Class XI, Principles of Economics, "Market Price"

Market Price

Market price is the actual price that prevails in the market at any particular time. It never remains constant. It changes from day to day and even from moment to moment. It can change at any time at any moment.
Determination of Market Price
Market price is determined by the relative forces of demand and supply. The demand depends upon the satisfaction, which a consumer drives from the consumption of the commodity. Supply on the other hand depends upon the cost of production of the commodity. The consumer tries to achieve more and more satisfaction least possible expenditure. He does not pay more than the marginal utility of the commodity to him the seller on the other hand tries to maximize his profit by changing as much as he can. He will never accept the price which is less than the marginal cost of production of the commodity and thus marginal utility and marginal cost pf production are the two limits the maximum and the minimum and price is determined between these two limits, so we can say that,
“The price is determined at point where the amounts demanded and offered for sale are equal.”

Class XI, Principles of Economics, "Monopoly"

Monopoly

Monopoly is that market from in which the single producer controls the whole supply of a single commodity that has no close substitutes.
Two points must be noted in regard to the definition. First there must be an individual owner it seller if. There will be monopoly. That single producer may be individual owner or group of partners or a joint stock company or any other combination of producers of the state. Hence there must be a sole producer or seller in the market if it is to be called monopoly.
Secondly, the commodity produced by the producer must have no close substitutes. Competing if he is to be called a monopolist this ensures that there must no rival of the monopolist. By the absence of closer substitutes we mean that there are no other firms producing similar products or product varying only slightly from that of the monopolist.
The above two conditions ensure that the monopolist can set the price of his product and can pursue an independent price policy.
“POWER TO INFLUENCE PRICE IS THE VERY ESSENCE OF MONOPOLY.”

Class XI, Principles of Economics, "Price Determines the Demand"

Price Determines the Demand

The demand for the commodity is related to price. IT is always at a price. Prof. Beaham defines as under:
“The demand for anything at a given price is the amount of it which will be brought per unit of time at that price.”

Demand varies with price. It varies inversely with price. If the price rises the demand contracts and if the price falls the demand extends. This responsiveness depends on many factors the effective demand for necessaries generally do not change with price. In other words the effective demand for necessaries is inelastic. The may rise or fall but the effective demand for necessaries remain practically the same. The effective demand for comforts is elastic. In other words variation in for comforts is in perpotion to a change in price.

Class XI, Principles of Economics, "Importance of Elasticity of Demand"

Importance

The concept of elasticity is not just an abstract idea its practical importance is very great.
(1) Importance For Government
The concept of elasticity of demand helps the finance minister of the monopolist. When it imposes a tax. When a tax is imposed the price tends to rise. But if the demand is very elastic it will considerably fall when the price has risen and thus the government will not be able to earn expected revenue. Thus this concept of elasticity of demand helps the government to impose the tax on a commodity whose demand lass elastic and hence earn valuable revenue.
(2) Importance for Businessmen
The businessmen also take cue from the nature of demand while fixing his price. IF the demand is inelastic he knows that the people must buy such commodities. Thus he will be able to change a higher price and big profits.
(3) Importance for Monopolist
The concept of elasticity of demand is of special importance to the monopolist. He is in a position to control the price and fix high price when demand is inelastic and low price when it is elastic will bring him the maximum profit.
(4) Application in Case of Joint Products
In case of joint products seperate costs are not ascertainable. Hence the producer will mostly be guided by the nature of demand while fixing the price.
(5) Determinitation of Wages
The concept of elasticity of demand influences the determination of wages of a particular type of labour. If the demand of particular type of labour is inelastic trade union can easily get their wages raised. On the other hand of the demand for labour is relatively elastic trade union trade unions may not be successful in raising wages.
(6) Importance for International Trade
The concept of elasticity of demand is used in calculating the terms of trade. Whenever a country fees an adverse balance of payment the government considers the elasticity of demand for the countries export and imports before devaluing its currency.

Class XI, Principles of Economics, "Does it apply only to Agriculture?"

Does it apply only to Agriculture?

It is wrong to say that the law only applies to agriculture as agriculture is always subject to diminishing and manufacturing to increasing returns. The application of the law is universal. It applies to industries also. If the industry is expanded too much and becomes unwisely supervision will become tax and the cost will go up. The law of diminishing returns thus sets in. The only difference is that in agriculture it sets in earlier and in industry much later.

Class XI, Principles of Economics, "Why does Law of Diminishing Returns apply to Agriculture?"

Why does Law of Diminishing Returns apply to Agriculture?

The law of diminishing returns specially applies to agriculture and other extractive industries. One thing that is common to all these industries is the supremacy of nature. It is therefore often remarked that the part that nature plays in production corresponds to diminishing returns and the part which man plays confirms to the law of increasing returns. The reason is that, nature where it is supreme is subject to diminishing returns, while industry where man is supreme, is subject to increasing return. Besides the supremacy of nature, there are several other reasons why agriculture is subject to the law of diminishing returns.The agricultural operations are spread out over a wide area, and supervision cannot be very effective. Scope for the use of specialized machinery is also very limited. Therefore economics of large scale production cannot be reaped.

Class XI, Principles of Economics, "Law of Constant Returns"

Law of Constant Returns

Introduction
Similarly, in some of the cases, the increase in the productive unit keeps the production constant. This tendency is known as law of Constant Returns.
Explanation
When an increase or decrease in the output of an industry makes not alteration in the cost of production per unit, the law of constant returns is said to operate. In other words when fresh doses of productive resources results in an equal return, it is called constant returns.
The law of constant returns operates in those industries where the cost of raw material and manufacturing cost are half and half. In other words the law operates where man and nature dominate equally. It is also said that a point where the opposite tendencies of diminishing returns and increasing returns are in equilibrium is the Constant Returns.
Examples
Possible examples of industries where the law applies are cane growing and sugar making, Iron-ore mining and steel making, cane growing and iron ore are subject to law of diminishing turns whereas sugar making and steel making to law of increasing turns. In these industries the advantage of increasing returns are neutralized by increasing cost of raw materials.

Class XI, Principles of Economics, "Law of Increasing Returns"

Law of Increasing Returns

Introduction
In order to increase the production, a producer has to increase the proportion of its fraction of production. However, the returns due to variations in the factors are not fixed. In some cases, return due to each successive unit is increased. This tendency is known as Law of Increasing Returns.
Explanation
This law is mostly found to be operating in manufacturing industries. This law was first propounded by Prof. Marshall, in his words, the law states that:
“An increase of labour and capital leads generally to improved organization, which increases the efficiency of the work of labour and capital.”

According to this law whenever a new dose of labour and capital is applied it yields increasing returns. Also the cost of production diminishes.

Class XI, Principles of Economics, "Law of Diminishing Returns"

Law of Diminishing Returns

Introduction
In some cases the return due to each successive additional unit, the production goes on diminishing. It is known as Diminishing Returns and is further explained by the Law of Diminishing Returns.
Explanation
This law is one of the most fundamental law of Economics. Usually it is related with agriculture and was also first enumerated by a Scottish Farmer.
Usually an increase in any of the factor of production results in an increase in production but this change is a proportionate change. It means that if the quantity of land and labour is doubled, although there will be an increase in the production but it will not be doubled. And that is what Law of Diminishing Returns states. In the words of Marshall:
“An increase in the capital and labour applies in the cultivation of land causes in general a less than propotionate change or increase in the amount of production raised. Unless it happens to coincide with an improvement in the art of agriculture.”

Class XI, Principles of Economics, "Economics of Scale"

Economics of Scale

Professor Marshall his divided the economics arising from an increase in the scale of production of any kind of goods in the broad classes.
External Economics
The outcomes of the general development of an industry either in a particular locality or a country are called external economics of scale. These economics do not depend upon the organizing capacity of particular business man, rather they are available to all the businessman alike. They depend on external condition and independent of any individual business or establishment and of it’s resource. Some examples are

• Benefits of low freight rates
• Benefits of banking facilities
• Benefits of power development

Internal Economics
The outcomes of the expansion of a particular firm cutting down the production costs and securing increasing returns is called Internal Economics for that firm are not shared by other firms and only a particular business man or firm enjoys the benefits. There can be many casual economics for a firm when it expands itself. Some of them may be:

• Benefit of expert services
• Benefit of construction
• Benefit of use of latest machinery
• Benefit of use of division of labour.

