Category: Commerce Notes PPT

In essence, forecasting is a method of examining past and current market movements and patterns in order to gain some insight or hints about future trends and business movements. Forecasting is looking into the future for us to prepare for it accordingly. 

Forecasting is not, however, a haywire operation. It is a systematic methodology with well-thought-out methods and procedures that are scientific. With the assistance of both quantitative and qualitative methods, it requires a detailed and proper study of data and information.

Steps in Forecasting

Identifying and Understanding the Structure- Factors that may shape the future of an organization are almost infinite. It is neither feasible nor desirable to define all these considerations. The executives must also define the variables on which to concentrate in order to make an effective forecast. In order to define the strategic factors of the organization, internal and external variables must also be examined.

Forecasting the Future

The next step now is to make a reliable and scientific prediction after the foundation is laid. This includes both research instruments and methods and professional judgment and observations as well. The forecast is not a foolproof strategy, just a potential guidance map.

Analysis of Deviations 

No prediction can be entirely exact. It is important to evaluate and study the variations or deviations from the forecasts. In the future, this would help to build more detailed predictions.

Adapting the Forecasts Procedure 

The skills and professional judgment required in forecasting are acquired through experience and practice. With every cycle, the forecast procedure is fine-tuned. And we can learn and continue to build on the forecasting procedures from our errors and weaknesses.

Advantages of Forecasting 

• Helps in Scheduling: One of the greatest benefits of forecasting is that it helps the manager to prepare for the organization’s future. Currently, planning and forecasting go hand in hand. We will not prepare for it without an understanding of what the future holds for the business. Forecasting, therefore, plays a very significant role in planning.

• Changes to the Climate: Prognostics should be able to point out the potential environmental changes when performed correctly. This implies that it will allow the organization to benefit from such environmental changes. It can develop and grow its business if the changes are beneficial to the company. And it may intend and prepare to defend itself in circumstances that are adverse.

• Weak Spots Detection: Another benefit of forecasting is that it can help the manager find any weak points that the company may have or overlooked areas. When attention has been drawn to these areas, successful controls and preparation strategies to fix them can be put into practice by the manager.

• Enhances Coordination and Control: Information and data from a lot of external and internal sources are needed for forecasting. This knowledge is obtained from different internal sources by the various managers and employees. Thus, nearly all of the organization’s divisions and verticals are involved in the forecasting process. This facilitates greater cooperation and communication between them.

 

Limitations of Forecasting 

Along with the advantages, there are certain forecasting constraints as well. Let us have a look at a few of them:

• Just Estimates: The future will be unpredictable at all times. Even if the best methods of forecasting are used and every factor possible is accounted for, a prediction is still just an estimation. With 100 percent effectiveness, one can never predict future events. So even the best-laid plans can be nothing at all. This will still be one of the forecasting’s greatest constraints.

• Based on Forecasts: Assumptions, approximations, natural conditions, etc are the basis of every forecasting system. This renders those predictions inaccurate. So, the inherent weaknesses of forecasting must always be kept in mind and everyone has to be careful about being over-reliant on them.

• Factors Time and Cost: There is usually a lot of data and knowledge needed to make structured forecasts. And, there is a lot of time and money involved in the processing and tabulation of such results. Another aspect is also the translation of qualitative data into quantitative data. One must be cautious that the forecasting time, resources, and effort expended must not overshadow the real benefits of such forecasts.

Why is Forecasting Important in Business Studies?

Business intelligence is a technology that transforms raw data into useful and trustworthy insights in real-time. Businesses will be able to make more educated business choices quicker as a result of this. These integrated systems can supply you with data from the past, present, and future. This data is used by Business Intelligence tools to generate analyses, highlights, dashboards, charts, infographics, and maps, all of which provide comprehensive information into corporate operations. 

Big data and artificial intelligence have altered corporate forecasting methodologies today, and they are always developing to meet business requirements and technological advancements. As businesses become increasingly data-driven, the need to share information and communicate grows. A business intelligence system is a good approach to get the data you need for better forecasting, and better forecasting leads to a more effective, creative, and cost-effective company.

