What is Business Environment ? What are its characteristics?

 Q. What is Business Environment ? What are its characteristics?

Ans. MEANING OF BUSINESS ENVIRONMENT: Business Environment (means)  is the sum total of all those factors which influence the business has no control. It has both threats and opportunities for the business. Threats refers to the negative changes that occurs in business environment and hinders the performance of the business organisation. Opportunities refers to the positive changes that occurs in the business environment and helps the organisation to improve its performance. The study of business environment enables the managers to identify threats and opportunities. 

Thus, Business Environment refers to the all the external factors which have a bearing on the functioning of the business. It refers to all forces which are external to business and beyond its control. 

Definition:

According to Prof. Keith Davis, “Business Environment is the aggregate of all conditions, events and influences that surround and affect the business.” 

In the words of V.P. Michael, “Business Environment is the sum total of the environmental factors which provide an atmosphere for the business. It has a direct relation with business organisation which operates in it.” 

CHARACTERISTICS OF BUSINESS ENVIRONMENT: 

(1) Totality of external forces: Business environment is the total of all those forces/factors which are available outside the business and over which the business has no control. That’s why its nature is of totality. 

Or

Aggregation of external forces:  A business environment is the aggregate of all the external forces such as individuals, consumers, government and legal matters that affect the performance of an organisation either positively or negatively. 

(2) Specific and general forces: Forces outside the business can be divided into two parts:

a) Specific: These forces affect the firms of an industry separately. e.g. customers, suppliers, investors, competitive firms etc. 

b) general: These forces affect the firms of an industry equally. e.g. social, political, legal and technical situations. 

Specific forces affect the business directly and immediately in its day-to-day working whereas general forces have an indirect effect on the business. 

(3) Interrelatedness: Different factors or components of business environment are related to each other and affect each other.

(4) Dynamic nature: Components of business environment changes continuously. So, the business environment is dynamic in nature which means it keeps on changing from time to time, reigon to reigon and country to country. 

(5) Uncertain: Business environment creates uncertainty for business firms as it is very difficult to predict environment and changes of future. Because of its uncertain nature, its study and analysis is difficult.

(6) Complex in nature: Business environment is a combination of many factors that have an Inter relation with business in many ways. These factors affect each other also. It is very difficult to know how these factors will influence the business. Thus, business environment is complex in nature. 

(7) Relativity (Relation): Business environment is a relative concept. It means business environment is related to local conditions. That’s why business environment is different in different countries and even different at different places in the same country. For eg. political conditions, religion, beliefs etc are different in different reigons. 

(8) Multi-faceted: Environment is multi-faceted. The same environment trend can have different effects on different industries. The same (one) can be threat for one company and opportunity for another company. 

(9) Far reaching impact: Environment has far reaching impact on business. Business and its environment are interdependent to each other. So any change in an environment has a direct impact on organisation in different ways. 

OR 

CHARACTERISTICS OF BUSINESS ENVIRONMENT: 

(1) Complex in Nature: Environment is a combination of many factors like political, economic, legal, social, cultural, technological, etc. These factors affect the business in many ways. Therefore, the influence that they exercise on business cannot be recognised independently.

(2) Dynamic: It is obvious that environment is a mixture of many factors and there are constant changes in some of them. It is only because of these changes in the factors of environment that make environment dynamic. The environmental factors change with passage of time. The plans and policies of business too have to be changed to keep pace with changing environment.

(3) Business Environment Affects Different Firms Differently: It is not necessary that any 

particular change in environment should affect all business units in a similar manner. One business unit may welcome a change in environment, while some other business unit may feel adverse effect of the same change. Therefore, environment may affect different business units in different manner.

(4) Business Environment has both Short-term and Long-term Impact: Every change in environment has both short-term and long-term impact on business. The changed environment affects the profitability, productivity and development of business in both short term and long term.

(5) Unlimited Effect of External Environmental Factors: External factors of business environment are uncontrollable. These factors have very deep effect on business. Sometimes the effect of these factors is so deep that it may take the business unit to closure. For example, decision of government to ban wine, whisky will compel wine shops to wind-up their business.

(6) Uncertain: The external business environment is very uncertain. There can be sudden change in it at any time. Because of its uncertain nature, its study and analysis is difficult.

(7) Interdependent Components: Various components of business environment are interdependent of each other. Different components of environment affect each other. For example, economic environment affects social environment and is also affected by it.

(8) Includes both Internal and External Environment: Business environment includes both internal and external environment. Internal environment means environment within the organisation; this environment is within the control of business unit. External environment is outside the organisation and is beyond the control of business unit. Business unit will have to change its activities along with changes in external environment.

What is Business Environment ? What are its characteristics?

Holding Company: What It Is, Advantages and Disadvantages

 Q. What is meant by Holding Company? Explain the advantages and disadvantages of Holding Companies. 

Ans. MEANING OF HOLDING COMPANY: A holding company is a company which controls another which controls another company by acquiring all or majority of its shares carrying voting rights or controlling the composition of board of directors. The company whose shares have been acquired is known as subsidiary company. The subsidiary company continues to operate as before because acquisition of controlling interest by another company does not result in its liquidation. 

ADVANTAGES OF HOLDING COMPANIES: 

(i) Easy Method of Acquiring Control: A company needs to invest comparatively a small amount in order to acquire control over other company through this method. 

(ii) Possibility of Maintaining Separate Goodwill: By maintaining the separate identities of holding and subsidiary companies, it would be possible to naintain their separate goodwill. 

(iii) Ascertainment of Separate Profitability and Financial Position: Since each subsidiary company has to prepare its own accounts, the profitability and financial position of each company is known.

(iv) Availing Income-Tax Benefits: By maintaining separate identities of holding and subsidiary companies, it would be possible to avail income tax benefits by carrying forward the losses of each company to the next year. This is not possible in case of amalgamation.

(v) Easy to Get Rid of Subsidiary: Whenever it is desired to get rid of the subsidiary company, it can be easily done by disposing off the shares of such company in the market.

(vi) Easy to Wind-up the Subsidiary: In case the subsidiary company is continuously running into losses, it can be easily wound-up.

(vii) Efficiency in Management: Since both the companies maintain their separate identity, the size of the holding company remains the same. It is easier to manage both the companies separately.

(viii) Elimination of Competition: Since both the companies are managed by the same group, competition between them is completely eliminated.

(ix) Benefit of Internal and External Economies: Both the companies can avail of the technical know-how and financial resources of each other. Hence, they are able to avail the internal and external economies.

