Theories of distribution - class-XII

$M _1$ consists of  currency notes and coins that are in circulaation with public as well as the demand deposits with commercial banks. These can be used by the public directly for any transactions. Hence, $M _1$ is also known as 'Transaction Money'.

Demand deposit refers to the deposit wherein the amount which you have deposited with the bank can be withdrawn by you any time. It includes saving account deposit and currency account deposit in which currency account is mainly meant for businessmen, and saving account is meant for general public.

Money multiplier is inversely related to LRR as Money Multiplier $= \dfrac{1}{LRR}$.

True.

Money supply increases when the RBI prints more money, banks expand credit, or the government spends more (often financed by borrowing). The fourth point is incomplete in the prompt, but based on standard economic theory, 1, 2, and 4 are the primary drivers of money supply expansion.

The money market is the segment of the financial market where high-liquidity, short-term debt securities are traded.

Core Banking Solution (CBS) is a centralized banking system that allows customers to access their accounts and perform transactions from any branch of the bank, serving as a key delivery channel.

A term deposit (or fixed deposit) is a deposit held at a financial institution that has a fixed term and cannot be withdrawn before the maturity date without penalty.

The primary functions of money are medium of exchange, unit of account, and store of value. Hedging against inflation is a strategy for managing assets, not a function of money itself.

Precautionary motive of money refers to the demand for money to store it for future uncertainties. In other words, if money is demanded so that it can be kept for bad days then the demand of such money is known as precautionary money. In such cases, money functions as the store of value. Precautionary money balance in needed in a company so that it can be used if there is any uncertainty of receipt in the income and expenditure statement which means the company can make use of this money if the expenditure exceeds the income in a particular year. 

The following variables affects the demand for money: 

NABARD (National Bank for Agriculture and Rural Development) is the apex regulatory body for the overall regulation of regional rural banks and apex cooperative banks in India, primarily focusing on agriculture credit.

A monopoly is characterized by a single seller and high barriers to entry. 'Not elastic in nature' is not a standard feature, as the demand curve for a monopolist can be elastic or inelastic depending on the price point.

Customer is one who purchase goods and services from the seller. Customer satisfaction is the main aim of the seller to earn goodwill in the market. Free market economy is one where there are no government or less government interventions. Hence, in a free market economy, the optimal quality of goods and service is determined by customers.

When the price elasticity of demand is 1 (unitary elastic), the total revenue is maximized, which means the marginal revenue (the change in revenue from selling one more unit) is zero.

Marginal revenue is negative when the demand is relatively inelastic (elasticity < 1), because to sell more units, the price must be lowered so significantly that total revenue decreases.

Marginal revenue is positive when demand is relatively elastic (elasticity > 1), as lowering the price leads to a proportionately larger increase in quantity sold, increasing total revenue.

Marginal revenue is zero at the point where total revenue is maximized, which occurs exactly when the price elasticity of demand is equal to 1.

If the demand curve has unit elasticity at all points (a rectangular hyperbola), the total revenue is constant. Therefore, the marginal revenue is zero, meaning the MR curve lies on the x-axis (parallel to the x-axis).

In economic theory, imperfect competition is a type of market structure showing some but not all features of competitive markets. Forms of imperfect competition include: Monopolistic competition: A situation in which many firms with slightly different products compete. The cross elasticity of demand between the product of the firm and that of other commodities in the market is small, though it is above zero

Price discrimination is not profitable if the demand curves of different market segments have the same elasticity (iso-elastic), as there is no basis to charge different prices to maximize revenue.

The relationship between marginal revenue (MR), average revenue (AR), and price elasticity of demand (e) is defined by the formula MR = AR(1 - 1/e). This formula shows how MR relates to the price charged by the firm.

Total revenue (TR) is maximized when marginal revenue (MR) equals zero. Beyond this point, selling additional units would cause TR to decline because the price reduction required to sell more outweighs the revenue from the extra unit.

For a monopolist, the demand curve is downward sloping, meaning to sell more units, the firm must lower the price for all units. Consequently, the marginal revenue of the next unit is lower than the average revenue (price) of the units sold.

In a perfectly competitive market, there are many buyers and sellers, and the product is homogeneous. Therefore, no single participant can influence the market price, making them price takers.

A firm under imperfect competition such as under monopoly can sell more only by lowering its price. Therefore, the average curve is downward sloping and its corresponding marginal revenue curve lies below it.

 Marginal revenue is the change
in total revenue which results from the sale of one
more or one less unit of output.

In a monopoly, the marginal revenue (MR) curve lies below the average revenue (AR) curve and is twice as steep. This is because the firm must lower the price on all previous units to sell an additional unit.

A monopolist faces the entire market demand curve, which is downward sloping. Since the average revenue curve is identical to the demand curve, it must also be downward sloping.

 The government requires the monopoly to set a price equal to average cost. That is, it requires the firm to choose an (output, price) pair for which AC is equal to AR. This regulation eliminates profit, but does not necessarily lead to an efficient outcome.

Average curve will be considerably more elastic  because the monopolistically competitive firm has less control over the price that it can charge for its output.

The demand curve for an individual firm is downward sloping in monopolistic competition, in contrast to perfect competition where the firm's individual demand curve is perfectly elastic. This is due to the fact that firms have market power: they can raise prices without losing all of their customers.

In the kinked demand curve model of oligopoly, the segment above the current price is more elastic because competitors do not follow price increases, leading to a larger drop in quantity demanded.

A monopoly faces a downward-sloping demand curve, meaning price is a function of quantity. Both statements A and B correctly describe this relationship.

According to the law of demand, there is an inverse relationship between price and quantity demanded. As price increases, quantity purchased decreases.

