MODULE – 1 – SOCIOLOGY

1.Society-Accrdng 2 sociologsts, a society is a grp f ppl wth comon territory, intractn, &
culture.Social grps consist f 2 or mor ppl hu intract & idntify wth 1 anodr.Territory: Most
countries hv formal boundries & territory dat d world rcognzes as dirs. Howevr, a society’s
boundaries don’t hv to b geopolitical borders, such as d 1 btw d Unted States & Canada.
Instead, membrs f a society, as well as nonmembers, mst recgnize partcular l& as belonging
to dat society.Eg: D society f d Yanomamo hs fluid bt definable l& boundaries. Loctd in a
South American rain forest, Yanamamo territory extends along d border f Brazil &
Venezuela. While outsiders would hv a hard tym detrminng wer Yanomamo l& begins &
ends, d Yanomamo & dir neighbors hv no trouble discerning wich l& is dirs & wich is not.
Interaction: Members f a society mst com in contct wth 1 anodr. If a grp f ppl within a
country has no regular contact wth anodr group, those grps cannot b considered part f d
same society. Geographic distance & language barriers can separate societies within a
country Culture: Ppl f d same society share aspects f dir culture, such as language or beliefs.
Culture refers to d language, values, beliefs, behavior, & material objects dat constitute a
ppl’s way f life. It is a defining element f society.
2.Community-From a sociological perspective, d notion f community refers to a group f ppl
united by at least one common characteristic. Such characteristics could include geography,
shared interests, values, experiences, or traditions. John McKnight, a sociologist, says dat
dre is no uniform view f community in sociology, “ To some ppl it’s a feeling, to some ppl it’s
relationships, to some ppl it’s a place, to some ppl it’s an institution" Communities may be
viewed as systems composed f individual members & sectors dat have a variety f distinct
characteristics & interrelationships .Dse sectors are populated by groups f individuals who
represent specialized functions, activities, or interests within a community system. Each
sector operates within specific boundaries to meet d needs f its members & those d sector
is designed to benefit. For example, schools focus on student education, d transportation
sector focuses on moving ppl & products, economic entities focus on enterprise &
employment, faith organizations focus on d spiritual & physical well-being f ppl, & health
care agencies focus on prevention & treatment f diseases & injuries. In reality, dse sectors
are a few f d many elements dat comprise d overall community system.A community can be
viewed as a living organism or well-oiled machine. For d community to be successful, each
sector has its role & failure to perform dat role in relationship to d whole organism or
machine will diminish success. In a systems view, healthy communities are those dat have
well-integrated, interdependent sectors dat share responsibility to resolve problems &
enhance d well-being f d community. It is increasingly recognized dat to successfully address
a community’s complex problems & quality f life issues, it is necessary to promote better
integration, collaboration, & coordination f resources from dsemultiple community
sectors.One useful way to describe d community & its sectors is through a technique known
as mapping. As shown in d following diagram, someone interested in describing d bounds f a
community can map it by identifying primary, secondary, & potential building blocks, or
human & material resources. Each f dse resources has assets dat can be identified,
mobilized, & used to address issues f concern & bring about change.
4.Institutions-Social institutons are established or st&ardized patterns f rule-governed
behavior. Dy include d family, education, religion, & economic & political institutions.
According to Karl Marx social institutions are determined by dir society’s mode f production
& social institutions serve to maintain d power f d dominant class. According to MaxWeber ,
social institutions are interdependent bt no single institution determines d rest. (a) D
Family: A socially defined set f relationships between at least two ppl related by birth,
marriage, adoption, or, in some definitions, long-st&ing ties f intimacy. How do parents,
particularly modrs, balance d dem&s f work & family (b) Education: A formal process in
which knowledge, skills, & values are systematically transmitted from one individual or
group to anodr..According to functionalist dory functions f education include transmitting
shared values & beliefs, transmitting specific knowledge & skills, sorting individuals based
on skill, & establishing social control over youths. (c) Religion: A unified system f beliefs &
practices pertaining to d supernatural & to norms about d right way to live dat is shared by a
group f believers. Sociologists treat religion as a social radr than supernatural
phenomenon..Ascetic religions require active self-mastery; mystical religions require passive
contemplation.Odr-worldly religions require focus on d next life (e.g., heaven); this-worldly
religions require focus on earthly life. (d)Economic Institutions: Sociologists underst& d
economy as d set f arrangements by which a society produces, distributes, & consumes
goods, services, & odr resources. (e) Political Institutions: Institutions dat pertain to d
governance f a society, its formal distribution f authority, its use f force, & its relationships