(x) Other Advantages: Other advantages are:

I. Increase in goodwill and credit worthiness of both the companies,

II. Smooth supply of raw material,

III. Getting on assured market, and

IV. Pooling of resources whenever needed.

DISADVANTAGES OF HOLDING COMPANIES:

(i) Fraud in Inter-Company Transactions: Inter-Company transaction between holding and subsidiary are often entered at too high or too low priss in order to suit the holding company.

(ii) Fear of Oppression of Minority Shareholders: Subsidiaries company is run in a manner that suits the interest of holding company. Financial and other resources of the subsidiary are used to the benefit of holding company. As such there is always the danger of oppression of minority shareholder’s interests. 

(iii) Forced Appointment of Directors: Subsidiary companies are forced to appoint the directors or other officers chosen by the holding company. Their remuneration is also fixed by the holding company which may be too high.

(iv) Difficulty in Ascertaining the True Financial Position: Shareholders in the holding company may not be aware of the true profitability and the financial position of subsidiary companies. Likewise, creditors and the outside shareholders in the subsidiary Company also may not be aware of the true picture of the company.

(v) Fear of Mismanagement: Where the group has a good number of constituents and managerial ability is limited, there must be mismanagement resulting into ruin of the group as a whole.

(vi) Difficulties in Valuing the Inventory: Difficulties may be experienced while valuing the Inventory containing huge quantities of inter-company goods.

(vii) Speculation in Shares: By manipulation of profits, reserves, inter-company sales etc. directors may speculate in the shares of the subsidiary companies, when such shares are quoted in the stock exchange.

(viii) Creation of Secret Reserves: Secret reserves may be easily created by the unscrupulous directors to the detriment of the minority interest.

What is meant by Holding Company? Explain the advantages and disadvantages of Holding Companies. 

salient features of Right to Information Act, 2005

 Q. Discuss the salient features of Right to Information Act, 2005. 

Ans. The salient features of Right to Information Act, 2005 are as under:

1. This Act may be called Right to Information Act, 2005.

2. This Act defines ‘Appropriate Government’ which may be termed as Public Authority.

3. The Public Authority is established, constituted, owned, controlled or substantially financed by funds provided directly or indirectly by the Central Government or the Union Territory or State Government.

4. This Act is applicable to all public authorities such as all central and state government ministries, departments, organisations, undertakings, autonomous bodies, municipalities, Panchayat, etc. enacted by law and also covers the Union Territories, Election Commission, Auditor General, Public Service Commission and the judiciary and the legislature are covered under its purview. Interal and Foreign private institutions situated (working) within the country have been kept out of its purview. 

5. The Act requires the public authority and its officers to maintain and keep ready its records and machinery so as to facilitate the right to Information.

6. The Act provides that if the Information sought for relates to another office or another public Information officer, then the Public Information Officer receiving the application for Information can transfer the application to the Public Information Officer of the concerned office. 

7. In general cases, normally the request for information shall be disposed by the concerned Information officer within 30 days of the receipt of request. Where the information sought relates (pertains) to third party, the same shall be provided within 40 days of the receipt of request. But if the information sought for concerns the life or liberty of a person, the same shall be provided within 48 hours of the receipt of request. 

8. The fee for seeking information shall be reasonable. There shall be no fee for citizens below poverty line.

9. The Act provides for Constitution of a Central Information Commission at the highest level and State Information Commission at state level. There shall be Chief Information Commissioner and Information Commissioner in both the Commissions. 

10. The Act provides for two-level forum for making appeal, i.e. appeal shall be filed at two levels.

– One within the organisation to the senior officer to the Public Information officer known as First Appellate Authority.

– The second appeal shall be filed with the Central or State Information Commission, as the case may be. 

11. The Act provides that if the concerned Public Information Officer does not furnish the required information within specified period or refuses to provide information, the applicant making request for information shall file an appeal within 30 days of the date of such refusal. An appeal shall be disposed of within a 30 days of the receipt of the appeal or within such extended period not exceeding a total of 45 days from the date of filling.

12. The provisions of this Act are of overriding nature and these provisions cannot be made ineffective by proceedings of the lower courts. 

13. The Central and State Information Commissions shall, after the end of each year, prepare a report on the implementation of this Act during that year and forward a copy to the appropriate Government which shall be laid down before each House of Parliament or State Legislature as the case may be. 

14. The Central Government, by using power vested (मिली हुई है) under this Act, shall check out programmes to advance the understanding of the public and develop (promote) the information machinery. 

15. If any Public Information Officer neither furnishes the information nor refuses to furnish the information within specified time, he shall be penalised with ₹ 250 per day for the delay period subject to the total amount of such penalty not exceeding ₹ 25,000.

16. The amount of fee deposited by the applicant for seeking information shall have to be returned, if information is not furnished within specified period.

17. If any person, with one reason or the other, is unable to give written application for seeking information, he can tell it orally to the concerned Public Information Officer and it will be taken as his oral request for seeking information. In such cases, the concerned Public Information Officer shall render all reasonable assistance to the person making the request orally to reduce the same in writing.

The salient features of Right to Information Act, 2005

Buyer Behaviour & nature of Indian Consumers buying behaviour

 Q. What is buyer behaviour? What is the nature of Indian Consumers buying behaviour? 

Ans. MEANING OF BUYER BEHAVIOUR: Buyer behaviour is known as consumer behaviour. The whole behaviour of a person while making purchases may be termed as consumer behaviour. It is an attempt and prediction of human action in the buying role. Understanding the consumer behaviour of the target market is the essential task of marketing management under the modern marketing concept. 

Consumer behaviour consists of both physical as well as mental activities. The study of consumer behaviour provides a sound basis for identifying and Understanding consumer needs. The study of consumer behaviour is concerned with consumer's buying behaviour rather than actual consumption. 

According to Schiffman and Kanuk, The study of consumer behaviour is the study of how individuals make decisions to spend their available resources (I.e. time, money and efforts) on consumption-related items. It includes the study of what they buy, why they buy, when they buy, where they buy, how often they buy it and how often they use it. 

Thus, consumer behaviour includes the acts of individuals directly involved in obtaining and using goods and services including sequence of decision decision processes that precede and determine these acts. Also, it is necessary to study the consumer behaviour for sound marketing planning. 

NATURE OF INDIAN CONSUMERS BUYING BEHAVIOUR: Due to diversity in social system, customs, religion, language, food habits, cultures, sub-cultures, etc. the behaviour of Indian consumers is not uniform. Following characteristics are found in their behaviour.

1. Bargaining: Indian customers are very fond of bargaining. They prefer buying goods by reducing the price as told by the seller. Indian sellers too don’t frame a uniform price policy. In rural markets, the trend of bargaining still persists, but in urban areas now, customers prefers one price policy of the seller. They prefer to visit stores where there is no bargaining.

