Ultimate Blogging Championship

Category: Class 12th

  • Notes of Controlling Business Studies Class 12

    UNIT 8

    CONTROLLING

    Meaning & Definition

    Controlling means ensuring that activities in an organisation are performed as per the plans. Controlling also ensures that an organisation s resources are being used effectively and efficiently for the achievement of predetermined goals.

    It can be defined as comparison of actual performance with the planned performance

    The controlling functions find out how far actual performance deviates from standards, analyses the causes of such deviations and attempts to take corrective actions based on the same.

    Importance of Controlling :-

    1. Controlling helps in achieving organisational goals :- The controlling function measures progress towards the organisational goals and brings to light/indicates corrective action.
    2. Judging accuracy of standards : A good control system enables management to verify whether the standards set are accurate or not.
    3. Making efficient use to resources – By the process of control, a manager seeks to reduce wastage of resources.
    4. Improves employees motivations : A good control system ensures that employees know well in advance what they are expected to do & also the standard of performance. It thus motivates & help them to give better performance.
    5. Facilitating Coordination in action : In controlling each department and employee is governed by predetermind standards which are well coordinated with one another.

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    6.

    Ensuring order and discipline :- Controlling creates an atmosphere of order and discipline in the organisation by keeping a close check on the activities of its employees.

    Limitations of Controlling

    1.

    Little Control on external factors : Generally no exterprise can control external factors such as government policies, technological changes, competitions etc.

    2.

    Resistance from employee – Control is often resisted by employees. They see it as a restriction on their freedom.

    3.

    Costly affair : Control is a costly affair as it involves a lot of expenditure time and efforts.

    4.

    Difficulty in setting quantitative standards :- Control system loses some of its effectiveness, when standards cannot be defined in quantitative terms. In the absence of quantitative standards, comparison with standards becomes difficult.

    Relationship between Planning and Controlling :

    Planning and controlling are interrelated and infact reinforce each other in the sense that

    1.

    Planning is pre-requisite for controlling. Plans provide the standard for controlling. Thus, with out planning, controlling is blind.

    2.

    Planning is meaningless without controlling. It is fruitful when control is exercised.

    3.

    Effectiveness of planning can be measured with the help of controlling.

    4.

    Planning is looking ahead & controlling is looking back.
     

    Thus planning & controlling cannot be separated. The two are supplementary functions which support each other for successful execution of both the functions.
     

    Planning makes controlling effective where as controlling improves future planning.

    Controlling Process :

    1.

    Setting performance Standards :- Standards are the criteria against which actual performance would be measured. Thus standards serve as bencemarks.

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    1. Measurement of Actual performance : Performance should be measured in an objective and reliable manner. Which include personal observation, sample checking.
    2. Comparing Actual performance with standard : This steps involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired performance.
    3. Analysing Deviations – The deviations from the standards are assessed and analysed to identify the causes of deviations.
    4. Taking Corrective Action :- The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within the acceptable limits.

    Techniques of Managerial Control

    Traditional Control Techniques Modern Control Techniques

    Personal Observation Return On investment

    Statistical Reports Break even analysis Budgetary Control

    Ratio Analysis Responsibility Accounting Management Audit PERT and CPM

    Management information

    Traditional Techniques :-

    Traditional techniques are those which have been used by the companies for a long time and are still being used.

    Modern Techniques :-

    Modern techniques of controlling are those which are of recent origin. These techniques provide refreshingly new thinking on the way in which various aspects of an organisation can be controlled.

    Budgetary Control : It is a technique of management control in which all operation are planned in advance in the form of budget & actual result are compared with budgetary standard.

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    Types of Budget (i) Sales Budget, Production Budget etc.

    Budgetary Control :

    A budget reflects the policy for the specified period. The most common types of budgets used by an organisation are sales budget, production budget, cash budget etc.

    Budgetary control is a technique of managerial control in which all operation are planned in advance in the form of budgets and actual results are compared with budgetary standards. This comparison reveals the necessary action to be taken so that organisational objectivies are accomplished.

    Modern Techniques of Managerial Control :

    1. ROI Return an investment

    Net Income x Sales

    Sale Total Investments

    1. Ratio Analysis : Liquidity ratios; Solvency ratios;

    Profitability ratios; Turnover ratios.

    PERT : Programme evaluation & review techniques.

    CPM : Critical path method

    MIS : Management Information System

    1. It is computer based information system that provides support & information for effective managerial decesion making.
    2. It servis as an important control technique by providing data & information to the managers at the right time so that appropriate corrective action may be taken in case of deviation from standards.

    One Mark Question :-

    1. Explain the meaning of controlling.
    2. Write the first step of controlling process.
    3. Mention any one features of good controlling system.
    4. What are the two types of deviations.
    5. Which principle of management control is based on the belief that an attempt to control everything results in controlling nothing.

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    3-4 Marks Questions

    1. Planning is looking ahead and controlling is looking back. Explain.
    2. Controlling function of management is a pervasive function . Explain.
    3. What is meant by Budgetary control?
    4. Corrective action is essence of control . Explain.

    5-6 Mark Questions :

    1. Explain the various steps involved in the process of control.
    2. Explain the importance of controlling is an organisation.
    3. What is break-even-analysis? How it is an effective technique of control.
    4. Planning and controlling are mutually interrelated and inter-dependent activities. Explain.
    5. What are the advantages of Budgetary Control?
    6. Explain the limitations of controlling?
    7. Explain any two Traditional techniques of controlling.
    8. Explain any two Modern techniques of controlling.

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  • Notes of Directing Business Studies Class 12

    UNIT 7

    DIRECTION

    Meaning

    Directing as a function of managment, refers to the process of instructing, guiding counselling, motivating and leading people in the organisation to achieve its objectives. It does not mean only instructions but also include supervising the employess when they are performing the job, motivating them to perform more efficiently and leading them towards the achievement of organisational goal.

    Features :

    1. Directing initiate action : The other functions of management prepare a setting for action, but directing initiates action in the organisation.
    2. Directing takes place at every level of Management :- Every manager from top executive to supervisor performs the function of directing.
    3. Directing is a continous process of supervision, communication, leadership and motivation, It takes place throughout the life of the organisation.
    4. Directing flows from top to bottom :- It is first initiated at the top level and flows to the bottom through organisational hierarchy.

    Importance :

    1. Initiates Action : It helps to initiate action by people in the organisation towards attainment of desired objectives. The employees start working only when they get instructions and directions from their superiors. It is the directing function which starts actual work to convert plans into results.
    2. Integrate Employee s Efforts :- All the activities of the oranisation are interrelated so it in necessary to coordinate all the activities. It integrates the activities of subordinates by supervision, guidance and counselling.

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    3.

    Means of motivation – It motivates the subordinates to work efficiently and to contribute their maximum efforts towards the achievement of organisational goals.

    4.

    Facilitates change :- Employees often resist changes due to fear of adverse effects on their employment and promotion. Directing facilitate adjustment in the organisation to cope with changes in the environment.

    5.

    Stability and Balance in the organisation :- It helps to achieve balance between individual interests of employees and organisational interests.

    Principles of Directing

    1.

    Maximum Individual Contribution : – Directing techniques must help every individual in the organisation to contribute his maximum potential for achievement of organisational objectives.

    2.

    Harmony of objectives – The objectives of individual and organisation must be in harmony with each other. But good directing should provide harmony by convincing the employees that organisational objectives are in their own interest.

    3.

    Unity of Command :- An individual or subordinate in the organisation should receive instructions from one superior only otherwise it creates confusion conflict and disorder in the organisation.

    4.

    Appropriateness of Direction Technique : According to this principle the technique like motivation, supervision, communication and leadership should be appropriate – according to the attitude and need of the employees.

    5.

    Managerial Communication : The two way flow of information is the most effective means of securing cooperation of the subordinates because it provides them an opportunity to express their feelings.

    6.

    Use of Informal organisation :- An informal organisation exist within formal organisation structure. So managers must make use of informal structure also for getting correct and real feed back.

    7.

    Leadership – A manager by becoming a good leader can make direction effective with the trust and confidence of his subordinates.

    8.

    Follow through : Mere giving of an order is not sufficient managers should follow it up by reviewing continuously.

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    Elements of Direction

    1. Supervision – It means observing the subordinates at work to see that they are working in according with plans and to help them in solving their problems. The important thing in supervision is it involves face to face contact between superior and subordinates. Supervisor s position is immediately above the worker.

    Importance of Supervision / Role of a Supervisor

    1. Link between workers and management because the supervisor explains management policies to worker and brings workers problems to the notice of the management.
    2. Ensures issuing Instructions : To make sure that the instructions are communicated to each and every employee.
    3. Facilities Control : – Control means match between actual and planned output. It ensures checking on the methods in use and progress of work according to planned schedule.
    4. Maintainence of Discipline : The strict supervision and guidance of supervisor encourages the employees and workers to be more disciplined in the activities.
    5. Feedback – The supervisors are directly dealing with the subordinates, As a result feedback in the form of suggestions, grievances keeps coming to the management.
    6. Improved Motivation – A supervisor with good leadership qualities can build up high morale among workers.
    7. Optimum utilisation of resources All the activities are under the observation of supervisor so less wastages and optimum utilisation of resources is possible.

    Motivations :-

    Meaning :- It is the process of stimulating people to act to their best ability

    to accomplish desired goals. It depends upon satisfying needs of people.

    Features :

    1. Psychological phonomenon – It is personal and internal feelings which arises from the needs and wants of a person.
    2. Goal Directed Behaviour – It includes people to behave in such a manner so that they can achieve their goal.
    3. Motivation can be either positive or Negative – Positive motivation means inspiring people to work better and appreciating a work that is well done. Negative motivation means forcing people to work by threatening or punishing them.
    4. Complex Process :- It is a complex and difficult process. Individuals differ in their needs and wants and moreover human needs change from time to time.

    Motivation Process –

    It is based on human needs.

    Unsatisfied Needs
    Tension
    Drives

    Search Behaviour
    Satisfied Need
    Reduction of Tension

    An Unsatisfied needs of an individual creates tension which stimulates his or her drives. These drives generate a search behaviour to satisfy such need. If such need is satisfied, the individual is relieved of tension.

    Importance –

    1. Achievement of Organisational Goal : Motivation puts human resources into action by satisfying their needs through appropriate rewards. Motivated employees cooperate and contribute their maximum efforts towards the organisational goals.
    2. Higher Efficiency of Employees – Depends upon their abilities and willingness to work hard. It bridges the gap between the ability to work and willingness to work and willingness always improves efficiency.
    3. Reduction in resistance to change It helps to overcome resistance to change.
    4. Stability in workforce – It brings confidence in employees and also improve their loyality and commitment towards the organisation. As a result the rates of labour absenteeism and labour turnover reduce.
    5. Optimum Utilisation of Resources – The motivated workers would handle machines and materials properly. This would ensure optimum utilisation of resources and reduction of wastage.

