., to produce things and services that society desires and sell them for a profit.

2. Legal Responsibility

Every business has a legal obligation to follow the rules of the land. A business who abides to the laws and regulations of the country, is also a socially responsponsible business.

3. Ethical Responsibility

Described as the behaviour that is expected by society but not codified in law. Performance of this task includes some voluntary action.

4. Discretionary Responsibility

It is the responsibility of the company to protect the capital investment by avoiding speculative activity and engaging in only healthy business initiatives that provide good returns on investment, such as charities, donations etc.

Responsibility towards Stakeholders

(1) Responsibilities towards Owners/Investors:

(i) Paying a reasonable rate of dividend as a reward for risking capital in business.

(ii) Ensuring safety of investment of funds provided by owners.

(iii) Giving owners a true and fair account of the functioning, profitability and financial position of the company.

(iv) Showing due regard towards the interest of minority of members.

(v) Ensuring growth of the company.

(2) Responsibilities towards employees

(i) Payment of adequate and timely wages

(ii) Providing congenial work environment

(iii) Providing adequate industrial safety devices

(iv) Granting job security.

(v) Providing opportunities for promotion and advancement.

(3) Responsibilities towards Consumers:

(i) Supplying goods of good quality, at fair prices.

(ii) Avoidance of indulging in unfair trade practices like:

1. Supplying lesser weight

2. Defective packing of goods

3. Black-marketing, hoarding and profiteering.

4. Adulteration etc.

(iii) Taking due care of after-sales services.

(iv) Not to indulge in false, misleading and vulgar advertising.

(v) Immediate redress of consumer grievances.

(4) Responsibilities towards the State or Government:

(i) Timely payment of legitimate taxes.

(ii) Co-operating with the government in the implementation of its economic and social policies.

(iii) Supplying the required information to government departments, from time to time.

(iv) Refraining from corrupting public servants.

(v) Not to indulge in winning political favours for selfish interests.

(5) Responsibilities towards Community and Public in General:

(i) Ensuring best utilisation of the scarce economic resources of society.

(ii) Generation of maximum employment opportunities.

(iii) Controlling environmental pollution.

(iv) Preventing urban congestion.

(v) Undertaking programmes for rural development.

Role of business in environment protection

The environment is everything we depend on. Whether it be the trees that give us oxygen, the land we live upon and the rivers that provide us with water. The environment is crucial for the society and businesses together. We all have a responsibility to conserve and protect the environment. And whether it be governments, businesses, consumers, workers or other members of society, each much contribute to stop the environment from polluting further.

Steps that can be Taken

Business enterprises should take lead in solving environmental issues. It is their responsibility to check the consequences of their actions and also to protect environmental resources. Some initiatives which can be taken by business enterprises for environmental protection are:

•A sincere commitment by the top management of the business to cultivate, maintain and develop work culture for environmental protection and pollution prevention.

•To ensure that the commitment towards environmental protection is shared by all the employees of all the divisions of the business.

•Developing clear-cut policies and programmes for purchasing good quality raw material, using latest technology, using scientific techniques of disposal and waste management and to develop the skills of the employees for the purpose of pollution control.

•To adapt to the laws and regulations passes by the government for the prevention of pollution.

•Participation in government programmes relating to the management of hazardous substances, clearing up of polluted water bodies, plantation of trees and to reduce deforestation.

•Assesment of pollution control programmes in terms of costs and benefits to increase the progress with respect to environmental protection.

•Also businesses can arrange workshops and give training material and share technical information and experience with suppliers and customers to get them involved in pollution control programmes.

•Promoting green energy that reduces the use of fossil fuels.

Business ethics

Business ethics refers to the standards for morally right and wrong conduct in business. Law partially defines the conduct, but “legal” and “ethical” aren't necessarily the same. Business ethics enhances the law by outlining acceptable behaviors beyond government control.

Elements of Business ethics

1) Respect:- As an entrepreneur building a business , you need to respect yourself with people you can respect. Remember, strong respect doesn’t mean you can fly on auto-pilot.

2)Honor:- Good people are a fundamental part of good ethics.They are also great ambassadors for doing things right. Give special attention to strong performers and people who exemplify the spirit of your organisation.

3)Customer focus:- A company is nothing if it does not have customers. More to the point, if a company does not produce what people want and will pay for, there is no point to that company. A focus on your customers reinforces the responsibility you have to the market

4)Results-oriented:-You wouldn’t be an entrepreneur if you weren’t focused on results already, but ethics factor into results too. Don’t aim for results at any cost. Work on achieving your results within your company values..

5)Risk-taking:

So far, you might be feeling that ethical companies are timid and mousy, scared of doing the wrong thing. That is simply not true. Organizations that thrive, prosper and grow do so by taking risks.

6)Passion:

Great organizations are comprised of people who have a passion for what they are doing. These are people who are working for you for the thrill and challenge, not merely putting in time to collect a pay-check.

7)Persistance:-

People in awesome organizations have the will to persist. They will keep working even when results are not what they hoped, or when customers refuse to buy. Their persistence is tied to their passion for what they are doing and a belief that this group of people, this company, has the best chance of “making it” of any company they could join.

8)Passion:

Great organizations are comprised of people who have a passion for what they are doing. These are people who are working for you for the thrill and challenge, not merely putting in time to collect a pay-check. They are excited, driven, and believe that their work and efforts can make a difference.

LESSON PLAN:-13

CONCEPT OF BUSINESS FINANCE:

The requirements of money by business to carry out its various activities is called business finance. Finance is needed at every stage in the life of a business. A business cannot function unless adequate funds are made available to it.

NEED OF BUSINESS FINANCE

Finance is the main fuel of every business irrespective of its size. The following are the basic reasons for need of business finance:

1. Fixed Capital Requirement: In order to start a business, funds are needed to purchase fixed assets like land and building, plant and machinery.The funds required in fixed assest remain invested in the business for a long period of time.

2. Working Capital Requirement: A business needs funds for its day to day operation. This is known as working Capital requirements. Working capital is required for purchase of raw materials, to pay salaries, wages, rent and taxes.Mathematically it is current assets minus current liabilities.

3. Diversification: A company needs more funds to diversify its operation to become a multi-product company e.g. ITC.

4. Technology upgradation: Finance is needed to adopt modern technology for example uses of updated software like SAP in business.

5. Growth and expansion: Higher growth of a business enterprise requires higher investment in fixed assets as well as in working capital.

Importance of Business Finance:

1. Establishment of Business Enterprises

Finance is required for the promotion of the establishment of any type of enterprise.

Finance is required for registration of the company, for incorporation, for obtaining the certificate for starting the business and also for obtaining permission letter.

2. Efficient Operation of Business

2. Efficient operation of the Business.

Finance is the source of business, which cannot be efficiently operated without finance, the reason being that with the help of Finance, purchase of commodities and raw materials, sending of products to the consumers, conversion of raw materials into finished product and sale thereof become possible.

3. Development and Extension of Business

3. For development and growth

Finances are also required for the development and extension of all business activities of the modern age.

machinery, and equipment, the establishment of Laboratories, etc.

4. Sound Business Position

Finance is the only base point by which sound or weak position of business is known, reason being that payments may be made easier to the suppliers, remuneration and facilities may be provided to the Employees and payment of original amount and interest may be paid to the debtors in time, only when sufficient funds are available.

5. Facing Competition

Advertisement and publicity production and distribution of new commodities and services, incentives to the consumers, sale promotion, providing services and commodities at a fair price are required, to face present-day competitors.

6. For Infrastructural Facilities

Finance is also required for arranging those infrastructural facilities which are essential for business entrepreneurship, although the volume of required finances may be high or low, according to the coverage of various Enterprises.

Substantial capital is required for all infrastructural facilities, place, land, office site, plant installation for the establishment of industries, place for conversion of raw materials into finished products, water, electricity, telephone, etc.

7. Modernization of Business

Finances are required for new techniques, new sources, new machinery, various new products, and computerization, which are essential for the modernization and operation of the business.

8. For Marketing Expenses

In the modern age, marketing is an important function of business, the reason being the area of marketing has become quite wide and that has necessitated various activities, like – advertising and publicity, sales promotion, marketing mix, selection of marketing intermediaries, distribution of goods, transportation, warehousing and marketing research, etc.

For all these activities, finances important needful role for every business.

9. Labour Welfare and Social Security

For the success of any business or enterprise, human relations between employers and workers should be cordial.

For that, the entrepreneurs should essentially safeguard the interests of the employees and workers.

For that, they are to be provided with various facilities, like – that of housing, primary treatment, health, education, libraries, and reading rooms, travel, etc.

In addition, they are also to be provided provident fund, gratuity, pension, old age, personal or group insurance and accidental insurance, etc.

All these need a substantial volume of finance.

Raising Finance

Company can raise finance in two basic way, one is owners fund another is borrowed fund.

Owners' funds consist of equity share capital, preference share capital and reserves, and surpluses or retained earnings. These are called owners' funds as they are provided by or belong to the shareholders of the company which is, in fact, its owners.

Equity Shares:

Equity shares are also known as ordinary shares. They are the form of fractional or part ownership in which the shareholder, as a fractional owner, takes the maximum business risk. The holders of Equity shares are members of the company and have voting rights. Equity shares are the vital source for raising long-term capital.

Equity shares represent the ownership of a company and capital raised by the issue of such shares is known as ownership capital or owner’s funds. They are the foundation for the creation of a company.

Equity shareholders are paid on the basis of earnings of the company and do not get a fixed dividend. They are referred to as ‘residual owners’. They receive what is left after all other claims on the company’s income and assets have been settled. Through their right to vote, these shareholders have a right to participate in the management of the company.Equity capital is the foundation of the capital of a company. It stands last in the list of claims and it provides a cushion for creditors.

Types of Equity Share

• Authorized Share Capital- This amount is the highest amount an organization can issue. This amount can be changed time as per the companies recommendation and with the help of few formalities.

• Issued Share Capital- This is the approved capital which an organization offers to Public.

• Subscribed Share Capital- Subscribed share capital is the value of shares investors have promised to buy when they are released.

• Paid Up Capital- Paid-up capital is a part of subscribed share capital that has been actually paid to the company by the shareholders.

• Right Share- The Right Shares refers to those issues of shares which a company offers to their existing shareholders at a discounted price. The company's shareholders have rights to accept or reject the proposal and also there are minimum criteria for subscriptions of the share if the shareholder accepts the proposal.

• Bonus Share- Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares.

• Sweat Equity Share- The sweat equity shares mean shares issued by a company to its directors or employees for non-cash consideration or at a discount for making rights available in the nature of intellectual property rights or providing know-hows or any providing any value additions in any form.

Advantages

• Equity capital provides creditworthiness to the company and confidence to prospective loan providers.

• Investors who are willing to take a bigger risk for higher returns prefer equity shares.

• There is no burden on the company, as payment of dividend to the equity shareholders is not compulsory.

• Equity issue raises funds without creating any charge on the assets of the company.

• Voting rights of equity shareholders make them have democratic control over the management of the company

Disadvantages

• Investors who prefer steady income may not prefer equity shares.

• The cost of equity shares is higher than the cost of raising funds through other sources.

• The issue of additional equity shares dilutes the voting power and earnings of existing equity shareholders.

• Many formalities and procedural delays are involved and they are time-consuming processes

Preference Shares

Preference shares are the shares which promise the holder a fixed dividend, whose payment takes priority over that of ordinary share dividends. Capital raised by the issue of preference shares is called preference share capital.

The preference shareholders are in superior position over equity shareholders in two ways: first, receiving a fixed rate of dividend, out of the profits of the company, before any dividend is declared for equity shareholder and second, receiving their capital after the claims of the company’s creditors have been settled, at the time of liquidation. In short, the preference shareholders have a preferential claim over dividend and repayment of capital as compared to equity shareholders.

Dividends are payable only at the discretion of the directors and only out of profit after tax, to that extent, these resemble equity shares. Preference resemble debentures as both bear fixed rate of return to the holder. Thus, preference shares have some characteristics of both equity shares and debentures.

Preference shareholders generally do not enjoy any voting rights. In certain cases, holders of preference shares may claim voting rights if the dividends are not paid for two years or more on cumulative preference shares and three years or more on non-cumulative preference shares. But what are cumulative and non-cumulative preference shares? They are classified below:

Types of Preference Shares

1. Cumulative and Non-Cumulative:

The preference shares that have the right to collect unpaid dividends in the future years, in case the same is not paid during a year are known as cumulative preference shares. Non-cumulative shares, the dividend is not accumulated if it is not paid in a particular year.

2. Participating and Non-Participating:

Preference shares which have a right to participate in the extra surplus of a company shares which after dividend at a certain rate has been paid on equity shares are called participating preference shares. These non-participating preference shares do not enjoy such rights of participation in the profits of the company.

3. Convertible and Non-Convertible:

Preference shares that can be converted into equity shares within a specified period of time are known as convertible preference shares. Non-convertible shares are such that cannot be converted into equity shares. intervals say six months or one year.

Advantages

• It does not affect the control of equity shareholders over the management as preference shareholders don’t have voting rights.

• Payment of fixed rate of dividend to preference shares may make a company to announce higher rates of dividend for the equity shareholders in good times.

• Preference shares have reasonably steady income in the form of fixed rate of return and safety of the investment.

• Also, they are suitable for those investors who want a fixed rate of return with low risk.

• Preference shareholders have a preferential right of repayment over equity shareholders in the event of liquidation or bankruptcy of a company.

• Preference capital does not create any sort of charge against the assets of a company.

Limitations of Preference Shares

• The rate of dividend on preference shares is generally higher than the rate of interest on debentures.

• The Dividend on these shares is to be paid only when the company earns a profit, there is no assured return for the investors.

• Preference shares are not preferred by those investors who are willing to take a risk and are interested in higher returns;

• Preference capital dilutes the claims of equity shareholders over assets of the company.

• The dividend paid is not deductible from profits as an expense. Thus, there is no tax saving as in the case of interest on loans.

Retained Earnings

Retained earnings are the amount of profit a company has left over after paying all its direct costs, indirect costs, income taxes and its dividends to shareholders. This represents the portion of the company's equity that can be used, for instance, to invest in new equipment, R&D, and marketing.

Borrowed Funds

Borrowed funds are referred to as the funds that a business needs to borrow from outside the company in order to provide a source of capital for the business.

Features

1. Borrowed funds are raised by business for certain fixed time periods, it can be short-term, medium-term or long-term, based on the requirement of the business.

2. Borrowed funds can be obtained against securities of the fixed assets of the business.

3. Businesses need to make regular interest payment for the loans obtained as funds as well as need to pay the principal amount after a fixed time.

4.The security holders of the borrowed funds do not have control over the business activities of the firm. They can however sue the firm in case there is default in payment of loan.

Debenture and Bonds

A debenture is a long-term loan that a corporate raises from the public in order to meet its capital requirements. The rate of interest mentioned in the prefix of the debenture.like % debenture.

Classification of debentures

Debentures are classified as follows:

1. Security

Uncensored / Naked Debentures

Secured Debentures.

Convertible Debentures.

Partially Convertible Debentures.

2. Repayment of Capital

Redeemable Debentures.

Irredeemably Debentures

3. Transfer

Bearer Debentures.

Registered Debentures.

Advantages

• Preferred by investors who want fixed income with lower risk.

• Non dilution of the voting rights as they do not carry voting rights.

• Less costly as compared to that of equity and preference share capital.

Disadvantages

• A permanent burden on the company as they are fixed charge instruments.

• The company has to make provisions for repayment in case of issue of redeemable debentures.

• Raising finance from this source limits the borrowing ability of the firm.

• Debenture holders do not get voting rights.

Bonds

a bond is a type of security under which the issuer owes the holder a debt, and is obliged – depending on the terms – to repay the principal of the bond at the maturity date as well as interest over a specified amount of time.There are five main types of bonds: Treasury, savings, agency, municipal, and corporate. Each type of bond has its own sellers, purposes, buyers, and levels of risk vs. return.

Commercial Banks

• Commercial Banks are those banks which provide funds to organizations for many purposes as well as various time periods.

• They extend their loan support to organizations irrespective of their size in the form of cash, credit, overdraft facility, discounting of bills, etc.

Merits

• They provide banks with timely assistance by providing funds at the time of needs.

• Secrecy of business is maintained.

• An easier source of finance as formalities of issuing of prospectus and underwriting is not required.

• A flexible source as funds can be increased as per requirements.

Limitations

• Generally, the funds are available for a short period of time and renewal becomes a difficult process and is uncertain.

• The company may have to keep assets as security as the banks ask for security assets before issuing such loans.

• Sometimes, the terms and conditions imposed by the banks are quite difficult.

10. Financial Institutions

• There are numerous financial institutions established by the government of India across the country.

• These institutions finance the businesses and are set up by both state and central governments.

• There are development banks especially established to promote industrial development in the country.

Merits

• Provide long term funds which are not provided by the commercial banks

• Provide various services such as managerial advice, financial and technical advice to the companies.

•Increases the goodwill of the borrowing company in the capital markets.

•Funds can be made available even at the time of contingency and can be paid in easy installment without being a burden to the company.

Limitations

•A rigid criteria is followed to sanction loans.

•Too many legal formalities to follow make it a lengthy process.

•Certain restrictions are put on the company to restrict the powers of the management of the company. For example: restrictions in respect to payment of dividend.

Public Deposit

The deposits raised by the organizations directly from the public is called public deposits. The companies work by offering higher rates of interest that are offered on these public deposits which are usually more than what is offered on the bank deposits. Companies invite public deposits for a maximum period up to three years.

merits

1.Public deposits do not create any charge on the assets of the company, rather the assets can be used as security for raising loans.

2.The depositors do not have any voting rights thus, the control of the company is not diluted.

3.The procedure of depositing in the company is less complicated and barely contains other restrictive conditions.

4.The cost of public deposits is much lower than the cost of borrowings from the banks and other financial institutions.

Limitations

1.Growing companies find it difficult to attract the public and obtain funds through the public deposit system.

2.It is not a reliable source of finance as the public may not respond when the company needs the money.

3.Collection of these deposits seem to be difficult, especially when the deposits required are quite large.

Trade Credits

Trade credit is a type of commercial financing in which a customer is allowed to purchase goods or services and pay the supplier at a later scheduled date.

Inter Corporate Deposit (ICD)

An Inter-Corporate Deposit (ICD) is an unsecured borrowing by corporates and FIs from other corporate entities registered under the Companies Act 1956. The corporate having surplus funds would lend to another corporate in need of funds.

LESSON PLAN:-14

Enterprenureship

Entrepreneurship is the process of developing, organizing, and running a new business to generate profit while taking on financial risk. The most prominent example of entrepreneurship is the starting of new businesses. Entrepreneurs are important to market economies because they can act as the wheels of the economic growth of the country. By creating new products and services, they stimulate new employment, which ultimately results in the acceleration of economic development.

The entrepreneur is defined as someone who has the ability and desire to establish, administer and succeed in a startup venture along with risk entitled to it, to make profits.

It is classified into the following types:

Small Business Entrepreneurship-

These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter, plumber, electrician, etc. These people run or own their own business and hire family members or local employee. For them, the profit would be able to feed their family and not making 100 million business or taking over an industry. They fund their business by taking small business loans or loans from friends and family.

Scalable Startup Entrepreneurship-

This start-up entrepreneur starts a business knowing that their vision can change the world. They attract investors who think and encourage people who think out of the box. The research focuses on a scalable business and experimental models, so, they hire the best and the brightest employees. They require more venture capital to fuel and back their project or business.

Large Company Entrepreneurship-

These huge companies have defined life-cycle. Most of these companies grow and sustain by offering new and innovative products that revolve around their main products. The change in technology, customer preferences, new competition, etc., build pressure for large companies to create an innovative product and sell it to the new set of customers in the new market. To cope with the rapid technological changes, the existing organisations either buy innovation enterprises or attempt to construct the product internally.

Social Entrepreneurship-

This type of entrepreneurship focuses on producing product and services that resolve social needs and problems. Their only motto and goal is to work for society and not make any profits.

Characteristic

1. Curiosity

Successful entrepreneurs have a distinct personality trait that sets them apart from other organizational leaders: a sense of curiosity. An entrepreneur's ability to remain curious allows them to continuously seek new opportunities. Rather than settling for what they think they know, entrepreneurs ask challenging questions and explore different avenues.

" Without curiosity, entrepreneurs can’t achieve their main objective: discovering new opportunities.

2. Organised Experiment

Along with curiosity, entrepreneurs require an understanding of structured experimentation. With each new opportunity, an entrepreneur must run tests to determine if it’s worthwhile to pursue.

For example, if you have an idea for a new product or service that fulfills an underserved demand, you’ll have to ensure customers are willing to pay for it.

3. Flexibility

The nature of business is ever-changing. Entrepreneurship is anrepetative process, and new challenges and opportunities present themselves at every turn. It’s nearly impossible to be prepared for every scenario, but successful business leaders must be adaptable. This is especially true for entrepreneurs who need to evaluate situations and remain flexible to ensure their business keeps moving forward, no matter what unexpected changes occur.

4. Decisiveness

To be successful, an entrepreneur has to make difficult decisions and stand by them. As a leader, they’re responsible for guiding the track of their business, including every aspect from funding and strategy to resource allocation.

Being decisive doesn’t always mean being correct. If you want to be an entrepreneur, it means having the confidence to make challenging decisions and see them through to the end. If the outcome turns out to be less than favorable, the decision to take corrective action is just as important.

5. Team work

A great entrepreneur is aware of their strengths and weaknesses. Rather than letting shortcomings hold them back, they build well-rounded teams that complement their abilities.

In many cases, it’s the entrepreneurial team, rather than an individual, that drives a venture toward success.

6. Risk tolerance

Entrepreneurship is often associated with risk. While it’s true that launching a venture requires an entrepreneur to take risks, they also need to take steps to minimize it.

While many things can go wrong when launching a new venture, many things can go right. According to Entrepreneurship Essentials, entrepreneurs who actively manage the relationship between risk and reward position their companies to “benefit from the upside.”

Successful entrepreneurs are comfortable with encountering some level of risk to reap the rewards of their efforts; however, their risk tolerance is tightly related to their efforts to mitigate it.

7. Comfort with Faliure

In addition to managing risk and making calculated decisions, entrepreneurship requires a certain level of comfort with failure.

It’s estimated that nearly 75 percent of new startups fail. The reasons for failure are vast and encompass everything from a faulty business model to a lack of focus or motivation. While many of these risks can be avoided, some are inevitable.

Despite this, successful entrepreneurs must prepare themselves for, and be comfortable with, failure. Rather than let fear hold them back, they allow the possibility of success to propel them forward.

8. Persistence

While many successful entrepreneurs are comfortable with the possibility of failing, it doesn’t mean they give up easily. Rather, they see failure as an opportunity to learn and grow.

Throughout the entrepreneurial process, many hypotheses turn out to be wrong, and some ventures fail altogether. Part of what makes an entrepreneur successful is their willingness to learn from mistakes, continue to ask questions, and persist until they reach their goal.

9. Innovation

Many assign to the idea that innovation goes hand-in-hand with entrepreneurship. This notion is often true. Some of the most successful startups have taken existing products or services and drastically improved them to meet the changing needs of the market.

Innovation is a characteristic some, but not all, entrepreneurs possess. Fortunately, it’s a type of strategic mindset that can be cultivated. By developing your strategic thinking skills, you can be well-equipped to spot innovative opportunities and position your venture for success.

10. Long term focus

“It’s easy to start a business, but hard to grow a sustainable and substantial one. Some of the greatest opportunities in history were discovered well after a venture launched.”

Entrepreneurship is a long-term endeavor, and entrepreneurs must focus on the process from beginning to end to ensure long-term success.

Need of Entrepreneurship

Entrepreneurship isn’t easy; It plays a vital role in the economy and encourages people to bring new and innovative ideas to market. Here are several factors that highlight the need for entrepreneurship in today’s fast-paced world.

1. Inspire Innovation

A majority of entrepreneurs solve challenges in society through technological innovations.LikeOLA,facebook.

2. Employment Generation

Entrepreneurship generates employment. Once a new business gets launched, it requires people who can drive that mission and vision forward. Entrepreneurs take the risk of employing even themselves. As the business continues to grow, the need to hire more people also increases.

3. Improve standard of living

Entrepreneurship increases income levels, therefore improving standards of living. Entrepreneurs identify challenges in the lives of customers and provide appropriate business solutions. Additionally, they hire new employees who receive remuneration and this income gets circulated in the economy. All of the spending and salaries generate incremental wealth, therefore improving standards of living.

4. Upgradation of society

You need to dream big and take risks if you want to be a successful entrepreneur. As you progress to solving existing challenges and gaps in society, you take responsibility for impacting various sections of society. A majority of businesses strive to make the world a better place by contributing to socio-economic development through their products and services.

5. Boost research and development

New products and services need to be tested before they can be launched. In the process, entrepreneurs are encouraged to invest their resources into effective research and development. Even after businesses get funding, entrepreneurs continue to prioritize research and development by creating educational institutes. This further encourages the next generation of entrepreneurs to take risks and pursue their dreams.

Process of Entrepreneurship Development

1. Innovative Idea

It is the starting process of entrepreneurship. Once an individual has generated the idea for a business, he/she will subsequently need to evaluate and identify its business opportunities. Hence, he/she has to learn more about the business and its consumers.

2. Evaluation process

Before moving forward, entrepreneurs need to evaluate a business idea or opportunity thoroughly. It is considered one of the most crucial parts of the Entrepreneurship Development Process. An entrepreneur can do it by himself/herself by considering the following points:

–Whether an opportunity or idea is worth investing in or not.