2. Price consciousness: Because of less income in the agriculture occupation, Indian consumer focus on price instead of the quality of the product. But now, consumers are quality conscious. They purchase quality products even at high price.

What is buyer behaviour? What is the nature of Indian Consumers buying behaviour?

3. Brand consciousness: Because of less education facilities, rural population are still unaware about the standard brand names of the product. They are concerned with the product and not with its brand name. But with the expansion of education and means of communication, the behaviour of Indian consumers is going on changing. Now they like branded products and they have brand loyalty of some reputed manufactures.

4. Complaining: Indian consumers are less complaining people. They believe that if a seller cheats on them, God will punish him. They are innocent and illiterate people. They do not kmow the laws and rights as a consumer. But now with the expansion of consumerism, consumers are more aware about their rights. They have started exhibiting their complaints through media and representation before 'Consumer Forums' under Consumer Protection Act, 1986. 

5. Role of women: The role of women is increasing day by day particularly in buying decisions and buying from the market. Women are generally interested in varieties and good looking products.

6. Changing consumption pattern: Because of increase in education, increase in income, increase in standard of living and also desires of more comforts, the pattern of consumption is now being changed. Indian consumers are more desirous of comforts and luxury products. 

7. Guarantee: Indian consumers are more interested in guarantee and warrantee. They prefer to purchase those commodities which are guaranteed by the manufacturers, regarding quality, durability, efficiency and effectiveness. 

8. Credit: Credit facilitates the consumers to buy those products which they cannot buy with their current cash resources. Indian consumers like to buy the products on credit, because their disposable income falls short to fulfill the demand for consumer durables. 

So, the proper understanding of consumer behaviour is essential for the marketers as it serves as the foundation of the marketing.

What is buyer behaviour? What is the nature of Indian Consumers buying behaviour?

Human Resource Management- meaning, nature and objectives.

Q. Define Human Resource Management. Explain its nature and objectives. 

Ans. MEANING OF HUMAN RESOURCE MANAGEMENT: In simple words, Human Resource means people working within the organisation. It refers to the knowledge, skills, abilities, values, aptitude and beliefs possessed by its workforce in the organisation. So, HRM deals with proper or best utilization of available human resources in the organisation.

HRM is the focal point of all the organisations in the present day competitive world. It is not possible for any organisation to achieve its objectives without proper management of human resources. It focuses on Human Approach while managing people in the organisation. It means that organisation should consider its people as an important resource to effectively achieve the objectives of the organisation along with the development of its human resources. HRM is a people oriented management policy. It stresses that organisation should consider its people as an asset not as cost. It deals with acquisition, development, motivation and maintenence of human resources to gain competitive advantage.

DEFINITION OF HUMAN RESOURCE MANAGEMENT: 

1. According to Flippo, “Human Resource/Personnel Management may be defined as the planning, organising, directing, and controlling of the procurement, development, compensation, integration, maintenance and separation of human resources to the end that individual, organisational and societal objectives are accomplished.” 

2. According to Wendell L. French, “The human resource management refers to the philosophy, policies, procedures, and practice related to the management of people within the organisation”.

NATURE OF HUMAN RESOURCE MANAGEMENT: 

1. Universal: HRM is universal in nature. It is present in all types of organisations i.e. government, business, education, health, social etc. It permeates (spreads, व्याप्त, फैला हुआ है) all types and levels of management in all organisations. 

2. Part of Management Discipline: HRM is a part of management discipline. It is not an independent discipline in itself. It is a functional area of management, so it depends on the management concepts, principles and techniques to a reasonable extent and applies these principles in the area of HRM.

3. People Oriented: HRM is all about people I.e. individual and groups in the organisation. It covers all kinds of people at various levels in the organisation. It is concerned with acquisition, development, motivation and maintenence of people in the organisation.

4. Action Oriented: HRM is an action oriented approach. It deals with policies and practices related to the management of people and resolve their problems by balanced policies.

5. Goal Oriebted: HRM is directed towards attainment of Organisational goals by strategic deployment of capable work force and personnel techniques.

6. Long Term Perspective: HRM is a long term perspective to the management of people in the organisation. Development of human resource and value addition is a long term process and for it, managers have to invest in human resources to harness their knowledge and capability in the organisation.

7. Integrating Mechanism: HRM tries to integrate Organisational goals and personal goals for the benefit of organisation as well as human resources.

8. Development Oriented: HRM is development oriented approach. It aims at development of human resources. It assesses the training needs of the employees and develops their knowledge and skill in the interest of the organisation.

9. Continuous Process: HRM is a continuous process. It has to regularly assess (estimation, valuation) the human resource requirement of the organisation, and plan to.meet the human resource needs of the organisation according to its ever changing needs and human resource requirement of various departments in the organisation.

OBJECTIVES OF HUMAN RESOURCE MANAGEMENT:

1. Societal Objectives: Every organisation i.e. business, government, education, health, recreation etc. is a part of society. So, it is the responsibility of the organisation to use the human resources in an ethical way not only for the benefit of organisation but also for the welfare of the society. They should respect the law of nation while hiring human resources into the organisation, maintain proper union-management relations, perform proper labour welfare functions and ensure safety of workers. The failure of organisations to use their resources for society’s benefit may result in failure.

2. Organisational Objectives: No organisation can achieve its objectives without human resources. It is the skill and efficiency of the human resources which utilizes all other resources i.e. money, material, technology, machines etc. So, it is the ultimate source that assists the organisation in achieving its objectives efficiently and economically.

3. Functional Objective: HR department is supposed to perform various functions such as Human Resource Planning, Recruitment, Selection, Training, Development, Appraisal, Employee Relation etc. It has to ensure that adequate number of manpower is available in the organisation according to the current and changing needs of the organisation.

4. Personal Objective: Human resources in the organisation help to achieve organisational goals. So, the organisation should also help human resources to satisfy and achieve their personal goals. There must be proper integration of organisational goal and personal goals so as to effectively achieve organisational goals. The satisfied and motivated employees will work more efficiently in attaining organisational objectives. It is essential to meet personal objectives of human resources in the organisation in order to retain, maintain and motivate them. This will lead to enhance their individual contribution in meeting organisational objectives. 

HUMAN RESOURCE MANAGEMENT: MEANING, NATURE AND OBJECTIVES.

Index Numbers- meaning, uses & problems

1. What are Index Numbers ? Explain uses of Index No.s and discuss various problems faced in the construction of Index No.s. 

Or 

What are Index Numbers ? Explain various problems faced in the construction of Index No.s .  

Or 

Explain the uses of Index Numbers. What are the difficulties in the construction of Index Numbers ?

