NATIONAL INCOME AND RELATED BASIC CONCEPTS
Dr. Asad Ahmad
PGT (Economics)
K V, Guna (MP)
Bhopal Region
Duration – 80 Minutes
OBJECTIVES
*Student will be able to recall the circular flow of National Income.
*Student will be able to recognize the difficult concept which will
included in National Income.
*Student will able to understand the concept of domestic territory and
other concept.
*Student will able to understand the concept of NIT, NFYA and
Depreciation.
*Student will be able to differentiate between the values which will be
included in N.I. and which will not be included in National Income.
LEARNING OUTCOMES
*They will able to know the basic concepts of National Income in Macro
Economics.
TEACHING MATERIAL
*Power Point Presentation, White Board, Marker.
METHODS OF TEACHING
*Question Answer Method
*Group Discussion Method
*Deductive Method
*Demonstration Effect
GIEST OF LESSON
STOCK- A stock is a quantity measured at a particular point of time.
FLOW- A flow is a quantity measured over a specified period of time.
ECONOMIC TERRITORY- Economic Territory is the geographical Territory
administrated by a government within which person goods and capital flow
freely. But the purpose of National Income Accounting we also includes
following- (1)Political territory including territorial water (2) Ships and aircraft
owned and operated by normal residents in one or more countries, (3)Fishing
vessels, oil and natural gas rigs operated by residence of a country in
international water or engaged in extraction in these areas where a country has
exclusive right of operation, (4)Embassies, consulates and military
establishment of a country located abroad.
NORMAL RESIDENT- Normal Residents refers to an individual or an institution
which who ordinarily resides in the country for a period of more than one year
and whose center of economic interest lies in that country. Following are not
included in this –(1)Foreign tourist and visitors, (2)Foreign staff of embassies,
officials, diplomats and members of armed forces, (3)International
organizations, (4)Employee of international organizations, (5)Border workers
and (6)Crew members of foreign vessels, commercial travelers and seasonal
workers.
FACTOR INCOME- Factor Income is the income received by the factors of
production for rendering factor services in the process of production (wage,
rent, interest and profit).
TRANSFER INCOME- Transfer Income refers to the income received without
rendering any productive services in return (old age pension , unemployment
allowances).
FINAL GOODS- Final Goods are those goods which are used either for
consumption or for investment (Cloths, TV set , Cars, Machinery ).
INTERMEDIATE GOODS- Intermediate Goods are those goods which are used
either for resale or for further production (Milk purchase by dairy shop, tyres
purchased by a cycle shop).
CONSUMPTION GOODS- Consumption Goods are those goods which satisfy the
wants of the consumers directly (Bread, Butter, Shirts etc).
CAPITAL GOODS- Capital Goods are those goods which help in production of
goods and services (Machinery, equipments, Plants etc).
DEPRICIATION- Depreciation refers to the fall in the value of fixed assets due to
normal wear and tear, passage of time and expected obsolescence (Change in
technology).
INDIRECT TAXES- Indirect Taxes are taxes which are imposed by the
government on the production of sale of goods and services.
SUBSIDIES- Subsidies are the financial assistance given by the government to an
enterprise on the production of a certain commodity.
NET INDIRECT TAX= Indirect tax - subsidies
NET FACTOR INCOME FROM ABROAD- Net Factor Income From Abroad refers
to the difference between the factor income received from the rest of the world
and the factor income paid to the rest of the world.
Net Factor Income From Abroad = Factor Income Received from Abroad – Factor
income paid to Rest of the world
TEACHER’S ACTIVITY
The topic will be introduced to the Students by asking simple question
based on their previous knowledge like*What is economics all about?
*Which branch of economics deals with the aggregates?
*What is national income?
After asking some questions, teacher will explain the concepts and provide
them additional knowledge by adopting various teaching methods.
Teachers carefully monitors the activity of the student and ask oral
questions to access the level of understanding.
STUDENT’S ACTIVITY
Students listen to the introductory remarks by the teacher and answer the
questions asked.
Student Silently and carefully learn the concept with great interest and
note the relevant information in their note book.
PROJECT
*Prepare a list of Final Goods and Intermediate Goods.
*Show the end-use classification of Goods and Services by a flow chart.
ASSIGNMENT
KNOWLEDGE BASED QUESTIONS
*Define Domestic Territory?
*What do you mean by consumer goods?
*What Is factor income?
*Give the meaning of depreciation.
UNDERSTANDING BASED QUESTION
*Distinguish between Factor income and Transfer income.
*What is the difference between Capital goods and Economics goods.
*Give the difference between Economic Territory and Political Territory.
APPLICATION BASED QUESTION
1.
Identify the normal resident*Indian official working in the Indian Embassy in U.S.A.
*A Japanese tourist who stays in India for 2 month.
*Indian going to Pakistan for watching cricket match.
*Indians working in UNO office, located in U.S.A.
*Indian employees working in WHO, located in India.
*Indian Muslims going for the Haj pilgrimage.
2.
Classify the following as intermediate goods and final good.
*Paper purchase by publisher.
*Milk purchased by household.
*Purchase of rice by a glossary shop.
