Category: Commerce Notes PPT

Industrialization and technology have brought many discoveries, inventions and ultimately a bigger and better lifestyle. People are constantly surrounded by a very happening world and the drastic change is going through. Humans are evolving and so is society and its perception. However, it is quite mandatory to commemorate and keep certain duties and responsibilities that people have towards those who/which helped in living on this planet. A collectivistic approach and group acts can cultivate comparatively more results. 

With the change in the business scenario, businesses are more inclined towards serving society. They understand the role of society in their business, without society, their business would have landed nowhere. Hence, nowadays we see big business houses perform societal duties. A large amount of their profits is diverted to the needs of society.

Also, various kinds of servings can be done in the interest of society. Here, we point out the kinds in our discussion with a deeper analysis of the social responsibility performed by the business sectors.

 

What is Social Responsibility of Business?

Social responsibility in the business is also known as corporate social responsibility abbreviated as CSR, which pertains to people and the organizations behaving and ethically conducting business with crucial sensitivity towards the society’s – social, cultural, economic, and environmental issues. Performing social responsibility helps individuals, organizations, and governments to have a positive impact on development, business, and society. 

To initiate a smart business decision, the companies are required to earn the belief of the society by serving them rather than only counting the short-term dollars or rupees. Decision-makers should consider the future impact of today’s choices on the societal people, on the community at large, and customers and their cultural opinions. 

Social Responsibility helps the business by:

• Providing a cultural view of the company and understanding of quality

• Generating new career paths for quality professionals who are experts in Social Responsibility related decisions.

• Providing methods to enhance the efforts of SR professionals’

• Growing the community of SR practitioners

All this will help to communicate the value of SR

Social responsibility of business means the obligations or duties of the management of a business enterprise to protect the interests of society at large. According to the concept of social responsibility, the objective of managers for taking business decisions is not only to maximize the profits or shareholders’ wealth but also to serve the societal interest and protect the interests of workers, consumers and the community as a whole.

Types of Social Responsibility

There are various types of social responsibilities that can be served by the corporates: 

This is the most common form of corporate social responsibility many companies focus on this type of CSR efforts which focuses on reducing their hazardous impact on the environment. After harmful effects on the environment were once ejected in the environment as an unavoidable cost of doing business, pollution and excessive consumption of resources now threaten social and political concern on a global level. For this reason, environmental CSR is now prioritising the impact that their business has on the environment. 

Companies, when engaged in environment-friendly practices can bring about a massive change in their surroundings and within themselves. Corporations, enormous industries, many uncountable numbers of small scale production communities and a lot of other people are contributing directly or indirectly towards the deterioration of the only planet that we got. The rapid rate of natural resource consumption and ascension of environmental pollution will only invite disastrous conclusions. Therefore Business companies can show their CSR towards the environment by raising awareness programs, initiating eco-friendly changes within the circles, conducting recycling programs, collaborating with local as well as national environmental protection based institutions. 

Ethical corporate social responsibility programmes ensure that all the stakeholders in a business will receive fair treatment, from employees to customers. Ethical responsibilities are self-enforced initiatives that a company puts in place because they believe it is the morally correct thing to do rather than out of any obligation. Businesses consider how stakeholders will be affected by their activity and work to have the most positive impact.  While the economic and legal responsibilities are the primary concerns of a company, after addressing the fundamental requirements of businesses, they can then focus on their ethical responsibilities. Ethical CSR is intended to enforce fair treatment for all employees, including paying higher wages, offering jobs to the individuals equally based on required criteria.    

Philanthropic social responsibilities extend further than simply operating as ethical in making society better. This corporate social responsibility is moreover associated with donating money to charities, with many businesses supporting the particular charities that are related to their business in some way. Not only charity donations but other common philanthropic responsibilities include investing in the community or participating in local projects. The main intention is to support a community in a wholesome manner. 

Just like ethical responsibility emerges from the sense of right, wrong and moral integrity, philanthropic responsibility should be kept alive by putting out individual emotions together. Since business isn’t mostly a one-man army field, the steps taken by all the people of a company or many such companies can easily make an impact on the lives of people who we may even never see. 

Economic responsibility is ensuring an economic advantage both to the region from where the purchase arrived and to the region where it is destined to be marketed. The responsibilities are the basic social responsibilities of the business. Economic Responsibility is viewed by some economists as the legitimate social responsibility of business. Living up to the economic responsibilities requires managers to maximize profits wherever and whenever it is possible. The essential responsibility of business is to be assumed to provide goods and services to society at a reasonable cost. In performing that economic responsibility, the company also emerges as socially responsible by providing jobs for its workforce.

