2K18 MBA 123 Vivek Rathi
2K18 MBA 123 Vivek Rathi
2K18 MBA 123 Vivek Rathi
A
Report on
‘Economics Operations on Different
Articles’
Avocado Markets
In the above diagram P0, Q0, D1, and S1 are initial equilibrium price, quantity,
demand curve and supply curve respectively. Now when there is a surge in demand
of avocados it will have increasing effect in both price and quantity supplied. So, we
can observe that when demand curve shifts from D1 to D2 price increases from P0
to P1 and quantity increased from Q0 to Q1 and forming new equilibrium point.
2. When demand increase is more than supply decrease
In the above figure, P0, Q0, D1, S1 are initial equilibrium price, quantity, demand
curve and supply curve respectively. Now, if supply decreases from S1 to S2 and
demand increases from D1 to D2 then following effects take place:
Price Increases from P0 to P1
Quantity increase from Q0 to Q1
1.1) Introduction
Rationing of the good is the means by which government ensures equitable
distribution of resources by putting a restraint on the purchase of the commodity in
the market for the rich people. Rationing is the controlled distribution of scarce
resources, goods, or services and it controls the size of the ration, one’s allotted
portion of the resources being distributed on a particular day or at a particular time.
In economics, rationing is an artificial restriction of demand and is done to keep
price below the equilibrium (market-clearing) price determined by the process of
supply and demand in an unfettered market. Thus, rationing can be complementary
to price controls which can be explained through indifference curve approach.
There are two kinds of rationing done by the government to reduce consumption-
price rationing and non-price rationing. By rationing, we mean exercise tax and by
non-price rationing, we mean all types of control on the quantity consumed. Non-
price rationing could be done by giving away of coupons that would enable low-
income families to obtain some good at affordable prices, which could not be
possible if the prices were to increase alone. With coupon scheme, it would develop
a black market for coupons, which would paradoxically increase the utility for those
who are in need of that commodity by collection of more of these coupons from
those who are not in need. This ensures greater marginal utility for those people who
are in need of the commodity and will provide exchange of money to those who sell
these coupons. For this, it is necessary for the government to encourage trading of
the coupons.
The major importance of introducing rationing is to keep the price of important
commodity under control, as for a necessary commodity, there will be an excessive
demand in the market which will drive their price up in the market and high prices
leads to reduction of consumption and utility for those who could not afford it. This
ensures that the resources are planned in favor of the poor people of the country and
restricting the rich people to ensure excessive purchase of limited resources of the
country. This ensures development and equality of welfare and utility between the
rich and the poor people. Rationing of the good is done by the government and not
the private sector. There is the same limit put on every person on the budget spending
to which people could buy the commodities and within the limit, one could buy any
amount of the commodity.
1.1.1) Persuasive and Binding power of rationing
In many cases, Rationing of goods do not have the binding value on the consumers
and it proves to be quite ineffective in restricting the consumption of a good, thereby
quashing its objective of affecting the budget limit of the consumer. This persuasive
value is more common for the poor people in the country where they even could not
afford to the buy the rationed commodity. This annuls the importance of the
rationing and reflects the importance of the income as a binding value on the
consumption choice and not the ration limit. It has its binding value for the rich
people which put a limit on their high consumption of goods, i.e. puts a limit on their
budget.
1.2) Examples related to rationing of goods
In India, rationing of good is done by the government through public distribution
system by providing food grains at a cheap rate to the people (especially poor); the
same can be explained through indifference curve analysis. Due to rationing of
wheat and rice in Delhi, every resident in India will get same amount of wheat and
rice by using ration cards. Every month, through the use of ration cards, one could
purchase 4 kg of wheat and 1 kg of rice and one family could buy 5 kg of rice, no
matter how many members are there in the family. But, south Indians will get more
satisfaction from rice than the wheat, and so if the rationing is done more on the
purchase of rice than the wheat, then it would amount to decline in the utility to the
south Indian people and vice versa. Similarly, for the Punjabi’s living in Delhi,
normally, getting more wheat gives them more utility than the purchase of rice. With
the help of indifference curve, Punjabis and South Indians will be able to decide the
rate at which they should exchange wheat and rice among themselves so as to get
maximum satisfaction.[4] This further shows that the effect of rationing may be
fruitful and provide more utility to some and not so good for the others and vice
versa. Hence, Government introduces rationing of only those goods which are not in
excess in the market and for which demand in the market is very high, i.e. these are
very common consumer good and hence, the government introduces the rationing
taking into account the balance of utility between different classes of people for the
purpose of satisfying mostly every people.
