Introduction to Economics Test - 4

To solve the problems through market or price mechanism ie., what goods are to be produced and what quantities, which methods for production are to be employed for the production of goods and how the output is to be distributed, should be decided by the free play of the forces of demand and supply.

Macro economics is concerned with variables as the aggregate volume of output of an economy, with extent to which resources are employed, with the size of national income and with general price level.

A resource is a source or supply from which benefit is produced. An item becomes a resource with time and developing technology.Typically resources are materials, energy, services, staff, knowledge, or other assets that are transformed to produce benefit and in the process may be consumed or made unavailable.

Micro economics deals with determination of prices and quantities in individual markerts and with the relationship among these markets.

Normative economics is a part of economics that expresses value or normative judgements about economic fairness or what the outcome of the economy or goals of public policy ought to be.

When an economy produces on PPC it mean there is no unemployment and all the resources are fully and being used efficiently but practically . If there is unemployment or inefficient use of resources an economy will operate inside the PPC.

Sale of patent is not an operating activity. Profit on sale of patents will be deducted in operating activities and sale price Rs.22,000 will be added in investing activities.

In Economics, goods are materials that satisfy human wants and provide utility. A good may be a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it.

PPFs are normally drawn as bulging upwards or outwards from the origin ("concave" when viewed from the origin), but they can be represented as bulging downward (inwards) or linear (straight), depending on a number of assumptions. A PPF illustrates several economic concepts, such as scarcity of resources, opportunity cost, productive efficiency, allocative efficiency, and economies of scale.

Economic resources are the assets which an economy may have available to supply and produce goods and services to meet the ever changing needs and wants of individuals and society as a whole.

Since human wants are unlimited and the means to satisfy them are limited, every society is faced with the fundamental problem of choosing and allocating its scarce resources among alternative uses. The production possibility curve or frontier is an analytical tool which is used to illustrate and explain this problem of choice.

Purchses= (Closing stock+Sales)-(Opening stock + Profit). Purchase of investment during the year Rs.3,75,000 i.e. (5,00,000 + 1,37,500) – (2,50,000 + 12,500) = 3,75,000

Central economic problem asserts that an economy's finite resources are insufficient to satisfy all human wants and needs. It assumes that human wants are unlimited, but the means to satisfy human wants are scarce.

Factors of production is an economic term that describes the inputs that are used in the production of goods or services in order to make an economic profit. This include land, labour, capital and entrepreneurship

Spares and tools which is not part of any particular Fixed assets, you can value as Inventory as per AS-2 and charge off in P&L a/c based on consumption.

Positive economics is the branch of economics that concerns the description and explanation of economic phenomena.

The decision Making Unit is a collection or team of individuals who participate in a buyer decision process.

Method which can be employed to solve the central problems is the adoption of economic planning. In this method, the solution of the various basic problems is not achieved through the free working of demand for and supply of goods and factors. But to solve these problems, Government sets up a central planning authority which has been called by several names, such as planning commission, planning ministry or planning board.

Micro economics deals with the behaviour of individual economic units such as consumers and business firm and is concerned with the determination of relative prices of commodities and factors of production.

These are the company's core business activities, such as manufacturing, distributing, marketing and selling a product or service. Operating activities should generally provide the majority of a company's cash flow and largely determine whether a company is profitable.

This problem refers to selection of the category of people who will ultimately consume the goods, i.e. whether to produce goods for more poor and less rich or more rich and less poor. Since resources are scarce in every economy, no society can satisfy all the wants of its people. Thus, a problem of choice arises.

Sale of shares of other company are part of investment which is now sold by the company. It is sale of investment, so it will take place in investing activity.

Cash from operating activities usually refers to the net cash inflow reported in the first section of the statement of cash flows. Cash from operating activities focuses on the cash inflows and outflows from a company's main business activities of buying and selling merchandise, providing services, etc.

Interest received on investment is a revenue receipt and added in investing activities while preparing cash flow statement.

Opportunity Cost is also known as Economic Opportunity Loss and it is the highest value alternative forgone. Moreover, Real cost is the fixed cost, which you have paid and therefore, opportunity cost is not a real cost.