    Financial and Non-Financial Incentives – Incentive means all measures which are used to motivate people to improve performance.

    Profit sharing

    Pay and Allowances

    Bonus

    Retirement Benefits Perquisites

    Productivity linked wage in centuries

    Co-partnership/stock option

    Status

    Career Advancement

    Opportunity

    Job enrichment

    Employee Recognition programmer

    Employees participation Job security

    Employees empowerment

    Maslow s Need Hierarchy Theory of Motivation :- Maslow s Theory focuses on the needs as the basis for motivation

    Example from the point
    view of Individual

    Example from the point of view of organisation

    Self fulfilments

    Achievement of goals

    Status

    Jobtitle

    Friendship

    Cordial relation with collegues

    Stability of Income

    Pension Plan

    Hunger

    Basic Salary

    f Self J
    rActualisatioi
    Needs

    Needs of the highest order

    Generally found in persons

    whose first four needs have

    f Esteem or Status ‘
    needs self confidence,
    prestidge

    already been fulfilled.

    Social Needs – Sense of Belongingness, association friendship

    / Safety or Security Needs – Oldage, \ sickness, job security, stability of income’

    Basic of physiclogical needs – Food, clothing
    Shelter, air, water, other necessities of life.

    Leadership –

    Leadership is the activity of influencing people to strive willingly for mutual objectives. Managers at all levels are expected to the leaders of their subordinates.

    Features :-

    1. Influence behaviour : It indicates ability of an individual to influence others.
    2. Interpersonal relations : It tries to bring change in the behaviour of others.

    3.

    Common goals : It is exercised to achieve common goals of the organisation.

    4.

    Contnuous process : It is a continous process.

    5.

    Situational : There a no particular style of leadership it is related to particular situation.

    Importance :-

    1. Help in guiding and inspiring employees.

    2.

    Creates confidence – by recognising the Quality and capabilities of individuals.

    3.

    Handles conflicts effectively and does not allow adverse effects resulting from the conflics.

    4.

    Provides Training to Subordinates .

    5.

    Secures cooperation of members of organisation

    6.

    Inspires productivity

    7.

    Improves job satisfaction

    8.

    Achievement of organisational goals

    9.

    Introducing required changes.

    Qualities of a Good Leader

    1.

    Physical Features – Health and endurance help a leader to work hard which inspires others also to work with same spirit.

    2.

    Knowledge – A leader must be able to examine every problem in the right direction.

    3.

    Integrity – He should be a model to others regarding his ethics and values.

    4.

    Initiative – He should not wait for opportunities come to his way rather he should grab the opportunities.

    5.

    Motivation skills – To understand the needs of people and motivate them through satisfying their needs.

    6.

    Communication skills : A leader must be a good communicator.

    Communication – It is transfer of information from the sender to the receiver with the information being understood by the receiver.

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    Elements of Communication Process –

    1.

    Sender – Who conveys his thoughts or ideas

    2.

    Message – Ideas, feelings, suggestions, order etc.

    3.

    Encoding – Converting the message into communication symbols such as words / pictures etc.

    4.

    Media – Path/ Channel through which encoded message is transmitted to receiver e.g., face to face, phone call, internet etc.

    5.

    Decoding – Converting encoded symbols of the sender.

    6.

    Receiver – Who receives communication of the sender.

    7.

    Feed back – All those action of receiver indicating that he has received and understood message of sender.

    8.

    Noise – Some obstruction or hindrance to communication like poor telephone connection, inattentive receiver.

    Importance of Communication

    1. Facilitates Coordination – between interrelated departments and sections thus creating a unity of purpose and action.

    2.

    Provides data necessary for decision makings – When information is effectively and efficiently communicated to management.

    3.

    Increases Managerial Efficiency – By Conveying the goals, targets, instructions.

    4.

    Promotes cooperation and Industrial Peace – The two way communication promotes cooperation and mutual understanding between the management and workers.

    5.

    Establishes effective leadership – Effective communication helps to influence subordinates – while influencing leader should posses good communication skills.

    Formal Communication – refer to official communication which takes place following the chain of command. Classification of formal communication –

    1.

    Vertical communication – Flows vertically i.e., upwards or downwards through formal channels
     

    i) Downward Communication – Higher to lower level like plans, policies, rules etc.

    53 XII – Business Studies

    ii) Upward Communication – Subordinate to superior like suggestions, grievances, reports etc.

    2. Horizontal / lateral Communication – between persons holding positions at the same level of ther organisation e.g., production manager may contact marketing manager about product design, quality etc.

    Communication Net works of a Formal Communication.

    Single Chain

    Free Flow

    Informal Communication : Communication that takes place without following the formal lines of communication is said to be internal communication. There is no fixed direction or path for the flow of information.

    Grapevine or Informal Communication Networks

    1. Single Strand – Each person communicates with the other in sequence.
    2. Gossip – Each person communicates with all on non-selective basis.
    3. Probability – The individual communicates randomly with other individual.
    4. Cluster – the individual communicates with only those people whom he trusts.

    Difference between Formal & Informal Communication
     

    Basis Formal Communication

    Internal Communication

    1.

    Meaning within the official chain of command

    Between individuals and groups which are not officially recognised.

    2.

    Channel Through a definite path

    No definite path

    3.

    Speed Slow – because all information has to pass through an established chain of command

    Very fast – Cuts across all the official channels.

    4.

    Nature More rigid and cannot be modified

    Flexible and varies from individual to individual.

    5.

    Expression It is mostly expressed in written form.

    It mostly tends to be oral

    Barriers to Effective Communication –

    		  

    1.

    Semantic Barriers – Concerned with problems and obstructions in the process of encoding or decoding of message into words or impressions Semantic barriers are as follows.

    1.

    Badly expressed message

    		  

    2.

    Symbols with different meanings.

    		  

    3.

    Faulty Translations.

    		  

    4.

    Unclarified assumptions – Subject to different interpretations.

    5.

    Technical Targon – Technical words may not be understood by the workers.

    Psychological Barriers –

    The state of mind of both sender and receiver affect the process of communication. Psychological barriers are as follows.

    1

    Premature Evaluation – Judgement before listening.

    2.

    Lack of attension.

    		  

    3.

    Loss by transmission and Poor Retention – When oral communication passes through various levels – destroy the structure of the message.

    4.

    Distrust – If the parties do not believe each other.
     

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    XII – Business Studies

    Organisational Barriers

    Factor related to organisation structure.

    1. Organisational Policy
    2. Rules and regulations.
    3. Status.
    4. Complexity in organisation structure.

    Personal Barriers – of superiors and subordinates

    1. Fear of challenge to authority.
    2. Lack of confidence of superior on his subordinates.
    3. Unwillingness to communicate.
    4. Lack of Proper incentives.

    Improving Communication Effectiveness.

    1. Clarify the ideas before communication.
    2. Communicate according to the needs of receiver.
    3. Consult others before communicating.
    4. Be aware of language, tone and content of message.
    5. Ensure proper feedback.
    6. Follow up communication.
    7. Be a good listner.

    QUESTIONS

    1 Mark

    1. Which function of management is known as Management-in-action ?
    2. How supervision is helpful in maintaining discipline?
    3. What is Economic Safety?
    4. What is meant by Job Enrichment as a type of non-monetary incentives?
    5. What is meant by Leadership ?
    6. What is meant by Integrity ?
    7. A leader does not wait for opportunities but creates them . This statement is related to which quality of a good leader?
    8. What is meant by NOISE in communication process?
    9. What is meant by Feedback in communication process?
    10. What is meant by Grapevine ?

    3 Marks Questions

    1. Direction is the least important function of management . Do you agree with this statement? Give any two reasons in support of your answer.
    2. The post of supervisor should be abolished in the hierarchy of Managers . Do you agree? Give any three reasons in support of your answers.
    3. Explain how supervision facilities control?
    4. Motivation can be either positive or negative. How?
    5. Motivation helps to reduce absentism in the organisation. Clarify.

    4/5 Marks Questions

    1. Explain any four principles of directing.
    2. State any four characteristics of motivation.
    3. Clarify Job Enrichment and Job Securing as non-financial Motivators.
    4. Explain the importance of leadership as the directing functions of management.
    5. Explain any four factors which are likely to disrupt effective communication.

    6 Marks Questions

    1. Supervision is an important element of directing function . Explain any four reasons in support of the above statement.
    2. Explain different financial and non-financial incentives used to motivate employees of a company.
    3. Effectiveness of Leadership depends on the qualities of the leader . Explain any four such qualities of a leader.
    4. In an organization there are many leaders. But a good leader must be a distinguished one. Suggest any four qualities that a good leader must possess.
    5. Explain the meaning and importance of communication process.

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  • Notes of Staffing Business Studies Class 12

    UNIT 6

    STAFFING

    Meaning

    Staffing means putting people to jobs. It begins with human resource planning and includes different other functions like recruitment, selection training, development, promotion and performance appraisal of work force.

    Need and Importance of Staffing

    1. Obtaining Competent personal : Proper staffing helps in discovering and obtaining competent personal for various jobs.
    2. Higher performance : Proper staffing ensures higher performance by putting right person on the right job.
    3. Continuous growth : Proper staffing ensures continuous survival and growth of the enterprise.
    4. Optimum utilisation of human resources :- it prevents under – utilisation of personnel and high labour cost.
    5. Improves job satisfaction : It improves job satisfaction and morale of employee.

    Human Resource Management : (HRM)

    The function of Human Resource Managent is to provide skill human elements to the enterprise. Therefore big enterprise create a separate department called HRD. This department work under H.R.M. Managers.

    Definition : Human Resource managent is the recruitment selection, development, utilisation, compensation and motivation of human resources of the organisation.

    Staffing as Part of Human Resources Management : The scope of Human Resources Management is big than staffing. It involves staffing, keeping personal record, providing expert service and other work.

    40 XII – Business Studies

    Process of staffing :

    Estimating manpower requirements I i II

    Recruitment

    ♦

    |Selecting from among the applications

    • Z Placement and Orientation

    ♦

    |Training and Development

    Components of Staffing

    (A) Recruitment (B) Selection (C) Training. Thus, Recruitment + Selection + Training = Staffing.

    (A) Recruitment : Recruitment may be defined as the process of searching for prospective employee and stimulating them to apply for job in the Organisation.

    Sources of Recruitment :-

    (A) Internal Source (B) External Sources

    Internal Sources of Recruitment :- Internal sources refer to inviting candidates from within the Organisation. Following are important sources of internal recruitment.

    1. Transfer :- It involves the shifting of an employee from one job of another, from one department to another or from one shift to another shift.
    2. Promotions : It refers to shifting an employee to a higer position carrying higher responsibilities, prestige, facilities and pay.
    3. Lay off : To recall the temporarty worker for work is called Lay-off.