Ans. MEANING OF INDEX NO.s: Index Numbers is a statistical technique which helps us to measure (which measure) the relative changes in general price level. These are a specialized type of averages designed to measure the change in a group of related variables over a period of time. These are economic barometer of (economic activities of) the country because if one wants to have an idea as to what is happening in an economy, he should check the important indicators like the index number of industrial production, index number of business activity etc.

USES/UTILITY OF INDEX NO.S:  The main uses of Index No.s are the followings:

i) To Simplify Complexities: An index number makes possible the measurement of such complex changes whose direct measurement is not possible. In other words, index numbers are used to measure the changes in some quantity which we cannot observe directly.

ii) Helpful in the Fixation of salary and Dearness Allowances: By index numbers, government and other employees can properly make wage and salary fixation. They determine the instalment of dearness allowance for employees on the basis of index numbers only.

iii) Helpful in Prediction: Index Numbers give the knowledge as to what changes have occured in the past. On the basis of these changes alone, predictions about the future are made. Thus, index numbers are economic barometers.

iv) Helpful in Comparison: Index Numbers make possible the comparative study of phenomena (fact or event that can be observed). By index numbers, the relative changes occurring in the variables are determined. This simplifies the comparison of data on the basis of time and space.

v) To measure purchasing power of money: By index numbers, the changes taking place in purchasing power of money can also measured.

vi) Useful in Business: Index Numbers measures the changes taking place in the business world and prove very useful in making a comparative study of those changes e.g. sales, change in output and value etc. Thus, index numbers, for a businessman, function like a barometer.

PROBLEMS FACED IN THE CONSTRUCTION OF INDEX NO.S: The number of problems come up while constructing the index numbers. Some of them are as follows:

i) Purpose of Index Number: Index numbers are of many types as they are constructed for different purposes. A single index can not fulfil all the purposes. It is very essential to fix the purpose of index number, because selection of commodities, their prices, fixation of their weights etc., depend on the very purpose of index numbers. There can be many purposes of an index number- measurement of changes in retail prices or measurement of changes in wholesale prices etc.

ii) Selection of Items: Another important problem in the construction of index numbers is the selection of items. The following things should be considered while making a selection of items. (i) Only those items should be selected which represent the taste, habit, custom and needs of the related group of people, (ii) the selected items should be standardized and of classified feature, (iii) their quality too must be considered, (iv) the number of items should be enough and they should be of current quality, and (v) the selected items must be classified into groups and sub-groups.

iii) Selection of Prices: After making the Selection of items, the next arises the problem of selection of prices. Prices can be of both types– retail and wholesale. Whether wholesale or retail prices are to be used, the decision depends upon the purpose of index number.

iv) Selection of Base year: Another important problem in the construction of index numbers is related to the selection of base year. A base year has to be selected for making an index number. The year for which changes are to be determined, is known as base year. Index number of base year is always taken as 100. In selecting a base year, the following things are to be kept in mind.
a) Base year should be normal year and no unusual event like Earthquake, Flood, War etc. should have taken place in that year.
b) Base year should not be very far in past.
c) So far as possible, base year should be close to the current year.
d) Base year should not be too old or too distant.

v) Selection of Weights: The term weight refers to the relative importance of different items in the construction of index numbers. Another important problem in making of index numbers is to assign weights to different commodities or items. In fact, all commodities included in the construction of Index numbers do not have equal importance. Therefore, to have accurate results, commodities are assigned weights according to their importance. There are two ways of assigning weights: (i) Quantity, (ii) Value. Weights decided in the construction of index numbers should be logical, accurate and rational.

vi) Selection of an Average: Averages can be of several types. Theoretically, any average can be used but in practice, arithmetic mean and geometric mean are used. Geometric mean is considered to be best for the construction of index numbers as this is the most suitable for measuring relative changes but due to the difficulties of computation, in place of geometric mean, arithmetic mean is often used in the construction of index numbers.

vii) Selection of an Appropriate Formula: Various formulae can be used in the construction of index numbers but it is very essential to select the most suitable out of them. This selection depends upon the purpose of index number and availability of data. Fisher's formula, which is called as Fisher's Ideal Index, is considered to be the best.    

Define DATA and Information. How data is different from Information ? Discuss types of information.

 Q. Define DATA and Information. How data is different from Information ? Discuss types of information.

Ans. MEANING OF DATA: Data can be defined as a representation of facts, concepts or instructions in a formalized manner suitable for communication, interpretation or processing by human or electronic machine. Data can be represented with the help of characters like alphabets (A-Z, a-z), digits (0-9) or special characters (+,-,*,>,<,= etc.)

MEANING OF INFORMATION: Information is organised or classified data so that it has some surprise value (meaningful values) to the receiver. OR 

Information is the processed data on which decisions and actions are based.

Differences between Data and Information.

DATA	INFORMATION
1. Data is Raw facts and figures. 2. Data itself has no meaning. 3. It does not help in decision making. 4. Data cannot be divisible. For example day, month and year. 5. In B.com examination, Anu got 45 marks in Paper 1, 50 marks in Paper 2 and 55 marks in Paper 3. Here marks obtained in different subject is example of data.	1. Information is processed form of the data. 2. Information is always meaningful. 3. It helps in decision making.  4. Information can be divisible. For example Date_of_Birth. 5. Anu passed the B.com examination with 50% marks. Hence, Result of B.com exam becomes an information.

Types of Information: There are three types of information.

1. Strategic Information is used by top management to plan the objectives of their organisation and to assess whether the objectives are being met in practice. This relates to long term planning policies of the organisation as a whole. Such information includes overall profitability of the organisation. Information requirements by top management are met by strategic information by arranging information from internal and external sources. 

2. Tactical or managerial information is used by middle management to ensure that the resources of the business are employed to achieve the strategic objectives of the organisation. This relates to the medium time period planning and is of use at management control level. Such information includes productivity measurement (output per man-hour or per machine-hour), budgetary control or variance analysis report, cash flow forecasts, manning levels, profit results within a particular department of the organisation, labour turnover statistics within a department, short term purchasing requirements etc. A large proportion of this information will be generated from within the organisation. 

Another important function of tactical level is to supply information to strategic tier for the use of top management. 

3. Operational information is used by operation level of management such as foreman or head clerks to ensure that specific tasks are planned and carried out properly within a factory or office etc. This relates to short periods which vary from an hour to a few days. Operational level require information for implementing and regulating operational plans for the purpose of conversion of inputs into outputs. Also it supplies routine and other information to tactical tier in summarised form.

Define DATA and Information. How data is different from Information ? Discuss types of information.

Define DATA and Information. How data is different from Information ? Discuss types of information.

