Category: Commerce Notes PPT

The law of variable Proportion is considered an important theory in Economics. It is called a law that when the value of one production element is increased, while all other factors are kept unchanged, it will lead to a decrease in the product output of that item.

The law of variable proportion is also known as the Law of Equality. When the dynamic factor becomes higher, it can lead to a negative value of the third party product.

The law of variable proportion can be understood as follows.

If the dynamic factor rises while all other factors are kept constant, the product price will initially increase at an increasing rate, the next level will decrease with the decrease and eventually there will be a decrease in production.

Consideration of the Variable Partial Law

The variable rate law works well under certain circumstances, which will be discussed in the following lines.

Continuous Technological Situation: It is assumed that the state of the art will be the same and with the advancement of technology, production will improve.

Flexible Character Estimates: This assumes that production characteristics vary. The law does not apply, if the production features are fixed.

Homogeneous factor units: This assumes that all units produced are the same in quality, quantity and price. In other words, units have the same nature.

Short Run: This assumes that this rule applies to those systems that run for a short period of time, where it is not possible to change all the included features.

Legal Categories of Flexible Value

The Variable Evaluation Act has three sections, which are discussed below.

Phase One or Phase Growth Row: At this stage, product volume increases with increasing rate. This is due to the fact that the efficiency of the embedded material increases with the addition of flexible inputs to the product.

Second Phase or Decreased Return Phase: In this phase, the product volume increases with a decrease in value until it reaches a high point. Side product and rating is good but it is slowly declining.

Third Phase or Negative Return Phase: In this phase, the product volume decreases and the side product becomes negative.

The Transformal Rates or Restoration Act plays an important role in Product Theory research. In this article, we will consider the definition, definition, categories, significance, and reasons for the application of the Variable Standards Act.

Also, if you get more output using the input unit, then this output may be equal to or less than the output you received in the previous unit.

The Variable Ratings Act worries about how the output changes when increasing the number of units of a variable. Therefore, it refers to the effect of a variable factor-ratio on the output.

In other words, the law indicates the relationship between the units of a variable element and the output value in the short term. This assumes that all other factors do not change. This relationship is also called restitution is a dynamic element.

The law states that to keep certain aspects unchanged, when you increase the dynamic element, the product volume initially increases with increasing rate, then increases with decreasing rate, and eventually begins to decline.

Why is it called the Flexible Standards Act?

As one input changes and all others remain unchanged, the factor or component factor varies. Let’s look at an example to better understand:

Suppose you have 10 hectares of land and 1 unit of production. Therefore, the global workforce is 10: 1. Now, if you keep the land unchanged but raise 2 staff units, the average workforce is 5: 1.

So, as you can see, the law analyzes the effects of a change in the factor ratio on the output value and that is why it is called the Flexibility Measurement Act.

The Variable Ratings Act Explained

Let’s understand this law with the help of another example:

In this example, the earth is an integral part of work and work is a dynamic element. The table shows the different product values ​​when using different work units in one hectare area that needs to be adjusted.

The following diagram illustrates the law of flexibility. To make a simple presentation, we draw the curve of Total Physical Product (TPP) and Marginal Physical Product (MPP) curves as smooth curves against flexible inputs (workers).

Liberalisation, Privatisation, and Globalisation are the three elements of the new economic model of the country. Liberalisation ensures a relaxation from severely strict laws and opinions which may include certain rules and regulations of the government. Privatisation is the complete transfer of roles and operations of publicly owned means to private ownership. This means a property or business of the government being taken by a private owner with an aim to function and discipline well. Globalisation is the next step forward to increase the network of trade and culture interconnecting the whole of the world. It ensures no trade, services or technology are bounded by borders thus connecting and integrating the whole world together. They are often togetherly referred to as LPG. They aim to develop the economy of the country fast so that it can compete and complement the world’s economy.

What is LPG?

LPG refers to Liberalisation, Privatisation, and Globalisation. When India under its New Economic Policy approached the International Banks for developing the country, they suggested that the government should open towards restrictions on trade which is mostly done by the private sectors in between India and other countries. After the suggestion put forward by the International Banks, the Indian Government announced New Economic Policy or NEP. This policy consisted of an extensive range of reforms. These measures are broadly classified into two groups- structural reforms and stabilisation measures. 