to odr societies & political units. D state, an important political institution in modern
societies, is d apparatus f governance over a particular territory.
1. Cooperation-it involves individuals or groups working togedr for d achievement f dir
individual or collective goals. In its simplest form, cooperation may involve only two ppl who
work togedr towards a common goal. Two college students working togedr to complete a
laboratory experiment. It can be divided into five principal types.1. Direct Cooperation:
Those activities in which ppl do like things togedr play togedr, worship togedr, labor togedr
in myriad ways. D essential character is dat ppl do in company, d things which dy can also do
separately or in isolation. Dy do dm togedr because it brings social satisfaction.2. Indirect
Cooperation: Those activities in which ppl do definitely unlike tasks toward a single end.
Here d famous principle f d 'division f labour' is introduced, a principle dat is imbedded in d
nature f social revealed wherever ppl combine dir difference for mutual satisfaction or for a
common end.3. Primary Cooperation: It is found in primary groups such as family,
neighborhood, friends & so on. Here, dre is an identity end. D rewards for which everyone
works are shared or meant to be shared, wth every odr member in d group. Means & goals
become one, for cooperation itself is a highly prized value.4. Secondary Cooperation: It is d
characteristic feature f d modern civilized society & is found mainly in social groups. It is
highly formalized & specialized. Each performs his/her task, & dus helps odrs to perform dir
tasks, so dat he/she can separately enjoy d fruits f his/her cooperation.5. Tertiary
Cooperation: It may be found between 2 or more political parties, castes, tribes, religions
groups etc. It is often called accommodation. D two groups may cooperate & work togedr
for antagonistic goals.
2.Conflict-D conflict perspective, or conflict dory, derives from d ideas f Karl Marx, who
believed society is a dynamic entity constantly undergoing change driven by class conflict.
Whereas functionalism underst&s society as a complex system striving for equilibrium, d
conflict perspective views social life as competition. According to d conflict perspective,
society is made up f individuals competing for limited resources .Competition over scarce
resources is at d heart f all social relationships. Competition, radr than consensus, is
characteristic f human relationships. Broader social structures & organizations reflect d
competition for resources & d inherent inequality competition entails; some ppl &
organizations have more resources, & use those resources to maintain dir positions f power
in society.
3.Competition-characteristics f competition 1. Scarcity as a condition f competition:
Wherever dre are commonly desired goods & services, dre is competition. Infact economics
starts wth its fundamental proposition dat while human wants are unlimited d resources dat
can satisfy dse wants are strictly limited. Hence ppl compete for d possession f dse limited
resources. As Hamilton has pointed out competition is necessitated by a population f
insatiable wants & a world f stubborn & inadequate resources.2. Competition is
continuous: it is found virtually in every area f social activity & social interaction-
particularly, competition for status, wealth & fame is always present in almost all
societies.3. Competition is a cause f social change: Competition is a cause f social change in
dat; it causes persons to adopt new forms f behavior in order to attain desired ends. New
forms f behavior involve inventions & innovations which naturally bring about social
change.4. Competition may be personal or impersonal: Competition is normally directed
towards a goal & not against any individual. Some times, it takes place without d actual
knowledge f odr's existence. It is impersonal as in d case f civil service examination in which
d contestants are not even aware f one anodr's identity. Competition may also be personal
as when two individuals contest for election to an office. As competition becomes more
personal it leads to rivalry & shades into conflict. Competition in d social world is largely
impersonal.5. Competition is always governed by norms: Competition is not limitless nor is
it un- regulated. Dre is no such thing as unrestricted competition. Such a phrase is
contradiction in terms. Moral norms or legal rules always govern & control competition.
Competitors are expected to use fair tactics & not cut throat devices.
4.Accommodation-D term 'accommodation' refers to several sorts f working agreements
between rival groups dat permit at least limited cooperation between dm even though d
issues dividing dm remain unsettled. It does not technically end d conflict, bt holds it in
abeyance. D accommodation may last for only a short time & may be for d purpose f
allowing d conflicting parties to consolidate dir positions & to prepare for furdr conflict. Or,
as is more often d case, d initial accommodation agreed upon by d parties may be part f d
process f seeking solutions to d issues dat divide dm. If those solutions are not found, d
accommodation itself may become permanent. Without accommodation social life could
hardly go on. Accommodation checks conflicts & helps persons & groups to maintain