What are the requirements for this product?

Is it feasible or not based on its cost?

What are the competitive advantages?

The capital that is required to put in the business, before the launch of that certain product or service. And where to get this capital.

Associated risks that are inherent with the product or service?. Such risks can be of many types like Technical risks, Economic risks, Social and Environmental Risks.

Whether it coincides with the company’s goal or not

Means, an entrepreneur must evaluate his/her skills and if he/she can manage such it.

3. Business Plan

After identifying the opportunity and gathering information about it, an entrepreneur needs to create a comprehensive business plan to make most of this opportunity. It is one of the vital stages of the entrepreneurship development process. Such a plan acts as the base of a venture as well as the benchmark. It shows whether the business is on track or not.

4.Finding Resources

Once the entire business plan is ready, the next step of entrepreneurship development and management is to locate sources of finance and human resources. Here entrepreneurs find investors for his/her venture. Moreover, recruits individuals as per their skill and abilities to carry out different business activities. Especially the marketing team, as it is the most important aspect for the growth of businesses nowadays.

5. Framing out the Management Structure

It is a crucial concept of entrepreneurship development. After raising funds and hiring the required employees, this is the next process on the list. An entrepreneur must frame out the hierarchy in the organisation. Thus, it becomes easier to resolve any problem through this chain of command.

6. Plan the Future

Once a business is up and running smoothly, an entrepreneur has to consider its future. In this final point of entrepreneur development programme notes, businesspersons decide the next step of the business. Based on actual data generated by the company and pitting it against the projected one gives a clear idea of how the business is performing. If everything is positive and on track, then an entrepreneur decides to invest in expansion.In a nutshell, an entrepreneurship development process is about assisting individuals in improving their skill via training. Thus, it aids such individuals to make better decisions in their existing ventures or encourages them to start a new one.

Startup India Scheme

The Startup India Scheme is an initiative of the Government of India in 2016. The primary objective of Startup India is the promotion of startups, generation of employment, and wealth creation. The Startup India has initiated several programs for building a robust startup ecosystem and transforming India into a country of job creators instead of job seekers. These programs are managed by the Department for Industrial Policy and Promotion (DPIIT).

Definition of “Startup”

Any company which fall into below list of category will be called as “Startup” and eligible to be recognised by the DPIIT to avail the benefits from the Government of India.

•Age of the Company – The Date of Incorporation should not exceed 10 years

•Type of Company – Should have been Incorporated as a Private Limited Company or a Registered Partnership Firm or a Limited Liability Partnership

•Annual Turnover – Should not exceed Rs.100 crore for any of the financial years since its Incorporation

•Original Entity – The company or Entity should have been formed originally by the promoters and should not have been formed by splitting up or reconstructing an existing business

•Innovative & Scalable – Should have plan for development or improvement of a product, process or service and/or have a scalable business model with high potential for the creation of wealth & employment

Benefits from DPIIT

Under the Startup India Initiative, the companies which are registered under DPIIT are eligible to receive the following benefits:

Simplification and Handholding – Easier compliance, easier exit process for failed startups, legal support, fast-tracking of patent applications and a website to reduce information asymmetry.

Funding & Incentives – Exemptions on Income Tax and Capital Gains Tax for eligible startups; a fund of funds to infuse more capital into the startup ecosystem and a credit guarantee scheme.

Incubation & Industry-Academia Partnerships – Creation of numerous incubators and innovation labs, events, competitions and grants.

Benefits of Startup India

•Financial Benefits

•Income Tax Benefits

•Registration Benefits

•Government Tenders

•Huge Networking Opportunities

1. Financial Benefits

Most of the startups are patent based. It means they produce or provide unique goods or services. In order to register their patents, they have to incur a heavy cost which is known as the Patent Cost.

Under this scheme, the government provides 80% rebate on the patent costs. Moreover, the process of patent registration and related is faster for them. Also, the government pays the fees of the facilitator to obtain the patent.

2. Income Tax Benefits

Startups enjoy a good amount of benefits under the Income Tax head. The government exempts their 3 years income tax post the incorporation year.

But they can avail it only after getting a certificate from the Inter-Ministerial Board. Also, they can claim exemption from tax on Capital Gains if they invest money in specified funds.

3. Registration Benefits

Everyone believes that incorporation and registration of business are far more difficult than running it. It is because of the long and complex steps of registration.

Under the Startup India scheme, an application is there to facilitate registration. A single meeting is arranged to at the Start-up India hub. Also, there is a single doubt and problem-solving window for them.

4. Government Tenders

Everyone seeks to acquire Government tenders because of high payments and large projects. But it is not easy to acquire the government tenders.Under this scheme, the startups get priority in getting government tenders. Also, they are not required to have any prior experience.

5. Huge Networking Opportunities

Networking Opportunities means the opportunity to meet with various startup stakeholders at a particular place and time. The government provides this opportunity by conducting 2 startups fests annually (both at domestic as well as the international level).

Challenges faced byStartup India

1. People generally believe startups are just about thinking about a new idea or plan. But in reality, execution of such plan is more necessary than just thinking about it.

2. The view or perspective of the government on startup India plan is quite short-term in nature. It does not look at the long-term path of the startups.

3. For the success of any new business, competent workforce is necessary. But in case of startups, skilled workforce is not possible due to the lack of funds at the initial phase.

4. The risk of reaching failure is greater in the startups as compared to other organizations. It is because they tend to take steps quite fast.

Ways to fund startup

1. Boot strapping : Commonly known as self financing, it is considered as the first funding option because by stretching out your personal savings and resources, you are tied to your business.

2. Crowd funding : It is the pooling of resources by a group of people for a common goal.

3. Angel investment: Angel investors are individuals with surplus cash who have keen interest to invest in upcoming startups. They also offer mentoring or advice alongside capital.

4. Venture capital : There are professionally managed funds which are invested in companies that have huge potential.

Intellectual property rights and Entrepreneurship

The World Intellectual Property Organisation defines intellectual property as creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.

In simple terms, anything that you create by applying your mind or intellect becomes your intellectual property. For example, you are setting up a business of your own and have designed a logo for your brand. That logo is your intellectual property. Similarly a scientific invention is also an intellectual property.

When you create a logo for your brand, you will want it to be unique and resonate with your brand. You want to stand out from your competitors and also make sure your ideas are not copied or misused. This is where intellectual property rights come in.

Intellectual property rights are given to creators for a specific amount of time. During this time the creator is protected from infringement and can license their product for manufacturing in return for a royalty.

The legal rights provided to the creator or inventor of intellectual property are known as intellectual property rights. Every creator enjoys certain privileges provided by the law that protects the creators from infringement or misuse of their work without their explicit permission. Intellectual property rights also aid creators in putting their work to use for the general public by allowing for commercial licencing.

Intellectual property rights are granted to creators for a limited period of time.

What are the types of intellectual property?

1.Trademarks

2.Copyrights

3.Patents

4.Industrial designs

5.Geographical indicators etc.

Small scale enterprise as defined by MSMED Act 2006

•Micro Enterprise: Where the investment in Plant and Machinery or Equipment does not exceed one crore rupees and turnover does not exceed five crore rupees.

•Small Enterprise: Where the investment in Plant and Machinery or Equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees.

•Medium Enterprises: Where the investment in Plant and Machinery or Equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.

Role of small business in India with special reference to rural areas

Small businesses are small in size are owned & controlled by limited people. These are privately owned business. These may be sole proprietorship, corporation partnershipfirm,one man company. There are a small number of people involved & working in these businesses.

Small businesses enjoy several rights from the government in terms of financial aid & tax exemptions. These businesses require less amount of capital to start. Even a single person can start & run these businesses. Small businesses work on low-profit margins& have low annual turnover.

There exists to provide profits to its owners & to serve the local community where it exists. These are generally situated & operated in rural parts of the country. It helps in providing employment to large no peoples &reduces poverty from the rural economy.

Role of small businesses in rural India:

Generates Employment

Small businesses employ large people in small rural areas. These businesses are basically labour intensive in nature. They recruit a large number of unskilled labours in their operations.

Reduce Rural To Urban Migration

Small businesses operating in rural areas have an effective role in reducing the migration of peoples from rural areas to urban areas. People basically migrate from rural to urban in search of employment opportunities & a better standard of living.

These businesses provide employment opportunities for large people. These also have a role in rural development. This way it helps in the migration of peoples from rural to urban areas.

Best Utilisation Of Local Resources

Rural areas in our country are enriched with different resources. These resources are sufficient & cheap. These resources otherwise would be lying idle & remain unused. This helps in improving the economy of the rural sector & removing poverty.

Promotes Rural Development & Growth

Rural development is one of the important role played by industries located there. A large number of people gets employment because of these industries & are earning their livelihood.

Equitable Distribution Of Income

Small businesses require a small amount of capital to establish & operate. This encourages many individuals to start their own businesses in rural areas. Therefore, there are a large number of small businesses operating all over the country.

It is equally distributed among a large number of small rural industrialists. This way it helps in removing the inequalities of income among peoples.

Improves Standards Of Living

Industries in rural areas aimed at improving the standards of peoples living there. These industries provide better quality products at cheap costs to rural population.

Increase Tax Revenue

There is a large number of industries operating in rural areas all over the country. These are efficiently working & generating sufficient revenue and ultimately effect in the income of the Government.

Government schemes and agencies for small scale Industries:

The Government of India has come up with some effective solutions for battling these money issues faced by small businesses.

NSIC(National small Industries Corporation)

was established in the year 1955 in order to promote, aid and foster the growth of small business units in the country. The functions of NSIC are as follows :

(a) To create awareness about technological upgradation.

(b) To develop technology transfer centres and software technology parks.

(c) To export the products of small business units in order to develop export worthiness.

(d) To obtain, supply and distribute indigenous and imported raw materials.

(e) To provide mentoring and advisory services.

(f) To serve as technology business incubators.

(g) NSIC has also introduced a new scheme of performance and credit rating for small businesses in order to encourage them to maintain good financial track record and to sensitize them about the need for credit rating.

District Industrial Centre (DIC) help in the following ways :

(a) It identifies projects for setting up SSI unit.

(b) It issues permanent registration certificate to SSI units.

(c) It provides marketing support to SSI units.

(d) It acts as a link between the entrepreneurs and the lead banks of districts.

(e) Helps businessman in obtaining license from electricity board, water supply board and so on.

LESSON PLAN:-15

b>Internal Trade

Internal Trade means buying and selling within the boundaries of a nation. The buying and selling of goods and services within the domestic territory of a country is known as internal trade. Purchase of goods from a local shop, a mall or an exhibition are all examples of internal trade.

Internal trade can be classified into two broad categories viz.,

(i) wholesale trade and (ii) retail trade

• Wholesale Trade:

Wholesale traders provide a range of products, they may also offer materials for production. For example, a wholesaler may sell wood to a chair manufacturer. In comparison, consumer traders deal in completed merchandise that's ready for consumers to take home.

Types of Wholesalers are:

1) Merchant Wholesalers:-Deals with complete product

2) General Wholesalers:- They directly purchase from the manufacture and sell to retailer by adding some value.

3) Speciality Wholesalers:- They Deals with the item belonging to a specific industry or product line.

4) Specific Product Wholesalers:- Deals with specific product. E.g - Laptop

5) Discount Wholesalers:-Deals with slightly defective or return goods on heavy discount.

6) Drop Ship Wholesalers :- Here, the wholesaler directly receive the payment from the customer and customer received the product directly from the manufacturer.

The services provided by the wholesaler to manufacturers or producers are explained as follows:

1. Economies of Large Scale:

A wholesaler buys the goods in large quantities which enable the producers to manufacture goods on a large scale. Economies of Large scale bring down the average cost of production.

2. Facilitate Distribution of Goods:

Presence of wholesalers in the distribution channel relieves the producers from the hassle of finding out the customers for their products. A wholesaler facilitates the producers to reach out to their target market by buying goods in bulk from the producer for distribution and making them accessible to the consumers via the retailers located in different areas.

3. Warehousing and Marketing:

There is a time lag between production and consumption. The wholesalers purchase the goods from the producers instantly after production and store the goods in their private warehousing facility. Thus, the producers are absolved from the burden of storing their produce.

4. Financial Assistance:

A wholesaler places bulk orders for the producer’s goods. He either pays for the goods in advance or makes the settlement within a short period of time after making the purchase. Once the goods are produced, the wholesaler promptly buys them from the producer.

5. Risk Bearer:

As the wholesaler places advance orders for the goods, the producer gets a ready market for their product. The wholesaler relieves the producer from the risk of loss due to the variations in demand and storage of goods; also cutting down risk by matching seasonal demand and supply.

6. Forecasting of Demand: The wholesalers provide helpful information to the manufacturers regarding the needs and wants of the consumers. They collect the information from the retailers about the nature and scope of demand and share it with the producers. Thus, the wholesaler assists the producers to manufacture the goods which are in tune with the fashion, taste and needs of the market.

B. Services to Retailers:

The services made available by the wholesaler to the retailers are numerous. They are described as under:

1. Convenient Buying: Retailers have to deal with different kinds of customers. It is, therefore, important for retailers to stock a wide range of goods at their outlet. However, they cannot afford to source the stock from so many producers directly.

2. Risk Taking: A wholesaler assumes a lot of risks of packing, transporting, storing and marketing the goods. For example, by warehousing the goods at his or her own facility, the wholesaler takes the risk of market fluctuations in prices or wastage of goods in warehouses due to pests, natural calamities, etc. In this way, the retailer is saved from such risks.

3. Knowledge about New Product: The wholesalers use the salesmen employed by them to introduce the retailers to the new kinds of products which are going to be launched in future. The wholesaler also uses trade circulars, newspaper advertisements and showroom visits to pass on this information.

4. Benefit of Specialisation:The wholesalers generally prefer to excel in a few varieties of products. They purchase at a bargain from manufacturers that produce high quality goods. Retailers derive the advantage of this specialisation by buying the best products from the wholesalers’ stock for their own shopping outlet.

5. Grading: Grading can be defined as the process of dividing the goods into lots which are similar in terms of shape, size, weight, quality, performance, etc. The wholesaler performs the process of grading the products of different qualities and / or of similar features by separating them into different lots or packages. With everything sorted or graded systematically, it becomes easier for the retailer to sell the goods.

6. Stabilisation of Prices:

The wholesaler keeps the price line intact by maintaining the balance of demand and supply. They enable the distribution and sale of goods when there is scarcity in the market, and store them in warehouses when they are not in demand. Thus, the retailers are saved from the risks resulting from the rise and fall of prices.

C. Services to Consumers:

The services rendered by the wholesalers to the consumers are as follows:

1. Ready Supply: The wholesalers enable the consumer to buy the desired quantity and quality of goods at the convenient time and place because they supply goods regularly to the retailers. Hence, the consumer does not have to wait for the stock to arrive at the retailer’s shop.

2. Fair-Priced Goods: Since the Wholesaler buys the goods from manufacturers in bulk and allows him to reap the benefit of economies of large scale production thereby bringing down the cost per unit, which ultimately benefits the customers.

3. Stabilisation of Price: The wholesaler is in a better position to stabilise prices of the products by adjusting demand and supply. The consumers are benefited to a great extent due to the stabilisation of prices.

4. Matching Consumer Demand: The wholesalers supply the goods as per the requirement and demands of the consumers. Thus, consumers get to choose from a diverse range in accordance to their demand.

5. Advertising the Goods: Wholesalers advertise their goods extensively to enlighten the consumer about its uses, types and qualities and availability. The consumers get knowledge about the goods and are in a better position to make their buying decisions.

6. Market Research: Some wholesalers carry out market research frequently to identify any improvement areas in the existing products and scope for development of new products. Further, they help the producers to stay updated with the dynamic market trends and consumer tastes by sharing useful information gathered through their market research.

• Retail trade:

Retail trading is a business activity that involves the sale of finished goods and products to the consumers. Generally the traders buy the products in bulk quantities and sell them to the customers in relatively higher prices.

Types of Retail Stores are:-

• Grocery/Supermarket:-Itis a store that primarily retails a general range of food products, which may be fresh or packaged.

• Big Box/Superstore:-Itis a physically large retail establishment, usually part of a chain of stores.

• Specialty Store:-It carries a deep variety within a narrow line of goods.

•Department Store:-It is retail establishment that sells a wide variety of goods.

• Discount Store:- It is a retail store that sells products at prices lower than those asked by traditional retail outlets.

• Off-Price Retailer:-They are the retailers who provide high quality of off-season and second hand goods at cheap price.

Itinerant:-

Itinerant means traveling from place to place. Itinerant retailers have no fixed place of business. They move from place to place for selling their goods to the consumers. Itinerant sell in small quantities. They invest a very small amount of capital. They deal in varieties of goods.

Types of Itinerant Retailers

Itinerant retailers may be of four types. They are Hawkers and peddlers, cheap jacks, market traders; and street traders.

1. Peddlers and Hawkers:

Peddlers are those retailers who carry goods in hand cart to sell them at the doors of consumers.

2. Cheap Jacks

Cheap jacks are different from hawkers and peddlers. They have an independent shop. But, the shop is not a permanent one. If business at one place is not profitable, cheap jacks will choose some other location.

3. Market traders

Market traders, as the name itself implies, open their shops on market days.

For example, ‘Sunday Market’ in Pondicherry is very popular among shoppers. 4

. Street traders

As the name itself suggests street traders carry on their business in busy streets. Aiming at the floating population, they choose bus stops, railway stations, government and commercial offices and educational institutions to do business.

Small Scale fixed shops retailers:-

The retailers selling goods from a permanent place are known as Fixed Shop Retailers. They don't move from one spot to another to serve their customers. Fixed Shop Retailers are one of the most common types of retailing trade in a market.

The services provided by the retailers to both wholesalers or consumers are explained as follows:

These can be explained as under:

(I) Services To Wholesalers:

(a) They supply invaluable information with regard to tastes, preferences, fashions and demands of the customers to the wholesalers who in turn transmit the same to the producers which is of immense utility to them.

(b) By taking over the function of retailing from the wholesalers and manufacturers, retailer’s relive them from selling goods in small quantities to the consumers.

(c) Many retailers usually place orders in advance with the wholesalers which is very helpful in planning the purchases of the wholesalers.

(d) Sometimes retailers make advance payments for the goods to be received from the wholesalers. In this manner, they help in financing the wholesale trade.

(e) Without the services of the retailers a new product cannot be introduced in the market supplied to him by the wholesalers.

(II) Services to Consumers:

(a) The retailers assemble variety to produces from the wholesaler and place them at the doorstep of the consumers and provide them a convenience of choice.

(b) They provide credit facilities to the consumers thereby helping them in times of difficulty.

(c) They extend personalised service to the consumers and try to give them maximum satisfaction.

(d) They introduce new products to the consumers and also guide them as to their uses.

(e) They extend free home delivery and after sales service to the consumers.

(f) They allow cash discount to the consumers on the products sold.

(g) They buy and stock products best suited to the consumers.

(h) They give valuable advice regarding the use and maintenance of the products delivered by them.

(i) They cater to the needs of every type of consumer by keeping in view their paying capacity.

Large scale retailers:

Large-scale retailers deal in a large stock of goods and purchase goods in bulk. They require huge investment. They are generally located at a central place or in shopping centers. A large number of customers visit these showrooms.

Departmental Stores:

Departmental Stores is a retail establishment that sells a wide variety of goods. These usually include ready-to-wear apparel and accessories for adults and children, yard goods and household textiles, small household wares, furniture, electrical appliances and accessories, and, often, food. Examples are Macy's, Bloomingdale's, J.C. Penney, Sears and Belk.

Chain Stores:

A store that is part of a chain of similar stores selling the same type of product, and that are all owned and controlled by the same organization: The shopping complex hosts a range of chain stores including Argos, Boots, and Virgin Megastore.

Examples of Retail Chain Stores

•Pantaloons, D-Mart etc.

GST (Goods and Services Tax):-

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage.

In general thesupplier of goods or service is liable to pay GST. However in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism.

Types of GST (Goods & Services Tax):-

The types of GST in India are-

1)Central Goods and Services Tax (CGST):- It subsumes all the taxes that were earlier applicable as central indirect taxes. They are levied by the central government for intrastate movement of goods and services. Intrastate means within one state.

2)State Goods and Services Tax (SGST):- It means the state goods and service tax that has replaces the existing tax like the sales tax, luxury tax, etc. This tax is levied by the state government.

3) Union Territory Goods and Services Tax (UTGST):- It refers to the tax levied on the intra-Union Territory supply of goods and services.

4)Integrated Goods and Services Tax (IGST):- IGST tax is levied when there is an inter-state transfer of goods and services.Inter state means from one state to another.

IGST rate= CGST rate + SGST rate ( more or less)

Key Features of GST are as follows:-

1)Single Indirect tax in GST-GST has been introduced as a single, unified tax reform. It has eliminated many existing indirect centre and state taxes like Central Value Added Tax, Special Additional Duty of Customs, Service Tax, and VAT and converted them into a single tax.

2. Input Tax Credit System In GST:- One of the most Important GST features in India is the input tax credit. If a manufacturer or service provider has already paid input tax on a purchase, the same can be deducted from their total output tax liability.

3)GST Composition Scheme:-SMEs with an annual turnover of up to Rs. 1 crore or Rs. 75 lakhs in specified states can also voluntarily opt for the composition scheme. With this scheme, the businesses can pay a fixed GST rate of 1% on their turnover.

4) Four-Tier Structure in GST :-GST has a 4-tier tax structure of 5%, 12%, 18%, and 28%. All the goods and services can only be taxed as per this tax structure. Many of the essential commodities such as food items do not have any GST. Improved transparency and cheaper goods and services are two of the biggest advantages of this 4-tier structure.

LESSON PLAN:-16

International trade

International trade is the purchase and sale of goods and services by companies in different countries. Consumer goods, raw materials, food, and machinery all are bought and sold in the international marketplace.

International trade allows countries to expand their markets and access goods and services due to unavailability ,quality and price issue. As a result of international trade, the market is more competitive. This ultimately results in more competitive pricing and brings a cheaper product home to the consumer.

Benefits of International Trade are as follows:-

1)More job opportunities:-

The industry helps to generate jobs as companies expand their available markets. As the available market grows and market share increases, naturally manufacturing and service capabilities expand as well. The end result is more job opportunities are available for the working class.

2)Expanding target market & increasing revenues:-

Beyond job creation, a larger target market allows companies to run production without the fear of overproduction as any excess products produced can be sold internationally. Each country a business adds to their list opens up new potential for business growth and increased revenue.

3)Improved Risk Management:-

International trade gives the benefit to improve the risk management orproviding continuous improvement aimed at identifying, evaluating and minimizing, among other things, all possible risks related to the activities, operations, and assets of an organization.

4)Greater varieties of goods available:-

International trade brings in different varieties of a particular product from different destinations. This gives consumers a wider array of choices which will not only improve their quality of life but as a whole it will help the country grow.

5)Better Relations between country:-The economic interdependence of countries that results from international trade can lead to strong relationships of cooperation in other areas. When countries engage in a substantial amount of trade, they are more likely to avoid other areas of conflict between the nations.

6)Enhanced Company reputation:-

Trading globally can provide a boost to a company’s reputation within the international market. When a company has success doing business in one country, it can significantly influence the success of that company in neighbouring and nearby countries as well.

Export Trade:-

Exports are explained as the goods and services manufactured in one country and acquired by citizens of another country. The export of good or service can be anything. This trade can be done through shipping, e-mail, transmitted in private luggage on a plane.

Export Procedure

In general, an export procedure initiates with the willingness tosend the goods and services to other foreign nations at someprice, these procedures of export are stated below:

Step 1: Receipt Order

The Indian exporter will receive the order either directlyfrom the importer or through the indent houses.

Step 2: Obtaining License and Quota

After receiving the order from the importer, the Indianexporter is required to obtain an export license from theGovernment of India, for this the exporter needs to applyto the Export Trade Control Authority and get a validlicense for this.

Step 3: Letter of Credit

The exporter then asks the importer for the letter of credit,if the importer does not send the letter of credit along withthe order.

Step 4: Fixing the Exchange Rate

The rate at which the home currency can be exchangedwith the foreign currency is then fixed. The foreignexchange rate fluctuates from time to time so they need tofix the rate of exchange.

Step 5: Foreign Exchange Formalities

As per the Foreign Exchange Regulation Act of India(FERA), every exporter of the goods is required to furnisha declaration in the form prescribed in a manner in theAct.

Step 6: Preparation for Executing the Order

The exporter should make the required arrangements toexecute the order:

Step 7: Formalities by a Forwarding Agent

Then the formalities are to be performed by the agentwhich includes obtaining a permit from the customsdepartment, preparing the shipping bill, paying the duesafter disclosing the required details of the product beingexported.

Step 8: Bill of Lading

The Indian exporter of the goods presents the receipt copyto the shipping company and issues the Bill of Lading.

Step 9: Shipment Advice to the Importer

The Indian exporter sends shipment advice to the importerof the goods to inform him about the shipment of thegoods.

Step 10: Presentation of Documents to the Bank

The Indian exporter needs to confirm that he possessesall the necessary shipping documents.

Step 11: The Realization of Export Proceeds

The exporter of the goods needs to comply with bankingformalities after submission of the bill of exchange.

Import Trade:-

The import trade refers to goods and services purchased intoone nation from another. The word “import” originates from the word “Port” considering the fact that the products are frequentlytransported via ship to foreign countries. Similar to exports,imports are also the backbone of international trade.