Macroeconomics: Meaning, scope, limitations

 Q. Define macroeconomics. Explain the scope and limitations of macroeconomics.

Ans. MEANING OF MACROECONOMICS: The term ‘Macro’ is derived from the Greek Word ‘Makros’ which means large. Thus, macroeconomics means economics of large dimension, referring to the economy as a whole.

Macroeconomics is defined as that branch of economics which studies economic activities including economic issues and economic problems at the level of economy as a whole. It focuses on macroeconomic variables like aggregate demand, aggregate supply, general price level, national income and output etc.

DEFINITION OF MICROECONOMICS:
In the words of Boulding, “Macroeconomics theory is that part of Economics which studies the over all averages and aggregates of the system.”

According to Shapiro, “Macroeconomics deals with the functioning of the economy as a whole.”

SCOPE OF MACROECONOMICS: It refers to the issues, problems and parameters of Economics that are included in macroeconomics. Following are the broad areas of study of macroeconomics and subject matter of macroeconomics.

i) Theory of National Income: Macroeconomics studies the concept of national income, its different elements, methods of measurement and social accounting.

ii) Theory of Employment: Macroeconomics also studies problems relating to employment and unemployment. It studies different factors determining the level of employment, viz. effective demand, aggregate supply aggregate consumption, aggregate investment, aggregate saving, etc.

iii) Theory of Money: Changes in demand for and supply of money have considerable
bearing on the level of employment. Macroeconomics studies functions of money and theories relating to it. The system of barking and other financial institutions is also studied in this context.

iv) Theory of General Price Level: Determination of changes in general price-level are the core issues of macroeconotnics. Problems concerning inflation and deflation are the principal issues involved in this context.

v) Economic Growth and Development: Study of problems relating to economic growth or increase in per capita real income forms a part of macroeconomics. Specifically, it studies the growth problem of underdeveloped economies.

vi) Business Cycles: Economic activity always shows ups and downs, it never shows a steady pattern of change for all time to come. This cyclical movement of the economy is better known as business cycle. It is a major macroeconomic issue and an important area of macroeconomics study.

vii) Theory of International Trade: Macroeconomics also studies trade among different countries. Theory of international trade, tariff protection, etc., are subjects of great significance in macroeconomics.

viii) Budgetary Deficit and Fiscal Policy: In the wake of privatisation and globalisation of the world economies, budgetary deficit and the related fiscal policy has emerged as a issue of macroeconomics.

ix) Interest Rates and Monetary Policy: Monetary policy involves monetary measures by the government in terms of changing interest rate with a view to stimulating economic growth and stability.

LIMITATIONS OF MACROECONOMICS: Main limitations of macroeconomics are as under:

i) Dependence on individual units: Several conclusions of macroeconomics are based on the sum total of individual units. In fact, it is not correct, because what is true for individuals may not necessarily be true for the whole economy. For instance, an individual may save in terms of money but if everybody starts saving, the aggregate demand will fall causing reduction in national income.

ii) Heterogeneous Units: Under macroeconomics, hetergeneous units are studied. These units are measured in different ways. It is not possible to express these units in uniform numbers or homogeneous measure.

iii) The composition (ingredients) of structure (manner) of the Aggregate is more important than the Aggregate itself: Macroeconomics studies aggregate but as a matter of fact, it is the composition of the structure of the aggregates which influences an economy more than the aggregate itself. Supposing, price level in 2012 and 2013 remains constant but it does not imply thar no change prices took place in 2013. It is possible that prices of food grains might have fallen in 2013 and that of industrial goods might have risen correspondingly, keeping the general price level constant. Thus, for a proper study of an economy, knowledge of the composition of structure of the aggregate is much essential as the aggregate itself.

iv) Different effects of Aggregates: Another difficulty in the study of macroeconomics is that it does not study the different effects of an aggregate on different sectors of an economy. Macroeconomic tendency (particular way of behaving) has not uniform effect on all sectors of an economy. For example, rise in price level benefits the traders and the industrialists but the wage-earners are the losers.

v) Limited Application: Another limitation of macroeconomics is that most of the models relating to it have only theoretical significance. They have very little use in practical life. Moreover, it is very difficult to measure various aggregates of macroeconomics.

vi) It ignores the contribution of Individual units: Macroeconomics analysis throws light only on the functioning of the aggregates. However, in real life, the economic activities and decisions taken by individual units on private level have their effects on the economy as a whole. Such effects are not known by the study of macroeconomics alone. 

Stress: Causes, techniques to reduce it.

 Q. What do you mean by stress? Explain its causes and what can we do to reduce stress?

Ans. MEANING OF STRESS:  Stress means/ refers to the bodily strain that an individual feels as a result of coping with some environmental factors. For example, students are under stress when they find their examinations are approaching because now they have to put in extra work for their study. Employees also come under stress for learning new techniques as a result of technical innovations in the working set up. Its effects can be both negative and positive. For example, students put in extra labour because of the stress of examination which brings them good marks. This is the positive outcome of stress. On the other hand, if the because of the transfer policy of a company, some employee is sent to some place away from his home, he will be under great stress and he shall have to face heavy mental torture. This is the negative effect of stress.

CAUSES OF STRESS: Causes of stress can be divided into various categories which are as follows:
(I) Organisational Stressors: (*Stressors refers to environmental demand that causes people to feel stressed.) The following are the chief causes related to the organisation stress that an individual has to face:
i) Organisational Policies: A company takes decision and formulate policies for the guidance of its employees. If a particular policy is against the expectations of a particular employee, it will create stress for that employee. For example, a company's policy lays down that the promotion of an employee will be determined by his age. Similarly, a transfer policy that results in quick transfers shall cause stress for the employees.

ii) Organisational Processes: Many processes are at work in every organisation. They are communication process, Decision-making process, staffing process, controlling process etc. If these processes happen to be ambiguous, long and difficult, they create stress for the employees. For example, if the communication process is to be carried on in writing, it will not be liked by any employee and that shall cause stress. So, long the process, more will be the stress.

iii) Organisational Structure: Organisational structure divides all the people working in an organisation into different levels, e.g., higher level, middle level, lower level, etc. If the levels of management happens to be more or less than the actual need, it is a source of anxiety for the employees which causes stress. Discrimination in the distribution of work can also be a cause for stress. Alloting too much work or too little work are both stressful for the employees. If the rules formulated for the smooth functioning of the organisation happens to be tough, they too contribute to the employees stress. In addition to this, there can be some other related factors connected with the organisational structure which can create stress for the employees.

iv) Working Conditions: The conditions under which the employees work can also cause stress if they are not proper or helpful, e.g., little or insufficient light, great noise, presence of dust, inconvenient temperature etc. These are some environmental factors which lay stress on the employees. In short, it can be said that adverse working conditions do help in decreasing employees' efficiency and increasing their stress.