*Raw material used by manufacturing firms.
*Construction of houses by the consumer household.
*Fertilizers used by farmers.
*Purchase of pulses by a consumer.
REFERENCES
*Introductory Macro Economics- Mr. Sandeep Garg
*Introductory Macro Economics- Ms Deepa Shree
*NCERT Text Book
*websites- www.cso.nic.in, www.gov.nic.in
**************************************************************************
CONSUMER’S EQUILIBRIUM – INDIFFERENCE APPROACH
Mrs. Alpha Reji
PGT (Economics)
Kendriya Vidyalaya,
MHOW (MP)
Bhopal Region
Duration – 80 Minutes
OBJECTIVES
*Student will remember the meaning of the terms indifference curve,
Budget line and Equilibrium.
*Student will understand the condition of equilibrium.
*Student will be able to relate the theoretical aspect of IC analysis in their
day to day life when purchasing more than one commodity..
LEARNING OUTCOMES
*The student will use this principle in their daily life while purchasing
goods, so that judicious use of income or resources is possible.
*Student will able to answer question based on indifference curve
analysis.
TEACHING MATERIAL
*Power Point Presentation, White Board, Marker, Chocolates.
METHODS OF TEACHING
*Question Answer Method
*Group Discussion Method
*Deductive Method
*Demonstration Effect
GIEST OF LESSON
Modern economist disregarded the concept of cardinal measure of utility. They
were of the opinion that a consumer is in a position to rank various combination
of goods and services in order of his preference.
Thus Indifference Curve are used as a tool to show or enlist all combination of
two goods that give equal satisfaction to the consumer.
Consumer equilibrium refers to a situation in which a consumer derives
maximum satisfaction with no intention to change it and subject to given prices
and his given income. The point of maximum satisfaction is achieved by studying
Indifference Map and Budget Line together. So a consumer always tries to
remain at the highest possible IC subject to his budget constraint. For this the
following condition need to be fulfilled. (1)Indifference Curve should be convex
to the origin. (2)Slope of Budget Line should be equal to the slope of IC. (Px/Py
= MRSxy)
TEACHER’S ACTIVITY
The topic will be introduced to the Students by asking simple question
based on their previous knowledge like*What is an Indifference Curve?
*How is a consumer rational?
The teacher will then explain the concept of Marginal Rate of Substitution
using an example. The teacher will give the students chocolates and perks
and will explain how MRS will be diminishing and would result in
convexity of the indifference curve. The teacher wil then derive the budget
line using a numerical example.
The teacher will now superimpose the indifference curve on the budget line to
find the point of consumer’s equilibrium. The teacher will state the conditions
for consumer equilibrium. (1)Indifference Curve should be convex to the origin.
(2)Slope of Budget Line should be equal to the slope of IC. (Px/Py = MRSxy).
The teacher will use power point slides
to show the diagram and explain the
conditions. (1) Why will the consumer
not choose a bundle on IC’. (2)Why will
the consumer not choose a bundle on
IC’’.
Teachers carefully monitor the
activity of the student and ask oral
questions to access the level of
understanding.
STUDENT’S ACTIVITY
The students listen to the introductory remarks by the teacher and answer
the questions asked.
Student silently and carefully learns the concept with great interest and
note the relevant information in their note book.
RECAPITULATION
*What do you mean by Indifference Curve?
*Define budget line.
*State the conditions of consumer equilibrium.
ASSIGNMENT
*Define Budget Line.
*What is Marginal Rate of Substitution?
*Explain with a numerical example, how marginal rate of substitution
makes the indifference curve convex to the origin?
Explain consumer equilibrium using indifference curve approach.
*Not compulsory for all.
PROJECT
MORAL VALUE
The consumer will be able to make conscious decision regarding
expenditure.
They will able to judiciously use the resources at their disposal.
REFERENCES
*Introductory Macro Economics- Mr. Sandeep Garg
*Introductory Macro Economics- Ms Deepa Shree
*NCERT Text Book
*websites- www.cso.nic.in, www.gov.nic.in
***************************************************************************
INVESTMENT MULTIPLIER AND ITS FUNCTIONING
PRESENTED BY
Mr. Anjani Kumar
Resource Person
Duration : 80 minutes (approx.)
OBJECTIVES: Investment multiplier, its meaning and functioning.
CONTENT:
1.
2.
3.
4.
5.
Meaning of investment multiplier
Diagrammatic presentation of multiplier
Multiplier and MPC
Algebraic relationship between multiplier and MPC
Functioning of Investment Multiplier through numerical example
METHODOLOGY: Problem solving method, demonstration, question answer method.
TEACHING AID: Power Point Presentation, graphic and diagrammatic
presentation
EVALUATION OF MODULE: Self check question
OVERVIEW:
The concept of multiplier is an important contribution by Prof. JM Keynes. Keynes believed that an
initial increment in investment increases the final income by many times. Multiplier expresses the
relationship between an initial increment in investment and the resulting increase in aggregate
income.
CONTENT
The operation of the multiplier ensures that a change in investment causes a change output (or
change in national income) by an amplified amount, which is a multiple of the change in investment.
