CONTENTS

PRICE THEORY OR MICRO ECONOMICS

Pages
Chapter
PART I: NATURE AND METHODOLOGY OF ECONOMICS
3-8
1. NATURE OF ECONOMICS: DEFINITION
Early Definitions: Science of Wealth. Marshaltian Definition: Science of Material Welfare.
Criticism of Marshalliart View. Robbins' Definition: Science of Scarcity or Science of Choice.
Superiority of Robbins' Definition. Criticism of Robbins' Definition. Modern Definition.
Conclusion regarding Definition. Major Economic Problems.
9-19
2. NATURE OF ECONOMICS: SCOPE AND METHOD
Introduction: Subject-Matter: Micro and Macro Economics. Micro Economics. Importance of
Micro Economics. Limitations of Micro Economics. Macro Economics or the Theory of Income
and Employment. Utility of Macro Analysis. Limitations of Macro Analysis. Need for
Integrating Macro and Micro Economics. Three Branches of Economics. Nature and Scope of
Economics. Is Economics a Science? True Nature of Economics. Positive or Normative Science.
Ends and Means. Economics—a Social Science. Can Economics Solve Practical Problems?
Laws of Economics. Definition. Nature of Economic Laws. Applicability of Economic Laws.
Basic Assumptions in Economics. Methods of Economics. Deductive Method. Merits of
Deductive Method. Limitations of Deductive Method. Inductive Method. Merits of Inductive
Method. Shortcomings of Inductive Method. Proper Method. Value of Lconomic Analysis.
20-26
3. PARTIAL EQUILIBRIUM AND GENERAL EQUILIBRIUM ANALYSIS
Meaning of Equilibrium. Types of Equilibria. Partial Equilibrium Analysis. Meaning, Applica-
bility. Significance, Limitations. General Equilibrium Analysis. Why General Equilibrium
Approach? Essence of General Equilibrium Approach, Generdi Equilibrium and Macro
Economic Equilibrium. Uses of General Equilibrium Analysis. Limitations of General
Equilibrium Analysis.
27-33
4. STATICS, DYNAMICS AND COMPARATIVE - STATICS
Economic Statics: Meaning. Stationary State. Significance of &ssnomic Statics. Limitations of
Economic Statics, Economic Dynamics. Significance of Economic Dynamics Limitations of
Economic Dynamics. Comparative Statics.

PART II: THEORY OF DEMAND

34-50
UTILITY ANALYSIS OF DEMAND
Basic Assumptions of Marginal Utility Analysis. Law of Diminishing Marginal Utility:
Statement of the Law, Diminishing Marginal Utility Curve. Limitations of the Law. Marginal
Utility: Marginal Utility of Money. Margiiial Utility and Price 1,)(1arginat Utility and Supply.
Margiral Utilities of Related Goods. Practical Importance of the Law of Diminishing Marginal
Utility. Law of Equi-Marginal Utility. Statement of the Law. Limitations of the Law. Practical
Importance of the Law. Consumer's Equilibrium: Equilibrium with One-Commodity Purchase
Equilibrium with Two Commodities-Purchase. Demand: Meaning of Demand. Types of the
Demand. Demand Curve. Why Demand Curve Slopes Downwards. Exceptional Demand
Curves. Law of Demand. Limitations of the Law. Derivation of the Demand Curve and the Law
of Demand from the Law of Diminishing Marginal Utility. Derivation of the Demand Curve
and the Law of Demand from the Law of Equi-Marginal Utility. Causes of Changes in
Demand. Shot tcomings of the Utility Analysis.
6. INDIFFERENCE CURVE TECHNIQUE
Scale of Preferences. Indifference Curves. Marginal Rate of Substitution. Principle of
Diminishing Marginal Rate of Substitution. Properties of Indifference Curves.

V
 VI
Chapter
Page.
7. INDIFFERENCE CURVE ANALYSIS OF DEMAND
57-69
Price Line or Budget Line. Shifting the Price Line, Consumer's Equilibrium or Maximising
Satisfaction. Conditions of E q uilibrium- How Far is this Theory of Consumer Behaviour Valid?
Income Effect, Substitution Effect, Price Effcct. Price Consumption Curve and Elasticity of
Demand. Derivation of Individual Demand Curve. Derivation of Market Demand Curve. Case
Of Competitive (or Substitute) Goods, and Complementary Goods. Indifference Curve
Technique Versus Marshallian Utility Analysis: Similarities, Superiority of the Indifference
Curve Technique Criticism of Indiflcrcnce Curve Approach, Exceptional Cases of Consumer's
Equilibrium.
L SOME APPLICATIONS OF INDIFFERENCE CURVE TECHNIQUE 70-72
Application in Consumption. Measurement of National Income. Rationing. Cost of Living
Index. Price Discrimination. Taxation: Direct vs. Indirect Taxes. Effect of a Subsidy. Effect of
Taxation on Willingness to Work. Effect of Increase in Wages on Supply of Labour. Other Uses
of Indifference Curve,

9. REVEALED PREFERENCE THEORY

73-76
The Theory. Assumptions. Demand Theorem with Revealed Preference Hypothesis. Critical
Evaluation: Merits. Demerits.

