Tag: Concept

  • What is the Self-Efficacy? Meaning, Definition, and Source

    What is the Self-Efficacy? Meaning, Definition, and Source

    Self-Efficacy Meaning, Definition, and Source; Self-efficacy, also referred to as personal efficacy, is the extent or strength of one’s belief in one’s own ability to complete tasks and reach goals. Psychologists have studied self-efficacy from several perspectives, noting various paths in the development of self-efficacy; the dynamics of self-efficacy, and lack thereof, in many different settings; interactions between self-efficacy and self-concept; and habits of attribution that contribute to, or detract from, self-efficacy.

    What is Self-Efficacy? also explain their topic Meaning, Definition, and Source.

    Self-efficacy affects every area of human endeavor. By determining the beliefs, a person holds regarding his or her power to affect situations, strongly influences both the power a person actually has to face challenges competently and the choices a person is most likely to make. These effects are particularly apparent, and compelling, concerning behaviors affecting health.

    Meaning and Definition of Self-Efficacy?

    Perceived self-efficacy define as people’s beliefs about their capabilities to produce designated levels of performance that exercise influence over events that affect their lives. Self-efficacy beliefs determine how people feel, think, motivate themselves, and behave. Such beliefs produce these diverse effects through four major processes. They include cognitive, motivational, affective, and selection processes.

    A strong sense of efficacy enhances human accomplishment and personal well-being in many ways. People with high assurance in their capabilities approach difficult tasks as challenges to master rather than as threats to avoid. Such an efficacious outlook fosters intrinsic interest and deep engrossment in activities. They set themselves challenging goals and maintain a strong commitment to them. They heighten and sustain their efforts in the face of failure. Also, They quickly recover their sense of efficacy after failures or setbacks.

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    They attribute failure to insufficient effort or deficient knowledge and skills which are acquirable. They approach threatening situations with assurance that they can exercise control over them. Such an efficacious outlook produces personal accomplishments, reduces stress, and lowers vulnerability to depression.

    In contrast, people who doubt their capabilities shy away from difficult tasks which they view as personal threats. Also, They have low aspirations and weak commitment to the goals they choose to pursue. When faced with difficult tasks, they dwell on their personal deficiencies, on the obstacles they will encounter, and all kinds of adverse outcomes rather than concentrate on how to perform successfully. They slacken their efforts and give up quickly in the face of difficulties. They are slow to recover their sense of efficacy following failure or setbacks. Because they view insufficient performance as deficient aptitude it does not require much failure for them to lose faith in their capabilities. They fall easy victim to stress and depression.

    Source of Self-Efficacy

    People’s beliefs about their efficacy can develop by four main sources of influence. The most effective way of creating a strong sense of efficacy is through mastery experiences. Successes build a robust belief in one’s personal efficacy. Failures undermine it, especially if failures occur before a sense of efficacy firmly establish.

    If people experience only easy successes, they come to expect quick results and easily discourage by failure. A resilient sense of efficacy requires experience in overcoming obstacles through perseverant effort. Some setbacks and difficulties in human pursuits serve a useful purpose in teaching that success usually requires sustained effort. After people become convinced they have what it takes to succeed, they persevere in the face of adversity and quickly rebound from setbacks. By sticking it out through tough times, they emerge stronger from adversity.

    Second way

    The second way of creating and strengthening self-beliefs of efficacy is through the vicarious experiences provided by social models. Seeing people similar to oneself succeed by sustained effort raises observers’ beliefs that they too possess the capabilities to master comparable activities required to succeed. By the same token, observing others’ fail despite high effort lowers observers’ judgments of their own efficacy and undermines their efforts. The impact of modeling on perceived self-efficacy strongly influences by perceived similarity to the models. The greater the assumed similarity the more persuasive are the models’ successes and failures. If people, see the models as very different from themselves their perceived self-efficacy is not much influenced by the models’ behavior and the results it produces.

    Modeling influences do more than provide a social standard against which to judge one’s own capabilities. People seek proficient models who possess the competencies to which they aspire. Through their behavior and expressed ways of thinking, competent models transmit knowledge and teach observers effective skills and strategies for managing environmental demands. Acquisition of better means raises perceived self-efficacy.

    Third way

    Social persuasion is a third way of strengthening people’s beliefs that they have what it takes to succeed. People who persuade verbally that they possess the capabilities to master gives activities are likely to mobilize greater effort and sustain it than if they harbor self-doubts and dwell on personal deficiencies when problems arise. To the extent that persuasive boosts in perceived self-efficacy lead people to try hard enough to succeed, they promote the development of skills and a sense of personal efficacy.

    It is more difficult to instill high beliefs of personal efficacy by social persuasion alone than to undermine it. Unrealistic boosts in efficacy quickly dis-confirm by disappointing results of one’s efforts. But people who have been persuaded that they lack capabilities tend to avoid challenging activities that cultivate potentialities and give up quickly in the face of difficulties. By constricting activities and undermining motivation, disbelief in one’s capabilities creates its own behavioral validation.

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    Successful efficacy builders do more than convey positive appraisals. In addition to raising people’s beliefs in their capabilities, they structure situations for them in ways that bring success and avoid placing people in situations prematurely where they are likely to fail often. They measure success in terms of self-improvement rather than by triumphs over others.

    People also rely partly on their somatic and emotional states in judging their capabilities. They interpret their stress reactions and tension as signs of vulnerability to poor performance. In activities involving strength and stamina, people judge their fatigue, aches, and pains as signs of physical debility. Mood also affects people’s judgments of their personal efficacy. A positive mood enhances perceived self-efficacy, a despondent mood diminishes it. The fourth way of modifying self-beliefs of efficacy is to reduce people’s stress reactions and alter their negative emotional proclivities and is-interpretations of their physical states.

    It is not the sheer intensity of emotional and physical reactions that is important but rather how they perceive and interpret. People who have a high sense of efficacy are likely to view their state of affective arousal as an energizing facilitator of performance, whereas those who are beset by self-doubts regard their arousal as a debilitator. Physiological indicators of efficacy play an especially influential role in health functioning and athletic and other physical activities.

    What is the Self-Efficacy Meaning Definition and Source Image
    What is the Self-Efficacy? Meaning, Definition, and Source; Image from Pixabay.
  • Increase Your Strengthening Self-Efficacy

    Increase Your Strengthening Self-Efficacy

    What knows about strengthening self-efficacy? A range of strategies that can use by teachers to enhance self-efficacy has been identified. Strategies that teachers can use to influence self-efficacy include (a) goals and feedback, (b) rewards, (c) self-instruction for verbalization of strategies, (d) participant modeling, and (e) various combinations of these strategies.

    How to Increase Your Strengthening Self-Efficacy? Here is the article to explain.

    Keep in mind that self-efficacy, skill development, and strategy use go hand in hand; whether it be math problem solving, soccer skills, or expository writing. Students learn strategies that enable them to develop skills resulting in increased self-efficacy strengthening.

    Goals, Feedback, Rewards, and Verbalization

    Because task accomplishment is the most powerful source of self-efficacy information; an important approach is to use strategies that can strengthen task accomplishment. The strategies of goal setting, feedback, rewards, and self-talk or verbalization were used in various combinations to help students categorized as LD or remedial to strengthen self-efficacy.