Multiplier refers to the change in income to a change in investment.
Symbolically,
ΔY = K.ΔI
Or, k = ΔY/ ΔI
DIAGRAMMATIC PRESENTATION OF MULTIPLIER
Multiplier and MPC: There exists a direct relationship between mpc and the value of
multiplier. Higher the mpc, more will be value of multiplier and vice-versa.
ALGEBRAIC RELATIONSHIP BETWEEN MULTIPLIER AND MPC
We know that the value of output is equal to aggregate spending. Thus,
Y=C+I
We also know that any change in income (ΔY) is always equal to (ΔC+ΔI). Thus,
ΔY=ΔC+ΔI
Dividing both the sides by ΔY, we get,
ΔY/ΔY=ΔC/ΔY+ΔY/ΔI
Or 1/K= 1-mpc
K=1/1-mpc
K=1/mps
MULTIPLIER AND MPC (ALTERNATE WAY)
At equilibrium price, Y=C+I ………………..(I)
We know, C=a+bY………………………..(2)
Substituting value of C we get,
Y=a+bY+I
Y-bY =a+I
Y(1-b)=a+I
Y=1/(1-b)*(a+I)
b is nothing but the mpc, so we have,
Y=1/1-mpc*(a+I)
To get the effect of a change in investment on income, we differentiate the
equation to obtain
ΔY=1/1-mpc *ΔI
K=ΔY/ΔI = 1/1-MPC
FUNCTIONING OF INVESTMENT MULTIPLIER: PRESENTATION BY A NUMERICAL EXAMPLE
The working of the multiplier tells as to what will be the final change in income as a
result of change in investment. Change in investment causes a change in income. As a
result, there is a change in consumption which in turn leads to a multiple change in
income.
Symbolically,
ΔI→ΔY→ΔC→ΔY
The working of the multiplier can be explained with the help of the following table
which is based on the assumption that ΔI=1000 and 0.8 (4/5)
PROCESS OF INCOME GENERATION
ROUND
ΔI
ΔY
ΔC
I
1000
1000
4/5*1000=800
II
-
800
4/5*800=640
III
-
640
4/5*640=512
IV
-
512
4/5*512=409.6
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL
5000
4000
From the above table , we learn that,
ΔY=1000+800+640+512+………+∞
=1000+4/5*1000+(4/5)2*1000+(4/5)3*1000+……….∞
=1000[1+(4/5)+(4/5)2+(4/5)3+…………∞
[s=1+a+a2+a3+…..∞ = 1/1-a]
Sum of an infinite GP series
=1000[1/1-4/5]
=1000*5
=Rs. 5000 Cr.
KNOW YOURSELF
1. Explain the meaning of investment multiplier. What can be its maximum and
minimum value and why?
2. Explain with the help of a numerical example how an increase in investment
in an economy affect its level of income.
3. Briefly explain the relationship between MPC and investment multiplier.
4. What is meant by investment multiplier? Explain the relationship between
mps and investment multiplier.
5. Explain the working of investment multiplier with the help of an example.
6. Explain the working of investment multiplier with the help of a diagram.
7. Giving reasons state whether the following statements are true or false.
a) APS is always greater than zero
b) Value of investment multiplier varies between zero and infinity
c) The value of APS can never be greater than one
d) If the ratio of MPC and mps is 4:1, the value of investment multiplier will be
4
e) There is an inverse relationship between the value of mps and investment
multiplier.
EXERCISE
a) In an economy, 75% of the increase in income is spent on consumption.
Investment is increased by Rs 1000 crore. Calculate i)total increase in income
ii)total increase in consumption expenditure
b) In an economy, the equilibrium level of income is Rs 12000 cr. The ratio of
mpc and mps is 3:1. Calculate the additional investment needed to reach a
new equilibrium level of income of Rs20000 cr.
c) In an economy, mpc is 0.75. If investment expenditure is increased by 500 cr,
calculate the total increase in income and consumption expenditure.
d) In an economy, an increase in investment leads to increase in national income
which is three times more than increase in investment. Calculate mpc.
e) The saving function of an economy is S=-200+0.25Y. the economy is in
equilibrium when income is equal to Rs 2000 cr. Calculate
a) Investment expenditure at equilibrium level of income
b) Autonomous consumption
c) Investment multiplier
f) In an economy, the actual level of income is Rs 500 cr whereas the full
employment level of income is Rs 800 cr. The mpc is 0.75. Calculate the
increase in investment required to achieve full employment equilibrium.
g) In an economy, mps is 0.10. How much increase in investment is required so
that national income rises by Rs 400 cr.
REFERENCE
Macroeconomics by M.L. Jhingan
Macroeconomics by H.L. Ahuja
Macroeconomics
NCERT
************************************************************************
BASIC ECONOMIC ACTIVITIES
Mr. Arun Kumar Patra
PGT (Economics)
Kendriya Vidyalaya,
Chhatarpur (MP)
Bhopal
Duration – 80 minutes
OBJECTIVES
*Student will remember the meaning of Production,
Distribution and Consumption.
*Student will be able to relate the three basic economic activities each
other.
*Student will be able to categorized different economic activities in to
three groups (Production, Distribution and Consumption).