    Advantages of Internal Sources Recruitment :-

    1. Employees are motivated to improve their performance.
    2. Internal recruitment also simplifies the process of selection & placement.
    3. No wastage of time on the employee training and development.
    4. Filling of jobs internally is cheaper.

    Limitation of Internal Sources

    (1)

    The scope for induction of fresh talent is reduced.

    (2)

    The employee may become lethargic.

    (3)

    The spirit of competition among the employees may be hampered.

    (4)

    Frequent transfers of employees may often reduce the productivity of the Organisation.

    External Sources of Recruitment :-

    1.

    Direct Recruitment :- Under the direct Recruitment a notice is placed on the notice board of the enterprise specifying the details of the job available.

    2.

    Casual callers : Many reputed business org. keep a data base of unsolicited applicants in their office. These list can be use for Recruitment.

    3.

    Advertisement : – Advertisement in newspaper is generally used when a wider choice is required.

    4.

    Employment Exchange : Employment exchange is regarded as a good source of Recruitment.

    5.

    Compus recruitment and labour contractors can be used for the purpose.

    Merit of External Sources :-

    1.

    Qualified Personnel : By using external source of recruitment the management can attract qualified and trained people to apply for the vacant job in the org.

    2.

    Wider Choice : The management has a winder choice selecting the people for employment.

    3.

    Fresh Talent : It provide wider choice and brings new blood in the org.

    4.

    Competitive Spirit : If a company taps external sources, the staff will have to compete with the outsiders.

    Limitations of External Sources of Recruitment :-

    1.

    Dissatisfaction among existing employee :- Recruitment from outside may causes dissatisfaction among the employees. They may feel that their chances of promotion are reduced.

    2.

    Costly process : A lot of money has to be spent on advertisement therefore this is costly process.

    42 XII – Business Studies

    3. Lengthy Process : It takes more time than other process.

    (B) Selection : Selection is the process of choosing from among the candidates from within the org. or from the outside, the most suitable person from the current position or for the future position.

    f

    Preliminary

    Screening

    Selection

    Test

    PROCESS OF SELECTION ^

    ^ ^ ^

    Employment Reference Selection

    interview Checks

    decision

    Medical

    Exam

    Job

    Offer

    *

    Contract

    of

    employment

    (C) Training : Training is the act of increasing the knowledge and technical skills of an employee for doing a particular job efficiently.

    Benefits to the Organisation :-

    1. It enhances employee productivity and quality.
    2. Training increases employee moral.
    3. Employee got new Tech. knowledge.
    4. Efficient uses of machine.

    Benefits to the Employee :-

    1. Improved skills and knowledge of employee
    2. Increased performance by the individual help him to earn more.
    3. Less accidents.
    4. Training increases the satisfaction and morale of employee.

    Training Method

    (A) On the Job Method :- It refers to the method that are applied to the work place, while the employee is actually working. It means learning while doing .

    1. Apprenticeship Programme Training :- A master worker or a trainer is appointed who guides the worker regarding the skill of job.
    2. Coaching : In this method, the superior guides and instructs the trainee as a a coach.
    3. Job Rotation : In this method employee is transfer to other department or other shift.

    (B) Off the Job Method : These methods are used away from the work place. It means learning before doing.

    1. Class room lectures : The lecture approach is well adapted to convey specific information. The use of audio-visuals can often make a formal classroom.
    2. Films : They can provide information to the employee.
    3. Case study : Trainee study the cases to determine problems & analyses causes.
    4. Computer modelling – Training provide to the employee by the help of computer.

    One Marks Questions :-

    1. Explain the meaning of Staffing .
    2. Define Placement .
    3. Why is selection considered to be a negative Process.
    4. Give one advantage of Job Rotation training.
    5. State one objective of Preliminary screening.
    6. What is interview?
    7. What do you mean by on the Job Training?
    8. What do you mean by Recruitment?
    9. Define Lay off.
    10. Give the last steps of staffing process.
    11. Give the first steps of selection process.

    3 or 4 Marks Questions :-

    1. Explain any three types of selection Test.
    2. Explain the meaning of selection and training.
    3. Internal sources of Recruitment are better than external sourcs of Recruitment . Give reasons in support of your answer.
    4. Write the difference between training and Development.

    5 – 6 Marks Questions

    1. Explain the importance of Staffing as the reference of Management function.
    2. Describe briefly the steps involved in the process of staffing.
    3. What do you mean by Training? What are its objectives?
    4. Explain in brief merits and limitation of external sources of recruitment.
    5. The process of selection starts where the process of recruitment ends. In the light of this statement, explain the difference between recruitment and selection.
    6. Explain the process of Selection.
    7. Explain off the job Training Method.
    8. Explain the Advantages and Limitation of Internal Sources of Recruitment.
    9. A newly appointed personal manager is of the view that there is no need for training the workers. Do you agree with his views? Give reasons in support of your answer.
    10. Explain Staffing as a part of Human Resources Management.

     

  • Notes of Organising Business Studies Class 12

    UNIT 5

    ORGANISING

    Meaning of Organising

    After laying down the plans and objectives the next function to be performed by the managers is organising. It determines what activities and resources are required and decides who will do a particular task, where it will be done and when it will be done.

    * Thus organising means establishing relationship between various factors of production and it in concerned with establishing relationship amongst jobs, sections, department & position.

    Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.

    Step Involved in the Process of Organising :-

    1. Identification and Division of Work :- It involves identification and dividing the total work to be done into specific activities (called jobs) in accordance with previously determined plans. By dividing the work the burden of work can be shared among the employees.

    It facilitates specialisation of work & skills. Duplication of work can be avoided by dividing the work into manageable activities.

    1. Departmentalisation :- The second step in organising is to combine or group similar or related jobs into larger units, called departments, divisions or sections. They can be grouped on the basis of functions which an organisation undertakes to achieve its objective. For example departments may be created for manufacturing, marketing, financing etc.

    Departmentalisation is done to achieve coordination & to facilitate unity of efforts.

    29 XII – Business Studies

    1. Assignment of duties Once departments have been formed each of them is placed under the charge of an individual called departmental head (e.g., production manager, finance manager etc.) Jobs are then allocated to the members of each department according to their skills and qualifications.
    2. Establishing Reporting Relationships :- Merely allocating work is not enough. Each individual should also know from whom he has to take orders and to whom he is accountable. It helps in coordination amongst various departments.

    Importance of Organising :-

    1. Benefits of specialisation : – In organising every individual is assigned a part of total work and not the whole task. Due to this division of work into smaller units and repetitive performance leads to specialisation. Thus organising promotes specialisation which in turn leads to efficient & speedy performance of tasks.
    2. Clarity in working Relationship :- It helps in creating well defined jobs and also clarifying the limits of authority and responsibility of each job. The superior, subordinate relationship is clearly defined in organising.
    3. Effective Administration : It provides a clear description of jobs and related duties which helps to avoid confusion and duplication. Clarity in working relationships enables proper execution of work which results in effective administration.
    4. Optimum Utilisation of resources : The proper assignment of jobs avoids overlapping/duplication of work. This helps in preventing confusion and minimising the wastage of resources and efforts.
    5. Adaptation of change :- It allows a business enterprise to adapt itself according to changes in the business environment. Organisational structures can be suitably modified according to changes.
    6. Development of personnel : Sound organisation encourages initiative & creative thinging on part of employees.
    7. Expansion and growth : It helps in growth & diversification of an enterprise by adding more job positions & department.

    Meaning of Organisational Structure :-

    It seeks to establish relations among all the persons working in the

    organisation. Under the organisational structure various posts are created to

    30 XII – Business Studies

    perform different activities for the attainment of the objectives of the enterprise. Relations among persons working on different posts are determined. The structure provides a basis or framework for managers and other employees for performing their functions.

    The organisation structure can be defined as the frame work within which managerial and operating tasks are performed.

    Relation between Span of Management and Organisation structure

    – Span of mangement refers to the number of subordinates that can be effectively managed by a superior. The Span of management to a large extent gives shape to the organisation structure. This determines the levels of management in the structure.

    Types of Organisation Structures

    Functional Structure

    Divisional Structure

    I. Functional Structure :- In functional structure activities are grouped and departments are created on the basis of specific functions to be performed. For example all the jobs related to production are grouped under production department – Sales to sales department etc.

    Advantages :

    1. Specialisation – Better division of labour takes place which results in specialisation of functions and its consequent benefits.
    2. Coordination is established :- All the persons working within a department are specialist of their respective jobs. It makes the coordination easier at department level.
    3. Helps in increasing managerial efficiency : Managers of one department are performing same type of function again and again which makes them specialised and improves their efficiency.
    4. Minimises cost – It leads to minimum duplication of effort which results in economies of scale and thus lowers cost.

    Disadvantages

    1. Ignorance of organisational objectives – Each departmental head works according to his own wishes. They always give more weight to their departmental objectives. Hence overall organisation objectives suffer.
    2. Difficulty in Inter-departmental Coordination – All departmental heads work as per their own wishes which results coordination within the department but it makes inter-departmental coordination difficult.
    3. Hurdle in complete development – because each employee specialises only in a small part of the whole job.

    Suitability :-

    1. Where the size of business unit is large.
    2. Where specialisation is required.
    3. Where there is mainly only one product in sold.

    II. DIVISIONAL ORGANISATION STRUCTURE :

    Dividing the whole enterprise according to the major products to be

    manufactured (like metal, plastic, cosmetics etc) in known as divisional

    organisation structure.

    Advantages :-

    1. Quick decision making :- Divisional manager can take any decision regarding his division independently which makes decisions quick and effective.
    2. Divisional results can be Assessed :- Divisional results (profit/loss) can be assessed easily. On this basis unprofitable division can be closed.
    3. Growth and Expansion :- It facilitates growth and expansion as new divisions can be added without disturbing existing departments.

    Disadvantages :-

    1. Conflicts – among different divisions on allocation of resources
    2. Duplicity of Functions : – Entire set of functions is required for all divisions. It gives rise to duplicity of efforts among divisions.
    3. Selfish Attitude :- Every division tries to display better performance even sometimes at the cost of other divisions. This shows their selfish attitude.

    Suitablity :-

    1. Where the number of main products are more than one.
    2. Where the size of the concern is large enough.

    FORMAL ORGANISATION

    This structure is designed by the management to achieve organisational goals in which the responsibilities, authority and mutual relationships among all the employees working in an enterprise are clearly defined. It can be functional or divisional.

    Features :-

    1. It in deliberately created by the top management.
    2. It is based on rules and procedures. Which are in written form
    3. It is impersonal – Does not take into consideration emotional aspect.
    4. It clearly difines the authority and responsibility of every individual.
    5. It is created to achieve organisational objectivies.

    Advantages :-

    1. Easier to fix responsibility since mutual relationships are clearly defined.
    2. No overlapping of work – because things move according to a definite plan.
    3. Unity of command through an established chain of commands.
    4. Easy to achieve objectives – because of coordination and optimum use of human and material resources.
    5. Stability in the organisation – because behaviour of employees can be fairly predicted since there are specific rules to guide them.