Class XI, Principles of Economics, "Propositions of The Theory"

Propositions of The Theory

The theory propounded by Malthus can be reduced to the following four propositions:
1. Food is necessary for the life of a man and therefore exercises a strong check on population. In other words, the size of population is determined by the availability of food.
2. Human population increases faster than food production which tends to out turn the increase in food production.
3. Population always increases when the means of subsistence increase unless prevented by some powerful checks.
4. There are two types of checks that can keep population on a level with the means of subsistence. They are preventive and positive checks.
Explanation
The explanation of the propositions is:
Means of  Subsistence
According to the first proposition, the population of a country is limited by means of subsistence i.e. the population is determined by the availability of food. The greater the food production, the greater would be the population and vice versa.
Growth or Population Outruns Food Production
According to Malthus, there is no limit to the fertility of man. Man multiplies itself at an enormous rate. But the power of land to produce food is limited. It means that the production of land increases at a lesser rate as compared to production of man. Thus, the continued growth of the population would result in a decrease in output per worker and a decline in the amount of food available per person.
Population Increases When the Means Increase
According to third preposition as the food supply in a country increases, the member of children per family also increases. It, therefore, would result in an increased demand for food and their food per person will diminish. Thus, according to Malthus, the standard of living of the people cannot rise permanently.
Checks
According to Malthus, contain positive and preventive checks can control the population. Preventive checks are those that are applied by man and includes measures for bring down the birth rate. The positive checks on the other hand exercise their influence on the growth of population by increasing death rates. They are applied by nature. Epidemics, wars and famines are some examples of positive checks.
Optimum Or Modern Theory Of Population
According to the theory, given a certain amount of resources, the state of technical know-how and a certain stock of capital, a country must have a certain size of population at which the real income (goods and services) per capital is the highest. This size of population is called optimum population. In other words, optimum population refers to a size of population at which the real income per capital is the maximum. If population exceeds the optimum size, it is said to be over populated. Such a condition develops in a country. When it’s available resources are fully exhausted and there exists no chance of their further exploitation. It is necessary at this stage that the country must practice preventive checks and to escape from the misery of positive checks.
According to this theory, there are three phases population in a country viz.

(a) Under Population
A condition at which real per capital income rises with a rise in the size of population.
(b) Optimum Population
A situation at which real income per capital is the highest.
(c) Over Population
From under and optimum population, a country moves, unless preventive checks are applied, to the level of over population, at which the real income per capital diminishes.

Class XI, Principles of Economics, "Malthusian Theory of Population"

Malthusian Theory of Population

The Malthusian theory of population was first propounded in 1798 by a British economist Robert Malthusian. . In his own words the theory can be stated as,

“By nature human food increases in a slow arithmetical ratio: man himself increases in a quick ratio unless wants and vice stop him”


Malthus based his theory on the biological fact that every living organism tends to multiply to an unimaginable extant while on the other hand production of food increases with less than proportionate change. It is subject to law of diminishing returns. According to Malthus population tends to outstrip food supply.

Class XI, Principles of Economics, "Measurment of Elasticity"

Measurment of Elasticity

The practical purposes, it is not enough to know whether the demand is elastic or inelastic. It is more useful to find out to what extent it is so. For that purpose it is essential to measure elasticity.
Three methods are generally used for measurement of elasticity, which are explained below:
1. Total Outlay Method
In this method, we compare the total outlay of the purchases (or total revenue from the point of view of the seller) before and after the variations in the price. It may be expressed as:
Unity: It is unity, when even though the price has changed, the total amount spent or total revenue remains the same.
Greater than Unity
When with the fall in the price the total amount spent or total revenue increases on the total amount spent (total revenue) decreases when the price rise it is said to be greater than unity .

Less than Unity
Elasticity between two prices is considered to be less than unity when the total amount spent (total revenue) decreases with the rise n the price and decreases with a fall in the price.
Though this method is dimple it suffers from a serious drawback. It simply classifies the price elasticity in three categories and does not assist in measuring it in numerical terms.
2. Proportional Method
In this method we compare the percentage change in price with the percentage change in demand. The elasticity is the ratio of the percentage change in the quantity demanded to the percentage change in the price charged. Its formula is:
Elasticity of Demand = Propotionate Change in amount Demanded / Propotionate Change in Price
3. Geometrical Method
We can better understand with the help of the figure:
In the figure DD’ is the demanded curve which is a straight line. Here the demand is represented by the fraction distance from D’ to a point on the curve divided by the distance from the other to that point. Thus elasticity of demand on the points P1, P2 and P3 is.
If the curve is not a straight line the above formula can be used by drawing a tangent at a point where the elasticity is to be measured.

Class XI, Principles of Economics, "Elasticity of Demand"

Elasticity of Demand

Meaning
There is a close connection between the quantity of a commodity purchased and its price. Changes in price are bound to affect the purchasers. The law of demand only indicates the direction of change in the quantity demanded as a result of change in prices. It does not tell the amount or the extant by which the demand will change in response to changes in prices. The concept which measures the responsiveness of quantities demanded to price changes is the elasticity of demand.
The term elasticity expresses the degree of correlation between demand and price. It is a result at which the quantity demanded varies with change in price. It may be defined as “ The degree of responses (in the form of variations in the quantity demanded) to changes in price.
To be more exact we can say that “the elasticity of demand is a measure of the relative change in amount purchased n response to a relative change in price n a given demand curve.”
Kinds
There are various kinds of elasticity of demand viz:
1. Price elasticity
2. Income elasticity
3. Cross elasticity
4. Substitution elasticity

Class XI, Principles of Economics, "Demand Curve"

Demand Curve

Demand curve is a geometrical presentation of the demand schedule. Demand schedule is a table and demand curve is based on this table. Thus one represents the other. The above schedule can be stated in terms of demand curve as:
Changes in Demand
According to the law of demand the demand for a product increases due to change in its price. But there are certain other reasons that influence the demand. Some of them are as follows:
1. Changes in the Taste and Fashion
The changes in the taste and fashion influence the demand to a great extant. Actually a human being psychologically want continuous change in his life style so that he get maximum satisfaction .To achieve his state of satisfaction he do not consider whatever the price of commodity he has to pay. Even if the price is high and the commodity is in high fashion or matches exactly his taste he will ultimately go for purchasing it.
2. Change in climatic conditions
The climatic conditions tend to increase or decrease the demand for a product. In winter there a great demand for warm clothing and in summer there a demand for electric fans and cold rinks and the marketers do not usually charge , less prices in these seasons in order to sell their products.
3. Change in Population
A change in the composition of the population will also affect demand. Influx of new people will create a demand for the good; they are in the habit of consuming. If the population of a country is rising, the over all demands of the people increase even at the same high price.
4. Change in the Amount of Money
Inflation also has a significant bearing on the demands of the people. When there is inflation it causes a great deal in demand, which leads to an increase in prices. Similarly if the amount of money is decreased the demand goes down even if there is no change in its price.
5. Change in Methods of Production
Changes in techniques and in the use of factors will affect the demand pattern of those factors as in the case of capital equipment and labour or chemicals.
6. Changes in the Price of the Substitutes
If the prices of the substitutes are varied their demand will directly be affected. If the price of any commodity whose substitute is also available in the market is decreased its demand will be increased whereas the demand for its substitute despite of unaltered price will fall down.
7. Changes in the Wealth Distribution
The distribution of wealth also affects the demand for a product. If the wealth is distributed evenly the goods demanded by people the have acquired more wealth will increase and demand of the people who have lost wealth will decrease.
8. Anticipated Political or Price Change
Some time norms and general speculation about tax changes war etc or of future shortages or abundance causes the present pattern of demand to change.
9. Changes in Conditions of Trade
The conditions of trade are closely related with the demand of the product. Demand for every thing is greater in a boom though the prices are rising. Opposite is the case when there is depression

Class XI, Principles of Economics, "Demand Schedule"

Demand Schedule

Demand schedule is simply a statement in the form of a table given against each price the quantity of the commodity that will be demanded for a given period of time.

The individual demand schedule is not of very great importance. It shows only the demands of an individual. Putting down against price the total quantity of commodity, which will be disposed off in the market, can prepare the market demand schedule.

Class XI, Principles of Economics, "Law of Demand"

Introduction of Law of Demand

Demand depends on price. Demand is always at a price. At different prices different quantitities will be purchased. The law of demand states:

“Demand varies inversely with price not necessarily proportionally, it means that when price falls demand rises and vice versa.