cooperation. It enables person & groups to adjust dmselves to changes functions & status
which is brought about by changed conditions. D only way in which conflicts between
groups may be eliminated permanently is through assimilation. Formally, assimilation is d
process whereby group differences gradually disappear. Issues are based upon differences.
When d differences disappear so do d issue & d conflict.
5. Assimilation-Some practices dat are common in odr societies will inevitably offend or
contradict d values & beliefs f d new society. Groups seeking to become part f a pluralistic
society often have to give up many f dir original traditions in order to fit in—a process
known as assimilation..Example: Although Chinese immigrants started arriving in d United
States 150 years ago, Chinese-American communities still follow some traditions, such as
celebrating d Lunar New Year.
6.Progress-D concept f progress found notable expression in d writings f d French
Philosophers such as Turgot, Condorcent & Fancis Bacon f d 18th century & has been a
dynamic agent in d social activity f modern man. Sociologists such as Saint Simon, Auguste
Comte & Herbert Spencer were d earlier exponents f d idea f progress. According Comte, it
was d intellectual elite who could bring about an era f progress.Etymologically, d word
progress means “moving forward.” Bt moving forward or backward, progress or regress are
relative terms. If it be remarked dat such & such country has progressed, no meaningful
information can be extracted from such a statement unless d direction towards which
progress has been made be known.In this way, progress is not mere change. It is a change in
particular direction. D word progress cannot be appended to change in every direction.
Criteria f Progress:It is difficult to explain d criteria f progress which are relative to dir
temporal context. Social values determine progress. Whedr any change will be considered
as progress or not depends upon d social values. Social values change wth time & place. D
criteria f progress change wth d change f social values. Hence, it is difficult to formulate a
universally acceptable criterion f progress. However, d following can be tentatively
suggested.1Health & Longevity f Life:Average length f life is one index f progress whedr d
world is growing better. Bt it does not necessarily follow from this dat a longer life mst be
more pleasurable & better. 2.Wealth:In d opinion f some persons, wealth or economic
progress is a criterion f progress. .3Population:Some ppl are f d view dat an increase in
population is a sign f progress. Bt over-population cannot be a sign f progress. 4.Moral
Conduct:According to some thinkers, moral conduct is d criterion f progress.Since life has
many facets, it is not possible to formulate any one criterion f progress. 5.Nature f
Progress:Byanalysing above definitions, we find dat progress is a change, a change for d
better. When we speak f progress, we simply not merely direction, bt direction towards
some final goal. D nature f d progress depends upon two factors, d nature f d end & d
distance f which we are from it.D modern writers today speak f social progress though dy do
not have a single satisfactory explanation f d concept. In order to have a better underst&ing
f d meaning f progress, we have to analyse d following A. Progress is Dependent upon
Social Values:Progress dependent upon & is determined by social values. It means dat
progress does not have precisely d same meaning at all times & places, because values
change from time to time. B. Dre is a Change in Progress: Change is one f its essential
attributes. D concept f progress presupposes d presence f change. Without change, dre can
be no progress.C. In Progress d Desired End is Achieved:D progress is not mere change. It is
a change in a particular direction. Broadly speaking, progress means an advance towards
some ideally desirable end. It always refers to d changes dat leads to human happiness. Not
all changes imply progress.D. Progress is Communal:Progress from its ethical point f view,
may be personal bt from d sociological point f view, is communal since sociology is dat
science f society. In it, d individual is taken into consideration only as a part f society.E.
Progress is Volitional:Progress does not come about through inactivity. Desire & volition are
needed for progress. Efforts have to be made & when dse efforts are successful it is called
progress. It is an uphill task. It mst be remembered dat every effort is not progressive.F.
Progress is Variable:D concept f progress varies from society to society, place to place &
from time to time. It does not remain constant in all times & f all places. Dat which is today
considered as d symbol or progress may tomorrow be considered & treated as a sign f
regress. G. Criteria f Progress are Variable:As stated earlier criteria f progress are relative to
dir temporal context. Social values determine progress. Bt social values change wth time &
place. Drefore, criteria f progress vary from place to place. Furdr, different scholars have
prescribed different criteria f progressH. Progress does not have a Measuring Rod:D term
progress is very much subjective & value-loaded. It is not demonstrable wth a degree f
certainty. We cannot show it to odrs unless dy first accept our evaluations. We may or may
not agree dat dre is progress, bt we cannot prove it
MODULE- 2 – SOCIOLOGY

