PRACTICAL APPROACH TO MARKET EQUILIBRIUM AND EFFECT OF TAX

The market supply and demand function are as follows:

Qd =1200-2P

Qs = 4P

On the basis of this information, answer the following:

a) Determine the equilibrium price and quantity

b) What is the effect of tax Rs 50 per unit on production?

Solution:

In the above question, the demand function is :

Qd =1200-2P

Similarly, the supply function is :

Qs = 4P

a) Computation of equilibrium price and quantity
As we know, at equilibrium point the market demand equals market supply.

In other words,

Qd = Qs

Putting the values of Qd and Qs

1200-2P = 4P

6P = 1200

Or, P = Rs.200


Now, putting the value of P in demand function

Qd = 1200 – 2p = 1200 -2 x 200 = 800 unit.


Similarly, putting the value of P in supply function

Qs = 4P = 4 X 200 = 800 unit.


Therefore, the required equilibrium price and quantity is Rs. 200 and 800 units respectively.

b) Computation of Effect due to tax of Rs 50 per unit on production:

Since, the effect of tax do not affect the market demand function but affects the market supply function, we need to first compute the new market supply function by considering the effect of tax.

Market Demand Function:

Qd = 1200 – 2P

Market Supply Function:

Qs = 4 (P – 50 )

Or Qs = 4P – 200

Again, at Market Equilibrium Point

Qd = Qs

Putting the values of Qd and Qs

1200-2P = 4P – 200

Or, 6P = 1400

Or, P = Rs. 233.33

Now, Putting the value of P in demand function

Qd = 1200 – 2p = 1200 -2 x 233.33 = 733.33 = 733 unit


Similarly, putting the value of P in supply function

Qs = 4P – 200 = 4 X 233.33 – 200 = 733.33 = 733 unit



Therefore, the new equilibrium price and quantity is Rs. 200 and 800 units respectively.

	Effect before tax	Effect after tax
Price	Rs. 200	Rs. 233.33
Quantity	800 Unit	733 unit

The effect of tax is that, it increases the price and decreases the quantity.

Tutorial Note :

                   

If there would be subsidy in the question then, add the government subsidy in the supply function and solve the problem accordingly. Subsidy decreases price and increases quantity.

CAPITAL FLIGHT

It is simply, moving out the large sum of money from the nation. 

In other words, it is moving out large amount of capital from your home country to foreign country. 


The reasons could be :

• Political instability 

• Currency devaluation 

• Defective system of capital control

• Legal instability

• Type of exchange rate system adopted by the country for international trade.

• The rise of digital money

• Increased Money Laundering activities 

• Fear of increased Capital Gains Tax (CGT) 

• Fear of decreasing the strength resource of the Nation for which it is recognized. 

Capital flight can be legal or illegal. If the government, through its stringent rules that discourages the movement of capital from their country- then the capital flight could be said to be legal. However, if foreign investors tries to create a situation of capital blocks through restrictions of trade activities it would be called as illegal capital flight. 

Generally, illegal capital flight is increased if the governmental laws, rules and controls- are more stringent and rigid in nature. If we analyze the situation of 1970-1980 of India capital flight, we can find that, there were billions of dollar currency moving out of the country. The researchers found that, the main reason behind it was stringent rules in relation to currency controls. 

Similarly, Due to high inflation and devalued currency - Argentina has faced a huge capital flight for years. 

The deep rooted economic and political difficulties have given the birth to the situation of capital flight. The situation of civil war has encouraged the capital flight in Pakistan, Nigeria and others.

When we talk about the exchange rate system in international trade, we can find three exchange rate system.They are :

• Floating Exchange Rate System

• Fixed Exchange Rate System

• Controlled Exchange Rate System 

Nepal has adopted Pegged Exchange Rate System. This has also been one of the reason of capital flight for the country. Researchers has agreed that,  pegging with Nepalese currency has led to the appreciation of currency in line with Indian currency. On contrary, it has also increased trade deficit as well as Forex currency reserve of Nepal. 

Most of the commercial banks in Nepal provides interest from 3-5 % to their depositors whereas, India provides 8-9% interest to their savers. This has encouraged Nepalese depositors (both households and business persons) to swift their deposits to India. Similarly, textiles, automobiles, agriculture or electronics- the imports based economy has placed a burden of capital flight for Nepal.


In order to control the situation of capital flight, most of the nations has made a currency control laws as to - utmost currency amount that could be taken out of the country. Different countries has also made laws to encourage Foreign Direct Investment rather than Foreign Portfolio Investment. 

In conclusion,

Capital Flight not only decreases the purchasing power of the country but also makes imports and foreign facilities expensive.