(II) Personal Stressors: There is a cause of stress which is related to particular individual. It includes-
i) Job: There is no job which is without stress. It is, however, possible that a particular job may have less stress while another job may be more stressful. A job that is completely under our control has little stress and vice-versa. For example, a job of a surgeon and police officer has more stress.

ii) Uncertainty: Since future is uncertain, everybody's life has more uncertainties. Even then some people who are economically or otherwise strong donot care for the future uncertainties. These people have the capacity to face any adverse situation boldly. As a result, they remain stress free. On the contrary, those people who are afraid of future uncertainties, they start feeling stress quickly. They are under stress sometimes because of their jobs and sometimes because of something else. They are also worried about the quickly changing technical changes because one has to get training in order to faced them.

Iii) Life changes: In everybody's life there are two types of changes. Firstly, those
changes which occur slowly, e. g., advancing age,' and secondly, those changes which are quick and sudden. Those changes that occur slowly are less stressful. On the contrary, quick and sudden changes are more stressful.

iv) Personal Features: Every individual has some special characteristics. These characteristics govern the effect of stress on that individual.

Friedman and Rosenman have characterised people on the basis of their characteristics and placed them into two groups. Type A Personality and Type B Personality. The first type of people feel the
impact of stress very quickly, while the second type of people remain stress free. Both the types of people have the following characteristics.
A) Type A Personality: These people have the following characteristics:
• They walk fast.
• They eat quickly
• They are always impatient.
• They perform many jobs simultaneously.
• They want to work more in a short span of time.
• Their face always reflects nervousness.
• They cannot wait
• They have no time to enjoy life.
B) Type B Personality
• They are patient.
• They have nothing urgent.
• They donot believe in highlighting their achievements.
• They play for fun and not to win.
• They are not proud

(III) Group Stressors: All the people are associated with some group. The group deeply affects the conduct of an
individual and individuals' conduct is related to stress. Therefore, a group can be the possible cause of stress. The following are the chief causes of stress because of the group:
i) Lack of group membership: No individual can spend his life happily all alone. In other words, every individual should be the member of some group or the other in order to live happily. It is because of the fact that the group helps its members in every possible way and they feel themselves to be independent. If some individual does not have this good fortune, he can come under stress.

ii) Group Conflicts: Since every individual is associated with some group or the other. Consequently, many groups are formed and every group has many members. When there are so many people in a group, difference of opinion in such cases is natural. Such a situation creates conflicts within the group. Similarly, there is difference of opinion between the two groups. As a result of this there are conflicts. Because of these conflicts the members of the groups are always under stress.

(IV) Environmental Stressors: The following are usually counted among the environmental stressors:
i) Economic Conditions: In an age of quickly rising prices, it is become difficult for the fixed income group people to make both ends meet. Such an economic condition pushes people towards stress.

ii) Political Conditions: Political instability in the country can be a cause of stress. If the people of a country are constantly under the fear of a foreign attack, they can never be stress free.

iii) Family Conditions: Every individual has a family. He is deeply attached to his family. Every big or small mishap in the family is a source of stress for him.

iv) Class Relation: There are various classes in the society, e.g., man and woman, rich and poor, educated and uneducated etc. For example, if you happen to be a woman and you have to work in a male-dominated environment, this situation will be stressful for you. Therefore, we can say that class relationship can be a cause of stress.

(V) Job Related Stressors: The main reasons for the job related stress of an individual are the following:
i) Poorly Defined Role: Generally, all the employees working in a company have theirr role/job defined. It implies that every employee is made clear about what he is to doand whatnot. If the role/job of
the employees is not clearly defined, they will not be able to understand what they are to do and what not. In such a situation they will begin to feel stress, which will affect their efficiency.

ii) Value Differences: It is possible that there may be a difference between the values of the employee and those of the job. For example, the employee himself wants to work very honestly, but wrong practices in currency in the job. In such a situation, due to the difference in values, the employee begins to feel stress.

iii) Heavy Workload and Time Deadlines: It is observed that the employees are given a workload which is more than their capacity. In this situation the employees come under stress. Such a situation arises due to carelessness of the management. Similarly, because of the time deadline of any work the employees come under stress. In this way, if stress continues for a long time, the employees fall victim of horrible diseases like high blood pressure.

iv) Low Quality of Supervision: The job stress is related to managerial style. The managers adopt several management styles, namely, autocratic, democratic and free-rein. Some managers prefer autocratic style. The managers who follow this style have a tight control over the employees. Such managers give the employees a very severe punishment (like dismissal from the job) for their petty mistakes. This type of supervision causes unnecessary stress to the employees. Consequently, their work speed becomes slow.

v) Interdependent Nature of Work: The nature of certain jobs is such that it becomes obligatory for a person to be dependent upon others for the accomplishment of his job. In such a situation, if an employee wants to do his work but others create hurdles in his way, he is bound to come unders stress that if the complete job is done by a single person only, he can remain without any stress. Whereas an interdependent job gives rise to stress.

vi) Frustrating Environment: Here the  environment means the one  created by colleagues, boss and the employee himself. Generally, it is observed that an employee comes under stress, sometimes because of a colleague, sometimes the boss, and sometimes because ofhis own activities. If all these three factors of environment are of positive attitude, the employees feel no stress. On the other hand, these three factors have a negative attitude, the employees are bound to come under
stress.

Stress: Causes, techniques to reduce it.

TECHNIQUES TO REDUCE STRESS: We can reduce stress with the help of stress management. Management of stress is possible with the help of following techniques:
I. Individual Related Techniques: If an individual desires, he can change the stressful situation. He can muster (collect, इकट्ठा करना) courage to face it. In order to get rid of stress, following efforts can be made on the individual level:

i) Meditation: Meditation is an important mode of coming out of stress. Meditation means taking your mind away from the disturbing thoughts in your mind and concentrating on some other point. Meditation requires you to sit in some quite corner of your room with closed eyes. Some 'Mantra' is repeatedly ultered. By doing so the useless thoughts emerging in your mind stand eliminated which results in physical and mental peace. When such a peace is achieved, stress gets removed.

ii) Yoga: Yoga is getting popular for the last some many years. This is a great stress buster. Baba Rama Dev has demonstrated te hidden power of Yoga to the people. Under the Yoga some Asanas are performed. These asanas bring flexibility to our bones and muscles. As a result of it, our nervous system gets activated and our body gets a balanced blood supply. In this way, we achieve physical and mental peace. Under such a condition, stress is sure to be eliminated.

iii) Exercise: Apart from meditation and Yoga, light exercises also help in reducing stress. Light exercises includes walking, jogging, hopping, cycling, swimming etc.

