Q.1. What are the factors that affect the elasticity of supply of a commodity.
Ans : The following are the main factors which affect the elasticity of supply of a commodity.
(1) Nature of the Inputs used : The elasticity of supply depends on the nature of inputs used for the production of commodity. If the production of a product utilizes factors of production that are commonly used to produce other products, it will tend to have a more elastic supply. On the other hand, if it uses specialised factors of production suited only for its production, its supply will be relatively inelastic.
(2) Natural Constraints : The elasticity of supply is also influenced by the natural constraints in the production of a commodity. The nature places restrictions upon supply. If we wish to produce more teak wood, it will take years of plantation before it becomes usable.
(3) Risk Taking : The elasticity of supply depends on the willingness of entrepreneurs to take risk. If entrepreneurs are willing to take risk, the supply will be more elastic. On the other hand if entrepreneurs hesitate to take risk, the supply will be inelastic.
(4) Nature of the Commodity : Perishable commodities have inelastic supply, because their supply cannot be increased or decreased, even when price changes. On the contrary, supply of durable goods is elastic, because their supply can be increased or decreased as a result of increase or decrease in price.
(5) Cost of Production : Elasticity of supply is also influenced by cost of production. If production is subject to law of increasing costs, then supply of such goods will be inelastic.
(6) Time Factor : Elasticity of supplies also influenced by time factor. Longer the time period greater will be the elasticity of supply. On the other hand, shorter the time-period, smaller will be the elasticity of supply, because it is not possible to change the supply of the goods in short period. In analysing the impact of time upon the elasticity of supply, economists find it useful to distinguish between (a) Very Short Period : In very short period, there is insufficient time to change output so supply is perfectly inelastic (b) Short Period : In short period the plant capacity is fixed but output can be altered by changing the intensity of its use, supply is therefore more elastic; (c) Long Period : In the long period, all desired adjustments including changes in plant capacity can be made, and supply becomes still more elastic.
(7) Technique of Production : If the production technique of a commodity is quite complex and needs large stock of capital ,then the supply of that commodity will be inelastic, because supply will not be amenable to change easily due to change in price. On the other hand, goods involving simple technique of production will have elastic supply.
Q.2. What is the relation between marginal product and total product and average product and marginal product ?
Ans : Relation Between Marginal Product and Total Product
(1) When marginal product increases, total product increases at increasing rate.
(2) When marginal product is constant, total product increases at constant rate.
(3) When marginal product decreases, total product increases at diminishing rate.
(4) When marginal product is negative, total product starts declining.
Relation between Average Product and Marginal Product
(1) The average product increases when marginal product is greater than average product.
(2) The average product decreases when marginal product is less than average product.
(3) MP can be positive, zero or negative, but average product is always positive.
(4) Diagrammatically, MP curve is always to the left of AP curve.
Q.3. What is Quasi Rent ? What is the difference between rent and quasi rent ?
Ans : The concept of Quasi Rent was used in Economics by Dr. Marshall, for the extra income earned by man-made factor, other than land, whose supply remains fixed in the short period. In the words of Marshall, “The term Quasi Rent will be used in the present volume as income derived from machines and other application made by man.” The term “Quasi” is derived from Latin language. It means, “ as if.” So, Quasi rent arises in case of land because the supply of land is limited. In short period, means of production made by man are also limited in supply. Hence income of these man-made means of production is like rent. But it cannot be called, rent because the supply of these means of production can be increased in the long-run according to their demand. Thus, these means cannot earn a surplus or rent in the long-run. Hence, it is quasi 1 rent. When demand for goods produced by machine is more than supply, then the machines earn an extra income which is called quasi rent. According to Silverman, “Extra payment made to those factors of production whose supply is fixed in the short period but variable in the long-period, is called quasi rent.:
In the broad sense, quasi-rent is not related to any particular factor, rather it is concerned with the total production of a firm. In the short run, the total cost of a firm consists of : fixed costs and variable costs. In the short period, if the demand for the product of a firm decreases, the firm will continue its production as long as it can met its variable costs with the prevailing prices and suffer the loss of its fixed costs. But the income that a firm earns over and above its variable costs, in the short run, will be called quasi rent. In the words of Bilas, “Quasi rent is the difference between total revenue and total variable costs.”
Difference between Rent and Quasi Rent
Following are the difference between Rent and Quasi Rent :
(i) Quasi rent accrues only to man-made fixed factors of production, while rent can accrue to any factor of production.