The objective of structural measures was to develop international competitiveness. Moreover, the measures aimed to eliminate the rigidity in various sections of the country’s economy. In stabilisation measures, the aim was to rectify and correct the existing weakness developed in controlling the inflation and balance of payments. Both sets of measures were taken for a short-term period. 

The stabilisation measure included Liberalisation, Privatisation, and Globalisation. Under this measure, the balance of payment was enabled to record all forms of economic transactions of a country with the rest of the world in a year. In such a scenario, inflation refers to the growth of prices in goods and services over a particular period. 

Liberalisation

The objective of liberalisation was to put an end to those rigidities and restrictions that were acting as a hindrance to the growth of the country. Further, in this approach, the Government was expected to be flexible with its regulation in the nation. 

The objectives of this policy were to enhance the competition among the domestic industries and encourage international trade with planned imports and exports. Moreover, it aimed at increasing international technology and capital. Also, this policy was expected to expand the international market frontier of the nation and reduce the burden of debt in the country. 

Privatisation

The second policy of the stabilisation measure is privatisation. This policy aims to expand the domination of private sector companies and reduce the control of the public sectors. Thus, the Government-owned enterprise will have less ownership. Besides these Government companies can be converted into private sector companies with two approaches. These approaches are by withdrawing the control of the Government in the public sector company and by disinvesting. There are three forms of Privatisation which are a strategic sale, partial sale, and token privatisation. In the strategic sale or denationalisation, the Government needs to deliver 100% of productive resources ownership to the owners of the private companies. 

The Partial Sale or Partial privatization owns a minimum of 50% ownership with the help of the transfer of shares. They would, therefore, own the majority of the shares and would have control of the autonomy and functioning of the company. In the token or the deficit privatisation, the Government would have to disinvest the share capital by up to 5-10% in order to meet the shortage in the budget. This policy, therefore, aims to improve the financial situation in the country and reduce the work pressure of the public sector companies. Moreover, funds could be raised from the disinvestment. With the reduced work pressure the efficiency of the public sector would automatically increase and yield better quality of goods and services for the use of consumers. 

Globalisation

In this policy, the country’s economy is expected to grow with the help of the global economy. This means that the primary focus would be on foreign trade and institutional and private investments. It is the third and the last policy that is to be implemented. The objective of this phenomenon is to develop and independent the world with the implication of suitable strategies. It is the attempt to create a world where the requirements of one country can be driven and turned into one large economy. One of the major outcomes of Globalisation is outsourcing. 

Outsourcing means an enterprise can employ professionals from other countries to reach a particular goal. There is a lot of contractual work that is being outsourced in the field of Information Technology leading to its development. This has opened new avenues for a lot of private sectors and Indian skills are regarded as the most effective and vibrant across the globe. The low wage rate and dedicated employees have made India one of the constructive nations suitable for international outsourcing.

Macro environment refers to all those external environment factors that immensely influence the business success, strategies, and decision making. These external factors that highly influence the business success are not controlled by the organization easily. The extensive and wide-ranging set of economic conditions is defined as a macro environment. Read the article below to know more about the macro environment.

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Macro Environment Meaning

Macro Environment refers to all those factors or forces that indirectly affect the business operation and working conditions. These factors are uncontrollable and the organization is not capable of exercising any control over them. The macro environment can be broadly classified into an economic environment and a non-economic environment.

Classification of Macro Environment

The two broad categories of Macro Environment are: 

1. Economic Environment 

2. Non-economic Environment. 

Let us understand the difference between the two terms.

• Economic Environment- It involves macroeconomic parameters, economic system, different stages of the business cycle, financial system, and more. Different macro-environment factors affecting the economic system directly have an impact on business success. The existing economic environment of any business is quite complex and not hassle-free to comprehend.

• Non-economic Environment- It involves government policies, demographic factors, legal framework, social system, political system, technological development, and more. Generally, a non-economic environment has a robust impact on the success of any business.

Macro Environment Factors

Following are the different macro environment factors affecting the business success. Socio-Culture Environment: It involves social values and culture that play a significant role in the effective functioning of any firm. It means whenever there is any change in the social environment, it can have a straight or unintentional effect on the business. The term culture includes traditions, several behavior patterns, values, and even critical facts. Cultural factors also affect the organization’s success in the long haul. Some of the social and cultural factors affecting business productivity include religion and beliefs, different lifestyles adopted by humans, social classes, the growth rate of population, life expectancy rates, and many more.