Suppose if a company is raising the cost of a day-to-day product like detergent or vegetables, and starts selling it to people at a higher price, they are showing their lack of economic responsibility. 

The business itself is an economic exercise. It aims at making money and earning profit. Do cut off the size of economic responsibility of business organizations with just provision of goods to people at a reasonable price. Business heads, through business processes, can show responsibility towards their employees too. Increment in salary, scale revision, provision, the adequate and deserving wage for each worker and to different sectors within the organization can induce a sense of happiness and in-turn make them responsible to keep up with the expectations of their senior employees. 

Apart from all these, another type of responsibility that business societies should ponder upon in future is Individual responsibility. Though all the types are interconnected in some way or the other, the integral value crafted by individual responsibility is much higher than anything. Business requires many people on board to run it. Naturally, it follows group-favourable approaches and decisions for the fulfilment of thoughts to actions. But it is also important to have an individualistic view when it comes to considerations and help. A business institution can grow individualistically responsible if the members can give care, respect and reflections to desired individuals. 

This includes regular surveys and meetings conducted to check on the mental health of employees, administering different tests that come in alignment with the company mission and work, among employees to motivate them to learn more and to recognize where a persons’ true passion lies. Also collect information about their family and financial background after which, collective decisions and ideas can be made to uplift at least one persons’ family who needs it the most. 

It is not easy to streamline such needs on an individual basis and gather things in one place. But it is also not impossible to do so. 

Section 23 of The Indian Contract Act states that for a contract to be valid, there must be the legality of object and consideration. The object is the purpose for which the parties enter into a contract. The fulfillment of the object leads to the transfer of the consideration agreed from one party to the other. Let’s look into the parameters under the legal object contract law that define what is a lawful object and consideration.

Lawful Object and Lawful Consideration

The legality of the object in contract law stipulates that the consideration and the object of a contract are considered legal except when:

• They are specifically forbidden by law.

• They are fraudulent in nature.

• The nature of the object and the consideration is such that it defeats the purpose of the law.

• They involve injury or harm to a person(s) or property.

• Are considered immoral by the court of law.

• Are against public policy.

Forbidden by the Law

An object and/or a consideration prohibited by law are not considered legal and render a contract void. Unlawful consideration of the object means unlawful acts that are punishable by the law. The acts disallowed by the appropriate authority by means of their rules and regulations are also considered for determining the legality. However, if these rules and regulations are not in tandem with the law, they are not applicable.

Forbidden by law provision renders a contract void but all void contracts may not be illegal.

Fraudulent in Nature

The object and the consideration of the contract must not be fraudulent as then, the contract will become void.

Example- A enters into a contract with B where he agrees to pay B if he embezzles money from C. This is considered a fraudulent object and the contract is not valid.

Defeats the Purpose of the Law

If the purpose of entering into the contract is to go against any provisions of law, the contract will be deemed void. The contract is void if:

• The object of the contract is to perform an illegal act.

• The object of the contract is explicitly or in an implied manner prohibited by law.

• The completion of the contract is impossible without going against the provisions of the law.

Example – A enters into a contract with B whereby B promises to not pursue legal proceedings against A if A commits a robbery in B’s house. This contract is against the provisions of the IPC law.

Involves Injury or Harm to Another Person or Property

The object of the contract must not cause any destruction to property or cause injury to another person.

Examples:

A enters into a contract with B whereby he agrees to pay a sum of money to B if he destroys a city landmark. This contract does not have a lawful consideration and lawful object and it is not deemed legal.

Immoral as Per Law

If the object and/or consideration of the contract are considered immoral, the contract will not be deemed void. Immoral acts are against the reasonable and acceptable general behavior or personal conduct accepted by society.

Example – A lends money to B on the condition that B will divorce C, and later get married to A. If B does not divorce C, then A cannot pursue legal proceedings against B to recover the money. The basic premise of this contract is immoral so it will be deemed void.

Against the Public Policy

A lawful object in business law means that it should not be against public policy. The purpose of public policy is not to curtail any individual’s rights but to maintain and protect the general welfare of the community. Let’s see what kind of contracts are considered to be against the public policy:

• Entering into an agreement with a party that belongs to a country with which India does not have peaceful relations, makes the agreement void. 

• Restraining from prosecution: A contract that prohibits a person from pursuing legal recourse is considered void. 