10. RECENT DEVELOPMENTS IN DEMAND THEORY

77-79
Hicks' Revised Theory of Demand.
Theory. Armstrong's
marginal Preference Theory . Marginal Utility of Mone y
. Bernoulli Hypothesis Friedman-
Savage Hypothesis. Markowitz Hypothcsis.

II. ELASTICITY OF DEMAND

80-91
Meaning of Elasticity. Elastic and Inelastic Demand. Relation of Elasticity with the Law of
Diminishing Utilit y
. Types of Elasticity:. Price Elasticity. Income Elasticity. Cross Elasticity,
Substitution Elasticity. Relation Between Price Elasticity, Income Elasticity and Substitution
Elasticity. Factors Determining Price Elasticity of Demand. Measurement of Elasticity Total
Outlay Mcthod, Proportional Method. Geometrical Method: Point Elasticity. Arc Elasticity.
Price Elasticity and Indifference Curve Technique. Slope of the Demand Curve and Price
Elasticity. Practical Applications of Elasticity of Demand. Theoretical Imortance.
p Demand as
seen by an Individual Seller.
12 C ONSUMER'S SURPLUS
Meaning, Consumer's Surplus and th Law OlD (-96
Measurement Criticism of Consumer Marginal Utilityl Difficulties of
Surii Measurcmen j-C diner's Surplus with
Indifference Curves. Practical Utility of Consumer's Surplus.

PART III: THEORY OF PRODUCTION

13.. FACTORS OF PRODUCTION
97-105
Theory of Production: Content and Importance. Meaning of Production. Factors of Production.
Land: Meaning and importance of Land. Peculiarities of Land. Labour: Meaning of Labour,
Peculiarities of Labour. Factors Determining Efficiency of Labour. Division of Labour'
Meaning and Types. Advantages, Disadvantages. Division of Labour is Limited by the Extent of
the Market. Territorial Division of Labour. Localisation of Industries. Causes of Localjsation
Cuses of Further Concentration. Consequences Of Localisation.
De centralisation of Industry,
Capital: Meaning, Importance of Capital. Capital Formation: importance of Capital Forma-
tion. Meaning of Cap
ital,Formation Cretion of Savings. Mobilisation of Savings. In v
estment
of Savings in Real Capital. Foreign Capital. Deficit Financing. Disguised Unemployment.
Enterprise: Ent rep
reneur's Role. Who is an Entroreneur in a Joint Stock Compy? Why Low
Capital Formation in Under-developed Countries.