LEARNING OUTCOMES
*The student will be able to apply economics.
*Student will able to understand the broadness of economics and will
extend their area of thinking.
*Student will be able to relate the day to day activities with the economics.
TEACHING MATERIAL
*Power Point Presentation, White Board, Marker, Glass and Cloth.
METHODS OF TEACHING
*Question Answer Method
*Group Discussion Method
*Deductive Method
*Demonstration Method
GIEST OF LESSON
Basic economic activities are Production, Distribution and Consumption. Basic
Activities are the structure of economic building lies on these three pillars.
Economic Activities – Which leads to income generation? Production refers to
all activities which are undertaken to produce goods and services for generation
of income and satisfying human wants or we mean creation of utility or value of
goods and services (Production – Investment – Capital Formation). Distribution
is that activity which studies how income generated in the process of
production is distributed among the factors of production (Land- Rent, LabourWages, Capital-Interest, and Entrepreneur- Profit). Consumption is an economic
activity which deals with the use of goods and services for the satisfaction of
human wants. When a want is satisfied, the process is known as consumption.
DIATRI
PROD
BUTIOCONS
UCTIECO
N UMPTI
ON NO ON
MY
TEACHER’S ACTIVITY
The topic will be introduced to the Students by asking simple question
based on their previous knowledge like*The teacher will ask the students about their daily work and that of their
parents. The teacher will note the activities and will group in to three
groups.
*Explain the broadness of economics and approach the students to be
broad minded.
*Discuss with the students why these activities are termed as basic.
*The teacher will differentiate between economic activities and non
economic activities.
*The teacher will explain the concept of consumption, production and
distribution.
*The teacher will ask some recapitulation question to the students.
*The teacher will give some assignment and project work to the students.
Teachers carefully monitor the activity of the student and ask oral
questions to access the level of understanding.
STUDENT’S ACTIVITY
Students listen to the introductory remarks by the teacher and answer the
questions asked.
Student silently and carefully learns the concept with great interest and
notes the relevant information in their note book.
RECAPTULATION
*What do you mean by consumption?
*Who is a producer?
*Who is a service provider?
*What is meant by economic activity?
*Who is a consumer?
ASSIGNMENT
What do you mean by consumption? Give examples.
What are basic economic activities? Why are they called basic
activities?
*Are the three basic activities interrelated? Give reasons in support of
your answer.*Not compulsory for all.
PROJECT
List 20 activities performed by a farmer in his day to day life and group
them into production, consumption, and distribution.
REFERENCES
*Introductory Macro Economics- Mr. Sandeep Garg
*Introductory Macro Economics- Ms Deepa Shree
*NCERT Text Book
*websites- www.cso.nic.in, www.gov.nic.in
***************************************************************************
MEASUREMENT OF NATIONAL INCOME
Mr. D.P. Thapliyal PGT
(Economics)
KV OLF Raipur
Dehradun Region
Duration: 80 minutes (approx.)
OVERVIEW
Three related phases are measuring National Income i.e. Production, Income, and
Expenditure which go continuously in a economy. Production process generates income;
income gives purchasing power in the hand of people, this expenditure in the economy
by measuring national income.
OBJECTIVE
This module enables the learner to understand:
(1) How to calculate National Income through production (value added), income
method and expenditure method.
(2) All three methods give the same result.
(3) Importance of factor income and market price.
(4) Importance of net factor income from abroad.
(5) Importance of Gross Capital formation.
(6) Precautions taken while calculating national income.
(7) Identification of growth of national income in the country.
CONTENT
National income refers to money value of final goods and services produced within
domestic territory by normal residents and including net factor income from abroad
during in an accounting year.
Methods for calculating national income
1. Production method (Value added method)
2. Income method.
3. Expenditure method
PRODUCTION METHOD
This method measures national income through the value added by producing units.
1.
Value of output = output x price
2.
Value of output – intermediate consumption = Gross Domestic Product at
MP. ( OR ) final production of primary, secondary, tertiarysector-intermediate
production of primary, secondary ,tertiary sector
3.
GDP at MP – depreciation-NIT + NFIA = NNP at FC
Precautions:
(a) Value of goods product for self-consumption must be included in the
estimation of domestic product.
(b) Value of second hands goods should not be included
Activity:
1. Value of output----------------------------= GDP at MP
2. GDP at MP--------------------------------
Answer:
= GNP at MP
1. Intermediate consumption
2. NFIA
INCOME METHOD:
In this method national income is calculated at factor cost
I.
II.
III.
Compensation of Employee
Operating surplus
Mixed income
Add net factor income from abroad = National Income
Activity 2:
Call four students in front of other students and name each them as above mentioned
and explain how to calculate.
Precautions:
1. Transfer payment not to be included
2. Leisure time activities not to be included
3. Income from share & bonds not to be included
EXPENDITURE METOD:
In this method national income is calculated at MP
1. Private final consumption expenditure
2. Government final consumption expenditure
3. Gross domestic capital formation
4. Net export
= GDP at MP- DEP –NIT +NFYA
= NATIONAL INCOME
Precautions
In this method we should take following precaution:
1. Intermediate consumption should not be included
2. Expenditures on second hand goods not to be included
3. Expenditure on transfer payments not to be included
National income and economic welfare
National income is related to the welfare of economy. Welfare of economy shows
standard of living of the economy. It increases GNP and increase in per capita income is
sign of equitable distribution of income and sustainable development.