(ii) Quasi rent is only a short period phenomenon, because some factor of production are fixed only in the short period. Rent is available at all times.
(iii) Quasi rent is the surplus generated over and above the variable costs of production during the short period. Rent is the surplus generated over and above all the costs of production.
Q.4. What is Inflationary Gap and Over Full Employment ?
Ans : Inflationary Gap implies a rise in the level of prices. Generally a rise in prices should encourage greater investment. Accordingly the level output and employment should also increase. But in the Keynesian analysis, any consistent rise in prices occurs only after full employment level of output is reached. It occurs because AD continues to increase while AS cannot increase once resources are fully utilised or once full employment level is reached. Thus, there is no question of any rise in the level of employment upon the Inflationary Gap in the economy.
"Inflationary gap is the excess of aggregate demand over and above its level required to maintain full employment equilibrium in the economy."
Q.5. How the distributioin of resources is made between centre and the states? Describe the grants and loans.
Ans : The transfer of resources from the Centre to the States are of three types–
(i) Share in Taxes and duties; (ii) Grants; (iii) Loans.
Grant-in-Aid – There is a provision for grants-in-aid by the Centre to the States for specific purposes (under Article 275 and quantum is decided by Finance commission) or any public purpose (under article 282 and quantum is decided by the Centre on its own discretion). The grants also serve the purpose of correcting inter-State disparities in resources. They also help in the exercise of a certain measure of Centre control and co-ordination over essential welfare services and development programmes in different States.
Loans – The State are authorised to raise loans in the market but they also borrow from the union government which gives the latter considerable control over State borrowing and expenditure. The rate of annual borrowing by the States from the Union has considerably increased during recent years.
Q.6. What was the objective and performance of the seventh plan?
Ans : The Seventh Plan was (1985 - 1990) prepared with the long-term perspective for the period 1985 to 2000 AD. The policies of the Plan were so aimed so as to achieve the goals that the nation has set for the year 2000 AD. Some of the goals are elimination of poverty, near full employment situation, universal education for all, providing basic minimum needs of the people in terms of food, clothing and shelter, access to health facilities for all, etc.
The plan emphasised accelerating growth in foodgrains production, expanding employment opportunities, and raising productivity towards growth, modernisation, self -reliance and social justice. In short the plan emphasised on food, work and productivity.
The development strategy of the plan aimed at directly attacking on the problems of poverty, unemployment and regional imbalances. This required substantial improvements and economy in the use of resources. These improvements are possible through the accelerated development of human resources, greater selectivity in the development and use of domestic technological capabilities, widespread introduction of new technologies in agriculture, factories and offices. Greater stress on capacity utilisation and better project implementation and pursuit of policies that would cut down costs of production, particularly in the industrial sector.
The Plan aimed at a 5 percent per annum rate of growth in GDP (at factor cost). The percentage of people below the poverty line was expected to come down from 36.9 percent in 1984-85 to 25.8 percent in 1989-90. Important anti-poverty programmes like National Rural Employment Programme (NREP), Rural Landless Employment Guarantee Programme (RLEGP), Integrated Rural Development Programme, (IRDP), Training Scheme For Rural Youth for Self Employment (TRYSEM), etc. were continued. To reduce unemployment and, consequently, the incidence of poverty, special programmes like Jawahar Rozgar Yojana (JRY) were initiated besides the already existing programmes. The main focus of the plan was generation of productive employment. Employment was to be provided for 40 million standard persons years (spy) against an increase in labour of around 39 million persons. Employment potential was to grow at 4 percent per annum as compared with the expected growth rate of 2.6 percent in labour force.
Performance : During the Seventh Plan period the economy performed satisfactorily with an average annual growth rate of 5.6% as against the target of 5%.
Despite a row of bad monsoons of the first three years, the agricultural sector performed rather well. In the following two years, good monsoon more than compensated the loss caused in the earlier years. The realised growth rate was 3 percent as against the target of 2.5 percent in agriculture. Industrial production was 8.1 percent as against the target of 8.3 percent. The infrastructure sector also performed more than satisfactorily. It all culminated in marked improvement in the quality of life. The percentage of poor in total population came down to 30% in 1987 from 37% in 1983-84.
However, Plan witnessed some shortfalls also. The Public sector failed to live up to expectations. It could not mobilise additional resources to the desired levels. There was also no respite from fiscal deficit and growing nonplanned expenditure. Increasing current account deficit further worsened the situation.