Managing a company necessitates making prompt and well-informed choices is tough. Many organizations, on the other hand, are struggling to keep up with the enormous volume of data being gathered. Business intelligence promotes and improves real-time decision-making while decreasing the burden and expense of data processing and analysis. 

Finally, forecasting allows organizations to get insight into data, helping them to change and react to future projections by maximizing resources. There are a number of techniques that can help a business gather more data and get a better picture of how operations, procedures, budgets, and other aspects of the business are now operating, as well as what needs to be altered or improved in terms of achieving future objectives and prospects. Forecasting can offer critical data to any company, regardless of the sector it belongs to. The word impartial comes to mind when describing a solid forecast. It accurately depicts the demand history’s expected pattern.

AOA or Articles of Association is rightly known as the ‘rule book’ of the company. The AOA lays down all the rules and objectives of the company which one must adhere to it. 

In this content, we will know about Articles of Association and their importance regarding the company.  

What are Articles of Association?

When a company is formed, certain rules and regulations are laid down along with the objectives of the company’s operations and its purpose. These laws regulate the internal affairs of a company. There are two important sets of documents that define these objectives and govern the functioning of the company and its directors or internal affairs. These documents are Articles of Association (AOA) and Memorandum of Association (MOA). Here, we will discuss in detail the Articles of association. 

Articles of Association contain the by-laws that regulate the operations and functioning of the company like the appointment of directors and handling of financial records to name a few. Let’s imagine the company as a machine. The articles of association then can be considered the user’s manual for this machine. It defines the operations that the machine is supposed to perform and how to do that on a day-to-day basis.

Definition of Articles of Association of a Company

As per Section 2 (5) of the Companies Act, 2013, Articles of Association have been defined as 

“The Articles of Association (AOA) of a company originally framed or altered or applied in pursuance of any previous company law or this Act.”

Objectives of the Articles of Association

Sec 5 of the Companies Act, 2103 states that the Articles of association:

They do not prevent a company from including additional matters in the AOA or from doing any alterations as may be considered necessary for the functioning of the company affairs.

Contents of the Articles of Association

The AOA contains the rules and by-laws for the following;

Share capital: 

Rights of various shareholders, share certificates, payment of a commission, etc.

• Lien of shares

• Calls on shares

• The process for the transfer of shares

• Transmission of shares

• Forfeiture of shares

• Surrender of shares

• Process for conversion of shares to stocks

• Share warrants

• Alteration of capital: Increase, decrease, or rearrangement of capital 

• General meetings and proceedings

• Voting rights of members

• The appointment, remuneration, qualifications, powers of directors, etc.

• Proceedings of the boards of directors’ meetings

• Dividends and reserves

• Accounts and Audits

• Borrowing Powers of the company

• Provisions relating to the winding up of the company

Forms of Articles of Association (AOA)

The forms for Articles of Association (AOA) in tables F, G, H, I, and J for different types of companies have been mentioned under Schedule I of the Companies Act, 2013. AOA must be in the respective form.

• Table F- AOA of a company limited by shares

• Table G- AOA of a company limited by guarantee and having a share capital

• Table H- AOA of a company limited by guarantee and not having a share capital

• Table I- AOA of an unlimited company and having a share capital

• Table J- AOA of an unlimited company and not having a share capital

Difference Between Memorandum and Articles of Association

Solved Questions on Articles of Association

1. What are the conditions for the provisions of entrenchment in the AOA?

Ans: The provisions for entrenchment provide specific provisions in the AOA that can be altered if certain conditions are complied with. These conditions are usually more restrictive than those applicable for a special resolution. The provisions for entrenchment can be added on the formation or after an amendment. However, in both cases, the company must give notice to the Registrar of the same.

• The inclusion of the provisions for entrenchment can be done:

• At the time of formation of the company

• By amending the Articles with approval from all members of the company. 

• In the case of a public limited company, it can be done with a special resolution.