    Schunk and Cox (1986) investigated the combination of strategy verbalization; and, effort feedback on the performance and self-efficacy of students with LD. While solving subtraction problems, students verbalized or said the task steps aloud to themselves; they were then given feedback that their successes were due to their effort. The combination of verbalization and effort feedback led to problem-solving successes, higher self-efficacy, and subtraction skills. The authors believed that the two strategies verbalization and effort feedback serve different purposes. Verbalization was useful for training students to systematically use the task strategy.

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    Giving students feedback that effort is responsible for success communicated that they are developing skills and that they can continue to perform well with hard work. The importance of feedback for enhancing self-efficacy may sometimes overlook by a teacher. Pajares and Johnson (1994) conducted a study in a language arts course for preservice teachers. The students received feedback from their teacher on attempting and completing writing tasks; but, they did not receive feedback on their specific writing skills.

    The end-of-course assessment revealed that, although the students improved on writing skills; their self-efficacy judgments about their skills did not increase. The authors concluded that when teachers note a growth or decline in skills (in this case, writing); they must give the students feedback about their specific skill development. As emphasized earlier, students will make future judgments not just on their actual skills; but, also on their perception of their competence in using the skill. These perceptions of self-efficacy are more likely to increase with specific teacher feedback.

    Participant Modeling

    Vicarious experience is the second most powerful source of self-efficacy. The most frequent form of vicarious experience for students is seeing a model (another student or teacher) perform a skill they are attempting to learn. Who is a more effective model, a peer or teacher, or a mastery or coping model?

    Peer or Teacher Model?

    Schunk and Hanson (1985) had students, ages 8 to 10, observe either a peer or teacher model solving fractions on a videotape. Children who had observed a peer model had higher self-efficacy and achievement scores on the math assessment than did students who had observed the teacher model. The authors concluded that the increase may have been because the children saw themselves as more similar to the peer model. The use of peer models is especially recommended for enhancement of self-efficacy among low-achieving students who are more doubtful about attaining the level of competence demonstrated by the teacher.

    Mastery or Coping Model?

    Which model do you think will be more effective in strengthening self-efficacy; an expert who demonstrates a high level of expertise or one who is competent, but demonstrates the strategies they used to acquire the skill? Previous research found that observer’s beliefs about competence influence by their perceived similarity incompetence to the model. Models can reflect either mastery or coping behaviors. A mastery model demonstrates a task at a high level of expertise with a high level of confidence. In contrast, a coping model demonstrates the task along with the difficulties students experienced and the strategies (e.g., effort) they used to overcome the difficulties. The effectiveness of coping versus mastery peer models was compared by Schunk et al.

    Types of models

    The two types of models demonstrated strategies as follows:

    1. Peer coping model; Made errors at first and verbalized negative statements that reflected self-efficacy (e.g., “I’m not sure I can do this”). The teacher then gave a prompt (e.g., “What do you do when denominators are the same?”). Next, the coping model made statements about how they overcame failure (e.g., “I need to pay attention to what I’m doing”) and eventually performed at a mastery level.
    2. Peer mastery models; Performed all problems correctly while working at the average rate. Verbalized high self-efficacy and ability (e.g., “I’m good at this.” “That was easy”).

    The findings indicated that the subjects judged themselves as more similar to the peer coping model. Students who observed the peer coping model demonstrated higher self-efficacy for learning, greater post-test self-efficacy, and skill development compared with those who observed a peer mastery model.

    Modeling is a resource that is readily available in the classroom. This is a case of positive social comparisons with others (Schunk, 2001). The important implication for teachers is to use caution in choosing peer models. An alert, the sensitive teacher can identify peer coping models in their classrooms and use them to strengthen the self-efficacy of many students.

    Increase Your Strengthening Self-Efficacy Image
    Increase Your Strengthening Self-Efficacy; Image from Pixabay.
  • Participative Management: Meaning Advantages Disadvantages

    Participative Management: Meaning Advantages Disadvantages

    What is Participative Management? Explain Meaning with their Definition, Benefits, Advantages, and Disadvantages. Participative Management alludes to an open type of management where workers are effectively engaged with the association’s dynamic procedure. Participative (or participatory) management, also called worker association or participative dynamic, empowers the inclusion of partners at all degrees of an association in the investigation of issues, advancement of methodologies, and execution of arrangements. The idea applies by the directors who comprehend the significance of the human mind and look for a solid relationship with their workers.

    Do you know about Participative Management in HRM? Where we are use them? What are the Benefits, Advantages, and Disadvantages use Participative Management in HRM?

    Participative Management; Participative Management alludes to the way toward including workers or worker agents at all degrees of the choice-making process. They comprehend that the workers are the facilitators who manage the clients and fulfill their requirements. To beat the opposition in the market and to remain in front of the opposition, this type of management has been received by numerous associations.

    They invite imaginative thoughts, ideas, and musings from the workers and include them in the dynamic procedure. Representatives are welcome to partake in the dynamic procedure of the firm by taking an interest in exercises, for example, defining objectives, deciding work routines, and making proposals. Different types of participative management incorporate expanding the obligation of representatives (work enhancement); shaping self-guided groups, quality circles, or nature of-work-life boards; and requesting study input.

    Concepts of Participative Management:

    Participative management, in any case, includes more than permitting workers to partake in deciding. It likewise includes management treating the thoughts and proposals of representatives with thought and regard. The broadest type of participative management is the immediate representative responsible for the organization. Participative management is a sort of management that includes its workers of various levels to be a piece of a dynamic procedure, which really engages the individuals from the gathering. It is likewise a kind of management which incorporates the workers of the various situation to contribute their thoughts towards setting up of the authoritative objectives, urgent dynamic, and its usage procedure.

    Participative Management you may understand by example.

    Satyam is an extraordinary model; It has been executing a broad recommendation plot, “The Idea Junction”, since 2001. A constant online entryway is available in Intranet that can be gotten to by the entirety of its representatives all over the globe to help the whole life pattern of thought directly from its age until its execution. The fundamental thought behind embracing this management style was to make esteems and bring a feeling of belongingness in the representatives through thoughts, proposals, and grumblings. The entire method supported by a solid and far-reaching reward strategy that urges workers to perform better each time.

    All the representatives are welcome to share their perspectives on a specific part of the dynamic. Different kinds of participative management can be by expanding the duty of the representatives, making the self-guided gatherings, and requesting the study inputs. Participative management additionally necessitates that the thoughts and proposals gave by the workers are to pay attention to and checked whether they may be of any utilization to profit the association in any conceivable manner. In spite of the fact that the gathering chiefs have the last approach the dynamic procedure however the colleagues are given finished opportunity to think of something new and unique, which may impact the ultimate choice in any positive manner.

    Which means and Definition of Participative Management:

    The idea of representative investment in an association’s dynamic isn’t new. In any case, the thought couldn’t pick up that much prominence among associations. Studies have indicated that solitary 3-5 percent of associations have really actualized this idea in their everyday tasks. Despite the fact that the hypothesis of participative management is as old as the foundation of worker’s businesses still, it not applies by an enormous extent of associations. The thought behind worker association at each phase of dynamic is completely straight.

    Transparent correspondence consistently delivers great outcomes both for the association just as laborers. Opportunity and straightforwardness in the organization’s activities take it to the following level and fortifies the premise of the association. Then again, there are a few organizations that straightway preclude the chance of a participative dynamic procedure. As indicated by them, workers abuse their opportunity of articulation and interest in dynamic as it gives higher status to representatives and engages them.

    Benefits of Participative Management:

    Participative management as a dynamic style isn’t welcome by everyone! Work or worker’s guilds, for instance, don’t endorse this. A participative management style offers different advantages at all degrees of the association. By making a feeling of proprietorship in the organization, participative management ingrains a feeling of pride and rouses representatives to build efficiency so as to accomplish their objectives.

