Description

TABLE OF CONTENTS
UNIT – 1 BASIC ECONOMIC PROBLEM ………………………………………………………………………….. 8
1.1 FACTORS OF PRODUCTION ……………………………………………………………………………………… 8
1.2 OPPORTUNITY COST AND SCARCITY (BASIC ECONOMIC PROBLEM)………………………………… 11
1.3 PRODUCTION POSSIBILITY CURVE …………………………………………………………………………… 15
UNIT – 2 DEMAND SUPPLY AND EQUILIBRIUM …………………………………………………………….18
2.1 DEMAND …………………………………………………………………………………………………………….. 18
2.2 MARKET EQUILIBRIUM & CHANGES IN EQUILIBRIUM …………………………………………………….. 22
UNIT – 3 ELASTICITY ……………………………………………………………………………………………………30
3.1 PRICE ELASTICITY OF DEMAND (PED) ………………………………………………………………………. 30
3.2 PRICE ELASTICITY OF SUPPLY (PES) ………………………………………………………………………. 40
3.3 ELASTICITY AND TAX INCIDENCE……………………………………………………………………………… 41
UNIT – 4 PRODUCTION AND COST ……………………………………………………………………………….43
4.1 PRIMARY, SECONDARY & TERTIARY SECTORS …………………………………………………………… 43
4.2 TYPES OF COSTS ………………………………………………………………………………………………… 44
4.3 DIVISION OF LABOUR AND SPECIALIZATION ……………………………………………………………….. 47
4.4 ECONOMIES & DISECONOMIES OF SCALE …………………………………………………………………. 50
4.5 SMALL FIRMS ………………………………………………………………………………………………………. 54
4.6 SOURCES OF GROWTH OF FIRMS & INTEGRATION ……………………………………………………… 56
4.7 PROFIT MAXIMISATION ………………………………………………………………………………………….. 59
UNIT – 5 TYPES OF BUSINESS ORGANIZATIONS ………………………………………………………….62
5.1 TYPES OF BUSINESS ORGANIZATIONS ……………………………………………………………………… 62
5.2 MULTINATIONALS …………………………………………………………………………………………………. 65
UNIT – 6 MARKET STRUCTURES ………………………………………………………………………………….70
6.1 MARKET STRUCTURES ………………………………………………………………………………………….. 70
6.2 ARE MONOPOLIES ARE ALWAYS BAD FOR CONSUMERS? …………………………………………….. 70
UNIT – 7 ECONOMIC SYSTEMS & ALLOCATION OF RESOURCES …………………………………74
7.1 PRIVATE AND PUBLIC SECTOR ……………………………………………………………………………….. 74
7.2 LABOUR INTENSIVE VS CAPITAL INTENSIVE METHOD …………………………………………………… 75
7.3 ECONOMIC SYSTEMS ……………………………………………………………………………………………. 76
UNIT – 8 MARKET FAILURE ………………………………………………………………………………………….83
8.1 SOCIAL COSTS AND BENEFITS ………………………………………………………………………………… 83
8.2 CAUSES OF MARKET FAILURE ………………………………………………………………………………… 89
8.3 WHY GOVERNMENT PRODUCE GOODS & SERVICES ……………………………………………………. 92
8.4 GOVERNMENT POLICIES AND THEIR LIMITATIONS ……………………………………………………….. 94
UNIT – 9 LABOUR MARKET…………………………………………………………………………………………102
9.1 FACTORS DETERMINING WAGE RATE……………………………………………………………………… 102
9.2 WAGE DIFFERENTIALS ………………………………………………………………………………………… 103
9.3 TRADE UNIONS ………………………………………………………………………………………………….. 110
9.4 FACTORS AFFECTING CHOICE OF OCCUPATION ……………………………………………………….. 113
9.5 TYPES OF PAYMENTS …………………………………………………………………………………………. 117
9.6 CHANGES IN EARNING IN LIFETIME ………………………………………………………………………… 117
UNIT – 10 SPENDING, SAVING AND BORROWING …………………………………………………..119
10.1 MOTIVES TO SPEND OR SAVE ………………………………………………………………………………. 119
10.2 SPENDING PATTERNS …………………………………………………………………………………………. 121
