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Money Clearing Process Accounting Help , Finance Tutorials The instruments of exchange (cheques, drafts, etc) are used to receive or pay claims. Before the amount is credited or debited to any account, it has to pass through the clearing system. The clearing process refers to the exchange of instruments by banks drawn on them through a clearing house. Instruments like cheques, demand drafts, interest and dividend warrants and refund orders can go through clearing. Documentary bills or promissory notes do not go through clearing. The clearing process has been highly automated in a number of countries. Electronic date is used instead of paper. Banks in India have started using MICR to automate the clearing process. They maintain an account with the reserve bank of India (RBI) which is debited for inward clearing (items drawn on plus outward returns) and credited for outward clearing (items drawn on other banks plus inward returns). The clearing house covers banks located within a def...

Capital Formation >> Microeconomics Assignment Economic growth depends on several factors. But the two most important factors that determine rate of economic growth are capital accumulation is essential for accelerating rate of economic growth. They need to build roads, factory buildings, machines and tools, tractors, means of irrigation, communication networks and transportation system. To produce more capital goods and build infrastructure, a society has to sacrifice some of its current consumptions. The same is true of making technological progress. Technological changes come from research and development that also required resources. The resources that have to be used for building and making technological advances have to come from the cutting the current production of consumer goods. In fact, the cut in the problem of capital formulation we have to construct such a production possibility curve in which on one axis capital formulation we have to construct such a production m...

Thumbs Price Rule Economics Theory >> Microeconomics Assignments Larne’s index of monopoly power according to which degree of monopoly Is given by P – MC / P = 1/e Where P – MC / P is the mark- up over marginal cost as a proportion of price, according to the above equation this mark-up over price is equal to inverse of the absolute value of the price elasticity of demand for the product. It follows from above that there are following relations of mark – up over marginal cost with price elasticity of demand. (a) The lower the price elasticity of demand the greater the mark – up as a proportion of pried and greater the monopoly power. (b) The greater the price elasticity of demand the smaller the mark up as a proportion of price and less the monopoly power. For example if marginal cost of production at the equilibrium output is 9 and price elasticity of demand is 4. What will be the price? Note that absolute value of price elasticity of demand is 4. Therefore Mark u...

Economics Subject Matter The basic subject matter of economics is the study how people-individuals, firms and nations-maximize their gains from their limited resources and opportunities. In other words economics is the study of how people allocate their resources to their alternative yes for deriving maximum possible gains from limited resources. For the purpose of economic analysis, people are classified under different categories of decision-makers. They are (i) consumers-the users of all final goods and services, (ii) firms- the producers of all goods and services and (iii) owners and users of resources. The term gain has different connotations for different sections of economic decision makers-consumers, firms and resource users. For consumers, gain means the total utility or satisfaction they derive from the consumption of goods and services; for producers, it is production and profit that they make from the use of resources at their disposal; for resource users especially l...

Demand Extension Economics Theory >> Microeconomics Assignments We have studied above the demand schedule, demand curve and law of demand. All these show that when price falls quantity demanded of it rises, and when its price rises, its quantity demanded falls, other things remaining the same. When as a result of changes in price the quantity demanded rises or falls, extension or contraction in demand is said to have taken place. Therefore, in economics the extension and contraction in demand are used when the quantity demanded rises or falls as a result of changes in price and we move along a given demand curve and when the quantity demanded of a good rises due to fall in price, it is called extension of demand. For instance suppose the price of bananas in the market at any given time is $. 12 per dozen and a consumer buys one dozen of them at a price. Now if other things such as tastes of consumer, now the consumer buys 2 dozen bananas, then extension in demand is said to ...

Price Discrimination Possibility Two fundamental conditions are necessary for the price discrimination to become possible. first price discrimination can occur only if it is not possible to transfer any unit of the product form one market to another. In other words a seller can practice price discriminate in only when heist selling in different markets which are divided in such a way that product sold by him in the cheaper market cannot be resold in the dearer market. Price discrimination by the original seller will break down if this buyers in the cheaper market purchase the product form him ad resell it to the buyers of the dearer market. Buyers in the dearer market of the original seller will instead of buying from him will buy the product from the buyers of his cheapen market. Thus a seller can charge different prices in the two markets when there is no possibility of the product beige transferred from the cheaper market to the dearer market. Second essential condition for price...

J. B. Clark propounded the dynamic theory of profit. He defined profit as the excess of price of commodities overcasts. He was of the view that the entrepreneurs gain profits due to dynamic change in society or due to the fact that society is dynamic. He classified social circumstances into two states (i) static state and (ii) dynamic state. Static state according to Clark is a state where the element of time is non-existent. In a static state there is no uncertainty. The following elements do not change in static state viz. population, supply of capital, technique of production, industrial organization and human wants. On the contrary in a dynamic state the elements shown above are invariably changing. In a stationary state the economic activities of the previous year will be repeated in subsequent years without any change. There is, therefore, no risk of any kind for the entrepreneur in a static society. There would be no profit for the entrepreneur. The entrepreneu...