Pic.Credit :www.canstockphoto.com

Modern Government HR Vs Traditional Government HR

Since a decade, the staffing system of governmental jobs has been found more and more structured, fair and competitive.

Gone are the days, where people used to take government staffs for granted.

The Public Service Commission has been found to be successful in digging out the best resources from the market, by conducting -

·         -Written exam

·         -Practical exam

·         -Interview

·         -Any other ways as per necessity of the commission

It is said “warriors must have best weapon to win the battlefield”. Same is the case with these filtered human resource. They can perform their best only if they have sound non-human resources within their set of parameters. The staffs are always willing to work day and night for the benefit of the organization.

The over qualified staffs has been appointed for the governmental jobs. This has brought both opportunities and threat for the organization. On the one hand, the organization is benefited from the capabilities of the human resource, on the other hand, they find difficult to cope up with the volatility of the employee turnover. This has given rise to a paradigm shift.

I strongly believe that, in order to achieve success for any organization, the demographic composition of different group of people plays an important role in the society. All new, semi-old and old generation staffs are equally important. A flowing river (young and energetic staffs) must have two definite boundaries (older staffs) and a bridge (semi-old staffs) to get it into the right track. Absence of any, or higher presence of any, will definitely bring challenges to cope up with the dynamism of environment. 

Technological change has definitely shorten the period of generation gap. There is a great degree of threat from getting technologically obsolete day by day. The communication system of web 2.0 has compelled human resource to either boom or get doomed from the market.

The new era of human resource employed in governmental jobs has been provoking the traditional rules, structure, framework, working patterns, and ethical behavior as the pace of change.

Out of the thousands of prospective candidates, only limited people are selected for the appointment. Although, students puts their utmost effort in order to be a part of government jobs. However, due to limited seats, only the best are able to get into the list. 

So, the general public must be aware that, new governmental employees are much more energetic, capable, smart, flexible, dynamic, visionary and ethically governed –as compared to the traditional staffs. Therefore, it is the time to change the mind set of people.

REASONS OF POOR LISTENING

Listening is a bit complex process that starts from hearing, passes through decoding, storing, evaluating and responding to the message. The main reasons of poor listening are as follows:

1. Cultural Differences:

Different cultures convey different meanings as per their culture. So, to understand the correct meaning of sender becomes very challenging job for the receiver.

Let us see an example:

The sign of ‘Ok’ in U.K and USA means ‘ok’. In the culture of Brazil, it is considered as an insult. Similarly, in Nepalese culture it means ‘awesome’.

2. Educational differences:

Educational differences creates a fear in the mind of the listener. The listener thinks that, he is not smart enough to understand the complete message.

Let us see an example:

We can see it, when a MBA post graduates attends the technical meeting of Engineers or Doctors, listening becomes poor because of the educational differences.

3. Family background:

The family background may lead to poor listening. There may be several viewpoints (developed over a certain period of time) about the same thing - that creates bias in understanding the message of sender.

4. Attitude Difference:

Attitude differences also results poor listening.

According to S.P.Robbins :

“Attitudes are evaluative statements or judgments concerning objects, people or events”

The Attitude differences like:

• Eagerness to speak more

• Passing remarks

• Passing comments

• criticizing others

• Being judgmental

• Interrupting in between etc.

- makes the listener poor. 

5. Psychological Reason:

As per research, it is found that most of the people speaking speed is at about 120 to 150 words per minute. Similarly, the processing speed of the audio is up to 500 or more words per minute. There is sufficient gap found in the speaking speed and listening speed.

So, if the receiver’s brain is left unsupervised, then the listener will surely start day dreaming or being engaged in other activities psychologically. Therefore, psychological reason can also lead to poor listening.

6. Other reasons :

• Not paying attention to the speaker.

• Jumping to conclusion.

• Focus on personal gestures.

• Pretend as if listening.

• Showing disinterest

• Being Selective in filtering message.

pic. Credit: navicate.org

LISTENING

Whether be it boss or teacher or parents, they keep on saying us-

“hey listen to me carefully”. 

So what do they really want us to do?

They simply wants us to pay attention and understand their message in right sense. …Don’t they ?

It is said “hearing is through ears but listening is through mind.”

So, basically what do listening really need?

It simply needs:

• A patient effort to shut down all your premature evaluation and internal bias related stimulus and 

• Understand the intended message of the speaker rather than simply hearing to him. 

Most of the students are physically present in their class but they are mentally present elsewhere, so they just hear but do not listen to the teachings. Majority of people who is a part of mass, just hears the speaker.