14. FORMS OF ENTREPRENEURIAL ORGANISATION

Individual Entrepreneur 'Advantages; Limitations, Partnership: 106-109
Advantages. Disadvantages of
Partnership. Joint-Stock Company: Merits; Demerits. Co-operative Enter p
rise: Producers'
Co-operation Consumers' Co-operation, State Enterprise, Merits: Demerits, Role of
Enterprise in Under-developed Economies Public
 Vii
Pages
Cluqfler
110-118
15. POPULATION THEORIES
Malthusian Theory. Criticism of Malthusian Theory. Modern Theory of Population: The
Optimum Theory . Criteria of Over-population. Limitations of the Concept of Optimum
Population. Malthtisian Theory and Modern Theory Compared. Economic Effects of Over-
population. Economic Development and Ppulation Growth: Theory of Demographic Transi-
tion. Over-population an Impediment to Economic Growth.
119-124
16. SCALE OF PRODUCTION
Economics of Large Scale Production. Diseconones of Scale. Concept of Indivisibilit y . Internal
and External Economies: Internal Economics, External Economies, Relation Between Internal
and External Economies. Real and Pecuniary economies. Internal and External Diseconoinics.
Limits to the Expansion of a Business. Advantages of Small-scale Production. Disadvantages.
Survival of Small Business. Role of Small-scale lndustrs' in Under-developed Countries.
125-130
17. PRODUCTION POSSIBILITY CURVE AND PRODUCTION FUNCTION
Production Possibility Curve. Marginal Rate of Transformation. Iso-Revenue Line. Output
Expansion Path. Uses of Production Possibility Curve. Efficient Allocation of Resources.
Production Function. Input-output Relationship. Types. Fixed Proportions Function. Variable
Proportions Funciiofl. Linear Homogeneous Production Function: Cobb-Douglas Production
Function.
131-139
18- LAWS OF RETURNS
Law of Diminishing Returns: Statement of the Law. Three Aspects of thc Law of Diminishing
Returns. Economic Implications 01 the Law of Variable Proportions. Law of Variable
Proportions: Assumptions of the Law of Variable Proportions. Average- MargInal Relations.
Limitations of the Law of Diminishing Returns. HOW to Counteract The Law? Application of
the Law. Why the Law Specially Applies to Agriculture? Law of Diminishing Returns in a
General Form. Why the Law of Diminishing Returns Operates? Importance of the Law of
Diminishing Returns. Law of Increasing Returns: Why the Law of Increasing Returns Operates?
Law of Constant Returns. Returns to Scale: Distinction Between Laws of Returns and Returns
to Scale. Three Phases of Returns to Scale. Causes of Diminishing Returns to Scale.
140-147
19. ISOQUANTS OR EQUAL PRODUCT CURVES
Meaning of Equal Product Curves. Indifference Curves and Iso-product Curves. Marginal Rate
of Technical Substitution. Law of Diminishing Marginal Rate of Technical Substitution.
Elasticity of Substitution between Factors. Application of Equal Product Curves. Properties of
Equal Product Curves. Producer's Equilibrium: Optimum Factor Combination. Producer's
Equilibrium with Equal Product Curves. Coincidence of MRTS and Price Ratio. Scale Line or
Expansion Path. Application of Equal Product Curves to Returns to Scale. Shape of the Scale
Line. Effect of Change in Input Price on Input Use. Substitute and Complementary Factors.
Application to Under-developed Countries.
148-157
20. COST AND COST CURVES
Concept of Cost of Production. Nominal and Real Cost. Economic Costs. Implicit and Explicit
Costs. Alternative, Opportunity or Transfer Costs. Significance of Opportunity Costs. Applies-
lion of Opportunity Cost Doctrine. Entrepreneur's Cost. Short-run and Long-run Cost Curves.
Meaning of Short-run and Long-run. Short-run and Variable Costs. Relation between
Marginal and Average Costs. Total-Marginal Cost Relationship. Deriving Marginal and
Average Cost Curves from Total Cost Curve. Long-run Average Cost Curves. Why LAC Curves
are Flatter? Long-run Marginal Cost Curve. Why LAC Curve First Falls and Then Rises.
Optimum Plan. Optimum Output. Optimum Firm L-shaped Long-run Average Cost Curve.
Empirical Curves. Dish-Shaped Curve. Inverse-i Curt Curves.
158-161
21. SUPPLY
Meaning of Supply. Law of Supply. Elasticity of Supply. Measurement of Elasticity. Causes of
Change in Supply. Supply Function. Supply as a Function of Price. Supply as a Function of
Prices 01 other goods. Supply as a Function of Technology. Supply as a Function of Marslialliafl
Time Periods.
 VIII
Chapte,
Pages
PART IV: PRODUCT PRICING
22. MARKET AND MARKET STRUCTURES
162-167
Market: Meaning of Market. Classification of Markets. Size of the Market. Perfect and
Imperfect Markets. Conditions of a Perfect Market. Market Forms or Market Structures. Perfect
Competition and Pure Competition. Pure Competition. Shape of Demand Curve in Pure
Competition Perfect Competition: Conditions. Imperfect Competition Monopolist
ic Competi-
tion. Oligopoly: Oligopoly Without Product Differentiation Oligopoly With Product Differe
tiation. Monopoly. Market Classifications and Cross Elasticity of Demand.f 1terii for Classjfican-
lion of Markets.

23. REVENUE AND REVENUE CURVES

Marginal Revenue and Average Revenue: Meaning. Relationship Between AR an A 168-17
MR: Under
Perfect Competition Under-Imperfect Competition. How much is MR below AR? Uasticity of
Demand. Average Revenue and Marginal Revenue. Relationship between AR. MR. TR and
Elasticity of Demand.
24. EQUILIBRIUM OF THE FIRM AND INDUSTRY GENERAL
Equilibrium of til
e Firm: Conditions of Firm's Equilibrium. Equilibrium of Firm: By Curves q
U72-180
Total Revenue and Total Cost. I3rcak-even Point. Equilibrium of Firm: By Curves of Marginal
Revenue and Marginal Cost. Equilibrium of Industry: Meaning. Conditions of E
q uilibrium,
Short-run and Long-run FAluJlihriLim. Incorporating Normal Profit into Average Cost Curve
V alidit y
of Profit- maximising Doctrone: Arguments Against, Full Cost Pricing Principle, Profit
Maximisation any Single owner Entreprcncur. Goals other than Profit Maximization: Security
Motive. Sale. Maximization. Utilit y
Maximization. flaumol's Sales Maximisation Principle.
25. E QUILIBRIUM OF FIRM AND INDUSTRY UNDER
PERFECT COMPETITION
181,186
Conditions of Perfect Competition: Their I m p
in the Short - run. Sh Ut - down Point. Eq ut Iilications. Conditions of Equilibrium. Equilibrium
briurn in the Long-run. Tendency to Opt mu iii.
Equilibrium Under I opened Com petit ion. Relevance of Pure Competition.
26. SUPPLY CURVE OF PERFECTLY COMPETITIVE INDUSTRY
187-191
Concept of Supply Curve. Short-run Supply Curve. Long-run Supply Curve. Supply Curve of
the Constant Cost Industry. Supply Curve of the Increasing Cost Industry, Supply Curve of the
Decreasing Cost Industry.