It can also be stated in these words:

“A rise in the price of a commodity or service is followed by a reduction in demand and a fall in price is followed by increase in demand if conditions of demand remain constant.”


It can also be written in the words of S.T. Thomas as:

“At any given time the demand for the commodity or service at the prevailing price is greater than it would be at a higher price and less than it would be at higher price and less than it would be at lower price.”


There are several factors that cause change in demand e.g. changes in weather, fashion, taste, change in population etc.

Class XI, Principles of Economics, "Marginal Utility and Price"

Definition of Marginal Utility

When we pay a certain price for a commodity it can be taken for granted that we think that the satisfaction is at least equal to the price paid. Hence we say they the price paid measures the marginal utility to that marginal utility indicates price. They move together. If the price goes up, the marginal utility also goes up, because now we buy less and vice versa. Marginal utility does not determine or governs price. It simply indicates it.

Law for Equi-Marginal Utility

The law of Equi marginal utility is also called law of substitution, law of maximum satisfaction or law of indifference.
Statement and Explanation
We all know that our wants are competitive. We have therefore to make a choice between the more urgent and the less urgent wants. When we are more or little less of a commodity it seems that we are trying to balance the marginal utility of the commodity and the money. Every person wants to make the best of his or her resources. This is necessary because resources are scarce in relation to wants. Every consumer aims at getting the maximum possible satisfaction for which he substitutes the more useful for the less useful things. When he does so, the marginal utilities in each direction will be equalized. It is only when marginal utilities have been equalized, through the process of substitution, that we get the maximum satisfaction.
Example
Suppose our hypothetical consumer has a given amount of income to spend and wants to maximize his satisfaction. We further assume that the commodities are subject to law of diminishing utility. He feels that he will aim greater satisfaction if he spends on any other good. Thus he goes on substituting one thing for another until the whole of the money is exhausted. When this is done he has got equi marginal utility. He cannot now increase his total utility by spending more on one thing and less on the other.
The law can be easily understood with the help of a hypothetical example. It is assumed that our consumer has only rupees 8 with which he purchases two comities say apple and bananas.

Class XI, Principles of Economics, "Criticism"

Criticism

One of the pivoted assumptions of the law is that utility is measurable. In other words it is assumed that it is possible to express the utility or satisfaction, which a person desires from a good in qualitative terms. But utility relates to the state of mind of an individual. Thus it is a subjective term and is capable of being measured.

The law assumes that margined utility of money is constant. But it is not true. Actually as more and more is spent on the purchase of a commodity and less and less money is left with the purchaser the marginal utility of money goes on increasing. Thus the unit of measurement itself is variable.

The law does not apply to all types of commodities and persons. A drunkard gets more satisfaction on taking successive cups of wine. Greed increases with more money with some people.

Class XI, Principles of Economics, "Mobility of Labour"

Mobility of Labour

Meaning
The capacity of a worker to move from one place to another is called mobility of labour. E.g. the movement of villagers towards cities for sake of employment, shifting a worker engaged in production to distribution.
Kinds of Mobility of Labour
Mobility of labour may take any one of the following kinds:
1. Geographical Mobility of Labour
The movement of a worker from one locality to another in search of employment is called geographical mobility of labour. E.g. if a worker has moved to Dubai in search of employment it will called geographical mobility.
Geographical mobility is of two types:
(i) National Mobility
If the movement of labour is with in the national boundaries of the country i.e. within the country it will be called national mobility.
(ii) International Mobility
When the movement of labour takes place across international boundaries i.e. out side the country such kind of mobility is called international mobility.
2. Occupational Mobility
The change of profession or occupation for the sake of getting better financial reward is called occupational mobility of labour. It is also called professional mobility e.g. if a labour changes his profession and starts a hotel it will be deemed as his professional or occupational mobility. It may be further classified as:
3. Horizontal Mobility of Labour
It is also known as parallel mobility of labour. It means that a worker moves from one employment to another without any change in his grade or salary e.g. a college clerk is transferred to the university office with the same salary and facilities.
4. Vertical Mobility of Labour
It refers to that mobility in which a person is transferred from a lower grade to a higher with an increase in his salary and other facilities e.g. an asst marketing manager is promoted as the marketing manager.
Diagram. Coming Soon…
Ox and Oy are the two axes. Units of apples are represented along ox and units of utility along oy. Utility of the first apple is represented by the rectangle standing on the utility of each successive unit consumed is represented by rectangles as shown in the figure, These rectangles are getting smaller as we consume more and more apples. The 5th apple yields no utility. The e6th and 7th have negative utility as shown by the rectangles below the axis.

Class XI, Principles of Economics, "Division of Labour"

Division of Labour

Definition
The splitting of the production process on to its components process is known as division of labour. Each process is entrusted into a separate set of workers so that all of them co-operate to produce a single product. Division of labour is the result of specialization. Different workers who are assigned specific operation are specialized and skilled in their work.
Division of labour today is an important characteristic of the system of production. Infect there is hardly any producing unit of respectable size which does not organize production on the basis of division of labour.
Kinds of Division of Labour
Following are the types of the division of labour:
1. Simple Division Of Labour
It means the division of society in to major sections each specialized in occupations e.g. carpenter weavers blacksmith etc.
2. Complex Division of Labour:
In this case no groups of workers make a complete article. Instead the making of the article is split up into number of process and sub-process and each is carried out by a separate group of people.
3. Irrational or Geographical Division of Labour
This form refers to certain localities cities or towns specializing in the production of a particular commodity. It is also called localization of industries or regional division.
4. Occupational Division of Labour
It refers to professional division of labour i.e. each and every person be engaged in different office and job. For example some one working as a clerk, other as a manager, a lecturer in a college etc.

Class XI, Principles of Economics, "Factors Determining Efficiency of Labour"

Factors Determining Efficiency of Labour

Some of the factors upon which the efficiency of labourer depend are follows:
1. Personal Characteristics of Labourer
The efficiency of labour depends to a great extant on its race and heredity. The workers belonging to certain races inherit efficiency and are used to such conditions, which belong to their work.
Some races are better endowed with physical and mental capacity than others. Every individual inherits some qualities from her racial stock to which he belongs.
2. Power to Work
A worker needs to possess good and sound health in order to be efficient in his work. He must be intellectual and intelligent. Intelligence and intellect makes a man clear in his thoughts quicker in action and thus incenses his efficiency.
3. Education
Education increases the efficiency of labour. It helps him to perform his duty with more intelligence. Skilled and trained workers prove to be more efficient then the untrained ones. The technical fitness depends upon the opportunities for training of labour.
4. Moral Qualities
Efficiency also depends how much the worker is morally fit. Honesty sincerity soberness and willingness increases the efficiency. The moral fitness depends on the attributes of characters.
5. Climate and physical conditions
The climate and physical conditions of a country affects the workers efficiency. In some countries the extreme conditions of weather restrict the workers to work efficiently. It does not allow the workers to work to there least and thus their efficiency and productivity both fall down. Mild and moderate climate conditions are considered ideal for production.
6. Fair and Prompt Payment
A worker will obviously be instructed in those industries where higher wages are available to him. A well-paid worker is contended and thus puts his heart in his work especially if he is promptly and punctually paid.
7. Nature of Work
Efficiency of labour is also affected by the nature of work. Where the work is monotonous the labourer ceases to take interest in his work. Similarly every work cannot be done with same technique. It depends upon the nature of work that how to perform it. Some works require more efficiency and skill on the part of workers and thus the productive capacity of the workers is increased.
8. Conditions of Work
The working conditions also play an important role in the efficiency of labour. Good lighting, ventilations, sanitations, artistic structure of the building, clean and quite atmosphere have a substantial bearing on the efficiency of workers.
9. Labour Legislations and Social Security
The workers need social security. They want to protect themselves through labour laws. The countries where there are good labour laws the workers or laborers find themselves more secure and hence have high efficiency to work. For getting good production the management must formulate such policies and rules that may give the workers the freedom to work. The countries where the labour legislation is absent their efficiency is very low.
10. Hope for Future Prospects
Labour desire to work in those firms where chances of promotion are available. Workers who have no hopeful prospects even a t good reputation lose to take interest in their work.
11. Division of Labour
Division of labour greatly influences its efficiency. When a whole task is split up into various parts and different parts are entrusted to different workers such workers become expert on performing their respective duties.
12. Efficiency of Organizer
Efficiency of labour also depends upon the ability of the organizer. The manner in which he makes the labour work his behavior his management his choice of machines and raw material introduction of labour organizations and the way he employs his men affect the efficiency of labourer.