Import procedure:-

1. Obtain IEC

Prior to importing from India, every business must first obtainan Import Export Code (IEC) number from the regional jointDGFT. The IEC is a pan-based registration of traders withlifetime validity and is required for clearing customs, sendingshipments, as well as for sending or receiving money in foreigncurrency.The process to obtain the IEC registration takes about 10-15days.

2. Ensure legal compliance under different trade laws

Once an IEC is allotted, businesses may import goods that arecompliant with Section 11 of the Customs Act (1962), ForeignTrade (Development & Regulation) Act (1992), and the ForeignTrade Policy, 2015-20.

3. Procure import licenses

To determine whether a license is needed to import a particularcommercial product or service, an importer must first classifythe item by identifying its Indian Trading Clarification based ona Harmonized System of Coding or ITC (HS) classification.

4. File Bill of Entry and other documents to completecustoms clearing formalities

After obtaining import licenses, importers are required to furnishimport declaration in the prescribed Bill of Entry alongwith permanent account number (PAN) based BusinessIdentification Number (BIN), as per Section 46 of the CustomsAct (1962).

5. Determine import duty rate for clearance of goods

India levies basic customs duty on imported goods, as specifiedin the first schedule of the Customs tariff Act, 1975, along withgoods-specific duties such as anti-dumping duty, safeguardduty, and social welfare surcharge.

Documents involve in international trade:-

1)Indent:- When the importer places an order to import the goods, he places an order for the goods to be despatched. This order is known as 'indent' containing description of the goods ordered, prices to be paid, delivery terms, packing and marking details and delivery instructions.

2) Letter of Credit (L/C):An L/C is an undertaking given by theimporter’s bank (called issuing bank) acting upon the request of the.An L/C involves a minimum of four parties – the importer,importer’s bank(issuing bank), exporter and the exporter’s bank(advising bank).

3) Shipping order: A Shipping Order (SO) is a document issued by thecarrier that confirms a shipment’s booking on a vessel. An SO willcontain the location of the empty container for pickup, and may alsocontain booking details like the vessel number and sailing time.

4) Shipping bills: It is the main document on the basis ofwhich the customs office gives the permission for export.Shipping bill contains particulars of the goods being exported,thename of the vessel, the port at which goods are to bedischarged, country of final destination, exporter’s name andaddress, and so on.

5) Mate’s receipt(DA/DP):- Mate's receipt is a receipt issued by the Commanding Officer of the ship when the cargo is loaded on the ship. It must be handed over to the shipping company in order to get the bill of lading. Bill of lading is prepared on the basis of the mate's receipt.

World Trade Organisation:-

The World Trade Organization is an intergovernmentalorganization that regulates and facilitates international trade.With effective cooperation in the United Nations System,governments use the organization to establish, revise, andenforce the rules that govern international trade.

Objectives of World Trade Oraganigation:-

(1) to set and enforce rules for international trade

(2) to provide a forum for negotiating and monitoring further trade liberalization

(3) to resolve trade disputes

(4) to increase the transparency of decision-making processes

(5) to cooperate with other major international economic institutions involved in global economic management,and

(6) to help developing countries benefit fully from the global trading system.

Part A: Statistics for Economics

Unit 1: Introduction

What is Economics?

Meaning, scope, functions and importance of statistics in Economics

Unit 2: Collection, Organisation and Presentation of data

Collection of data – sources of data – primary and secondary; how basic data is collected with concepts of Sampling; methods of collecting data; some important sources of secondary data: Census of India and National Sample Survey Organisation.

Organisation of Data: Meaning and types of variables; Frequency Distribution.

Presentation of Data: Tabular Presentation and Diagrammatic Presentation of Data: (i) Geometric forms (bar diagrams and pie diagrams), (ii) Frequency diagrams (histogram, polygon and Ogive) and (iii) Arithmetic line graphs (time series graph).

Unit 3: Statistical Tools and Interpretation

Measures of Central Tendency – Arithmetic mean, median and mode.

Correlation – meaning and properties, scatter diagram; Measures of correlation – Karl Pearson’s method (two variables ungrouped data) Spearman’s rank correlation.

Introduction to Index Numbers – meaning, types – wholesale price index, consumer price index and index of industrial production, uses of index numbers; Inflation and index numbers.

Part B: Introductory Microeconomics

Unit 4: Introduction

Meaning of microeconomics and macroeconomics; positive and normative economics

What is an economy? Central problems of an economy: what, how and for whom to produce; concepts of production possibility frontier and opportunity cost.

Unit 5: Consumer’s Equilibrium and Demand

Consumer’s equilibrium – meaning of utility, marginal utility, law of diminishing marginal utility, conditions of consumer’s equilibrium using marginal utility analysis.

Indifference curve analysis of consumer’s equilibrium-the consumer’s budget (budget set and budget line), preferences of the consumer (indifference curve, indifference map) and conditions of consumer’s equilibrium.

Demand, market demand, determinants of demand, demand schedule, demand curve and its slope, movement along and shifts in the demand curve; price elasticity of demand – factors affecting price elasticity of demand; measurement of price elasticity of demand – percentage-change method and total expenditure method.

Unit 6: Producer Behaviour and Supply

Meaning of Production Function – Short-Run and Long-Run

Total Product, Average Product and Marginal Product.

Returns to a Factor

Cost: Short run costs – total cost, total fixed cost, total variable cost; Average cost; Average fixed cost, average variable cost and marginal cost-meaning and their relationships.

Revenue – total, average and marginal revenue – meaning and their relationship.

Producer’s equilibrium-meaning and its conditions in terms of marginal revenue marginal cost. Supply, market supply, determinants of supply, supply schedule, supply curve and its slope, movements along and shifts in supply curve, price elasticity of supply; measurement of price elasticity of supply – percentage-change method.

Unit 7: Forms of Market and Price Determination under Perfect Competition with simple applications.

Perfect competition – Features; Determination of market equilibrium and effects of shifts in demand and supply.

Simple Applications of Demand and Supply: Price ceiling, price floor.

Unit-I: Sets and Functions

1. Sets

Sets and their representations, Empty set, Finite and Infinite sets, Equal sets, Subsets, Subsets of a set of real numbers especially intervals (with notations). Universal set. Venn diagrams. Union and Intersection of sets. Difference of sets. Complement of a set. Properties of Complement.

2. Relations & Functions

Ordered pairs. Cartesian product of sets. Number of elements in the Cartesian product of two finite sets. Cartesian product of the set of reals with itself (upto R x R x R).Definition of relation, pictorial diagrams, domain, co-domain and range of a relation. Function as a special type of relation. Pictorial representation of a function, domain, co-domain and range of a function. Real valued functions, domain and range of these functions, constant, identity, polynomial, rational, modulus, signum, exponential, logarithmic and greatest integer functions, with their graphs. Sum, difference, product and quotients of functions.

3. Trigonometric Functions

Positive and negative angles. Measuring angles in radians and in degrees and conversion from one measure to another. Definition of trigonometric functions with the help of unit circle. Truth of the identity, Signs of trigonometric functions. Domain and range of trigonometric functions and their graphs. Expressing sin (x±y) and cos (x±y) in terms of sinx, siny, cosx & cosy and their simple applications. Deducing identities. Identities related to sin2x, cos2x, tan2 x, sin3x, cos3x and tan3x.

Unit-II: Algebra

1. Complex Numbers and Quadratic Equations

Need for complex numbers, especiallyv-1, to be motivated by inability to solve some of the quadratic equations. Algebraic properties of complex numbers. Argand plane.

2. Linear Inequalities

Linear inequalities. Algebraic solutions of linear inequalities in one variable and their representation on the number line.

3. Permutations and Combinations

Fundamental principle of counting. Factorial n. (n!) Permutations and combinations, derivation of Formulae for nPr and nCr and their connections, simple applications.

4. Binomial Theorem

Historical perspective, statement and proof of the binomial theorem for positive integral indices. Pascal’s triangle, simple applications.

5. Sequence and Series

Sequence and Series. Arithmetic Progression (A. P.). Arithmetic Mean (A.M.) Geometric Progression (G.P.), general term of a G.P., sum of n terms of a G.P., infinite G.P. and its sum, geometric mean (G.M.), relation between A.M. and G.M.

Unit-III: Coordinate Geometry

1. Straight Lines

Brief recall of two dimensional geometry from earlier classes. Slope of a line and angle between two lines. Various forms of equations of a line: parallel to axis, point -slope form, slope-intercept form, two-point form, intercept form and normal form. General equation of a line. Distance of a point from a line.

2. Conic Sections

Sections of a cone: circles, ellipse, parabola, hyperbola, a point, a straight line and a pair of intersecting lines as a degenerated case of a conic section. Standard equations and simple properties of parabola, ellipse and hyperbola. Standard equation of a circle.

3. Introduction to Three-dimensional Geometry

Coordinate axes and coordinate planes in three dimensions. Coordinates of a point. Distance between two points.

Unit-IV: Calculus

1. Limits and Derivatives

Derivative introduced as rate of change both as that of distance function and geometrically. Intuitive idea of limit. Limits of polynomials and rational functions trigonometric, exponential and logarithmic functions. Definition of derivative relate it to scope of tangent of the curve, derivative of sum, difference, product and quotient of functions. Derivatives of polynomial and trigonometric functions.

Unit-V: Statistics and Probability

1. Statistics

Measures of Dispersion: Range, Mean deviation, variance and standard deviation of ungrouped/grouped data.

2. Probability

Events; occurrence of events, ‘not’, ‘and’ and ‘or’ events, exhaustive events, mutually exclusive events, Axiomatic (set theoretic) probability, connections with other theories of earlier classes. Probability of an event, probability of ‘not’, ‘and’ and ‘or’ events.

Unit 1: Entrepreneurship: Concept and Functions

Competencies- Vision, Decision making, Logical, Critical and Analytical Thinking, Managing Skills

Contents

Entrepreneurship – Concept, Functions and Need Why Entrepreneurship for You

Myths about Entrepreneurship

Advantage and Limitations of Entrepreneurship

Process of Entrepreneurship

Entrepreneurship – The Indian Scenario

Unit 2: An Entrepreneur

Competencies: Need Achievement, Motivation, Ethics, opportunity seeking, Passion, Independence

Contents

Why be an Entrepreneur

Types of Entrepreneurs

Competencies and characteristics

Entrepreneurial Values, Attitudes and Motivation

Intrapreneur: Meaning and Importance

Unit 3: Entrepreneurship Journey

Competencies: Scanning the environment; Information seeking; creativity; Innovativeness; divergent thinking; Perseverance

Contents

Idea generation.

Feasibility Study and opportunity assessment

Business Plan: meaning, purpose and elements

Execution of Business Plan

Unit 4: Entrepreneurship as Innovation and Problem Solving

Competencies: Risk taking; Determination; Initiative; problem solving ability; Adaptability to changing technologies

Contents

Entrepreneurs as problem solvers

Innovations and Entrepreneurial Ventures – Global and Indian

Role of Technology – E-commerce and Social Media

Social Entrepreneurship – Concept

Unit 5: Understanding the Market

Competencies: Task oriented, Opportunity seeking, resourcefulness, organizational skills, Analytical and logical reasoning

Contents

Market: Concept, Types

Micro and Macro Market Environment

Market Research – Concept, Importance and Process

Marketing Mix

Unit 6: Business Finance and Arithmetic

Contents

Unit of Sale, Unit Price and Unit Cost – for single product or service

Types of Costs – Start up, Variable and Fixed

Break Even Analysis – for single product or service

Unit 7: Resource Mobilization

Competencies: Resourcefulness; Collaboration; Managing Risk; Organizational Skills; Informed Decision Making

Contents

Types of Resources – Physical, Human, Financial and Intangible.

Selection and utilization of human resources and professionals like Accountants, Lawyers, Auditors, Board Members, etc.

Study Materials

LESSON PLAN:-01

Management � concept:

i) Traditional Concept Management is the art of getting things done through others.

(ii) Modern Concept Management is defined as the process (refers to the basic steps) to get the things done with the aim of achieving goals effectively and efficiently (effectiveness refers to achievement of task on time and efficiently implies optimum use of resources).

DEFINITIONS: Management According to Marrie and Douglas,

�Management is the process by which a co-operative group directs actions of others toward common goals.�

Management is defined as the process of planning, organising and controlling an organisation�s operations in order to achieve the target efficiently and effectively. It is essential for all organisations.

Objectives:Objectives can be classified into organisational, social or personal

(i) Organisational Objectives

(a) Survival It exists for a long time in the competition market.

(b) Profit It provides a vital incentive for the continued successful operations.

(c) Growth Success of an organisation is measured by growth and expansion of activities.

(ii) Social Objectives Involves creation of benefit for society.

(iii) Personal Objectives Objectives of employees like good salary, promotion, social recognition, healthy working conditions.

Importance:

(i) Management Helps Achieving Group Goals It integrates the objective of individual along with organisational goal.

(ii) Management Increases Efficiency It increases productivity through better planning, organising, directing the activities of the organisation.

(iii) Management Creates a Dynamic Organisation Organisation have to survive in dynamic environment thus manager keep changes in the organisation to match environmental changes.

(iv) Management Helps in Achieving Personal Objectives Through motivation and leadership, management helps in achieving the personal objectives.

(v) Management Helps in the Development of Society It provides good quality products and services, creates employment, generate new technology in that sense it helps in the development of the society.

Management as Science, Art and Profession:

Management as an Art

Management as an art because it satisfies following points

(i) It is based on practice and creativity.

(ii) Lots of literature is present which gives the existence of theoretical knowledge. Management as a Science

Management as a science because

(i) It is a systematised body of knowledge.

(ii) Its principles are based on experimentation.

Management as a Profession It does not meet the exact criterion of a profession, it does have some features of a profession.

Levels of Management

i) Top Management It consists of senior most executives who are usually referred to as the Chairman, Chief Executive Officer, President and Vice President.

(ii) Middle Management They are usually division heads who are the link between top and lower level of management.

(iii) Operational Management They are usually the foremen and supervisors who actually carry on the work or perform the activities.

Management functions-planning, organising, staffing, directing and controlling

Functions of Management

(i) Planning It refers to deciding in advance what to do, how to do and developing a may of achieving goal efficiently and effectively.

(ii) Organising It refers to the assigning of duties, grouping tasks, establishing authority and allocating of resources required to carry out a specific plan.

(iii) Staffing It implies right people for the right job.

(iv) Directing It involves leading, influencing, motivating employees to perform the task assigned to them.

(v) Controlling It refers to the performance measurement and follow up actions that keep the actual performance on the path of plan.

Coordination- concept: Co-ordination means binding together all the activities such as purchase, production, sales, finance to ensure continuity in the working of the organisation. It is considered as a separate function of management, in order to achieve harmony among individual, efforts towards the accomplishment of goods.

Importance:

(i) Growth in Size When there is a growth in size, the number of people employed by the organisation also increases. Thus to integrate the efforts, co-ordination is needed.

(ii) Functional Differentiation In an organisation, there are separate department and different goals. The process of linking these activities is achieved by co-ordination.

(iii) Specialisation Modern organisation is characterised by a high degree of specialisation. Co-ordination is required among different specialists because of their different approaches, judgement etc.

LESSON PLAN:-02

Principles of Management- concept : These are the statements of fundamental truth, they serve as a guide to thought and actions for managerial decision actions and their execution.

Significance:

(i) Providing managers with useful insight in to reality

(ii) Optimum utilisation of the resources

(iii) Scientific decisions

(iv) Meeting changing environment requirements

(v) Fulfilling social responsibility

(vi) Management training, education and research

Fayol�s principles of management:

(i) Principle of division of work

(ii) Principle of authority and responsibility

(iii) Principle of discipline

(iv) Principle of unity of command

(v) Unity of direction

(vi) Subordination of individual interest to general interest

(vii) Remuneration of employees

(viii) Centralisation and decentralisation

(ix) Scalar chain

(x) Order

(xi) Equity

(xii) Stability of personal

(xiii) Initiative

(xiv) Espirit de Corps

Taylor�s Scientific management- According to Taylor, �Scientific management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.�

Principles:(i) Science, not rule of thumb

(ii) Harmony, not discord

(iii) Co-operation, not individualism

(iv) Development of workers to their greatest efficiency and prosperity

Techniques:

(i) Functional Foremanship In this technique, Taylor suggested the division of factory in two departments

(a) Planning Department

� Route clerk

� Instruction card clerk

�Time and cost clerk

� Disciplinarian

(b) Operational Department

� Gang boss & Speed boss

� Repair boss

� Inspector

(ii) Standardisation and Simplification of Work

Standardisation output possible if standard is maintained right from selection of tools, equipment and machine to use.

Simplification emphasises on elimination of unnecessary diversity of product, size and type.

(iii) Fatigue Study This technique of scientific management is conducted to find out

(a) The frequency of rest intervals

(b) The duration of rest intervals

(c) The number of rest intervals

(iv) Method Study This technique find out the one best method or way of performing the job.

(v) Time Study The objectives of time study are

(a) The standard time required to perform a job.

(b) Setting up the standard target of the workers.

(c) Determining the number of workers required to perform a job.

(d) Categorising the workers into efficient and inefficient employees.

(vi) Motion Study To conduct motion study, Taylor suggested to observe an average worker when he is performing the job and note down all the movements he is doing.

(vii) Differential Piece Wage System This technique emphasis on paying different rate of wage for efficient and inefficient employees.

(viii) Mental Revolution The objectives of mental revolution are

(a) Co-operation between workers and management.

(b) Change in mental attitudes of workers and management towards each other.

Business Environment- concept: Business environment as such is the total of all external forces which affect the organisation and operation of business.

Importance:

(i) Environment Provides Numerous Opportunities for Business Success It enables the firm to identify opportunities and getting the first mover advantage.

(ii) Threats and Early Warning Signals Environmental awareness can help managers to identify various threats on time and serve as an early warning signal.

(iii) It Helps in Tapping Useful Resources Environment is a source of various resources for running a business. Like as finance, machines, raw materials etc.

(iv) It Helps in Copying with Rapid Changes Knowledge of environmental changes sensitises the management to make new strategy to copy with the emerging problems of changes.

(v) It Helps in Assisting in Planning and Policy Formulation Its understanding and analysis can be the basis for deciding the future course of action or training guidelines for decision making.

(vi) It helps in Improving Performance With continuous scan of business environment, companies can easily improve their performance.

Dimensions of Business Environment:

i) Economic Environment It consists of Gross Domestic product, Income at National level and per capita level. Profit earning rate, monetary and fiscal policy of the government etc.

(ii) Social Environment It consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preferences etc.

(iii) Political Environment It constitutes all the factors related to government affairs such as type of government, power, attitude of government towards different groups of societies etc.

(iv) Legal Environment It constitutes the laws and various legislations passed in the parliament. Like as Trade Mark Act, Essential Commodity Act, Weights and Measures Act etc.

(v) Technological Environment It refers to changes taking place in the method of production, use of equipments and machineries to improves the quality of product.

Demonetization � concept: When a currency is stripped of its legal status and replaced with a new currency, it is known as demonetization. It is also interpreted as a shift on the part of the government indicating that tax evasion will no longer be tolerated or accepted. The government of India, announced the demonetization on November 8, 2016, with profound implications for the Indian economy. The government decided that the two largest denomination notes, Rs. 500 and Rs. 1000 were �demonetized� with immediate effect, ceasing to be legal tender except for a few specified purposes such as paying utility bills. This led to eight-six percent of the money in circulation bills. The people of India had to deposit the invalid currency in the banks, which came along with the restrictions placed on cash withdrawals. The aim of demonetization was to control corruption, counterfeiting the use of high denomination notes for illegal activities, and especially the increase of black money generated by income that has not been paid to the tax authorities.

The reasons behind taking the step of demonetization are as follows:

To curb the circulation of fake currency in the economy

To tackle corruption due to currency upholds

To make idle money productive and help in reducing corruption crime

To promote a cashless society and bring transparency to financial transactions

Features:

1.Demonetization is seen as a tax administration measure. Cash that was there with the people from their income by performing legal activities, was instantly deposited in the bank in order to exchange against the new notes. But people with the money earned through illegal activities, i.e. the black money had to pay taxes with the penalty rate as their money was unaccountable. It was also made clear by the government that demonetization was a change on their part, showing that tax evasion will no longer be tolerated or accepted.

2.Demonetization led to the withdrawal of nearly 86% of currency in circulation. As per the report of the income tax department, an undisclosed income over Rs. 9,334 crore between November 9, 2016 to February 2017 was reported.

3.It promoted the variable service of launching a mass awareness campaign against black money. It reduced the informal transactions in the economy.

4.Demonetization facilitates channelizing savings into the formal financial system. As a result, some of the new deposit schemes offered by the banks continued to provide base loans at the lower interest that can be used for launching new profitable schemes.

5.Demonetization also helped in creating a less-cash economy by bringing an understanding within the general people, i.e., channeling more savings through the formal financial system and improving tax compliance that would improve more chances of a cash-lite economy. This would help in introducing a formal economy in our country.

LESSON PLAN:-03

Planning Concept: Planning can be defined as �thinking in advance what is to be done, when it is to be done, how it is to be done and by whom it should be done.�

According to Fayol, �Planning is chalking out plan of action, i.e., the result envisaged in the line of action to be followed, the stages to go through the methods to use.�

Importance:

(i) Planning Provides Directions Planning provides the directions to the efforts of employees. Planning makes clear what employees have to do, how to do etc.

(ii) Planning Reduces the Risk Uncertainty Planning helps the manager to face the uncertainty because planners try to force the future by making some assumptions. The plans are made to over come uncertainties.

(iii) Planning Reduces Over Lapping and Wasteful Activities Planning evaluates the alternatives uses of the available and prospective resources of the business and makes their must appropriate use.

(iv) Planning Promotes Innovative Ideas Planning requires high thinking and it is an intellectual process. So it makes the managers innovative and creative.

(v) Planning Facilitates Decision Making Planning helps the managers to look in to the future and make a choice from amongst various alternative courses of action.

(vi) Planning Establishes Standards for Controlling It has predetermined goal with which the actual performances are compared to find out deviation and suggest remedial measures.

Limitation:

(i) Planning Leads to Rigidity Once plans are made to decide the future course of action the manager may not be in a position to change them.

(ii) Planning May Not Work in a Dynamic Environment Business environment is very dynamic as there are continuously changes. It becomes very difficult to forecast these future changes. Plans may fail if the changes are very frequent.

(iii) Planning Reduces Creativity With the planning the managers of the organisation start working rigidly and they become the blind followers of the plan only.

(iv) Planning Involves Huge Costs Planning process involves lot of cost because it is an intellectual process and companies need to hire the professional experts to carry on this process.

(v) Planning is a Time Consuming Success Lot of time is needed in developing planning premises.

(vi) Planning does not Guarantee Success Planning only provides a base for analysing future. It is not a solution for future course of action.

Planning process:

(i) Setting Objectives In planning function manager begin with setting up of objectives because all the policies, procedures and methods are framed for achieving objectives only.

(ii) Developing Premises Premises refers to making assumptions regarding future. The assumptions are made on the basis of forecasting. Forecast is the technique of gathering information.

(iii) Identifying Alternative Courses of Action After setting up of objectives the managers make a list of alternatives through which the organisation can achieve its objectives.

(iv) Evaluating Alternative Courses After making the list of various alternatives along with the assumptions supporting them the manager starts evaluating each and every alternative.

(v) Selecting an Alternative The best alternative is selected but as such there is no mathematical formula to select the best alternative. Some times instead of selecting one alternative a combination of different alternatives can also be selected.

(vi) Implementing the Plan This is the step where other managerial functions also come in to the picture. The step is concerned with putting the plan into action i.e., doing what is required.

(vii) Follow-up Action Planning is a continuous process so the manager�s job does not get over simply by putting the plan into action. The manager monitor the plan carefully while it is implemented.

Single use and standing plans:Standing Plans are plans which are made for activities or events which occur regularly. Single-Use Plans are plans which are made for activities or events which do not occur regularly.

Objectives: Objectives are the ends towards which the activities are directed. They are the end result of every activity, e.g., increase in sale by 10%.

Strategy: A strategy is a comprehensive plan to achieve the organisational objectives.

Policy: A strategy is a comprehensive plan to achieve the organisational objectives.

Procedure: Procedures are required steps established in advance to handle future conditions. The procedure can be defined as the exact manner in which an activity has to be accomplished.

Method: Methods provide the prescribed ways or manner in which a task has to be performed considering the objective.

Rule: Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discreation.

Budget: A budget is a statement of expected results expressed in numerical terms.

Programme: Programme are detailed statements about a project which outlines the objectives, policies, procedures, rules.

Organising Concept: Identifying and grouping different activities in the organisation and bringing together the physical, financial and human resources to establish most productive relations for the achievement of specific goal of organisation.

According to Henry Fayol, �To organise a business is to provide it with everything useful to its functioning; raw materials, machines and tools, capital and personnel.�

Importance:

(i) Benefits of specialisation

(ii) Clarity in working relationships

(iii) Optimum utilisation of resources

(iv) Adaptation to change

(v) Effective administration

(vi) Development of personnel

(vii) Expansion and growth

Organising Process:Organising refers to a process consisting of a series of steps to identify and group various activities, collect or assemble various resources and establish authority relationships with responsibility amongst job positions.

Structure of organisation- It can be defined as �Network of job positions, responsibilities and authority at different levels.�

The considerations to be kept in mind while farming the organisational structure are

(i) Job design

(ii) Departmentation

The considerations to be kept in mind while farming the organisational structure are

(i) Job design

(ii) Departmentation

(iii) Span of management

(iv) Delegation of authority

Functional structure:

(i) Functional structure It is an organisational structure which is formed by grouping of jobs of similar nature under various functional departments.