27. P RICE-OUTPUT DETER MIN ATION—PERFECT COMPETITION

192-20o
Two approaches: Partial Equilibrium Approach. General Equilibrium Approach. Price Deter-
mination: General Statement. Equilibrium Price. Demand and Supply Only Superficially Affect
Price. Importance of Time Element: Three Time-Periods. Which is More Important: Demand
or Supply? Time Affects Supply. Change in Supply Does Not Necessarily Change Demand.
Determination of Market Price: Of Perishable Goods, Of Reproducible Goods, Reserve Price.
Price as a Rationing Device, Determination of Short-run Price. Determination of Long-run
Normal Price. Long-run Normal Price in Constant-Cost Industry. Long-run Normal Price in
Decreasing-Cost Industry. Decreasing-Cost Industry is Incompatible with Perfect Competition.
Normal Price and Market Price Compared. Price Determination Under Perfect Competition
Summed up.

28. PRI CE-OUTPUT UNDER MONOPOLY

207-224
Meaning of Monopoly. Bases of Monopoly: Barriers to the Entry of Rivals. Price-Output
Determination under Monopoly. Equating Marginal Revenue and Marginal Cost. Monopoly
Price and Elasticity of Demand. Short-run and Long-run View. Does the Monopolist
Necessarily Make Profit? Long-run Adjustments Under Monopoly. Monopoly Equilibrium and
Comp etitive Equilibrium Compared. Regulation of Moiiopoly: Taxation, Other Methods of
Control. Discriminating Monopoly: Meaning ut I'nicc Discrimination. Type of Price Discrimin-
ation. Degrees of Price Discrimination. Con
Dis ditions of' Price Discrimination. When l'riie
crimination is Possible When Price Discrimination1 is Profitable. Discrimination Not
Profitable When the Demand Curves Are Iso-elastic Price E)iscrimjnaiion Profitable When
Elasticit i
es Differ. Price-output Equilibrium in Discriminating Monopoly. Price Discrimination
and Output. Price Discrimination by Dumping. Effects of Price Dicrimination. Is Price
 Pages
Chapter
Discrimination Beneficial to Society? Monopoly Power: Measurement of Monopoly Power.
Elasticity of Demand and Monopoly. Power. Is Monopoly Price a High Price? Criticism of
Monopoly. Restraints on Monopolies. Price Under Monopsony. Bilateral Monopoly. Regulating
monopoly through Taxation. Make-up Principle.
225-234
29. PRICE-OUTPUT UNDER MONOPOLISTIC COMPETITION
Meaning of Imperfect Competition. Monopolistic Competition: Meaning and Nature, Product
Differentiation, Many Firms. Price-Output Determination Under Monopolistic Competition.
Price-output Equilibrium. Short-run Equilibrium. Long-run Equilibrium of Firm and Group
Equilibrium. Product Variation Equilibrium. Group Equilibrium. Product Group Selling Costs:
Meaning olSclling Costs. How Far Are Selling Coats Efficacious? Effect of Selling Costs on the
Demand Curve. Selling Costs and Equilibrium Output. Optimum Selling Costs. Increased
Selling Costs vs. Price-Cutting. Excess Capacity Under imperfect Competition. Critique of
Monopolistic Competition. Effects of Monopolistic Competition. Wastes of Monopolistic
Competition. Monopolistic Competition. An Appraisal
30. OLIGOPOLY AND DUOPOLY 235-241
Duopoly. Duopoly without Product Differentiation. Duopoly With Product Differentiation.
Oligopoly: Oligopoly Without Product Differentiation. Oligopoly With Product Differentiation,
Stability of Price Under Oligopoly. Kinky Demand Curve. Price Leadership Under Oligopoly.
Types of Price Leadership. Price-Output Determination under Price Leadership. Difficulties of
Price Leadership. Collusive Oligopoly. Game Theory and Oligopoly Behaviour. Effects of
Oligopol y . Evils of Oligopoly. Duopaly Models-Cournot Model. Edgeworth Model. Chamber-
lin Model.