Class XI, Principles of Economics, "Efficiency of Labour"

Efficiency of Labour

In very simple words efficiency of labour mean productive capacity. The capacity of a worker to work more or less in a given period of time is called his efficiency. Marshal defines efficiency as
“At a particular time the ability of a labourer to do better or much better and more work is deemed as the efficiency of labour.”

Efficiency of labour is a comparative concept. It compares the two or more workers. For example if a carpenter can make three chairs a day and another can make only one chair a day then this Implies that the efficiency of labour of the first worker is three times more than of the second. All the labours performing the same work turnout with different qualities in the same time depending upon their efficiency .All the laboures may not give similar output on a given period of time due to a difference their efficiency. Generally it depends upon the following factors:

• Personal qualities of labourer.
• Atmosphere of a country
• Atmosphere of the working place
• Ability of the organizer
• Miscellaneous

Class XI, Principles of Economics, "Labour"

Characteristics of Labour

Some of the characteristics of labour are as follows:
1. Labour is In-separable Form of Labourer
A Labourer cannot work without his labour. Whatever he performs is a result of his mental and physical exertion. Both cannot be separated from each other. The main driving force of a labourer is his labour. It may not happen that a labourer remains at home and ask his labour to go for work. It is covert i.e. it is present within a human being.
2. Labour is Indispensable for Production
As a matter of fact production is not possible without labour. In other words production is the aftermath of labour. Labour is necessary to activate production process. Every aspect of production ranging from purchase of raw material to final distribution in the market entirely depends upon labour. As a general rule, “efficient labour gives efficient production.”
3. Labour is perishable
A very important characteristic of labour is that it is perishable by natural law. It perishes with the passage of time. Since labour is present within a human being, therefore end of a laboures life means an end of labour as well. A loss of labour means loss forever.
4. Labour is an Active Factor of Production
Labour gives production itself. Nothing has to apply to start work except labour itself gives the performance and thus activates the production process. A noteworthy feature of this characteristic is that other factors of production cannot produce any thing without aid of labour.
5. Labour Sells his Service not Himself
Labour falls within the category of service industry. It is an intangible product of labourer for which he is free to sell it to anyone he likes. The place where he is free to sell it to any one he likes. The place where he works and the people, who hire him, actually hire the labour service not him.
6. Labour is Both Means and Ends of Production
Labour is not only meant for producing. They are fully entitled to use what ever they have produced. Being human being the labour works for the satisfaction of their wants and their labour act as the means to achieve their ends i.e. their satisfaction.
7. Labour is mobile
Avery important characteristic of labour is that it is mobile in nature. It may be shifted from one place to another whenever and wherever it is needed. But how ever the laborers when get set at the particular working place not very easily move from there because they may be fully satisfied working there.
8. Labour cannot be Calculated
The amount of labour spent on a particular work cannot be calculated. It is almost impossible even to assume that how many units of labour are required to perform a particular work. Labour therefore is an immeasurable factor of production.
9. Labours Differ in Efficiency
Alls the laboures are not alike there ability to do a work i.e. the labour differ from each other. A labour having high mental and physical capabilities to do a work differs from that having low physical and mental capabilities. This efficiency depends on a number of factors.

Class XI, Principles of Economics, "Importance of Capital"

Pakistan is one of the less advanced countries of the world. We use very little capital in production as compared to advanced and developed countries. There fore of our working force is engaged in agriculture. In most cases capital consist if a few cattle and a few wooden tools and a cart in some cases. Some expensive forms of capital; are also being supplied by the government in certain parts of the country and some other facilities are also being provided e.g. irrigation canals railways and roods etc. The government also owns some powerhouses. As a result n new industries are springing up which use modern method. Hence we have factories and machines at work. But still their importance in the economy is yet quite small. If we want to develop ourselves economically we must increase our capital supply. Without adequate capital to call ourselves a developed nation would become a mere dream. Nowadays the key to success economically and industrially is the supply of capital. We can take the example of Korea Japan China America Germany etc. They are not born established nations. They have relied on themselves conduced the people to save and made efficient use of capital. Very simply we can say that in to days age and era of technology and industry a country like Pakistan has to rely heavily on capital formation and hence the capital.

Class XI, Principles of Economics, "Formation of Capital"

Formation of Capital
Capital is the produce means of production and it comes in to existence when wealth is used for further production. The formation of capital depends upon:
1. Ability to Save and Invest
Ability of saving and investing of the people largely depends upon the excess of income over expenditures. Taking the people as a society it can be said that the ability to save and invest of a nation depends or is determined by excess production over consumption there will be no saving .In terns this saving becomes a part of capital formation.
2. Willingness to Save and Invest
Willingness to save of the people depends upon the consideration. This consideration may either be subjective or objective. Subjective consideration or personal factors include the factors, which are associated with the individual who save. This consideration include the following:
(i) Foresightedness
People save a certain portion of their money by way of foresightedness. They save for rainy days or to meet social obligations like education and marriages of their children in later part of their lives.
(ii) Social and Political Consideration
It refers to that part that people save in order to have a prestige in the eyes of others. A wealthy man is given much respect in the society and therefore people save to become wealthy and gain social prestige.
(iii) Economic Consideration
Economic consideration refers to the idea of receiving income from saving. People save to make further earnings. Entrepreneurs making saving in order to use it for further expansion of their wealth or to covet the gap between receipts and expenditure on the course of their business.
3. Mobilization of Savings
The next step is the formation of capital is that savings must be mobilized and transferred to the people who require them for investment in the capital market funds are supplied by individuals, investors, banks, investment trusts, insurance, companies, finance corporations, government etc. if the rate of capital market is to be stopped up the development of capital market is very necessary.
4. Investment of Saving in Real Capital
For saving to result in capital formation they must be invested. There must be number of honest and dynamic entrepreneurs in the country who should make investment of the savings. They will make investment if there is sufficient inducement to invest, which depends on the marginal efficiency of capital i.e. the prospective rate of profit on one land and the rate of interest on the other.

Class XI, Principles of Economics, "Capital and Wealth"

Capital means wealth in ordinary sense. But in economics both are treated and defined differently from each other. Capital is defined as
“The part of wealth of individual or communities other then land which is used or intended to be used for further production of wealth.”

In other words,
“Capital is that wealth other then land which aids in the production of further wealth or which yields an income.”

Where as wealth is defined as,
“All those goods which possess utility and have value in exchange are called wealth.”

In other words,
“Economic goods are called wealth”
Thus capital includes all the goods that are used for further production for yielding income while wealth includes that can be exchanged for certain value.

Class XI, Principles of Economics, "Capital"

Definition

Money is some thing, which has general acceptability in the settlement of debt, or in transfer of ownership of goods and services in a country. The value of exchange of every thing in a country is expressed in terms of money.
Mr. Robertson defines money in the following words

“Money is a commodity which is widely accepted in payment of goods or in discharge of other kinds of business obligation”.

An English economist Mr. Hawtrey observes that
“Money is one of those concepts which are definable primarily by the use or the purpose which they serve”.

In the words of Goh Cole,
“Money is purchasing power some thing that buys things”
According to Ely,
“Any thing that passes freely from hand to hand as a medium of exchange and is generally received in final discharge of debts”.
One of the simplest definitions of money is given by Mr. Walker who says that
“Money is what money does”.
In the light of the above definitions, it can be said that
“Any thing that is generally accepted as a means of exchange and at the same time acts as a measures and a store of value”.

Class XI, Principles of Economics, "Land"

Meaning of Land

Very simply we can say that all what is given by nature for the use of mankind is called land.
Marshal defines land as,
“By land is not merely meant land in the strict sense of word but whole of the materials and forces which nature gives freely for mans aid in land and water in air light or heat.”

In the light of above definition land is not only a piece of land as we generally understand nether it includes mineral wealth surface of ground, fishes, air, sunlight, oceans, streams, fertility of soil, rainfall etc. In short we can say that what ever we find below and above the surface of earth and seas, comes within the category of land it is a free gift of nature. The tern land is one of the broodiest terms that are used in economics.