Advantages of functio>nal structure are:

i)It promotes control and coordination within a department.

ii)It is the most logical, time proven form of organisation structure.

iii)It leads to minimal duplication of effort, which results in economies of sacle and this lowers cost.

iv)It ensures that different functions get due attention.

Disadvantages of functional structure are:

(a) It becomes difficult to hold a particular department responsible for any problem.

It may lead to inflexibility as people with same skills and knowledge may develop a narrow perspective.

A functional structure places less emphasis on overall enterprise objectives than the objectives pursued by a functional head.

Divisional structure:Divisional structure Under the divisional structure an organisation is divided into different divisions or units on the basis of products or geographical area.

Advantages of divisional structure are:

Decisions are taken much faster in divisional structure.

It facilitates expansion and growth as new divisions can be added without interrupting the existing operations.

It leads to specialisation of physical facilities and human talent.

Disadvantages of divisional structure are:

There is a duplication of physical facilities and functions.

It suffers from the under utillisation of plan capacity.

Conflict may arise between different divisions on allocation of funds and other resources.

Formal and informal organisation- concept:

An organisation created by the management in the form of structure of authority is called formal organisation. An organisation born out of mutual relations is called informal organisation and it emerges automatically.

Delegation: concept: �A process of entrusting responsibility and authority to the subordinates and creating accountability on those employees who are entrusted responsibility and authority.�

Elements:

(i) Responsibility It means the work assigned to an individual. It includes all the physical and mental activities to be performed by the employees at a particular job position.

(ii) Authority It means power to take decision. To carry on the responsibility every employee need to have some authority.

(iii) Accountability It means subordinates will be answerable for the non-completion of the task.

Importance:

Delegation is important in an organisation due to the following reasons

. Delegation of authority allows more time for managers to concentrate on the tasks that are of higher importance for the organisation. Also, delegation allows for changing of the routine work which brings a sense of freedom.

2. When authority is delegated by a superior to a subordinate, the subordinate gets to learn new work which helps in the growth of the employee and provides an opportunity to develop new skills that can improve the chances of promotion.

3.When superiors delegate any function to the subordinates, it motivates the subordinates as they feel trusted and appreciated in the organisation. The direct benefit of this is improvement in employee morale and productivity.

Decentralisation: concept: Decentralisation explains the manner in which decision making responsibilities are divided among hierarchical level.

Importance: (i) Develops initiative among subordinate

(ii) Develops managerial talent for the future

(iii) Quick decision making

(iv) Relief to top management

(v) Facilitates growth

(vi)Better Control

LESSON PLAN:-04

Staffing Concept: It consists of manpower planning, recruitment, selection, training, compensation, promotion and maintenance of managerial personnel.

According to Dale Yoder, �Staffing is that phase of the management which deals with the effective control and use of manpower or human resources.�

Importance of staffing:

(i) Filling the roles by obtaining competent personal

(ii) Placing right person at the right job

(iii) Growth of enterprise

(iv) Optimum utilisation of human resources

(v) Helps in competing

(vi) Improves job satisfaction and morale of employees

(vii) Key to effectiveness of other functions

Staffing as a part of Human Resource Management concept: When staffing function is carried on at a large scale, it becomes human resource management.

Activities of Human Resource Management

(i) Human resource planning

(ii) Recruitment, selection and placement

(iii) Career growth

(iv) Performance appraisal

(v) Motivation

(vi) Compensation

(vii) Social security

Staffing process: The steps involved in the staffing process are

(i) Estimating the manpower requirements

(ii) Recruitment

(iii) Selection

(iv) Placement and orientation

(v) Training and development

(vi) Performance appraisal
(vii) Promotion and career planning (viii) Compensation

Recruitment process:

Selection � It can be defined as discovering most promising and most suitable candidate to fill up the vacant job position in the organisation.

Selection process: (i) Preliminary screening

(ii) Selection test

(a) Intelligence test

(b) Aptitude test

(c) Personality test

(d) Trade test

(e) Interest test

(iii) Employment interview

(iv) Reference and background cheeks

(v) Selection decision

(vi) Medical examination

(vii) Job offer

(viii) Contract of employment

Training and Development � Concept: Training means equipping the employees with the required skill to perform the job.

(ii) Development: It refers to overall growth of the employee. It focuses on personal growth and successful employees development.

Importance:

(i) Reduced learning time

(ii) Better performance

(iii) Attitude formation

(iv) Aids in or help in solving operational problems

(v) Managing manpower need

Methods of training � on the job:

(a) Apprenticeship programmes (b) Coaching

(c) Internship training (d) Job rotation Off the Job Methods

(a) Classroom lectures

(b) Films

(c) Case study

(d) Computer modelling

(e) Vestibule training

(f) Programmed instruction

Vestibule training:Vestibule training is on-the-job training in which technical personnel are taught how to utilise tools and machines in a simulated environment. This type of training is often known as 'near the job training' because it involves the creation of a simulated work environment near the primary production plant.

Apprenticeship training: It is a type of programme, in which people seeking to become plumbers, electricians etc are required to work under the supervision of an experienced guide for the prescribed amount of time under his guidance. The period of training may often vary from two to five years.

Internship training:A joint programme of training in which educational institutes and business firms impart training to selected candidates to gain practical work experience. Job rotation The trainee is systematically transferred from one job/rotation to another so that he may get varied experience.

DirectingConcept: Directing function of management is concerned with instructing, guiding, inspiring and motivating the employees in the organisation so that their efforts result in achievement of organisational goal.

According to Ernest Dale, �Directing is telling people what to do and seeing that they do it to the best of their ability.�

Characteristics of Directing

(i) It initiates action.

(ii) Continuing function.

(iii) It takes place at every level.

(iv) It flow from top to bottom.

(v) It is performance oriented.

(vi) It is human element.

Importance:

(i) To initiate action

(ii) To integrate employees efforts

(iii) Means of motivation

(iv) Balance in the organisation

(v) To facilitate change

Elements of Directing: There are four main elements of directing

(i) Supervision (ii) Motivation

(iii) Leadership (iv) Communication

Supervision :The supervision means instructing, guiding, monitoring and observing the employees while they are performing jobs in the organisation.

(i) Role of Supervisor

(a) Role of mediator or linking pin

(b) Role of a guide

Motivation � concept:

Motivation can be defined as stimulating, inspiring and inducing the employees to perform to their best capacity. Motivation is a psychological term which means it can not be forced on employees.

Maslow�s hierarchy of needs:Maslow�s Need Hierarchy theory Need or the desire is a very important elements in motivation because the employees get motivated only for their needs.

Maslow has given a sequence or hierarchy of needs in the follows way

(i) Physiological needs

(ii) Safety and security needs

(iii) Social or belonging needs

(iv) Esteem needs

(v) Self-actualisation needs

Financial incentives: Incentive means all measures which are used to motivate people to improve performance. These incentives may be broadly classified

(i) Financial Incentives The reward or incentive which can be calculated in terms of money is known as monetary incentive.

The common monetary incentives are

(a) Pay and allowances

(b) Profit sharing

(c) Co-Partnership/stock option

(d) Bonus

(e) Commission

(f) Suggestion system

(g) Productivity linked with wage incentives

(h) Retirement benefits

(i) Perks/Fringe benefits/perquisites

Non-financial incentives: The incentives which cannot be calculated in terms of money are known as non-financial incentives.

The common non-financial incentives are

(a) Status

(b) Organisational climate

(c) Career advancement

(d) Job enrichment

(e) Employees recognition

(f) Job security

(g) Employee�s participation

(h) Autonomy/Employee empowerment

Leadership � concept: It is a process of influencing the behaviour of people at work towards the achievement of specified goal.

(i) Features of Leadership

(a) It indicates the ability of an individual to influence others.

(b) It tries to bring change in behaviour.

(c) It shows interpersonal relationship between leader and followers.

(d) It is to achieve common goal.

(e) It is a continuous process.

Styles �

Authoritative: The autocratic style of leadership is also known as authoritative style or directive style of leadership, in which the autocratic leader retains most of the authority for himself/herself. An autocratic leader gives orders to his/her subordinates and expects that subordinates should give complete obedience to the orders issued. In this type, the decisions are taken by the leader without consulting others.

Democratic: This style of leadership is also known as participative style of leadership. In this style, the subordinates are also involved in decision making. The democratic style of leadership can be further categorized into three types:

Consensus: A consensus leader makes a decision only after consulting the group members. A decision is not made final until all the members agree with the decisions

Consultative: A consultative leader takes the opinion of the employees before making a decision

Democratic: In the democratic style, the final authority of making decisions rests with the subordinates.

Laissez faire: The Laissez-Faire leadership is also known as free-reign leadership. In this style of leadership, the decision making power is completely left with the subordinates. The leader�s involvement in making decision is minimized and the people are allowed to make their own decisions.

Communication � concept: Communication is a process that is an essential part of directing process that means the exchange of ideas, thoughts, views, facts, knowledge, figures, etc. This transfer of information of any kind and getting a response for the same is known as the process of communication.

Elements of Communication:

1. Sender: Who conveys his thoughts or ideas.

2. Message: Ideas, feelings, suggestions, order etc.

3. Encoding: Converting the message into communication symbols such as words/pictures etc.

4. Media: Path/Channel through which encoded message is transmitted to receiver e.g., face to face, phone call, internet etc.

5. Decoding: Converting encoded symbols of the sender.

6. Receiver: Who receives communication of the sender.

7. Feedback: All those actions of receiver indicating that he has received and understood the message of the sender.

8. Noise: Some obstruction or hindrance to communication like poor telephone connection, inattentive receiver.

Barriers to effective communication:

Semantic Barriers: Concerned with problems and obstructions in the process of encoding or decoding of message into words or impressions. Semantic barriers are as follows:

1. Badly expressed message: Sometimes intended meaning may not be conveyed.

2. Words with different meanings confuses the receiver.

3. Faulty translations may transfer wrong messages.

4. Unclarified assumption: Different interpretations may result in confusion.

5. Technical Jargon: Technical words may not be understood by the workers.

Psychological/Emotional barriers

1. Premature evaluation- judgement before listening leads to misunderstanding.

2. Lack of attention/poor listening may disappoint the employees.

3. Loss by transmission and poor retention: When oral communication passes through various levels it destroys the structure of the message or leads to transmission of inaccurate message.

4. Distrust: If the parties do not believe each other. They cannot understand each other�s message in its original sense.

Organizational Barriers

Factors related to organization structure:

1. If organizational policy does not support free flow of information it creates problem.

2. Rules and regulations: Rigid rules and regulations may lead to red tapism and delay of action.

3. Status conscious managers may not allow subordinates to express their feelings freely.

4. Complexity in organization structure results in delay and distortion.

Personal Barriers: of superiors and subordinates.

1. Fear of challenge to authority may withhold or suppress a particular communication.

2. Lack of confidence of superior in his subordinates.

3. Unwillingness to communicate. e.g., fear of punishment/demotion.

4. Lack of proper incentives stops the subordinates to offer useful suggestions.

How to overcome the barriers:

1. Clarify the ideas before communication.

2. Communicate according to the needs of receiver.

3. Consult others before communicating.

4. Be aware of language, tone and content of message.

5. Ensure proper feedback. Feedback provides opportunity for suggestions and criticism.

6. Follow up communication helps to remove hurdles, misunderstanding of information given by managers to subordination.

7. Be a good listener.

Controlling � Concept: It can be defined as comparison of actual performance with the planned performance.

According to Ricky W Griffin, �Controlling function leads to goal achievement, an organisation without effective control is not likely to reach its goals.�

Importance:

(i) Helps in achieving organisational goods

(ii) Judging accuracy of standards

(iii) Making efficient use of resources

(iv) Improving employee motivation

(v) Ensures order and discipline

(vi) Facilitate co-ordination in action

(vii) Controlling help in minimising the errors

Relationship between planning and controlling:

(i) Planning and controlling are interdependent and interlinked activities.

(ii) Planning and controlling both are forward looking function.

Steps in process of control:

(i) Setting performance standards: The first step in the controlling process is to set the performance standards.

Standards are those criteria, on which the actual performances are measured. These standards serve as a benchmark towards which an organisation strives to work.

(ii) Measurement of actual performance: After the establishment of standards, the next step is measuring the actual performance with the set standards. This can be done by opting several methods like personal observation, sample checking, performance reports, etc.

(iii) Comparison of actual performance with standards: In this step, the actual performances are compared with the established standards. Such comparisons reveal the deviation between planned and actual results.

(iv) Analysing deviations: At this stage, acceptable and non-acceptable deviations are analysed.

Two methods are generally used:

(a) Critical point control: It means keeping the focus on key result areas where deviations are not acceptable and they should be attended on a priority basis.

(b) Management by exception: It means that if a manager tries to control everything, he may end up in controlling nothing. Thus, he should first handle the significant deviations, which require his priority.

(v) Taking corrective action: The most important step in the controlling process is taking corrective actions. After the deviations and their causes are analysed, the task is to remove the hurdles from the actual work plan. The purpose of this step is to bring the actual performance up to the level of expectations by taking corrective measures.

LESSON PLAN:-05

Financial Management Concept: It refers to efficient acquisition of finance, efficient utilisation of finance and efficient distributing and disposal of surplus for smooth working of company.

According to Howard and Upton, �Financial management involves the application of general management principles to a particular financial operation.

Role and objectives of Financial Management:

Role of Financial Management

(i) Size and composition of fixed assets

(ii) Amount and composition of current assets

(iii) The amount of long term and short financing

(iv) Fixing debt equity ratio in capital

(v) All items in Profit and Loss account

Objective of Financial Management

i)Profit maximization: This was the primary objective of firms which are concerned with the increasing earning per share (EPS) of the company. It is also the traditional objectives of the financial management that focuses on the fact that all the financial efforts should be made to increase the overall profit of the company,

ii)Wealth maximization: Financial management mainly aims to maximize shareholders' wealth which is also referred to as wealth-maximization. This objective focuses on increasing the overall shareholder wealth of the company, by directing the financing efforts on increasing the share price of the company. Higher the share price, higher is the wealth of the shareholders. The goal of financial management in this is to optimize the current value of the company's equity shares. The market price of the shares of the company are highly influenced by the financial decisions of the company.

Other objectives: There can be other objectives such as optimum utilisation of financial resources, choosing the most appropriate source, ensuring easy availability of funds at reasonable costs etc.

Financial decisions: The financial functions relate to three major decisions which every finance manager has to take

(i) Investment decision

(ii) Financing decision

(iii) Dividend decision

Investment Decision (Capital Budgeting Decision)

This decision relates to careful selection of assets in which funds will be invested by the firms.

Factors affecting investment/capital budgeting decisions are

(i) Cash flow of the project (ii) Return on investment

(iii) Risk involved (iv) Investment criteria

Factors affecting Capital budgeting decisions.

There are a huge number of ventures and businesses available in the market for the purpose of investment. It is important to evaluate each and every venture carefully to assess the profitability and return on investment. The factors affecting the decisions are:

1.Cash flow of the project: It is important to analyse the pattern of cash flows in terms of inflows and outflows over a period of time.

2.Rate of return: This is one of the most important factors to be considered before investing in any venture. These are based on expected returns and the risk involved in each proposal.

3.The investment criteria involved: It is important to evaluate various investment proposals by considering factors like interest rate, cash flows, etc.

Financing Decision This relates to composition of various securities in the capital structure of the company. Mainly sources of finance can be divided in to two categories

(i) Owners fund

(ii) Borrowed fund

Factors affecting financing decisions are

(i) Cost (ii) Risk

(iii) Cash flow position (iv) Control consideration (v) Floatation cost (vi) Fixed operating cost

(vii) State of capital market

Factors affecting Financing Decision

1.Cost: Cost of raising funds influences the financing decisions. A prudent financial manager selects the cheapest source of finance.

2.Risk: Each source of finance has a different degree of risk. For example, borrowed funds have high financial risk as compared to equity capital.

3.Floatation cost: A finance manager estimates the flotation cost of various sources and selects the source with least flotation cost.

4.Cash Flow position of the company: A business with a strong cash flow position prefers to raise funds from debts as it can easily pay interest and the principal.

5.Fixed operating costs: For a business with high operating cost, funds must be raised from equity and lower debt financing would be better.

6.Control consideration: A company would prefer debt financing if it wants to retain complete control of the business with the existing shareholders. On the other hand if a company is ready to lose control, it can raise funds from equity.

Dividend Decision This relates to distribution of profit earned. The major alternatives are to retain the earnings or to distribute to the shareholders.

Factors affecting dividend decisions are

(i) Earning

(ii) Stability of earning

(iii) Cash flow position

(iv) Growth opportunities

(v) Stability of dividend

(vi) Preference of shareholders

(vii) Taxation policy

(viii) Access to capital market consideration

(ix) Legal restrictions

(x) Contractual constraints

(xi) Stock market reaction

Factors affecting dividend decision

1.Amount of earning: Dividend represents the share of profits distributed amongst shareholders. Thus, earning is a major determinant of dividend decisions.

2.Stability Earnings: A company with stable earnings is not only in a position to declare higher dividend but also maintain the rate of dividend in the long run.

3.Stability of Dividends: In order to maintain dividend per share a company prefers to declare the same rate of dividend to its shareholders.

4.Growth Opportunities: The growing companies prefer to retain a larger share of profits to finance their investment requirements, hence they prefer distributing less dividends.

5.Cash Flow position: A profitable company is in a position to declare dividend but it may have liquidity problems as a result of which it may not be in a position to pay dividends to its shareholders.

6.Shareholders' Preference: Management of a company takes into consideration its shareholders expectations for dividend and try to take dividend decisions accordingly.

7.Taxation policy: Dividends are a tax free income for shareholders but the company has to pay tax on the share of profit distributed as dividend.

8.Legal Constraints: Every company is required to adhere to the restrictions and provisions laid by the companies Act regarding dividend payouts.

9.Contractual Constraints: Sometimes companies are required to enter into contractual agreements with their lenders with respect to the payment of dividend in future.

10.Stock Market: A bull or bear market, also affects the dividend decision of the firm.

Financial Planning � concept: It means deciding in advance how much to spend, on what to spend according to the funds at your disposal.

Importance:

(i) It facilitates collection of optimum funds.

(ii) It helps in fixing the most appropriate capital structure.

(iii) Helps in investing finance in right projects.

(iv) Helps in operational activities.

(v) Base for financial control.

(vi) Helps in proper utilisation of finance.

(vii) Helps in avoiding business shocks and surprises.

(viii) Link between investment and financing decisions.

(ix) Helps in co-ordination.

(x) It links present with future.

Capital Structure � concept: Capital structure means the proportion of dept and equity used for financing the operations of business.

i)It is one of the most important decisions under financial management to decide the pattern or the proportion of various sources that should be used for raising the funds.

ii)Capital structure is a blend of debt and equity or borrowed funds and owners' funds respectively. It is calculated as debt-equity ratio.

i.e. [DebtEquity]i.e. [DebtEquity]

Or

The proportion of debt out of total capital i.e.

[DebtDebt+Equity][DebtDebt+Equity]

Classification of Sources of Business Finance: On the Basis of Ownership:

This can be classified into two categories:

Owners' Funds:It consists of equity share capital, preference share capital, reserves and surplus and retained earnings.

Borrowed funds: It can be in the form of loans, debentures, various types of public deposits, borrowed funds from banks and other financial institutions.

1.Factors affecting capital structure: Cash Flow Position: Before raising finance business must consider the projected flow to ensure that it has sufficient cash to pay fixed cash obligations.A company with high liquidity and a good cash flow position can issue debt capital, as the company will have less chances of facing financial risk than the company with a low cash position.

2.Size of business:Small businesses generally go for retained earnings, and equity capital, as if they go for debt or borrowed capital, the company has to face a fixed interest burden. However in the case of large companies, issuing debt is not a big issue, and they can raise long term finance from borrowed sources cheaper than that of small firms.

3.Interest Coverage Ratio: It refers to the number of times a company can cover its interest obligations from the profits and higher ICR reduces the risk of failing to meet interest obligations.

4.Debt Service Coverage Ratio: It indicates the company's ability to meet cash commitments for interest and principal amount of debt.

5.Return on Investment: If a company earns hai returns it has the capacity to opt for death as a source of finance.

6.Cost of debt: A company may raise funds from debts if it has the capacity to borrow funds at a lower interest rate.

7.Tax Rate: Higher the tax rate, more preference for debt capital in the capital structure, as interest on debt capital being a tax deductible expense makes the debt cheaper.

8.Cost of equity: If a company has high risk, its shareholder may expect a high rate of return resulting in increased cost of capital.

9.Floatation cost: Choosing a source of fund depends on the flotation cost to be incurred to raise such funds, flotation cost makes this show less attractive.

10.Risk Consideration: A company chooses debts as a source of finance depending on its operating risk and overall business risk.

11.Flexibility: The choice of debts depends on the company's potential to borrow and the level of flexibility it wants to retain for choosing a source of funds in future.

12.Regulatory Framework: The guidelines norms for documentation procedures influence the decision to choose a source of finance.

Fixed capital:

i)Fixed capital is that amount of capital which is incurred in procurement or buying the fixed assets for a business or an organization. The fixed assets of an organization are those assets which remain with the business for more than one year.

i)For example: Plant and Machinery, land, furniture and fixtures vehicles, etc.

Factors affecting fixed capital:

1.Nature of Business: The requirement of fixed capital largely depends upon the type and nature of the business a company or organization is involved in. Trading requires less fixed capital, while manufacturing business requires more fixed capital due to the involvement of heavy plant and machinery.

2.Scale of operations: Larger the business operation, bigger is the investment and lower the level of business operation smaller is the investment.

3.Choice of Technique: The requirement of fixed capital of an organization largely depends upon the technique of operation in the organization. An organization that is capital-intensive requires a huge amount of investment in plant and machinery because it does not rely on manual labour whereas if an organization is labour-intensive it requires a comparatively less amount of investment in its fixed assets.

4.Technology Upgradation: The organizations whose assets become obsolete in a very short duration need to upgrade their technology from time to time which may result in a higher amount of investment in fixed assets.

5.Growth Prospects: If an organization aspires for higher growth, the investment in fixed assets should be on a higher side.

6.Diversification: Diversification needs investment in fixed assets. If a jute textile manufacturing company diversifies into FMCG it requires huge investment.

7.Financing Alternatives: There are many tools that act as alternatives to huge investment in assets. For example: Plant and Machinery may be available on a lease and the firm may use the asset for the required time and pay the rentals thereby reducing huge capital investment.

8.Level of Collaboration: It has become a common practice to collaborate with different organizations in the industry and use each other's resources for a common good. For example: One single ATM machine can be used to withdraw funds from accounts of different banks, this practice reduces the investment cost at a large scale.

Working Capital:

1.Working capital is that amount of capital which is used in the day-to-day operations of the business this may be in cash or cash equivalents. The working capital is utilised by the business within one year.

2.For example: stocks and inventories, debtors, bills receivables, etc.

Factors affecting the Working Capital requirements advances from customers.

i)Nature of Business: Manufacturing business requires more working capital as compared to trading business or service provider.

ii)Business Cycle: During boom period firms require a large amount of working capital to manage the increased sales and production.

iii)Seasonal Factors: Seasonal businesses require more working capital during their season time.

iv)Scale of Operations: Businesses operating on a large scale require larger amounts of working capital as compared to small business firms.

v)Credit Allowed: A business extending a longer credit period to its buyers will need more working capital as compared to a business doing cash business or offering a lesser credit period.

vi)Production Cycle: Businesses with longer production cycles require more working capital as compared to businesses with short-term production cycles.

viii)Credit Availed: A business organisation receiving longer credit period from their supplier will require lesser working capital as compared to business purchases goods for cash or receive short credit period.

ix)Operating Efficiency: A business operating efficiently is able to convert current assets into cash easily and thus will require lesser working capital.

x)Availability of Raw Material: A business having each and continuous availability of raw material will not require large stock levels and thus, can manage with lesser working capital.

xi)Growth Prospects: Firms with high growth rate targets need higher working capital to meet increased sales target.

xii)Level of Competition: Tougher competition forces businesses to offer discounts liberal credit and maintain high levels of stock requiring larger amounts of working capital.

xiii)Inflation: Inflation increases prices as a result firms require large amounts of working capital to meet the same volume of purchase and operating expenses.

LESSON PLAN:-06

Financial Markets: Concept: Financial market is a market which facilitates creation of assets and exchange of securities to provide short, medium and long term business finance.

It mobilizes funds between savers and investors.

It locates funds into the most productive investment opportunities.

There are two types of Financial Markets:

Money Market

Capital Market

Functions of Financial Market

Mobilisation of savings and channeling them into the most productive uses: A financial market performs the allocative function by linking the savers and investors, thus mobilising savings and channelising them to make the most use of these idle savings.

Facilitating price discovery: The interaction between the households (supplier of funds) and business firms helps to establish a price for the traded financial asset in the market.

Providing liquidity to financial assets: Financial assets can be easily converted into cash as financial markets provide facility of purchase and sale of financial assets.

Reducing the cost of transactions: Financial markets provide information about the traded securities and save time, effort and money of both the buyers and sellers of a financial asset.

Money market: Concept:

It is a market which deals in short term securities and whose maturity period is less than one year.

Capital market is of further two types:

A.Primary Market

B.Secondary Market

Primary Market

Primary market deals with the securities which are issued for the first time in the market and is also known as new issues market.

Banks, financial institutions, insurance companies, mutual funds and individuals are the main participants in the primary market.

Secondary Market

Secondary market is a market which deals with the sale and purchase of existing securities. It is also called the stock market or stock exchange.