PART V: FACTOR PRICING

31, THE GENERAL THEORY OF FACTOR PRICING 242-254

Significance of Factor Pricing. Meaning of Distribution. Functional vs. Personal Distribution.
Role of Factor Prices. Marginal Productivity Theory. Criticism of Marginal Productivity Theory.
Firm's Equilibrium in Factor Employment. Equilibrium Under Perfect Competition in the
Factor Market. Equilibrium Under Imperfect Competition in the Factor Market. Conditions of
Monopsony. Modern Theory of Distribution: Demand Side. Supply Side. Equilibrium of
Demand and Supply. Transfer Earnings. Equity in Income Distribution. Relation between
Production, Value and Distribution Theories. Relation between Value and Distribution
Theories. Relation Between Production and Distribution Theories. Product Exhaustion Problem
or Adding-Up Problem. Impact of Technological Progress on Relative Factor Shares.
255-269
32. WAGES
Meaning of Wages. Is Labour a Commodity? Nominal Wages versus Real Wages. Why a
Separate Theory of Wages? Old Theories of Wages: Subsistence Theory, Wages -Fund Theory,
Residual Claimant Theory. Marginal Productivity Theory of Wages. Taussig's Theory of Wages.
Modern Theory of Wages: Demand for Labour. Supply of Labour. Interaction of Demand and
Supply. Wages Under Imperfect Competition. Exploitation of Labour Trade Unions and Wage
Determination: Can lradc Union Raise Wages? Adverse Effect of Trade Union Action. Wage
Dilrercnuals: Relative Wages. Low Wages of Women. Wages Under Full Employment. Share
of Wages in the National Income: Factors Affecting Share of Wagcs.
270-281
33. RENT
Meaning of Rent: Economic Rent and Contract Rent. Rent as Surplus. Rent and Transfer
Earnings. Ricardian Theory of Rent: How Does Rent Arise? Differential Rent. Marginal or
No- Rent Land. Does No-Rent Land Really Exist? Scarcity Rent. Criticism of the
Ricardian Theory. Further Appraisal of the Ricardian Theory. Modern View of Rent of Land.
Land for a Particular Use. Modern Theory of Rent: How Economic Rent Arises. Quasi-Rent.
Quasi-Rent and Interest. Rent Element in Other Factors. Relation Between Rent and Price:
When Rent Enters Price. Rent and Economic Progress. Rent in a Socialist State. Rent as a Basis
for a Sin gle Land Tax.
282-298
34. INTEREST
What is Interest? Gross and Net Interest. Differences in Interest Rates. Differences in Pure
Interest. Differences in Gross Interest. Theories of interest: How Interest Ari s es: Productivity
Theor y. Abstinence or Waiting Theory, Austrian or Agio Theory. Fisher's Time Preference
 x
Chapter
l'ages
Theory. Liquidity [Link] flow Rate of Interest is Determined: Classical or Real
Theory of Interest: Demand for Savings. Supply of Sayings. Equilibrium between Demand and
Supply. Criticism. LonabIc Funds Theory of Interest: Supply of Loanable Funds: Savings.
Dishoarding. Bank Credit Disinvestment. Demand for Loanable Funds. Equilibrium between
Demand for and Supply of Loanable Funds. Criticism. Liquidity Preference Theory: Meaning.
Factors Governing Liquidity Preference. Determination of the Rate of interest. Criticism of
Liquidity Preference Theory. Keynesian and Other Theories of Interest Compared: Keynesian
vs. Classical Theory. Keynesian vs. Loanable Funds Theory. Modern Theory of Interest:
Hicks-Hansen Synthesis. Effect of Changes in the Variables. Criticai Appraisal of Hicks-
Hansen Synthesis. Can the Rate of Interest Fall to Zero? Social Importance of Interest.

35. PROFIT 299-307

Nature of Profits. Analysis of Gross Profits. Pure or Net Profit, Theories of Profits: Profit as Rent
of Ability. Wages Theory of Profits. Marginal Productivity and Profits. Dynamic Theory of
Profits. Innovations Theory of Profits. Rr.k . hearing Theory of Proilts. Uncertainty-hearing
Theory of Profits. Conclusion Regarding Theories of' Profit. Normal Profits. Monopoly and
Profits. Critical Evaluation of Monopoly Theory of Profits. Do Profits Fend to Equalit y? Social
Function of Profit. Macro- Distribution Theories. Marxian Theory. Kaccki's Degree of
Monopoly Theory. Neo-Classical 'Fheory.'Kaldor's l'hcor, of Income Distribution.

3& ROLE OF PRICE MECHANISM 308-311

Problems to be Tackled by Price System. Functions of the Price System. Critical Appraisal of
the Price System. Shortcomings. Price System in a Developing Economy.

BOOK TWO: THEORY OF INCOME AND EMVLOYMENT OR MACRO-ECONOMICS

PART I: SOCIAL ACCOUNTING

37. SOCIAL ACCOUNTING
315-322
Importance. What is Social Accounting? Social Accounting and Private Accounting compared
Uses of Social Accounting. Preparation of Social Accounts: Social Accounts in a closed
Economy. Social Accounts in an Open Economy. items Included in the various sectors of the
Economy. Items included in the Production Sector. Items included in Consumption, Items
included in Accumulation Capital Iransaction Account. Problems of Classification and
Definition.