Characteristics of Land

Some of the important characteristics of land are as follows:
1. It is Fixed in Quantity
One of the most important features of land is that it is fixed in quantity nither it can be decreased nor increased since it is a nature’s gift its quantity is naturally fixed. Humans do not have the power that can help them in changing the quantity of the gift of nature. Due to this the productive activities get restricted or limited to the particular size of land. It can be said that the extant of production largely depend upon the availability of land.
2. Land is an Indispensable Factor
Land is the most essential factor of production. Without land no business or productivity can even be initiated. Since land does not merely means a estate, it also include air, water, light etc. which are indispensable factors to produce something. Therefore it is rightly said, “No land no production”.
3. Land is Passive in Nature
Land is passive factor of production i.e. it cannot produce any thing by itself. It needs something to activate its productive capacity. Efforts have to be made effectively so that full utilization of this factor can be obtained. A number of other sources and elements are properly applied to get efficient production.
4. Land is Immobile
Land cannot move. It is immobile in nature and is a non-portable commodity. It cannot be transferred from its place to a new one even if the conditions are more favorable to increase its capacities. It remained fixed on a particular location and its position cannot be changed.
5. Fertility of Land Differs
An important characteristic of land is that all lands differ from each other In terms of their fertility. They all are not equally alike. As a result one cannot expect to get same quantity or quality or production from different pieces of lands. Equal and identical production may not be achieved on different lands at the same time. Although artificial measures are available but they only help to activate the fertility but are incapable of making the lands equal in production.
6. Land is Indestructible
Since land is a gift of man cannot destroy nature and it. It is a gift from the nature to humans for satisfying and fulfilling his needs and wants. It is not a result of his efforts and sacrifices.
7. Its Value is Different
The value of land to great extant depends on its fertility and location. Higher the fertility higher the value, lower the fertility lower the value. Similarly a land near to market may have higher value as compared to the land located away from the market.

Class XI, Principles of Economics, "Scope of Economics"

Scope of Economics

The scope of a subject refers to the fields they actually cover. The scope of economics can be finely understood if we classify it into heads viz:
1.Subject matter
2.Nature
3.Limitations
These headings are discussed as under:
Subject Matter
It can be further studied as:
According to Adam Smith
The classical economist Adam Smith considered wealth as the subject matter of economics. According to him economics deals with the activities of man in earning his income me and spending it among different objects in order to obtain the maximum benefit for satisfaction of his wants.
According to Marshal
The neo classical economist Alfred Marshal regarded material welfare it be the subject matter of economics. According to him the activities of man kind as a social being and in the ordinary business of life which are related to the attainment of economic well being through the use of the material requisite are considered to be the subject matter of economics.
According to Robbins
According to Robbins those activities, which originate because of the imbalance relation between human wants and available resources constitute the subject matter of economics.
According to Keynes
Keynes is of the view that economics problems constitute the subject matter of economics.
Nature of Economics
The nature of economics includes study or discussion that weather economics is arts or science?
Economics as a Science
Most of the economists regard economics as a science because it is a body of knowledge, which deals facts and rules and studies their cause?????? with their effect. Now economics as a science generally studied two heads:
Economics as a Positive Science
Most of the English economists regard economics as a positive science because it examines the relationship between causes and effect. It studies economic problems, which are existing and effect directly human life.
Economics as a Normative Science
Some economists think that economics is a normative science. It tells that weather a particular thing is describable or not. The aim of economics is to promote human welfare so it studies the factors relating to what out to be.
Economics is an Art
Economics not only studies how economic problems arise but it also recommends positive measures to end these problems. The purpose of economics is to promote welfare and satisfaction and thus it outlines the guidelines to achieve these objectives.
Limitations of Economics
Economics has some limitations, which are as follow:
1. Economics does not study all human activities. It is limited only to those activities, which are related to wealth.
2. Economics studies only the human activities. It does not study the activities of other creatures.
3. Economics studies the activities of normal real and social man. The activities of insane, drunkards etc are not studied under economics.
Un-Employment can be Eradicated
Economics can help to reduce unemployment through division of labor large-scale production etc.
Distribution of Money
Economics teaches equal distribution of money among all the people to discriminate the difference of rich and poor through laws of taxation etc.
Utility to Individual
It can be studied as:
1. Utility to Producers
The study of economics is of great importance to the capitalitists. It can help them to achieve cooperation of the working classes, utilize the available resources and factors of production to their best out put and maximum profit. Buing and selling principles, supply consumption, demand determination etc are to be solved though economics.
2. Utility to Consumers
Economics offers practical guidance to the consumers. It suggest them the principle by which he can drive maximum satisfaction and benefits out of his limited income it helps him to divide his income successfully between the expenditure of necessasities, comfort and luxuries.
3. Utility to Laborer
The study of economics is also useful for the laborers. It encourages him to claim appropriate return for his work.

Class XI, Principles of Economics, "Comparison of Marshall’s and Robbins Definitions of Economics"

After comparing the two definitions of economics given by two eminent economists the following differentiating points have come forward: Marshal was of the view that economics is a study of mans action in the ordinary business of life. In other words he wants to study economics, all those activities which are directly related to wealth. Robbins on the other hand regards economics as the study of economic aspect of all human activities. Marshal’s definition is quite materialistic .he has restricted economics to a study of human behavior related to wealth. Robbins on the other hand takes in to account the human behavior related to scarce means.
Marshal’s definition is classificatory. It classifies human activities in to economic activities and non-economic activities. Robbins definition on the other hand is analytical.
Marshal’s definition includes the economic activities of only those persons who member of society. Robbins definition includes the activities of social human beings only as far as they are concerned with wealth. Robbins definition is study of every human behavior, which is related to scar means.

Class XI, Principles of Economics, "Robbins Definition of Economics"

Robbins Definition of Economics
Prof. Lionel Robbins gave his definition of economics in his book” Nature and significance of Economic Science” in the year 1932 .He defined economics as,
“Economics is the science that studies human behavior as a relationship between ends and scarce means which have alternative uses.”

Robbins definition is based on:
1.Multiplicity of wants.
2.Scarcity of means
In other words, Robbins definition says that:
1.The ends are unlimited,
2.The means to achieve those ends are limited, and
3.The means are capable of alternative uses.
ATTRIBUTES OF THE DEFINITION
Followings are some of the attributes of Robbins definition:
1. Multiplicity of Ends
As a matter of fact, never come to an end. They are always unlimited. As soon as one want is satisfied, another comes forward. Thus it is the unlimitedness of a person wants that never stops him from working and keeps him engaged in the work of earning money for the satisfaction of his wants.
2. Scarcity of Means
It refers to the limited resources due to which economic problems arise. But if the resources were unlimited, then consequently there would have no economic problems and all the wants would have been satisfied. But it should be noted that the means are scare with respect to their demand.
3. Selection / Urgency of Wants
It is obvious that some of the wants are more urgent for us as compared to others. Naturally, we go to satisfy our urgent needs / wants first and then the remaining ones. If all the wants are same there would be no urgency to fulfill then and hence no economic problem would arise.
4. Alternative Uses
According to the Robbins definition all the scars means are capable of alternative uses i.e. they can be put to a number of uses e.g water can be used for drinking as well as for cooking. The main problem arises that where the utilization should be made first.
5. Human Science
Robbins in his definition has broadened the scope of economics. According to him economics is the study of human behavior as a whole both with in and out side the society. It does not restrict the subject matter within specific limits.
CRITICISM OF THE DEFINATON
Robin’s definition also faces criticism from many economists. Some of the criticizing points areas follows:
1. Economics as a Positive Science
According to Robins, economics discovers only the facts that give rise to certain problems and does not give suggestions as to how to deal with human behavior that varies from man to man and from time to time. So it is not a physical science, which deals with matter and energy and remains unchanged at any place. Economics is therefore not a physical science. It discovers both causes / efforts and suggestions.
2. Human Touch Missing
In Robbins definition the human touch is entirely missing. It does not take in to account the systematic thinking, human sympathy, imagination and the variety of human life.
3. Abstract and Complex
Robbins has made economics more abstract and complex and hence difficult. This distracts from its utility for the common man. Utilities of economics lie in being a concrete and realistic study.
4. Macro Concept
Another criticism on Robbins definition is that it ignores the macro aspect. It has ignored the issues like employment, national income from its boundaries.
5. Does not Covers Economics of Growth
The economic growth theory or economic development theory has been overlooked in Robbins definition. Economics of growth explains how an economy grows and the factors, which bring about an increase in national income and productivity of the economy. Robbins takes the resources as given and discusses only their allocation.