    Workers who take an interest in the choices of the organization feel like they are a piece of a group with a shared objective, and discover their feeling of confidence and inventive satisfaction elevated. Directors who utilize a participative style find that workers are more responsive to change than in circumstances in which they have no voice. Changes execute all the more adequately when workers have information and settle on commitments to choices. Interest keeps representatives educated regarding up and coming occasions so they will know about expected changes.

    In short:

    The association would then be able to put itself in a proactive mode rather than a receptive one, as administrators can rapidly recognize territories of concern and go to workers for arrangements. Cooperation assists representatives with increasing a more extensive perspective on the association. Through preparing, improvement openings, and data sharing, workers can get the calculated abilities expected to become powerful chiefs or top heads. It additionally builds the responsibility of representatives to the association and the choices they make.

    Innovativeness and development are two significant advantages of participative management. By permitting a different gathering of workers to have a contribution to choices, the association profits by the cooperative energy that originates from a more extensive selection of choices. At the point when all representatives, rather than just directors or heads, allows the chance to take an interest, the odds expand that a legitimate and one of a kind thought will recommend. What are the Participation and Organizational Climate?

    In any case, we may specify the benefits of participative management as follows:

    Advancement and expanded proficiency:

    The critical thinking procedure and receptiveness to new thoughts can bring about development. Aside from this as referenced above there is additional information sharing among the laborers and the chiefs. This implies the individuals who are a piece of a specific procedure at the ground level give contributions for improved effectiveness of the equivalent. This has double ramifications, improving the nature of the item and reducing the expense of assembling.

    Idealness:

    There improves the correspondence between the supervisors and the laborers and between laborers across various units. An escape clause or blemish accounts for in time.

    Representative fulfillment and Motivation:

    Empowering the workers to expand their possession or stake in their work. This builds effectiveness and profitability. Thus, there diminishes non-attendance and less representative turnover. This additionally works in pulling in more individuals towards the association and the activity.

    Item quality:

    A state in dynamic implies that laborers can quickly pinpoint and propose healing measures for improving the productivity of the procedure they separate from. This implies quality control in the item or administration practics for the most minimal level.

    Fewer oversight prerequisites:

    There is a more prominent spotlight on the management of self with a due accentuation on broadening one’s range of abilities. One of the significant advantages of this is there is a lesser requirement for management and care staff.

    Better complaint redressal:

    Increased correspondence clears route for a decreased number of complaints and brisk and compelling goals of the debate (regularly on the spot). Association – management relationship likewise profits and fortifies.

    Recruiting Flexibility:

    Hiring adaptability expands because of broadly educating. Expanded coordination among colleagues likewise offers a safe place for the recently employed.

    Participative management in this way brings about a general increment in the responsibility for the work of a worker. This strengthening can prompt expanded effectiveness, better profitability, improved confidence, and occupation fulfillment. However, the reality the participative management requires a general change in the hierarchical culture, the execution of the equivalent, particularly when there is a bureaucratic style of dynamic set up, can be a significant test!

    Participative Management Meaning Advantages Disadvantages Image
    Participative Management: Meaning Advantages Disadvantages; Image from Pixabay.

    Essentially talking about the advantages of participative management:

    Coming up next are a couple of advantages of participative management;

    • Participative management offers different various sorts of advantages to the workers of various levels in the association. This activity empowers and propels the workers to build their efficiency so as to accomplish their authoritative objectives.
    • Chiefs utilizing this style discover representatives more agreeable to change than in the position where they have no voice. The support of the representatives keeps them refreshed with the forthcoming occasions for which the workers should arrange in advance.
    • The investment of the representatives empowers them to have a more extensive perspective on the association. With the assistance of the improvement openings, thought sharing, and preparing, workers can gain the propelled abilities expected to turn into the top chief of the association.
    • Participative management likewise draws out the innovativeness and advancement of the representatives. When there is a wide selection of alternatives originating from various gatherings of representatives, it improves the collaboration of the gathering.

    Propelled Advantages of Participative Management:

    Without a doubt, a participative way to deal with management expands the stake or responsibility. Yet, there is a whole other world to it. The accompanying focuses explain the equivalent.

    Increment in Productivity:

    An expanded state in dynamic implies that there is a solid inclination of affiliation now. The representative currently accepts accountability and assumes responsibility. There is lesser news or appointment or oversight from the director. Working hours may get extended all alone with no impulse or power from the management. This prompts expanded profitability.

    Occupation Satisfaction:

    In bunches of associations that utilize participative management, a large portion of the workers are happy with their employment, and the degree of fulfillment id exceptionally high. This is particularly when individuals see their proposals and suggestions being actualized or put to rehearse. Mentally, this tells the individual representative that, ‘he also has a state in dynamic and that he also is an indispensable part of the association and not a minor specialist’.

    Inspiration:

    Increased profitability and occupation fulfillment can’t exist except if there is a significant level of inspiration in the representative. The other way around additionally remains constant! Decentralized dynamic implies that everybody has a state and everybody is significant.

    Improved Quality:

    Since the data sources or input originates from individuals who are a piece of the procedures at the most reduced or execution level. This implies even the minutest subtleties are dealt with and detailed. No imperfection or escape clause goes unreported. Quality control consequently starts and guarantees at the least level.

    Diminished Costs:

    There is a lesser requirement for oversight and more accentuation is laid on the enlarging of abilities, self-management. This and quality control implies that the expenses control naturally.

    Propelled Disadvantages of Participative Management:

    There is a flip side to everything; participative management stands no special case to it. Though this style of authority or dynamic prompts better interest of the considerable number of representatives, there are without a doubt a few disadvantages as well.

    Dynamic eases back down:

    Participative management represents expanded cooperation and when there are numerous individuals associated with dynamic, the procedure certainly eases back down. Data sources and criticism begin pouring from each side. It requires some investment to confirm the exactness of estimations which implies that dynamic will ease back down.

    Security Issue:

    The security issue in participative management additionally emerges from the way that since the beginning phases an excessive number of individuals know to bunches of realities and data. This data may change into basic data in the later stages. There is in this manner a more noteworthy worry of data being spilled out.

    The advantages appear to dwarf the disadvantages. This anyway is no confirmation that one ought to indiscriminately embrace it for his/her association. Associations are extraordinary and along these lines the way of life, the HR. A profound comprehension of both requires so as to learn a dynamic style and embrace the equivalent.

  • Centralized and Decentralized Purchasing: Meaning, Advantages, Disadvantages, and Difference

    Centralized and Decentralized Purchasing: Meaning, Advantages, Disadvantages, and Difference

    Learn the Concept of Centralized and Decentralized Purchasing; Organization of the purchase function will vary according to particular conditions and ideas. Purchases may centralized or decentralized. This article explains centralized and decentralized purchasing and their point in pdf or ppt – meaning, advantages, disadvantages, and difference. In centralized purchasing, there is a separate purchasing department entrusted with the task of making all purchases of all types of materials. The head of this department usually designates as Purchase Manager or Chief Buyer. Also, in decentralized purchasing, each branch or department makes its purchases.

    Here explains the Centralized and Decentralized Purchasing and their topics – Meaning, Advantages, Disadvantages, and Difference.