NATIONAL INCOME: MEANING AND CONCEPT

323-329
Meaning and Concepts. Introduction. Definition of National Income. Concepts of National
Income. Gross National Product (G.N.P.). Net National Product (NN.P.). National Income or
National Income at Factor Cost (N.!.). Personal Income (P.1.), Disposable Income (DI.).
Measurement of National Income: Production or Output Method. Income Method. Expendi
-
ture Method, Identity of Methods. Difficulties of Measurement, Special Difficulties of
Measurement in Uder-devcloped Countries. Significance of National Income Statistics. Is the
Growth of (IN!' an Unfailing Index of a Country's Economic Progress?

PART II: THEORY OF INCOME DETERMINATION

39. THEORY OF EMPLOYMENT
330-341
Classical Theoryof Employment. Say's Law. Pigou's Modification. Basic Assunip(ionaf Say's
Law. Implications of Say's Law. Criticism of Classical Theory and Say's Law. Keynesian Theory
of Employment: Principle of Effective Demand. Determination of Effective Demand. Aggregate
Supply Price. Aggregate Demand Price. Determination of Equilibrium Level of Employment.
Further Discussion on Effective Demand. Importance of Effective Demand. Equilibrium not
necessarily at full employment. Why Under-empIoyment,quiibnu ,[Link]._Djtrmjmn
.Ajgregatespplv and ggegatc Demand. Summary of Keynesian Theory of Employment and
The. '- -

40. DETERMINATION OF NATIONAL INCOME

342-349
How the Level of Narioi Income is Determined. Equilibrium Not Necessarily at Full
 xi
Pages
Chapter
Employment Equilibrium level of Income: Equality of Saving and Investment. Keynes'
Theory in Outline. Inflationary and Deflationary Gaps. Saving- Invcstmcnt Controversy. Some
Macro-economic Terms.
CRITIQUE AND RELEVANCE OF KEYNESIAN SYSTEM 350-355
Kenes vs. Classical Econornists.CritcLSm0l the Keynesian Theory. Retreat from Keynesian im.
t!C Keynesian theory. Theoretical Importance
Supply-side Economics Significance UI
Practical Importance. Relevance of Kenesian Econoiilic% to Under-developed Economics
Further Criticism of the Keynesian Model.
42 DETERMINAN T S OF INCOME AND EMPLOYMENT: 356-364
PROPENSITY TO CONSUME
Consumption Function: Meaning. Factors Influencing Consumption. Average and Marginal
Propensities to Consume. Propensity to Save. Keynes' Law of Consumption: Propositions of the
Law. Assumptions. Implications. Factors influencing Consumption Function Objective Fac-
tors. Subjective Factors. Importance of Consumption Fuiction. Post-Keynesian Developmcnt.s
regarding Consumption Function. Pigou Effect. Three Theories of Consumption Funclion.
Permanent Income hypothesis. Life Cycle Hypothesis.