• Maintenance and Champerty: In a maintenance agreement, a person promises to maintain a lawsuit in which he has no vested interest. Champerty is when a person agrees to assist another party in litigation in return for a portion of the damages or proceeds received.

• An agreement to indulge in trafficking in public offices.

• Agreements to create monopolies.

• An agreement to brokerage marriage as a reward.

• An agreement to induce judiciary or state officials to act in a corrupt manner and interferes with legal proceedings.

Solved Questions on the Legality of the Object in Business Law

Q1. L lends some money to P to help him buy some goods from X who belongs to a country with which India is at war. Can L recover his money from P?

Ans. Any agreement for the purchase of goods between P and X will be considered void since entering into trade with the enemy is against public policy. Any agreement between L and P will also be void since it is collateral to the main agreement. So L cannot recover his money from P. However, If L did not know the reasons for P borrowing the money, he can enforce the contract for recovering money.

Q2. Is an agreement between a husband and wife to stay separately after marriage considered valid?

Ans. The agreement will be considered void since it is against the provisions of Hindu Law. The nature of the contract between the husband and wife is against the spirit of the Hindu marriage act and hence considered void.

Section 23 of the Indian Contract Act

Section 23 of the Indian Contract Act, 1872 (“the Act”), clarifies three matters, for example, the consideration of an agreement, the purpose of the contract, and the actual agreement. Article 23 imposes restrictions on individual freedoms by entering into agreements and places the rights of such persons in the higher concepts of public policy and the other provisions mentioned under it. Article 23 repeats its appearance in Section 264.

The Word “Object” used in Section 23 

The word “object” used in Section 23 indicates and implies “purpose” and does not mean significance in the same sense as “consideration”. Therefore, unless the consideration of the agreement may be legal and valid, that will not prevent the contract from being invalid if the purpose of the agreement is invalid. Section 23 limits the courts as the section may be guided by thought or motive, for the purpose of exchange or transaction is basically not for reasons leading to equality. Although the consideration is provided under Section 2 (d) [1] of the Act, no official definition of the word ‘object’ exists. An “object” can better be understood as the “purpose” or “design” of a contract. Thus, when a loan is taken under a contract for the purpose of marriage, in that case, the marriage is the purpose of the contract.

 

Lawful Object and Lawful Consideration- Section 23 Order

The purpose or consideration of an agreement is absolutely valid unless it falls into any of the categories provided below-

•  It is forbidden by the Law

• A consideration or object violation of the provision of Law

• Deceptive thoughts or something

• A consideration or object includes an injury to a person or property

• The court considers it immoral

• The consideration or intent is contrary to public policy

• Trading with enemy

 

It is forbidden by the Law

If the purpose of the contract or the consideration of the contract is legally prohibited, then there is no legal consideration or objection. Then they become naturally illegitimate. Therefore such an agreement will no longer apply. Illegal consideration of an object includes actions that are directly punishable by law. This includes those who have legitimate authority over the existence of laws and regulations. But if the rules made by such authorities do not comply with the law it will not work.

Let’s see an example. A licensed Department of Forestry for cutting local grass. Departmental officials told him he could not pass such an interest on to anyone else. But the Forest Law does not have that law. So A sold his interest in B and the contract was held legally.

A Consideration or Object Violation of the Provision of Law

This means that if the contractor tries to defeat the purpose of the law. If the courts find that the real purpose of the parties to the agreement is to circumvent the provisions of the law, they will set aside the stated contract. Give an example A and B enter into an agreement, where A is a debtor, B will not agree to a limit. This, however, is done to defeat the purpose of the Restrictions Act, so the courts may decide the contract as null and void because of something illegal.

Deceptive Thoughts or Something

A legitimate consideration or object can never be deceptive. Agreements entered into that contain the presumption of illicit fraud or material misconduct. Suppose that A decides to sell goods to B and smuggles them out of the country. This is falsework as it is useless. Now B cannot reimburse under the law if A does not fulfill his promise. 

A Consideration or Object includes an Injury to a Person or Property

In this case, the word injury refers to acts of violence, harassment, coercion, assault, etc. An assault agreement, for example, falls under this section. Thus, when X borrowed Rupees 1000 from Y and made a bond promising to work for Y without pay for two years and in the event of any failure allowed to pay high interest on the principal amount, the contract was held in vain. as it involved the injury of someone in the contract. 