Hearing is the ability of the ears to sense the sound (tone, peach variations, volume, pauses, speed of speaker and stress on words). Listening requires our concentration of mind and interpretation of the sound - to get the intended message. Therefore, it can be rightly said that, when a person understands what he hears, he is listening. 

Listening Process

When hearing transforms through complex process, it results in listening. So, Listening is not a simple process. In order to complete listening process, it must have following five steps:

1. Hearing : 

First of all the message is received from the sender. 

2. Understanding or Decoding : 

Then, the message is understood as per the receivers internal environment . 

3. Storing or Remembering : 

After decoding, the message is stored in the psychological sections of the receiver.

4. Evaluating or Analyzing: 

Then, the intended message is completely evaluated or analyzed.

5. Responding or Feedback : 

Finally, the feedback is sent by the receiver- as a response to the sender.

If any process breaks down in between, then listening process gets hampered. This results to the cons of listening.

Types of Listening:

Various philosophers has described the types of listening as per their understandings. They are briefly explained as follows: 

1. Critical Listening :

Under this, a listener makes a critical understanding by analyzing it at their different perception angle. Here, the receiver are generally skeptical. The receiver tries to evaluate and judge the sender on various grounds.

2. Selective Listening :

Under this method, the receiver filters few message among the whole message as per their level of interest.

3. Empathetic Listening :

Under this, a receiver puts himself in the place of sender and keeps listening. This makes sender easier to send their message.

4. Comprehensive Listening :

Under this, the Vocabulary and language skills make the receiver to understand the thoughts, ideas and messages of the sender.

5. Discriminative Listening:

Here, the receiver tries to understand the message by discriminating it on the basis of sound. For eg. Tone, peach variations, volume, pauses, speed of speaker, stress on words and the body languages)

6. Biased Listening:

Here, the listener listens only what he wants to hear. The receivers are very evaluative and a bit stereotype.

7. Appreciative Listening:

Here, the receivers appreciates when his favorite sender sends the message. For eg. Musics, speeches

8. Sympathetic Listening:

Here, we use our sympathy as a basis to understand the message. Emotional feelings plays a major role for listening.

9. Dialogic Listening:

John stewart and Milt Thomas has developed the concept of dialogic listening. This type of learning is done through words. Here, the receiver not only focus on listening but also tries to form a relationship during conversation.

10. Relationship Listening:

This is a type of listening whose main objective is to develop and spread relationship. Mostly seen within Peer groups, friends circle among peers, family members.

11. Informational Listening :

Here, the receiver mainly tries to understand the message given by sender by focusing upon the knowledge, skill and behavior of sender. The receiver listens to the tons of information day by day. For eg. Student receives information from teacher, family, surroundings and so on.

12. Therapeutic Listening:

It is a research based device that is used to help to the people who have poor sensory receptors. This method is generally used in theraphy.

13. Rapport Listening :

Here, the receiver tries to build some common ground of interest. This helps to understand the feelings, ideas and messages of each other. The receiver generally focuses upon the non-verbal language to understand the message.

14. Passive Listening:

It is listening without showing any reactions. Generally, the receiver do not show any interest to sender. The communication is generally one way and dominant. Queries are discouraged.

15. Active Listening:

Under this type, the receiver takes an active participation during listening process. It makes the speaker alive. Queries are encouraged.

16. Initial Listening :

Under this type of listening, as soon as the receiver receives the message, he starts to query the sender, without letting him to speak until the query is complete. Under this process the receiver keeps an eye to interrupt the sender frequently.

17. False Listening :

Under this type of listening, the receiver takes more time to understand and analyze the earlier message. Due to this reason he shows a false impression to the sender that he is listening to their message.


18. Content Listening : 

Under this kind of listening, the focus of listener is on the information provided by the speaker.


19. Full Listening :

Under this method, the receiver tries to understand all the messages of the sender and tries to find the meaning and intended sense of the message .

20. Deep Listening :

Here, the receiver makes a deep understanding of the message. The word spoken may have multiple meanings as per time and circumstances. This listener tries to break down the real meaning (even out of jargon used) tactfully.

21. Evaluative (critical, judgmental or interpretive) Listening:

Under this method, the main aim of listener is to evaluate, judge, criticize and pass comments to the sender.

22. Attentive Listening :

Under this method, the receiver attentively listens the message of sender.

23. Reflective Listening:

Under this method, a listener tries to reflect his understandings to other people.







Pic. Credit : www.lantanaliving.com

CONCEPT AND FORMS OF MONEY

This is the blog written to explore the knowledge about money.

In very simple language, 

Money is the coin and paper note that is circulated and accepted as a medium of consideration in the society.