    If the branches of plants are located in different places, it may not be possible to centralize all purchases. What is the difference between centralized and decentralized purchasing? or What are the difference between centralised and decentralised purchasing? or What is the centralised and decentralised purchasing and supply chain functioning? In such cases, decentralized purchasing can better meet the situation by making purchases in the local market by plant or branch managers.

    Centralized Purchase refers to purchasing all the requirements under the central point of the organization. Likewise, Decentralized Purchase refers to the purchasing of requirements of each production center in an organization.

    Meaning of Centralized and Decentralized Purchasing:

    Centralization and Decentralization are the two types of structures, that can find in the organization, government, management, and even in purchasing. Centralization of authority means the power of planning and decision making are exclusively in the hands of top management. It alludes to the concentration of all the powers at the apex level. On the other hand, Decentralization refers to the dissemination of powers by the top management to the middle or low-level management. It is the delegation of authority, at all levels of management.

    What is Centralized purchasing?

    Under centralized purchasing purchases are made at one central point for the whole organization and material is issued to respective departments or jobs as and when needed. Also, Centralized purchasing is suitable in cases where the organization runs one plant. It will bring about economies of purchasing and buying in small lots will avoid.

    It ensures consistent buying policies in the future and purchasing powers are concentrated in the hands of one person, the in-charge of the purchasing department. This type of purchasing is very helpful in the quick implementation of decisions regarding purchasing. It also ensures bulk buying which ensures favorable prices. The staff requirements under this type are limited and specialists in buying may appoint.

    Centralized purchasing is further helpful to the vendors since their selling costs are reduced as they can easily coordinate and supply goods to a single buyer instead of a large number of buyers. The most important benefit which can draw from centralized buying is that it keeps the inventories in control and checks the wasteful investment in materials and equipment etc. thereby ensuring the overall economy in purchasing.

    What is Decentralized purchasing?

    Decentralized purchasing is just the reverse of centralized purchasing. This is suitable for organizations running more than one plant. Under this type, each plant has its purchasing agents. In other words, every department makes its purchases. This also calls localized purchasing. Also, Decentralized purchasing is quite flexible and can quickly adjust following the requirements of a particular plant.

    More attention can pay by the departmental head to buying problems as he will be carrying the limited number of activities in his department and he can hold responsible for the purchase of goods and the overall performance of the plant. The serious drawback which emerges from this type is the lack of uniformity in purchasing procedure in the organization.

    At the same time, uniformity in prices cannot ensure and every departmental head may not possess the caliber of an expert buyer. This method also poses the problems of coordination among various departments of the organization and usually leads to unplanned buying. In comparison to centralized buying, this method involves a lesser economy in purchasing.

    Advantages and Disadvantages of Centralized and Decentralized Purchasing:

    The following advantages and disadvantages of centralized and decentralized purchasing below are – PDF;

    Advantages of Centralised Purchasing:

    A centralized purchasing system generally prefers because of the following advantages of it;

    • Specialized and expert purchasing staff can concentrate on one department.
    • Better layout of storage space.
    • Utilization of high technical skills.
    • A firm policy can initiate which may result in favorable terms of purchase, e.g., higher trade discount, easy terms of payment, etc.
    • Standardization of quality of raw material facilitates.
    • Minimum finance required.
    • Better supervision of materials usage, and.
    • Also, better control over purchasing is possible because reckless buying by various individuals avoid. Keeping all records of purchase transactions in one place also helps in control.
    Disadvantages of Centralised Purchasing:

    A centralized purchasing system generally refuses because of the following disadvantages of it;

    • The high cost of internal transport.
    • The creation and maintenance of a special purchasing department lead to higher administration costs which small concerns may not be in a position to afford.
    • Non-availability of materials for production in time.
    • Greater risk of obsolescence, and.
    • Centralized purchasing is not suitable for plants or branches located at different places that are far apart.
    Advantages of Decentralized Purchasing:

    A Decentralized purchasing system generally prefers because of the following advantages of it;

    • Materials can purchase by each department locally as and when required.
    • Timely availability of materials.
    • Materials are purchasing in the right quantity of the right quality for each department easily.
    • No heavy investment requires initially.
    • Less cost of internal transport.
    • Lower chance of obsolescence.
    • Purchase orders can place quickly, and.
    • The replacement of defective materials takes little time.
    Disadvantages of Decentralized Purchasing:

    A Decentralized purchasing system generally refuses because of the following disadvantages of it;

    • Organization losses the benefit of a bulk purchase.
    • Poor layout of space.
    • More finance requires.
    • Duplicate purchase of materials.
    • Specialized knowledge may be lacking in purchasing staff.
    • There is a chance of over and under-purchasing of materials.
    • Fewer chances of effective control of materials.
    • Less technical skill obtains.
    • More clerical work, and.
    • Lack of proper co-operation and co-ordination among various departments.

    Centralized and Decentralized Purchasing Meaning Advantages Disadvantages and Difference
    Centralized and Decentralized Purchasing: Meaning, Advantages, Disadvantages, and Difference.

    Differences Between Centralized and Decentralized Purchasing:

    Learn and understand the points given below are noteworthy. So far as the difference between centralized and decentralized purchasing concerns;

    • Control on buying exercise effectively, Effective control is not possible.
    • The economy in large scale purchase is possible, Large scale benefits are not available.
    • Skills of the purchasing officer are high, Purchasing skill is available from the purchaser or purchasing officer.
    • Purchasing specialization obtains, Purchasing specialization not obtains.
    • Uniformity in the purchase follows, There is a lot of difference in the purchase.
    • Standard materials are purchased, Quality of the material is questionable.
    • There is a misunderstanding between the production center and purchase department, There is no such misunderstanding since the concerned department purchases the materials.

    The comparative advantage and disadvantages of the two systems are as below:

    Meaning:

    Centralized is the retention of powers and authority concerning planning and decisions, with the top management, knows as Centralization. However, decentralized is the dissemination of authority, responsibility, and accountability to the various management levels know as Decentralization.

    Terms of Purchase:

    Centralized is Due to the large scale order, better terms of purchase may be available, but Decentralized in Less favorable terms may be available.

    Nature:

    Centralized is usually involves two people; a manager and his subordinate. But decentralized involves the entire organization; from the top management to individual departments.

    Advantage:

    Centralized is proper coordination and Leadership, but Decentralized is sharing of burden and responsibility.

    Control:

    Centralized is controlling by the manager or the delegator controls it. But decentralized control rests with the respective departments or classes.

    Need:

    Centralized need all organizations to need delegation to get things done, Delegating authority is essential to assign responsibility. But decentralized is an optional mode of working, Organizations can also work in a centralized manner.

    Responsibility:

    Centralized Responsibility is the delegator can delegate authority but the responsibility remains with him, the delegator is accountable for the task. However, decentralized is the head of the departments responsible for the activities performed under him, Therefore, responsibility is fixed at the department-level.

    Involves:

    Centralized is involves in Systematic and consistent reservation of authority. Similarly, decentralized involves Systematic dispersal of authority.

  • What is the Cost concepts in Cost accounting? Discussion

    What is the Cost concepts in Cost accounting? Discussion

    Top 17 Cost concepts in Cost accounting: They are; 1) Product and period costs, 2) Common and joint costs, 3) Short-run and long-run costs, 4) Past and future costs, 5) Controllable and non-controllable costs, 6) Replacement and Historical Costs, 7) Escapable and unavoidable costs, 8) Out of pocket and Book Costs, 9) Imputed and Sunk Costs, 10) Relevant and Irrelevant Costs, 11) Opportunity and Incremental Costs, 12) Conversion cost, 13) Committed cost, 14) Shutdown and Abandonment costs, 15) Urgent and Postponable costs, 16) Marginal cost, and 17) Notional cost.