-Culture & Scty Culture consists f d bliefs, bhaviors, objects, & odr chrctristics common to d
membrs f a particular group or scty. Thru culture, ppl & groups define dmselves, conform to
scty's shared values, & contribute to scty. Dus, culture includes many societal aspects:
language, customs, values, norms, mores, rules, tools, technologies, products, organizations,
& institutions. This latter term institution refers to clusters f rules & cultural meanings
associated wth specific social activities. Common institutions are d family, education,
religion, work, & health care. Sociolgsts define scty as d ppl who interact in such a way as to
share a common culture. D cultural bond may b ethnic or racial, based on gender, or due to
shared bliefs, values, & activities. D term scty can also have a geographic meaning & refer to
ppl who share a common culture in a particular location. For example, ppl living in arctic
climates developed different cultures from those living in desert cultures. In time, a large
variety f human cultures arose around d world. Culture is changing constantly. Certain
products f culture are governments, languages, buildings & man made things. It is a
powerful tool for d survival f mankind. Cultural patterns f ancient ppl are reflected in dir
artifacts & are studied by archaeolgsts to underst& dir way f life. Culture is an imp part f a
scty for d very existence f scty. Culture also plays an imp role to establish discipline in a scty.
Scty-is referred to as a group f ppl who share common area, culture & bhavior patterns.
Scty is united & referred as a distinct entity. Scty consists f a government, health care,
education system & several occupations f ppl. In a scty each & every individual is imp bcause
each individual can contribute something to d scty. Also you can find smaller groups f ppl
wth a certain goal which include groups f students, government agencies or groups dat raise
money for a specific cause in a scty. Many different cultures can b found within a scty. You
can find several differences within a country or town.
Cultural Lag-For a btter underst&ing f d relationship btween culture & technology, let us
analyse here d concept f “cultural lag”.D concept f ‘cultural lag’, has bcome a favourite one
wth sociolgsts, it is an expression dat has a particular appeal in an age in which inventions
discoveries & innovations f many kinds are constantly disturbing & threatening older ways f
living. In this context, it will serve also to introduce d principle dat cultural conditions are
dmselves imp agencies in d process f social chnge.D concept f ‘cultural lag’ was first
explicitly formulated by W.F. Ogburn in his treaties entitled ‘Social Chnge’. Lag means
crippled movement. Hence, ‘cultural lag’ means d phases f culture which fall bhind odr
phases dat keep on moving ahead.Ogburn’s idea f ‘cultural lag’ is perhaps one f d most imp
concept influencing d fact f discussion regarding technology & social chnge. Ogburn
distinguishes btween “material” & ‘non-material’ culture.By ‘material culture’ he means
things which are ‘tangible’, visible, seen or touched like goods, tools, utensils, furniture,
machine. Bt d ‘non-material’ culture includes things which cannot b touched or tangible
such as family, religion, skill, talent. Government & education etc.According to Ogburn,
when chnges occur in ‘material culture’, those in turn stimulate chnges in ‘non-material’
culture, particularly in what he terms d ‘adaptive’ culture. According to Ogburn, material
culture chnges by a process which is different in pace from chnges in non-material culture.D
larger d technological knowledge f a scty, d greater d possibility f a new combinations &
innovations.
Deviant Sub-Culture-A Sub-Culture is a smaller culture held by a group f ppl within d main
culture f a scty, in some ways different from d dominant culture f a scty, bt wth many
aspects iN common. Subcultures come in a diversity f forms, associated wth street gangs,
prison inmates, drug addicts, football hooligans, religious cults, hippie communes, & punk
rockers. On a larger societal scale, subcultures include working-class & underclass
subcultures, racial/ethnic subcultures, immigrant subcultures, regional subcultures, & youth
subcultures.D existence f many subcultures is chrctristic f complex societies such as d United
States. Conflict dorists argue dat subcultures often emerge bcause d dominant scty has
unsuccessfully attempted to suppress a practice regarded as improper, such as d use f illegal
drugs.D impact f subculture within d United States is evident in d celebration f seasonal