The Court considers it Immoral

The term “immorality” is often translated in conjunction with the norms and definitions of the Courts. The Supreme Court has given a limited definition of the word “immorality” and has interpreted it as a strong reference to “forms of sexual immorality”. Thus, betting agreements cannot be considered immoral. Explaining the scope of the Gherulal Parakh v Mahadeodas, the Supreme Court cited certain agreements in which the consideration or object was immoral: the promise of marriage for consideration, a contract for the sale of goods for the prostitute to continue her work, a contract. facilitating divorce, future settlement agreement, etc. A good example of an agreement that facilitates divorce is when a person, X, gives Y to Y with the promise that Y will divorce Z, and later marry X. Here if Y does not separate from Z, A cannot continue legal action against him. Y refund. The very nature of this contract is immoral and will therefore be regarded as null and void.

 

The Consideration or Intent is Contrary to Public Policy

The word ‘enforce’ is broad in scope and is governed by precursors. In the case of Ratanchand Hirachand v Askar Nawaz Jung, the Court defined the definition of “public policy” as the development of the public good on the one hand and the prevention of public evil on the other. When the marriage was dissolved on the condition that the wife would not claim maintenance or maintenance money but later the wife applied for maintenance, the Court held that the terms of the divorce would not prevent the court from granting maintenance as this right was part of it. of a larger “right to life” and would be against public policy to seize it. Thus, anything that harms the public interest or the welfare of the community falls under this category. However, it is not possible to provide a complete list of assumptions against public policy. It varies from time to time. 

Trading with Enemy

An agreement with an unknown enemy during the war without an Indian government license is invalid because it violates civil policy. The proclamation of war brings a ban on trade relations and contacts with the citizens of the enemy country. The very nature of the war is the crippling trade of the enemy world.

Conclusion

The importance of legitimacy and consideration in making an agreement work can not be underestimated. If the object and consideration are illegal, the agreement becomes void. As knowledgeable citizens, we must understand that until further notice unless our agreement falls under the provisions of Sections 10, 23, and 24 of the Indian Contract Act, 1872, our efforts to enforce our rights under this agreement in a court of law will be in vain. This is because such a covenant would not be sacred in the eyes of the law. Therefore, when entering into agreements we must be very careful to ensure that they are not just “agreements”, but rather meet the requirements of the law so that in the event of a collision, we will not be without legal action.

Liquid funds help a business in meeting its short-term expenses commitments. Liquidity can be defined as an organization’s ability to meet an expense or settle a liability towards its stakeholders, as and when it becomes due. It is a parameter that gives a picture of the solvency of the firm.

To measure the liquidity, we need to calculate the liquidity ratios. These ratios give a short-term answer as the creditors are interested in the current liquidity position of the entity. If the organization is not in a position to meet its short-term commitments, it has an adverse effect on its credit rating and credibility. If the organization is not able to honor its financial commitments, it can result in its bankruptcy or closure. The liquidity of the organization must neither be insufficient nor should it be excessive.  

Types of Liquidity Ratio 

• Current Ratio

• Quick Ratio or Acid test Ratio

• Cash Ratio or Absolute Liquidity Ratio

• Net Working Capital Ratio

Let’s look at these ratios in detail.

Current Ratio

One of the most common ratios for measuring the short-term liquidity of the firm is the current ratio. This ratio is also called the working capital ratio. It measures whether the current assets of the firm are enough to pay the current liabilities or debts of the firm. This ratio keeps a margin of safety for any potential losses that might occur during the realization of the current assets. It can be calculated as the ratio between the Current Assets and Current Liabilities.

The ideal current ratio is 2:1 but it also depends on the characteristics of the current assets and current liabilities along with the nature of the business of the firm. Let’s see the heads that are included under current assets and current liabilities.

Current Assets 

• Stock

• Sundry Debtors

• Cash/ Bank Balances

• Bills receivable

• Accruals

• Short term loans given

• Short term Securities

Current Liabilities

• Creditors

• Outstanding Expenses

• Short Term Loans taken

• Bank Overdrafts

• Provision for Taxation

• Proposed Dividend

Current Ratio Formula

Current Ratio = Current Assets / Current Liabilities

Where,

• Current Assets = Sundry Debtors + Inventories + Cash-at-Bank + Cash-in-hand + Receivables + Loans and Advances + Advance Tax + Disposable Investments

• Current Liabilities = Creditors + Short-term Loans + Bank Overdraft + Cash Credit + Outstanding expenses + Dividend payable + Provision for Taxation 

Quick Ratio

Quick Ratio is also known as Acid-test Ratio. It is a measure of the liquidity calculated on the basis of the relationship between Quick Assets and Current Liabilities. It is used to calculate if the readily convertible quick funds are enough to pay the current debts. The ideal Quick Ratio or Acid-test Ratio is 1:1. 