2. Can the AOA be altered?

Ans: Section 31 of the Companies Act states that the Articles of Association can be altered at any time by a special resolution. A copy of the same must be filed with the Registrar of Companies. However, this power of alteration is subject to two restrictions:

• The alteration must be under the provisions of the Act

• The alteration is subject to conditions stated in the MOA

• Any alteration that converts a public company into a private company must be approved by the Central Government.

3. Can the AOA go beyond the scope of the MOA?

Ans: MOA and AOA are two key documents that come into being at the time of the company formation. The Articles of Association are subsidiaries not just to the company but also to the Memorandum of Association of a company. The MOA is a fundamental constitutional document of the company. Any articles that go beyond the Memorandum of Association are deemed ultra vires. 

Accounting is an academic field that can be defined as a process of reporting, recording, summarizing, and interpreting economic data. Introduction to accounting is essential for any organization as it helps in making better decisions that lead to effective choices. This is done by providing information on the financial status of the business.

According to the American Institute of Certified Public Accountants (AICPA), accounting is the art of recording, classifying, and providing a summary in an essential manner and in terms of money, transactions, and events. These transactions and events have, at least in part, a financial character. The results of these events and transactions can later be interpreted.

These days almost everybody uses accounting. Hence, a good knowledge of accounting can be beneficial for all students. One can also look at accounting as a language of finance. And if one wants to learn this language of finance, then he or she needs to learn its basics and important aspects. Some of those aspects are given in a list below.

Economic events are basically consequences an organization has to undergo whenever any number of monetary transactions are involved. For example, purchasing new machinery, machine installation on-site, and transportation.

• Measurement, Identification, Recording, and Communication

The accounting system must be outlined in a manner that the right data is identified, measured, recorded, and communicated to the right individual and at the correct time.

This refers to the level of a business operation and the size of activities.

• Interested Users of Information

Interested users of information refer to communicating important financial information to the customers. This is according to what will be used for making the right decision.

Also, apart from all of this, there are also some basic accounting procedures. Those accounting procedures are:

()

The Basic Accounting Procedures

In this section, readers will be able to understand the basic accounting procedures in more detail. Those basic accounting procedures are:

1. Double Entry System

There are two main methods that can be used for accounting. These methods are single entry systems and double entry systems. Usually, the double entry system is used for higher quality accounting purposes. It is an important accounting mechanics process and system.

It should be noted that the double entry system of accounting mainly deals with either two or more accounts. These accounts are dealt with for every single business transaction. Students should remember that the double entry system is a basic and very fundamental concept that encompasses both accounting and book-keeping currently.

Also, every financial transaction has an equal and opposite effect in, at the very least, two accounts. The equation for this can be mentioned  as:

Assets = Liabilities + Equity

There are also several advantages of using the double entry accounting or system. If you want to learn what those benefits are, then go through the list that is given below.

• A double entry system helps in enhancing the accuracy of the accounting. This is done with the help of a trial balance device.

• Profit and loss that one suffered during a year can be calculated through details.

• An organization can follow the double entry system to keep the accounting records in greater detail. This helps the organization in exercising control.

• Comparison can also be made by referring to the recorded details. The details of the first year can also be compared with the second year. Any deviations that are found during the comparison can be dealt with later.

These are all the major advantages of using a double entry system.

2. Traditional Approach

The traditional accounting approach is used for classifying the accounts in an organization. Also, there are different classifications that are made for the types of accounts. These classifications of accounts are:

These accounts are often of natural people, human beings, and artificial people. Personal accounts can also be classified into different types, including natural persons, artificial persons, and representative persons.

These are the accounts that don’t fall under the category of personal accounts. These types of accounts are classified into different kinds, including real accounts and nominal accounts. Real accounts can further be differentiated into tangible real accounts and intangible real accounts.

These are the important types of traditional approaches to accounting.

3. Journal and Journalising Process

There are several transactions that are carried out in an organization every single day. Some of these transactions can be similar while others can be different. This is why it is not possible to keep all the journalising process without writing it or recording it down.