traditions. Decembr is dominated by d religious & commercial celebration f Christmas
holiday – an event well-entrenched in d dominant culture f American scty. However, d
Jewish subculture observes Hanukkah, African Americans observe d relatively new holiday f
Kwanzaa & some adists join in rituals celebrating d winter Solstice s..
Sanskritization or Sanskritisation is a particular form f social chnge found in India. It
denotes d process by whichcastes placed lower in d caste hierarchy seek upward mobility by
emulating d rituals & practices f d upper or dominant castes. This term was made popular
by Indian sociolgst M. N. Srinivas in d 1950s,although earlier references to this process can b
found in Castes in India: Dir Mechanism, Genesis & Development by Dr. B. R. AmbdkarM.N.
Srinivas first propounded this dory in his D.Phil. dsis at Oxford University. D dsis was later
brought out as a book titled Religion & Scty Among d Coorgs f South India. Published in
1952, d book was ethnographical study f d Kodava Community f Karnataka..
Social chnge may b defined as d alteration or transformation at large scale level in d social
structure, social institutions, social organization & patterns f social bhavior in a given scty or
social system. Social chnge can also b defined as d alteration, rearrangement or total
replacement f phenomena, activities, values or processes thru time in a scty in a succession
f events. D alteration or rearrangement may involve simple or complex chnges in d
structure, form or shape f d social phenomena. Sometimes it may mean d complete wiping
out f d phenomenon & dir total replacement by new forms (Calhoun et al, 1994). Some
minor chnges dat take place in d lives f individuals & small, limited groups may not b
regarded as social chnges although dse kinds f chnges may b d manifestations or effects f
chnges dat are taking place at larger scale. Chnges in d material & non- material contents f a
culture also may not b regarded as social chnges. However, it is very difficult to separate
social chnges from cultural chnge. Bcause d two are usually interdependent, social chnge
may usually introduce cultural chnges, & vice versa
Factors f Social Chnge: 1. Physcal Environment:Certain geographic chnges smtyms produce
grt social chnge. Climate, storms, social erosion, earthquakes, floods, droughts etc.,
definitely affect social life & induce social chnge. Human life is closely bound up wth d
geographical conditions f d earth.2. Demographic (biological) Factor:Broadly speaking,
demography is concerned wth d size & structure f human population. D social structure f a
scty is closely related wth d chnges in d size, composition & distribution f population. D size f
d population is based mainly upon three factors—birth rate, death rate & migration
(immigration & emigration3. Cultural Factor:It is an established fact dat dre is an intimate
connection btween our bliefs & social institutions, our values & social relationships. Values,
bliefs, ideas, institutions are d basic elements f a culture. Certainly, all cultural chnges
involve social chnge 4. Economic Factor:F economic influences, d most far-reaching is d
impact f industrialisation. It has revolutionised d whole way f life, institutions, orgnistns &
community life. In traditional production systems, levels f production were fairly static since
dy were geared to habitual, customary needs. Modern industrial capitalism promotes d
constant revision f d technology f production, a process into which science is increasingly
drawn 5. Political Factor: State is d most powerful orgnistn which regulates d social
relationships. It has d power to legislate new laws, repeal old ones to bring social chnge in d
scty. Laws regarding child marriage, widow remarriage, divorce, inheritance & succession,
untouchability are some f d examples which have brought many chnges in d social structure
f Indian scty
Social Chnges in Kerala:1.Structural factors2.Emergence f nationalism3.Malayalee
memorial4.Malabar rebllion5.Civil disobdience6.Left movements7.Responsible
govt8.Education
SOCIAL&DIFFRENTIATIOND distinction made btween social groups
&persons on d basis f biological, physiological,& sociocultural factors, as sex, age, orethnicit
y,resulting in d assignment f roles & statuswithin a scty. Intragroup & intergroup
differentiation are two basic types f social differentiation. Intragroup differentiation
represents a division f d group into subgroups dat perform different functions in d group
without bing superior or inferior to each odr. Division f a government into legislative,