UNIT – 11 GOVT. MICROECONOMIC INTERVENTION …………………………………………………….123
11.1 TYPES OF TAXES SYSTEM AND DISTRIBUTION OF INCOME …………………………………………. 123
11.2 DIRECT & INDIRECT TAXES …………………………………………………………………………………… 125
11.3 REASONS FOR TAXATION …………………………………………………………………………………….. 126
11.4 OBJECTIVE AND FINANCE OF GOVERNMENT SPENDING ……………………………………………… 127
11.5 GOVERNMENT BUDGET ……………………………………………………………………………………….. 128
UNIT – 12 MONEY AND BANKING …………………………………………………………………………………129
12.1 FUNCTIONS OF MONEY ……………………………………………………………………………………….. 129
12.2 FUNCTION OF CENTRAL BANK ………………………………………………………………………………. 129
12.3 FUNCTION OF COMMERCIAL BANK …………………………………………………………………………. 130
UNIT – 13 NATIONAL INCOME, AD & AS ……………………………………………………………………….131
13.1 NATIONAL INCOME ……………………………………………………………………………………………… 131
13.2 AD AND AS ……………………………………………………………………………………………………….. 131
UNIT – 14 INFLATION ……………………………………………………………………………………………………132
14.1 MEANING OF INFLATION ………………………………………………………………………………………. 132
14.2 CAUSES OF INFLATION ………………………………………………………………………………………… 132
14.3 MEASUREMENT OF INFLATION ………………………………………………………………………………. 135
14.4 EFFECTS OF INFLATION ……………………………………………………………………………………….. 137
14.5 ACTUAL VALUE VS PERCENTAGE VALUE …………………………………………………………………. 138
UNIT – 15 EMPLOYMENT & UNEMPLOYMENT ……………………………………………………………….140
15.1 MEANING OF UNEMPLOYMENT………………………………………………………………………………. 140
15.2 TYPES & CAUSES OF UNEMPLOYMENT …………………………………………………………………… 141
15.3 EFFECTS OF UNEMPLOYMENT ………………………………………………………………………………. 142
15.4 FULL EMPLOYMENT …………………………………………………………………………………………….. 144
UNIT – 16 ECONOMIC GROWTH ……………………………………………………………………………………145
16.1 ECONOMIC GROWTH …………………………………………………………………………………………… 145
16.2 CAUSES OF ECONOMIC GROWTH ………………………………………………………………………….. 147
16.3 MEANING AND MEASUREMENT OF ECONOMIC GROWTH …………………………………………….. 148
UNIT – 17 POPULATION ………………………………………………………………………………………………..149
17.1 FACTORS OF GROWTH IN POPULATION …………………………………………………………………… 149
17.2 AGEING POPULATION ………………………………………………………………………………………….. 151
17.3 TYPES OF POPULATION AND EFFECTS OF GROWTH IN POPULATION …………………………….. 153
UNIT – 18 ECONOMIC DEVELOPMENT & STANDARD OF LIVING …………………………………..155
18.1 STANDARD OF LIVING …………………………………………………………………………………………. 155
18.2 ECONOMIC DEVELOPMENT …………………………………………………………………………………… 158
18.3 ABSOLUTE VS RELATIVE POVERTY ………………………………………………………………………… 166
18.4 CAUSES AND POLICIES FOR ECONOMIC DEVELOPMENT & POVERTY …………………………….. 167
UNIT – 19 INTERNATIONAL TRADE ………………………………………………………………………………170
19.1 REASONS FOR SPECIALIZATION AND TRADE ……………………………………………………………. 170
19.2 METHODS OF PROTECTIONISM ……………………………………………………………………………… 170
19.3 ADVANTAGES AND DISADVANTAGES OF FREE TRADE AND PROTECTIONISM …………………… 173
UNIT – 20 EXCHANGE RATE …………………………………………………………………………………………178
20.1 MEANING OF EXCHANGE RATE ……………………………………………………………………………… 178
20.2 EXCHANGE RATE SYSTEMS ………………………………………………………………………………….. 178