SEBI prescribes the framework within which all the securities are traded, cleared and settled.

It provides opportunities of disinvestment and reinvestment to investors by exchange of securities.

Stock Exchange � Functions and trading procedure:

According to Securities Contract (Regulation) Act 1956, defines stock exchange as a body of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities.

Functions of a Stock Exchange

Providing liquidity and marketability to existing securities: Stock exchange provides a continuous market for sale and purchase of existing securities.

Pricing of securities: The forces of demand and supply determine the share prices for securities in the stock exchange.

Safety of transaction: Trading within the regulatory framework of SEBI ensures safety of financial transactions.

Contributes to economic growth: Process of disinvestment and reinvestment channelizes savings into most productive investments contributing to capital formation and economic growth.

Spreading of equity cult: Providing constant information about securities traded through stock exchange educates investors.

Providing scope for speculation: Fluctuations in prices due to demand and supply forces allows for restricted and controlled speculations.

Trading and Settlement Procedure

In traditional time: Outcry or auction system.

In modern time: Electronic trading system for screen based trading. In this system transactions are carried on the computer screen and both the parties are able to see the prices of all shares going up and down all the time during business hours of the stock exchange.

Securities and Exchange Board of India (SEBI) � objectives and functions

SEBI was established by the Government of India on 12th April, 1988 and given statutory powers in 1992 being passed by the Indian Parliament.

SEBI has its headquarters at the business district of Bandra-Kurla complex in Mumbai and it has regional offices in New Delhi (northern), Kolkata (eastern), Chennai (southern), and Ahmedabad (western).

SEBI works as an interim administrative body which aims to promote growth of the securities market as well as protect the interest of the investors.

Reasons for the Establishment of SEBI

To control unfair trade practices and malpractices in trading securities such as rigging of prices, violation of rules, unofficial private placements, etc.

To protect the interest of the investors.

Purpose and Role of SEBI

Issuers: To the issuers, it provides a market for raising finance in an easy, fair, cost effective and efficient manner.

Investors: To the investors, to protect the interest of the investors by disclosing accurate information on a continuous basis.

Intermediaries: To the intermediaries, to offer a competitive and professional market with efficient infrastructure.

Objectives of SEBI

To regulate the stock exchange and the securities industry in order to promote orderly functioning of capital markets.

To protect the rights as well as the interests of the investors.

To prevent and keep a check on any unfair trading malpractices

To maintain and create a balance between self and statutory regulations.

To attend investor�s complaints, liaise with the issuers, intermediaries and other stock exchanges in the region through its regional offices.

Functions of SEBI

SEBI performs the task of regulation and development of the securities market. The functions performed by SEBI are:

1. Regulatory Functions

A.Registration of brokers, sub-brokers and other intermediaries.

B.Registration of collective investment schemes.

C.Regulation of Stock Bankers, underwriters, portfolio exchanges, and merchant bankers.

D.Regulation of takeover bids by companies.

E.Undertakes inspection, conducts enquiries and audits of stock exchange and intermediaries.

F.Changing fee or other charges for carrying out the purposes and operations of the Act.

G.Performing and exercising powers under Securities Contracts (Regulation) Act 1956, delegated by the Government of India.

2. Development Functions

A.Educating and training investors and intermediaries of the securities market.

B.Conduct research and publish information related to trading of securities.

C.Taking measures for the development of the capital market through the adoption of a flexible approach.

3. Protective Functions

A.Prohibiting fraudulent and unfair trade practices.

B.Controlling insider trading and imposing penalties for malpractices.

C.Educate and protect the investors.

D.Promoting fair trade practices and a strict code of conduct in the securities market.

The Organisation Structure Of SEBI

SEBI has five operational departments headed by the Executive Director. It is advised or assisted in policy formation by two advisory committees �

The primary market advisory committee

The secondary market advisory committee

Objectives of Advisory Committees

To advise SEBI on matters related to regulations.

To advise SEBI on development and regulation of the primary market.

It advises SEBI on disclosure requirements for the companies as per the provisions mentioned in the Act.

To advise SEBI in the legal framework for making dealing in the primary market simple and transparent.

LESSON PLAN:-07

Marketing � Concept: The term "market" refers to the gathering place of buyers and sellers to conduct transactions involving the exchange of goods and services. The term "market" comes from the Latin word "Marcatus," which means "to trade."

Marketing

Marketing is defined as "a human activity aimed at satisfying needs and desires through an exchange process."

Philip Kotler

Marketing concept is a key to determining the needs, desires of target markets, delivering the desired satisfactions more efficiently and effectively by competitors is critical to achieving organizational goals.

Features of Marketing

1. Needs and Wants:

1)The marketing process assists consumers in obtaining what they require and desire.

2)A need is said to be known as a state of deprivation or the feeling that one is depriving oneself of something.

3)Needs are fundamental to human beings and are unrelated to a specific product.

2. Creating a Market Offering:

Market offering is the process of offering and introducing a product or service with specific features such as size, quality, taste, and so on for the purpose of selling.

3. Customer Value:

Marketing used to facilitate the exchange of goods as well as services between buyers and sellers.

4. Exchange Mechanism:

The exchange mechanism is used in the marketing process.

Exchange refers to the process where two or more parties used to come together in order to get the desired goods or service from someone while in exchange for something. For example, money is the medium of exchange used to purchase or sell a product or service.

The following conditions needs to be met in order for an exchange to take place:

a. There must be at least two parties.

b. providing something of value to the other party

c. communication

d. freedom to accept or reject offer

e. willingness of the parties to enter into a transaction

What can be Marketed?

1. Physical product

2. Services

3. Ideas

4. Person

5. Palace

6. Experience

7. Properties

8. Events

9. Information

10. Organisation

Marketer

A marketer is anyone who makes an extra effort to identify the needs of the consumers and offer the product or service as well as persuade them in order to buy in the process of exchange.

Sellers, as marketers, are the ones who provide satisfaction. They make products/services available and sell them to customers in order to meet their needs and desires.

They are classified as follows:

a. goods marketers (such as Hindustan Lever)

b. services marketers (such as Indian Airlines)

c. others marketing experiences or places (such as Walt Disney) (like tourist destinations).

Marketing activities are those undertaken by marketers in order to facilitate the exchange of goods and services between producers and consumers.

Marketing Management

Marketing management is the administration of marketing functions.

It is considered as the process of organizing, directing as well as controlling the activities associated with marketing goods and services in order to meet the needs of customers and achieve organizational goals.

�Marketing management is defined as the art and science of selecting target markets and acquiring, retaining, and growing customers by creating, delivering, and communicating superior customer service.�
Philip Kotler

The Process of Management of Marketing Involves:

a. Identifying a target market

b. Creating demand by producing products that meet the needs and interests of customers.

c. Create, develop, and communicate superior customer values: To provide superior value products/services to prospective customers, and to communicate these values to other potential buyers in order to persuade them to purchase the product/service.

Marketing and Selling

Marketing: It refers to a broad range of activities, of which selling is only one component. Before making a sale, a marketer must plan the type, design, and price of the product, as well as select the distribution channels and the appropriate promotional mix for the target market.

Selling: refers to the sale of a product or service through advertising, promotion, and salesmanship. The product's title is transferred from seller to buyer. The primary goal of selling is to turn a product into cash.

Marketing Management Philosophies

Marketing Concepts/Philosophiesusually refers to determining the needs as well as wants of the target markets & then delivering the desired satisfactions more efficiently and effectively by competitors is critical to achieving organizational goals.

1. Production Concept:

Because the number of producers was limited in the early days of the industrial revolution, industrialists assumed that consumers were only interested in easily and widely available goods at an affordable price.

2. Product Concept:

As time passed, supply improved, and customers began to prefer products that were superior in performance, quality, and features.

As a result, product improvement has become the key to a company's profit maximization.

3. Selling Concept:

Increased production scale resulted in increased competition among sellers. Because there were so many companies selling similar products, product quality and availability were insufficient to ensure survival.

Consumers will not buy products unless the company engages in aggressive sales and promotional activities.

4. Marketing Concept :

Marketing begins with determining what consumers want in order to satisfy consumers and profit.

Customer satisfaction is a prerequisite for achieving the firm's goals and objectives.

5. Social Marketing Concept:

Customer satisfaction is supplemented by social welfare in this concept.

A company that adopts the societal concept must balance the company's profits, consumer satisfaction, and societal interests.

Functions: Gathering and Analyzing Market Information:

Systematic fact-gathering and information-analysis

Examining a business environment's strengths, weaknesses, opportunities, and threats.

Identifying customer needs and desires, determining purchasing motivations, selecting a brand name, packaging, and promotional media, and so on.

Data is available from both primary and secondary sources.

2. Marketing Planning :

Create an appropriate marketing plan in order to meet marketing objectives.

It should specify the action plans to achieve these goals.

For example, if a marketer wants to increase his country's market share in the next three years, his marketing plan should include various important aspects such as a plan for increasing production levels, product promotion, and so on.

3. Product Designing and Development:

Involves decisions about the product to be manufactured and its attributes, such as quality considerations, packaging, new models and variations, and so on.

A good design can improve the performance of the product while also giving it a competitive advantage in the market.

Anticipate customer needs and create new products or improve existing ones to meet those needs.

4. Standardization and Grading:

Standardisation refers to the production of goods that meet predetermined specifications, which aids in the production of uniformity and consistency (e.g., ISI Mark).

Grading is said to be the process of categorizing different products into different groups based on important characteristics such as quality, size, and so on.

5. Packaging and Labeling:

Packaging is called as the process of designing as well as developing a package for a product that protects it from damage, spoilage, breakage, and leakage. It also makes purchasing easier for customers and serves as a marketing tool.

Labeling is the process of designing a label to be placed on a package. It can range from a simple tag to intricate graphics. For example, colgate, lays, and so on.

6. Branding:'

It aids in product differenttion, builds customer loyalty, and promotes sales.

An important decision area is branding strategy, which determines whether each product will have a separate brand name or the same brand name will be used for all products.

7. Customer Support Services:

Customer support services are extremely effective at increasing prospective customer sales and developing brand loyalty for a product.

It aims to provide maximum customer satisfaction while also building brand loyalty.

Examples include sales services, customer complaints and adjustments, credit services, maintenance services, technical services, and consumer information.

8. Pricing of Product:

Product price refers to the amount of money that customers must pay in order to obtain a product.

It is an important factor in a product's success or failure.

Because the price of a product/service is related to its demand, the price should be set after considering all of the factors that influence the price of the product.

9. Promotion:

Product and service promotion entails informing customers about the firm's product, its features, and so on, and persuading them to purchase the products.

Promotional methods include advertising, personal selling, public relations, and sales promotion.

10. Physical Distribution:

The two major decision areas under this function are

(a) the channels of distribution or marketing intermediaries to be used (e.g. wholesalers, retailers); and the marketing intermediaries to be used.

(b) Physical movement of the product from the point of manufacture to the point of consumption.

11. Transportation:

Transportation refers to the physical movement of goods from one location to another.

When selecting a mode of transportation, various factors such as the nature of the product, cost, location of the target market, and so on should be considered.

12. Storage or Warehousing:

Proper storage of products is required to maintain a smooth flow of products in the market.

Storage and warehousing are used to protect against unavoidable delays in delivery or to meet contingencies in demand.

Marketing Mix � Concept: A large number of factors influence marketing decisions; these are classified as �non-controllable factors' and �controllable factors.'

Controllable factors are those that can be influenced at the firm level.

Environmental variables are factors that influence a decision but are not controllable at the firm level.

In order to be successful, a company must make sound decisions after analyzing controllable factors and keeping environmental factors in mind.

Marketing Mix refers to the set of marketing tools that a company employs to achieve its marketing objectives in the target market.

The success of a market offer is determined by how well these ingredients are combined to provide superior value to customers while also meeting sales and profit goals.

Elements:

The marketing mix consists of four main elements

A. Product

B. Price

C. Place/Physical Distribution

D. Promotion

These elements are used to popularly known as 4 P�s of the marketing.

1. Product: A product is defined as "anything of value" that is offered for sale in the market. Colgate, Dove, and so on.

2. Price: the sum of money that a customer must pay in order to obtain a product or service.

3. Place: Physical product distribution, i.e. making the product available to customers at the point of sale.

4. Promotion: Informing customers about the products and convincing them to purchase them.

Product � branding, labelling and packaging � Concept:

A product, in the eyes of the customer, is a collection of utilities that is purchased because of its ability to meet a specific need.

Classification of Products

Products can be classified into two categories:

(i) Consumers �products,

(ii) Industrial products.

A. Shopping Efforts Involved

On the basis of the buyers' time and effort.

1. Convenience Products: Convenience goods are consumer products that are frequently purchased for immediate use. Medicines, newspapers, stationery, toothpaste, and so on.

2. Shopping Products: Shopping products are those in which buyers spend a significant amount of time comparing the quality, price, style, suitability, and so on at various stores before making a final purchase. For example, electronic goods, automobiles, and so on.

3. Specialty Products: Specialty products are goods that have unique characteristics that compel customers to go out of their way to purchase them. For example, art, antiques, and so on.

B. Durability of Products

1. Non-durable Products: These are consumer goods that are consumed in a short period of time. For example, milk, soap, stationery, and so on.

2. Durable Products: Tangible items that can withstand repeated use, such as a refrigerator, radio, bicycle, and so on.

3. Services: Intangible services are those activities, benefits, or satisfactions that are sold, such as dry cleaning, watch repairs, hair cutting, postal services, doctor services, and so on.

Industrial Products

Industrial products are those that are used as inputs in the manufacturing process.

Characteristics

Number of Buyers

Channel Levels

Geographic Concentration

Derived Demand

Role of Technical Considerations

Reciprocal Buying

Leasing Out

Classification

Materials and Parts: items that are completely incorporated into the manufacturer's products.

Capital Items: the manufacture of finished goods, such as installations and equipment.

Supplies and Business Services: short-term goods and services that aid in the development or management of the final product. Repairs and maintenance, for example.

Branding:

Branding is the process of creating a corporate brand identity for consumers and imprinting that brand identity on their minds, which necessitates brand positioning and brand management.
Amazon's Jeff Bezos

The process of developing a product's distinct identity. It is the process of identifying a product by using a name, term, symbol, or design alone or in some combination.

Brand: A name, term, sign, design, or some combination of the above used to identify and differentiate the seller's products from those of competitors.

Advantages to the Marketers

Enables Product Differentiation Through Marking: It aids in distinguishing its product from that of its competitors.

Aids in the development of advertising and display programs

Differential Pricing: It allows a company to charge different prices for different products.

Ease of New Product Introduction

Advantages to the Customers

Aids in Product Identification: Assists customers in identifying products.

Ensures Quality: Ensures product quality

Status Symbol: Brands become status symbols due to their quality As an example, consider Benz automobiles.

Characteristics of Good Brand Name

Short, simple to say, spell, recognize, and remember

Suggest the product's advantages and characteristics.

Different from other products

Adaptable to packing or labeling requirements, as well as different advertising media and languages.

Versatile enough to accommodate new products;

Legally registered and protected

Packaging

Packaging: The act of designing and developing a product's container or wrapper. Because good packaging often aids in the sale of a product, it is referred to as a silent salesman.

Levels of Packaging

1. Primary Package: This is the product's immediate container/covering, such as toffee in a wrapper, a match box, a soap wrapper, and so on.

2. Secondary Package: It's all about additional layers of protection that are kept until the product is ready for use, such as a red cardboard box for Colgate toothpaste.

3. Transportation Package: refers to additional packaging components required for storage, identification, and transportation, such as putting a package of toffees into cardboard boxes for storage at a manufacturer's warehouse and transportation.

Functions of Packaging

Product Identification: Packaging aids in product identification.

Product Protection: The primary function of the packaging is to protect the product.

Facilitating Product Usage: It makes transportation, stocking, and consumption easier.

Product Promotion: Packaging makes sales promotion easier.

Rising Health and Sanitation Standards: It is believed that there is minimal adulteration in packaged goods.

Self-Service Outlets: Good and appealing packaging can help to promote a product.

Opportunities for Innovation: Packaging innovation has increased the shelf life of products.

For example, tetra packs for milk.

Product Differentiation: The color, size, material, and other characteristics of packaging influence customers' perceptions of the product's quality.

Labelling

Labeling is the process of affixing identification marks to a package. Labels are information carriers that provide information such as the name of the product, the name of the manufacturer, the contents of the product, the expiry and manufacturing date, general information for use, weight, and so on.

Labels Perform Following Functions:

1. Identify the product: It assists customers in identifying the product among the various types of products available. For example, the purple color of a Cadbury chocolate label easily distinguishes it from other chocolates.

2. Describe and specify the product's contents: The manufacturer provides all information regarding the product's contents, etc.

3. Product grading: With the help of labels, products can be classified into different categories based on quality, nature, and so on, for example: Brooke Bond Red Label, Brooke Bond Yellow Label, Brooke Bond Green Label, and so on.

4. Aids in product promotion: Attractive and colorful labels excite customers and entice them to purchase the products. For example, 40 percent extra free, as stated on detergent, buy two get one free, and so on.

5. Providing legal information: There is a legal requirement to print the batch number, maximum retail price, weight/volume on all products, and a statutory warning on the packet of cigarettes, �Smoking is harmful to one's health�: In the event of a hazard on/poisonous material, appropriate safety warnings should be posted.

Pricing

Meaning of Price:

It is considered as the sum of the values that customers exchange in exchange for the benefit of owning or using the product. Price can thus be defined as the sum of money paid by a buyer (or received by a seller) in exchange for the purchase of a product or service.

Factors Determining Price Determination:

1. Pricing Objectives

The marketing firm's goal is to maximize profits. Pricing objectives can be determined in both the short and long run. If the company wants to maximize profits in the short run, it will charge the highest price for its products. However, in order to maximize its total profit in the long run, it would choose a lower per unit price in order to capture a larger share of the market and earn higher profits through increased sales.

2. Product Cost:

Price should cover all costs and aim to earn a reasonable profit above and beyond the cost.

It takes into account the costs of manufacturing, distribution, and sale of the product.

Costs establish the floor price, or the lowest price at which the product can be sold.

The price should rise. Total costs (Fixed costs/overheads + Variable costs + Semi-variable costs) in the long run, but in certain circumstances (introduction of a new product or entry into a new market), the product price may not cover all costs for a short period of time.

3. Utility and Demand:

The utility provided by the product, as well as the demand for the product, determine the maximum price that a buyer will be willing to pay for that particular product.

Buyers would be willing to pay until the utility of the demand exceeded or equaled the utility derived from it.

According to the law of demand, consumers buy more at a lower price.

Demand elasticity is the responsiveness of demand to changes in product prices. If a small change in price leads to a larger change in quantity demanded, demand is elastic. Firms can set higher prices if demand is inelastic.

4. Extent of Competition in Market:

Before setting prices, competitors' prices and anticipated actions must be considered.

5. Government Policies:
In the public interest, the government can intervene to regulate product prices.

6. Marketing Methods Used:
Other marketing elements such as distribution system, sales promotion efforts, packaging type, product differentiation, credit facility, and so on all have an impact on the price fixing process.

Physical Distribution � concept:

A series of decisions must be made in order to make the product available for purchase and consumption by customers.

The marketer must ensure that the product is available in sufficient quantities, at the appropriate time, and in the appropriate location.

A channel of distribution is a group of companies and individuals who take title, or assist in the transfer of title, to specific goods or services as they move from producers to consumers.

Choosing an appropriate channel of distribution is a critical marketing decision that affects an organization's performance. It is a strategic decision whether the firm will use direct marketing channels or long channels involving a number of intermediaries.

Components of Physical Distribution:

Functions of Distribution Channels

1. Sorting: Middlemen obtain supplies of goods from a variety of sources, which are not always of the same quality.

2. Accumulation: the accumulation of goods into larger homogeneous stocks that aid in the maintenance of a continuous flow of supply.

3. Allocation entails dividing homogeneous stock into smaller, more marketable lots.

4. Assorting: the collection of products for resale.

5. Product Promotion: Middlemen take part in activities such as demonstrations, special displays, and so on.

6. Bargaining: Manufacturers, intermediaries, and customers bargain over price, quality, and other issues.

7. Risk Taking: Merchant middlemen take title to the goods, assuming risks such as price and demand fluctuations, spoilage, destruction, and so on.

Channels of Distribution

Consists of a network of firms, individuals, merchants, and functionaries who assist in the transfer of title to a product from the producer to the end consumer.

Intermediaries help to cover a large geographical area and increase distribution efficiency, including transportation, storage, and negotiation. They also provide customers with convenience by having a variety of items available in one location, as well as serving as an authentic source of market information because they are in direct contact with the customer.

Types of Channels:

Direct Channel ( Zero Level)

The manufacturer and the customer establish a direct relationship. Manufacturer-Customer. For example, mail order, internet, and door-to-door sales.

Indirect Channel

The distribution network is referred to as indirect when a producer uses one or more intermediaries to move goods from the point of production to the point of sale.

1. Manufacturer-Retailer-Customer (One Level Channel)

Between the manufacturers and the customers, one intermediary, namely retailers, is used. Typically used for high-end items such as watches, appliances, automobiles (Maruti Udyog), and so on.

2. Manufacturer-wholesaler-Retailer-customer (Two Level Channel):

This channel is primarily used for consumer goods distribution. Typically used for consumer goods such as soaps, salt, and so on.

3. Manufacturer ? Agent ? Wholesaler ? Retailer ? Customer (Three Level Channel):

Manufacturers use their own selling agents or brokers in this case, who connect them with wholesalers, then retailers, and finally consumers.

Factors Determining Choice of Channels of Distribution

The selection of an appropriate channel of distribution is a critical marketing decision.

1. Product Related Factors: The nature of the product, whether it is industrial or consumer goods, perishable or nonperishable, etc., determines the distribution channels used.

2. Company Characteristics: The company's financial strength and the level of control it wishes to exert over other channel members. Short channels are used to exert more control over intermediaries and vice versa.

3. Competitive Factors: Companies may copy the channels used by their competitors.

4. Market Factors: The size of the market as well as the geographical concentration of potential buyers influence channel selection.

5. Environmental Factors: Legal constraints and a country's economic situation. In a down economy, marketers use shorter distribution channels.

Promotion � Concept and elements;

A promotion mix is considered as a combination of promotional tools used by a company to achieve its communication goals.

Promotion mix tools:

(i) Advertising,

(ii) Personal Selling,

(iii) Sales Promotion,

(iv) Publicity.

1. Advertising

Advertising, as defined by a specific sponsor, is a paid form of nonpersonal presentation and promotion of goods, services, or ideas.

The most widely used promotional tool. It is a cold, impersonal form of communication that is paid for by marketers (sponsors) to promote their products and services. Newspapers, magazines, television, and radio are all common mediums.

Features

Paid Form: The sponsor must bear the cost of communicating with customers.

Lack of Personalization: There is no direct face-to-face contact between the prospect and the advertiser.

Identified Sponsor: Advertising is done by a specific person or company.

Merits

Mass Reach: a large number of people can be reached across a large geographical area.

Increasing customer satisfaction and trust.

Expressiveness: It is a powerful medium of communication.

Economy: Because of its wide reach, is a very cost-effective mode of communication.

Limitations

Less Forceful: There is no pressure on the prospects to listen to the message.

Feedback Deficit:

Inflexibility: It is less flexible because the message is standardised and not tailored to the individual.

Low Efficacy: It is difficult to get advertising messages heard by the intended prospects.

Objections to Advertising

Some critics argue that advertising is a social waste because it raises costs, multiplies people's needs, and undermines social values.

1. Adds to Cost: Unnecessary advertising raises the cost of the product, which is then passed on to the buyer in the form of high prices.

2. Undermines Social Values: It undermines social values while encouraging materialism.

3. Confuses the Buyers: A similar product of the same nature/quality confuses the buyer.

4. Encourages Sale of Inferior Products: It makes no distinction between superior and inferior goods.

5. Some Advertisements are in Bad Taste: These depict something that some people do not agree with.

2. Personal Selling

Personal selling entails personally contacting prospective buyers of a product, i.e. engaging in a face-to-face interaction between seller as well as the buyer for the purpose of sale.

Features of the Personal Selling

1. Under personal selling, personal contact is established.

2. Establishing relationships with prospective customers, which are critical in closing sales.

3. Oral communication

4. Quick response to queries.

Merits of Personal Selling

1. Flexibility

2. Direct Feedback

3. Minimum wastage

Role of Personal Selling

Importance to Business Organisation

(i) Effective Promotional Tool

(ii) Versatile Tool

(iii) Reduces Effort Wastage

(iv) Consumer Attention

(v) Long-Term Relationship

(vi) Personal Relationship

(vii) Role in the Introduction Stage

(viii) Customer Relationship

Importance to Customers

(i)Assist in the Identification of Needs

(ii) Up-to-date market information

(iii) Expert advice

(iv) Customers are enticed

Importance to Society

(i)Converts the most recent demand

(ii) Employment Possibilities

(iii) Job Opportunities

(iv) Salesperson Mobility

(v) Standardization of Products

3. Sales Promotion

Short-term incentives or other promotional activities that aim to pique a customer's interest in purchasing a product are referred to as sales promotion.

Merits of Sales Promotion

Attention Value: Using incentives, attract people's attention.

Useful in New Product Launch: Sales promotion tools persuade people to abandon their usual purchasing habits and try new products.

Synergy in Total Promotional Efforts: Sales promotion activities contribute to the overall effectiveness of a company's promotional efforts.

Limitations of Sales Promotion

Reflects Crisis: A company that frequently relies on sales promotion activities may give the impression that it is unable to manage its sales and that its products are unpopular.

