\(\overline { C } \) = 140

Personal Income = Personal Disposable Income + Personal Taxes + Miscellaneous Receipts of Government Administrative Departments

= 200 + 30 + 50 = Rs 280 crore

Given, E_d = -1
In this case, when Elasticity of Demand is (-)1, total expenditure will remain constant.
Total expenditure does not change.
When price is Rs.8 per unit,
Quality demanded = TE / P = 56 / 8 = 7 units

Difference between planned and market economy

Y = 2000, C = 900

Consider the equation of a straight line of the form,
                       b = ma + e
Where, m > 0 is called the slope of the straight line, e > 0 is called the intercept on the vertical axis.
When 'a' increases by 1 unit, the value 'b' increases by 'm' units. These are called movements of variables along the line. The entity 'e' is called the parameter of the line.
As the value of m increases, the straight line swings upward, This is called a parametric shift of line.
(i) A positively sloping straight line swings or rotates downward as its slope decreases.
(ii) A positively sloping straight line shifts upward parallel when its intercept increases.

Balance of Trade. It is defined as the difference between the value of goods exported and value of goods imported during an year. It takes into the exchange of only visible items (or visible goods). It does not consider the exchange of services between the countries. Symbolically,\(BOT=V_{ Z }-V_{ M }\)  whereas Balance of Payment on Current Account records imports and exports of visible items (goods) and invisible items (services) and unilateral transfers (gifts and donations). The net value of balance of visible trade and of invisible trade and of unilateral transfers is the balance on current account.

Foreign exchange rate refers to the rate at which the currency of one country is exchanged with the currency of another country.
(i) Fixed exchange rate is the rate which is officially fixed in terms of any other currency by the government, whereas Flexible exchange rate is that rate which is determined by the forces of demand and supply of foreign exchange.
(ii) Fixed exchange rate does not vary with changes in demand and supply of foreign currency, only the government has the power to change it, whereas Flexible exchange rate is free to fluctuate according to changes in demand and supply of foreign currency.

(i) Revenue deficit   (ii) Fiscal deficit

(i) Revenue deficit  It is the excess of revenue expenditure over revenue receipts.

Revenue Deficit = Revenue Expenditure-Revenue Receipts

(ii) Fiscal deficit It is the difference of total budget expenditure over total budget receipts excluding borrowings.

Fiscal Deficit = Total Budget Expenditure - Total Budget Receipts(excluding borrowings)

When there is a rise in the visit to foreign countries by the people in India, the demand for foreign currency increases. With the supply of foreign currency remaining same, the foreign exchange rate rises, implying a depreciation of rupee.

The producer's equilibrium condition's are (i) MC = MR and (ii) MC > MR after equilibrium, i.e., MC = MR.

  (i) When MC > MR: In this situation, it will be profitable for the given firm to produce more or less depending upon relative changes in MC and MR till MC = MR.

  (ii) When MC < MR: It will be profitable for the producer to produce more till MC = MR.

MC = MR is not a sufficient condition to ensure equilibrium. Given MC = MR, suppose the behaviour of MC and MR is such that if one more unit is produced MC becomes less than MR. Then, in this case, it would be profitable for the firm to produce more. Therefore, in this case, though MC = MR, the producer is not in equilibrium.

However, if after MC = MR output, MC becomes greater than MR, it will be most advantageous for the firm to produce only upto MC = MR.

(a) Price rigidity refers to product price fixed by the oligopolist after negotiating and deliberating with co-sellers. They usually stick to the price fixed in order to avoid any price war among them.
(b) The firm's or producer's equilibrium conditions are:
(i) MR = MC
(ii) Me must be rising after the MR = Me output level.
First condition MR= MC is a necessary condition but not a sufficient condition to ensure firm's equilibrium. This is because MR = MC at two output levels. But out of these, only that output beyond which MC becomes greater than MR is the equilibrium output. This is because MC is greater than MR. If the firm produces beyond MC = MR output, it will reduce its profits.

Price elasticity of demand is the degree of responsiveness of the quantity demanded of a good to a change in its price. Following are the factors affecting price elasticity of demand There are five degrees of price elasticity of demand which are gIven as:
(i) Perfectly Elastic Demand (e_D = \(\infty \)). When the demand of a commodity rises or falls to any extent at the prevailing price, it is said to be perfectly elastic demand. Here coefficient of elasticity of demand =\(\infty\) (infinity). See Fig. (a).

(ii) PerfectlyInelastic Demand (eD =0).When the demand of a commodity does not change at all irrespective of any change in its price, it is said to be perfectly inelastic demand. Here coefficient of elasticity of demand = 0 (zero). See Fig. (b).

(iii) UnitEkisticDemand(eD =1).When percentage change in the demand of a commodity is equal to the percentage change in its price, it is said to be unit elastic demand. Here coefficient of elasticity of demand = 1. See Fig.(c).

(iv)More Elastic Demand (eD > 1). When percentage change in demand of a commodity is more than the percentage change in its price, it is called greater than unitary elastic demand. Here coefficient of elasticity of demand> 1. See Fig. (d)

(v) Less than Unitary Elastic Demand (eD < 1). When percentage change in demand of a commodity is less than the percentage change in its price, it is called less than unitary elastic demand or less elastic demand. Here coefficient of elasticity of demand < 1. See Fig. (e).