Technology Factors

As the time passes, there is constant change in technology due to which more and more firms are concerned to keep their services updated. Technology is not limited to the IT sector only. It involves the manufacturing process, products, advanced techniques, and many more. Technological developments act as a beneficial tool for any company’s success. Some of the significant and most common macro-environment factors related to technology include automation, engine performance and efficiency, wireless charging, internet connectivity, and many more. 

Technology factors are related to the skills and abilities that are used in the production as well as the material and technology that a particular product requires to be made. The technology factors are important and can have a significant impact on how well your business is running. It figures out even the most basic factors such as what kind of maintenance trolley is used to preserve your tools and equipment as long as possible.

Some of the technology factors that affect business include:

• Internet Connectivity

• 3-D Technology

• Automation

• Wireless Charging

• Security-related to Cryptography

• Speed or power of computer calculation

• Engine Performance and Efficiency

• Ecology and Physical Environment: Ecology and physical environment play an immense role when determining the success of any firm. For instance, global warming, a revolutionary change in the physical environment, has started alarming the rainfall in different areas. As a result, it may impact the crops. This can cause a scarcity in the production of raw materials like cotton. So, whether it’s topographical elements, climate changes, weather conditions, or any other ecological factor, all are crucial in the macro business environment.

• Demographic Environment:  Demography refers to the study of the human population especially concerning sex, age, education, occupation, income size, density, cultural characteristics, lifestyle, etc. Such information about the population is significant for any business to flourish. It not only helps in selecting items to produce, but also helps to select the channel of distribution advertising media, choice of marketing method, choice of manufacturing site, and other business decisions.

The choice of manufacturing site would be influenced by the population size. However, the improved transport facilities have enabled the buyers to shop at distant places, the sellers may therefore sometimes find that accommodation in thickly populated areas may offer goods and services at extensively lower prices by establishing themselves at a few distance away, hence attracting a large number of  customers.

 

The policy of balanced regional development encourages the government to offer infrastructure and basic facilities at cheaper rates to attract business in backward regions. This, in turn, benefits the business, not only in terms of the lower cost of such facilities but also the labor can be easily available at lower rates. It also helps to flourish all the ancillaries and supporting business. For example, the establishment of a cement factory or steel plant in the backward regions will generate employment not only in the factory itself but a completely developed market to fulfill consumption and other needs of those employees shall also come up.

Therefore, the businesses will have the opportunity to establish canteen/hotels, entertainment centers, textile shops, provisional stores, medical shops, and so on. Besides, the government observes the demographic considerations in terms of their licensing policy. Manufacturing units, specifically those which cause air or noise pollution are not permitted to operate in congested areas. That is the reason why every state government has established industrial areas away from residential areas.

Political and Legal Factors: The market flourishes according to the political and legal environment in different areas. This implies that every business needs to be updated with such forces globally to be able to make the right decisions. The general legal factors include:

• Copyright Law

• Employment Law

• Discrimination Law

• Fraud Law

• Health and Safety Law

• Import and Export Law

Advantages of Macro Environment

• The macro-environment analysis enables the economy to identify the potential threats and also suggest measures to control it.

• The macro-environment survey helps in budgeting the economic and financial requirements of the forthcoming years considering the macro-environmental factors that will play a pivotal role.

• The macro-environment analysis helps in attaining the desired objectives by examining the factors that affect the macro environment.

• The macro-environment analysis highlights the strengths and weaknesses of the economy as a whole as the impact of the macro factors can be extreme.

Disadvantages of Macro Environment

• There is a greatest danger of administering the delicate information which comprehends the macro-environmental factors.

• Data on the macro-environmental factors are not available easily and need to be collected from various sources.

• There might be differences in the rules and regulations of the two countries. Hence what is impacting one country may not be that impacting the other country.

• Political stability is one of the most important factors to have healthy conditions in the economy as all the top-level decisions are taken by the political leaders. In the absence of political stability, it would be difficult for any country to flourish in the future as the political will is not there to boost the economy ahead.

Conclusion

In short, Macro Environment factors are the factors that are beyond for the organization to control. An organization can change its policies considering the macro environment conditions that can affect the business but cannot change the macro environment conditions itself. The demographic factors, political factors, technology factors, social-cultural factors, and natural factors are some of the factors that should be analyzed while formulating marketing strategies or manufacturing products.