Q. 7. Write a short note on pressure groups. Distinguish between interest groups and pressure groups.
- An interest group is a part of the political process. It protects and promotes a particular interest by influencing the policy of government. It brings pressure on government through various means.
- Those interest groups that seek to influence decision-making processes in a State through pressure are called pressure groups.
- Large numbers of groups exist to exert pressure on government by direct consultation with ministers and civil servants, lobbying in Parliament and general publicity campaigns.
- Some exist to defend interests such as labour, business or consumers. Other promote particular causes viz. the prevention of cruelty to children or the banning of blood sports. Groups representing labour and business are of great importance in contemporary politics.
- Pressure groups exercise pressure on government usually by three means—economic, political or social.
- Various associations of social and cultural bodies are interest groups but not pressure groups. All pressure groups are interest groups, but not vice versa.
Q.8. What measures have been taken by the Constitution to protect the interests of the Scheduled Castes and Tribes?
- Measures for the advancement of the Scheduled Castes and Tribes are exempted from the general ban against discrimination on the grounds of race, caste, and the like contained in Art. 15.
- While the rights of free movement and residence throughout the territory of India and acquisition and disposition of property are guaranteed to every citizen in the case of members of the Scheduled Castes and Tribes, special restrictions may be imposed by the State as may be required for the protection of their interests.
- The claims of the members of the Scheduled Castes and the Scheduled Tribes shall be taken into consideration, consistently with the maintenance of administration, in the making of appointments to services and posts in connection with the affairs of the Union or a State.
- There shall be a Special Officer for the Scheduled Castes and Scheduled Tribes.
- The President may, at any time, appoint a Commission to report on the administration of the Scheduled Areas and the welfare of the Scheduled Tribes in the States.
- Two Central Advisory Boards (one for the Scheduled Castes and the other for the Scheduled Tribes) have been set up to formulate and review the working of schemes for the welfare of the Scheduled Castes and Tribes and to advise the Government of India on matters relating to these classes and tribes.
- Financial aid for the implementation of these welfare schema is provided for in Art. 275 (1).
- There is a general directive in Art. 46 that the States shall promote with special care the educational and economic interests of the weaker sections of the people and, in particular, at the Scheduled Castes and the Scheduled Tribes in the Legislature.
Q.9. Critically examine the causes of communal riots and tension in India. What have our efforts towards national integration achieved? What measures would you suggest to improve the situation?
- Communal harmony is essential for national progress—social, political and economic. Our Constitution prescribes a secular polity with full freedom and cultural rights for the minorities.
- But on the practical level, the communal problem has remained with us.
- Factors responsible for this are social, economic and political. Insecurity of the minorities who feel their rights and needs will be crushed by the majority; the majority resentment against concessions to minorities; fundamentalism and chauvinism on both sides; unchecked growth in the power of communal parties such as Jamait-i-Islami, Muslim Majlis, Shiv Sena etc; lack of foresighted, strong, tolerant leaders who can speak against communalism; political irresponsibility working up fanatic forces for short-term gains such as immediate victory in elections; educational and economic backwardness and unemployment among the Muslims especially leading to a gap between the majority and minority communities, religious orthodoxy eroding the secular political fabric.
- Government efforts to diagnose and remove basic cause of communal riots are half-heated, lethargic and thus ineffective; political will is generally lacking in trying to tackle the problem.
- Efforts made: National Integration Council established; many private organisations working for communal harmony; code of conduct formulated for elections, public and press (but not properly enforced); riots always followed by inquiry commissions (but reports not acted upon). These steps have not exactly achieved much, mainly because they have not been imaginatively and sincerely dealt with.
- Further measures: Evolve an integrated approach to the problem involving the leaders of different communities; prompt action by law enforcing agencies on complaints and grievances of a communal nature; proper training of law-enforcing agencies to eschew communal attitude and to deal with such situations; formation of integration groups locality-wise; using the media effectively to educate the masses on the dangers of communal disharmony and need for tolerance; value-based education inculcating national feeling rather than communal attitude; ban on communal organisations; principled politics not indulging in communal political affiliations. In the event of a communal riot, the report of an inquiry commission should be acted upon without political bias; punitive fines may work; political interference in administrative work must cease; anti-social elements must be put down.
Q.10. The Indian nation today seems to be getting torn apart by fundamentalists of different guises, encouraged by misplaced religious, linguistic and cultural loyalties. Analyse the causes and offer suggestions to improve the situation.