    Disadvantages :

    1. The work is based by rules which causes unnecessary delay.
    2. Lack of initiatives – because the employees have to do what they are told to do and they have no opportunity of thinking.
    3. Limited in scope – It is difficult to understand all human relationships in an enterprice as it places more emphasis on structure and work.

    Informal Organisation :

    An informal organisation is that organisation which is not established

    deliberately but comes into existence because of common interests, tastes and

    religious and communal relations.

    Features :

    1. It originates from within the formal organisation as a result of personal interaction among employees.
    2. It has no written rules and procedures.
    3. It does not have fixed lines of communication.
    4. It is not deliberately created by the management.
    5. It is personal – means the feelings of individuals are kept in mind.

    Advantage

    1. Speed : Prescribed lines of communication are not followed which leads to faster spread of information.
    2. Fulfillment of social needs – enhances job satisfaction which gives them a sense of belongingness in the organisation.
    3. Quick solution of the problems – because the subordinates can speak out their mind before the officers which helps the officers to understand the problems of their subordinates.

    Disadvantages :-

    1. It creates rumours :- All the persons in an informal organisation talk carelessly and sometimes a wrong thing in conveyed to the other person.
    2. It resists change and lays stress on adopting the old techniques.
    3. Priority to group Interests – Pressurises members to confirm to group expectations.

    Difference between Formal & Informal organisation

     

    Basis

    Formal organisation

    Informal organisation

    1.

    Meaning

    If refers to the structure of well defined authority and and responsibility.

    It refers to the network of social relationships which develops automatically

    2.

    Nature

    Rigid

    Flexible

    3.

    Authority

    Arises by virtue of positions in management

    Arises out to personal qualities.

    4.

    Adherence to rules

    Violation of rules may lead to penalties and punishments

    No such punishments.

    5.

    Flow of

    Takes place through the

    Not through a planned
     

    communi

    cation

    scalar chain

    route It can take place in any direction.

    Delegation of Authority

    Meaning – It means the granting of authority to subordinates to operate within the prescribed limits. The manager who delegates authority holds his subordinates responsible for proper performance of the assigned tasks. To make sure that his subordinates perform all the work effectively and efficiently in expected manner the manager creates accountability.

    Elements of Delegation :-

    1. Authority – The power of taking decisions in order to guide the activities of others. Authority is that power which influences the conduct of others.
    2. Responsibility : It is the obligation of a subordinate to properly perform the assigned duty. When a superior issues orders it becomes the responsibility of the subordinate to carry it out.
    3. Accountability – When a superior assigns some work to a subordinate, he is answerable to his superior for its success or failure.

    Principle of Absoluteness of Accountability – Authority can be delegated but responsibility / Accountability cannot be delegated by a manager. The authority granted to a subordinate can be taken back and re-delegated to another person. The manager cannot escape from the responsibility for any default or mistake on the part of his subordinates.

    Importance of Delegation of Authority

    1. Reduction of Executive work load – It reduces the work load of officers. They can thus utilise their time in more important and creative works instead of works of daily routine.
    2. Employee development – Employees get more opportunities to utilise their talent which allows them to develop those skills which will enable them to perform complex tasks.
    3. Quick and better decision are possible – The subordinate are granted sufficient authority so they need not to go to their superiors for taking decisions concerning the routine matters.
    4. High Morale of subordinates – Because of delegation of authority to the subordinates they get an opportunity to display their efficiency and capacity.
    5. Better coordination – The elements of delegation – authority, responsibility and accountability help to define the power, duties and answerability related to various job positions which results in developing and maintaining effective co-ordination.

    Difference – Authority, Resposibility and Accountability

    Basis

    Authority

    Responsibility

    Accountability

    1. Meaning

    Right to command

    Obligation to perform an assigned task

    Answerability for out come of the assigned task.

    2. Origin

    Arises from formal position

    Arises from delegated authority

    Arises from responsibility.

    3. Flow

    Downward – from Superior to Subordinate

    upward – from Subordinate to Superior

    upward – from Subordinate to Superior

    4. Withdrawl

    Can be withdrawn anytime by giving notice

    Cannot be withdrawn once created

    Cannot be withdrawn once created

    Decentralisation :-

    Meaning – It means to delegate authority to all levels of management for taking decisions. Under decentralisation all the authority except the one which is absolutely necessary for the superiors to hold is given to the subordinates permanently. Under decentralisation the number of centres for taking decisions

    36 XII – Business Studies

    increases because the managers belonging to the middle and lower level have the authority to take important decisions.

    Centralisation and Decentralisation – represents the pattern of authority among managers at different levels. Centralisation of authority means concentrations of power of decision making in a few hands. In such an organisation very little authority is delegated to managers at middle and lower levels. No organisation can be completely centralised or decentralised. They exist together and there in a need for a balance between the two. As the organisation grows in size there is tendency to move towards decentralisation. Thus every organisation characterised by both.

    Importance of Decentralisation :-

    1. Develops initiative amongst subordinates – It helps to promote confidence because the subordinates are given freedom to take their own decisions.
    2. Quick and better decisions – The burden of managerial decisions does not lie on a few individuals but get divided among various persons which helps them to take better and quick decisions.
    3. Relieves the top Executives from excess workload – The daily managerial works all assigned to the subordinates which leaves enough time with the superiors which they can utilise in developing new strategies.
    4. Managerial Development – It means giving authority to the subordinates upto the lower level to take decisions regarding their work. In this way the opportunity to take decisions helps in the development of the organisation.
    5. Better Control – It makes it possible to evaluate performance at each level which results in complete control over all the activities.

    Difference between – Delegation & Decentralisation

     

    Basis

    Delegation

    Decentralisation

    1.

    Nature

    It is a compulsory act

    It is an optional policy

    2.

    Freedom

    Less freedom to take

    More freedom of action due
     

    of action

    decisions due to more

    to less control by the top
       

    control by the superiors

    management.

    3.

    Status

    It is a process of sharing

    It is the result of policy
       

    tasks and authority

    decisions taken by top
         

    management.

    37 XII – Business Studies

    4.

    Scope

    Narrow – as it is confined

    Wide – It includes extensions
       

    to a superior and his

    of delegation to the lowest
       

    immediate subordinate.

    of management.

    5.

    Purpose

    To reduce the burden of

    To increase the role and
       

    the manager

    autonomy of lower level
         

    management.

    QUESTIONS

    1 marks

    1. How effective administration in possible through organising?
    2. Name the function of management which coordinates the physical, financial and human resources and establishes productive relations among them for achievement of specific goals.
    3. Name the organisation which is directed by group norms.
    4. What is organisation chart?
    5. What is meant by organisational structure?
    6. Difficulty in inter-departmental coordination is one of the limitations of which organisation structure.
    7. What is meant by Authority?
    8. What is the basis of delegation of authority.
    9. Why effective management is possible through delegation of authority.

    3 marks

    1. What is functional organisation structure? Write two advantages of this structure.
    2. How accountability related to authority? Explain.
    3. Why is it necessary to delegate authority? Give three reasons.
    4. Write three characteristics of decentralisation.
    5. State three steps in the process of organising.

    4/5 marks

    1. Explain briefly any four features of formal organisation.
    2. The employees of Sachin Ltd. a software company, have formed a Dramatic group for their recreation, Name the type of organisation and state its three features.
    3. Distinguish between Formal and Informal organisation (any four points)
    4. A manager is of the view that he is not responsible for the quality of work that he has delegated to his subordinates . Do you agree?
    5. Delegation of authority provides the means where by a manager multiples himself Commnet.

    6 marks

    1. Explain the importance of organising as a function of management.
    2. Formal organisation is considered better than informal organisation . Do you agree with this statement? Give reasons.
    3. What is meant by Divisional structure of an organisation? Explan any two advantages and two limitations of it.
    4. Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.
    5. Explain the meaning and process of delegation of authority.

  • Notes of Planning Business Studies Class 12

    UNIT 4

    PLANNING

    ConceptPlanning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are to where we want to go. It is one of the basic managerial functions. Planning involves setting objectives and developing appropriate courses of action to achieve these objectives. Thus it in closely connected with creativity and innovation.

    Importance of Planning :-

    1. Planning provides directions : By Stating in advance how work to be done planning provides direction for action. If there was no planning, employees would be working in different direction and the organisation would not be able to achieve its goods efficiently.
    2. Planning reduces the risk of uncertainty :- Planning is an activity which enables a manager to look ahead, anticipate change, consider the impact of change and develop appropriate responses.
    3. Planning reduces wasteful activities :- Planning serves as the basis of coordinating the activities and efforts of different departments and individuals useless and redundant activities are minimised.
    4. Planning promotes innovative ideas : Planning is the first function of management : Managers get the opportunity to develop new ideas and new ideas can take the shape of concrete plans.
    5. Planning facilities decision making : Under planning targets are laid down. The manager has to evaluate each alternative and select the most viable proposition.
    6. Planning establishes standards for controlling :- Planning provides the standards against which the actual performance can be measured and evaluated. Control is blind without planning. Thus planning provides the basis for control.

    24 XII – Business Studies

    Features of Planning

    1.

    Planning focuses on achieving objectives :- Planning function of management starts with determination of objectives. Once the objectives are set up, the next step is to determine the step that are to be followed to achieve these objectives.

    2.

    Planning is the primary function of management : – Planning precedes organising, directing and controlling. It serves as the basis of all other function of management.

    3.

    Planning is pervasive : Planning is required in all types of organisations and at all levels of management as well as in all departments of the organisation.

    4.

    Planning is continuous :- Planning continues as a continuous process which an organisation has to undertake till its existence.

    5.

    Planning is futuristic : Planning is deciding in the present what to do in the future. It is never done for past.

    6.

    Planning is a mental exercise : Planning requires application of the mind involving creative thinking and imagination, therefore this is a mental
     

    exercise :

    Limitations of Planning

    1.

    Planning leads to rigidity : A well defined plan is drawn up with specific goals to be achieved within a specific time frame. A plan decide in advance the future course of action. This kind of rigidity in plan may create difficulty.

    2.

    Planning may not work in a dynamic environment :- The business environment is dynamic, nothing is constant. Every organisation has to constantly adapt itself to the changes in business environment.

    3.

    Planning reduces creativity : Planning is an activity which is done by the top management therefore it reduced other level creativity.

    4.

    Planning involves huge costs : When plans are drawn up, huge cost involved in their formulation.

    5.

    Planning is time consuming : Sometime plans to be drawn up take so much of time that there is not much time left for their implementation.

    6.

    Planning does not guarantee success

    25 XII – Business Studies

    Planning Process

    1. Setting Objectives : The first and foremost step is setting objective. Objective may be set for the entire organisation and each department.

    2.

    Developing premises : Planning premises are the assumptions about the likely shape of events of future. It forecasts the abstacles, problems or limitations in the path of the effective planning because of which the plans may deviate, planning premises supply relevant facts & information relating to future.