    Here are important topic or questions is Discussion; What is the Cost concepts in Cost accounting?

    A clear understanding of various cost concepts is essential for the study of cost accounting and cost systems.

    Top 17 Cost concepts in Cost accounting - List
    Top 17 Cost concepts in Cost accounting – List

    The description of these cost concepts follows now for cost accounting.

    1] Product and period costs:

    First Cost concepts; The product cost is the aggregate of costs that are associated with a unit of product. Such Costs may or may not include an element of overheads depending upon the type of costing system in force-absorption or direct. Product costs are related to goods produce or purchase for resale and are initially identifying as part of the inventory.

    These products or inventory costs become expenses in the form of the cost of goods sold only when the inventory sales. Product cost associated with the unit of output. The costs of inputs informing the product viz., the direct material, direct labor, factory overhead constitute the product costs. The period cost is a cost that tends to be unaffecting by changes in the level of activity during a given period. What is the importance of Cost accounting?

    The period cost associative with a period rather than manufacturing activity and these costs deduct as expenses during. The current period without have been previously classifying as product costs. Selling and distribution costs are period costs and are deducting from the revenue without their existence regard as part of the inventory cost.

    2] Common and joint costs:

    The common cost is an indirect cost that incurs for the general benefit of several departments or for the whole enterprise and which is necessary for present and future operations. The joint costs are the cost of either a single process or a series of processes. That simultaneously produce two or more products of significant relative sales value.

    3] Short-run and long-run costs:

    The short-run costs are costs that vary with the output when fixed plant and capital equipment remain the same and become relevant. When a firm has to decide whether or not to produce more in the immediate future. The long-run-costs are those which vary with the output when all input factors including plant and equipment vary and become relevant. When the firm has to decide whether to set up a new plant or to expand the existing one.

    4] Past and future costs:

    The past costs are actual costs incur in the past and are generally containing in the financial accounts. These costs report past events and the time lag between event and its reporting makes the information out of date and irrelevant for decision-making.

    These costs will just act as a guide for the future course of action. The future costs are costs expecting to incur at a later date and are the only costs that matter for managerial decisions because they are subject to management control.

    Future costs are relevant for managerial decision making in cost control, profit projections, appraisal of capital expenditure, the introduction of new products, expansion programs, and pricing, etc.

    5] Controllable and non-controllable costs:

    The concept of responsibility accounting leads directly to the classification of costs as controllable or uncontrollable. The controllable cost is a cost chargeable to a budget or cost center. Which can influence the actions of the person in whom control the center vests? It is always not possible to predetermine responsibility, because the reason for deviation from expected performance may only become evident later.

    For example, excessive scrap may arise from inadequate supervision or latent defect in purchased material. The controllable cost is a cost that can influence and regulate during a given period by the actions of a particular individual within an organization. The controllability of cost depends upon the level of responsibility under consideration.

    Direct costs are generally controllable by shop level management. The uncontrollable cost is a cost that is beyond the control of a given individual during a given period. The distinction between controllable and uncontrollable costs are not very sharp and may be left to individual judgment. Some expenditure which may uncontrollably on a short-term basis controllably on a long-term basis,

    There are certain costs which are difficult to control due to the following reasons.

    • Physical hazards arising due to flood, fire, strike, lockout, etc.
    • Economic risks such as increased competition, change in fashion or model, higher prices of inputs, import restrictions, etc.
    • Political risks like change in Government policy, political unrest, war, etc.
    • Technological risk such as a change in design, know-how, etc.

    6] Replacement and Historical Costs:

    The Replacement costs and Historical costs are two methods for carrying assets in the balance sheet and establishing the amounts of costs that use to determine income.

    • The Replacement cost is a cost at which material identical to that is to replace could purchase at the date of valuation (as distinct, from actual cost price at the date of purchase). The replacement cost is the cost of replacing an asset at any allow point of time either present or the future (excluding any element attributable to improvement).
    • The Historical cost is the actual cost, determined after the event. Historical cost valuation states the costs of plant and materials, for example, at the price originally paid for them whereas replacement cost valuation states the costs at prices that would have to pay currently.

    Costs reported by conventional financial accounts are based on historical valuations. But during periods of changing price level, historical costs may not be the correct basis for projecting future costs. Naturally historical costs must adjust to reflect current or future price levels.

    7] Escapable and unavoidable costs:

    The Escapable cost is an avoidable cost that will not incur if an activity does not undertakes or discontinue. The avoidable cost will often correspond-with variable costs. The avoidable cost can identify with an activity or sector of a business and which would avoid if that activity or sector did not exist. The escapable costs refer to costs that can reduce due to the contraction in the activities of a business enterprise. It is the net effect on costs that is important, not just the costs directly avoidable by the contraction. Examples:

    • Closing an unprofitable branch house-storage costs of other branches and transportation charges would increase.
    • Reducing credit sales costs estimated may be less than the benefits otherwise available.

    Note: Escapable costs are different from controllable and discretionary costs.

    8] Out of pocket and Book Costs:

    The out of pocket cost is a cost that will necessitate a corresponding outflow of cash. Also, the costs involving cash outlay or payment to other parties term as out of pocket costs. Book costs are those which do not require current cash payments.

    Depreciation is a notional cost in which no cash transaction involves. The distinction between out of pocket costs and book costs primarily shows how costs affect the cash position.

    Out of pocket costs are relevant in some decision-making problems. Such as the fluctuation of prices during the recession, make or buy decisions, etc. Book-costs can convert into out of pocket costs by selling the assets and having the item on hire. Rent would then replace depreciation and interest.

    9] Imputed and Sunk Costs:

    The imputed cost is a cost that does not involve actual cash outlay. Which uses only for decision making and performance evaluation. Imputed cost is a hypothetical cost from financial accounting. Interest on capital is a common type of imputed cost. No actual payment of interest makes but the basic concept is that had the funds been investing elsewhere they would have to earn interest. Thus, imputed costs are a type of opportunity costs.

    The Sunk costs are those costs that have been investing in a project and which will not recover if the project terminates. The sunk cost is one for which the expenditure has to take place in the past. This cost does not affect a particular decision under consideration. Sunk costs are always results of decisions accept in the past.

    This, the cost cannot change by any decision in the future. Investment in plant and machinery as soon as it installs its cost is sunk cost and is not relevant for decisions. Amortization of past expenses e.g. depreciation is sunk cost. Sunk, costs will remain the same irrespective of the alternative selected.

    Thus, it need not consider by the management in evaluating the alternatives as it is common to all of them. It is important to observe that an unavoidable cost may not be a sunk cost. The Managing Director’s salary is generally unavoidable and also out of pocket but not sunk cost.

    10] Relevant and Irrelevant Costs:

    The relevant cost is a cost appropriate in aiding to make specific management decisions. Business decisions involve planning for the future and consideration of several alternative courses of action. In this process, the costs which are affecting by the decisions are future costs. Such costs call relevant costs because they are pertinent to the decisions in hand. The cost is saying to be relevant if it helps the manager in taking. The right decision in furtherance of the company’s objectives.

    11] Opportunity and Incremental Costs:

    The opportunity cost is the value of a benefit sacrifice in favor of an alternative course of action. It is the maximum amount that could obtain at any given point of time. If a resource was selling or put to the most valuable alternative use that would be practicable.

