1. Write down difference between Demand and Supply.
Income Elasticity: The income elasticity is defined as the proportionate change in the quantity demanded resulting from a proportionate change in income. The income elasticity is positive for normal goods.
Cross Elasticity: The cross-elasticity of demand is defined as the proportionate change in the quantity demanded of x resulting from a proportionate change in the price of y. The sign of the cross-elasticity is negative if x and y are complementary goods, and positive if x and y are substitutes. The higher the value of the cross-elasticity the stronger will be the degree of substitutability or complementarity of x and y.
What is a Cost Element?
Due to the integrated nature of SAP Systems there is a requirement to create expense accounts in Financial Accounting with corresponding primary cost elements in Controlling. This ensures that expenses in Financial Accounting and primary costs in Management Accounting can be reconciled.
Primary Cost Elements
To be able to post a primary cost element, you require an object in Management Accounting (such as a cost center) to identify the origin of the costs. Examples of primary cost elements are material costs and salary costs.
Secondary Cost Elements
Secondary cost elements are used exclusively in Management Accounting to identify internal cost flows such as assessments or settlements. They do not have corresponding general ledger accounts in Financial Accounting (FI) and are defined in Management Accounting only. When creating secondary cost elements remember they should be valid from the first day of the current fiscal year through to the default 'Valid to' date.
1. By lowering the average cost of our product we will be able to still charge the same price and make more money on each sale, thus increasing our profit margins while not risking losing customers due to ballooning costs.
2. Tom sat down with Becky and explained to her that if she had four apples that she sold for $1.00 a piece and she divided the total cost by the number of apples she would have the Average Cost of the apples.
2. I wondered what the average cost of the item was because that would determine how high I made the price in our business.
Unit Cost: A unit cost is the total expenditure incurred by a company to produce, store and sell one unit of a particular product or service. Unit costs include all fixed costs, or overhead costs, and all variable costs, or direct material costs and direct labor costs, involved in production. Determining the unit cost is a quick way to check if companies are efficient in producing their products. Unit cost is determined by combining the variable costs and fixed costs and dividing by the number of total units produced.
The marginal product formula calculates this relationship by dividing the total change in output by the total change in a particular input. In other words, MP is equal to the slope of the total product curve, when it is plotted with the specific type of input on one axis and the amount of production on another axis.
(b) Growth in overall revenue: It is estimated that India could get revenue of $15 billion per annum by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. Over a period, the dilution of the principles may see that only part of this is accruing.
(c) Single point taxation: Uniformity in tax laws will lead to single point taxation for supply of goods or services all over India. This increases the tax compliance and more assesses will come into tax net.
(d) Simplified tax laws: This reduces litigation and waste of time of the judiciary and the assessee due to frivolous proceedings at various levels of adjudication and appellate authorities. Present law appears to be much worse and an amalgam of the bad parts of VAT/ ST/ CE.
(e) Increase in exports and employment– GST could also result in increased employment, promotion of exports and consequently a significant boost to overall economic growth and factors of production -land labour and capital.
| BASIS FOR COMPARISON | DEMAND | SUPPLY |
|---|---|---|
| Meaning | Demand is the desire of a buyer and his ability to pay for a particular commodity at a specific price. | Supply is the quantity of a commodity which is made available by the producers to its consumers at a certain price. |
| Curve | Downward-sloping | Upward-sloping |
| Inter-relationship | When demand increases supply decreases, i.e. inverse relationship. | When supply increases demand decreases, i.e. inverse relationship. |
| Effect of Variations | Demand increases with the supply remaining the same leads to shortage while demand decreases with the supply remaining the same leads to surplus. | Supply increases with the demand remaining the same leads to surplus while supply decreases with the demand remaining the same leads to shortage. |
| Impact of Price | With an increase in price the demand decreases and vice versa i.e. indirect relationship. | Supply increases along with the increase in price. So it has a direct relationship. |
| Who represents what? | Demand represents the consumer. | Supply represents the firm |
Key difference between Demand and Supply
- The equilibrium between the quantity demanded and the price of a commodity at a given time is known as demand. On the other hand, the equilibrium between the quantity supplied and the price of a commodity at a given time is known as supply.
- Demand curve slopes downward while supply curve is upward sloping.
- Demand is the willingness and paying capacity of a buyer at a specific price while Supply is the quantity offered by the producers to its customers at a specific price.
- Demand has an inverse relationship with supply, i.e. if demand increases supply decreases and vice versa.
- Demand has an indirect relationship with the price i.e. if price increases the demand decreases and if the price decreases the demand increases, however, the price has a direct relationship with supply, i.e. if price increases the supply will also increase and if the price decreases supply also decreases.
- Demand represents the customer’s taste and preferences for a particular commodity demanded by him, whereas Supply represents the firms, i.e how much of a commodity is offered by the producers in the market.
2. Explain law of equi margin utility with suitable example.
In order to get maximum satisfaction out of the funds we have, we carefully weigh the satisfaction obtained from each rupee ‘had we spend If we find that a rupee spent in one direction has greater utility than in another, we shall go on spending money on the former commodity, till the satisfaction derived from the last rupee spent in the two cases is equal. In other words, we substitute some units of the commodity of greater utility tor some units of the commodity of less utility. The result of this substitution will be that the marginal utility of the former will fall and that of the latter will rise, till the two marginal utilities are equalized. That is why the law is also called the Law of Substitution or the Law of equimarginal Utility. Example: Suppose apples and oranges are the two commodities to be purchased. Suppose further that we have got seven rupees to spend. Let us spend three rupees on oranges and four rupees on apples. What is the result? The utility of the 3rd unit of oranges is 6 and that of the 4th unit of apples is 2. As the marginal utility of oranges is higher, we should buy more of oranges and less of apples. Let us substitute one orange for one apple so that we buy four oranges and three apples.