Class XI, Principles of Economics, "Marshal’s Definition of Economics"

Marshal’s Definition of Economics The new classical definition or Marshal’s definition of economics says that:
“A study of man kind in the ordinary business of life. It examines the part of individual and social action which is most closely connected with the attainment and use of material requisites of well being”

In simple words, he said
“Economics is a link between wealth and welfare”
This definition has generally regarded economics as
“Science of material welfare”
Generally this definition is considered to be the finest of all since it encircles man’s activities performed by him for earning and spending of his income.
ATTRIBUTES OF THE DEFINITION
Marshal’s definition of economics contains the following attributes:
1. Study of Mankind
According to this definition economics is the study of human beings. It emphasizes on man. It excludes the study of plants animals and beasts. But it does not study the activities of all human beings. Despite it studies only the activities of real, social and normal man.
2. Material Welfare
According to this definition, wealth is achieved for material welfare. Material welfare refers to the economic prosperity and well being which is achieved through earning of wealth. Of course, the aim of a man’s life is to attain the welfare, which is possible through wealth.
3. Economic Aspect of Life
In the light of this definition economics studies only the economic aspect of life and leaves out the other aspects of social, religious, political etc. economic aspect relates to how a man earns his income and how he spends it.
4. Studies of Physical Activities
According to this definition, economics studies only material activities such as that of carpenters, masons etc. The activities of teachers, doctors engineers i.e. services have been neglected.
5. Economics is a Social Science
Economics is a social science and not one which studies isolated individuals. In economics we study persons living in a society, influencing other people and being influenced by them.
CRITICISM OF THE DEFINITION
Prof. Lionel Robbins criticized strongly Marshals definition of economics. He pointed the following defects in the definition:
1.Narrow Concept of the Subject
Since marshal concentrated mainly on material welfare as a result of the material goods therefore according to marshal’s definition only those activities, which produce material goods, are studied in economics and the service sector of the business has been entirely neglected. This proved to be a major criticized part of the definition.
2. It is Classificatory
Marshal’s definition is classificatory. It has classified economic phenomenon in to material and non-material. The definition how ever recognizes only the satisfaction of material needs in to the subject of economics.
3. Ambiguity in Definition
The distinction made in this definition between ordinary business of life and extra ordinary is not clear.
4. Welfare cannot be measured
Welfare is a state of mind and is unquantifiable i.e. it cannot be quantitatively measured. The correct amount of welfare cannot be measured and the satisfaction derived from the purchases or performance or activities cannot be calculated in exact figures. Only the assumption can be made. For instance if two friends purchase the same commodity, it would almost be impossible to identify, measure or even assume that how much welfare they are going to gain through their purchases.
5. Economics is not Purely a Social Science
Marshals have defined economics as a social science. According to him that all men being members of the society is the concern of the subject but a man living in jungle does not fall within its orbits. But Robbins argued that economics studies all human beings whether or not they are members of society. Thus it is better to call economics as “human science”.
6. Objection on Welfare
The objection is not merely to the word material but also to welfare. If economics is made to welfare rather than wealth it gives rise to anomalies e.g. Intoxicants come under wealth but their use is not conducive to human welfare. There are on the other hand, many things like love and affection, which are highly conducive to welfare but are not regarded as wealth. In deed about welfare vary from time to time, person-to-person and place-to-place.

Class XI, Principles of Economics, "Smith’s Definition of Economics"

Smith’s Definition of Economics “Science which enquires the nature and cause of the wealth of nations.”
CRITISM
Actually speaking the definition given by Adam Smith had been boldly criticized on the following grounds:
1. One Sided Definition
It was the one sided definition because of only wealth had been taken in to consideration while “humans” were neglected who are equally important in the discussion of economics.
2. Emphasis on Wealth
According to this definition, wealth was given to much concentration on wealth that destined man selfish and illustrious. Therefore the social reformers raised voices against this definition.
3. End Or Mean
Wealth was taken as end by itself and not a mean to an end. This concept is wrong because wealth is the source of satisfaction and satisfaction by itself. It is a mean not an end while it is for man and man is not for wealth.
4. Narrow Sense of Wealth
The term wealth was interpreted in a very narrow sense. Wealth meant something tangible, visible and concrete object, which is capable of satisfying human, needs thus all the intangible goods and services which provide to human being were completely ignored.
5. Limited the Scope
According to the classical definition, “Science of wealth” was regarded as a subject matter of economics had been left out from its study. Only the people engaged in production and consumption were studied under this definition.

Class XI, Principles of Economics, "Early Definitions of Economics"

The classical school of thought i.e. Adam Smith, N.W Senior, Hills, Malthus and Ricardo have defined economics as,

“Economics is the science of wealth”
In the words of Adam Smith,
“Science, which enquires the nature and cause of the wealth of nations”
Waller defined economics as,
“Economics is that body of knowledge which relates to wealth.”
In the words of Mills,
“Economics to the science of wealth in relation to mass.”
In short, the classical school of thought emphasized purely wealth. So we can say that
“Economics studies the production, consumption, exchange and distribution of wealth.”

Class XI, Principles of Economics, "Origin of the word Economics"

According to economists, the word ‘economics’ has been derived from the word ‘Political Economy’ which consist of three Latin words:
Polis which means state.
Plika which means domestic or related home.
Nama which means principles.
i.e. it means those principles which are adopted in a home to bring a balance between income and expenditure that can be applied to a state for the sake of balance. Most economist vise of the vices state that the Economics has been derived from the Greek word “OIKONOMOS”.

Class XI, Principles of Economics, "Basics of Economics"

Concept

As a matter of fact a man is born with wants, which are always unlimited. A human being always try to satisfy his wants i.e. satisfaction of wants becomes a prime objective of his life. In order to satisfy his wants, a man has to work. Since most of the wants are mainly related to the materialistic well being of a person’s state of life, therefore the work that he doses gives him a material reward.
Economics deals with all those efforts or activities human being for bringing welfare in his life and for satisfying his wants performs them. The basic objective for the performance of such activities to achieve satisfaction and the driving force working behind it is to earn money it is to earn money i.e. to receive income.
In the light of above forts we can define in very simple words,” economics as: all the activities performed by man to earn income and it on achieving satisfaction of his wants are called economic activities or simply economics”
From the above definition, we get a specific definition in which economics moves i.e

• It deals only with economic activities,
• It deals only with human activities and
• It takes in to part the people who are social and normal.

Class XI, Principles of Commerce, "CORRESPONDENCE"