Market Price, Factor Cost, and Basic price are the basic concepts which are to be learned and understood by the students at their basic level. This content is especially to make the foundation strong. Factor cost, basic prices, and market prices are amongst some of the most essential curricula for students who have selected the Commerce stream as their 10+2.To understand these in a better way, it is essential to get to know the basics of the terms.

Definitions of the Terms – Factor Cost, Basic Price, and Market Price

The total cost incurred in deploying all factors, which led to the production or generation of goods and commodities available in the market, is known as factor cost.

It is the value or amount which a producer expects to receive from the consumer by selling one unit of product. This amount receivable is exclusive of all taxes and inclusive of subsidy. Therefore, the formula for the Basic price can be written as

Basic price = factor cost + Production taxes – Production subsidy

Where production tax and production subsidy are determined in reference to production and don’t necessarily depend upon the volume of actual production. Therefore, stamp duty, registration fee, land revenues, etc. are a few examples of production tax. And these production subsidies are given to farmers, small industries, administrative subsidies to cooperatives, etc.

This is how one can calculate the basic price of a commodity receivable by the producer of the good.

As the name suggests, the market price is a measure of the amount at which goods or commodities are made available to the general consumer for sale. This total cost is inclusive of the entire production cost right from the purchase of raw material to worker wages, input prices, rent, interest, profit, etc.

Unlike basic Price, it is inclusive of the imposed taxes on the goods to be sold in the market. It also deducts the subsidies offered by the government if there are any.

Subsequently, one can calculate the market price of a commodity with this formula mentioned below – 

Market Price = P + T – S

Where,

P = Basic price

T = Production taxes 

S = Production subsidy

Where production tax and production subsidy are determined in reference to production and don’t necessarily depend upon the volume of actual production.

What is GDP at Factor Cost?

To understand this concept of GDP at factor cost, you first need to understand a few pointers as mentioned below. 

• GDP and GVA are the tools that are used for measuring the economic growth of a nation. 

• GDP stands for Gross Domestic Product and is the measure of the value of the end-products produced in a country. 

• GVA stands for Gross Value Added, and it quantifies the value of the total production of goods and commodities in a nation.

Therefore, GDP at Factor cost is the total value of goods and commodities produced in a year in a country by its all-production units. This value calculated here is inclusive of depreciation as well.

GDP at Factor Cost = Sum of all GVA at factor cost.

 

GDP at Market Price = GDP at factor cost + Product taxes + Production tax – Product subsidies – Production subsidies.

Test Your Knowledge

Q1. GDP is a Measure of 

1. A country’s income 

2. Consumer spending 

3. A country’s wealth 

4. Net trade income 

Q2. Adjusting GDP from Market Prices to Factor cost Requires

1. Addition of indirect taxes 

2. Subtraction of subsidies 

3. Deduction of indirect taxes and subsidies 

4. Deduction of indirect taxes and addition of subsidies

Q3. A Higher GDP Per Capita Does not Mean that Quality of life has Improved in the Area, and the Reasons are 

1. It does not measure the quality of items produced in the country 

2. It is only measured every 5 years 

3. It measures wealth and not income 

4. It measures gross domestic product

Q4. The Value of Domestic Output Attained by Residents of Country before Depreciation and Addition of Influence of Taxes and Subsidy is known as 

1. GDP at factor cost 

2. GNP at factor cost 

3. GNP at market prices

4. GDP at market prices 

5. NNP at factor cost

With this concept of such costs and prices in place, students will be able to learn the nuances of this subject better. They can further acquire help and in-depth knowledge of the topic by going through ’s website. We offer detailed learning exposure to students willing to reach the extra mile in their academics.

A joint venture can be defined as an arrangement in any business organization by more than two parties where they agree to put in their resources to carry out a specific task for the growth of the company. In the case of a joint venture, all the people who have invested their money have the right to know about the profits and losses that the project or the business activity is making. It can be a partnership, a corporation or an LLC or limited liability company. 

Meaning of Joint Ventures and their Features

JV means a business arrangement where more than one independent party participate together after forming a single entity legally. They undertake the responsibility of bearing the profits and losses that the company shall make for a specific period. 

Joint venture can be defined as a temporary partnership that is made for a specific purpose that leads to the growth or establishment of the company or business association. 

Features of the Joint Venture are the following:

More than one company come forward with a definite purpose for the growth of the company and they remain bound to their decision.