Acid-Test Ratio Formula or Quick Ratio Formula

Quick Ratio= Quick Assets / Current Liabilities

Where,

Quick Assets = Current Assets – Inventories – Prepaid Expenses

Cash Ratio or Absolute Liquidity Ratio

The cash ratio is used to measure the absolute liquidity of the firm. It calculates whether a firm can use only its cash balances, bank balances, and marketable securities to pay its current debts. Inventory and Debtors are not included while calculating this ratio because there is no guarantee of their realization. 

Cash Ratio= Cash and Bank Balances + Marketable Securities + Current Investments / Current Liabilities

It is a measure of the cash flow and this ratio should be positive. This ratio is very important for the bankers as it helps them gauge if there is a financial crisis in the firm.

Net Working Capital Ratio= Current Assets – Current Liabilities (exclude short-term bank borrowing)

Solvency Ratios vs. Liquidity Ratios

Solvency ratios, in contrast to liquidity ratios, assess a company’s capacity to satisfy all of its financial obligations, including long-term debts. Liquidity focuses on current or short-term financial accounts, whereas solvency refers to a company’s overall capacity to satisfy debt commitments and maintain its operations.

To be solvent, a business must have more total assets than total liabilities; to be liquid, it must have more current assets than current liabilities. Liquidity ratios provide an early assessment of a company’s solvency, despite the fact that solvency is not directly related to liquidity.

Divide a company’s net income and depreciation by its short- and long-term obligations to get the solvency ratio. This determines if a company’s net income is sufficient to cover all of its liabilities. A corporation with a greater solvency ratio is generally thought to be a better investment.

Solved Example on Liquidity Ratios

1. Calculate the different liquidity ratios from the following particulars

1. Current Ratio= Current Assets/ Current Liabilities

Current Assets = Sundry Debtors + Inventories + Cash-in-hand + Bills Receivable

Current Liabilities = Creditors + Bank Overdraft

Current Assets= 300,000 + 150,000+ 50,000+ 30,000= 530,000

Current Liabilities = 350,000+ 30,000= 380,000

Current Ratio= 530,000 / 400,000= 1.3 :1

2. Quick Ratio or Acid Test Ratio= Quick Assets / Current Liabilities

Quick Assets = Current Assets – Inventories

Quick Assets= 530,000 – 150,000= 380,000

Quick Ratio or Acid Test Ratio= 380,000 / 380,000 = 1:1

3. Cash Ratio = Cash Balance / Current Liabilities

Cash Ratio = 50,000 / 380,000= 0.13:1

4. Net Working Capital Ratio = Current Assets – Current Liabilities (exclude short-term bank borrowing)

Net Working Capital Ratio = 530,000- 350,000= 180,000

Marginal utility analysis focuses on understanding the consumer’s behaviour in allocating his expenditure on different goods and services for the maximum utilisation of the available resources. To delve more into the topic, let us first understand the marginal utility analysis definition.

()

What is Marginal Utility Analysis?

To understand the concept of the marginal utility analysis, we need to focus on the following two points.Total utility refers to the sum of all the marginal utilities associated with different units of any commodity utilised by the consumer. Total utility is also known as full satiety.Marginal utility refers to the utility related to any additional component of the commodity. Individual marginal utility contributes to the total utility.

Assumptions of Marginal Utility Analysis

There are certain assumptions of marginal utility analysis. Cardinal MeasurabilityMarginal utility is considered to be a cardinal concept, i.e., it is quantifiable and measurable. If you derive different utilities from consuming variable units of separate commodities, then you can compare the commodities and select the one which provides better satisfaction and rate of utility. The theory also considers money as the means to measure utility. The utility derived from a given commodity is the amount spent on that commodity instead of going against it. Constant Nature of Marginal UtilityTo facilitate marginal utility analysis on a particular commodity in the terms of money, it is important to assume that the marginal utility remains constant. Independent Utility HypothesisThe independent utility hypothesis considers that the total utility is the sum of all the separate utilities of each commodity. It does not take into consideration the complementarity that exists between different commodities.