iv) Balanced Diet: A balanced diet provides us physical and mental strength. As a result of it, we face stress with strength. Our food should include fruits, vegetables, pulses, bread, milk etc. in sufficient quantity. Taking excessive food or little food than necessary is harmful. Hence, we can save ourselves by taking a balanced diet.

v) Time Management: Generally we see that only those people are the victims of stress who fail to accomplish their jobs in time. Its cause is absence of time management. Therfore, we can avoid stress by time management. Following things should be kept in mind with respect to time management:
• What is to be done tomorrow should be decided on the eve of today.
• Each day's priorities should be determined.
• Doing only a single job at a time.
• Attempt should be made to finish the job quickly after the job is assigned to you.

vi) Sufficient Sleep: Sleep is equally important for an individual like other things. Adequate sleep refreshes our body and mind and stress cannot bother us.

vii) Awaring limits: Some people remain under stress simply because all the people are not happy with them. Everybody should avoid doing any evil to others. As far as possible we should do good to others. But even with your best efforts if you fail to please somebody, do not bother yourself. There is a limit to please everybody. We should better understand this truth, the earlier the better. By doing so you can easily avoid stress.

viii) Social Support: Generally, it has been observed that no individual can be happy for all the times. Difficulties do come in life. In such a situation, it is natural for an individual to feel stressed. This stress can be eliminated with the help of social support. Social support means support from the family, neighbours, friends, relatives, colleagues etc. Everybody needs all these people so that he can share his difficulties with them. If he gets this support, he will certainly come out of stressful situation. That is why it is so very important for every individual to maintain his relationship with different parts of society so that he can seek their help in times of need. Apart from it, seeking God's help gives us mental strength and we can easily get rid of stress.

ix) Realistic Goals: Generally people set very high goals for themselves which is sometimes difficult to achieve. When their goals, are not achieved, they come under stress. Therefore, we should set goals which are realistic and which are capable of achieving. If sometimes we find that goals set by us seem to be unattainable, we should be wise enough to revise our goals to make them attainable. Setting attainable goals for ourselves will safe us from stress.

x) Massage: Massage helps our muscles to relax which gives us a sound sleep which in turn refreshes our body. As a result of it stress also get relieved.

II. Organisation Related Techniques: When policies, rules, procedures, organisational structure, authorities, responsibilities etc are against the wishes of the employees, stress is the natural outcome. Following efforts can be made at the organizational level to help the employees to ease out of stress.

i) Job Enrichment: Job enrichment aims at enhancing the importance of work. In other words, such a job which (i) has wide of authority, responsibility and challenge, (ii) needs high level of knowledge and experience, (iii) opportunities for individual development, (iv) freedom of taking decision. The employees feel honoured on getting such a job and their interest in the job increases. In this way, the stress of the employees can be eliminated by way of job enrichment.

ii) Imparting training: Every employee wishes to be efficient in his work. Keeping this thing in mind effort should be made for their training. Consequently, they will gain efficiency in their job and they will get recognition in the organisation. This will keep them happy and stress will not affect them.

iii) Participation in Management: Generally, it has been observed that the employees do not know their roles in the organisation. As a result of this, they remain under stress. The reason is that they have no role to play in the decision-making in the organisation. If the employees are made a part of the process of decision-making regarding their job, it will have three-fold benefits. First, the employees will feel honoured, second, they will come to know about their role in the organisation and finally, they will implement the decision wholeheartedly and will not oppose them. By being a part of decision-making process, they will come to realise the organisation's expectations out of them. Their efficiency will increase, they will remain happy and be able to face stress boldly.

iv) Open Communication: Open Communication is a medium of getting rid of stress. Under this process, all the employees listen to the values of others with an open mind and they will put forward their own views with a really frank attitude. This process leads to a free exchange of orders, suggestions, complaints etc. Such a situation removes all kinds of ambiguities and employees remain stress-free.

v) Proper Selection: Imroper selection gives rise to stress. If the employees are not alloted works according to their taste and ability, it will affect their efficiency.  They will feel stressed. Therefore, while selecting the employees the needs of the job should always be kept in mind. Every job should get a really competent man. This will ensure employees satisfaction and keep stress away.

vi) Effective Reward System: If the work of the employees is recognized and they are appropriately rewarded for their efforts, they will not have to face the problem of stress. Therefore, those employees who perform expertly, should always be rewarded. This will improve their efficiency and stress will stand eliminated.

vii) Career Advancement Opportunity: When the employees have a feeling that they are not getting opportunities for career advancement, stress is the only outcome of such a feeling. They get a feeling that their capabilities are not fully exploited. They become indifferent towards their job. In such a situation if they are given career advancement opportunities, they can overcome their stress. Every employee wants their promotion. This requires efficiency and an employee can be efficient only when he has the opportunities for training and development. Therefore, by providing these facilities the way to their promotion can be smoothened. This will bring happiness to them and make them stress-free.

viii) Employees' Goodness Scheme: There are many employees' welfare schemes which can be implemented to ease the pressure from the employees. The purpose of these welfare schemes happens to be to help leave their evil habits. For example, special lectures by experts can be arranged on the topics of evils of drinking, smoking, dishonesty, shirking etc. With the help of the experts they can be made acquintef with their rights and duties. In addition to that arrangement in the company can be made regarding meditation, yoga, hawan etc. By doing so, the employees will get a feeling that the company is taking interest in their welfare. This will boost their confidence. They will be more efficient and stress-free.

ix) Suitable Policies: In order to run the organisation smoothly, policies are formulated. If these policies are against the expectations of the employees, it creates stress for them. Therefore, the policies have to be appropriate to avoid any stress for the employees. The policies should be so formulated as to be acceptable for both the parties. If, however, some policy has to be formulated which is not welcome by the employees, it should always be done only with their consultation. This will certainly help in easing out the stress of the employees.

x) Easy Processes: Many processes are at work in every organisation, e.g., Decision-making, communication, controlling etc. If these processes are ambiguous and difficult, no work will be accomplished in time and the employees will automatically come under stress. Therefore, all the process in the organisation should be clear and simple. By doing so, everybody will be able to understand them and observe them. As a result of this, his efficiency will increase and his stress will be eliminated. 

Stress: Causes, techniques to reduce it.

"Business is the product of environment". Explain. Also discuss the relationship between business and environment.

 Q. "Business is the product of environment". Explain. Also discuss the relationship between business and environment. 

Ans. No business enterprise functions in a vacuum. Each business operates in its unique environment. Business is the product of the environment as various environmental factors directly influence it. A business firm might be regarded as a social institution that is surrounded by external forces that affect how it operates. Both living and nonliving entities are part of the environment. Decisions of the whole business unit such as nature, location, product/service, various policies of the business unit etc are influenced by the business environment. Success or failure of any business organisation is also depend on its environment. Thus, we can say that business is the product of environment.