However, the concept of money is not limited to this. In ancient years beside the use of metallic coins -cattle, tobacco and grains were also used as money. So, is it appropriate to call all of these items as money?

A ) Traditional Function-Based Views: 

Under this view, anything that performs the functions of money is considered as money. The economists had a consensus-ad-idem as to the concept of money. They believed that, any commodity that functions as money can be said to be money. 

In the words of Hartley Withers, “Money is what Money does.” 

So, this definition has made the concept bit complex …isn’t it?

To simplify it, the economist mentioned that, in order to be qualified as a money, it must have to satisfy following four important functions:

1. It must be used as a medium of exchange .

2. It must have measure of value .

3. It must be used as a standard of deferred payment .

4. It must have store of value.

The economist like: Crowther, R.P.Kent, walker and other modern economist were the supporters of this views.

However, an economist named Conlberston had argued that, money should not be defined upon its characteristics. It is a concept that is based on a function of good, on a particular use to which it is put.

B ) Generally Accepted Views: 

Under this view, whatever the society accepts as money becomes money. The economist like: Marshall, Benham, Seligman, Robertson and other neo-classical economists gave their definitions on the basis of general acceptability. This is the reason, cheques, bills, drafts, Letter of Credit are considered as money. 

According to Benham : 

“Money is defined as generally acceptable purchasing power or something which everybody is prepared to accept in exchange of goods and services. “

According to Seligman :

“Money is one thing that possesses general acceptability.”

C) Legal Views: 

Under this view, anything that is declared money by the central banks of the country is called money.

According to Hawtery :

“Money has two sides: first it is a unit of account, second it is legal tender “

According to Nepal Rastra Bank Act, 2002 :

"'Money' means all types of currency notes, postal orders, postal notes, money orders, cheques, drafts, traveler's cheques, letters of credit, bills of exchange, promissory notes and credit cards and this term also includes similar types of monetary instruments as the Bank may prescribe, as per the requirement, through the publication and transmission of public notice. "

(-as amended on 14th November 2016) 

The economist argued that, these definitions has neglected the rule of “general acceptability”. Money can’t be called as money, if the people do not accept it as money.

For eg. During the situation of hyperinflation in Germany, people adopted U.S dollar as the money, and rejected the government money.

D ) Modern functional View: 

It is an extension of traditional functional view with some degree of expansion over it. Under this view the function of money is classified as follows:

1 ) Primary Function

• Money works as a medium of exchange 
• Money serves as common measure of value 
• Money serves as a unit of account 

2 ) Secondary Function/Derived Function:

• Money serves as the basis of standard of deferred Payment.
• Money serves as a store of value .
• Money serves as the transfer of value (purchasing power) .

3 ) Contingent Function:

As discussed by prof. Kinley:

• Money serves as a basis of credit .

• Money serves as a distribution basis of social income .

• Money works as a general form of capital .

• Money is the source of deriving maximum satisfaction and maximum benefits. 

Forms of Money: 

Money can be of following forms:

A) Commodity money

If commodity is used as money, it is called commodity money. For e.g. Animal leathers, bones, grains, cattle and so on.

B) Metallic money/ Standard Money

If metals is used as money, it is called metallic money. For e.g. Coins made from iron, copper, brass, gold, silver and so on. This money were able to be used for long period of time. Therefore, metallic money were termed as standard money. The metallic money took any one of the following two forms:

1 ) Standard coins:

If the intrinsic value of money is greater or equal to the face value of money, it is called standard coins. Generally, the metals used are gold and silver (either in bimetallism form or mono-metallic form) with definite weight and purity. These money are also called “full-bodied coins”.

2 ) Token coins:

If the intrinsic value of money is less than its face value of money, it is called token coins. Generally, the metals used are made up of – aluminum, copper, brass, iron. Nobody is bound to accept more than a particular quantity of it. Therefore, they are called “subsidiary money”.

C) Paper money:

A money made up of paper is called paper money. It is generally issued by central bank. The intrinsic value of money is very less than its face value. It is legal tender money accepted by all. China is sourced to be first country to use paper money. It can be :

1 ) Representative money:

Such money that represents other form of money, it is called representative money. For eg. Golds are not circulated in large amount from one place to other. So, it is kept in reserves. One the behalf of it, a certificate of ownership is provided. Such paper do act as money that represents the quantity of gold. Therefore, it is called “representative money” and “convertible money” .

2 ) Fiat money:

If gold is not kept at its full value in the reserve, then such money is called fiat money. Its face value is very much high than its intrinsic value. It derives value only by the order of government. There is no provision to get it converted into gold or silver. It is called “in-convertible money”.