3. Write down difference between Price, Income and Cross - Elasticity.
Price Elasticity: The price elasticity is a measure of the responsiveness of demand to changes in the commodity’s own price. If the changes in price are very small we use as a measure of the responsiveness of demand the point elasticity of demand. If the changes in price are not small we use the arc elasticity of demand as the relevant measure. The point elasticity of demand is defined as the proportionate change in the quantity demanded resulting from a very small proportionate change in price.Income Elasticity: The income elasticity is defined as the proportionate change in the quantity demanded resulting from a proportionate change in income. The income elasticity is positive for normal goods.
Cross Elasticity: The cross-elasticity of demand is defined as the proportionate change in the quantity demanded of x resulting from a proportionate change in the price of y. The sign of the cross-elasticity is negative if x and y are complementary goods, and positive if x and y are substitutes. The higher the value of the cross-elasticity the stronger will be the degree of substitutability or complementarity of x and y.
4. Explain the element of cost.
Cost Elements play a very important role in the reconciliation/alignment of costs and postings between Financial Accounting (FI) and Management Accounting/ Controlling (CO). There are different types of cost elements such as Primary Cost Elements, Secondary Cost Elements and Revenue Cost Elements all which have a specific purpose. The category set for a Cost Element at the time of creation will determine the transactions that can utilize the cost element.What is a Cost Element?
Due to the integrated nature of SAP Systems there is a requirement to create expense accounts in Financial Accounting with corresponding primary cost elements in Controlling. This ensures that expenses in Financial Accounting and primary costs in Management Accounting can be reconciled.
Primary Cost Elements
To be able to post a primary cost element, you require an object in Management Accounting (such as a cost center) to identify the origin of the costs. Examples of primary cost elements are material costs and salary costs.
Secondary Cost Elements
Secondary cost elements are used exclusively in Management Accounting to identify internal cost flows such as assessments or settlements. They do not have corresponding general ledger accounts in Financial Accounting (FI) and are defined in Management Accounting only. When creating secondary cost elements remember they should be valid from the first day of the current fiscal year through to the default 'Valid to' date.
5. Concept of Average Cost and Unit Cost.
Average Cost: Production cost per unit of output, computed by dividing the total of fixed costs and variable costs by the number of total units produced (total output). Lower average costs are a potent competitive advantage. Also called unit cost.
Formula: (Fixed costs + Variable costs) ÷ Total output.
Usage Examples:1. By lowering the average cost of our product we will be able to still charge the same price and make more money on each sale, thus increasing our profit margins while not risking losing customers due to ballooning costs.
2. Tom sat down with Becky and explained to her that if she had four apples that she sold for $1.00 a piece and she divided the total cost by the number of apples she would have the Average Cost of the apples.
2. I wondered what the average cost of the item was because that would determine how high I made the price in our business.
Unit Cost: A unit cost is the total expenditure incurred by a company to produce, store and sell one unit of a particular product or service. Unit costs include all fixed costs, or overhead costs, and all variable costs, or direct material costs and direct labor costs, involved in production. Determining the unit cost is a quick way to check if companies are efficient in producing their products. Unit cost is determined by combining the variable costs and fixed costs and dividing by the number of total units produced.
6. Concept of Consumer Surplus with the help of graph.
A supply curve is a graphical representation of the relationship between the amount of a commodity that a producer or supplier is willing to offer and the price of the commodity, at any given time. In other words, a supply curve can also be defined as the graphical representation of a supply schedule.
A supply curve is a graphical representation of the relationship between the amount of a commodity that a producer or supplier is willing to offer and the price of the commodity, at any given time. In other words, a supply curve can also be defined as the graphical representation of a supply schedule.
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| Concept of Consumer Surplus |
7. Price determination under monopoly with the help of graph.
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| Price Determination under Monopoly |
8. Movement along supply curve with curve diagram.
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| Supply Curve |
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| Shifting/Movement along Supply Curve |
9. Defination of Marginal Product in your own words.
Marginal product, also called marginal physical product, is the change in total output as one additional unit of input is added to production. In other words, it measures the how many additional units will be produced by adding one unit of input like materials, labor, and overhead.
This measurement is really a relationship between inputs and outputs. The marginal product formula calculates this relationship by dividing the total change in output by the total change in a particular input. In other words, MP is equal to the slope of the total product curve, when it is plotted with the specific type of input on one axis and the amount of production on another axis.
10. Effect of GST in Indian Economy in present situation.
(a) Increased FDI: The flow of Foreign Direct Investments may increase once GST is implemented as the present complicated/ multiple tax laws are one of the reasons foreign Companies are wary of coming to India in addition to widespread corruption.(b) Growth in overall revenue: It is estimated that India could get revenue of $15 billion per annum by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. Over a period, the dilution of the principles may see that only part of this is accruing.
(c) Single point taxation: Uniformity in tax laws will lead to single point taxation for supply of goods or services all over India. This increases the tax compliance and more assesses will come into tax net.
(d) Simplified tax laws: This reduces litigation and waste of time of the judiciary and the assessee due to frivolous proceedings at various levels of adjudication and appellate authorities. Present law appears to be much worse and an amalgam of the bad parts of VAT/ ST/ CE.
(e) Increase in exports and employment– GST could also result in increased employment, promotion of exports and consequently a significant boost to overall economic growth and factors of production -land labour and capital.
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