    3.

    Identifying alternative courses of action :- Once objective are set and

    premises are developed. Then the next step would be to act upon them. All the alternative courses of action should be identified.

    4.

    Evaluating alternative Courses : The next step is to be weight pros and cons of each alternative. Each course will have many variables which have to be weighted against each other.

    5.

    Selecting an alternative :- After comparison and evaluation the best alternative is chosen for reaching organisation objectives.

    6.

    Implement the plan : Once the plan are developed they are put into action.

    7.

    Follow to action : To see whether plans are being implemented, activities are performed according to schedule.

    Types of Plan :-

    1. Objective : Objectives can be said to be the desired future position that the management would like to reach.

    2.

    Strategy : A strategy refers to future decision defining the organisation s direction and scope in the long run.

    3.

    Policy : Policies are general statements that guide thinking or channelise energies towards a particular direction. We don t sell on Credit is the example of sales policy.

    4.

    Procedure : Procedures are routine steps on how to carry out activities.

    5.

    Rule : Rules are specific statement that tell what is to be done. For example No Smoking is a rule.

    6.

    Programmes :- Programmes are the combination of goals, policies and rules. All these plans together form a programme.

    26 XII – Business Studies

    7.

    Single use plan : Plan made to be used only one time or at most, couple of times because they focus on unique or rare situations within the organisation eg. program, budget.

    8.

    Standing plan : Standing plan are often policies, procedure and program developed to ensure the inernal operation of a given business are operating smoothly. They other developed onces & then modified to suit the business needs requirements.

    9.

    Budgets : A budget is a statement of expected result expressed in numerical terms for a definite period of time in the future.

    10.

    Method : Methods are standardised ways or manner in which a task has to be performed considering the objectives.

    1 Mark Questions

    1.

    Define planning.

    2.

    Explain Procedures.

    3.

    Define Rules.

    4.

    Write the meaning of Budgets.

    5.

    Write one difference between Policies & Procedure.

    6.

    One of the function of management is considered as base for all other function. Name that functions.

    7.

    Name the types of plan in which the movement of competitors is considered.

    8.

    No Smoking in the work shop This statement is related to which types of plan.

    9.

    We do not sell on credit This statement is related to which types of plan.

    10.

    Write the meaning of strategies.

    3 and 4 Marks Question

    11.

    Planning is the heart of management . How?

    12.

    Control is blind without planning. How?

    13.

    How planning proviide base to controlling?

    14.

    Write the difference between rules and policies.

    15.

    Write the difference between Policies & Procedures.

    27 XII – Business Studies

    5 – 6 Marks Question :-

    1. Explain any four types of planning.
    2. In spite of best effort of managers sometime planning fails to achieve desired result due to its limitations. Explain.
    3. Planning keeps the organisation on the right path. In this reference explain the importance of Planning.
    4. Explain the features of Planning.
    5. Explain the limitations of Planning.
    6. Explain the process of Planning.

    28 XII – Business Studies

  • Notes of Business Environment Business Studies Class 12

    UNIT 3

    BUSINESS ENVIRONMENT

    Business environment can be defined as those forces, individuals and institutions who have the ability to influence the working of an organisation.

    Features of Business Environment :

    (1) Totality of external forces : Business environment is the sum total of all the forces/factors external to a business firm.

    Specific and General forces : Business environment includes both specific and general forces. Specific forces includes investors, competitors, customers etc who influence business firm directly while general forces includes social, political, economic, legal and technological conditions which affect a business firm indirectly.

    Inter-relatedness : All the forces/factors of a business environment are closely interrelated.

    Dynamic : Business environment is dynamic in nature which keeps on changing with the change in technology, consumers fashion and tastes etc.

    Uncertainty : Business environment is uncertain as it is difficult to predict the future environmental changes and their impact.

    Complexity : Business environment is complex which is easy to understand in parts separately but it is difficult to understand in totality.

    Relativity : Business environment is a relative concept whose impact differ from country to country and region to region.

    IMPORTANCE OF BUSINESS ENVIRONMENT

    1. I d en t i fi c a t i o n o f op p o rt u n i t i e s t o g e t f i r s t m ov e r a d v a n t a ge :

    Understanding of business environment help an organisation in identifying advantageous opportunities and getting their benefits prior to competitors.

    (2)

    (3)

    (4)

    (5)

    1. (7)

    18 XII – Business Studies

    2.

    Identification of threats : Correct knowledge of business environment help an organisation to identify those threats which may adversely affect its operations.

    3.

    Tapping useful resources : Business environment made available various resources such as capital, labour, machines, raw material etc to a business firm. In order to know the availability of resources and making them available on time knowledge of business environment is necessary.

    4.

    Coping with Rapid changes : Continuous study/scanning of business environment help in knowing the changes which are taking place and thus they can be faced effectively.

    5.

    Assistance in planning and policy formulation : Understanding and analysis of business environment help an organisation in planning & policy formulation.

    6.

    helps in Improving Performance : Correct and continuous monitoring of business environment help an organisation in improving its performance.
     

    DIMENSIONS / COMPONENTS OF BUSINESS

    ENVIRONMENT

    1.

    Economic Environment : It has immediate and direct impact on a business. Rate of interest, inflation rate, change in the income of people etc. are some economic factors which could affect business firms. Economic environment offers opportunities to a firm or it may put constraints.

    2.

    Social Environment : It includes various social forces such as customs, beliefs, literacy rate, educational levels, lifestyle, values etc. Changes in social environment affect an organisation in the long run. Example : now a days people are paying more attention towards their health as a result of which demand for mineral water, diet coke etc has increased while demand of tobacco, fatty food products has decreased.

    3.

    Technological Environment : It provides new and advance ways/ techniques of production. A businessman must closely monitor the technological changes taking place in the industry as it helps in facing competition and improving quality of the product.

    4.

    Political Environment : Changes in political situation also affect business organisations. Political stability builds confidence among business community white political instability and bad law & order situation, may

    19 XII – Business Studies

    bring uncertainly in business activities. Political environment has immediate and great impact on the business transctions, so the businessman must scan the environment carefully so that necessary changes can be made in the organisation as per requirements.

    5. Legal Environment : It constitutes the laws and legislation passed by the Government, administrative orders, court judgements & decisions of various commissions and agencies. Businessman had to act according to various legislations and so their knowledge is very necessary.

    Economic Reforms :

    As a part of Economic reforms, the Government of India announces new

    Industrial Policy in 1991, whose main features are as follows :

    1. Only six industries were kept under licencing scheme.
    2. The role of public sector was limited only to four industries.
    3. Disinvestment was carried out in many public sector enterprises.
    4. Foreign capital/investment policy was liberalised and in many sectors 100% direct foreign investment was allowed.
    5. Automatic permission was given for signing technology agreements with foreign companies.
    6. Foreign investment promotion board (FIPB) was setup to promote & bring foreign investment in India.

    The main objective of New Industrial Policy was to promote Liberalization,

    Privatization and Globalization

    Liberalization : Abolishing licensing requirements; Freedom in deciding the scale of business: removals of restriction on movements of goods and service; reduction in tax rates; freedom in fixing prices; simplifying procedures; making it easier to attract foreign investment.

    Privatization : Giving greater role to private sector in the nation buiding process and reduced role of public sector; Disinvestment in many Public Sector undertaking etc.

    Globalization : It means integration of various economies of the world leading to the emergence of cohesive global economy. The measures taken by the Government include trade liberalization which includes import liberalization; Export Promotion though rationalization of tariff structure; Foreign exchange liberalization; increased interaction among global economics under the aegis (protection/support) of World Trade Organization.

    20 XII – Business Studies

    IMPACT OF GOVERNMENT POLICY CHANGES ON BUSINESS AND INDUSTRY

    1.

    Increasing Competition : Delicencing and entry of foreign firms in Indian market has increased the level of competition for Indian firms.

    2.

    More Demanding Customers : Now customers are more aware and they keep maximum information of the market as the result of which now market are customer/buyer oriented. Now products are produced keeping in mind the demands of the customers.

    3.

    Rapid Changing Technological Environment : Rapid Technological advancement has changed/improved the production process as a result of which maximum production is possible at minimum cost but it leads to tough challenges in front of small firms.

    4.

    Necessity for change : After new industrial policy the market forces (demand & supply) are changing at a very fast rate. Changes in the various components of business environment has made it necessary for the business firms to modify their policies & operations from time to time.

    4.

    Need for Developing Human resources : The changing market corditions of today require people with higher competence and greater commitment, hence the need for developing human resources arise, which could increase their effectiveness and efficiency.

    5.

    Market orientation : Earlier selling concept was famous in the market but now its place is taken by the marketing concept. Today firms produces those goods & services which are required by the customers.

    6.

    Reduction in budgetary Support to Public Sector : The budgetary support given by the government to the public sector is going on reducing and thus the public sector have to survive and grow by utilising their own resources efficiently.
     

    IMPORTANT QUESTIONS

    1 Mark Questions (To be answered in 1 word or 1 sentence)

    1.

    Govt. of India is seriously thinking to allow oil marketing public sector undertaking to fix their own price for diesel. Which economic reform is the reason of this change in government s policy (Answer: Liberalization)

    21 XII – Business Studies

    2.

    Just after declaration of Lok Sabha Elections 2009 results, the Bombay stock exchange s price index (Sensex) rose by 2100 points in a day. Identify the environmental factor which led to this rise. (Answer : Political Environment)

    3.

    State any two impacts of change of government policy on business and industry.

    4.

    The understanding of business environment helps the managers to identify threats . What is meant by threats here? (Answer: Threats refer to the external environment trends and changes that will hinder a firm s performance)

    5.

    Business environment includes both specific and general forces. List any four specific forces. (Answer : Suppliers, investors, customers and competions).

    6.

    The understanding of business environment helps the managers to identify Opportunities . What is meant by Opportunities here? (Answer-Opportunities refer to positive changes and trends that will help the business to improve its performance.)

    7.

    Business Environment includes both specific and general forces . List any four general forces. (Answer: Social, Economic, Political Legal and Technological).

    3/4

    Marks Questions (To be answered in about 50 to 75 words)

    1.

    Explain any three features of Business Environment.

    2.

    Explain any two impacts of Government policy changes on Business and Industry.

    3.

    Explain Increasing Competition and More demanding customers as impact of Government policy changes on Business and Industry.

    5 Marks Questions (To be answered about 150 words)

    1.

    Identify the type of dimension of environment to which the following are related :
     

    i) Banks reducing interest rate on housing loans.
     

    ii) An increasing number of working women.
     