Four limitations of using GDP as a measure/index of welfare of a country are:
(i) Non-monetary exchanges like the services rendered by housewives and other family members etc. are left out on account of non-availability of data and problem of valuation. Certainly these items contributed to economic welfare. If we depend only on GDP, then we would be underestimating economic welfare.
(ii) GDP doesn't take into account externalities positive and negative, which affect the welfare. Positive externalities increase welfare and negative decrease welfare. But by ignoring them, we overstate/understate welfare.
(iii) All products do not contribute equally to economic welfare. For example, Police services, food items, houses ete. may contribute more to the welfare of the people than products like pan masala, cigarettes ete. Eco welfare would thus depend upon the type of goods and services produced and not simply how much is being produced.
(iv) Change in the income distribution may also affect welfare. As there is unequal distribution of income which may be increase or decreased. If it increases, it may lead to a decline in welfare or if it decreases, it may lead to a rise in welfare.

As per the Hicksian analysis, the given consumer attains equilibrium when the two conditions are fulfilled.
(i) MRS = MRE = P_X/P_Y
Slope of Indifference curve = Slope of the Budget line
(ii) MRSfallsas more is consumed of one good at the cost of another.
Showing the condition of equilibrium diagrammatically.
The given budget line AB is tangential to the indifference curve I₂ at point X in the given diagram.This is the consumers equilibrium.The utility maximizing combination of the two goods is OQ of good

The central problems of an economy are as follows:
(a) What to produce is defined as the problem of choice between different goods that can be produced from the given scarce resources. An economy has millions of commodities to pr.oduce. It has to decide whether to produce luxury goods or necessities. It may have to decide between capital goods and consumer goods and so on.
(b) How to produce is defined as the problem of choice between different techniques of production available in the economy. Every economy faces the problem as to how resources should be combined for the production of a given commodity. Depending upon the abundance of a particular resource, an economy may choose between labour-intensive and capital- intensive techniques.
(c) For whom to produce is defined as the problem of choice between different ways of functional and physical distribution of income and output in the economy. What goods should be consumed and by whom depends upon how national product/income is distributed among people/factors of production. All central problems arise due to scarcity of available resources, having alternative uses.

P_X=Rs.2
P_Y=Rs.1
MU_X=4 utils, MU_Y=Utils,
Consumer is in equilibrium when \({MU_X\over P_X}={MU_Y\over P_Y}\)
Here, \({MU_X\over P_X}={4\over2}={2}\)
\({MU_Y\over P_Y}={4\over 1}=4\)
Clearly \({MU_X\over P_X}< {MU_Y\over P_Y}\)
Since per rupee, MU _x is lower in case of X, the consumer will transfer expenditure from X to Y by buying less of X and more of Y. Buying less of X raises MU_x while buying more of Y lowers MU_y.
Thus, MU_x rises and MU_y falls till \({MU_X\over P_X}={MU_Y\over P_Y}\)

An economic problem mainly arises on account of the scarcity of the resources available to satisfy the unlimited human wants. To a large extent, if the resources were not limited, the economic problem would not have arisen, because every want could be satisfied, i.e., everyone could have everything. But this indeed is not true as the reality is that relative scarcity will continue to prevail and the other related problem -of 'choice' would always exist. One is always confronted with the problem of what to choose and what to give up, i.e., sacrifice. Thus, scarcity, being a relative term, will always exist and so would an economic problem.

The government budget can be used to bring in economic stability. Economic stability refers to the minimization of fluctuations in prices (i.e., control of inflationary and deflationary trends) in the economy. Appropriate taxation, subsidies and public expenditure policies may be used for this purpose. When there is inflation, government can reduce its own expenditure and may impose new taxes and raise the rate of existing taxes, thus reducing aggregate demand and inflationary pressure thereby. When there is deflation, the government can increase its own expenditure. It can also reduce taxes and give subsidies to encourage spending by the people, thus increasing aggregate demand and reducing deflationary pressure thereby.

'Money is what money does' In the light of this statement, money performs four main functions, namely, medium of exchange, unit of account, store of value and standard of deferred payments. Only through these above' functions, money overcomes the shortcomings of the barter system. Now explaining the above functions briefly:
(i) Medium of exchange: It facilitates buying and selling of goods and services. So, exchange has become very simple and is conducted on a large scale. As a result, the level of production has also substantially risen with the introduction of money.
(ii) Unit of account: Measurement of the value of goods being exchanged was very difficult in barter system. This was because of lack of common unit of account. But now the introduction of money has removed this difficulty and each good/service is valued in terms of money, which acts as a common unit of account.
(iii) Store of Value: Store of value here refers to store of wealth in terms of paper titles like FDR's..... etc. It is a source of future investment for a secure future. All stored wealth should be properly invested and should not remain like idle-saving.
(iv) Standard of deferred payments: Money has made deferred payments (which are payments made in the future) much easier than before. When money is borrowed, it is to be returned with interest, i.e., both the principal as well as interest amount, are to be paid back. This function of money has facilitated borrowing and lending and also led to the emergence of 'financial market'.

(i) It is included in the \({ GDP }_{ MP }\), as it is a part of government final consumption expenditure.

(ii) It is not included in the estimation of   \({ GDP }_{ MP }\)because loans are not used for production purpose.

(iii) It is included in the estimation of because it is a part of final expenditure by a firm.

(i) Dividend received by a foreigner from investment in shares of an Indian company is included in National Income of India as a negative component, because it is a part of net factor income paid to rest of the world.

(ii) Profits earned by a branch of an Indian bank in Canada is included in National Income of India since, it is a part of net factor income from rest of the world.

(iii) Scholarship given to Indian students studying in India by a foreign company is not included in National Income of India because it is a kind of transfer income.