SUM UP
1. There are three ways of calculating national income
a) Production method (Value added method)
b) Income method.
c)
Expenditure method
2. Steps of value added method are Value of output = output x price,
Value of output – intermediate consumption = Gross Domestic Product
at MP.
3. Steps of Income method are adding Compensation of Employees, Operating surplus,
Mixed income, add net factor income from abroad =
National Income.
4. The main steps of expenditure method are - Private
final
consumption
expenditure, government final consumption expenditure, Gross domestic capital
formation, net export = GDP at MP- DEP –NIT +NFYA.
EXERCISE
Q.1
No.
1
2
3
4
5
6
From the following date, calculate gross value added at factor cost:
Particulars
Amt.(Rs. In lakhs)
Sales
180
Rent
5
Subsidies
10
Change in stock
15
Purchase of raw material
100
Profits
25
7
Imports
15
Q.2.
From the following data Calculate National Income by –
a) Income method
b) Expenditure method
Items
Rs. crores
i)
Compensation of employees
800
ii)
Pvt final consumption expenditure
1200
iii)
Profit
500
iv)
Rent
200
v)
Govt. final consumption expenditure
800
vi)
Interest
150
vii)
Net factor income from abroad
20
viii) Net indirect taxes
190
ix)
Mixed income of self-employed
630
x)
Net exports
(-)30
xi)
Net domestic capital formation
500
xii)
Consumption of fixed capital
150
REFERENCES
1)
2)
3)
4)
Introductory Macro Economics
Micro and Macro Economics
Micro Economics
Introductory micro and Macro Economics
www.ncert.nic.com
www.nos.org
NCERT
Mr. Sandeep Garg
Mr. M. L. Jhingan
Mr. B.L. Gupta
*************************************************
CONCEPT OF PRODUCER’S EQUILIBRIUM AND ITS
DETERMINATION BY MR-MC APPROACH
PRESENTED BY
Ms. Jayashree
K.V. NO. 1
Gaya (Ptana)
Patna Region
Duration : 80 min.
 OBJECTIVES :-
1) Students will be able to recall the concepts of MR & MC.
2) Students will be able to understand the meaning of producer’s equilibrium.
3) Students will be able to find out the maximum level of output that a prudent
producers will undertake .
4) The students will be able to ascertain the quantity produced by a rational producer
with objective of profit maximization.
 LEARNING OUTCOMES :The students will be able to identify the rational behind the decision of the
producer i.e maximization of output with minimum resources.
 TEACHING METHODS USED :1)
2)
3)
4)
Lecture method.
Question – answer method.
Demonstration & quizzing method.
Overall a deductive approach will be used for elaboration of the topic.
 TEACHING MATERIALS :1)
2)
3)
4)
White board
Marker and duster
Power point slides on the topic.
Chart papers etc
 GIST OF THE LESSON :A producer is said to be reach equilibrium at that level of output which gives him
maximum profit and he has no tendency to change his output.
A producer is said to be in equilibrium at a point where :1) MR = MC
2) MC cuts MR from below.
According to the MR –MC approach the first condition of the producer’s
equilibrium is that marginal cost should be equal to marginal revenue.
But the MC can be equal to MR even after that level of output cost becomes less
than the revenue i.e. MC<MR.
Therefore MC=MR is a necessary but not a sufficient condition.
The second condition is that MC cuts MR from below.
 TEACHER’S ACTIVITY :The topic will be introduced to the students by asking simple questions based on
their previous knowledge.
1) Who is a producer?
2) What is the main objective for which a producer produces a commodity?
3) When will a producer be in equilibrium?
The teacher will explain the meaning of producer’s equilibrium using MR-MC approach.
The teacher will use power point slides to explain the various theoretical concepts i.e.
definition & condition of producer’s equilibrium using MR-MC approach.
The white board will be used for graphical presentation of the topic.
The teacher will ask short questions to access the level of understanding like.
Q1. Why will the producer not stop producing at point K level of output?
Q2. At what level of output will the producer maximize his profit?
 RECAPTULATION :The teacher will use power point slides for quick recapitulation by asking simple
questions.
 STUDENT’S ACTIVITY :The students listen to the introductory remarks of the topic and try to answer the
questions ask by the teacher . They carefully listen the content of topic & note
the relevant facts in their class work note-book .
 VALUES INCULCATED :Judicious use of scarce resources i.e. maximization of the output with minimum
resources.
 HOME ASSINGMENT / PROJECT :Question for slow learners:1) What do you understand by producer’s equilibrium?
2) State only the condition of producer’s equilibrium.
Questions for bright students:-
3) Is MR=MC a sufficient condition for producer’s equilibrium? Explain.