Diminishing Marginal Utility Law

The diminishing marginal utility law is an important law of marginal utility analysis. The British economist Alfred Marshall puts forward the diminishing marginal utility analysis definition as the additional profit, associated with an increase in the stock of a commodity, decreases with the increase. Such a law was based on the human nature of unlimited demands. As more and more units are consumed, the intensity of our desire decreases to a point when we no longer desire it. Therefore, the extra benefits associated with the consumption of surplus units of any product decreases as the consumption of the product increases. However, it must be kept in mind that although the marginal utility decreases with increasing stock, the total utility does not decrease.

Correlation Between Total Utility and Marginal Utility

If you have understood marginal utility analysis, then you will be able to denote the correlation between total utility and marginal utility. The following points will define such a relationship. The total utility can rise although if the marginal utility decreases.If the total utility has reached the maximum value, marginal utility is equal to zero. If the total utility decreases, the marginal utility value tends to be negative. Such a correlation helps in understanding why a consumer can reach the equilibrium state for a single commodity. The consumer generally uses the commodity until its value matches the market price. This will enable the complete utilization of that product. In case of a decline in the commodity price, the consumer increases the consumption of that product to a point where the marginal value has declined to the equilibrium state. If the commodity price rises, the consumer will decrease the consumption so that the equilibrium is maintained.

Limitations of the Law of Diminishing Marginal Utility

There are certain limitations to the law. It is based on certain assumptions as follows.

• Homogeneous Units: The different units of products and the attributes of the consumer like temperament, taste, income, etc. are identical at all times.

• Standard Consumption Units: The consumption units are considered to be standard units. For example, the unit for water consumption will always be a glass. 

• Continuous Consumption: The consumers continuously consume the units of the product without any gap in between. The Law cannot be applied to 

• Prestigious Goods: The law does not take prestigious goods into consideration since the increase in stock increases the demands. 

• Related Goods: The utility of any product is related to the presence or absence of a related product. For example, your tea consumption can be less in the absence of sugar.

Tips for Students to Understand Marginal Utility Analysis

Understanding Consumer behaviour is beneficial for a commerce student and it must not mix the difference between the Marginal Utility and Total Utility. In order to avoid the peril, here are some of the tips and tricks that a student must bear in mind in order to receive a better understanding regarding this topic on and prepare for the final exams.

• A student must be acquainted with the key terms of the topics along with the definitions so that it does not get confusing for the students to understand the concept of Marginal utility analysis in detail. 

• Some of the key terms of marginal utility are mentioned below— 

1. Consumer theory

2. Utility maximizer

3. Total utility 

4. Law of diminishing marginal utility 

5. Utility

1. Human wants are unlimited since a human can never be truly satisfied. 

2. Every want has a different kind of intensity and need of goods and services.

3. Human wants are never constant. They are ever-changing with several factors such as changes in lifestyle and economy, or time. 

4.  Human wants can transform into customs and needs. 

1. The first classification of human-wants fall under the necessities. These include goods that are essential for the sustenance of humans in society such as food, water, clothes, etc. They are absolute and essential for any human for basic survival so they never go out of the market. 

2. Comforts are the second classified human wants. These are the goods and services that are required to make human life easy and smooth. After the basic wants are met, a human wants to be satisfied. These are not as important as the necessities but they are present in the market. For example, goods like fans, furniture, etc fall under this category of human wants. 

3. The third classification of human wants is known as luxuries. This category includes the goods and services that are essential for the pleasures of a human in society. Human wants bring acceptance and prestige to humans at large. It includes cars, diamond jewellery, an air conditioner, etc. 

• After understanding the nature of the human wants as well as the key terms, the student must memorise the key calculations regarding marginal utility correlating to total utility. 

• Concepts can be altered according to the income of an individual since an increase and decrease in income directly affects the consumption of goods and services by an individual and the relation between the income of an individual and change in income of humans is known as marginal utility. It is a significant topic in commerce that has to be understood in depth by the student so as to secure better marks in exams. 

• provides solutions to this topic on the official website and mobile application. A student can easily learn about the marginal utility analysis and other chapters that are curated by the experts here at . 

• There are chapter-wise solutions provided by regarding class 11 and 12 commerce that can be downloaded by the website in PDF format anywhere and any time. 

• A student must refer to the right topics and study materials when studying marginal utility and commerce in general. Here are some tips that will help a student in preparing for marginal utility–

1. A student must focus on creating the right format while creating the answers. 

2. A student must refer to the notes regularly in order to memorise the topic by heart. It will help the students during exams. 