Ans : Causes
- Erosion of enlightened leadership;
- Economic rat race to corner benefits of development strengthened divisions, as group identity is more conducive to getting benefits;
- sectarian leaders influencing voting pattern;
- Zealous caste and religious groups in conflict with modern secular trend; our education also at fault.
Measures to improve the situations
- The concept of nationhood, the elements of culture which are our common heritage, would have to be constantly defined and identified.
- The elements which weave these concepts in a multi-cultural, multi-religious and multi-ethnic society are a secular education, the inculcation of reverence towards nation’s geography and history and the national flag.
- We have to assure protection to various minority cultural identities apart from minority religious faiths but nothing should stand in the way of imbibing the Constitution right from school.
- By putting a little more emotion into the study of history and geography in our schools, every Indian can be made to feel proud to identify himself with the Indian history. A certain uniformity in the system of education, with a curriculum on India’s past written with greater imagination, can do wonders.
- National integration can also be fostered as employment opportunities expand and people travel more to work far from their native lands. While job reservation for “sons of soil” might be necessary to an extent, this should not be taken to absurd limits. Big industrial houses should also follow a conscious policy of all-India recruitment.
- States should set up composite police forces in communally sensitive areas to instill a sense of confidence among the minorities. Code of conduct should be formulated for political parties to ensure that they do not aggravate existing differences or create hatred between castes and communities.
Q.11. What are the causes of the growth of regional parties in India?
- Local and regional parties played an important role in the political scenario of the 1950s. In many cases, the national parties could not afford to ignore them and even joined hands with them to register political victories.
- In the 1960s, the local and regional parties had started functioning in a major sense. Many parties gradually entered the political contests.
- It was mainly an ethnic uprurge that created parties such as the DMK, AIDMK, the Akali Dal, Assam Gana Sangram Parishad, the Jharkhand Mukti Morcha, etc. which based themselves on religious identity, linguistic traditions or other criteria.
- Actually, two main reasons can be identified for the large-scale growth of such parties. One, socio-economic problems such as economic backwardness owing to loss of employment opportunities, etc. and the imposing of an unacceptable link-language—an example being the threat of Hindi perceived by the south—have created regional imbalances that are sought to be rectified by encouraging the people to rise and fight for their rights.
- Major economic imbalances have, in the past, created regional feelings in the economically-backward regions of Telengana and Marathwada. Following independence, considerable hardships were witnessed by sections of the people in different regions such as the Tamilians and the Keralites in Maharashtra and the Bengalis in Assam.
- The regional parties that arose thus aimed at highlighting the grievances of one set of people or the other. Another reason for the growth of these parties was the selfish aim of political leaders and persons aiming to become political leaders to fulfil vested interests.
- Hence often, regional ire has been awakened and fuelled by raising regional issues to win the support of the people of a particular region. This has been successful owing to the fact that, almost always, people are extremely sensitive to and they easily become emotional over regional issues.
- Nowdays, many parties successfully steer into power by adopting such means. They inspire regional feelings in a variety of ways, viz. adopting regional symbols, glamourising local heroes or historical persons and leaders who belonged to the region, etc.
- Regional parties have thus grown to be a strong force in modern India. In many states, they are the ruling power and where they are not the ruling power, they form a significant force in the opposition.
Q.12. ‘Regional parties have played a crucial and positive role in specific ways,—Discuss.
- The greatest advantage is in that these parties being restricted to a particular region, are more in touch with ground realities. They are well aware of the local interests, needs and expectations and more sensitive to them with the result that they can react in an effective manner to fulfil them.
- These parties have succeeded in altering the indifferent, apathetic attitude of the common people towards the political process as a result of a long spell of one-party rule. Regional parties, by bringing regional issues especially those of immediate concern to the foreground, have inspired the people to take an active interest in politics.
- In electoral politics, Congress continued in power without any stiff and sustained opposition from other national parties. If such a scenario had continued, it would have proved very unhealthy for our democratic set-up. The regional parties, thankfully, succeeded in providing a genuine challenge to the dominant party. The Akali Dal in Pubjab, the National Conference (in Jammu and Kashmir), the DMK and AIADMK (in Tamil Nadu), the Mizo National Front, Asom Gana Sangram Parishad (in Assam), the Sikkim Parishad (in Assam), the Manipur Hill Union and the Manipur Peoples Party (in Manipur)and JMM in Jharkhand are some examples of regional parties that have been dominant in states. These parties have thus ensured a competitive electoral process.