Further, one has to ensure that nothing is omitted or avoided in these transactions. This is why these transactions are kept in books. And journalising can be defined as the traditional form of keeping records of everything that is happening in an organization.

Also, a journal is the book of primary entry. It is also known as the book of original entry. This means that transactions are first entered in the book and it is also the most vital book of accounts. The transactions should be recorded in a systematic and chronological manner.

Journals can also be used to keep track of all the accounts that are debited or credited. Students should remember that keeping a record of transactions in ‘journals’ is known as ‘journalising the entries.’ There is also a list of activities that are recorded under journal entry.

4. Modern Approach of Accounting Classification

When it comes to the modern approach, the accounts are either credited or debited. This means that the accounting equation can be used to debit or credit an account. Hence, it is known as the accounting equation approach. There are also several modern rules of accounting.

The basic accounting equation that is valid in this case is:

Assets = Liabilities + Capital (This is known as the Owner’s Equity)

This equation can also be expanded in the form of:

Assets = Liabilities + Capital + Revenues – Expenses

Further, it can also be said that Profit = Revenues – Expenses

It is important for the accounting equations to remain balanced every single time. Further, one should also keep in mind that every equation has a dual aspect. This means that every transaction would either affect the debit side or the credit side.

It is also possible for a transaction to affect two accounts on the debit side or two accounts on the side of credit. This information should help students answer questions like what is a modern approach as we have given a modern system of accounting introduction in this section.

Fun Facts About the Fundamentals of Accounting

Do you know that there are several fundamentals of accounting? Some of those fundamentals are given below in a list.

An asset can be defined as the economic value of an item that is possessed by an organization. In other words, assets can also be defined as items that can be transformed into cash. These items can also generate income for the enterprise shortly. Assets are useful when it comes to paying any expenses of the business debt or entity.

Liability is defined as the economic value of an obligation or debt that an organization has to pay some other organization or individual. It can also be explained as the obligations that come out of previous transactions. These are payable by the enterprise. This payment is possessed by the organization.

This is one of the third most important segments of a sole proprietorship’s balance sheet. And one of the primary aspects of the accounting equation is:

Assets = Liabilities + Owner’s Equity

This equation shows the investment made by the owner in the trade minus the withdrawal made by the owner from the trade plus the net income of the business that is concerned.

One might also find it interesting to note that Luca Pacioli is the father of modern accounting.

In businesses, written communication is an important medium for passing information. This form of written communication used for business purposes is termed Business correspondence. The correspondence in business communication can happen within the organization, between different organizations, or between client and organization. 

The importance of business correspondence lies in the fact that it is the formal way of exchanging information by which professional relationships are maintained between organizations, employees, and clients. Since it is in a written form, it can serve as a future reference for the information being communicated.

Business correspondence happens daily in the lives of businessmen in the form of letters to suppliers, letters of inquiry, complaint letters, job application letters, and a few other forms.

 

Business Correspondence Meaning

Business correspondence is an umbrella term used for any form of written communication that happens in business relationships. It could be with business partners or internal communication within the organization.

Business correspondence is mostly in the form of letters. People related to any business understand the significance of business letters since this correspondence in business communication can be used by them to express themselves, ask a doubt or clarification regarding any uncertainty. 

 

The Importance of Business Correspondence

Business correspondence is essential in realizing organizational goals. Meeting people personally can be quite a time-consuming job hence business correspondence helps businesses with:

• Maintaining Proper Relationships – The significance of business letters is governed by the fact that it facilitates effective communication which does not cost the business much. It strengthens the business by making communication, within and outside the organization, clear and concise.

• Acts As Evidence – The importance of business correspondence is further solidified as it lets businesses keep records of facts that can serve as evidence at a later point in time.

• Creating Goodwill – A company’s growth increases due to business correspondence. It creates goodwill between business and clients since any letter like a complaint, feedback, or suggestion promotes a healthy relationship.

• Costs Very Less – Business correspondence is an inexpensive mode of communication in terms of money as well as time. This method of correspondence in business communication is very convenient for businesses.