    1. Booking of air tickets through internet.
    2. Alcohol beverages are prohibited to be advertised on Door Darshan

    22 XII – Business Studies
    1. Economic Environment,
    2. Social Envrionment
    3. Technological Environment
    4. Legal Environment

    2. Explain the various dimensions of business environment.

    23 XII – Business Studies

     

  • Notes of Principles of Management Business Studies Class 12

    UNIT 2

    PRINCIPLES OF MANAGEMENT

    Concept of Principle of Management :

    Principle of Management are the broad and general guidelines for managerial decision making. They are different from principles of science as they deal with human behaviour. They are different from techniques of management as techniques are method whereas principles are guidelines to action and decision making. Principle of management are different from values which are formed as generally accepted behaviour in society and having moral coordination where-as principles are formed through research having teachnical nature.

    Nature of Principles of Management

    The nature of principles of management can be described in the following points :

    1. Universal applicability i.e. they can be applied in all types of organizations, business as well as non-business, small as well as large.
    2. General Guidelines : They are General Guidelines to action which however do not provide readymade solutions as the business environment is very changing or dynamic.
    3. Formed by practice and experimentation : They are developed after thorough research work on the basis of experiences of managers.
    4. Flexible which can be modified by the practicing manager as per the demands of the situations.
    5. Mainly Behavioural : Since the principles aim at influencing human behaviour they are behavioural in nature.
    6. Cause and Effect relationship : They intend to establish relationship between cause & effect so that they can be used in similar situations.
    7. Contingent : Their applicability depends upon the prevailing situation at a particular point of time.

    12 XII – Business Studies

    Significance of the Principles of Management

    The significance of principles of management can be derived from their utility

    which can be understood from the following points :

    1. Providing managers with useful insights into reality.
    2. Optimum utilization of resource and effective administration.
    3. Scientific decisions.
    4. Meeting the changing environmental requirements.
    5. Fulfilling social responsibility.
    6. Management training, education and research.

    Taylor s Scientific Management :

    F.W. Taylor (1856-1915) was an American mechanical engineer who believed

    in analyzing the work scientifically and finds one best way to do any work.

    His book Principles of Scientific Management was published in 1911.

    Principles of Scientific Management :

    Taylor gave the following principles of scientific management :

    1. Science and not the rule of thumb : which implies developing one standard method through work study unifying the best practices globally which would result in optimum resource utilization.
    2. Harmony, Not discord : which implies that there sould be mental revolution on part of managers, workers and owners to respect each other s role and eliminate any class conflict to realize organizational objectives.
    3. Cooperation not individualism : It is an extension of the Principle of Harmony, Not discord whereby constructive suggestions of workers should be adopted and they should not go on strike as both management and workers share responsibility and perform together. Infact there should be complete cooperation between the labour and the management instead of individualism.
    4. Development of Each and Every Person to His or Her greatest Efficiency and Prosperity : Which implies development of competencies of all persons of an organization after their scientific selection and assigning work suited to their temperament and abilities.

    Techniques of Scientific Management

    (1) Functional Foremanship : Functional foremanship is a technique in which planning and execution are saparated. There are 8 types of specialized professionals 4 each under planning and execution who keep a watch on all workders to extract optimum performance.

    1. Standardisation and Simplification of work : Standardization refers to developing standards for every business activity whereas Simplification refers to eliminating superfluous varieties of product or service. It results in savings of cost of labour, machines and tools. It leads to fuller utilization of equipment and increase in turnover.
    2. Method Study : The objective of method study is to final out one best way of doing the job to maximise efficiency in the use of materials, machinery, manpower and capital.
    3. Motion Study : Motion study seeks to eliminate unnecessary motions in the execution of a job to enable it to be completed in less time efficienty.
    4. Time study : It determines the standard time taken to perform a well defined job. The objective of time study is to determine the number of workers to be employed, frame suitable incentive schemes & determine labour costs.
    5. Fatigue study : Fatigue study seeks to determine amount and frequency or rest intervals in completing a task.
    6. Differential Piece Wage system : Differential Piece Wage system seeks to reward a more efficient worker by giving him/her more wages for more quantity of standard production achieved.
    7. Mental Revolution : It involves a change in the attitude of workers and management towards one another from competition to cooperation.

    14 XII – Business Studies

    Foyol s Principles of Management : Henri Fayol (1841-1925) was a French

    Mechanical engineer who gave 14 general principles of Management which are

    as under :

    1. Division of Work : Work is divided into small tasks / jobs and each one is done by a trained specialist which leads to greater efficiency.
    2. Authority and Responsibility : Managers are empowered with authority to give orders and obtain obedience and responsible for the accomplishment of task for which they are granted authority.
    3. Discipline : it is the obedience to organizational rules and employment agreement which are necessary for working of the organization.
    4. Unity of Command : There sould be only one boss for every employee. If an employee gets orders from two superiors at the save time the principle of unity of command is voilated.
    5. Unity of Direction : Each group of activities having the same objective must have one head and one plan. This ensures unity of action and coordination.
    6. Subordination of Individual Interest to General Interest : The Interest of an organization should take priority over the interests of any one individual employee.
    7. Remuneration of Employees : The overall pay and compensation should be fair to both employees and the organization.
    8. Centralization and Decentralization : The concentration of decision making authority is called centralization whereas its dispersal among more than one person is known as decentralization. Both should be balanced.
    9. Scalar Chain : The formal lines of authority between superiors and subordinates from the highest to the lowest ranks is known as scalar chain. This chain should not be voilated but in emergency employees at same level can contact through Gang Plank.

    1. Order : A place for everything (everyone) and everything (everyone) in its place. People & materials must be in suitable places at oppropriate time for maximum efficiency.
    2. Equity : The working environment of any organization should be free from all form of discrimination and the principles of Justice and fair play should be followed.
    3. Stability of Personnel : After being selected and appointed after due and rigorous procedure the selected person should be kept at the post for a minimum period decided to show result.
    4. Initiative : Workers should be encouraged to develop and carry out their plans for improvements. Initiative means taking the first step with self motivation It is thinking out and executing the plan.
    5. Espirit De Corps : Management should promote team spirit, unity and harmony among employees. Management should promote a team work.

    Difference between unity of command and unity of direction

    Basis

    (2) Meaning

    (2) Aim

    Unity of Command

    One subordinate should receive orders from & should be responsible to only one superior.

    Prevents dual subordination

    Unity of Direction

    Each group of activities having save objectives must have one head and one plan

    Prevents overlapping of activities

    (3) Implications Affects an individual employee

    Affects the entire organisation.

    Fayol versus Taylor :

    While the work of Taylor concerned shop floor, the work of Fayol concerned General Principles applicable to all types of situations.

    IMPORTANT QUESTIONS

    1 Mark Questions (To be answered in 1 word or 1 sentence)

    1. The Principles of Management are different from those used in pure science”. Write anyone difference.
    2. Why is it said that the management principles are universal?
    3. Different techniques were developed by Taylor to facilitate the Principles

    of Scientific Management. One of them was ‘Fatigue study’. What is the objective of this study?

    1. List any two principles of “Scientific Management” formulated by Taylor for managing an organization scientifically?
    2. What is meant by principles of management?
    3. State anyone principle of scientific management.
    4. State any one reason why Principles of Management are important.
    5. Give the meaning of mental revolution as suggested by Taylor.

    3/4 MARKS QUESTIONS :

    1. Explain the following principles of management:-
    2. Equity.
    3. Remuneration of Employees.
    4. In your school, you observe that books, are kept in office, chalks in the library and office records in the staffroom. How will that affect the achievement of school objectives? Which aspect of management is lacking and why? As a manager, what steps will you take to rectify the shortcomings?

    5/6 Marks Question (to be answered in about 150 words)

    1. Explain any two techniques of Taylor s Scientific Management.
    2. Explain the following principles of Fayol with example.
    3. Unity of Command
    4. Unity of Direction
    5. Order
    6. Espirit De Corps.

  • Notes of Nature and Significance of Management Business Studies Class 12

    UNIT 1

    NATURE AND SIGNIFICANCE OF MANAGEMENT

    Management is an art of getting things done through others. Management can be defined as, the process of getting things done with the aim of achieving goals effectively and efficiently.

    Efficiency and Effectiveness

    Efficiency means doing the task correctly at minimum cost while effectiveness means completing the task correctly. Although Efficiency and effectiveness are different but they are interrelated. It is important for management to be both i.e. effective and efficient.

    Example : A business produces targeted 1000 units but at a higher cost is effecitive but not efficient. Therefore if the business has to be effective and efficient then it has to produce 1000 units within cost.

    Characteristics of Management

    1. Goal oriented Process : It is a goal oriented process, which is undertaken to achieve already specified and desired objectives.
    2. Pervasive : Management is pervasive in nature. It is used in all types of organizations whether economic, social or political and at every level.
    3. Multidimensional : It is multidimensional as it involves management of Work, People and operations.
    4. Continuous : It is a continuous process i.e. its functions are being performed by all managers simultaneously. The process of management continue till an organisation exist for attaining its objectives.
    5. Group Activity : It is a group activity since it involves managing and coordinating activities of different people as a team to attain the desired objectives.
    6. Dynamic function : it is a dynamic function since it has to adapt to the

    6 XII – Business Studies

    changing environment.

    7. Intangible Force : It is an intagible force as it cannot be seen but its effect are felt in the form of results like whether the objectives are met and whether people are motivated or not.

    Objectives of management

    1. Organizational objectives of Survival (Earning enough revenues to cover cost); Profit (To Cover cost and risk); & Growth (To improve its future Prospects).
    2. Social Objectives of giving benefits to society like using environmental friendly practices and giving employment to disadvantaged sections of society etc.
    3. Personal Objectives because diverse personal objectives of people working in the organization have to be reconciled with organizational objectives.

    Importance of management

    1. Achieving Group Goals : Management helps in achieving group goals. Manager give common direction to the individual effort in achieving the overall goal of the organisation.
    2. Increases Efficiency : Management increases efficiency by using resources in the best possible manner to reduce cost and increase productivity.
    3. Creates Dynamic Organisation : Management helps in creating Dynamic organisation which could adopt changing situations easily.
    4. Achieving Personal Objectives : Management helps in achieving objectives of individuals working in the organisation.
    5. Development of Society : Management helps in the development of society by producing good quality products, creating employment opportunities and adopting new technology.

    Management as an Art

    Art refers to skillful and personal application of existing knowledge to achieve desired results. It can be acquired through study, observation and experience. The features of art are as follows.

    (2) Existence of theoretical knowledge : In every art systematic & organised study material should be available compulsorily to acquire theoretical knowledge.

    1. Personalised application : The use of basic knowledge differ from person to person and thus, art is a very personalised concept.
    2. Based on practice and creativity : Art involves the creative practice of existing theoretical knowledge.

    All the features of art are present in management so it can be called an art.

    Management as a science

    Science is a systematised body of knowledge that is based on general truths

    which can be tested anywhere, anytime. The features of science are as follows

    1. Systematized body of knowledge : Science has a systematised body of knowledge based on principles and experiments.
    2. Principles based on experiments & observation : Scientific principles are developed through experiments and observations.
    3. Universal Validity : Scientific principles have universal validity and application. Management has systematic body of knowledge and its principles are developed over a period of time based on repeated experiments & observation, which are universally applicable.