D) Plastic Money:

Money made from plastics are called plastic money. Nepal Rastra Bank had issued Nepalese ten rupee as plastic money. It is also a legal tender.

E) Bank money:

The cheques drawn on demand or current deposits of bank are called bank money. There is a strong debate, whether cheques drawn upon saving deposits (also called near money) will be called bank money or not. Bank money also includes: drafts, travelers cheque, bill of exchange, promissory cards and other banking cards. Since these money are not a legal tender, it is also termed as “optional money”. This kind of money is also called “credit money”.

F) Digital Money:
The money that is in electronic form (digitally stored) are called digital money. They are also called “cryptocurrency” or “Digital Currency”. They are not legal tender, however has more acceptability by the general public across the world. For eg. Flooz, Beenz, Bitcoins.

(For details regarding currency of nepal and its related rules in relation to money, bank notes and coins click on above link)







pic. credit :www.history.com

CURRENT SITUATION OF NEPAL (2018)

As described under article 4 of the constitution of Nepal, 2015 -

Nepal is an independent, indivisible, sovereign, secular (i.e. religious, cultural freedom including protection of religion, culture handed down from the time immemorial), inclusive, democratic, socialism-oriented, federal democratic state.

This is the blog written to explore the knowledge of current scenario of Nepal through business perspective. 

Current Overall Scenario of Nepal:

a ) The new constitution of Nepal, 2015 has changed the federal structure of Nepal. There are three level of government. They are:

• The Federal Government 
• State Government 
• Local Government

b ) Nepal is currently divided into :

• 7 provinces (as defined by schedule 4 of the Constitution of Nepal, 2015)
• 77 Districts 
• 753 Local levels 
• 6 Metro-city 
• 11 Sub-metro city 
• 276 Municipalities 
• 460 Rural municipalities

c ) Dr. Yuba Raj khatiwada, a current finance minister and a well-known economist of Nepal, had announced budget on 29 May 2018 for the year 2018/19. 

The provincial governments had presented their revenue and expenditure estimates in their respective assemblies on 15 June 2018, following the provision of the Intergovernmental Fiscal Arrangement Act, 2017.

Therefore, in the alignment of government budget, studying the global scenario of economic outlook, suggestions from the stakeholders – Nepal Rastra Bank has framed the monetary policy ( for details Road Map of monetary policy (2018/19 ) of Nepal ) to safeguard macroeconomic and financial stability, widen financial inclusion and achieve targeted economic growth.

d ) All the relevant laws are being amended or re-framed as per the new federal structure of Nepal Government.

e ) The frequent change in election process of Nepal has been stable.

f ) Political environment has been found stable as compared to past few years.

g ) The economic indicators were not found in positive direction. The root cause of problem were-

• Being unable to utilize the allocated budget expenditure of the government. 
• Non-budgetary expenses were increased up to high level. 

- This has resulted to a great challenge in the area of Public finance.

h) The financial discipline are broken with unhealthy and unfair way. The country has been revolved around the cyclic movement of revenue based upon imports, and remittance based consumption. The government revenue has been condensed due to following factors:

• Compactness in the volume of national economy 
• Foreign aid has not been received in full 
• Received Foreign aid has not been properly mobilized.

i ) Volume of remittance is found quantitatively high but the elasticity of remittance has been found relatively low then earlier years. 

k ) An unbearable unbalanced change in the external environment has pressurized the country’s foreign currency reserve.

l ) Capital mobilization of financial sector has not been able to align with economic growth. Infrastructure and industrial sector has not been grown as per expected. Internal capital market has not been still stable and reliable. The industrial capital has been mostly shifted towards financial and trading sectors.

m ) Creeping Activities for capital formation is found in both private and governmental sectors (majority of projects are not completed within allotted time frame.)

n ) The basic and fundamental facilities provided by the Governmental service is found to be poor. The flow of services are neither simple and consistent nor easily available. 

o ) Rather being Production and manufacture oriented, the interest of country people are inclined towards distribution oriented activities. 

p ) The governmental reserves has been reached to the minimum level. This is due to non-compliance of budgetary discipline. In the name of project implementation, assurance of source has been given- without proper planning, without proper reliable base and without proper sources. Even after allocating the funds to the local levels, the cost and benefit measurements could not be properly known. 

q ) Since, the country has marched towards new federal structure. One the one hand, the operating expenditure will tremendously get increased, while on the other hand, huge budget is required to develop all the local levels. 

This has led the challenges to all the three levels of government (central government, state government and local government) to - effectively mobilize the resources and implement development activities.

r ) Other current scenarios are mentioned as follows under following link : Current economic scenarios of Nepal.  

Picture credit :kathmandupost.ekantipur.com