• Removes Ambiguity in Communication – It is a formal correspondence between the involved parties which helps in unambiguous communication.

• Helps Businesses Expand and Grow – A business can have a seamless flow of information regarding any product or resources through business correspondence. This helps in the proper utilization of manpower and time management, which in turn leads to expansion and growth in business.

 

Types of Business Correspondence

A business typically uses many kinds of business correspondence in its day to day activities. There are six most common kinds of business correspondences in the business community as defined below:

1. Internal Correspondence – The flow of information between employees, departments, branches, and units of the same company is termed internal correspondence. They can be formal or informal. 

1. Some examples of formal internal correspondence are promotion letters, a formal request for approval, a memorandum, etc. They are mostly printed on paper.

2. A routine or informal internal correspondence can be a quick instruction between a manager and subordinate, which are mostly in the form of emails.

2. External Correspondence – The communication between 2 different organizations or between an organization and a client comes under external correspondence. This type of correspondence in business communication is usually made to suppliers, existing and prospective clients, government offices, etc.

3. Sales Correspondence – Any communication related to sales is called sales correspondence. It is not only concerned with the sale of a product or service but encompasses many other activities. It includes marketing letters, invoices, discount letters, statements of accounts, etc.

4. Routine Correspondence – Such correspondence happens routinely like orders, inquiries, invitations, replies, etc.

5. Personalized Correspondence – This involves personal and emotional factors. Some of the examples of this type of correspondence are letters of gratitude, congratulation letters, appreciation notes, letters of request for a recommendation, etc.

6. Circulars – This type of correspondence is used when a business has to convey a common matter to a large audience. A few examples are notices of tenders, change in contact information, etc. 

Qualities of effective business communication can be summed up in the figure below:

 

()

 

What is Correspondence?

Correspondence is simply written communication from one person to another for various reasons: to report information, convey feelings, or ask questions. It can be verbal or written. The communication may include memos and emails. It can range from formal to informal. In all cases, it is a two-way exchange of information.

The goal of business correspondence is to communicate accurately and effectively. Therefore, it is important to select the most appropriate format for the message and its recipients. Business correspondents can include people or businesses. They may include individuals who are in a position to give or receive business information, such as a president, a vice president, a chief operating officer, and/or a business manager. Businesses are entities, such as a company, a subsidiary, or a joint venture. Businesses may include other groups of people who are in a position to receive or give business information. Such groups may include the human resources department, the finance department, the legal department, and/or the communications department. Finally, they may include businesses. They may include government organizations, non-profit organizations, political campaigns, advocacy groups, and/or social organizations.

Business correspondence can include memos and emails. Memos are typically short (two-page or less) documents that explain information or contain instructions. E-mails are short text documents that can be sent to one or more recipients. Both types of business correspondence contain similar information, such as the purpose, date, author, and recipient.

The format of business correspondence is one of the most important factors in determining its success. The right format will help get your message across and make it appear clear to the intended reader. You can use the information below to help you select the correct format for your message and its intended recipients.

If you are writing to a business person, there are many different ways to send a memo, the most common being to email the document.

In addition, you may use email to send messages to groups, including all the people in your organization. For example, you may email your organization’s president to introduce yourself.

There is also the e-mail address of the chief executive officer or CEO of a business. This may be different from the company’s mailing address and you will need to double-check. Many companies also have their Web sites and frequently post their chief executives’ email addresses on their homepage or other areas of the site.

Business Correspondence (or Business Letters) is a form of written communication usually used in the workplace and sent and received as part of the job of a business professional. The form is mainly employed when there is an urgency for a reply to a particular letter or message. It is different from regular communication because it’s done via a business-like medium. Business letters are usually written in the style of a formal document; however, they often need to be brief and well-organized. They are usually used in business, especially when communicating with or giving information to clients, vendors, contractors, other businesses, and/or other business people. Business letters are commonly used in the business world, in addition to the more common personal letters.