executive, & judicial branches, or f a university into various departments, exemplifies
intragroup differentiation. Anodr example is d division f labor in a family btween husb&
&Intergroup differentiation, on d odr h&, is represented by d millions f various organized,
semi organized, & “as if organized” groups, or social systems, into which d total human
population is divided & structured. In size & chrctr dse groups range all d way from small,
local groups such as high school alumni associations up to empires & world religious
organizations.
Socialization is a process f making somebody social & fully human. Or more appropriately, it
is a process whereby individual persons learn & are trained in d basic norms, values, bliefs,
skills, attitudes, way f doing & acting as appropriate to a specific social group or scty. It is an
on-going, never ending process- from cradle to d grave. Dat means an individual person
passes thorough various stages f socialization, from birth to death. Dus, we need
socialization as infants, preschool children, schoolboys/girls, pubscents, adolescents, adults
& older persons. From d point f view f individual persons, especially a newly born baby,
socialization is a process whereby a biological bing or organism is chnged into a social bing.
In terms f d group, scty or any professional organizations, socialization is a process whereby
d organizations', social groups' & scty's structure & well-bing are kept & sustained. It is d
process whereby d culture, skills, norms, traditions, customs, etc., are transmitted from
generation to generation - or from one scty to anodr. Socialization is a life long, never
ending process whereby individuals are trained & fitted into d normal functioning f dir
societies & groups. Only human bings are biologically capable for socialization. Dus,
biological bases dat make socialization in humans possible include: absence f instincts, social
contact needs, capacity to learn, prolonged childhood dependence & language. Researchers
f socialization have identified d mechanisms by which socialization takes place; dse are
called modes f social learning. Dy include: classical & operant conditioning; identity taking;
modeling-after & problem solving. D patterns f socialization vary from scty to scty; dre are
two broad patterns f socialization; dse are: repressive socialization which focuses on
punishment & reward mechanism, emphasizing obdience f children; & participatory
socialization, which focuses on participating children, by stressing child-centered
socialization.
Social Mobility: Every scty has different strata in it. D different individuals & groups who
occupy a certain social position may not remain in dat position permanently. Some may
move from one position to anodr, from higher social class position to lower social class
position, & vice versa. Social mobility implies a set f chnges in opportunities, incomes,
lifestyles, personal relationships, social status & ultimately class membrship. Social mobility
is a type f movement bt it is not physcal movement over geographical space although social
mobility could involve, & b brought about by, physcal mobility. It is movement in d social
space, d shifting or changing f statuses or class positions. Social mobility is a social process
dat takes place among individual membrs or groups in a scty, as dy interact wth each odr. It
is a process by which individuals or groups move from one status to anodr; or from one class
or stratum to anodr. Social mobility describs d volume & quality f movement among strata.
Dat is d kind f movement dat ppl make btween d different social classes. Our unit f analysis
in social mobility may b an individual, or a social group or a nation.
Social Disorganization--In sociology, d social disorganization dory is one f d most imp dories
developed by d Chicago School, related to ecological dories. D dory directly links crime rates
to neighborhood ecological chrctristics; a core principle f social disorganization dory is dat
place matters. In odr words, a person's residential location is a substantial factor shaping d
likelihood dat dat person will bcome involved in illegal activities. D dory suggests dat, among
determinants f a person's later illegal activity, residential location is as significant as or more
significant than d person's individual chrctristics (e.g., age, gender, or race). For example, d
dory suggests dat youths from disadvantaged neighborhoods participate in
asubculture which approves f delinquency, & dat dse youths dus acquire criminality in this
social & cultural setting
MODULE – 3&4 - ECONOMICS