    As the principles of management are not as exact as the principles of pure science, so it may be called inexact science.

    Management as a profession :

    Profession means an occupation for which specialised knowledge and skills are

    required. The main features of profession are as follows.

    1. Well defined body of knowledge : All the professions are based on well defined body of knowledge.
    2. Restricted entry : The entry in every profession is restricted through examination or through some minimum educational qualification.
    3. Professional Associations : All professions are affiliated to a professional association which regulates entry and frame code of conduct relating to the profession.
    4. Ethical code of conduct : All professions are bound by a code of conduct which guides the behaviour of its members
    5. Service Motive : The main aim of a profession is to serve its clients.

    Management does not fulfill all the features of a profession and thus it is not

    a full pledged profession.

    Levels of Management : Top, Middle and operational levels.

    Top Level

    Consists of Chairperson, Chief Executive Officer, Chief Operating Officer or equivalent and their team.

    Chief task is to integrate and to coordinate the various activities of the business, framing policies, formulating organisational goals & strategies.

    Middle Level

    Consists of divisional heads, Plant Superintendent and Operations Manager etc.

    Main tasks are to interpret the policies of the top management, to ensure the availability of resources to implement Policies & to coordinate all activities, ensure availability of necessary personnel & assign duties & responsibilties to them.

    Lower Level / Supervisory Level

    Consists of Foremen and supervisors etc.

    Main task is ensure actual implementation of the policies as per directions, bring workers grievances before the management & maintain discipline among the workers.

    Functions of Management : Planning, Organizing, Staffing, Directing and Controlling.

    Planning is deciding in advance what to do in future and how to do it.

    Organizing is to assign duties, grouping tasks, establishing authority and allocating resources required to carry out a specific plan.

    Staffing is finding the right people for the right job.

    Directing is leading, influencing and motivating employees to perform the tasks assigned to them.

    Controlling is monitoring the organizational performance towards the attainment of organizational goals.

    Coordination : The essence of Management : Coordination is the force which synchronizes all the functions of management and activities of different departments.

    It integrates the group efforts.

    It ensure unity of action.

    9 XII – Business Studies

     

    It is a continuous process.

    It is an all pervasive function.

    It is a deliberate function.

    It is the responsibility of all managers
     

    IMPORTANT QUESTIONS

    1 Mark Questions (To be answered in one word or one sentence)

    1.

    In order to be successful an organization must change its goals according to the needs to the environment. Which characteristic of management is highlighted in the statement? (Answer: It is a dynamic function).

    2.

    To meet the objectives of the firm the Management of Angora Limited offers employment to Physically Challenged persons. Identify the organizational objective it is trying to achieve (Answer : Social Objective.

    3.

    Management of any organization strives to attain different objectives. Enumerate any two such objectives.

    4.

    Give any two characteristics of management.

    5.

    Management is multidimensional. Enumerate any two dimensions of management.

    6.

    Managerial activities are performed in all types of organizations in all departments at all levels. Which management character is highlighted here? (Answer : It is all pervasive)

    7.

    Your grandfather has retired where he is responsible for implementing the plans developed by the top management at which level of management was he working? State one more function of this level of management. (Answer: Middle level management) (Write any one function of this level).

    8.

    List any two social objectives of management.

    9.

    Your grandfather has retired as a Director of manufacturing company. At which level of management was he working? Different functions are performed at this level. State any one such function. (Answer : Top level of management) Write any one function of this level).

    10.

    What is meant by management ?

    10 XII – Business Studies

    3/4 Marks Questions (To be answered in about 50 to 70 words)

    1. There are different Business Objectives and Economic Objectives are one among them. Explain these economic objectives.
    2. Explain how management is an art
    3. Explain why management is not considered a full fledged profession.
    4. Explain how management is science.
    5. Coordination is the essence of management . Explain.

    5/6 Marks Questions (To be answered in about 150 words)

    1. Management is a Profession like Accounting, Medicine and Law as it also has a well defined body of knowledge. Yet management does not qualify to be a full fledged profession. Why? (Hint : No formal qualification is prescribed to enter management, no code of conduct is prescribed).
    2. Success of an organization largely depends upon its management Explain any five reasons to justify the statement. (Hint : Give five points of Importance of management).

  • Notes of Microeconomics Class 12th CBSE

    CBSE Notes for Class 12 Micro Economics

    1. Introduction to Economics Notes Class 12 Microeconomics 
    2. Consumer Equilibrium Notes Class 12 Microeconomics 
    3. Demand Notes Class 12 Microeconomics 
    4. Elasticity of Demand Notes Class 12 Microeconomics 
    5. Production Notes Class 12 Microeconomics 
    6. Cost Notes Class 12 Microeconomics 
    7. Supply Notes Class 12 Microeconomics 
    8. Revenue Notes Class 12 Microeconomics 
    9. Producer Equilibrium Notes Class 12 Microeconomics 
    10. Perfect Competition Notes Class 12 Microeconomics 
    11. Non-Competitive Market Notes Class 12 Microeconomics 
    12. Market Equilibrium with Simple Applications Notes Class 12 Microeconomics 

  • FORMS OF MARKET AND PRICE DETERMINATION NOTES CLASS 12th

    UNIT – IV: FORMS OF MARKET AND PRICE DETERMINATION

    Market : Market is a place in which buyers and sellers come into contact for the purchase and sale of goods and services.

    • Perfect Competition
    • Monopoly
    • Monopolistic competition
    • Oligopoly

    Market structure: refers to number of firms operating in an industry, nature of competition between them and the nature of product.

    Types of market

    1. Perfect competition.
    2. Monopoly.
    3. Monopolistic Competition
    4. Oligopoly.
    5. Perfect competition: refers to a market situation in which there are large number of buyers and sellers. Firms sell homogeneous products at a uniform price.
    6. Monopoly market: Monopoly is a market situation dominated by a single seller who has full control over the price.
    7. Monopolistic competition: It refers to a market situation in which there are many firms who sell closely related but differentiated products.
    8. Oligopoly: is a market structure in which there are few large sellers of a commodity and large number of buyers.

    Features of perfect competition:

    1. Very large number of buyers and sellers.
    2. Homogeneous product.
    3. Free entry and exit of firms.
    4. Perfect knowledge.
    5. Firm is a price taker and industry is price maker.
    6. Perfectly elastic demand curve (AR=MR)
    7. Perfect mobility of factors of production.
    8. Absence of transportation cost.
    9. Absence of selling cost.

    Features of monopoly:

    1. Single seller of a commodity.
    2. Absence of close substitute of the product.
    3. Difficulty of entry of a new firm.
    4. Negatively sloped demand curve(AR>MR)
    5. Full control over price.
    6. Price discrimination exists
    7. Existence of abnormal profit.

    Features of monopolistic competition

    1. Large number of buyers and sellers but less than perfect competition.
    2. Product differentiation.
    3. Freedom of entry and exit.
    4. Selling cost.
    5. Lack of perfect knowledge.
    6. High transportation cost.
    7. Partial control over price.

    Main features of Oligopoly.

    1. Few dominant firms who are large in size
    2. Mutual interdependence.
    3. Barrier to entry.
    4. Homogeneous or differentiated product.
    5. Price rigidity.

    Features of pure competition

    1. Large number of buyers and sellers.
    2. Homogeneous products.
    3. Free entry and exit of firm.

    DETERMINATION OF PRICE UNDER PERFECT COMPETITION

    Equilibrium: It means a position of rest, there is no tendency to change.

    Market equilibrium: It means equality between quantity demanded and quantity supplied of a commodity in the market.

    Equilibrium price: This is the price at which market demand of a commodity is exactly equal to the market supply.

    Market demand: It refers to the sum total demand for a commodity by all buyers in the market.

    Market supply: It refers to supply of a commodity by all the firms in the market

    Very short answer questions

    1. Define perfect competition.

    Ans:- Perfect competition is a market with large number of buyers and sellers , selling homogeneous product at same price.

    1. Define monopoly.

    Ans: Monopoly is a market situation dominated by a single seller who has full control over the price.

    1. Define monopolistic competition.

    Ans:- It refers to a market situation in which many buyers and sellers selling differentiated product and have partial control over the price.

    1. Under which market form firm is a price maker?

    Ans: – Monopoly

    1. What are selling cost?

    Ans:- Cost incurred by a firm for the promotion of sale is known as selling cost. (Advertisement cost)

    1. What is oligopoly?

    Ans:- Oligopoly is defined as a market structure in which there are few large sellers who sell either homogenous or differentiated goods.

    1. In which market form is there product differentiation?

    Ans:- Monopolistic competition market and oligopoly market.

    1. What is product differentiation?

    Ans: It means close substitutes offered by different producers to show their output differs from other output available in the market. Differentiation can be in colour, size packing, brand name etc to attract buyers.

    1. What do you mean by patent rights?

    Ans:- Patent rights is an exclusive right or license granted to a company to produce a particular output under a specific technology.

    1. What is price discrimination?

    Ans: – It refers to charging of different prices from different consumers for different units of the same product.

    1. What is the shape of marginal revenue curve under monopoly?

    Ans:- Under monopoly market MR curve is downwards sloping curve form left to right and it lies below the AR curve.

    1. What do you mean by abnormal profits?

    Ans:- It is a situation for the firm when TR > TC.

    1. Why AR is equal to MR under perfect competition?

    Ans:- AR is equal to MR under perfect competition because price is constant.

    1. What are advertisement costs?

    Ans:- Advertisement cost are the expenditure incurred by a firm for the promotion of its sales such as publicity through TV , Radio , Newspaper , Magazine etc.

    1. What is short period?

    Ans:- Short period refers to that much time period when quantity of output can be changed only by changing the quantity of variable input and fixed factors remaining same.

    1. Define long period.

    Ans:- Long period refers to that much time period available to a firm in which it can increase its outputs by changing its fixed and variable inputs.

    1. What is market period?

    Ans: Market period is defined as a very short time period in which supply of commodity cannot be increased.

    1. What is meant by normal profit?

    Ans:- Normal profit is the minimum amount of profit which is required to keep an entrepreneur in production in the long run.

    1. What is break-even price?

    ANs:-In a perfectly competitive market, break- even price is the price at which a firm earn normal profit (Price=AC). In the long run, Break- even price is that price where P=AR=MC

    Short Answer Questions: (3 / 4 Marks)

    1. Explain any four characteristics of perfect competition market.

    Ans:-

    1. Large number of buyers and sellers : The number of buyers and sellers are so large in this market that no firm can influence the price.
    2. Homogeneous products: Products are uniform in nature. The products are perfect substitute of each other. No seller can charge a higher price for the product. Otherwise he will lose his customers.

    iiU Perfect knowledge: Buyers as well as sellers have complete knowledge about the product.

    iv) Free entry and exit of firm: Under perfect competition any firm can enter or exit in the market at any time. This ensures that the firms are neither earning abnormal profits nor incurring abnormal losses.