4) Find out the profit maximizing level of output :-
Quantity Sold
Marginal Cost
Total Revenue
1
2
3
4
5
15
9
6
2
3
12
26
34
40
42
REFERENCE :
Introductory Micro Economics –Text book NCERT
Principles of Micro Economics – H. L. Ahuja
Micro Economics
-M. L. Jhingan
Micro Economics
- M.L. Seth
Introductory Micro & Macro Economics – Ohri & Jain
************************************************************************
ECONOMIC REFORMS SINCE, 1991
PRESENTED BY
Mr. R. N.MOHKER
KENDRIYA VIDYALAYA
A.F.S.
AMLA (M.P.)
DURATION: 40 MINUTES
OBJECTIVE
1)
2)
3)
4)
5)
To strengthen the growth impulses in the economy.
To make our production units more efficient and highly productive.
To increase the competitive of our production units.
To make use of global resources for our own progress and development.
Main objective of Liberalization means a reduced role for the Govt. and a greater role
for the market sources.
6) The main objective of privatization is to make use of privately owned resources for
collective welfare of the people.
SPECIFIC OBJECTIVE
Students will be familiar with Economic reforms and its impact on Indian Economy.
LEARNING OUTCOME
Students will be enabling to find out the changes appear in their surroundings after
economic reforms as MNCs products and role in the Indian economy.
TEACHING MATERIALS
1) PowerPoint presentation.
2) Foreign company’s (MNCs) products.
3) Services of foreign Intellectuals hired and examples according to the class situations.
METHODOLOGY
1) Lecture method.
2) Question- cum – answer method.
3) Situation Analysis approach-cum- solution.
GIST OF THE LESSON
ECONOMIC REFORMS
Economic reforms refer to the all those measures which aim at rendering the economy
more efficiently, competitive and developed. Main economic reforms are: (1)
Liberalization,
(2)
Privatization and
(3)
Globalization.
NEED FOR ECONOMIC REFORMS
1)
2)
3)
4)
5)
6)
Increase in fiscal deficit.
Increase in adverse BoP.
Gulf crisis.
Fall in foreign exchange reserve.
Rise in prices.
Poor performance of P.S.U.
NEW ECONOMIC POLICY
LIBERALISATION
Implying freedom of private enterprises from control imposed by the Govt.
Industrial licensing removed
Expansion of production area
Freedom to import capital goods
Financial reforms
Fiscal reforms
External sector reforms
PRIVATISATION
It implies partial or full ownership and management of public sector enterprises by the
private sector.
Disinvestment of PSU
Withdrawal of Government ownership
Efficient performance of private sector
GLOBALISATION
It is a process associated with increasing openness, growing economic independence and
deepening economic integration in the world economy.
Increase equity limit of foreign investment
Partial convertibility
Long term trade policy
POSITIVE IMPACT OF THE L. P. G. POLICY
1)
2)
3)
4)
5)
6)
7)
8)
A vibrant economy.
A stimulant to industrial product.
A check on fiscal deficit.
A check on inflation.
Consumer’s sovereignty.
A substantial increase in foreign exchange reserves.
Flow of F.D.I.
Recognition of India is an emerging economic power.
NEGATIVE EFFECT OF NEW ECONOMIC POLICY
1) Adversely affects the employment of unskilled Persons.
2) No importance is given to the small scale industries and agriculture.
TEACHER’S ACTIVITY
Checking the control of large Industrial houses on the financial resources of the
country.Negative lists of imports contain those items for whose import license are still
required.
STUDENT’S ACTIVITIES
1)
2)
3)
4)
Students will give the answers while asking the questions by the teacher.
Students will note the Blackboard write-ups as important tips.
Students will think the need of the economic reforms as critically based analysis.
Students will note the home work & class work accordingly.
PROJECT
1) Prepare a list of domestic Industries and Multinational companies.
2) Prepare a list of Exports and imports items in the Indian Economy.
ASSIGNMENTS
1.
2.
3.
4.
When was the new economic policy enforcing?
Define Liberalization, privatization and globalization.
Describe the need for economic reforms?
It is said, new economic policy is liberal. Do you agree? Give arguments in support
of your answer.
5. Mention the financial reforms introduced under the new Economic policy?
REFERENCES
1. Indian Economic Development (N C E R T)
2. Indian Economic Development By T R Jain & V K Ohri.
3. Indian Economic development By I C Dingra.
*************************************************************************
CENTRAL BANK AND ITS FUNCTIONS
Presented by
Urvashi Mishra
P.G.T(Eco)
K.V.No-1, Indore(MP)
Bhopal Region
Duration – 80 Minutes
1.Objectives*The students will be able to understand our banking system.
* The student will be able to know about our monetary system and economic
policy of govt. of India.
*The student will be able to know how RBI controls banks in India.
*The student will be able to know that RBI is the controlling authority of money supply
in the market.
2.Learning Out comes.*The student will use this knowledge in there daily life.
*They will understand the functions of RBI.
3.Teaching material usedCurrency notes for display.
White board, marker, power point presentation.
4.Methodology*Question - Answer Method,
*Display Cum Discussion Method.
5.Gist of the lesson –
Definition-Central
bank is the apex financial institution of a country which issues
currency notes and regulates the banking system of the country.