    • The opportunity cost of a good or service measure in terms of revenue. Which could have been earning by employing that good or service in some other alternative uses. Opportunity cost can define as the revenue forgone by not making the best alternative use. Opportunity cost is the prospective change in cost following the adoption of an alternative machine process, raw materials, etc. It is the cost of opportunity lost by the diversion of an input factor from use to another.
    • The incremental cost is the extra cost of taking one course of action rather than another. It also calls at different costs. The incremental cost is the additional cost due to a change in the level of nature of the business activity.

    The change may take several forms e.g., changing the channel of distribution, adding a new machine, replacing a machine by a better machine, execution of export orders, etc. Incremental costs will be different in case of different alternatives. Hence, incremental costs are relevant to the management in the analysis of decision making.

    12] Conversion cost:

    The conversion cost is the cost incur for converting the raw material into the finished product. It refers to as the production cost excluding the cost of direct materials:

    13] Committed cost:

    The committed cost is a cost that primarily associates with maintaining the organization’s legal and physical existence over which management has little discretion. Also, the committed cost a fixed cost that results from the froth decision of the prior period.

    The amount of committed cost as fixed by decisions. Which makes in the past and not subject to managerial control in the short-run? Since committed cost does not fluctuate with volume and remains unchanged until action takes to increase or reduce available capacity.

    Committed cost does not present any problem in cost behavior analysis. Examples of committed costs are depreciation, insurance premium, rent, etc. This is an important Cost concept in accounting.

    14] Shutdown and Abandonment costs:

    The shutdown costs are the cost incur about the temporary closing of a department/division/enterprise. Such costs include those of closing as well as those of re-opening. Also, the shutdown costs asses as those costs which would incur in the event of suspension of the plant operation. And, which would save if the operations are continuing. Examples of such costs are the costs of sheltering the plant and equipment and construction of sheds for storing exposed property.

    Further, additional expenses may have to incur when operations are restoring e.g.. Re-employment of workers may involve the cost of recruitment and training. The Abandonment cost is the cost incur in closing down. Also, A department or a division or in withdrawing a product or ceasing to operate in a particular sales territory etc.. The abandonment costs are the cost of retiring altogether a plant from service; Abandonment arises when there is a complete cessation of activities and creates a problem as to the disposal of assets.

    15] Urgent and Postponable costs:

    The urgent costs are those which must incur to continue operations of the firm. For example, the cost of material and labor must incur if production is to take place. The Postponable cost is that cost which can shift to the future with little or no effect on the efficiency of current operations. These costs can postpone at least for some time, e.g., maintenance relating to building and machinery.

    16] Marginal cost:

    The marginal cost is the variable cost of one unit of a product or a service i.e., a cost that would avoid. If the unit did not produce or provide. In this context, a unit in usually either a single article or a standard measure such as a liter or kilogram. But may in certain circumstances be an operation, process or part of an organization.

    They are the amount at any allow volume of output by which aggregate costs are changing. If the volume of output increases or decreases by one unit. It uses full Cost concepts in accounting.

    The marginal costing technique is the process of ascertaining marginal costs and of the effects of changes in the volume of the type of output on profit by differentiating between fixed and variable costs.

    17] Notional cost:

    Final Cost concepts; The Constitutional or notional cost is hypothetical to take into account in a particular situation to re-present. As well as, the benefits enjoying by an entity in respect of which no actual expense incurs. Maybe you understand your misinformation of the cost concepts in cost accounting.

    What is the Cost concepts in Cost accounting Discussion
    What is the Cost concepts in Cost accounting? Discussion.

  • Difference between Traditional and Modern Concept in Business

    Difference between Traditional and Modern Concept in Business

    Difference between Traditional and Modern Concept of Business: Business is concerned with producing and distributing goods and services to make a profit. These are two Concepts: The traditional concept of business and the Modern concept of business. A regular process of exchange of goods and services that involves risk and also uncertainty. Business is an economic activity aimed at meeting needs through the supply of goods and services to customers and their satisfaction.

    What is the Difference between Traditional and Modern Concepts in Business?

    They are two types:

    1] Traditional Concept:

    The traditional concept states that the business aims to make a profit through the production and marketing of products. Also, Products can be of various types. Furthermore, The traditional concept states that the objective of the business is to earn profit through the production and marketing of products. For example, the main objective of the business of material goods, services, ideas, information, etc. is to get maximum profit according to the traditional concept.

    Meaning of Traditional Concept:

    Business is the production and distribution of products for personal gain. The profit-oriented concept stands also known as the traditional concept of business. Any human activity directed towards the acquisition of wealth or earning profit through the production or exchange of goods was treated to be a business.

    2] Modern concept:

    Consumer satisfaction is the focal point of the modern concept of business. The modern concept states that a business earns profit through customer satisfaction. Business without consumers is not business. Also, It develops long-term relations with customers. The business should earn profit with social responsibility. It should care about the welfare of society and consumers. it must work within the law. Furthermore, Profits can exist made by maintaining social accountability. It attempts to incorporate every aspect of human civilization. It sees modern business as a socio-economic institution that is always responsible to society.

    Meaning of Modern Concept:

    The business organization should determine the needs of the customers and also deliver them the desired products. The business organization began to think that businesses should earn profits through the service and also the satisfaction of the customers. Do you like to play online casino games?

    Traditional and Modern Concept – Table:

    Difference between Traditional and Modern Concept in Business
    Difference between Traditional and Modern Concept in Business.
  • What is the different Concept of Business? Discussion

    What is the different Concept of Business? Discussion

    Concept of Business: Business activity has been conceptualized by many business persons, business managers and academicians in the field of business management, ever since business emerged as an organized activity. Therefore the concept of business has changed over the years of history of the business. Traditional and Modern Concept of Business, Business is an economic activity aimed to fulfill the need and wants of customers through the supply of goods and services for their satisfaction.

    What is the different Concept of Business? Discussion with Definition and Assumptions.

    The term “business” refers to all the economic activities carried out by people and organization for generating incomes. It is concerned with producing and distributing goods and services for earning a profit. It is a regular process of exchanging goods and services which involve risk and uncertainty.

    Definition of Business:

    The following definitions below are;

    According to L.H Haney,

    “Business may define as a human activity directed towards producing or acquiring wealth through buying and selling of goods.”

    According to James Stephenson,

    “Economic activities performed for earning profits are termed as the business.”

    From the above definitions, it is clear that the business is the economic activity of individuals and organizations aimed to earn profit through the production and distribution of goods and services.

    Generally, there are two concepts of the business:

    • Traditional Concept: The traditional concept explains that the purpose of business is to earn profit through production and marketing of products. Products may be different types. For example physical goods, services, ideas, and information, etc. The main motto of business is to maximize profit only as per the traditional concept.
    • Modern Concept: Consumer satisfaction is the central point of the modern concept of business. Profit can earn by maintaining social responsibility. It strives to include every aspect of human civilization. It views the modern business as a socio-economic institution which is always responsible towards society.

    What is the different Concept of Business Discussion
    What is the different Concept of Business? Discussion.

    The different Concept of Business:

    So far, the following concept of business has emerged:

    1. Profit Oriented or Traditional Concept, and.
    2. Customer Oriented or Modern Concept.

    Now, explain each;

    Profit Oriented or Traditional Concept of Business:

    In the early age of the business, it was conceiving to be a profit-making economic activity. Any human activity directed towards the acquisition of wealth or earning profit through production or exchange of goods was treated to be a business. The profit-oriented concept also knows as the traditional concept of business.