Damages Product Image: Customers may believe that the products are of poor quality or are overpriced.

Commonly Used Sales Promotion Activities

Product Combination: Including another product as a free gift with the purchase of one.

Rebate: Providing products at reduced prices.

Instant draws and assigned gifts: Scratch a card and instantly win a prize with the purchase of a TV, Tea, or Refrigerator, for example.

Lucky Draw: a lucky draw coupon for free gasoline when a certain amount is purchased, and so on.

Useful Benefit: 'Purchase goods worth Rs 3000 and get a holiday package worth Rs 3000 free,' and so on.

Full finance at 0%: Many marketers of consumer durables such as electronics, automobiles, and so on offer simple financing schemes such as "24 easy instalments" and so on.

Contests: Holding competitive events that require the use of skills or luck, etc.

Quantity Gift: Providing an extra quantity of the product, for example, "Buy three, get one free."

Refunds: Refunding a portion of the price paid by the customer upon presentation of proof of purchase.

Discount: Selling products at a lower price than the list price.

Sampling: Provide free product samples to potential customers. Typically used at the time of a product's introduction.

4. Publicity

Publicity occurs when favorable news about a product or service is broadcast in the mass media. For example, if a manufacturer makes a breakthrough in the development of a car engine and this news is covered by television, radio, or newspapers as a news item.

Features of Publicity are:

I. Publicity is a form of communication that is not compensated.

II. There is no identified sponsor

5. Public Relations

Public relations encompasses a wide range of tactics and is typically concerned with providing information to independent media outlets in the hope of obtaining favorable coverage. It also includes a mix of promoting specific products, services, and events as well as promoting an organization's overall brand, which is an ongoing tactic.

Role of Public Relations:

1. Press Relations: A press release is an announcement of an event, performance, or other newsworthy item issued to the press by an organization's public relations professional. It is written in the form of a positive story with an appealing heading in order for the media to quickly grasp and spread the message.

2. Product promotion: The company tries to draw attention to new products by organizing sporting and cultural events such as news conferences, seminars, and exhibitions, among other things.

3. Corporate Communication: The image of the organization is promoted through newsletters, annual reports, brochures, and other means.

4. Lobbying: The organization maintains cordial relations with government officials and ministers in charge of corporate affairs, industry, and finance in regard to business and economic policies.

5. Counseling: The public relations department advises management on general issues affecting the public and the company's position.

Maintaining Good Public Relations also Helps in Achieving the Following Marketing Objectives:

(a) Building awareness

(b) Building credibility

(c) Stimulates sales force

(d) Lowers promotion costs

LESSON PLAN:-08

Consumer Protection Concept: Consumer protection refers to safeguarding consumers from manufacturers or sellers that engage in anti-consumer trade activities.

Earlier Approach

The previous approach was of �caveat emptor�, which literally translates to "let the buyer beware."

Present Approach

However, presently the approach is of �caveat venditor�, which literally translates to "let the seller beware."

Exploitative and unfair trading practices, such as defective and dangerous items, adulteration, false and misleading advertising, hoarding, and black-marketing, expose consumers to dangers. As a result, effective consumer protection against such acts is required.

Importance of consumer protection:

A. From Consumer�s Point of View

1.Consumer Ignorance: The majority of consumers are unaware of their rights and remedies, and as a result, they are constantly exploited. Consumer protection is required to protect consumers from such exploitative practices.

2.Widespread Exploitation of Consumers: Consumers are abused on a huge scale through a variety of unfair trade practices, and consumer protection is necessary to safeguard them.

3.Unorganized Consumers: Consumers in India are still unorganised, and there are few consumer organisations that would advocate for them.

B. From Business Point of View

1.Business utilises societal resources: Every business utilises societal resources, and it is their job to operate in the society's best interests.

2.Long-term business interests: It is in the business's best interests to keep its customers happy. Customers must be satisfied in order to win the global competition. Satisfied consumers lead to repeat purchases, which helps to expand the company's customer base.

3.Government Intervention: If a firm engages in any type of unfair commercial practices, the government will take action against it, harming the company's reputation.

4.Social Responsibility: A business has social duties to a variety of stakeholders, including owners, employees, the government, and customers. As a result, shoppers should be able to purchase high-quality goods at affordable pricing.

5.Moral Justification: Any firm has a moral obligation to behave in the best interests of its customers and prevent exploitation and unfair trade practices such as faulty and unsafe products, adulteration, false and misleading advertising, hoardings, black marketing, and so on.

Consumer Protection Act 2019:

The Consumer Protection Act of 2019 aims to safeguard and promote consumers' interests by resolving their complaints in a timely and cost-effective manner. It came into force on July 20th 2020.

It covers the entire country of India, except the State of Jammu and Kashmir..

It applies to all types of enterprises, whether they are manufacturers or traders, and whether they sell goods or services, including e-commerce companies.

The Act gives consumers specific rights in order to empower them and defend their interests.

Scope of the Act

The scope of this act is broad and covers a wide range of activities. This act covers all the undertakings;

Both large and small scale undertakings.

All three sectors are covered, namely private, public, and cooperative.

It is applicable to e-commerce companies as well.

It is applicable to whole of India.

All goods, services and trade practices are a part of this act, until specifically exempted.

Meaning of consumer: A consumer is defined as someone who buys or receives consumer goods or services against a payment. It includes anyone who benefits from such services, but it excludes anyone who uses such services for financial gain.

Under the Consumer Protection Act 2019, a consumer is a person who buys any goods or avails services for a consideration, which has been paid or promised, or partly paid and partly promised, or under any scheme of deferred payment.

Rights and responsibilities of consumers:

1.Right to Safety: Consumers have the right to be safeguarded against items and services that are harmful to their health and well-being. The consumers are righteous to get quality products, and they can also demand quality assurance from the seller for the same. Such as ISI, FPO, AGMARK, Hallmark etc are quality marks for industrial items, food products, agricultural products, gold respectively.

2.Right to be Informed: Before purchasing a product, the consumer has the right to get complete information about it, regarding the quality, quantity, ingredients, purity, price etc.

3.Right to Choose: Consumers have the right to choose any product from the available options based on their own preferences. Hence no seller has the right to influence the consumer into purchasing a certain product through unacceptable means

4.Right to Seek Redressal: If a product or service fails to meet the consumer's expectations or is dangerous, the consumer has the right to seek redressal. The consumer may be entitled to a replacement or repair of the problem, as well as reimbursement for any losses.

5.Right to Consumer Education: Consumers have the right to learn and be well-informed throughout their lives. He should be informed of his rights and remedies in the event that the goods or service does not meet his expectations. The Indian government has integrated consumer education in school curriculum and is using the media to educate consumers about their rights. For example, efforts like Jaago Grahak Jaago is one such measure to educate the consumers

6.Right to be Heard: The consumer has the right to provide his opinion regarding the product and services, as well as he has the right to to be heard in such cases. Hence the consumer has a right to file a complaint if he thinks that his rights have been violated. Also various consumer cells have been opened up in India so as to provide them the right to be heard.

Consumer Responsibilities

Consumers have the following responsibilities:

1.Be knowledgeable: Be knowledgeable about the numerous items on the market so that you can make an informed and educated decision.

2.Standardized products: Purchase just standardized products to ensure quality. Look for the ISI mark on electrical goods, the FPO label on food products, and the Hallmark on jewellery, among other things.

3.Follow Instructions: Follow the product's instructions and learn about the hazards linked with it, then use it safely.

4.Cautious Purchasing: Carefully read labels for information on prices, net weight, manufacturing, expiration dates, and so on.

5.Assert Yourself: Assert yourself to guarantee that you obtain a fair bargain, and fair price of the product.

6.Honesty: Be truthful in interactions and buy only legal goods and services, thus discouraging buying from sellers who follow unethical methods such as black marketing and hoarding.

7.Cash Memo: When purchasing products or services, request a cash memo. This will serve as proof of the transaction.

8.Consumer Societies: Establish consumer societies that will actively participate in consumer education and protection.

9.Take action whenever needed: In the event of a defect in the quality of items purchased or services received, file a complaint with an appropriate consumer forum. Even if the sum involved is modest, don't hesitate to take action.

10.Avoid Littering: Respect and value the environment, and avoid any activity that would adversely affect it.

Who can file a complaint?

a consumer; or

any voluntary consumer association registered under any law for the time being in force; or

the Central Government or any State Government; or

the Central Authority; or

one or more consumers, where there are numerous consumers having the same interest; or

in case of death of a consumer, his legal heir or legal representative; or

in case of a consumer being a minor, his parent or legal guardian.

b. Redressal Agencies

As per Consumer Protection Act, 2019, The statute establishes a three�tier system for resolving consumer complaints, as follows:
;c. District Commission
The state concerned establishes district forums in each district. The following are the key characteristics:

a)It is made up of a President and two members, one of whom must be a woman, who are officially nominated by the state government.

b)The value of consumer complaints should not exceed Rs. 1 crore.

c)Upon receiving the complaint, the district forum shall forward it to the opposing party and submit the items or sample to a laboratory for testing.

d)If the district forum determines that the goods are defective or that there has been unfair trading practices, the opposite party may be ordered to repair or return the items or pay compensation. If any of the party is not satisfied with the district forum's decision, they have 45 days to file an appeal with the state forum from the date of order.

d. State Commission

The government establishes a state commission in each state. The following are the key characteristics:

Each commission has a president and at least two members appointed by the state government, one of whom should be a woman.

The total worth of the products or services, including the compensation sought, is greater than Rs. 1 Crore but less than Rs. 10 crore.

Upon receiving a complaint, the state commission may submit the matter to the opposing party and send the items to a laboratory for examination.
After being satisfied, the state commission might require the other party to replace, reimburse, or pay compensation. If any of the parties is not pleased with the judgement, they can file a complaint with the national commission within 30 days of the order being issued.

e. National Commission

Central government sets the National commission. The provisions are:

It is made up of a President and at least four members chosen by the central government, one of whom should be a woman.

All complaints relating to products and services with a compensation value above Rs. 1 crore can be filed with the national commission.

When the national commission receives a complaint, it can also refer it to the opposing party and send items for testing.

The National Commission has the authority to issue orders for product replacement and loss compensation, among other things.

If any of the parties is not pleased with the decision taken, they can file a complaint with the Supreme Court of India within 30 days of the order being issued.

Remedies available:

(i) Removal of defects from the goods

(ii) Replacement of the goods

(iii) Refund of the price paid

(iv) Compensation of loss or injury suffered

(v) Removal of deficiency in service

(vi) Discontinuance of unfair trade practices

(vii) Stopping the sale of hazardous goods

(viii) Withdrawal of hazardous goods from market

Consumer awareness � Role of consumer organizations and Non-Governmental Organizations (NGOs)

There are a number of NGO�s and consumer organizations active in India who are working for consumer protection. Their roles involve:

Raising awareness of consumer rights among the general public.

Educating consumers through periodicals and other publications.

Providing consumers with legal help, such as legal counsel.

Filing complaints on behalf of consumers in competent consumer tribunals.

Inspiring consumers to take action against unfair business practices.

Taking the initiative to file cases on behalf of consumers in consumer courts.

LESSON PLAN:-01

What is Economics ?

Economics is a social science that focuses on the production, distribution, and consumption of goods and services, and analyzes the choices that individuals, businesses, governments, and nations make to allocate resources.

Meaning of statistics:-

Statistics deals with the collection, organisation, and presentation of quantitative and qualitative information pertaining to various simple economic aspects systematically.

Statistics is a set of decision-making techniques which helps Organisation in making suitable policies from the available data. In fact, every Organisation needs a sound background of statistics as well as of mathematics.

Scope of Statistics:-

1)Presents facts in numerical figures

The first function of statistics is to present a given problem in terms of numerical figures. We know that the numerical presentation helps in having a better understanding of nature andcomplexity of the problem.

2)Presents complex facts in a simplified form

Generally, a problem to be investigated is represented by a large mass of numerical figures which are very difficult to understand and remember. Using various statistical methods, this large mass of data can be presented in a simplified form.

3)Studies relationship between two or more phenomena

Statistics can be used to investigate whether two or more phenomena are related. For example, the relationship between income and consumption, demand and supply, etc.

4)Helps in the formulation of policies

Statistical analysis of data is the starting point in the formulation of policies in various economic, business and government activities.

5)Helps in forecasting

The success of planning by the Government or of a business depends to a large extent upon the accuracy of their forecasts. Statistics provides a scientific basis for making such forecasts.

6)Provides techniques for testing of hypothesis

Hypothesis testing is an important step as it involves the verification of an assumption that could help develop a statistical parameter. For instance, a researcher establishes a hypothesis assuming that the average of all odd numbers is an even number.

7)Provides techniques for making decisions under uncertainty

Many times we face an uncertain situation where any one of the many alternatives may be adopted. An Organisation might face a situation of uncertain investment opportunities in which he can lose or gain.

Functions of statistics:-

It presents the various facts and figures, in such a manner so that various complicated facts become easy, brief and concrete and they may be understood easily.

1)Condensation

Statistics can be used to compress a large amount of data into small meaningful information; for example, aggregated sales forecast, BSE indices, GDP growth rate, etc.

2)Comparison

Statistics facilitate comparing different quantities. For example,we can compare the income and profit of similar companies to find out the efficiency.

3)Forecast

Statistics helps forecast by looking at trends of a variable. It is essential for planning and decision-making. Predictions or forecasts based on intuition can be disastrous for any business.

4)Preciseness

Statistics visualises and presents facts precisely in a quantitative form. Facts and information conveyed in quantitative terms are more convincing than qualitative data. For example, ‘increase in profit margin is less in the year 2020 than in the year 2019’ does not convey a precise and complete piece of information.But if we say profit margin decrease by 15% in the year 2020 over 2019 then it represents our definite and precise data.

5)Measure Uncertainty

Future is uncertain, but statistics help the various authorities in all the phenomenon of the world to make correct estimation by taking and analyzing the various data of the part. So the uncertainty could be decreased. As we have to make a forecast we have also to create trend behaviors of the past, for which we use techniques like regression, interpolation and time series analysis.

Importance of Statistics:-

1)Importance of Statistics in Business and Industry

In past days, decisions regarding business were made only on personal judgement. However, in these days, they are based on several mathematical and statistical techniques and the best decision is arrived by applying all these techniques.

2)Importance in the Field of Science and Research

Statistics has great significance in the field of physical and natural sciences. It is widely used in verifying scientific laws and phenomenon.

For example, to formulate standards of body temperature, pulse rate, blood pressure, etc. The success of modern computers depends on the conclusions drawn on the basis of statistics.

3)Importance in the Field of Financial Institution

In Financial Institution, the management have to relate different financial criteria for smooth running.With the help of statistics they decide credit policy ,interest rate ,CRR (Cash Reserve Ratio), SLR (Statutory Liquidity Ratio)etc.

4)Importance to the Government

In the Present scenario, the role of Government has increased and they also take care of the welfare of its people. Therefore, these governments require much greater information in the form of numerical figures for the fulfilment of welfare objectives in addition to the efficient running of their administration.

5)Importance in planning

Planning is indispensable for achieving faster rate of growth through the best use of a nation’s resources. It also requires a good deal of statistical data on various aspects of the economy.

One of the aims of planning could be to achieve a specified rate of growth of the economy. Using statistical techniques, it is possible to assess the amounts of various resources available in the economy and accordingly determine whether the specified rate of growth is sustainable or not.

LESSON PLAN:-02

Collection of data

Sources of data:-

Data can be gathered from two places: internal and external sources. The information collected from internal sources is called “primary data,” while the information gathered from outside references is called “secondary data.” For data analysis, it all must be collected through primary or secondary research.

1)Primary Data:-

Primary data is a type of data that is collected by researchers directly from main sources through interviews, surveys, experiments, etc. Primary data are usually collected from the source—where the data originally originates from and are regarded as the best kind of data in research.

The sources of primary data are usually chosen and tailored specifically to meet the demands or requirements of particular research. Also, before choosing a data collection source, things like the aim of the research and target population need to be identified.

2)Secondary Data:-

Secondary data is the data that has already been collected through primary sources and made readily available for researchers to use for their own research. It is a type of data that has already been collected in the past.

A researcher may have collected the data for a particular project, then made it available to be used by another researcher. The data may also have been collected for general use with no specific research purpose like in the case of the national census.

Sources of secondary data include books, personal sources, journals, newspapers, websitess, government records etc.

How basic data is collected with concepts of Sampling ?

Sampling means selecting the group that you will actually collect data from in your research. For example, if you are researching the opinions of students in your university, you could survey a sample of 100 students. In statistics, sampling allows you to test a hypothesis about the characteristics of a population.

Methods of collecting Data:-

The methods of data collection are:

1)Observation method:-

The observation method involves human or mechanical observation of what people actually do or what events take place during a buying or consumption situation. “Information is collected by observing process at work. ”

2)Interview method:-

Every individual in our daily life meet with other and discuss something with him. This is the process of interview b/w interviewer and interviewee. The daily conversation b/w patient and doctor or student and teacher are the examples of interview. In interview the investigator and the respondents set together and they exist a face to face conversation between the two for a specific purpose. Interview is a process of meet with interviewee either by telephone or face to face conversation to discuss some purposeful thing.

3)Questionnaire method:-

A questionnaire is a research instrument that consists of a set of questions or other types of prompts that aims to collect information from a respondent. A research questionnaire is typically a mix of close-ended questions and open-ended questions.

4)Schedules:-

It is a plan of procedure, usually written, for a proposed objective, especially with reference to the sequence of and time allotted for each item or operation necessary to its completion:

Some important sources of secondary data are:-

1)Books

Books are one of the most traditional ways of collecting data. Today, there are books available for all topics you can think of. When carrying out research, all you have to do is look for a book on the topic being researched, then select from the available repository of books in that area. Books, when carefully chosen are an authentic source of authentic data and can be useful in preparing a literature review.

2)Published Sources

There are a variety of published sources available for different research topics. The authenticity of the data generated from these sources depends majorly on the writer and publishing company.

3)Unpublished Personal Sources
This may not be readily available and easily accessible compared to the published sources. They only become accessible if the researcher shares with another researcher who is not allowed to share it with a third party.

4)Journal

Journals are gradually becoming more important than books these days when data collection is concerned. This is because journals are updated regularly with new publications on a periodic basis, therefore giving to date information.

Also, journals are usually more specific when it comes to research. For example, we can have a journal on, “Secondary data collection for quantitative data” while a book will simply be titled, “Secondary data collection”.

5)Newspapers

In most cases, the information passed through a newspaper is usually very reliable. Hence, making it one of the most authentic sources of collecting secondary data.

The kind of data commonly shared in newspapers is usually more political, economic, and educational than scientific. Therefore, newspapers may not be the best source for scientific data collection.

6)Websites

The information shared on websites is mostly not regulated and as such may not be trusted compared to other sources. However, there are some regulated websites that only share authentic data and can be trusted by researchers.

7)Blogs

Blogs are one of the most common online sources for data and may even be less authentic than websites. These days, practically everyone owns a blog, and a lot of people use these blogs to drive traffic to their website or make money through paid ads.

Therefore, they cannot always be trusted. For example, a blogger may write good things about a product because he or she was paid to do so by the manufacturer even though these things are not true.

8)Diaries

They are personal records and as such rarely used for data collection by researchers. Also, diaries are usually personal, except for these days when people now share public diaries containing specific events in their life.

A common example of this is Anne Frank’s diary which contained an accurate record of the Nazi wars.

9)Government Records

Government records are a very important and authentic source of secondary data. They contain information useful in marketing, management, humanities, and social science research.

Some of these records include; census data, health records, education institute records, etc. They are usually collected to aid proper planning, allocation of funds, and prioritizing of projects.

10)Podcasts

Podcasts are gradually becoming very common these days, and a lot of people listen to them as an alternative to radio. They are more or less like online radio stations and are generating increasing popularity.

Some important sources of secondary data are:-

1)Books

Books are one of the most traditional ways of collecting data. Today, there are books available for all topics you can think of. When carrying out research, all you have to do is look for a book on the topic being researched, then select from the available repository of books in that area. Books, when carefully chosen are an authentic source of authentic data and can be useful in preparing a literature review.

2)Published Sources

There are a variety of published sources available for different research topics. The authenticity of the data generated from these sources depends majorly on the writer and publishing company.

3)Unpublished Personal Sources

This may not be readily available and easily accessible compared to the published sources. They only become accessible if the researcher shares with another researcher who is not allowed to share it with a third party.

4)Journal

Journals are gradually becoming more important than books these days when data collection is concerned. This is because journals are updated regularly with new publications on a periodic basis, therefore giving to date information.

Also, journals are usually more specific when it comes to research. For example, we can have a journal on, “Secondary data collection for quantitative data” while a book will simply be titled, “Secondary data collection”.

5)Newspapers

In most cases, the information passed through a newspaper is usually very reliable. Hence, making it one of the most authentic sources of collecting secondary data.

The kind of data commonly shared in newspapers is usually more political, economic, and educational than scientific. Therefore, newspapers may not be the best source for scientific data collection.

6)Websites

The information shared on websites is mostly not regulated and as such may not be trusted compared to other sources. However, there are some regulated websites that only share authentic data and can be trusted by researchers.

Most of these websites are usually government websites or private organizations that are paid, data collectors.

7)Blogs

Blogs are one of the most common online sources for data and may even be less authentic than websites. These days, practically everyone owns a blog, and a lot of people use these blogs to drive traffic to their website or make money through paid ads.

Therefore, they cannot always be trusted. For example, a blogger may write good things about a product because he or she was paid to do so by the manufacturer even though these things are not true.

8)Diaries

They are personal records and as such rarely used for data collection by researchers. Also, diaries are usually personal, except for these days when people now share public diaries containing specific events in their life.

A common example of this is Anne Frank’s diary which contained an accurate record of the Nazi wars.

9)Government Records

Government records are a very important and authentic source of secondary data. They contain information useful in marketing, management, humanities, and social science research.

Some of these records include; census data, health records, education institute records, etc. They are usually collected to aid proper planning, allocation of funds, and prioritizing of projects.

10)Podcasts

Podcasts are gradually becoming very common these days, and a lot of people listen to them as an alternative to radio. They are more or less like online radio stations and are generating increasing popularity.

Census of India and National Sample Survey Organisation.

There are some agencies both at the national and state level, which collect, process and tabulate the statistical data.

Some of the major agencies at the national level are Census of India, National Sample Survey Organisation (NSSO), Central Statistical Organisation (CSO), Registrar General of India (RGI), Directorate General of Commercial Intelligence and Statistics (DGCIS), Labour Bureau etc.

The Census of India provides the most complete and continuous demographic record of population.

The Census is being regularly conducted every ten years since 1881. The first Census after Independence was held in 1951.

The Census collects information on various aspects of population such as the size, density, sex ratio, literacy, migration, rural urban distribution etc.

Census in India is not merely a statistical operation, the data is interpreted and analysed in an interesting manner.

The NSSO was established by the government of India to conduct nation-wide surveys on socioeconomic issues.

The NSSO does continuous surveys in successive rounds.

The data collected by NSSO surveys, on different socio economic subjects, are released through reports and its quarterly journal Sarvekshana.

NSSO provides periodic estimates of literacy, school enrolment, utilisation of educational services, employment, unemployment, manufacturing and service sector enterprises, morbidity, maternity, child care, utilisation of the public distribution system etc.

The NSS 59th round survey (January–December 2003) was on land and livestock holdings, debt and investment.

The NSS 60th round survey (January–June 2004) was on morbidity and health care.

The NSSO also undertakes the fieldwork of Annual survey of industries, conducts crop estimation surveys, collects rural and urban retail prices for compilation of consumer price index numbers.

Organisation of Data

Meaning of Variables:-

A variable is any characteristics, number, or quantity that can be measured or counted. A variable may also be called a data item. Age, Height, business income and expenses, country of birth, capital expenditure, class grades, eye colour and vehicle type are examples of variables.

Types of variable:-

Variables are broadly classified into two categories, namely:

1)Dependent Variable:-

The dependent variable is a variable that depends on the value of some other number or variable. In short, the dependent variable is the output of a function. The value of the dependent variable changes, if there is a change in the value of an independent variable. The variable is dependent because its value depends on what we put into the function.

Example: y = 4 + 2x

Here, y is called a dependent variable. The value of y completely depends on the function 4 + 2x

2)Independent Variable:-

The independent variable does not depend on any values. It is called the input of a function. The value of the independent variable is not affected by any values of a function.

Example: x = 2y + 3z

Here, x is called a dependent variable

y and z are the independent variables

Because the value of y and z are not affected by any other values.

Frequency Distribution

A frequency distribution is a representation, either in a graphical or tabular format, that displays the number of observations within a given interval. The frequency is how often a value occurs in an interval while the distribution is the pattern of frequency of the variable.

The interval size depends on the data being analyzed and the goals of the analyst. The intervals must be mutually exclusive and exhaustive. Frequency distributions are typically used within a statistical context. Generally, frequency distributions can be associated with the charting of a normal distribution.

Presentation of Data

Tabular Presentation and Diagrammatic Presentation of Data:

It is a table that helps to represent even a large amount of data in an engaging, easy to read, and coordinated manner. The data is arranged in rows and columns. This is one of the most popularly used forms of presentation of data as data tables are simple to prepare and read.

The most significant benefit of tabulation is that it coordinates data for additional statistical treatment and decision making. The analysis used in tabulation is of four types. They are:

1. Qualitative classification:

When the classification is done according to traits such as physical status, nationality, social status, etc., it is known as qualitative classification.