3. A student must solve the calculations regularly to stay in touch with this topic.

4. offers practice questions as well as important questions regarding this topic so students can cover this extensive topic and prepare for the exams at ease and with confidence. 

5. A student should refer to the notes and create their own notes that can be referred to during the exams. 

We can explain the term group dynamics as a useful problem-solving tool that gives productive results in several organizations. Group dynamics but makes motivation and collaboration between the groups or teams which helps to work together for innovative products. As group dynamics is one of the essential Mootools managerial tasks, let us discuss group dynamics meaning, the importance of group dynamism, and phases of group dynamics in detail.

Define Group Dynamics 

According to Cartwright and Zander, group dynamics is a set of psychological, behavioural tools or procedures which help to change the nature of groups, teams available in the organization to collaborate and work together for attaining the objective of the organization.

Group Dynamics’ meaning can be explained simply as it is a social process with which the people can form into groups or teams to attain a set of common goals. It is a continuous process where the groups can be formed as the goals keep on changing until to achieve the final goal of the organization.

5 Stages of Group Dynamics 

These are also known as phases of group dynamics. Since group dynamics is a continuous process, it has five different stages for forming a group every time. All the group formation stages are sequential and significant. So let us understand all 5 stages of group development elaborately.

Forming:

It is the first stage in the cycle of group development. Different members can be formed into a group by setting common goals. So far, each individual has different tasks And goals to reach their workplace. The main criteria for forming a group are their abilities, work culture, designation, affiliation, etc. It is the most important stage in the phases of group dynamics.

Storming:  

It is critical and crucial among the group formation stages. Usually, dyads and triads can appear here. This is a stage where people can segregate themselves according to their similarities and special interests. This led to the conflicts between the group members, and one should try to settle down the conflict and help to coordinate with each other.

Norming: 

It is the third level in stages of group dynamics. Here allocation of tasks can be formulated. It can be done by the diet or triad of groups or entirely by the management. After structuring these norms to every group, the hierarchy and designations were also allocated in that particular group, who need to report and whom to be reported. The group members can take higher dogs and responsibilities to maintain their group identity.

Performing: 

It is the actual working stage among the phases of group dynamics. After taking the work, every group member has started performing their tasks by putting all their efforts. The head of the group can supervise and correlate all the work done by his group members, and he needs to report to his supervisor. Every group member has to follow the norms and should exhibit all their efforts collectively to increase the effectiveness of the entire group.

Adjourning:  

It is the final stage of all 5 stages of group development. Here, after performing their tasks, the group members May reallocate into other groups. Here some people may be happy with the output and some other way unhappy with the output. It is a morning process that can be decided by the management or the team lead.

These are the 5 Stages of Group Dynamics in general. It is also important to note that the stages of group dynamics may vary from organization to organization or by the task also.

Importance of Group Dynamism 

Group dynamism is an effective process that helps to solve various problems with the organization and again avoid conflicts between the people by improving collaboration and coordination some of the benefits which explain the importance of group dynamism are as follows- 

• Group dynamics help to influence and motivate other group members to increase their effectiveness in the performance. It is always good to have a good group leader for the success of the group.

• If the group is full of optimists, it always helps to improve the efficiency of the whole group.

• Group dynamics also help to inculcate job satisfaction, knowledge sharing, team spirit, competitive spirit, motivation, etc.

• It also helps to reduce the labor turnover as the people were attached to their groups, and they can feel comfortable like their family members.

Questions on Group Dynamics

1. What are Different Kinds of Formal Groups?

A. The groups can be categorized as formal groups and informal groups. in organizations, we can see mostly formal groups. The formal groups are again classified into three different types. They are,

Command Groups:- These groups are formed based on the hierarchy and designations of the employees. Usually has a superior to whom all the subordinates need to be reported after finishing their job.

Task Groups:- These groups are used to split the task and share the work among the group members. Usually, all the group members are on the same level and can work for the same goal. These are small in size, temporary, and also work for narrow goals.

Functional Groups:- These are the groups formed to achieve a specific function in a specific period these are not permanent.

2. What are the Influencing Factors of Groups?

A. The influencing factors of groups are-

• The structure of the group.

• The size of the group.

• The resources are available in the group.

• The norms sit by the group or to the group.

• Group cohesiveness.

• Processes involved in the group.

• Roles and responsibilities of the group.

3. What are the Prerequisites to Form an Effective Group? 

A. We have several prerequisites to follow which helps to form an effective group. They are,

• The expectations and goals can be explained clearly to all the group members.

• Every group member should have a great commitment and dedication to work.

