BUSINESS ECONOMICS NOTES PDF

Money Supply

Money supply is the total stock of money available in an economy at a given time.

• Narrow money (e.g., M1): includes highly liquid components like currency with public and demand deposits.
• Broad money (e.g., M3): includes M1 plus less liquid deposits like time deposits and other near-money components.

Mini table:

Thus, broad money is wider and larger in size than narrow money.

Types of unemployment (any four):

• Frictional: temporary unemployment during job search or job change.
• Structural: mismatch between workers’ skills/locations and job requirements.
• Cyclical: caused by recession/business cycle downturn.
• Seasonal: due to seasonal nature of work (agriculture, tourism).
• Disguised: surplus labour where marginal productivity is very low (common in agriculture).

Thus, unemployment may arise due to both short-term factors and long-term structural issues.

Price Determination: Perfect Competition vs Monopoly

Perfect competition (price taker)

• Market demand & supply determine price (P).
• Firm accepts P and chooses output where P = MC (since MR = P).

Monopoly (price maker)

• Monopolist faces market demand curve.
• Chooses output where MR = MC.
• Sets price from demand curve corresponding to that output.

Perfect competition:
Market sets P → Firm chooses Q where P = MC

Monopoly:
Choose Q where MR = MC → Set P from demand curve

Thus, competitive price is market-determined, while monopoly price is firm-determined based on demand and cost conditions.