In perfect competition, individual farmers are price takers. They have no market power to influence the price, so they focus on their own production levels rather than competing through price manipulation.

A perfectly competitive market is defined by the existence of many buyers and sellers, none of whom can influence the market price. Each firm is a price taker.

The market demand curve is the addition of all the individual demand curves in the market. It shows the quantity demanded by the individuals at a given price point. Hence, the market demand curve shows the quantities that consumers as a whole are willing to purchase at different prices.

Average revenue (AR) is the revenue per unit sold, which is equal to the price. Therefore, the AR curve is the same as the market demand curve.

Market risk refers to the possibility of an investor experiencing losses due to factors that affect the overall performance of the financial markets, such as sudden price changes.

Marginal revenue is defined as the change in total revenue resulting from the sale of one additional unit of output.

When demand is elastic (e > 1), an increase in quantity (via a price decrease) leads to an increase in total revenue, meaning marginal revenue must be positive.

For a linear demand curve, the marginal revenue curve is twice as steep as the demand (AR) curve, meaning it bisects the distance between the Y-axis and the AR curve at any given price level.

In first-degree price discrimination, the monopolist charges each consumer their maximum willingness to pay. Thus, the marginal revenue of each unit is equal to the price of that unit, making the MR curve identical to the demand curve.

A monopolist faces a downward-sloping demand curve. To sell an additional unit, the firm must lower the price not just for that unit, but for all previous units, causing MR to be less than the price.

A firm in a competitive market faces a horizontal demand curve (price taker). A monopoly firm faces the entire market demand curve, which is downward sloping.

A firm maximizes profit where the cost of producing one more unit (MC) equals the revenue gained from that unit (MR).

A monopoly does not have a supply curve because it is a price setter. The quantity supplied depends on the demand curve and the marginal cost curve, not just price.

The average revenue curve for a monopolist is the market demand curve, which is downward sloping because consumers buy more at lower prices.

Natural monopoly is a situation which exist due to the high fixed or start up costs to set up a business. It is seen basically where there are unique technology, raw materials.etc. A monopoly based on size and market strength is known as natural monopoly. It also has a long run average cost which is declining over large range of output.

This is a duplicate of question 473117 testing the same concept. For linear demand, MR lies halfway between AR and Y-axis because MR has twice the slope of demand. Both start at same intercept, but MR hits zero at half the quantity where AR reaches zero.

This is a duplicate of question 473116. When demand is elastic (|Ed|>1), a price decrease increases total revenue, meaning MR is positive. MR becomes negative when demand is inelastic, and equals zero at unit elastic point.

For a monopolist, the demand curve (AR) is downward sloping. To sell an additional unit, the firm must lower the price for all units, meaning the marginal revenue from the last unit is less than the price (AR) received for it.

The average revenue (AR) represents the price per unit at different quantities, which is exactly the definition of the demand curve. Therefore, for any firm, the demand curve is the same as the AR curve.

In the long run, a competitive firm operates at MC = MR, on the minimum of the LAC and earn zero economic profit, i.e, operate at normal profit levels.

Price discrimination will be profitable only if the elasticity of demand
in different markets in which the total market has been divided is
different, since, that would give the firm an opportunity to charge differing prices and generate higher revenues.

Marginal cost is defined as the change in total cost resulting from a one-unit change in output. Since fixed costs do not change with output, marginal cost is entirely determined by the change in variable costs.

The marginal revenues curve follows from the demand curve/average revenue curve (it is twice as steep as the demand curve), thus if the demand curve shifts upwards the marginal revenue curve will also shift upwards. 

A supply curve shows the quantity a firm is willing to produce at various prices. Because a monopolist chooses a price based on its demand curve rather than taking the price as given, there is no unique relationship between price and quantity supplied, so no supply curve exists.

Marginal revenue is the change in total revenue divided by the change in output. It also accounts for the gain from the new unit sold minus the loss in revenue from selling previous units at a lower price.

In perfect competition, the firm is a price taker, so AR equals MR. In imperfect competition, the firm faces a downward-sloping demand curve, meaning it must lower prices to sell more, causing MR to be lower than AR.

In monopolistic competition, the firm faces a downward-sloping demand curve. As a result, the price (AR) is always greater than the marginal revenue (MR) at any quantity produced.

When the average revenue (price) is falling, the marginal revenue must be lower than the average revenue because the firm must reduce the price on all previous units to sell the additional unit.

Marginal revenue becomes negative when the total revenue starts to decline. This occurs when the demand is inelastic, which happens as the price (AR) decreases along the lower portion of the demand curve.

The gap between AR and MR is a reflection of the price elasticity of demand. A larger gap indicates less elastic demand, which gives the monopolist more market power to set prices above marginal cost.

For a linear demand curve, the MR curve is twice as steep as the AR curve. Geometrically, this means that for any horizontal line drawn from the Y-axis, the MR curve will intersect it exactly halfway between the Y-axis and the AR curve.

In a monopoly, the firm is a price maker. The price is determined by the demand curve (AR) at the quantity where the firm chooses to produce (where MR equals MC). Thus, the AR curve is the primary determinant of the price.

In a monopoly, the marginal revenue is lower than the price because the demand curve is downward sloping. When prices go down, more units of the product are bought. Because of this, marginal revenue will not always equal price.

Competition or competitive behaviour means when firms compete with each other in a variety of ways to achieve a higher level of sales or a greater share of the market.

The concept of quasi-rent, which refers to the short-run earnings of capital equipment whose supply is fixed in the short run, was introduced by Alfred Marshall.

Quasi-rent is the surplus income earned by man-made capital goods (like machines) in the short run, where the supply of such goods is inelastic.

In classical economics, rent is specifically defined as the payment made for the use of land, which is considered a factor of production with a fixed supply.