43 DETERMINANTS OF INCOME AND EMPLOYMENT: 365-372

INDUCEMENT TO INVEST
.Meaning of lnvestmçflt Types of Investment. Importance of Investment. Factors Affecting
Investment Marginal Efficiency of Capital: Meaning. Investment Demand Curve. The Position
S 1j1 . i .c,.[Link] of Business Expectations in Determining
and Sha p e of the M LC Cu
MEC. Factors Influencing Expectations. Theory of Secular Stagnation. Investment and the
Level of Jucome.
373-382
44 MULTIPLIER AND ACCELERATOR
Concept of Multiplier. Kahn's Employment Multiplier. Keynes' Income or Investment
Multiplier. Diagrammatic Representation of Multiplier. Unsitations of Multiplier. Uses of
Multiplier. Leakages in Income Stream and Their Effect on the Multiplier. Reverse Operation of
the Multiplier. Importance of the Miltiptier. Multiplier and Under-development Countries.
Acceleration: Concept of Accelerator. Working of the Accelerator. Criticism of the Acceleration
of the Accelerator. Comparison Between the
Principle. Limitations of the Accelerator. util i ty
Accelerator and the Multiplier. Three Concepts of the Multiplier. The Balanced Budget
M Ut iplier.
383-381
45. WAGES AND EMPLOYNtENT
Classical View: Assumption. Criticism. Money Illusion. Effect of Wage-Cut on Determinants o
Employment: Effect on Marginal Efficiency of Capital. Effect on Consumption Function. Effect
on Rate of Interest. Modern Theory of Wages and Employment. Application to Wage Policy.
Pigou Eflct or Real Balance Effect.
388-393
46, UNEMPLOYMENT AND FULL EMPLOYMENT
Types of Unemployment : Structural Unemployment. Seasonal Unemployment. Frictional
Unemployment. Keynesian Unemployment or Cyclical Unemployment. Measures to Remove
Cyclical or Keynesian Unemployment. Nature of Unemployment itr Under- developed Coun-
tries Full Employment: Meaning of Full Employment. Measurement of Full Employment
Level. Policy for Full Employment: Fiscal Policy for Full Employment. Monetary Policy for
Full Employment, incomes Policy for Full Employment. Price Policy for Full Employment.
International Measures for Full Employment.
PART Ill: ECONOMIC FLUCTUATIONS
394-406
47. TRADE CYCLES
Meaning of a Trade Cycle. Economic Crisis. Phases of a Trade Cycle. Characteristics of a Trade
Cycle. Theories of Trade Cycle: Climatic Theory. Psychological Theory. Under -consumption
Theory. Monetary Theory. Over-investment Theory. Keynes' Theory. Modern Theory: interac-
tion of Multiplier and Accelerator. Kaldor's Contribution to Modern Trade Cycle Theory.
Policy for the Trade Cycle: Remedial Measures: Monetary Policy. Fiscal Policy. International
Measures. Mathews' Model.
 Chapter
Pages
BOOK THREE: MONEY AND BANKING
PART I: MONETARY STANDARDS AND THEORY OF MONEY AND PRICES
48. NATURE AND FUNCTIONS OF MONEY
409-415
Meaning of Money. Concepts of Money, money stock measures in India. Difficulties of Barter
Importance of Money in Modem Economy. Dangers of Money. Money in a Socialist State.
Gresham's Law. Functions of Money: Money as Medium of Exchange. Money as a Standard
Measure of Value. Money as a Standard rs
fDcfcrred Payments. Money as a Store of Value
Money as a Means of' Transferring Value, P r
imary, Secondary and Contingency Functions.
Static and Dynamic Functions. When Does Money Cease to Perform its Functions? Essentials
of Good Money. Demand for and Supply of Money: Demand for Money Supply of Money.
49. MONETARY STANDARDS
416-424
Gold Standard: Gold Currency Standard. Gold Bullion Standard. Gold Exchange Standard.
Gold Parity Standard. Advantages of Gold Standard. Disadvantages of Gold Standard.
Conditions for Successful Functioning of Gold Standard. Causes of the Breakdown of the
Gold Standard, Future of Gold Standard, Paper Currency Standard. Advantages of Paper
Money. Disadvantages of Paper Money. Principles of Note-Issue. S'vstems of Note-Issue
EssentMlsfa Sound Currency System. Paper Gold Standard or the SDR Stundard,
50. THEORY OF MONEY AND PRICES
425-434
Index Numbers: Meaning. Preparation of Index Numbers. Weighted Index Numbs, Uses of
Index Numbers. Limitations. Theories of Money and Prices: Value of Money: Its Meaning.
Quantity Theories of Money: The Quantity-Velocity or Cash Transactions Approach. Equation
of Exchange. Critical Evaluation of the Quantity Thcoiy. Merits of the Theory. Cash Balances
Approach: Cambridge Equation. Differences between Fisher E q
uation and Cambridge Equa-
tion, Friedman, Restatement of the Quantity 'theory of Money. Modern Theory of Money:
The Income Approach. Determination of the General Price Level: Kevirsjan View. Role of
Money iii Economic Activity Conditions for Neutrality.
51, INFLATION
435-44e
Definition of Inflation. Inflationary Gap. Inflationary Process,
Inflation Cost'-psj i . Wage-price Spiral. Demand-put[
Inflation Theories of Inflation Market-power Theory of Inflation. Policy
Implications Conventional Demand-pull Inflation. Structural Tleories of Inflation. Bottle-
Neck Inflation. Demand
-Composition Inflation. Causes of Inflation. Full Employment and
Inflation. [lie Phillips' Curve. Trade-off Between Degree of Unemployment and Wage-Price
Rise. Nature of Inflation in a Developing Economy. Effects of Changing Prices: Control of
Inflation: Monetary Measures. Limitations of Monetary Policy. Fiscal Measures. Physical or
Non-Monetary Measures. Price Control. Failure of Price Control. Further Measures to Control
Inflation Price Income Policy. Monetarists Recipe. Indexation.