All the parties have equal right over the operations, business assets, administration as well as the company’s ventures.

• The Pooling of Expertise and Resource: 

All the company’s pool their resources that include manpower, capital, technical parts, which help the company to produce in large-scale.

• Sharing the Profits and Losses: 

As per the joint company definition, the co-ventures are responsible for all the profits and losses that the company makes for that period. The computation of loss and profit is generally done when the business activity or the project comes to its end. However, if a project continues for a longer period then the loss and profit are calculated yearly. 

• Getting Access to the New Technologies: 

While describing the meaning of joint ventures and their features, this calls for special mention. When a party enters a joint venture with a company then it gets access to all the techniques of the production, business performance, and marketing that results in decreasing the cost and improving the quality. 

Joint Venture Company Definition 

Joint venture company meaning refers to the joint venture that involves more than one business company or party taking part in the resource to achieve a set of goals that can lead to the development and growth of the company. The rewards and risks of the company organization are also equally shared. 

Joint Venture Account Meaning 

This refers to an account that is prepared for measuring venture profits. These accounts are debited with all the expenses of the ventures and then credited with all collections or sales. The loss and profits made by the venture are transferred to their accounts in the profit-sharing ratio. 

Definition of Joint Venture in Business

Meaning of joint ventures refers to the parties coming together by investing their resources to a new project and agreeing to share the loss and profits that are made from the specific project.

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The last thing that a parent would want for the child is to spend his whole time glued to the mobile phone. But with , spending time on Smartphone will become more interesting and beneficial also. The major USP factor of lies in its ability to combine all its content with strong design and technology. All the modules presented on the site are curated by experienced teachers smoothly and easily so that they can be easily understood by the students. Another important factor of this learning app is that it not only provides lessons but also test papers that can be solved by the students. 

There are many forms of communication that businesses use. These vary depending on the type of communication, formal or informal. Memos are the most popular form of internal communication in a written format maintaining the confidentiality of the business.

What is a Memo in Business Communication?

A memo is an abbreviation for memorandum. It serves the purpose of delivering the information to a mass of people. It is written from the perspective of one-to-all. Memo notes normally include the interest of the business. You can use a memo to explain any upcoming task or event, as a reminder, highlighting the event and for many other purposes. However, memos hardly include a call to action elements. It is the ideal document that helps in addressing several people formally. 

Memorandum Format

Every part of the memorandum format has a justifiable reason. Always write the memo in a professional format. It should include all the required details and no unnecessary information. The format and details to be included while writing a memorandum are as follows.

• Heading: After writing the information that is added in the header format, ‘Memo’ is written, before starting with the body and adding content.

• Recipient: Next, the address of the recipient is added. For example, “Employees of the marketing department.”

• Writer: Here, the name of the person writing the memo is added. 

• Additional Receipts: These people receive the memo just like others; however, the memo does not address them. These can be members of the managing committee who need to keep track or any other people. They are just a part of the loop.

• Date: It is an integral part of every formal document, and so is it necessary for writing memos, also.

• Subject Line: This provides an outline of what the memo is about, in just a line or two. This allows the reader to know the context that the memo is referring to. For example, Subject: Induction seminar for the recruits of the company.

• Body: Here you get all the information. It contains the ‘when’, ‘what’, ‘where’, ‘why’, and answers to all these questions. This will help in providing all the information readers need to know in a concise, professional, and well-structured format. It is necessary to convey all the information with precision and clarity. Try ending the body with a positive note.

• Proofread and Editing: The final and most important step is to proofread the content before sending it out. Ensure that it does not contain any minor issues either.

Effective Tips for Memo Writing

Here is a list of the tips one can follow for memo writing and these are:

• The Orientation of the Audience: While drafting a memo, it is essential to understand the audience well. Try to offer a clear and concise memo without any ambiguities. There might be cases when only a department of the company is aware of an acronym. Under such cases, use the full forms for appropriate communication.

• Professional Tone: A memo speaks volumes, representing a part of the organization. This makes it vital to take note of how you communicate with one and all.

• Subject: A special emphasis is to be laid on the subject line. Make it clear and concise. In case of any specific event or occasion, ensure that its name is added in the subject line.

• Direct Format: Make it direct. You cannot be passive about declaring any information. Keep the information related to the topic.

• Objectivity: Without any personal bias, make the memo objective. Place the facts right away without any addition of subjective information.