20.3 EFFECTS OF EXCHANGE RATE CHANGES. ………………………………………………………………. 179
20.4 ADVANTAGES/DISADVANTAGE OF EXCHANGE RATE SYSTEM ………………………………………. 180
20.5 CAUSES OF EXCHANGE RATE DEPP/APP ………………………………………………………………… 181
UNIT – 21 BALANCE OF PAYMENT ……………………………………………………………………………….182
21.1 BOP ACCOUNTS …………………………………………………………………………………………………. 182
21.2 CAUSES OF BOP DEFICIT/SURPLUS ……………………………………………………………………….. 182
21.3 EFFECTS OF BOP DEFICIT OR SURPLUS …………………………………………………………………. 184
UNIT – 22 GOVERNMENT MACROECONOMIC INTERVENTION ………………………………………185
22.1 MACROECONOMIC AIMS & CONFLICTS ……………………………………………………………………. 185
22.2 MACROECONOMIC POLICIES FOR CURRENT ACCOUNT DEFICIT ……………………………………. 188
22.3 MACROECONOMIC POLICIES FOR ECONOMIC GROWTH AND EMPLOYMENT …………………….. 188
20.4 MACROECONOMIC POLICIES FOR INFLATION ……………………………………………………………. 194
20.5 MACROECONOMIC POLICIES FOR MULTIPLE AIMS ……………………………………………………… 196
UNIT – 23 OTHERS ……………………………………………………………………………………………………….199
SECTION A   202
J04/P2/Q1………………………………………………………………………………………………………………… 202
N04/P2/Q1 DECLINE IN WORLD SUPPLY OF COTTON …………………………………………………….. 204
J05/P2/Q1 EUROPEAN RECESSION ……………………………………………………………………………. 205
N05/P2/Q1 LESOTHO NATIONAL DEVELOPMENT CORPORATION ……………………………………….. 207
J06/P2/Q1 DEMAND FOR OIL IN INDIA ………………………………………………………………………… 208
N06/P2/Q1 TRADE AND PRODUCTION IN BANGLADESH ………………………………………………….. 210
J07/P2/Q1 AIRLINE INDUSTRY LOSSES ………………………………………………………………………. 211
N07/P2/Q1 THE ROYAL MAIL ……………………………………………………………………………………. 213
J08/P2/Q1 UK RAILWAY OPERATION …………………………………………………………………………. 214
N08/P2/Q1 POPULATION IN BOTSWANA ………………………………………………………………………. 216
J09/P2/Q1 ECONOMIC GROWTH IN UGANDA ……………………………………………………………….. 218
N09/P2/Q1 ……………………………………………………………………………………………………………….. 219
J10/P2/Q1 ECONOMIC DOWNTURN PUTS PRESSURE ON NEW ZEALAND FIRMS TO BE MORE
PRODUCTIVE 221
N10/P2/Q1 THE ASIAN DEVELOPMENT BANK MEETS IN INDONESIA …………………………………… 223
J11/P2/Q1 THE DHAKA STOCK EXCHANGE IS DOING WELL ……………………………………………. 225
N11/P2/Q1 THE STRUGGLES OF THE IVORY COAST’S COCOA FARMERS……………………………. 226
J12/P2/Q1 CHINA DECIDES TO MOVE TOWARDS A MORE FLEXIBLE EXCHANGE RATE …………. 229
N12/P2/Q1 A NEW CITY IS TO BE BUILT IN GHANA ……………………………………………………….. 230
J13/P2/Q1 THE COMMUNICATIONS MONOPOLY IN MEXICO …………………………………………….. 233
N13/P2/Q1 PRICES RISE FASTER THAN WAGES IN THE UNITED KINGDOM (UK) ………………….. 234
J14/P2/Q1 THE CHALLENGES FACING ANGOLA ……………………………………………………………. 236
N14/P2/Q1 FISCAL POLICY AND AN AGEING POPULATION IN JAPAN ………………………………….. 240
J15/P2/Q1 PERU AND PANAMA ………………………………………………………………………………… 243
NOVEMBER 2015 PAPER 22 ………………………………………………………………………………………..247
JUNE 2016 PAPER 22 …………………………………………………………………………………………………..259
NOVEMBER 2016 PAPER 22 ………………………………………………………………………………………..270
JUNE 2017 PAPER 22 …………………………………………………………………………………………………..283
NOVEMBER 2017 PAPER 22 ………………………………………………………………………………………..293