    When people start doing business by forming organizations, the business was conceiving as an organization, organize and operate to produce and provide goods and services to society under the motive of private gain or profit. The traditional concept states that the objective of the business is to earn profit through production and marketing of products.

    Products can be:

    • Goods: They are physical goods. They can own. They are tangible and can touch. Examples are books, computer, clothes, etc.
    • Ideas: They are ideas based on knowledge. Examples are environment protection, human rights, consumer welfare, etc.
    • Services: They cannot own. They are intangible and cannot touch. Examples are a class lecture, banking service, etc.
    • Places: They are specific places such as the USA, London, Delhi, etc.
    • Persons: They are celebrities, such as politicians, movie stars, sportspersons, etc.
    • Information: They are data-related activities. Examples are research, newspapers, internet, etc.

    Assumptions:

    • The sole objective of the business is to earn profit by production and distribution of goods.
    • Customers will buy the products that are available in the market at the most competitive rates.
    • There is hardly any need to think for customer service and satisfaction for running a business.
    Customer Oriented or Modern Concept of Business:

    This concepts came into existence around the 1950s and gained momentum during the 1960s and 1970s. The business organization began to think that business should earn profits through service and satisfaction of the customers. The organization was forced to regard customer as the king of the market.

    The modern concept states that business earns profit through customers satisfaction. Business without consumers is not business. It develops long term relations with customers. The business should earn profit with social responsibility.

    It should care about the welfare of society and consumers. it must work within the law. Business encompasses all economic activities involving production and marketing of products to earn profit and wealth through satisfaction of human needs.

    The main points in the concept of business are as follows:

    • Business money-Oriente organizes economic activity.
    • The business produces and markets products.
    • The business makes a profit to acquire wealth.
    • Business satisfies customers needs by creating utilities.
    • Business behaves legally with social responsibility, and.
    • The business works within the law.

    Assumptions:

    • Business organizations should produce and provide the goods and services that are need by customers.
    • The products and services provided by the business should satisfy the needs of the customers.
    • The business should earn profits through the service and satisfaction of the customer.
  • Utility Analysis; Meaning, Definition, Features, and Concept

    Utility Analysis; Meaning, Definition, Features, and Concept

    Understand utility analysis and its significance in consumer behavior. Learn about cardinal utility, its assumptions, features, and concept. Utility Analysis; The Cardinal Approach or Utility Analysis to the theory of consumer behavior is based upon the concept of utility. This article is to explain Utility Analysis Meaning, Definition, Assumptions, Features, and Concept. It assumes that utility is capable of measurement. It can add, subtract, multiply, and so on. Cardinal utility analysis is the oldest theory of demand which provides an explanation of consumer’s demand for a product and derives the law of demand which establishes an inverse relationship between price and quantity demanded of a product.

    Utility Analysis or Cardinal Approach; Meaning, Definition, Assumptions, Features, and Concept.

    Recently, cardinal utility approach to the theory of demand has been subjected to severe criticisms and as a result, some alternative theories, namely, Indifference Curve Analysis, Samuelson’s Revealed Preference Theory, and Hicks’ Logical Weak Ordering Theory have been propounded.

    According to this approach, the utility can be measured in cardinal numbers, like 1,2,3,4, etc. Fisher has used the term “Util” as a measure of utility. Thus in terms of cardinal approach, it can be said that one gets from a cup of tea 5 utils, from a cup of coffee 10 utils, and a Rasgulla 15 utils worth of utility.

    Meaning and definition of Utility Analysis:

    The term utility in Economics is used to denote that quality in a good or service by which our wants are satisfied. In, other words utility is defined as the want satisfying power of a commodity.

    According to Mrs. Robinson,

    “Utility is the quality of commodities that makes individuals want to buy them.”

    According to Hibdon,

    “Utility is the quality of a good to satisfy a want.”

    Assumptions of Utility Analysis:

    Cardinal utility analysis of demand is based upon certain important assumptions. Before explaining how cardinal utility analysis explains consumer’s equilibrium regarding the demand for a good, it is essential to describe the basic assumptions on which the whole utility analysis rests. As we shall see later, cardinal utility analysis has been criticized because of its unrealistic assumptions.

    The utility analysis is based on a set of following assumptions:

    • The utility analysis is based on the cardinal concept which assumes that utility is measurable and additive like weights and lengths of goods.
    • Cardinal or Utility is measurable in terms of money.
    • The marginal utility of money is assumed to be constant
    • The consumer is rational who measures, calculates, chooses and compares the utilities of different units of the various commodities and aims at the maximization of utility.
    • He has full knowledge of the availability of commodities and their technical qualities.
    • He possesses perfect knowledge of the choice of commodities open to him and his choices are certain.
    • They know the exact prices of various commodities and their utilities are not influencing by variations in their prices.
    • There are no substitutes.

    Features of Utility Analysis:

    The utility analysis has the following main features;

    • Subjective.
    • Relative.
    • Usefulness, and.
    • Morality.

    Now, explain each one;

    The utility is Subjective:

    The utility is subjective because it deals with the mental satisfaction of a man. A commodity may have different utility for different persons. Cigarette has utility for a smoker but for a person who does not smoke, the cigarette has no utility. Utility, therefore, is subjective.

    The utility is Relative:

    The utility of a good never remains the same. It varies with time and place. The fan has utility in the summer but not during the winter season.

    Utility and usefulness:

    A commodity having utility need not be useful. Cigarette and liquor are harmful to health, but if they satisfy the want of an addict then they have utility for him.

    Utility and Morality:

    The utility is independent of morality. Use of liquor or opium may not be proper from the moral point of views. But as these intoxicants satisfy wants of the drunkards and opium eaters, they have utility for them.

    Concept of Utility Analysis:

    There are three concepts of utility analysis;

    1. Initial.
    2. Total, and.
    3. Marginal.

    Now, explain them;

    Initial Utility:

    The utility derived from the first unit of a commodity calls initial utility. Utility derived from the first piece of bread calls initial utility. Thus, the initial utility is the utility obtained from the consumption of the first unit of a commodity. It is always positive.

    Total Utility:

    Total utility is the sum of utility derived from different units of a commodity consumed by a household.

    According to Leftwitch,

    “Total utility refers to the entire amount of satisfaction obtained from consuming various quantities of a commodity.”

    Supposing a consumer four units of apple. If the consumer gets 10 utils from the consumption of first apple, 8 utils from the second, 6 utils from third, and 4 utils from the fourth apple, then the total utility will be 10+8+6+4 = 28.

    Accordingly, the total utility can calculate as:

    TU = MU1 + MU2 + MU3 +                                       + MUn

    or 

    TU = EMU

    Here TU = Total utility and MU1, MU2, MU3, +                       MUn =

    The Marginal Utility derived from the first, second, third………………….and nth unit.

    Marginal Utility:

    The Marginal Utility is the utility derived from the additional unit of a commodity consumed. The change that takes place in the total utility by the consumption of an additional unit of a commodity calls marginal utility.

    According to Chapman,

    “Marginal utility is the addition made to total utility by consuming one more unit of commodity.”

    Supposing a consumer gets 10 utils from the consumption of one mango and 18 utils from two mangoes, then. the marginal utility of second .mango will be 18-10=8 utils.

    The marginal utility can measure with the help of the following formula MUnth = TUn – TUn-1

    Here;

    • MUnth = Marginal utility of nth unit.
    • TUn = Total utility of “n” units, and.
    • TUn-1 = Total utility of n-1 units.
    Types of Marginal utility:

    The following marginal utility can be; positive marginal utility, zero marginal utility, or negative marginal utility.