• All the groups and within the groups should maintain a healthy competition to increase their effectiveness.

• Controlling is also a major element for the effective group.

• An effective group should have proper collaboration and coordination with the other group members.

• The team leader should try to extract the creativity among his group members.

• Proper appraisal and recognition are beneficial for the group members to increase their interest and efficiency of work.

The price elasticity of demand is a calculation of the degree of change in a commodity’s demand with respect to the price change of that commodity. The price elasticity of demand, in other words, is the rate of change in the quantity requested in response to the price change. It is sometimes denoted by Ep or PED. To understand the meaning of elasticity of demand, it is important to learn the methods of measuring the quantity. 

Here, we will study the relative elasticity of demand types: price elasticity of demand, price elasticity formula, the elasticity of demand and supply, point elasticity of demand, etc.

Methods of Measuring Price Elasticity of Demand

Basically, there are four ways by which we can calculate the price elasticity of demand, and these are:

Percentage Method- Price Elasticity Demand

The Percentage method is one of the widely used methods for calculating demand price elasticities, where price elasticity is calculated in terms of the rate of the percentage change in the quantity requested to the percentage change in price. 

The price elasticity of demand can, according to this approach, be mathematically expressed as –

PED = % change in quantity demanded / % change in price, where

[ text{change in quantity demanded} = frac{text{new quantity (Q2)} – text{initial quantity (Q1)}} {text{initial quantity (Q1)} times 100}]

[ text{change in price} = frac{text{new price ( P2)} -text{initial price ( P1)}} {text {initial price ( P1)} times 100}]

Therefore, [PED=frac{Delta Q}{Delta P}times frac{P1}{Q1}]

For example, when the price of a commodity was Rs 10 per unit, the market demand for that commodity was 50 units a day. When the price of the product dropped to Rs 8, demand increased to 60 units. The price elasticity of demand can here be evaluated as –

PED =%change in quantity demanded/ % change in price, where

[frac{Q2-frac{Q1}{Q1}}{p2-frac{p1}{p1}}times100]

= [frac{60-frac{50}{50}times100}{8-frac{10}{10}times100}]

= [ frac{20}{-20}]

= -1 

In comparison to supply price elasticity, demand price elasticity is often a negative number since the quantity requested and the product share price are inversely related. This implies that the higher the price, the lower the demand, and the lower the price, the greater the product demand.

Total Outlay Method

Professor Alfred Marshall developed the total outlay method, also known as the overall cost method of calculating price demand elasticity. The price elasticity of demand can, according to this approach, be calculated by comparing the total expenditure on the commodity before and after the price adjustment.

We can get one of three results when comparing the expenditure. They are the 

Request elasticity would be greater than the unity of (Ep > 1)

If total expenditure rises with a decrease in price and decreases with a rise in price, the value of the PED is greater than 1. Here, price rises, and overall spending or outlays shift in the opposite direction.

The elasticity of demand will be equal to unity (Ep = 1)

If, in response to a rise in the price of the commodity, the overall expenditure on the commodity remains unchanged, the value of the PED would be equal to 1.

The elasticity of demand will be less than unity (Ep < 1)

The value of PED would be less than 1 if total spending decreases with a decline in price and rises with a rise in price. Here, commodity prices and overall spending are going in the same direction.

When the information from the above table is plotted in the graph, we get a graph like the one shown below.

On the X-axis, gross outlay or cost is calculated in the graph while the price on the Y-axis is measured. The transfer from point A to point B demonstrates elastic demand in the figure, as we can see that overall spending has risen with price decreases.

As total expenditure has remained unchanged with the change in price, the shift from point B to point C demonstrates unitary elastic demand. Likewise, as overall expenditure, as well as price, has decreased, the shift from point C to point D indicates inelastic demand.

Price Elasticity on a Linear Demand Curve

If the demand curve is linear in nature, the PED is determined simply by applying the above expression, i.e.

[PED = frac{text{lower segment of the demand curve}}{ text{upper segment of the demand curve}}]

MN is a linear demand curve in the figure and P is the midpoint of the curve.

Therefore, at point P,

[PED = frac{text{lower segment of the demand curve}}{ text{upper segment of the demand curve}}]

Price Elasticity on a Non-linear Demand Curve

If the demand curve is non-linear or convex in nature, then at the point where the PED is to be determined, a tangent line is drawn. Then again, PED is measured as 

[PED = frac{text{lower segment of the demand curve}}{ text{upper segment of the demand curve}}]