CORRESPONDENCE
Letters are usually classified as
1. Private for correspondence between the friends and relative.
2. Commercial or business for correspondence between traders , bankers , financiers, merchants, manufacturers and agents.
3. Official
For correspondence between and national and local public bodies and their correspondence concerning the government and its various form of administration.
BUSINESS LETTERS
It refers to the letters entering into business transactions. Modern businessman has to write a large number of letters. The larger the business the greater is the volume of correspondence.
MECHANICAL PARTS OF BUSINESS LETTER —
A business letter consist of following parts:
1. HEADING
It is sort of advertisement and that is why they are set up in a very attractive ,manner. The heading is printed at the top pf a letter paper. It should be compact and well arranged. It should consist of printed names and address of individual firms company or corporation sending the letter. The telephone number, telegraphic address, codes used, date and reference number are also given with the letter head.
2. INSIDE ADDRESS
It is the name and address of the party which is being address. It should be exactly the same as the outside address on the envelope. The name of the person or the firm used is an inside address must have proper courtesy titles. The common prefix for a man is Mr. if a person hold a degree or a title it must be added to his name such as Dr. Khan., if a person holds a university degree, it will precedes his designation as Mr. Raus-UL- Hasan M.Com, M.A, S.E.S.
3. SALUTATION
This is the compliment or greeting preceding the body of the letter. It would always be in harmony with the personal relations of the writer except in care of official letters which invariably have Sir for situation. The most common forms of salutation in a commercial letter are Dear Sir when addressing one gentle man, Dear Sirs for a firm or company.
4. THE BODY OF THE LETTER
The entire letter is to be divided into suitable paragraph which ius not only the question of appearance but giving the reader breathing times. Each paragraph should contain one topic. The correspondent should commence a new paragraph whenever he switches on a new topic. The introductory paragraph should be very carefully written. In subsequent paragraphs the discussion should continue dealing with the main subject matter of the letter. The last paragraph should be written in good spirit.
5. COMPLEMENTARY CLOSE
It consist of words of respects like “ Yours faithfully” , yours sincerely etc.
6. SIGNATURE
The writer of the letter has to put down his signature in ink just below the complimentary close. A letter without signature is unauthentic.
7. DIRECTORS AND STENOGRAPHER’S INITIAL
These initials are usually placed in the lower left hand corner of the letter. These are put down with a view to hold the persons responsible. The usual method of writing is thus;
AS/HK
The letters AS indicates the initials of the person and HK of the typist.
8. POST SCRIPTS OR PS
If due to some after thoughts the writer wants to add something after the completion of the letter he puts down PS and after that writes down what ever he wants. PS should also be signed by the writer.
9. ENCLOSURES
If the letter is sent along with the documents, it should be indicated by writing about the enclosures on the left hand at the bottom corner of the letter paper.
ARRANGEMENT OF THE BUSINESS LETTER
(1) Heading
(2) Inside Address (Place and Date)
(3) Salutation
(4) Body of the Letter
First Para ——————————————————————————–
Second Para ——————————————————————————-
Third Para ——————————————————————————–
(5) Complimentary Close
(6) Signature
(7) Enclosures
(8) Stenographer’s Initials
(9) Post Script
CHARACTERISTICS OF BUSINESS LETTERS
A good business letter is the one which achieves the object for which is being written. Some of the essentials to make a business letter effective are given below:
1. CLEARNESS
It must be so lucid that the subject is clear, even at rapid reading. As it is not possible for the busy business man to give much time on reading. This can be achieved only when the writer understating the subject and has command on language.
2. ACCURACY OF STATEMENT
Whatever is written must be correct. There should not be any incorrect statement. Special care is to be taken in writing amounts.
3. COMPLETENESS
It should be complete in all respects so that no information is e.g. order for goods must give quality, price, mode of carriage, methods of payment etc.
4. COURTESY
All correspondent are o be treated ad gentlemen. It does not mean humility. What is required is honest , frank and straight, forward statement of facts worded in polite and courteous language. Special care is to be taken when drafting dunning letters of complaint.
5. BREVITY OR CONCISENESS
The letter should be as short as possible in view clearness, completeness and courtesy. Brevity should not be at the expense of completeness. There is no place for flowery language in business letter.
6. SOURCEFULLNESS
The letter must be effective convincing and impressive. These are the days of competition and many times it depends on a letter that business is created and goods sold.
7. NEATNESS AND DISPLAY
The letter must be clearly written or typed, properly folded and put into proper size envelope.
8. ORIGINALITY
Age long phrases are not to be copies but the writer should try to be original so that he is able to assert his individuality. American writers and businessmen has been first to discard old and ancient ways. A letter is written in original fashion will soon attract the attention among thousands in stereotyped manner.
9. UNITY
Clearness of letter depends to great extent on its unity or oneness. One thought should naturally follow another and each sentences must show proper arrangement.
VARIOUS TYPES OF LETTER
Wanted accurate typist preferably knowing shorthand at salary of Rs.250/- per month. Hand written application with testimonial to be addressed to CIBA (Pakistan) Ltd., P.O.Box no. 63.-“Dwan dated 27th December, 1974”.
The manager,
CIBA (PAK) Ltd.,
P.O.Box No. 163,
Karachi.
Sir,
In response to your advertisement in dawn of 27th December, 1974, I wish to apply for the post
of typist advertised by you.
I passed the intermediate commerce examination in 1969 from the board of secondary education,
Lahore getting distinction in the steno-typing and was placed in the second division.
I was employed by M/s. Ali Automobiles, Ltd., Lahore in1970 as a steno-typist which company I
have been serving since then.
I easily type 50 words per minute quite easily neatly and accurately and my speed in shorthand
is 120 words per minute. I am drawing Rs. 175/- per month and my relation with my present employers are quite happy. But they are unable to offer me attractive prospects that are why I am applying for the post.
I am young man of 25 years of age and posses a robust health. I have active and sober habits.
I enclose two copies of testimonial. I am also pleased to refer you my present employers.
I shall be glad to come for interview when convenient to you.
You’re respectfully,
Mohammad Ali.
Encl :2
Habib Vila,
Lawrence road,
Lahore,
January 1,1973.
Statement of qualification and experience
NAME……………………………………….Mohammad Ali
AGE AND HEALTH…………………………….25 years and posses a robust health
EDUCATIONAL QUALIFICATION…………………Passed high school examination from government model school, Lahore in 1968, with commerce and typewriting as optional course, passed intermediate examination of Punjab board in second in the year 1070 with shorthand and typewriting as optional object.
EXPERIENCE…………………………Since 1970 I am working as a stenographer with m/s Ali automobiles Ltd. Lahore.
PRESENT SALARY AND REASON FOR LEAVING JOB ……………….. Drawing a salary of Rs.2700/- per month and have very good relations with employers. Leaving the service for better future prospects.
REFERENCE ……………………………. Reference may be made to M/S ALI automobiles Ltd.Lahore.
APPOINTMENTS
CIBA (PAKISTAN) LTD .chemists and druggists

I.I Chundrigar road,
Karachi.
25th January ,1975.

MR.Mohammad Ali
Habib Vila
Lawrence road,
Lahore.
Dear sir,
We have your application of 1s t January,1975 for the post of stenographer. We are glad to
inform you that we have decided to appoint you as stenographer in our firm on a salary of Rs.350/- per month. Please let us know by return post when we may except you to join us.

Your’s Faithfully,
CIBA Pak Ltd.

PAKISTAN CHEMICAL INDUSTRIES

5, New Queens Road,
Karachi
January

Hassan ahmed Chemicals,
Purani anarkali’
Lahore.
Dear sir,
Having some prospects of concluding substantial business with the firm mentioned on the
slip attached below, who have given us your reference, we write this letter. As the firm in question had no previous business dealings with us , we are not aware of their financial status ,business conduct and the reputation of the persons controlling the firm.
We shall be pleased to learn if you deem them worthy of a credit upto Rs.10,000.
We thank you in advance for any information with which you can favour us as to the
solidity of the firm and we assure that the information supplied b you will be kept strictly confidential and we would be glade to place ourselves at your service in similar matters.

Yours faithfully ,
Pakistan chemical industries.

REPLY
Dear sirs,
Today we received your enquiry about the standing and financial position of messes. Noorani
&Co, of your city. We are glad to say that we can give you nothing but favorable reply as we have dealt with the team to last five years and have never experienced any difficulty in recovering our dues . they have considerable amount of capital and have never known to have sufficient losses .
We shall have a no hesitation in according them the credit mentioned by you .however this is
without obligation on your part and hope this information will serve your purposes .