    1. Positive: If by consuming additional units of a commodity, total utility goes on increasing, marginal utility will be positive.
    2. Zero: If the consumption of an additional unit of a commodity causes no change in total utility, the marginal utility will be zero.
    3. Negative: If the consumption of an additional unit of a commodity causes falls in total utility, the marginal utility will be negative.
  • Monopoly; Introduction, Meaning, Concept, and Features

    Monopoly; Introduction, Meaning, Concept, and Features

    Understanding Monopoly: Explore the concept of monopoly and its impact on markets. Learn how a single seller dominates an industry and affects prices. Introduction; Monopoly is defined as a single seller or credit in the market. The monopoly refers to a market situation in which there is only one seller of a particular product. This means that the firm itself is the industry and the firm’s product has no close substitute. The monopolist is not bothered about the reaction of rival firms since it has no rival. So the demand curve faced by the monopoly firm is the same as the industry demand curve.

    Here are economics explain Monopoly; Introduction, Meaning, Concept, and Features.

    Three features characterize a monopoly — a market in which there is only one supplier. First, the firm is in it’s in motivated by profits. Secondly, it stands alone and barriers prevent new firms from entering the industry; and thirdly, the actions of the monopolist itself affect the market price of its output—it is not a price-taker.

    Can there be a complete monopoly in the real commercial world? Some economists feel that by maintaining some barriers to entry a firm can act as the single seller of a product in a particular industry. Others feel that all products compete for the limited budget of the consumer. Therefore, no firm, even if it is the only seller of a particular product, is free from competition from the sellers of other products. Thus complete monopoly does not exist in reality.

    The monopolist is the sole seller of a particular product. Therefore, if the monopolist is to enjoy excess profit in the long run that must exist certain barriers to the entry of new firms into the industry. Such barriers may refer to any force which prevents rival firms (competing producers) from enter­ing the industry.

    What is the Meaning of the term Monopoly?

    Monopoly is said to exist when one firm is the sole producer or seller of a product which has no close substitutes. Three points are worth noting in this definition. First, there must be a single producer or seller of a product if there is to be a monopoly. This single producer may be in the form of an individual owner or a single partnership or a joint-stock company.

    If many producers are producing a product, either perfect competition or monopolistic competition will prevail depending upon whether the product is homogeneous or differential. On the other hand, when there are few producers or sellers of a product, oligopoly is said to exist. If then there is to be a monopoly, there must be one firm in the industry. Even literally monopoly means one seller.

    “Mono” means one and “Poly” means the seller. Thus monopoly means one seller or one producer. But to say that monopoly means one seller or producer is not enough. A second condition which is essential for a firm to be called monopolistic is that no close substitutes for the product of that monopolistic firm should be available in the market.

    Meaning of Monopoly:

    The word monopoly has been deriving from the combination of two words i.e., “Mono” and “Poly”. Mono refers to a single and poly to control. In this way, the monopoly refers to a market situation in which there is only one seller of a commodity. There are no close substitutes for the commodity it produces and there are barriers to entry. The single producer may be in the form of an individual owner or a single partnership or a joint-stock company.

    In other words, under a monopoly, there is no difference between firm and industry. The monopolist has full control over the supply of the commodity. Having control over the supply of the commodity he possesses the market power to set the price. Thus, as a single seller, the monopolist may be a king without a crown. If there is to be a monopoly, the cross elasticity of demand between the product of the monopolist and the product of any other seller must be very small.

    Definition of Monopoly:

    The following definitions are below;

    1. According to Bilas as;

    “Pure monopoly is represented by a market situation in which there is a single seller of a product for which there are no substitutes; this single seller is unaffected by and does not affect the prices and outputs of other products sold in the economy.”

    2. According to Koutsoyiannis as;

    “Monopoly is a market situation in which there is a single seller. There are no close substitutes of the commodity it produces, there are barriers to entry.”

    3. According to A. J. Braff as;

    “Under pure monopoly, there is a single seller in the market. The monopolist demand is market demand. The monopolist is a price-maker. Pure monopoly suggests no substitute situation.”

    Concept of Monopoly:

    Analysis of the working of a competitive system was the main task done by classical economists such as Adam Smith, David Ricardo, and J.S. Mill. Considering the earlier views, later economists of the 19th century developed the “ideal” system of perfect competition. Many economists, since the time of Adam Smith, were more interested in theoretical perfections than in the actual development of the capitalist system. They tried to explain the meaning of an economic system based on the model of perfect competition.

    According to them, perfect competition would mean;

    • Production at the minimum possible cost, and.
    • Consumer satisfaction at its maximum.

    But in real words, we hardly come across such a system of perfect competition. The exception to perfect competition which attracted serious attention during the 19th century was the concept of monopoly. This is in fact, the antithesis of perfect competition.

    Monopoly market is one in which there is only one seller of the product having no close substitutes. The cross elasticity of demand for a monopolized product is either zero or negative. There being only one firm, producing that product, there is no difference between the firm and industry in case of monopoly. Monopoly is a price maker, not the price taker.

    In the words of Koutsoyiannis, “Monopoly is a market situation in which there is a single seller, there are no close substitutes for the commodity it produced there are barriers to entry of other firms”.

    Features of Monopoly:

    The following are the features of a monopoly;

    One seller of the product.

    In the case of a monopoly, there is only one seller of the product. He may be a sole proprietor or a partnership firm or a joint stock company or a state enterprise. There is no difference between firm and industry. The firm is a price maker and not a price taker.

    No close substitute.

    The commodity which the monopolist produces has no close substitutes. Lack of substitutes means no other firm in the market is producing the same type of commodity.

    Restriction no entry of the new firm.

    There are powerful restrictions to the entry of new firms in the industry, under the Monopoly. There are either natural or artificial restrictions on the entry of firms into the industry, even when the firm is making abnormal profits.

    Monopoly is also an Industry.

    Under monopoly, there is only one firm which constitutes the industry. Difference between firm and industry comes to an end.

    Price Maker.

    Under monopoly, the monopolist has full control over the supply of the commodity. But due to a large number of buyers, the demand of any one buyer constitutes an infinitely small part of the total demand. Therefore, buyers have to pay the price fixed by the monopolist.

    Monopoly explain – For instance;

    There is one firm in India which produces “Binaca” toothpaste but this firm cannot be called monopolist since there are many other firms which produce close substitutes of Binaca toothpaste such as Colgate, Promise, Forhans, Meclean, etc. These various brands of toothpaste compete with each other in the market and the producer of any one of them cannot say to have a monopoly.

    Prof. Bober rightly remarks,

    “The privilege of being the only seller of a prod­uct does not by itself make one a monopolist in the sense of possessing the power to set the price. As one seller, he may be a king without a crown.”

    We can express the second condition of monopoly in terms of cross elasticity of demand also. Cross elasticity of demand shows a change in the demand for a good as a result of the change in the price of another good. Therefore, if there is to be monopoly the cross elasticity of demand between the product of the monopolist and the product of any other producer must be very small. The fact that there is one firm under monopoly means that other firms for one reason or other are prohibiting to enter the monopolistic industry.

    In other words, strong barriers to the entry of firms exist wherever there is one firm having sole control over the production of a commodity. The barriers which prevent the firms to enter the industry may be economic in nature or else of institu­tional and artificial nature. In the case of monopoly, barriers are so strong that prevent the entry of all firms except the one which is already in the field.