The letter and the business are often separated by the word ‘Correspondence’. ‘Business Correspondence’ may mean anything from a sales letter or letter sent from one business person to another, to an employee’s letter sent from a workplace back to a company, or a personal letter sent to a business.

A business letter is considered a formal letter by many people. However, if there is a need for something in a business letter to be informal, it can be done by using, “I would like to ask…,” instead of “I would like to propose…” (i.e. the word ‘I’ or ‘me’ is placed at the beginning of the sentence). Sometimes a more informal greeting is used with formal business letters, as a reference to an example above: “Hello”, “Dear, _________”, “Dear Sir, Mr._________.”

In English, the term correspondence (also spelt “correspondence”) comes from the Latin corresponses, from cor, “heart” + responsus, “answer”. Correspondence is not as common as the English word letter, with which it may be substituted in modern dictionaries (excepting military usage).

 

Format 

Business letters follow many standard formats. Letters that contain all the information needed to make a decision can be quite short. Sometimes they are only a simple reminder of an action or a request for more information. Business letters are written on business stationery, or as a result of sending a letter in response to an enquiry. A reply letter may follow the action letter, containing information that is in response to the information in the action letter. Alternatively, information may be supplied in a questionnaire. A letter with many details often follows a standard format called a model, or template.

 

Model 

A model sometimes called an executive letter, is a template or model that provides a style, tone and structure of business letters, with a set format and many sections. Different types of models exist for different purposes, often including a preamble, text, signature block, and response. The model can usually be found in a book, an instruction manual or a software manual. A cover letter is often sent as a model for a business letter or an email.

Money is the most practical and basic requirement to start a company. The capital structure is the initial fund or money that one needs to start initial business activities. It is the foundation brick of business finance, depicting how you can use different sources of money to initiate growth and finance overall operations. To raise long-term business funds, an arrangement of money from different sources is needed, and this is known as the capital structure. It refers to the combination or proportions of preference share capital, equity share capital, long-term loans, debentures, retained earnings, and other funding sources in the total capital amount which a firm raises to run its business.

What is Capital Structure?

()

A careful and intelligent balance between debt and equity is known as the capital structure from a technical point of view. Funds can be divided into two sectors. The first one is owner’s funds, followed by borrowed funds. The answer to the question of what is capital structure is that capital is a mixture of both, which a business uses to finance its day-to-day operations, growth, and assets. Owner’s funds or Equity includes Preference share capital, equity share capital, retained earnings, reserves, and surpluses. While debt or borrowed funds include public deposits, loans, and debentures. 

When Does a Company Have Greater Investor Risks?

The true capital structure meaning is that it is a combination of long-term fund sources. Whenever the proportion of equity and debt maximizes the value of the company’s equity share, it is said that the capital structure is optimal. However, a company is said to have an aggressive capital structure if it is heavily funded by debt. Such firms have a greater risk to investors, but this can also be the primary source of the company’s growth.

Comparing Equity and Debt

Debt vs. equity is a long-fought battle, and now we shall look into it in detail. On the other hand, debt is far riskier than equity because of the repayment of capital with assured interest that the lender earns. Another reason that supports the fact that debt is riskier is that debt interest is a tax-deductible expense. Therefore, it brings down the business’s tax liability, and after-tax dividends are paid out of profit. Liquidation of the company can occur in case of any failures related to repayment of the principal amount or interest payment. Debt undoubtedly adds to the financial risks faced by a business and is more dangerous. 

Factors Affecting Capital Structure

There are various factors determining capital structure, and we shall look into each of them in detail.

• Position Of Cash Flow: Debt capacity is the company’s ability to pay loans and expenses. If the company has a fluent cash flow position, then they may raise funds by issuing debts as they can be repaid in some time. The ability to meet financial obligations is affected if a firm operates in a volatile financial environment. 

• Interest Coverage Ratio: It is the ratio between EBIT or earnings before interest and tax and the interest itself. The company can have more borrowed money if this ratio is high.