Functions of central bank*Currency Authority –
Generally the central bank issues the currency notes in our country but the one rupee
note is issued by ministry of finance. The Central Bank adopts certain minimum reserve
system for issuing currency notes.
*Banker to the governmentRBI accepts receipts and make payment for the govt. It provide short term
credit to the govt. It provide foreign exchange reserve to the govt. to repay
external loans.
*Bankers bank and supervisorThe central bank acts as a banker to the commercial bank and supervises, regulates and
controls the activity of commercial bank.
*Controller of money supply and creditThe Central bank controls the money supply and credit in the best interest of the
economy .The bank does this by taking various quantitative and qualitative instruments
such as-bank rate, open market operations, cash reserve ratio, statutory liquidity ratio,
change in margin requirements, moral suasion.
I - Bank rate-It is the minimum rate at which the central bank of a country gives
credit to the commercial bank. During inflation the central bank increases the Bank Rate
to discourage commercial banks to take more loan. On the other hand during
depression the Central bank decreases the bank rate as a result of which supply of
credit in the economy increases. Bank rate as on 27/12/2010 is6%.
II - Open market operation-It refers to the purchase and sale of govt. securities.
During inflation the Central bank sales securities in the open market. his reduces the
money supply in the economy and helps in reducing price level. During depression
central bank purchase securities to increase money supply in the economy.
III - Cash reserve ratio-It is the minimum percentage of total deposits which is
required to be kept with the central bank. During inflation Reserve bank increases CRR.
During depression it lowers the CRR.
IV - Statutory Liquidity Ratio-It is the amount of cash which a commercial bank has
to keep in the form of liquid asset in order to meet un anticipated withdrawals. At
present SLR is 25%.
V - Legal Reserve Ratio-It is the sum of cash reserve ratio and statutory liquidity
ratio.
LRR=CRR+SLR
6.Teacher’s Activity*The topic will be introduced to the pupil by asking simple questions based on their
previous knowledge.
*What is barter system?
*What is money?
*Where you deposit your money ?
*The teacher will teach the student using all methods mentioned above.
*The teacher will supervise the written work of the students
7.Students ActivityThe students will answer the questions asked by the teacher.
They will see the different notes (one rupee, Five hundred etc) and will find out the
difference.
8.Home Assignment1)What are the functions of central bank?
2)What is bank rate?
3)Explain how CRR is used to control money supply.
9.Project*Make a project based on the functions of central bank by flow chart.
*Write down the current status of monetary policy of India and prepare a chart based
on the current data.
10.ReferenceNCERT Text Book .,
Macro economics-E .W. Sapiro.
Introductory Macro Economics – Mr Sandeep Garg
Concept of Cost
Mr. Vijay Pratap Singh
K V Lansdown
Dehradun Region
Duration – 80 Minutes
Objective - To make the student aware the concept of cost of production.
Specific objective – To aware the student about the various concepts of cost, Specially concept of
variable & fixed cost.
Learning outcome- The students will be able to explain the meaning, definition & concept of various
costs. They will also be able to estimate various types of cost viz. Fc, vg etc.
Teaching Material- Black board & power point presentation.
Methodology- Lecture cum demonstration method.
Question answer method.
Gist of lesion- Meaning of cost “the expenditure incurred on inputs require to produced a commodity is
known as the cost of production.
Cost function – Cost function refers to the functional relationship between cost and output
C = f (Q)
Kinds of Cost - 1- Money cost
2 –Explicit and implicit cost
3 –Real cost
4 –Private and social cost
5- Opportunity cost
Money Cost – Money cost refers to the total expense incurred by a firm for producing a commodity.
Explicit Cost– Explicit cost refers to the actual payment made to outsider for purchasing and hiring
service of the factor of production.
Implicit Cost – Implicit cost refers to the cost of self-supplied factor.
Real Cost – Real cost refers to the pain sacrifice discomfort and disutility involved in providing factor
services to produce a commodity.
Private Cost - Private cost refers to the cost of production incurred by an individual firm in producing a
commodity.
Social Cost – Social cost include the disadvantage, suffered by the society due to production of a
commodity.
Opportunity Cost - Opportunity cost is the cost of the next best alternative
forgone.
Classification of cost on the basis of time.
Short Run Cost - Short run cost are those cost in which some cost are fixed and some cost variable .
Long Run Cost – In long run cost all cost are variable cost.
SHORT RUN COSTS
Total variable cost – total variable cost refers to the cost which directly varies with the level of
output.
Schedule
Output(units)
0
1
2
3
4
TVC (Rs)
0
6
10
15
24
Total Fixed Cost- Fixed cost refers to the those cost which do not vary with the level of
output. Schedule
Output
Cost
Toatl Cost –
0
20
1
20
2
20
3
20
4
20
TC = TVC + TFC
TC= AQ
TVC= BQ
TFC= CQ
TC= TVC+ TFC
= BQ + CQ
= AQ
Teacher Activity – Teacher will develop the lesson plan with the help of question answered methods and
then teach with the help of power point presentation.
Student Activity – Student will note all the points and ask the question if any doubt.
Project- Student will be asked to prepare a list of cost of various brand of colour television.