Relationship between business and environment: Business and environment are closely related to each other. A business enterprise can expand itself as and when favourable changes take place in the environment. On the other hand, when the prevailing environment is unfavorable, the business may face challenges and problems. The relationship between business and environment is as follows:

i) Mutually Related: There is a correlation between business and its environment. Both influences/affects each other. For example, when the competition is more, the business may decide to go for aggressive advertisement. So, here environment is affecting business. Hence, business and environment are mutually related to each other.

ii) Environment Requires Business to be Dynamic: Because of changing environment business policies and strategies have to be dynamic. Many elements in the environment are constantly changing e.g. the economic, social, political, cultural, technological factors of environment never remain constant. These factors are flexible or dynamic, so policies should be dynamic enough to adjust to the changing environment.

iii) Opportunities and Threats: If the prevailing environment is favourable for business growth and prosperity then business unit respond positively. For example, business unit is often changed to produce more when government gives subsidy or reduces tax burden. On the other hand, if business environment poses threat to the business, then it is unfavorable for business unit. For example, when the government imposes high Taz rates on profits then it acts as hindrance in the growth.

       Thus, business and environment are mutually dependent on each other. The business affects environment and environment affects business. Both business and environment are closely related to each other.  

"Business is the product of environment". Explain. Also discuss the relationship between business and environment. 

Merits and limitations of computer

 1. (a) Discuss merits of computer.

(b) Discuss limitations of computer.

Ans.  (a) Merits of computer are as follow:
i) High Speed: A computer is a high speed device capable of performing arithmetic at unbelievable speed. The units of speed in computer are microsecond, the nanosecond and even the picosecond.

ii) Accuracy: Computers never commits errors in processing. Computerized systems sometimes do produce wrong results but in almost all such cases the error is because of wrong input of data and instructions.

iii) Reliability: (means strength) The reliability of computer is indeed very high. Computers are designed so as to make maintenance easy. Most of the hardware is in module form. When a component fails, the component can be replaced or repaired at a minimal cost.

iv) Versatility: (means having different skills & qualities) A computer is a very versatile machine. This machine can be used to solve the problems relating to various different fields. At one instant, it may be solving a complex scientific problem and the very next moment it may be playing a chess game and then a busy in taking up a payroll problem.

v) Automation: Once a program and instructions are input in the computers memory, the operator need not make intervention when program is being executed because the instructions automatically take care of the steps to be processed to solve the problem.

vi) Diligence: The capacity of computer of performing repetitive tasks without getting tired is called diligence. A computer can operate twenty four hours continuously without taking any rest. It works with same concentration and with same accuracy as the first instruction.

vii) Data Base: The use of computer facility in business organisation facilitates establishment of database. Data base integrates data records and reduces data redundancy (back ups ans duplicates).

viii) Reduction in Paper Work: The use of computers for data processing has reduced some of the paper needs through the storage of data in elaborately constructed data bases and files where they can retrieved (get back/ regain) when needed.

ix) Reduces Cost: Though the initial investment for installing a computer is high but it substantially reduces the cost of each of its transaction.

x) Facilitates Report Preparation: Data maintained with the help of a computer facilitates the preparation of various types of reports required by the organisational executives for the purpose of decision-making and control.

xi) Reduce the space requirements: The use of computers for office activities reduces the requirements of office space which otherwise is required.

xii) Reduce the manpower requirement:  The number of persons required for performing various organisational activities will be reduced by using a computer system.

xiii) Increased ability to perform computations: The use of computer has helped in performing computations with speed.

xiv) Intangible benefits: It includes customer image, leadership in the industry and community, increases customer morale and management confidence.

(b) Limitations of computers are as follow:
i) No I.Q.: It possesses (अधिकार) no intelligence of its own. It's I.Q. is zero atleast till today. It has to told what to do and in what sequence.

ii) The application logic must be understood: The computer can only process jobs which can be expressed in finite number of steps. Each step must be clearly defined. If the steps in the solution cannot be precisely stated, the job cannot be done.

iii) Dependent on human being.

iv) It requires a lot of looking after.

v) Environment: The environment for operating the computer should be suitable to it.

vi) No Feeling/Judgement: Computer cannot make judgement which a human being make in day to day life. Its judgement is based on the instructions given to it in the form of programmes that are written by us.

vii) It is very sensitive to dust particles even a small dust particle can make great losses to it. 

Meaning, importance, limitations of Microeconomics

 Q.  What is microeconomics? Discuss the importance and limitations of microeconomics. 

Ans. MEANING OF MICROECONOMICS: The term micro has been borrowed from the Greek word, ‘Mikros’ meaning small. Under microeconomics, we study individual units, like, a Consumer, a firm, an industry, price determination of a particular commodity etc. In other words, microeconomics studies economic relationships, or economic problems at the level of an individual- an individual firm, an individual household or an individual consumer. It is concerned with determination of output and price for an individual firm or industry.

In the words of Shapiro, “Microeconomics deals with small parts of the economy.”

IMPORTANCE OF MICROECONOMICS: Importance of the study of microeconomics lies in the following:

i) Operation of an Economy: Microeconomics explains the functioning of an economy. It tells whether different constituents of economy, namely, consumers, firms, etc. are functioning efficiently or not.

ii) Prediction: Predictions are made on the basis of the theories of Microeconomics. If a cause occurs then a set of results will follow. For instance, if demand increases prices are also likely to rise.

iii) Economic Policies: Study of microeconomics helps in the formation of economic policies. 

iv) Economic welfare: Microeconomics informs us of the conditions of economic welfare. Study of microeconomics suggests how the ideal of economic welfare can be achieved.

v) Mangerial Decision: Business firms make use of microeconomics to take managerial decisions. They take these decisions on the basis of cost and demand analysis.

LIMITATIONS OF MICROECONOMICS: Following are the main limitations of microeconomics: 

i) Static: In the study of microeconomics, mostly static analysis is made use of. In it many economic variables are assumed to be constant.

ii) Wrong Conclusions: The conclusions drawn from microeconomics are in many cases not valid from the point of view of macroeconomics. For example, in microeconomics, saving is a virtue so far is individual is concerned but if it is viewed from macro angle, if the entire population begins to save more than before, then there will be fall in aggregate demand leading to fall in production and employment.

iii) Unrealistic Assumptions: This economics analysis is based on many unrealistic assumptions like prevalence of full employment and perfect competition in the economy. In real life these assumptions are not found.

iv) Limited Scope: Microeconomics has limited scope, study of many important economic policies and problems like, fiscal policy, monetary policy, inflation, unemployment, etc. is outside its scope.