• Having Control: The company must issue debts as it does not cost dilution of control. Public issues can make the firm vulnerable and destroy its reputation. So there’s a constant turmoil whether to pay more for capital or give up control.

• Investment Or Return: If the rate of interest on debt is lower than the return on investment, then the business can increase its finance through borrowed funds. But the company should go for equity if they are not sure if they can cover the fixed cost of interest. 

• Floatation Costs: This helps in determining the finance sources after you understand capital structure meaning. The floatation cost includes prospectus cost, broker’s commission, underwriter’s fee, security issuing costs, and more.

• Stock Market: Determining securities is influenced by stock market conditions. Investors are ready to invest in equity shares and take a risk during the boom. But during times of depression, it’s exactly the opposite. 

• Flexibility: It can be incorporated by issuing preferences and debentures. A good financial plan should have the scope to contract or expand whenever required. Hence it should be sound enough and flexible. 

• Rate Of Tax: If the rate of tax is high, then debts are preferred over equity as interest on debt is allowed like a deduction. Again, if the rate is low, then equity gets the first preference. 

Supply, Supply Curve, and Change in Market Equilibrium:

Market equilibrium study is a harder challenge, and it gets tougher when an individual has no idea about several fundamentals of the economic concepts. Thus, it is necessary to have an understanding of all the concepts involved, especially the ones that are more important, like supply and demand.

Starting with the concepts, what do you understand by the supply and supply curve?

Supply is the total quality of all the goods that the seller willingly sells or offers at a sale at:

Furthermore, a supply curve is a graphical representation that is useful to explain the supply schedules (also called supply function) effectively. It acts as the logistic planning of the points showing the amount of well supplied at different prices. According to the Law of Supply, the slope of the demand curve is upwards moving.

Furthermore, let us move on to a supply function (supply schedule). A supply schedule (function) is the mathematical representation of the supplies of the total number of goods and different factors that help in determining the supply.

Qd = f(Px, Y, COP, C, T, Inp, …)

The major determining factors in a supply function are as follows:

• Px – The cost of the product

• Y – The consumer’s income

• COP – Cost of production

• C – Number of sellers OR total competition

• T – Tax

• Inp – Production’s input

Market Equilibrium:

Moving ahead, let us discuss the definition of the market equilibrium.

The market equilibrium is the pair of price and quantity in which the demanded quantity equals the supplied quantity. The representation of Market equilibrium is possible when the market demand and market supply intersects, keeping the other factors constant.

Changes in Market Equilibrium and its Impacts –

Further, we will start with the discussion on changes in market equilibrium, changes in market price, changes in equilibrium price, and other defining factors. Also, we can explain the changes’ impacts on supplies, prices, and commodity output when the commodity demand stays constant.

Starting with the examination of the increase in supplies, consider that last year India experienced a good monsoon season, thus yielding higher excess and surplus in the number of wheat crops. This would have directly raised the wheat supply across the Indian market, causing a right shift to the supply curve.

Additionally, the increase in wheat supplies has an impact on the equilibrium quantity, and the equilibrium price is mentioned in the below graphical representation.

Generally, the demand curve (DD) and the supply curve (SS) intersects at point E. This is the factor that determines that OP is the equilibrium price’s measurement, and OQ is the measurement of equilibrium quantity.

Furthermore, due to the better monsoon season, there must have been a result of bumper wheat crops, thus the supply curve of wheat shifts towards the right from the line SS to the new one, i.e., S1S1. Now, S1S1 (the latest supply curve) intersects DD (the given demand curve) at point E1, determining OP1, the new lower equilibrium price, and OQ1, the larger quantity.

Thus, the increasing supply resulted in the falling price and increase the quantity of equilibrium.

But, rapid enhancements in the technologies, reduced prices for the factors of commodity production or lowered excise duty on any commodity results in the increased commodity supplies.

For example, given, the recent improvements in technology for personal computers’ manufactures served for increasing the personal computers’ supplies. This resulted in the shift in the supply curve towards the right side. Thus, it also resulted in the lowered-down prices of personal computers.