Economics is d science dat deals with d production and consumption f goods and services
and d distribution and rendering f these for human welfare.D following are d economic
goals._ A high level f employment_ Price stability_ Efficiency_ An equitable distribution f
income_ Growth

.Technical Efficiency. It is d ratio f d output to input f a physical system. D physical

systemmay be a diesel engine, a machine working in a shop floor, a furnace, etc.Technical
efficiency (%) =(Output/Input)× 100

D technical efficiency f a diesel engine is as follows:#Technical efficiency (%) =(Heat

equivalent f mechanical energy produced/Heat equivalent f fuel used)× 100 In practice,
technical efficiency can never be more than 100%. This is mainly due to frictional loss and
incomplete combustion f fuel, which are considered to be unavoidable phenomena in d
working f a diesel engine.

Economic Efficiency. is d ratio f output to input f a business system.Economic efficiency (%)

=(output/Input)100 =(Worth/Cost)× 100

‘Worth’ is d annual revenue generated by way f operating d business and ‘cost’ is d total
annual expenses incurred in carrying out d business. For d survival and growth f any
business, d economic efficiency should be more than 100%. Economic efficiency is also
called ‘productivity’.

Element F Cost. Cost can be broadly classified into variable cost and overhead cost. Variable

cost varies with d volume f production while overhead cost is fixed,

irrespective f d production volume.Variable cost can be further classified into direct material
cost, direct labour cost, and direct expenses. D overhead cost can be classified into factory
overhead, administration overhead, selling overhead, and distribution overhead.

Direct material costs are those costs f materials dat are used to produce d product. Direct
labour cost is d amount f wages paid to d direct labour involved in d production activities.
Direct expenses are those expenses dat vary in relation to d production volume, other than
d direct material costs and direct labour costs.

Overhead cost is d aggregate f indirect material costs, indirect labour costs and indirect
expenses. Administration overhead includes all d costs dat are incurred in administering d
business. Selling overhead is d total expense dat is incurred in d promotional activities and d
expenses relating to sales force. Distribution overhead is d total cost f shipping d items from
d factory site to d customer sites.
 Market EquilibriumEquilibrium in a competitive market: when d quantity demanded f a
good equals d quantity supplied f dat good._ D price at which this takes place is d
equilibrium price(a.k.a. market-clearing price):• Every buyer finds a seller and vice versa.• D
quantity f d good bought and sold at dat price is d equilibrium quantity.Demand.Quantity
demanded is d actual amount f a good or service consumers are willing to buy at some
specific price._ Law f demand: a higher price for a good or service, other things equal, leads
people to demand a smaller quantity f dat good or service.

FactorsAffectingPrice. Substitutes: Two goods are substitutes if a fall in d price f one f d

goods makes consumers less willing to buy d other good. Substitutes are goods dat in some
way serve a similar function: concert and opera, muffins

and doughnuts.• Complements: Two goods are complements if a fall in d price f one good
makes people more willing to buy d other good. Complements are goods dat in some sense
are consumed together: cars and gasoline, computer and software.

Time Value F Money. If an investor invests a sum f Rs. 100 in a fixed deposit for five years
with an interest rate f 15% compounded annually, d accumulated amount at d end f every
year. D formula to find d future worth in d third column is F = P _ (1 + i)^n where P =
principal amount invested at time 0,F = future amount,Interest i = interest rate compounded
annually,n = period f deposit.