2. Quantitative classification:

In this, the data is classified on the basis of features that are quantitative in nature. In other words, these features can be estimated quantitatively.

3. Temporal classification:

In this classification, time becomes the categorising variable and data are classified according to time. Time, maybe in years, months, weeks, days, hours, etc.,

4. Spatial classification:

When the categorisation is done on the basis of location, it is known as spatial classification. The place may be a country, state, district, block, village/town, etc.

Geometric Forms
(Bar diagrams & Pie diagrams)

Geometric Forms

This article covers understanding geometrical forms of graphical representation, examples of tools of geometric forms of diagrammatic representation, explanation of pie diagram, bar diagram, types of bar diagram, etc.

Bar Diagram

Bar diagrams are diagrams in which data is presented in the shape of bars or rectangles, as opposed to pie charts. There are several different types of bar diagrams. They are:

Simple Bar Diagram

Simple bar diagrams are those diagrams that are based on a single piece of numerical data and are easy to understand.

i)A bar diagram is made up of a series of rectangular bars that are evenly spaced and have equal widths for each class or category of data.

ii)The magnitude of the data is represented by the height or length of the bar.

iii)The lower end of the bar hits the baseline, causing the height of the bar to begin at zero units when viewed from above.

iv)A bar diagram’s bars can be visually compared to one another based on their relative height, allowing data to be absorbed more rapidly.

v)There are two types of data that can be used for this: frequency data and non-frequency data.

Pie Diagram

i)An illustration of a pie chart is a circle whose area is proportionally divided among the components that it displays. It is also referred to as a pie chart.

ii)By drawing straight lines from the centre to the circumference of the circle, it is possible to divide the circle into as many parts as there are components.

iii)In most cases, pie charts are not made with absolute values of a category as a starting point. Initially, the values of each category are expressed as a percentage of the total value of all the categories in the category.

iv)A circle in a pie chart, regardless of the value of its radius, is considered to have 100 equal portions of 3.6° (360°/100) each, regardless of the value of its radius.

When calculating the angle, the component must subtend the centre of the circle, and each percentage number of every component must be multiplied by 3.6° for each component

Frequency diagrams

(Histogram, Polygon and Ogive)

Frequency diagrams

Frequency diagrams are a diagrammatic or graphical representation of data, enabling a quick and clear understanding of complex data sets. Frequency diagrams are created to avoid mistakes and provide a bird’s eye view of large data sets. The large data sets are first grouped under various frequencies and then diagrammatically represented on a paper. Besides giving an accurate picture of data, the frequency diagrams reflect a definite pattern.

Histogram

The histogram is a graph that displays the data by using contiguous vertical bars (unless the frequency of a class is 0) of various heights to represent the frequencies of the classes.

The Frequency Polygon

The frequency polygon is a graph that displays the data by using lines that connect points plotted for the frequencies at the midpoints of the classes.

The Ogive

This type of graph is called the cumulative frequency graph, or ogive. The cumulative frequency is the sum of the frequencies accumulated up to the upper boundary of a class in the distribution. The ogive is a graph that represents the cumulative frequencies for the classes in a frequency distribution.

LESSON PLAN:-03

Measures of Central Tendency

The 3 most common measures of central tendency are the Arithmetic mean, median and mode.

1) Arithmetic mean:-

Arithmetic mean is often referred to as the mean or arithmetic average. It is calculated by adding all the numbers in a given data set and then dividing it by the total number of items within that set. The arithmetic mean (AM) for evenly distributed numbers is equal to the middlemost number. Further, the AM is calculated using numerous methods, which is based on the amount of the data, and the distribution of the data.

Let's discuss an example where we find the use of arithmetic mean. The mean of the numbers 6, 8, 10 is 8 since 6 + 8 + 10 = 24 and 24 divided by 3 [there are three numbers] is 8.

2) Median:-

The value of the middle-most observation obtained after arranging the data in ascending order is called the median of the data. Many an instance, it is difficult to consider the complete data for representation, and here median is useful. Among the statistical summary metrics, the median is an easy metric to calculate. Median is also called the Place Average, as the data placed in the middle of a sequence is taken as the median.

Let's consider an example to figure out what is median for a given set of data.

Step 1: Consider the data: 4, 4, 6, 3, and 2. Let's arrange this data in ascending order: 2, 3, 4, 4, 6.

Step 2: Count the number of values. There are 5 values.

Step 3: Look for the middle value. The middle value is the median. Thus, median = 4.

3)Mode:-

The mode is one of the values of the measures of central tendency. This value gives us a rough idea about which of the items in a data set tend to occur most frequently.

For example, you know that a college is offering 10 different courses for students. Now, out of these, the course that has the highest number of registrations from the students will be counted as the mode of our given data (number of students taking each course). So overall, mode tells us about the highest frequency of any given item in the data set.

Correlation

Meaning of Correlation:-

In statistics, a correlation estimates how closely two variables are related. This sums up the correlation definition. The measure works best with variables that have a linear connection. A scatterplot is used to check how well the data fits together. We may analyse the association between the factors and decide if they are correlated or not using a scatterplot.

Properties of Correlation:-

The main properties of correlation are as under:-

1. Coefficient of Correlation lies between -1 and +1:

The coefficient of correlation cannot take value less than -1 or more than one +1. Symbolically, -1<=r<= + 1 or | r | <1.

2. Coefficients of Correlation are independent of Change of Origin:

This property reveals that if we subtract any constant from all the values of X and Y, it will not affect the coefficient of correlation.

3. Coefficients of Correlation possess the property of symmetry:

The degree of relationship between two variables is symmetric as shown below:

4. Coefficient of Correlation is independent of Change of Scale:

This property reveals that if we divide or multiply all the values of X and Y, it will not affect the coefficient of correlation.

5. Co-efficient of correlation measures only linear correlation between X and Y.

6. If two variables X and Y are independent, coefficient of correlation between them will be zero.

Plot different sets of values i.e. (8, 70), (16, 58) (24, 50), (31, 32), (42, 26), (50, 12) on the graph paper. Join these points. The result is the scatter diagram. This data gives high degree of negative correlation.

Scatter Diagram

A scatter diagram (Also known as scatter plot, scatter graph, and correlation chart) is a tool for analyzing relationships between two variables for determining how closely the two variables are related. One variable is plotted on the horizontal axis and the other is plotted on the vertical axis. The pattern of their intersecting points can graphically show relationship patterns.

Most often a scatter diagram is used to prove or disprove cause-and-effect relationships. While the diagram shows relationships, it does not by itself prove that one variable causes the other. Thus, we can use a scatter diagram to examine theories about cause-and-effect relationships and to search for root causes of an identified problem.

For example, we can analyze the pattern of motorcycle accidents on a highway. You select the two variables: motorcycle speed and number of accidents, and draw the diagram. Once the diagram is completed, you notice that as the speed of vehicle increases, the number of accidents also goes up. This shows that there is a relationship between the speed of vehicles and accidents happening on the highway.

Measures of correlation

Karl Pearson’s method (two variables ungrouped data)

The study of Karl Pearson Coefficient is an inevitable part of Statistics. Statistics is majorly dependent on Karl Pearson Coefficient Correlation method. The Karl Pearson coefficient is defined as a linear correlation that falls in the numeric range of -1 to +1.

This is a quantitative method that offers the numeric value to form the intensity of the linear relationship between the X and Y variable. But is it really useful for any economic calculation? Let, us find and delve into this topic to get more detailed information on the subject matter – Karl Pearson Coefficient of Correlation.

Spearman’s rank correlation.

The Spearman's Rank Correlation Coefficient is used to discover the strength of a link between two sets of data. This example looks at the strength of the link between the price of a convenience item (a 50cl bottle of water) and distance from the Contemporary Art Museum in El Raval, Barcelona.

Example: The hypothesis tested is that prices should decrease with distance from the key area of gentrification surrounding the Contemporary Art Museum. The line followed is Transect 2 in the map below, with continuous sampling of the price of a 50cl bottle water at every convenience store.

Introduction to Index Numbers

An index number is a statistical device for measuring changes in the magnitude of a group of related variables.
Features of Index Number:-
1.Index numbers are expressed in terms of percentages. However, percentage sign (%) is never used.

2.Index numbers are relative measurement of group of data.

3.Index numbers offer a precise measurement of the quantitative change in the concerned variables over time.

4.Index number show changes in terms of averages.

5.They are expressed in numbers.

6.Index number facilitates the comparative study over different time period.

Types of Index numbers:

(i) Wholesale price index (WPI)

(ii) Consumer price index (CPI) or Cost of living index

(iii) Index of industrial production (IIP)

(iv) Index of Agricultural production (IAP)

(v) Sensex

Wholesale Price Index (WPI)

The Wholesale Price Index represents the price of a basket of wholesale goods. WPI focuses on the price of goods that are traded between corporations. It does not concentrate on goods purchased by the consumers.

•The main objective of WPI is monitoring price drifts that reflect demand and supply in manufacturing, construction and industry.

•WPI helps in assessing the macroeconomic as well as microeconomic conditions of an economy.

Consumer price index (CPI):

CPI is also known as the cost of living index, measures the average change in retail prices.

Index of Industrial Production

1.The Index of Industrial Production (IIP) is an index that indicates the performance of various industrial sectors of the Indian economy.

2.It is calculated and published by the Central Statistical Organisation (CSO) every month.

3.It is a composite indicator of the general level of industrial activity in the economy.

Uses of index numbers

Index numbers are useful in many basic to complicated studies. Like it is used in the basic study of human population in a country and also it is used to determine the extinction rate of the rare animals in a particular region. There are many more usages of Index Numbers, let us find out:

1.It helps in measuring changes in the standard of living as well as the price level.

2.Wage rate regulation is consistent with the changes in the price level. With the determination of price levels, wage rates may be revised.

3.Government policies are framed following the index number of prices. This price stability inherent to fiscal and economic policies is based on index numbers.

4.It gives a pointer for international comparison concerning different economic variables—for instance, living standards between two countries.

Inflation and Index Number

A statistical tool that measures the changes in the magnitude of a group of related variables is called an index number.

The inflation and index numbers keep track of the changes in the overall price level in an economy. The ratio of the cost of a commodity or a group of many commodities at one time to the cost of one commodity or many commodities at some other time is represented by the inflation and index numbers.

LESSON PLAN:-04

Meaning of Microeconomics

Microeconomics is the social science that studies the implications of incentives and decisions, specifically about how those affect the utilization and distribution of resources. Microeconomics shows how and why different goods have different values, how individuals and businesses conduct and benefit from efficient production and exchange, and how individuals best coordinate and cooperate with one another. Generally speaking, microeconomics provides a more complete and detailed understanding than macroeconomics.

One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results.

Meaning of Macroeconomics

Macroeconomics is a branch of economics that studies how an overall economy—the markets, businesses, consumers, and governments—behave. Macroeconomics examines economy-wide phenomena such as inflation, price levels, rate of economic growth, national income, gross domestic product (GDP), and changes in unemployment.

Macroeconomists study such questions as: What makes the business cycle fluctuate; what makes economic growth go up and down; how are prices determined; what is the rate of inflation, and what determines it; what is productivity growth; and what are the determinants of productivity? Importantly, macroeconomists also study the role government has in determining the pace of growth, the long-run rate of potential output in an economy, and the inflation rate. The Fed cares about macroeconomics because its goals are determined and defined in macroeconomic concepts: Stable inflation or stable prices and maximum employment are measured and achieved on an economywide, macroeconomic level, not at an individual level. Because the Fed's goals are macroeconomic goals, it often thinks in terms of macroeconomics.

What is an economy?

An economy is the system for deciding how scarce resources are used so that goods and services can be produced and consumed. Resources are things like land, people (who can work or innovate through their ideas) and raw materials. They are seen as scarce because we have unlimited wants but there are not enough resources to produce the goods and services to satisfy these wants.

Central Problems of an economy

The basic economic activities of life are production, distribution, and disposition of goods and services. A society will be facing scarcity of resources during the time of fulfillment of these activities.

Scarcity is evident, due to the availability of limited resources, and human needs having no limit. This variation between the supply and demand leads to the formation of central problems of an economy.

The central problems of an economy revolve around the following factors:.

1.What to produce?

2.How to produce?

3.For whom to produce?

Let us discuss these points in detail.

What to produce?

It is one of the central problems in an economy. It is related to the type and quantity of goods and services that need to be produced.

Since resources are in limited quantities, producing more of one good will result in less production of the other.

How to produce?

This aspect deals with the process or technique by which the goods and services can be produced. Generally, there are two techniques of production:

1.Labour intensive techniques

2.Capital intensive techniques

The choice of technique for production depends on the availability of the resource in that nation, hence resource allocation becomes a challenge.

For whom to produce?

This problem deals with determining the final consumers of the goods produced. As resources are scarce in an economy, it becomes difficult to cater to all sections of the society.

It leads to a problem of choice in an economy as a good that may be in demand among one section, may not be in demand for another section of the society.

Such a situation arises due to the difference in income distribution among the population, which causes a change in buying behaviour.

With this, we conclude the concept of central problems of an economy.

Concepts of production possibility frontier and Opportunity Cost.

Production possibility frontier (PPF) is referred to as a graph that shows the maximum possible output that can be achieved by two goods when the input is maintained constant or fixed.The factors that are included in the input are natural resources, capital goods, labour and entrepreneurship.

The production of one good can be increased when the production of the other good is sacrificed. The Production Possibility Frontier (PPF) is also known as the Production Possibility Curve.

The production possibility frontier represents the concepts of scarcity, tradeoffs and choice and the shape of the curve will change based on whether the price costs are constant, increasing or decreasing.

The slope of the PPF is indicative of the opportunity cost of producing a good in comparison to another good. The same can be used for comparing the opportunity costs of another producer for determining the comparative advantage.

Opportunity Cost:-

Opportunity cost is commonly defined as the next best alternative. Also, known as the alternative cost, it is the loss of gain which could have been gained if another alternative was chosen. It can also be explained as the loss of benefit due to a change in choice.

Opportunity cost is an economic concept arising out of the realistic assumption of the scarcity of resources. The limited amount of resources will also limit the number of possibilities for production. As the number of possibilities of production is limited, to produce a given combination of goods, the production of another combination of goods would have to be forgotten. This can be referred to as opportunity cost.

Opportunity cost is a concept that is widely used by promoters and business analysts to conduct feasibility studies as well as to ascertain policy decisions to be taken.

LESSON PLAN:-05

Consumer’s equilibrium

A consumer is said to be in an equilibrium state when he feels that he cannot change his situation either by earning more or by spending more or by changing the number of things he buys. A rational consumer will purchase a commodity up to the point where the price of the commodity is equivalent to the marginal utility obtained from the thing.

If this condition is not fulfilled, the consumer will either purchase more or less. If he purchases more, the MU will fall and situations will arise when the price paid will exceed marginal utility. In order to prevent negative utility, i.e. dissatisfaction, he will reduce his consumption and MU will go on increasing till price = marginal utility.

Meaning of Utility

A consumer is a person who usually decides his/her need for products and commodities according to the satisfaction he/she gets from it. The concept of utility in economics refers to the satisfaction a customer derives from a service or a product. Customers try their best to choose the commodities logically, to boost their utility.

Marginal Utility

Marginal utility is the added satisfaction that a consumer gets from having one more unit of a good or service. The concept of marginal utility is used by economists to determine how much of an item consumers are willing to purchase.

Law of Diminishing Marginal Utility

The law of diminishing marginal utility states that all else equal, as consumption increases, the marginal utility derived from each additional unit declines. Marginal utility is the incremental increase in utility that results from the consumption of one additional unit. "Utility" is an economic term used to represent satisfaction or happiness.

The marginal utility may decrease into negative utility, as it may become entirely unfavorable to consume another unit of any product. Therefore, the first unit of consumption for any product is typically highest, with every unit of consumption to follow holding less and less utility. Consumers handle the law of diminishing marginal utility by consuming numerous quantities of numerous goods.

The law of diminishing marginal utility directly relates to the concept of diminishing prices. As the utility of a product decreases as its consumption increases, consumers are willing to pay smaller dollar amounts for more of the product.

Conditions of consumer’s equilibrium using marginal utility analysis:-

The state of equilibrium for consumers is possible under the following conditions:

i)The (MU)marginal utility of commodity X cost of product in terms of cost is equal to the cost of the commodity X in cost (MUx = Px). If the consumer purchases more of the commodity, then the MU or marginal utility will fall, and then the situation will arise where the price paid will increase from the MU or marginal utility.

ii) To avoid dissatisfaction with negative utility, the consumer will reduce the consumption, and the MU will keep increasing until the price is equal to the MU or marginal utility.

iii)Whereas, if the MU or marginal utility exceeds the price paid, the consumer will gain additional satisfaction from the commodity he consumed before. This will make the consumer desire to buy so many units of a single or one commodity, leading to the falling of MU, bringing it equal to the price. Therefore, after buying some quantities of goods and services, they will reach a point where P=MU.

Indifference curve analysis of consumer’s equilibrium-

Indifference curves operate under many assumptions; for example, each indifference curve is typically convex to the origin, and no two indifference curves ever intersect. Consumers are always assumed to be more satisfied when achieving bundles of goods on indifference curves that are farther from the origin.

As income increases, an individual will typically shift their consumption level because they can afford more commodities, with the result that they will end up on an indifference curve that is farther from the origin—hence better off.

Many core principles of microeconomics appear in indifference curve analysis, including individual choice, marginal utility theory, income, substitution effects, and the subjective theory of value. Indifference curve analysis emphasizes marginal rates of substitution (MRS) and opportunity costs. Indifference curve analysis typically assumes that all other variables are constant or stable.

Most economic textbooks build upon indifference curves to introduce the optimal choice of goods for any consumer based on that consumer’s income. Classic analysis suggests that the optimal consumption bundle takes place at the point where a consumer’s indifference curve is tangent with their budget constraint.

The consumer’s budget (budget set and budget line)

A consumer’s budget is the real purchasing power of the consumer with which he can purchase a combination of two goods, given their prices. It shows the combinations of goods and services which a consumer can buy with his limited income.

Consumer Budget includes:

1.Budget Set

2.Price or Budget Line

Budget Set:-

It refers to attainable combinations of a set of goods, given prices of goods and income of the consumer. The budget set equation can be written as:

P1X1+P2X2 = Y

Here,

P1 refers to the price of Good-1

X1 refers to the quantity of Good-1

P2 refers to the price of Good-2

X2 refers to the quantity of Good-2

Y refers to total expenditure or total budget.

Budget set is also known as a budget constraint as it shows the limit up to which a consumer can buy a set of two goods with given income.

Budget line:-

Budget Line is a line showing different possible combinations of Commodity-1 and Commodity -2 which a consumer can buy within his budget and given market prices of commodities. It is also known as price line, consumption possibility line and line of attainable combinations.

The basic components of this line are:

1)Consumer’s Purchasing power (income)

2)Price or market value of two goods.

Its equation can be written as:

P1X1+P2X2 = Y

Here,

P1 refers to the price of Good-1

X1 refers to the quantity of Good-<1< /dd>
P2 refers to the price of Good-2

X2 refers to the quantity of Good-2

Y refers to total expenditure or total budget.

Preferences of the consumer (indifference curve, indifference map)

Consumer preference is a significant part of microeconomics. Customer preferences include the concepts of the budget line, utility, indifference map, and indifference curve which are very closely associated with customer satisfaction.

Indifference Curve:-

Bundles of a product making a customer more satisfies are preferred more than other bundles. However, in cases when some bundles provide equal satisfaction to a customer, indifference grows within the customer for the bundles. This makes the consumer fail in preferring one commodity over another. The indifference curve is a graphical diagram representing the bundles that tend to cause indifference in a customer. It is to be remembered that an indifference curve is in all case sloping downwards and is convex to its origin. The higher satisfaction level is denoted by a higher indifference curve.

Indifference Map:-

The Indifference Map refers to a set of Indifference Curves that reflects an understanding and gives an entire view of a consumer's choices. The below diagram shows an indifference map with three indifference curves.

Demand

Demand is willingness and ability to purchase a commodity or service.

Market Demand:-

Market demand is the total amount of goods and services that all consumers are willing and able to purchase at a specific price in a marketplace. In other words, it represents how much consumers can and will buy from suppliers at a given price level in a market.

Determinants of Demand:-

There are many determinants of demand, but the top five determinants of demand are as follows:

1)Product cost: Demand of the product changes as per the change in the price of the commodity. People deciding to buy a product remain constant only if all the factors related to it remain unchanged.

2)The income of the consumers: When the income increases, the number of goods demanded also increases. Likewise, if the income decreases, the demand also decreases.

3)Costs of related goods and services: For a complimentary product, an increase in the cost of one commodity will decrease the demand for a complimentary product. Example: An increase in the rate of bread will decrease the demand for butter. Similarly, an increase in the rate of one commodity will generate the demand for a substitute product to increase. Example: Increase in the cost of tea will raise the demand for coffee and therefore, decrease the demand for tea.

4)Consumer expectation: High expectation of income or expectation in the increase in price of a good also leads to an increase in demand. Similarly, low expectation of income or low pricing of goods will decrease the demand.

5)Buyers in the market: If the number of buyers for a commodity are more or less, then there will be a shift in demand.

Demand Schedule

This is a statement in a tabular form that shows different quantities which are being demanded at different prices. There are two types of Demand Schedules:

i)Individual Demand Schedule

ii)Market Demand Schedule

In economics, a demanding schedule is a table that shows the quantity that is demanded of a good or service at different price levels. A demand schedule can also be graphed as a continuous demand curve on a chart where the Y-axis represents the price and the X-axis represents the quantity.

Demand Curve and its Slope:-

A demand curve is a graph depicting the relationship between the price of a certain commodity (the y-axis) and the quantity of that commodity that is demanded at that price (the x-axis). Demand curves can be used either for the price-quantity relationship for an individual consumer (an individual demand curve), or for all consumers in a particular market (a market demand curve).

Slope of the demand curve:-

The slope of a demand curve shows the ratio between the two absolute changes in price and demand (both are variables). By applying this formula, it can be said that, when at the fall of price by Re. 1 (- 1) the quantity demanded increases by 10 units (+ 10), the slope of the curve at that stage will be -1/10.

Movement along and Shifts in the Demand Curve:-

Keeping all other factors the same, when there is a change in demand of a commodity due to change in price, it is referred to as the change in quantity demanded. It is shown as a movement along the demand curve when expressed graphically.

1.)UPWARD MOVEMENT OF DEMAND CURVE:-

a)When the price of the commodity rises, the quantity demanded falls. It leads to the upward movement of the demand curve.

b)It is also known as contraction of demand.

2.) DOWNWARD MOVEMENT OF DEMAND CURVE:-

When the price of the commodity falls, the quantity demanded rises. It leads to the downward movement of the demand curve.

It is also known as expansion of demand.

Shift in demand curve:-

This happens when there is a change in any other factor apart from the price. It could be due to the quantity, consumer income, or several other factors on which the Demand Curve is based. Under this, even the price can vary. This leads to left or right Shift in the Demand Curve.

The factors leading to a Shift in the Curve are as follows.

Increase in Demand quantity of the products due to popularity

a)Increase in the price of a competitive good

c)A rise in the income of consumers

d)Seasonal factors

It leads to a Shift in the Demand Curve, depending on the factors.

Price elasticity of demand:-

Price elasticity of demand is a measurement of the change in the consumption of a product in relation to a change in its price. Expressed mathematically, it is:

Price Elasticity of Demand = Percentage Change in Quantity Demanded ÷ Percentage Change in Price

Economists use price elasticity to understand how supply and demand for a product change when its price changes.1 Like demand, supply also has an elasticity, known as price elasticity of supply. Price elasticity of supply refers to the relationship between change in supply and change in price. It’s calculated by dividing the percentage change in quantity supplied by the percentage change in price. Together, the two elasticities combine to determine what goods are produced at what prices.

Factors affecting price elasticity of demand:-

1. Nature or type of Good

The Elasticity of Demand for a good is affected by its nature. Different goods can be a necessity good, a comfort good, or a luxury good for a person.

There is one more thing that is a single good can be a necessity for one person, a comfort for the second person, and a luxury for a third person. So, we can say that a good’s nature is relative.

let us understand how nature affects the elasticity of demand.

i. A necessity good like vegetables, food grains, medicines and drugs, has an inelastic demand. Such goods are required for human survival so their demand does not fluctuate much against a change in their price.

ii. A comfort good like a fan, refrigerator, washing machine, etc., has an elastic demand as their consumption can be postponed for a time period.

iii. A luxury good like AC, Cars, Diamond has a relatively high elasticity of demand when compared to comfort goods.

2. Availability of Substitutes

The Price Elasticity of Demand for a good, with a large number of substitutes available, is very high.

Thus, the availability of a large number of close substitutes increases the sensitivity against change in price, or we can also say that this increases the Price Elasticity of Demand.

3. Price Level:-

The price level of goods plays a major role in determining the price elasticity of demand. Goods that fall in a higher price segment are more likely to have high elasticity.

A price rise will further push them in the higher segment while even a small decline in the price can put them in the affordable segment. An example of this can be mobile phones or laptops. A person with a budget of 15k won’t go for a phone that is 20% more costly.

On the other hand, goods that belong to the low-price segment are generally inelastic or relatively less elastic. An example can be a packet of matchboxes. Even a sharp rise in its price won’t throw it into the high-price segment.

4. Income Levels

Our society is divided into different classes based on incomes and lifestyle. Upper-class people generally have a higher income and live a lavish life whereas the lower class people can’t afford luxury items because they have a low income.

Income levels have a considerable effect on the elasticity of demand. The Elasticity of Demand for a commodity is generally very low for higher income level groups. The change in prices does not bother people from such groups.

