Skip to main content

Land utilisation

  LAND UTILIZATION  Land is a scarce resource, whose supply is fixed for all practical purposes. At the same time, the demand for land for various competing purposes is continuously increasing with the increase in human population and economic growth.Land use pattern at any given time is determined by several factors including size of human and livestock population, the demand pattern, the technology in use, the cultural traditions, the location and capability of land, institutional factors like ownership pattern and rights scale regulation. Major Types of Land Utilization in India : As in all other countries, land in India is put to various uses. The utilization of land depends upon physical factors like topography, soil and climate as well as upon human factors such as the density of population, duration of occupation of the area,land tenure and technical levels of the people.There are spatial and temporal difference in land utilization due to the continued interplay of phys...
Post a Comment

Inflationary gap

EXCESS DEMAND or INFLATIONARY GAP

Excess demand refers to the situation when aggregate demand is in excess of aggregate supply corresponding to full employment in the economy.
                AD>AS
It implies that
a)Desired AD in the economy happens to exceed its full employment level .
b)The level of AD surpasses level of AS even when available factors are fully utilised.
c)The level of output cannot be rise because factors are already fully employed.

Excess demand raises the market value of output because quantum of output remaining constant,higher the demand leads to rise in prices level which implies the situation of inflationary gap .
 
Inflationary gap
Inflationary gap is the excess of AD over and above it's level required to maintain full employment equilibrium in the economy.Higher the excess demand,greater the inflationary gap.
It is measured as the difference between AD beyond full employment and AD at full employment.

Causes of inflationary gap 

a)Private consumption: Increase in private consumption expenditure may occur owing to increase in propensity to consume or decrease in propensity to save .

b) Investment expenditure :Increase in investment expenditure which may occurs owing to soaring business expectations.

c) Government expenditure: Increase in government expenditure owing to its expanding commitment for development as well as welfare projects in the economy.

d)Exports :Increase in exports owing to higher international prices compared with the domestic prices.

e)Imports :Decrease in imports ,owing to higher international prices compared with domestic prices .

f)Tax: A cut in tax rates leaving higher disposal income with the people.

Effects of inflationary gap

a)When AD increases beyond its full employment level ,the pressure of demand on existing supply state mounting up.
b)Mounting pressure causes a rise in prices which is the situation of inflation.
c)Excess demand generates pressure of demand on existing resources.This raises factor cost which further contributes to rise in general price level.
d)A situation may arise when wages start catching prices and vice versa which implies situation of wage price spiral.This generates bottlenecks of growth and economy may hit the path of stagnation.

Comments

Post a Comment

Popular posts from this blog

COMPONENTS AND TYPES OF ECONOMICS

COMPONENTS OF ECONOMICS a) Consumption : The study of consumption and consumer behaviour relates to the study of consumer where he has to allocate his means (income) on the purchase of goods and services so that his satisfaction can be maximised. b) Production : The study of production or producer behaviour relates to the study of producer where he has to choose such combinations of diferent inputs within given price which are least expensive so that he is able to maximise his cost of production . Also , how he choose to produce those goods and services within given prices ,the production of which offers him maximum revenue, so that his profit can be maximised c) Distribution :The study of distribution relates to study of how income is distributed among those who are the agents of production. Here, the agents of production refers to the owners of factors of production. There are 4 factors of production : 1) Land   - The income is distributed to the owners of land(used in product...
Post a Comment
Read more

Investment Multiplier

INVESTMENT MULTIPLIER The number of times by which the increase in ∆Y exceeds the increase in investment is called as Investment Multiplier.  Investment Multiplier or output multiplier refers to the number of times by which the increase in output/income ∆Y exceeds the increase in investment ∆I. It is measures as the ratio between change in output /income and change in investment.                                      k = ∆Y / ∆I Where k is the multiplier. Relationship between Multiplier and Marginal propensity to consume (MPC) There is direct relationship between Multiplier and MPC . Higher the value of MPC ,higher the multiplier .                   K =1 / 1- MpC This is because of the given reasons : a)Additional investment means additional expenditure in the economy, additional expenditure means additional income . b) Higher the value of MPC ,...
Post a Comment
Read more

CONCEPT OF ECONOMICS

ECONOMY Economy refers to a system of a particular area that shows how people of the concerned area earn money. It shows the nature of all the economic activities in that area.  ECONOMICS Economics has been derived from Greek words i.e "Oekos" and "nomos" .The former means a house and the latter means to manage . By combining the both it means managing a houshold. It refers to the study of how society choose to enjoy scarce resources that have alternatives uses. In other words, it is a social science that focuses on management of scarce resources in such a manner that both individual and society can attain maximum benefit. ECONOMIC PROBLEM It is the problem of choice or problem of allocation of scarce resources to their best alternative uses.  It mainly arises out of the given two facts: a) Resources are scarce . b)Resources are unlimited and have alternative uses.  ECONOMIC ACTIVITIES These are those activities which are related to how one can make use of scarce re...
Post a Comment
Read more