    1. Explain briefly why a firm under perfect competition is a price taker not a price maker?

    Ans:- A firm under perfect competition is a price taker not a price maker because the price is determined by the market forces of demand of supply. This price is known as equilibrium price. All the firms in the industry have to sell their outputs at this equilibrium price. The reason is that, number of firms under perfect competition is so large. So no firm can influence the price by its supply. All firms produce homogeneous product.

    y

    y Industry

    Demand & Supply

    Firm

    AR/MR

    x

    Output

    1. Distinguish between monopoly and perfect competition.

    Ans:-

    Perfect Competition

    Monopoly

    Very large number of buyers and sellers.

    Single seller of the product.

    Products are homogenous

    Product has no close substitute

    Firm is the price taker and not a maker

    Firm is price maker not price taker

    Price is uniform in the market (price =AR)

    Due to price discrimination price is not uniform.

    Free entry and exit of firms.

    Very difficult entry of new firms.
    1. Which features of monopolistic competition are monopolistic in nature?

    Ans:- i) Product differentiation

    1. Control over price
    2. Downward sloping demand curve
    3. What are the reasons which give emergence to the monopoly market?

    Ans:-i) Patent Rights: Patent rights are the authority given by the government to a particular firm to produce a particular product for a specific time period.

    1. Formation of Cartel: Cartel refers to a collective decision taken by a group of firms to avoid outside competition and securing monopoly right.
    2. Government licensing: Government provides the license to a particular firm to produce a particular commodity exclusively.
    3. Explain the process of price determination under perfect competition with the help of schedule and a diagram.

    Ans:-Equilibrium price is that price which is determined by market forces of demand and supply. At this price both demand and supply are equal to each other. Diagrammatically it is determined at the point where demand curve and supply curve intersect each other. At this point price is known as equilibrium price and quantity is known as equilibrium quantity.

    0 2 4 6 8

    Mkt. Demand & Supply

    Price (Rs.)

    M.D (Units)

    M S (Units)

    1

    10

    2

    2

    8

    4

    3

    6

    6

    4

    4

    8

    5

    2

    10
    1. When will equilibrium price not change even if demand and supply increase?

    Ans:- When proportionate increase in demand is just equal to proportionate increase in supply. Equilibrium price will not change. It can be shown in the following diagrams.

    y S

    In the above diagram increase in demand is just equal to increase in supply. Demand curve shift from D to D1 and supply curve shift from S to S1 which intersect at point E. Thus equilibrium price remain unchanged at OP though equilibrium quantity increased from OQ to OQ1.

    1. How does increase in price of substitute goods in consumption affect the equilibrium price of a good? Explain with a diagram.

    Ans:- An increase in price of substitute goods (coke) will cause increase in demand for its related goods (Pepsi) . The demand curve for Pepsi will shift to the right side. The supply curve of Pepsi remains the same. It will lead to an increase in equilibrium price of Pepsi and increase in quantity also.

    Y D1

    Result: Price increases from OP to OP1.Quantity demand increases from OQ to OQ1

    1. How does the equilibrium price of a normal commodity change when income of its buyers falls? Explain the chain effects.

    Ans:-

    • When income falls demand falls
    • Supply remaining unchanged .There is excess supply at a given price
    • This leads to competition among sellers to reduce the price.
    • As a result demand starts rising and supply starts falling.
    • These changes continue till a new equilibrium price is established where demand equal supply.
    • Equilibrium price falls.
    1. Why is the demand curve facing monopolistically competitive firm likely to be very elastic?

    Ans:- It is because the product produced by monopolistically competitive firms are close substitute to each other. If the products are closer substitutes to each other the elasticity of demand is high which makes the firm demand curve is elastic.

    1. Show with the help of diagram the effect on equilibrium price and quantity when supply is perfectly inelastic and demand increases and decreases?

    Ans:-

    Y

    D1 S

    x

    When supply is perfectly inelastic and demand increases. Demand curve shift to towards right. The new demand curve D1 intersects the supply curve at point E1.

    Result : Price increases from OP to OP1 and quantity demand remains unchanged.

    O)

    u

    CL

    Y

    S

    x

    In the above diagram demand curve shift left wards from D to D1 Price falls from OP to OP1 , but quantity remains same.

    1. Explain the implication of free entry and free exit of a firm in perfect competitive market.

    Ans: – If there is free entry and free exit of firms, then no firm can earn abnormal profit in the long run (firm earn zero abnormal profit). Each firm earns just normal profit.

    1. Explain the implication of the feature ‘large number of buyers and sellers’ in perfect competition

    LONG ANSWER QUESTIONS (6 MARKS)

    1. Equilibrium price may or may not change with shifts in both demand and supply curve. Comment.

    Ans:- There can be 3 situations of a simultaneous right wards shift of supply curves and demand curves.

    1. When demand increases more than supply price and quantity both will increase.

    Y

    When increase in demand is more than increase in supply price increases from OP to OP1. Quantity increases from OM to OM1. Increase in price is less than increase in quantity.

    1. When demand increases less than supply, price will fall but quantity will rise.

    CD

    u

    CL

    M kt . D & Su p.

    S1

    X

    When supply increases more than demand price falls from OP to OP1 and quantity demand i: y ases from OM to OM1. Decrease in price is less than increase in quantity. i) When demand and supply increases equally then equilibrium price remain same.

    X

    When increase in demand is equal to increase in supply price remains unchanged at OP. Quantity exchanged increases from OQ to OQi.

    1. Distinguish between collusive and non-collusive oligopoly. Explain the following features of oligopoly.
    2. Few firms.
    3. Non-price competition.

    Ans:- Collusive oligopoly is one in which the firm cooperate with each other in deciding price and output.

    Non collusive oligopoly is one in which firms compete with each other.

    Few firms: There are few sellers of the commodity and each seller sells a substantial portion of the output of the industry. The number of firm is so small that each seller knows that he can influence the price by his own action and that he can provoke rival firms to react.

    Non price competition: The firms are afraid of competition through lowering the price because it may start price war. Therefore they complete through the non price factors like advertising, after sales service etc.

    1. With the help of demand and supply schedule explain the meaning of excess demand and its effects on price of a commodity.

    Ans:- Demand and supply schedule

    Price(Rs)

    Market demand (in kg.)

    Market supply(in kg.)

    10

    10

    50

    9

    20

    40

    8

    30

    30

    The above schedule shows market demand and market supply of the commodity at different prices. At the price of 7 and 6 the market demand is greater than market supply. This is the situation of excess demand. There will be competition among the buyers resulting in a rise in price. Rise in price will result in fall in market demand and rise in market supply. This reduces the excess demand. These changes continue till the price rises to Rs. 8 at which excess demand is zero. The excess demand results in a rise in price of the commodity.

    7

    40

    20

    6

    50

    10
    1. Market for a good is in equilibrium. There is increase in demand for the goods. Explain the chain effect of this change.

    Ans:-

    • Increase in demand shift the demand curve from D to D1 to right leading to excess demand E E1 at the given price OP.
    • There will be competition among buyers leading to rise in price.
    • As price rise supply starts rising (along S) demand starts falling.
    • These changes continues till D=S at a new equilibrium at E1
    • The quantity rises to OM to OM1 and price rises OP to OP1
    1. Distinguish between monopoly and monopolistic competition.

    Ans:- i) Under monopoly there is single seller / producer of the commodity. Whereas under monopolistic competition there are large numbers of sellers, so the firm under monopoly has greater influence over price than under monopolistic competition.

    ii) There is freedom of entry of new firms under monopolistic competition where as there is no such freedom under monopoly. As a result a monopolist can earn abnormal profit in the long run.

    1. Under monopolistic competition the product is heterogeneous while under monopoly there is no close substitute of the product.
    2. Demand curve in a monopoly market is less elastic than the demand curve under monopolistic competition because under monopoly there is no close substitute of the product.

    HOTS

    1. How much loss a firm can bear in the short run?

    Ans:- A firm can bear losses up to its total fixed cost in the short run.

    1. The firms are earning abnormal profits. Will the number of firms in the industry change?

    Ans:- If firms are getting abnormal profit new firms will enter the industry.

    1. If firms are making abnormal losses will the number of firms in the industry change?

    Ans:- When firms are suffering losses, the number of firms in the industry will decrease as some firms may exit from the industry.

    1. Why is demand curve facing a monopolistic competition firm likely to be more elastic?

    Ans:- In monopolistic competition market the demand curve of a firm is likely to be more elastic, the reason behind this is that all the firm in the industry produce close substitute of each other. If close substitute of any good is available in the market then elasticity of demand is very high because whenever there is a hike in price the consumer will shift to its substitutes. That is why a firm’s demand curve under monopolistic competition is more elastic.

    1. Explain how the efficiency may increase if two firms merge.

    Ans:- i) When two firms merge then there combined efforts and efficiency brings more output to the firm. Increase in the sale of output and economies of scale can be availed. It leads to division of labour and can get advantage of the specialization. Use of better and advanced technology saves the cost of production.

    FREQUENTLY ASKED QUESTIONS – CBSE BOARD EXAMINATION

    One Mark Questions (1M)

    1. In which market form can a firm not influence the price of the product?
    2. What is equilibrium price?
    3. Under which market form a firm is a price taker?
    4. Define market equilibrium.
    5. Define Monopoly.
    6. State one feature of Oligopoly.

    Three Marks Questions (3M)

    1. Why is the number of firms small in an Oligopoly Market? Explain.
    2. Explain three features of Monopoly.
    3. How is equilibrium price of a commodity affected by a decrease in demand?
    4. Why is the demand curve more elastic under monopolistic competition than under

    monopoly? Explain.

    1. Explain the feature ‘differentiated product’ of a market with monopolistic competition.
    2. Explain the effect of ‘large number of buyers and sellers’ in a perfectly competitive

    firm.

    Four Marks Questions (4 M)

    1. Distinguish between Monopoly and Perfect Competition.
    2. Draw the Average Revenue Curve of a firm under a) Monopoly and b) Perfect Competition. Explain the difference in these curves, if any.
    3. Show with the help of a diagram the effects of an increase in demand for a commodity on its equilibrium price and quantity.
    4. Explain with the help of a diagram the determination of price of a commodity under perfect competition.
    5. Explain the concept of equilibrium price with the help of market demand and supply schedules.

    Six Marks Questions (6 M)

    1. Given the market equilibrium of a good. What are the effects of Simultaneous increase in both demand and supply of that good on its equilibrium price and quantity?
    2. Distinguish between perfect competition and monopoly. Why is the demand curve facing a firm under perfect competition perfectly elastic?
    3. Explain briefly the three feature of perfect competition.
    4. Explain the chain of effects on demand, supply and price of a commodity caused by a leftward shift of the demand curve. Use diagram.
    5. Explain three feature of Monopolistic Competition.