Whereas the Price Elasticity of Demand of a commodity is very high for people belonging to low-income level groups. Poor people are highly affected by the change in the prices of commodities.

5. Time Period

The price elasticity of demand varies directly with the time period. The given time period can be as shorts as a day and as long as several years.

The price elasticity of demand is directly proportional to the time period. This means the elasticity for a shorter time period is always low or it can be even inelastic.

Measurement of Price Elasticity of demand –

1)Percentage-change method:-

The Percentage method is one of the widely used methods for calculating demand price elasticities, where price elasticity is calculated in terms of the rate of the percentage change in the quantity requested to the percentage change in price.

The price elasticity of demand can, according to this approach, be mathematically expressed as -

PED = % change in quantity demanded / % change in price, where

change in quantity demanded=new quantity (Q2)-initial quantity (Q1)initial quantity (Q1)×100change in quantity demanded=new quantity (Q2)-initial quantity (Q1)initial quantity (Q1)×100

change in price=new price ( P2)-initial price ( P1)initial price ( P1)×100change in price=new price ( P2)-initial price ( P1)initial price ( P1)×100

Therefore,

PED=?Q?P×P1Q1

2)Total expenditure method.

In this method amount of change and direction of change in total expenditure are determined as a result of change in price of commodity.Total expenditure = Commodity Price x Commodity demandOnly three degrees of the elasticity of demand can be calculated by this method.I.Equal to unit Elasticity – When total expenditure remains constant due to increase or decrease in price elasticity of demand is equal to unity. II.Greater than Unit Elasticity – When total expenditure increases due to decrease in price or total expenditure decreases due to increase in price elasticity of demand is greater that unity.III.Less Than Unit Elasticity – When total expenditure decreases due to decrease in price or total expenditure increases due to increase in price elasticity of demand is less than unity. All the above three conditions have been represented in given fig.. In fig. elasticity of demand is greater than unit from point A to point B because total expenditure is increasing on decline in prices and total expenditure decreasing on increase in prices. Elasticity of demand is equal to unit from point B to C because total expenditure remains constant on either increasing or decreasing the prices. Elasticity of demand is less that unit from point C to D because total expenditure decreases on decrease in price and increases on increase in price of the goods.

LESSON PLAN:-06

Meaning of Production Function

Production function means a mathematical equation/representation of the relationship between tangible inputs and the tangible output of a firm during the production of goods. A single factor in the absence of the other three cannot help production. In simple words, it describes the method that will enable the maximum production of goods by technically combining the four major factors of production- land, enterprise, labor and capital at a certain timeframe using a specific technology most efficiently. It changes with development in technology. J H Von was the first person to develop the proportions of the first variable of this function in the 1840s.

This function depends on the price factor and output levels that producers can easily observe. Moreover, every manufacturing plant converts inputs into outputs. Hence the factors necessarily determine the production level of goods to maximize profits and minimize cost. Therefore, the production function is essential to know the quantity of output the firms require to produce at the said price of goods. It determines the output and the combination inputs at a certain capital and labor cost.

Types of Production Function:-

1)Short Run:- The firm cannot vary its input quantities in the short-run production function. The law of variable proportion gets applicable here. There is no change in the level of activity in the short-run function. The ratio of factors keeps changing because only one input changes concerning all the other variables, which remain fixed. The manufacturing firms face exit barriers. As a result, they can be shut down permanently but cannot exit from production.

For any production company, only the nature of the input variable determines the type of productivity function one uses. If one uses variable input, it is a short-run productivity function; otherwise, it is a long-run function.

2)Long Run:- In the long-run production function, all the inputs are variable such as labor or raw materials during a certain period. Therefore, the operation is flexible as all the input variables can be changed per the firm’s requirements. Furthermore, in the production function in economics, the producers can use the law of equi-marginal returns to scale. It leads to a smaller rise in output if the producer increases the input even after the optimal production capacity. It means the manufacturer can secure the best combination of factors and change the production scale at any time. Therefore, the factor ratio remains the same here.

Moreover, the firms are free to enter and exit in the long run due to low barriers.

Total Product, Average Product and Marginal Product.

1)Total Product:-It refers to the total amount of output that a firm produces within a given period, utilising given inputs.

Total Product Formula is

TP= AP*L

Where AP= product/ labour unit; L= Labour

2)Average Product:- It is output per unit of inputs of variable factors.

Average Product (AP)= Total Product (TP)/ Labour (L).

3)Marginal Product:-It denotes the addition of variable factors to the total product.

Thus, Marginal product= Changed output/ changed input.

In other ways, marginal product leads to an increase of total product with the help of additional workers or input.

Returns to a Factor

Returns to factors are also called factor productivities. Productivity is the ratio of output to the input. Factor productivity refers to the short-run relationship of input and output. The productivity of one unit of a factor of production will be equal to the output it can generate. The productivity of a particular factor is measured with the assumption that the other factors are not changed or remain unchanged. Only that particular factor under study is changed.

Returns to factors refer to the output or return generated as a result of change in one or more factors, keeping the other factors unchanged. Given a percentage of increase or decrease in a particular factor such as labour, is it yielding proportionate increase or decrease in production? This is analysed in 'returns to factors.'

The change in productivity can be measured in terms of

(a) Total productivity The total output generated at varied levels of input of a particular factor (while other factors remain constant), is called total physical product.

(b) Average productivity The total physical product divided by the number units of that particular factor used yields average productivity.

(c) Marginal productivity The marginal physical product is the additional output generated by adding an additional unit of the factor under study, keeping the other factors constant.

The total physical product increases along with an increase in the inputs. However, the rate of increase is varied, not constant. The total physical product at first increases at an increasing rate because of the law of increasing return to scale, and later its rate of increase declines because of the law of decreasing returns to scale.

Cost:

Cost is the amount of money needed to buy, do, or make something.

1)Short run costs:- The Short-run Cost is the cost which has short-term implications in the production process, i.e. these are used over a short range of output. These are the cost incurred once and cannot be used again and again, such as payment of wages, cost of raw materials, etc.

2) Total fixed cost:- Total fixed cost is the total amount of money a business must pay to keep their operations running regardless of how many products they make or sell. Total fixed cost does not change regardless of production or lack of production. Fixed costs are those that still exist even when production is at zero.

3)Total variable cost:- Total variable cost is the aggregate amount of all variable costs associated with the cost of goods sold in a reporting period. It is a key component in the analysis of corporate profitability. The components of total variable cost are only those costs that vary in relation to production or sales volume. It is not compiled at the individual unit level.

4)Average cost:- Average cost or unit cost is equal to total cost (TC) divided by the number of units of a good produced (the output Q)

Therefore, AC=TC/Q.

5) Average fixed cost:- The average fixed cost (AFC) is the fixed cost that does not change with the change in the number of goods and services produced by a company. To put it in a nutshell, the average fixed cost (AFC) is the fixed cost per unit and is calculated by dividing the total fixed cost by the output level.

Average variable cost and Marginal cost-meaning and their relationships:-

Marginal cost (MC) is the cost of producing an extra unit of output. Review: Average variable cost (AVC) is the cost of labor per unit of output produced. When MC is below AVC, MC pulls the average down.

When MC is above AVC, MC is pushing the average up;

Therefore,MC and AVC intersect at the lowest AVC.

Total Revenue, average and marginal revenue – meaning and their relationship.

(a) Total Revenue (TR):Total revenue is the amount of money that a firm receives for the offer of goods and services in the market. A firm’s total revenue can be calculated as the quantity of goods sold multiplied by the price. The total revenue includes the product of the quantity sold and the price.

Total revenue=Total Quantity Sold × Unit Price

(b) Average Revenue (AR):Average revenue is used as price in a perfectly competitive market. This can be found by the ratio of the firm’s total revenue and the number of goods sold.

AR = Total Revenue/ Total Output Sold

AR = (P x Q)/ Q

The equation remains with AR = P

(c) Marginal Revenue (MR):

Marginal revenue refers to the extra money received by selling one more additional unit of the commodity. It is an addition to the total revenue of a firm as new additional units are sold. By selling an additional unit, a firm earns additional revenue that adds to the total revenue and this addition to revenue is called marginal revenue.It is given in the form,

MR= ?TR/?Q

The relationship among TR, AR and MR can be summarized as follows:

(i) At the outset, Total Revenue (i.e., price x units of the commodity sold) increases at a diminishing rate with increase in the units of output, since more units of the commodity can only be sold at a lower price, such that Marginal Revenue is positive and is downward sloping.

(ii) At the point when TR is maximum MR happens to equal to zero.

(iii) MR becomes negative, when TR decreases with increase in the units of output.

(iv) MR falls with the fall in AR, but, the rate of decrease in MR is much higher than that in AR.

(v) MR may be positive, negative or zero, but AR is always positive (since negative price is illogical)

Producer’s equilibrium-meaning and its conditions in terms of marginal revenue marginal cost:-

An organization is under equilibrium if there is no increase or decrease in it’s profits. This equilibrium bubble is when the company is gaining its maximum profit.
Producer’s equilibrium is the output where the producer gets maximized profits. So a producer can reach a producer’s equilibrium if his profits are at their highest levels. An organization is in equilibrium if there is no scope for either increasing the profit or reducing its loss by changing the quality of the output. Therefore, we have

Profit= Total Revenue-Total Cost

Which is written as P=TR - TC

Hence, the output level at which the total revenue minus the total cost is maximum is the equilibrium level of the output. There are two approaches to arrive at the producer’s equilibrium:

Total Revenue - Total Cost (TR-TC) Approach

Marginal Revenue - Marginal Cost (MR-MC) Approach

In order to find the producer's equilibrium, it is important to learn about isoquant curves and iso-cost lines. By understanding these two concepts, you can calculate optimum production.

Supply

Supply in economics is defined as the total amount of a given product or service a supplier offers to consumers at a given period and a given price level. It is usually determined by market movement. For instance, a higher demand may push a supplier to increase supply.

Market Supply:-

The market supply is the total quantity of a good or service that all producers are willing to supply at the prevailing set of relative prices during a defined period of time. It is understood that "Supply" means Market Supply, unless it refers to one producer. ,

Determinants of supply:-

1) Price Of The Product Or Service

The price of the product or service is the most evident factor in determining supply. If all other variables remain constant, the supply of a product will increase if its relative price rises. To put it another way, a company provides goods or services in order to generate a profit, and when prices increase, so does supply to increase profits. Hence, increasing the supply of a product is motivated by a price rise. However, there may be diminishing returns associated with attempting to increase the resources required to manufacture a product in a short amount of time.

2)Price Of Other Related Items

If the price of related items rises, the company will raise its supply of the higher-priced commodities. This results in a decrease in the supply of low-priced items.

Suppose that wheat’s price increases. Consequently, it is more profitable for businesses to provide wheat than maize or soybean. Consequently, the supply of wheat will increase while the supplies of corn and soya beans will decrease. If a certain product is produced in huge amounts, companies that produce similar goods, such as detergents, will transfer their manufacturing to that item. This causes the price to rise and the supply to decrease.

3) Price Of Production’s Elements Or Factors Of Production

Many expenses are associated with the production of an item. If the price of a certain element of production rises, the cost of producing items that rely heavily on that factor will climb dramatically.

Whereas an increased price of one input causes a little rise in the manufacturing costs of product that utilizes a less quantity of that input. For instance, a rise in the price of land will substantially impact the cost of growing wheat but a little impact on the cost of making vehicles.

4) Technology Intervention

Innovations and inventions in technology typically allow for the production of higher-quality and/or greater quantities of things with the same amount of resources. Consequently, the degree of technology can either enhance or decrease the supply of specific items.

5) Administrative Policy

Commodity taxes such as excise duty, import charges, and the Goods and Services Tax highly affect manufacturing costs. These taxes might increase total expenses. Consequently, the supply of commodities that are affected by these levies grows only when the price rises. On the other side, subsidies cut production costs and typically result in an increase in supply.

It is possible to attribute the supply to government policy. The government imposes several rules, taxes, and production subsidies, all of which influence the supply. For instance, say manufacturing taxes on commodities will raise the marginal cost of manufacturing. Conversely, production subsidies will lower marginal costs. Thus, the minimal price at which the commodities are to be delivered increases or decreases as well.

6)Expectations/Speculations Of Price

It can also affect the current supply, because if suppliers anticipate a price reduction in the near future, they may attempt to liquidate all of their current stock. Similarly, if suppliers anticipate that prices will rise in the future, they may hang on to their inventory until prices rise.

7)Other Elements

There are several additional elements that influence the supply of products or services, such as the international policies, the firm’s objectives, infrastructure facilities, market structure, and natural causes, among others.

Supply Schedule:-

Supply schedule is a chart that shows how much product a supplier will have to produce to meet consumer demand at a specified price based on the supply curve. In other words, it's basically a supply graph in spreadsheet form listing the quantity that needs to be produced at each product price level.

Supply curve and its slope:-

A supply curve is usually upward-sloping, reflecting the willingness of producers to sell more of the commodity they produce in a market with higher prices. Any change in non-price factors would cause a shift in the supply curve, whereas changes in the price of the commodity can be traced along a fixed supply curve.

The law of supply states that all else being equal, the quantity supplied of an item increases as the price increases, and vice versa. Graphically, this means that the supply curve usually has a positive slope, i.e. slopes up and to the right.

Movements along and Shifts in supply curve:-

The movement along the supply curve can be classified as :

1.Extension of Supply

2.Contraction of Supply

i)Extension of Supply :

When the quantity supplied of a commodity increase with a rise in its price, it is known as an extension of supply, other things being equal.

ii)Contraction of Supply :

When the quantity supplied of a commodity decrease with a fall in its price, it is known as an extension of supply, other things being equal.

Shift in Supply Curve :

When the supply of a commodity change due to changes in factors other than its price such as the price of related goods, cost of production, technology etc., the supply curve doesn’t extend or contract but shifts entirely. Then, it is known as the Shift in Supply Curve.

For example, the improvement in technology increases the production with low cost of production, which leads to more supply due to change in other factors of supply.

The shifts in the supply curve can be classified as :

1.Upward Shift in Supply Curve

2.Downward Shift in Supply Curve

Upward Shift in Supply Curve:

When the supply increases due to change in determinants of supply other than its price, it refers to an upward shift in the supply curve. Increase in supply implies two things :

a) Same Price More Supply:

When the supply of a commodity increase but its price remains the same, there is an upward shift in the supply curve.

b) Less Price Same Supply:

When the price of a commodity fall but its supply remains constant, there is an upward shift in the supply curve.

This shift of the supply curve is known as an upward shift.

Downward Shift in Supply Curve :

When the supply increases due to change in determinants of supply other than its price, it refers to an upward shift in the supply curve. Increase in supply implies two things :

a) Same Price Less Supply:

When the supply of a commodity decrease but its price remains the same, there is a downward shift in the supply curve.

b) More Price Same Supply:

When the price of a commodity rise but its supply remains constant, there is an upward shift in the supply curve.

Price Elasticity of Supply:-

The price elasticity of supply is the percentage change in quantity supplied divided by the percentage change in price. Elasticities can be usefully divided into five broad categories: perfectly elastic, elastic, perfectly inelastic, inelastic, and unitary.

Measurement of price elasticity of supply – percentage-change method.

The Percentage method is one of the widely used methods for calculating demand price elasticities, where price elasticity is calculated in terms of the rate of the percentage change in the quantity requested to the percentage change in price.

The price elasticity of demand can, according to this approach, be mathematically expressed as -

PED = % change in quantity demanded / % change in price, where

change in quantity demanded=new quantity (Q2)-initial quantity (Q1)/initial quantity (Q1)×100

change in price=new price ( P2)-initial price ( P1)/initial price ( P1)×100

Therefore, PED=?Q/?P×P1/Q1

LESSON PLAN:-07

CLASSIFICATION OF MARKET

1. On the basis of area-

a) Local market: Local market refers to a market in a particular village or locality. Generally perishable goods have local market.

b) Regional market: Regional market refers to a market, which covers a particular region. Generally bulky articles like bricks and s\ones have regional markets.

c) National market: It refers to a market which is spread over the entire country. Generally commodities like wheat, rice etc. have national market.

d) International market: When the market is spread over the globe it is said to be an international market. Generally valuable metals like gold, silver, etc., have an international, market.

2. On the basis of time-

a) Very short period market: A very short period is one in which supply cannot be increased or decreased to adjust as per demand. Examples for very short period markets are vegetables, fruits, etc.

b) Short period: Short period market refers to a period of time in which the rate of production is variable.

c) Long period: Long period is a period of time in which the supply of the commodity can be varied according to the conditions of demand. Long period involves many years.

3. Classification on the basis of competition-

a) Perfect market: A perfect market is where there is perfect competition.

b) Imperfect market: A market is imperfectly competitive if the action of one or more buyers and sellers have a perceptible influence on price.

On the basis of Nature of Competition

1)Perfect or pure competition

1.No. of firms are infinite

2.Nature of goods is Homogenous

2) Imperfect Competition

(i) Monopolistic competition

•No. of firms are many

•Nature of goods is differentiated

(ii) Duopoly

• No. of firms are two

• Nature of goods is Homogenous or differentiated,

(iii) Oligopoly

• No. of firms (or sellers) are few.

• Nature of goods is Homogenous or differentiated

(iv) Monopoly

• No, of seller (or firm) is single

• Nature of goods is Homogenous.

Price Determination under Perfect Competition with simple applications.

Perfect competition is defined as a market situation where there are a large number of sellers of a homogeneous product. An individual firm supplies a very small portion of the total output and is not powerful enough to exert an influence on the market price.

A single buyer, however large, is not in a position to influence the market price. Market price in a perfectly competitive market is determined by the interaction of the forces of market demand and market supply. Market demand means the sum of the quantity demanded by individual buyers at different prices.

Similarly, market supply is the sum of quantity supplied by the individual firms in the industry. Each seller and buyer takes the price as determined. Therefore, in a perfectly competitive market, the main problem for a profit-maximizing firm is not to determine the price of its product but to adjust its output to the market price so that profit is maximized.

Price determination under perfect competition is analyzed under three different time periods:

(a) Market Period:- In a market period, the time span is so short that no firm can increase its output. The total stock of the commodity in the market is limited. The market period may be an hour, a day or a few days or even a few weeks depending upon the nature of the product.

(b) Short Run:- Short period is the span of time so short that existing plants cannot be extended and new plants cannot be erected to meet increased demand. However, the time is adequate enough for producers to adjust to some extent their output to the increase in demand by overworking their fixed capacity plants. In the short run, therefore, supply curve is elast

(c) Long Run:- The long run is a period of time long enough to permit changes in the variable as well as in the fixed factors. In the long run, accordingly, all factors are variable and non- fixed. Thus, in the long run, firms can change their output by increasing their fixed equipment. They can enlarge the old plants or replace them by new plants or add new plants.

Perfect competition

Perfect Competition is a theoretical market structure where direct competition does not exist between firms or sellers. Instead, many sellers (also buyers) are present in the market that simultaneously sell an identical product at the market price. Thus, each seller has a very small share in the market with limited control over market prices.

Perfect competition is considered the ideal market scenario as it allocates the available resources most efficiently. It is also referred to as pure competition.

Features of perfect competition:-

1) Large Market:-A large population of buyers and sellers is present in the market. Sellers are unorganized, small, or medium enterprises owned by individuals. However, a large number of both sellers and buyers maintain the constancy of the demand and supply chain in the market. i.e., a buyer can easily substitute firms to buy its product, and the seller also has a large availability of buyers.

2)Homogeneous Market:-Firms sell identical products with similar features and pricing. Hence, the buyer cannot differentiate between available products based on features and generally has no preference to select a particular product or seller over others.

3)Freedom to Enter or Exit the Market:-In perfect competition, the start-up and production costs are very low, and the demand for products is high. Thus, entry into the market is easy. However, suppose some enterprise incurs losses, and survival in the market becomes difficult due to the heavy competition. Then, it is free to exit, and other players take their place to fulfill the supply requirements.

4)Lower Restrictions and Obligations from Governments:-For sellers, governmental barriers are less. Sellers are allowed to sell their products in the market freely. Similarly, buyers are also free to buy goods and services offered by sellers. Prices are not regulated but fluctuate according to demand and supply chain.

5)Perfect Information Availability:-Sellers have full market knowledge like required costs, technological requirements, marketing tactics, and supply levels as per demands in the market. On the other hand, the buyer is fully informed about products’ availability, features, quality, and prices. Hence, manipulating the market by either party is not possible.

6) Cheap and Efficient Transportation:-Transportation is an important part of every business, and in a perfectly competitive market, transportation for the seller is low. Thus, the product prices decrease. Also, an efficient vehicle is easily available, causing a reduction in delays in transporting goods.

Determination of market equilibrium

Market equilibrium is the condition where the production by the sellers and the demand of that product by the buyer becomes equal. We can find the equilibrium price by putting the demand equal to the demand. The equilibrium price is the price at which the quantity demanded equals the quantity supplied.

The demand curve is the curve that depicts the quantity demanded at any price while the supply curve depicts the quantity supplied at any price. So there is one price on the graph that they have in common, which is at the intersection of the two curves.

The equilibrium price is the intersection of the demand curve and supply curve. We can also derive it mathematically.

Effects of shifts in demand and supply:-

The law of supply and demand represents the interaction between manufacturers and consumers. This theory shows how these two concepts are interlinked, and the price of a product can affect its sales. The supply-demand curve represents this concept in a graphical manner for better understanding.

Supply and demand law are one of the fundamentals of economics that is related to almost every principle of economics. Moreover, this supply-demand principle also affects the equilibrium prices of a product and often determines its price. However, there are various reasons that can affect this principle.

Shift in Supply Demand Curve

If there are any changes in this curve, it has a direct effect on market equilibrium. Here are some notable factors that can affect supply and demand –

1. Change of Demand

The demand for a product changes due to one of the following factors –

•Population

•Per capita income

•Preferences

•Value of the essential commodities

•Value of substitute items

•Forecast of change in prices

2. Change in Supply

Supply of an item alters owing to the following reasons –

•Number of manufacturers

•Taxes levied

•Technological advancement

•Aim of the companies

•Cost of factors of production

•Cost of competitive products

•Expectation of future price change

This offers a brief idea about the major factors that have an effect on supply and demand. However, to understand this concept in detail, one must understand how a market reacts when both supply and demand curve shifts.

When Demand Changes:-Increase in demand and decrease in demand plays a crucial role in determining the price of a product. Here is a detailed discussion regarding that –

•Demand Increase

When supply remains constant, but the demand surges, it tends to shift the demand curve rightwards. If the demand for a product steadily rises, it ultimately affects the equilibrium price. Therefore, this price rise also increases competition among buyers, which also hikes the price of a product.

On the flip side, this rise in price serves as an incentive to the manufacturers. They will then increase production and supply that will result in falling demand. A point to note here is that this process stays operational until a new equilibrium is set. Resultantly, there is a hike in both the equilibrium price and quantity.

•Demand Decrease

Similarly, if the supply remains constant, and demand for a product plummets, the demand curve will shift towards the left. In a situation like this, a condition of excess supply occurs at the equilibrium level. This situation leads to a competition between sellers, who want to sell their products due to this fall of prices.

Alternatively, once a product’s prices go down its market demand increases. This demand then leads to an increase in supply and manufacturing. This process then continues till a new equilibrium is in place. Resultantly, there is a reduction in the equilibrium price as well as quantity.

When Supply Changes:-Supply-demand curve also observes a shift when there is any alteration in the supply of a product. Here are two phenomena regarding that –

•Increase in Supply

When demand remains constant with a change in supply, it tilts the supply curve towards right. Therefore, when the supply of a product rises its demand at the equilibrium level also increases. This situation leads to a competition among sellers, which results in a drop in prices of a product.

Moreover, this lowering of prices also increases the demand for a product in the market, which also affects its production. This process continues till a new equilibrium is found, and at that point, the price of a product decreases and its quantity increases.

•Decrease in Supply

Similarly, when the demand of a product remains constant, but its supply plunges, it shifts the supply curve towards left. This reduction of supply creates an excess demand at the equilibrium level, which results in an increase in the price.

Contrarily, this price hike will be accompanied by a lowering of demand and excess supply. This process will also carry on until a new equilibrium is found. Thus, the equilibrium price of a product will rise, but its quantity will fall.

Change of Both Supply and Demand:-The market situation is more complicated than the above-mentioned increase and decrease in supply and demand. Usually, supply and demand do not alter individually; instead, they change simultaneously. Here are four such occasions that arise in the real world –

1.Demand decreases and supply decreases

2.Demand increase and supply increases

3.Supply increase but demand decreases

4.Supply decreases and demand increases

A supply-demand curve is a pictorial representation of this discussion. This chapter of modern economics is vital for individuals to learn as it can help them comprehend the basis of economics. On e-learning platforms like Vedantu, they can access relevant study materials of this chapter. Also, they can register for an online class and doubt clearing session to enhance their preparations further.

Simple Applications of Demand and Supply:-

Supply-and-demand analysis may be applied to markets for final goods and services or to markets for labour, capital, and other factors of production. It can be applied at the level of the firm or the industry or at the aggregate level for the entire economy.

•Price floor:- A price floor is the lowest legal price that can be paid in a market for goods and services, labor, or financial capital. Perhaps the best-known example of a price floor is the minimum wage, which is based on the normative view that someone working full time ought to be able to afford a basic standard of living.

•Price ceiling:- A price ceiling is the mandated maximum amount a seller is allowed to charge for a product or service. Usually set by law, price ceilings are typically applied to staples such as food and energy products when such goods become unaffordable to regular consumers.

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