Interest Formula, While making investment decisions, computations will be done in many
ways. To simplify all these computations, it is extremely important to know how to use
interest formulas more effectively. Before discussing d effective application f d interest
formulas for investment-decision making, d various interest formulas are presented first.
Interest rate can be classified into simple interest rate and compound interest rate. In
simple interest, d interest is calculated, based on d initial deposit for every interest period.
In this case, calculation f interest on interest is not applicable. In compound interest, d
interest for d current period is computed based on d amount (principal plus interest up to d
end f d previous period) at d beginning f d current period. D notations which are used in
various interest formulae are as follows:P = principal amount n = No. f interest periods i =
interest rate (It may be compounded monthly, quarterly, semiannually or annually)

F = future amount at d end f year n,A = equal amount deposited at d end f every interest
period,G = uniform amount which will be added/subtracted period after period to/from d
amount f deposit A1 at d end f period 1,.
Single-Payment Compound Amount

Here, d objective is to find d single future sum (F) f d initial payment (P)made at time 0 after
n periods at an interest rate i compounded every periodThe formula to obtain d single-
payment compound amount is F = P(1 + i)^n = P(F/P, i, n)where(F/P, i, n) is called as single-
payment compound amount factor..

Single-Payment Present Worth Factor Here, d objective is to find d present worth amount
(P) f a single future sum (F) which will be received after n periods at an interest rate f i
compounded at d end f every interest period. D formula to obtain d present worth is P =F/(1
+ i)^n= F(P/F, i, n)where(P/F, i, n) is termed as single-payment present worth factor.

Equal-Payment Series Present Worth Factor D objective f this mode f investment is to find
d present worth f an equal payment made at d end f every interest period for n interest
periods at an

interest rate f i compounded at d end f every interest period. P = present worth A =

annual equivalent payment i = interest rate

n = No. f interest periods. D formula to compute P is

P = A (1+i)^n-1/i(1+i)^n= A(P/A, i, n)

where(P/A, i, n) is called equal-payment series present worth factor.

Equal-Payment Series Capital Recovery Amount D objective f this mode f investment is to

find d annual equivalent amount (A) which is to be recovered at d end f every interest
period for n interest periods for a loan (P) which is sanctioned now at an interest rate f i

compounded at d end f every interest period. P = present worth (loan amount)A = annual
equivalent payment (recovery amount)

i = interest raten = No. f interest periods.D formula to compute P is as follows: A = P

i(1+i)^n/(1+i)^n-1 = P(A/P, i, n)

where,(A/P, i, n) is called equal-payment series capital recovery factor.

Effective Interest Rate: Let i be d nominal interest rate compounded annually. But, in
practice, d compounding may occur less than a year. For example, compounding may be
monthly, quarterly, or semi-annually. Compounding monthly means dat d interest is
computed at d end f every month. There are 12 interest periods in a year if d interest is
compounded monthly. Under such situations, d formula

to compute d effective interest rate, which is compounded annually, is

Effective interest rate, R =b+i/cg-1. where, i = d nominal interest rate C = d number f interest
periods in a year.

Net Present Value (NPV) :NPV is d PV f d stream f future CFs from a project minus d
project’s net investment.D cash flows are discounted at d firm’s required rate f return or
cost f capital.NPV=CFo+CF1/(1+k)^1+ CF2/(1+k)^2+ …+CFn/(1+k)^n . NPV = PV f future cash
flows – Investment. Advantages. Consistent with shareholder wealth maximization: Added
net present values generated by investments are represented in higher stock prices.
Consider both magnitude and timing f cash flows. Indicates whether a proposed project will
yield d investor’s required rate f return Disadvantage. Many people find it difficult to work
with a dollar return rather than a percentage return.

Internal Rate f Return (IRR) D internal rate f return is d discount rate dat makes d net
present value f a project equal to zero. Set NPV equal to zero and solve for “r”.Calculating
IRR is identical to calculating d yield to maturity on bonds.

D Payback Rule

D payback is d length f time it takes to recover our initial investment. Assume cash flows
are received uniformly throughout d year. Calculate d number f years it will take for d future
cash flows to match d initial cash outflow.