Yours faithfully
Ahmed Chemicals

ORDER LETTER
EASTERN CARPET HOUSE CARPETS &DARI MERCHANTS

|M.A |Jinnah Road,
Lahore.
20th January,1975

Modern Carpet and Dari house ,
Carpets & |Dari Merchants ,
M.A Jinnah Road ,
Karachi.
Dear sirs,
We thank you for quotations dated January 4,1975 and shall be glad if you will send us by good train as early as possible the following :- Carpet as per sample No .213_ _ 20’X15’_ _ _4 pieces Carpet as per sample No .312_ _ 20’X20’_ _ _3 pieces Please send us the Railway Receipt properly endorsed in our favor and drawn up our bankers Habib Bank Ltd . Abdullah Hoaroon Road Branch for the invoice value after deducting 2% cash discount .
We trust this will receive your immediate attention as we are much short of stock at present
and have large outstanding orders .
Yours faithfully
Eastern Carpet House
DIAMOND SILK HOUSE
Silk Merchants
Cloth Market , M.A Jinnah Road ,
Karachi.
The Chief commercial Manager,
Pakistan Western Railway ,
Lahore.
Dear sirs,
We took delivery this morning of ten bales of cloth consigned to us by Massrs. lyallpur, silk mills Ltd,lyallpur ,as per R/P No.42072 dated January 5,0976.two of the bales bore distinct evidence of having been tempered with in transit . we noted down this fact on the Railway Receipt while surrendering it to the |Railway authorities at Karachi.
We find that hundred yards of printed silk has been removed from both the bales . our
estimate of damage is Rs . 1,000/_ .we are enclosing a copy of the invoice and the certificates given by the Staten |Master ,Karachi ,in whose presence we opened the bales .
We request you to please accept our claim promptly.
Your faithfully | Diamond silk House.
MOHD . RAIZ MOHD SHAFI
EXPOTETERS &IMP[OTERS
32, I .J chundrigar Road, Karachi.
Messrs .Ramzan Bros.,
5,M.A Jinnah Road ,
Lahore.
Dear sirs,
We have to bring to your notice a change in the constitution of our firm . Mr.fazal raza, our valued partner has been serving from ill health for the last 12 months an d he find him selves unable to take up the responsibilities of an active business carrier. He has , therefore decided to retrieve from business from the 1st march 1975. we are really very sorry to lose his valuable partnership but consideration of health do not permit us to force him to continue shouldering the responsibility. We are , how ever , glad to inform you that we have arrange to take Mr. Muhammad Shafi who is the man of wide experience and fixed well for a business like yours. Further more his inclusion into business will enable us too continue the present policy of business to cause a large increase also.
In order to settle all matters in connection with the old account we have reconciled accounts on the 20th instant and shall be glad if you will please forward us a cheque of Rs. 59/- only for the amount due on you.
Hoping to receive your immediate attention.

Yours faithfully
Mohd. Shafi.

Class XI, Principles of Commerce, "Salesmanship"

INTRODUCTION AND DEFINITION Advertising and salesman are two aspects of the marketing goods and services. Salesmanship is the basis of all trade, the first and last object of which is to market goods and services to the mutual profit and tasting satisfaction of buyers and the sellers. This service is essential for the producer. The distribution of goods as personal or impersonal of assisting the prospective customer to buy a commodity or service. As salesman has to sell ideas; ideas of beauty, of health, of economy, of prosperity, of service etc. the salesman therefore must know not only the details of his commodity but also know human nature so as to lend his customer to accept his ideas.
QUALITIES OF A GOOD SALESMAN
1. EDUCATION
He should be an educated person, and should have studied the subject of salesmanship so as to know certain essential connected with this field.
2. COURTESY
He should respect to his customers, and should not become angry even if his customer gives the lowest offer.
3. LOYALTY
He should show the customer that he is the well wisher of the customer and wants to give him the article which is best suitable for him.
4. ATTENTIVENESS
He should attend to his customer in a nice way and should show the articles which he needs.
5. TACT
He should have the tact to attract customers either by calling or by his motions and should be able to show the goods tactfully which his customer needs.
6. HONESTY
He should be honest with his customer and should make the customer known the prices which are reasonable.
7. IMAGINATION
He should have the capability to imagine the things which his customers want.
8. POLITENESS
He should be polite with his customer and should talk with him such a way so as to show that he is his well-wisher.
9. CHEERFULNESS
He should have a smiling face and should never make his customer fearful. Cheerfulness makes the customer friend of salesman.
10. PATIENCE
A salesman should always be patient and should always think in term of progress.
11. CHARACTER
He should have a sound moral character and should not commit such fruits with male and female customers which may dis-name his organization i.e he should not be corrupted.
12. BEHAVIOUR
He should think that customer are his masters, which is usually thought of by a good and reputed salesman.
13. PERSONALITY
He should have attractive personality because it helps him in convincing the customers and affecting sales

Class XI, Principles of Commerce, "Co-Operative Society"

INTRODUCTION Co-operative society is voluntary association of small producers or consumers for their mutual benefits. It is formed for producing and supplying goods in accordance with the needs and requirements of the member who compose it. The members form and carry on the business of co-operative societies themselves. They are the owners, workers and mangers of the society. They have democratic control over its organization and management. It is formed for the purpose of achieving economic, social and educative benefits. Profit making is not the man aim of such organizations. Its aim is to eliminate the services of middlemen. It brings benefits for the welfare of the members with the help of applying the principals of all for each and each for all into practice. Its success depends on how much mutual co-operation in between the members has been developed.
CHARACTERISTICS OF CO-OPERATIVE SOCIETY:
The following are the main features of the Co-operative society:-
1. OBJECT
Its main aim is to bring mutual benefit to the members who compose it. Money making is not the main aim of the Co-operative Society. The Society looks after the welfare of the members. It aims producing and supplying goods to meet requirement of the members.
2. CAPITAL
It collects capital from the members. The members purchase shares in the cooperative society and provide necessary capital to it. The cooperate society is divided into fix number of shares. To become a member of the society one must purchase at least one share.
3. MEMBERSHIP
There must be at least 15 members in a cooperative society. But one cannot become a member of the society unless he attains the age of maturity.
4. DEMOCRATIC PRINCIPLE
The cooperate society is based on the principle of democracy. Every member enjoys rights. Everyone has got only one vote. Policies of the society can be criticized by the members. So the members have a democratic control over the affairs of the society.
5. TRANSFERABILITY OF SHARE
The shares of the cooperative society can be transferred to the members of the society. They cannot be transferred to nonmember.
6. DIVISION OF PROFIT
Although it is not the main idea of the cooperative society to earn profit at any cost yet it often earns a handsome profit. The profit of the society is distributed to the members on the paid up capital but the profits of the consumers cooperative society are distributed in proportion to their total purchases during the trading period.
7. ENTITY
The cooperative society has a separate artificial entity. Thus its entity is independent of the members.
ADVANTAGES OF COOPERATIVE SOCIETY
1. ELIMINATION OF MIDDLEMAN
The consumers get their requirements direct from the producers or they supply their own requirements. hence the cooperative society eliminated middleman and makes the goods available to the consumers at cheaper rate.
2. ECONOMY
Certain economies can be enjoyed by the members of cooperative society in the field of production an distribution. The society has not to bother from marketing the goods. the members are its regular customers and it need not advertise its good in the market.
3.CAPTURE MARKET
The cooperative society sells goods at a cheaper rate. hence it can easily attract a good number of customers.
4. NO SURPLUS STOCK
The society has got regular customers so it has not to keep any surplus stock in hand.
5. SAVING OF MANAGEMENT EXPENSE
Sometimes the members render free services to manage the affairs of the society. They do not demand any remuneration.
6. EDUCATIVE VALUE
The members are able to learn the principles of cooperation. They learn how to render services for the mutual benefits of themselves. They learn about economic and social aspects of human life.
7. PROVISION FOR THE MAINTENANCE OF THE POOR
Poor people accumulate and invest their small saving in the society which brings for them a better standard of living particularly it increases the income of agriculturists and the people who have been engaged in small and cottage industry.
8. SOCIAL BENEFITS
It develops self-confidence and self -reliance among the general people. They learn the principal ‘Self-help is the best help’. At the same time it develops them a sense of cooperation and sacrifices.
9. PROVISION FOR EMPLOYMENT
It solves unemployment problems of the under developed countries. People find employment in small and cottage industries to earn their livelihood.
10. INTEGRATION
Under this system of production and distribution a complete integration between the manufacturers wholesalers and the retailers is possible.
11. EQUAL DISTRIBUTION OF WEALTH
Under the system of production and distribution wealth cannot be concentrated in few hands. Equal distribution of wealth takes place under this system.
12. EQUAL STATUS
There is no master servant relationship in between the members of cooperative society. All are the owners managers, and workers of the cooperative society.
DISADVANTAGES OF COOPERATIVE SOCIETY
1. LACK OF CAPITAL
It suffers from lack of capital because it is an organization of poor people. They cannot afford large amount of capital so they cannot afford to expand the size of the business.
2. LACK OF INTEREST
As the market for the products of cooperative society has been guaranteed so the organizers and managers do not pay keen interest in the management of cooperative society.
3. LACK OF EFFICIENT PERSON
It fails to accommodate men of talent, skills and initiative because it requires free services from them. Such people may not be interested to join the cooperative society.
4. LACK OF COOPERATION
It requires cooperation and selflessness and other facilities which are rarely found in the general people. There is no scarcity of mean minded people living within individuals of the society. The society remains for its success.
5. UN-EDUCATION
Most of the members of the cooperative society are uneducated and unskilled. So the management of the society may fall in the clutches of selfish people.
6. FREQUENT CHANGE IN DEMAND OF GOODS
The cooperative society cannot be carried on successively in the fields where the demand for goods changes frequently.