Assignment – For slow lerner
Q1 Define various type of cost?
Q2 Find out TVC and MC from the following.
Output
TC
0
20
1
40
2
60
3
90
FOR BRIGHT – Explain the relationship between TC TVC TFC with the help of hypothetical schedule and
diagram.
Reference –
Micro Economics of H.L AHUJA
Introductory Micro Economics SANDEEP GARG
***************************************************************************
PRODUCTION FUNCTION AND LAW OF VARIABLE PROPORTION
Mr. Abhishek Chaturvedi
PGT (Economics)
Kendriya Vidyalaya,
Ambajhari,Nagpur
Bhopal
Duration – 80 Minutes
OBJECTIVES
*Student will be able to recall the concept of TP, MP and AP.
*Student will be able to recognize the determinants factors which are
responsible for increasing returns, decreasing return and Negative Return
to a factor.
*Student will able to understand the convexity of TP curve.
*Student will able to understand the slope of MP curve.
*Student will be able to draw TP ad MP curve with the help of numerical
schedule.
*Student will able to correlate this law with other concepts like disguised
unemployment in agricultural sector
LEARNING OUTCOMES
*They will able to use of formula to calculate MP, AP and TP.
TEACHING MATERIAL
*Power Point Presentation, White Board, Marker.
METHODS OF TEACHING
*Question Answer Method
*Group Discussion Method
*Deductive Method
*Demonstration Effect
GIEST OF LESSON
Production function is the physical relationship between input and output.
There are two types of production function (1) Short run production function
and (2) Long run Production function. In short run period of time there are two
types of factor- (1) Fixed Factor and (2) Variable Factor. There are three types of
production (1) Total Production, (2) Average Production and (3) Marginal
Production. Total Production refers to total quantity of goods produce by a firm
during given period of time with given number of inputs. Average production
refers to output per unit of variable input. Marginal Product refers too
additional to total product when more unit of variable factor is employed.
The law of variable proportion can be explained with the help of following
schedule and diagram..
Fixed
Factor
Variable
Factor
(Land
1
in
1
acres)
(
1
Labour)
2
1
TP
MP
AP
(Units)
10
(Units)
10
(Units)
10.0
30
20
15.0
3
45
15
15.0
1
4
52
7
13.0
1
5
52
0
10.4
1
6
48
-4
08.0
1
7
38
-10
05.4
Stages
st
I (Increasing returns to a
factor)
nd
II (Diminishing returns to a
factor)
rd
III (Negative returns to a
factor)
Our above schedule reveals the under mentioned stages.
Stage 1 (Increasing returns to a factor)- In the first stage, TP increase at an
increasing rate and MP is also increases. MP increases till point ‘P’ and TP
increases at an increasing rate till point ‘Q’.
Stage 2 (Diminishing returns to a factor)- In the second stage, TP increases at a
decreasing rate and MP starts falling. This stage ends when MP becomes Zero
and TP reaches its maximum point. In figure after point ‘P’, when MP starts
decreasing and TP increases at a diminishing rate. This stage occurs between
point ’P’ and point ‘S’. The stage ends when MP is zero at point ’S’ and TP is
maximum at point ‘M’
Stage 3 (Negative returns to a factor)- In the third stage, TP starts decreasing
and MP not only falls, but also becomes negative. In figure after point ‘S’ in MP
curve and after point ‘M’ in TP curve.
A rational Producer will always prefer to produce in the II stage of production.
TEACHER’S ACTIVITY
The topic will be introduced to the Students by asking simple question
based on their previous knowledge like*What are the vital activities of any economy?
*If a farmer wants to earn income, what should he do?
*What is the meaning of production?
*What are the main requirement which necessary for production?
After asking some questions, teacher will explain the concepts and provide
them additional knowledge by adopting various teaching methods.
Teachers carefully monitors the activity of the student and ask oral
questions to access the level of understanding.
STUDENT’S ACTIVITY
Students listen to the introductory remarks by the teacher and answer the
questions asked.
Student Silently and carefully learn the concept with great interest and
note the relevant information in their note book.
PROJECT
Collect the data about Total Production, Marginal Production and Average
Production from your near area of agriculture sector.
ASSIGNMENT
VERY SHORT ANS QUESTIONS
1. What is Production Function?
2. List any Four inputs used in production process?
3. What is the general slope of Marginal Production Curve?
*What will u say about MP of a factor, when TP rises at an increasing
rate?
*When MP is falling and positive, at what rate TP is changing?
SHORT ANS QUESTIONS
1. Explain the Relationship between TP and MP.
2. Explain the concepts of Short run and Long run.
*There is always an ideal factor ratio. What happens if this ideal ratio is
violated?
LONG ANS QUESTION
1. Explian the Law of Variable Proportion with the help of diagram.
*Do you agree that TP must increase in a situation of diminishing returns
and AP may continue to rise even when MP starts declining? Why?
REFERENCES
*Introductory Micro Economics- Mr. Sandeep Garg
*Introductory Micro Economics- Ms Deepa Shree
*NCERT Text Book
*websites- www.cso.nic.in, www.gov.nic.in
***