Economic Explanation of Rationing through Ordinal Approach
Food Stamp program is a type of food subsidy to provide poor people with
adequate quantity of food. It is another form of in-kind food subsidy which is
discerning from the subsidy in the form of cash income, called as cash subsidy
which is provided in the cash grant program. Food Stamp program is a boon in
providing nutritional assistance benefits to different classes of people i.e. families
and children, unemployed people and the working families, elderly and disabled
people. It solely objective is to alleviate hunger among poor people. These food
stamps are available to only those people whose income lie below a certain
minimum level. For e.g. In US, a person with income $400/month might be able to
buy $100/month worth of food, and any excessive consumption from the given
$100/month must be bought in for cash.
The purpose of giving food stamp is to purchase only food products and not to
purchase cigarettes, alcohol, and other lethal products. These food stamps are
exchanged for cash by the food retailers from the government. For e.g. In US, the
number of people receiving food stamps through the federal Supplemental
Nutrition Assistance Program rose during the recession. The higher poverty rate,
poor job market, and changes to the way applicants are evaluated have contributed
to the rising ranks. In the year 2012, about 48 million people drew utility from food
stamp benefits. This can be contrasted with cash grants in the sense that it provides
money to the people which can be used not only in buying food but also any other
commodity. So it provides a wider scope for the people on the consumption of
various commodities in the market. It acts as a supplementary income to the
consumer. In many cases, cash grants are given to meet the specific demand of the
people, like in Massachusetts (US), The Cash Grant Program, under the
Massachusetts Department for Higher education, is designed to assist needy
students in meeting institutionally held charges such as mandatory fees and non-
state-supported tuition. This raises the utility for the people in spending according
to one’s wish and desire.
Indian Railways: A Monopoly Organisation
Suruchi Agarwal
Visiting/ Empanelled Faculty, National Institute of Financial Management
Ministry of Finance, Govt. of India
Abstract:
This article deals in depth in the functioning and features of the Indian Railways,
the advantages and disadvantages of being a monopoly organisation. The arrogant
attitude and inefficiency that creeps in as soon as the word monopoly is attached
and why in today's world competition is necessary for efficient functioning of the
organization
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Demand from China, which is a significant buyer, is expected to go up in the next few
weeks. “There are some problems in Hai Phong port in Vietnam which is delaying the
shipments to China. Once it is cleared, more consignments may go to China,’’ Parikh said.
Exporters feel the prices will cross Rs 200 per kg by November.
Some of the chilling attacks in
Lack of sufficient rains in some jeera growing regions in Gujarat and Rajasthan, two top covert operations
producers, may impact the sowing that will begin by the end of the month. “There may not Over two weeks ago, Khashoggi entered
be any increase in the sowing area because of dry weather. But those regions which have the Saudi consulate in Istanbul to obtain
documents for his upcoming wedding and
good irrigation facilities will have good output,’’ said Ritesh Kumar Sahu, analyst at Angel
never came out.
Commodity Broking.
Trump says US will pull out of nuclear
arms deal with Russia
Jeera futures prices had crossed Rs 200 per kg in August but then fell on profit booking Afghans shut out by polling station chaos
return to vote
and subdued demand. Robust domestic demand is keeping the prices at above Rs 190
per kg level now. “If the producing states receive good rains in November, then the sowing
area could see an increase,’’ Sahu said. In the event, prices may see a decline.
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Washington
A former Dallas Fed president, I cover the economy.
Given the financial crisis, recession, slow recovery, and the pounding the banking
industry has taken from all fronts, the banks have had a large appetite for excess
reserves as a contingency. They may be excess in a technical sense, but they are
not excess to the bankers under current circumstances. Therefore, the huge
amount of reserves created by the Fed’s past open market purchases have largely
https://www.forbes.com/sites/bobmcteer/2012/06/26/the-diminishing-marginal-utility-of-excess-bank-reserves/#6d5bfd2570b9 1/2
10/21/2018 The Diminishing Marginal Utility of Excess Bank Reserves
ended up on banks’ balance sheets as excess reserves rather than being fully
utilized to make money-creating bank loans and investments. A similar
phenomenon occurred during the depression.
If the Fed had not engaged in aggressive open market operations to create
reserves, chances are the banks would have tried to add to their reserves by
shrinking their balance sheets. At this point, additional reserve creation may lead
to more reserve hoarding, but, given the diminishing marginal utility of those
reserve, at some point what can be done with additional reserves will become
more attractive to banks than accumulating more reserves.
If a medicine has been sufficient to keep a patient from worsening, but not
sufficient to restore his health, the answer may be to increase the dosage rather
than remove the medicine altogether.
I am a former president of the Dallas Fed and member of the FOMC 1991-2004.
I'm also a former Chancellor of the Texas A&M University System 2004-2006. I
was a CNBC Contributor and a Distinguished Fellow at the National Center for
Policy Analysis 2007-2014. I had a 36 yea... MORE
https://www.forbes.com/sites/bobmcteer/2012/06/26/the-diminishing-marginal-utility-of-excess-bank-reserves/#6d5bfd2570b9 2/2