General Economics For CA-CPT (Common Proficiency Test)

519 Pages·2015·16.78 MB·English

by  Sripal Jain, Bandana Mundada

GENERAL
ECONOMICS
FOR CA-Cpt
(Common Proficiency Test)
Second Edition
Sripal Jain
Venkatesh R.
Delhi • Chennai
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Copyright © 2013 Dorling Kindersley (India )Pv.t Ltd
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eISBN 9 789332540590
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Contents
Preface v
About the Authors vi
Chapter I: Introduction to Microeconomics
Unit 1.1 Introduction to Microeconomics 3
Chapter II: theory of Demand and Supply
Unit 2.1 Law of Demand and Elasticity of Demand 43
Unit 2.2 Theory of Consumer Behaviour 82
Unit 2.3 Supply 118
Chapter III: theory of production and Cost
Unit 3.1 Theory of Production 139
Unit 3.2 Theory of Cost 176
Chapter IV: price Determination in Different Markets
Unit 4.1 Price Determination in Different Markets 205
Unit 4.2 Determination of Prices 216
Unit 4.3 Price-output Determination Under Different Market Forms 229
Chapter V: Indian Economy-a profile
Unit 5.1 Nature of Indian Economy 269
Unit 5.2 Role of Different Sectors in India 281
Unit 5.3 National Income in India 308
Unit 5.4 Basic Understanding of Tax System in India 322
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Chapter VI: Select Aspects of Indian Economy
Unit 6.1 Population 345
Unit 6.2 Poverty 362
Unit 6.3 Unemployment 373
Unit 6.4 Infrastructural Challenges 384
Unit 6.5 Inflation 405
Unit 6.6 Budget and Fiscal Deficits in India 417
Unit 6.7 Balance of Payments 425
Unit 6.8 External Debt 434
Chapter VII: Economic Reforms in India
Unit 7.1 Economic Reforms in India 441
Unit 7.2 Liberalization, Privatization and Disinvestment 458
Unit 7.3 Globalization 466
Chapter VIII: Money and Banking
Unit 8.1 Money 483
Unit 8.2 Commercial Banks 490
Unit 8.3 The Reserve Bank of India (RBI) 500
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Preface
General Economics for CA-CPT is a comprehensive study material prepared for CPT students, in
accordance to the most recent syllabus of ICAI, after taking into consideration all the changes in the
statistical data, relevant laws, and amendments. General Economics for CA-CPT deals with economic
concepts and theories in the most simple manner. The subject matter has been dealt exhaustively in
an articulate and descriptive language. Care has been taken to explain the concepts with the help of
diagrams, examples and illustrations. The focus of this book has been learner-centric. At the end of each unit,
students can find exhaustive multiple-choice questions to help them test their understanding of the subject
and their skills in applying economic theory to real world situations.
This book is written taking into consideration the present need of the student community and, thus,
includes explanation of the concepts with a lot of examples and illustrations and as many as 1,500
questions to help the students to understand the subject. Special notes to emphasise the importance of an
information and tabular representation of the data to further enhance the utility of the book.
The book is the result of inspiration, dedication and expertise of a committed team to whom we owe
a debt of gratitude. We appreciate the depth of research undertaken by the team in making this book
comprehensive and learner-centric.
We wish you the best and hope that you make complete use of this book.
Sripal Jain
Venkatesh R.
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About the Authors
Sripal Jain is a Chartered Accountant by profession and has been teaching accountancy at CA-CPT and
IPCC level for over 10 years and has coached around 8,000+ students. He is also an author and has been
a mentor to many success projects like 100 Pages to Success, Shortcut to IPCC, and Career after +2. His
latest masterpiece titled, “Is CA My Cup of Tea?” is most awaited by the CA aspirants.
The author is also a well-known motivational speaker who combines the present and future, helping the
students to focus on their career. He is a profound entrepreneur heading a commerce training institute as
its CEO.
Venkatesh.R has completed his Masters in Economics in 2002. He also holds a Masters in Business
Administration (MBA). The author further went on and completed his Post- Graduation Diploma
in Business Administration (PGDBA). He is a UGC recognized NET and SLET qualified faculty in
Economics. Currently he is pursuing his Ph.D. He started his career as a lecturer and is been teaching
Economics for a decade now, for various levels like Pre-University, Bachelor of Commerce, Master of
Business Administration, Master of Commerce, etc. He is a visiting faculty at various premier colleges
in Bangalore. He is well-known for teaching economics in a most simple ways with a lot of examples
correlating economic theories and concepts with practical life.
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Introduction to
Chapter-01
Micro Economics
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Unit Introduction to
Microeconomics
1.1
After studying this unit, you will be able to:
) Know the meaning and various definitions ) Understand the central economics prob-
of economics lems and their solutions
) Understand the methodology of studying ) Appreciate the concept of Production
economics Possibilities Curve
) Understand the nature and scope of ) Know the different methodologies of
economics economics
Introduction
Economics is an important branch of social science, which deals with the behaviour of human beings
in relation to economic activities. Economics is derived from two Greek words viz. “Oikos” (means
household) and “Nomia” (means management). Therefore, economics was understood as a “Science of
Household Management” – managing a household with the limited resources available, in an economical
manner. But later, the scope of economics has expanded from mere household management to the nation’s
management. Infact, out of social sciences, it is economics which has more practical applicability, hence
regarded as ‘Queen of Social Sciences’.
The science of economics was born with the publication of Adam Smith’s classical work “An Inquiry into
Nature and Causes of Wealth of Nations” in the year 1776. Before Adam Smith, there were many people
who expressed ideas on economics. In the 17th century, Adam Smith was the first person who put all the
economic ideas in a systematic way. Hence, he is considered to be the “father of economics”.
Basic premise of economics
ƒ Human wants are unlimited
ƒ Means of satisfying these wants are relatively scarce
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