- The one-party rule has threatened to affect the federal process. The autonomy of the states was in much danger owing to the dominant party's misuse of powers against states ruled by other parties through practices such as arbitrary dismissal of governors and state governments. But the emergence of the regional parties has meant parties that fight for states' rights. Steps to review and improve centre-state relations through the appointment of the Sarkaria Commission and other acts was a direct result. Strong regional parties have thus saved the federal process from disintegrating.
- Regional parties have, time and again, strongly opposed the dominant national party/parties on many issues, forcing the latter to adopt a reasonable approach for conflict resolution. They have exposed a number of failures in our present-day political functioning, such as the misuse of power of issuing ordinances.
Q.13. What are the negative impact of regional parties. Do you favour the increasing strength of the regional parties?
- Regional parties, by their very definition, are an encouragement to a trend of sub-nationalism that, when exercised without a balance, is bound to affect the unity and integrity of a nation.
- The ‘regional’ causes are narrow-based. They aim at the betterment of a specific region only often, as is evident nowadays, opposing the same goal for other regions. The larger cause of the nation is ignored, sometimes intentionally, to win the interests of a region. In the long term, it is the country's oneness that is threatened as regional causes come in conflict and incite passions.
- Many of the parties do not hesitate to encourage violence or pursue violent means and methods themselves to win their goals. Many parties are openly terrorist or secessionist in nature. Such parties have been operating in the north-east, Jammu and Kashmir, Punjab and other states.
- The fact that regional parties, illegitimate in their demands and the means to achieve them in many cases, and often formed by selfish politicians simply to win power, do succeed in winning power has prompted even national parties to embrace so-called ‘regional’ causes depending upon the region concerned.
- This is not a healthy trend as, now, even the national parties are therefore proving themselves less committed to pursue national objectives.
- It is our historical experience that makes many of us despair of the recent growth and successes of regional parties. We put our faith in national parties, aware that it was only a lack of strong power at the centre and disunity among the various regions that resulted in repeated invasions of the country in the past.
- It is for this reason that our constitution-makers opted for the creation of a strong central government. The need for this is paramount in a diverse entity like India. The view prevalent in some minds that it is time the regional parties are allowed to take the upper hand in politics cannot be encouraged.
- According to this view, the country has undertaken economic liberalisation and it is time for a totally decentralised polity now. Centralised polities is not viable and effective any longer.
- It is also stated that regional parties have been made to realise that violence cannot pay any longer and the country would not tolerate secessionist designs. But this is to be much doubted.
- The only possible answer lies in ensuring a strong centre and the success of national parties while encouraging regional parties to an extent that does not hinder the unity, integrity and overall development of the nation. For this, regional parties, which to a large degree excite regional passions, ought to be kept in check.
- First of all, regional parties that have no genuine and clear agenda for the betterment of a region should not be allowed to proliferate.
- Many factors have contributed to discourage regionalism and thus large-scale growth of local or regional parties. Increasing political consciousness, the patterns of urbanisation and industrialisation that have been emerging such as the growth of cities, development of transport and communications impact of western culture have resulted in some checks on regionalism.
- Some measures can be enforced for this purpose. There may include a thorough review of Centre-State relations, reform of our administrative and economic set-up, promoting an educational system that would expose the evils and deteriorative influence of communalism, casterism, linguistic divisions, regional conflicts, etc.
Q.14. What do you understand by plantation crops? Name two important plantation crops in India and their cultivation and conversion into finished products.
Ans. Cash crop cultivated in an integrated process ending-with a finished product at a factory are called Plantation Crops. they are linked with factories and not cultivated separately.
- Integrated organisation from cultivation to finishing is on modern lines like factories with high wages, and housing for workers, etc. Tea and coffee are India’s important plantation crops.
- Tea is grown on hill slopes having rainfall of 150-200 cms on deep friable loams or forest soil having organic matter, under shady trees and transplanted to garden sites. Bohea and Assamica are two varieties. Leaves are picked carefully and processed by withering, fermenting and drying into black tea.
- Arabica and Robusta are varieties of coffee grown in well-drained rich forest loam oil on gentle terraced slopes under trees in hot and humid climates.
- In wet processing of coffee, berries are pulped, fermented, washed, dried and peeled. In dry processing, they are sun dried and peeled.