PART II: BANKING

52. BANKING
449-455
Functions of Commercial Banks. Creation of Credit: How Binks Create Credit. Process of
Credit Creation. Limitations, Significance of Credit Creation. Investment Policy: Liquidity vs.
Profitabilit y . Importance of Liquidity. Bank Balance Sheet. Utilit
y of Banks Role of Banks in
Economic Development A Note on N
on-Banking Financial Intermediaries. NBFIs and
Commercial Banks. Functions of NBFIs.
53 CENTRAL BANKING
456-464
Importance of Central Bank. Central Banking Principles. Functions of Central Banks.
Note-Issuing Agency. Ranker of the ha,e. Bankers Hank. Lender of Last Resort. Clearing and
Settlement. Control of Credit: Objectives of Credit Control. Difficulties of Cred
i
Methods of Credit Control or instruments of Monetary Management. General Credit t Con [to t
Selcuive tredit Controls. Bank Rate Policy. Bank Rate Policy Under Gold Standarll. Controls.
Conditions of' Bank Rate Policy. Keynes' View of the Bank Rate Policy. 0pn Market limiting
Operations: Limitations of the Theory. Credit
Varying Reserve Requirements. R ationing. Direct Action and Moral Suasion
Selective Credit Controls: Varying Margin Rcqujrcjiients
Li mitations of Selective Credit Cojitruls
 XIJi
Pages
Chapter
465-47
54. MONETARY POLICY
Objectives. Dear Money vs. Cheap Money: Neutral Money Policy. Monetary Policy for a
ment. Limitations of
Devdopvg Economy. Role of Central Bank in Economic Develo p
Monetary Policy. Role of Monetary Policy in Indian Economic Development. Conflicting
Objectives of Monetary Polic y . Coordination of Monetar y Objectives. Optimising Approach
Fixed Target Approach. Harmonious Adjustment and judicious Mix. Monetary Polic y Vs Fiscal
Policy. Monetary- 1-iscal Policy Mix.
BOOK FOUR: INTERNATIONAL ECONOMICS
PART I: INTERNATIONAL TRADE THEORY
475-488
35. THEORY OF INTERNATIONAL TRADE
inter-regional vs. International Trade. Why a Separate Theqry of International Trade. The Basis
of International Trade: Classical Theory of International Trade. The Theory of Absolute
Advantage The Theory of Comparative Cost. Criticism of the Comparative Cost Theory.
Modern Theory: General Equilibrium Theory. Criticism of Ohhn's Theory. Comparison
between Classical Theory and Oblin's Theory. The theory of Opportunity Cost. Comparative
Cost Theory and the Opportunity Cost Ilicory Compared. Assumptions. Terms of Trade.
Factors on which terms of Trade Depend. Terms of' Trade and Economic Growth. (jams from
Foreign Trade; Static and Dynamic Conscqucnccs of lnternalional Trade.
489-495
56. FREE TRADE VS. PROTECTION
Theory of Free Trade. Case for Free Trade, Protectionism: Arguments for Protection.
Arguments Against Protection. Role of Protection in Under-developed Countries. Barriers to
Foreign Trade. .\ Note on the Theory of TariU. Stolper-SamuelsonThcorem. The Terms of
Trade I lied. Effect on National Income Optimum Tarift
PART II: BAlANCE OF PAYMENTS AND INTERNATIONAL MONETARY SYSTEM

57. BALANCE OF PAYMENTS 496-505

Definition of Balance of Payments. Balance of Payments: Curent and Capital Accounts. Items
Included in the Balance of Payments. India's Balance of Payments (Current Account). India's
Balance of Payments: Capital Account. Balance of Payments and Balance of Trade. How does
the Balance of Payments Balance ? Equilibrium. Disequilibrium and Adjustment Balance of
Payments Equilibrium. Types and Causes of Disequilibrium. Theories Concerning Disequili-
brium in Balance of Payments. Methods of Correcting Disequilibrium in Balance of Payments.
Economic Development and Balance of Payments. Sixth Plan Projections.

5. EXCHANGE RATE DETERMINATION 506-515

Rate of Exchange under Gold Standard. Exchange between Gold and Silver Standards.
Purchasing Power Parity Theory. Exchange between Inconvertible Paper Currencies. Critical
Evaluation of the Purchasing Power Parity Theory. Modern Theory of Exchange Rate
Determination: Demand and Supply Theory or Balance of Payments Theo ry...Evaluation of the
Balance of Payments Theory, Equilibrium Rate of Exchange. Fluctuating vs. Fixed Exchange:
Case for Flexible Exchange. Case for Fixed Exchange. Exchange Control. Objectives of
Exchange Control. Methods of Exchange Control. Forms of Exchange Control. Other Exchange
Control Devices,

59. INTERNATIONAL MONETARY FUND 51 6-525

Purposes and Objectives. Organisation and Functions. Organisation of the Fund. Function of
the Fund. I.M.F. an Improvement on Gold Standard. Working and Evaluation o the Fund.
I.M.F. and Less Developed Countries. Problem of International Liquidity: Components of
International Liquidity. Causes of Inadequacy. Special Drawing Rights. Reforms of the
International Monetary System. Breakdown of the Brejionwoods System. Reforms, Oilier
Recent Development—Supplementary Financing Facilit y (SFF. Compensatory Financing
Facility. Trust Fund, Subsidy Account Substitution Account litifier stock Financing Facility.
Common Fund. Fund Conditionaity.
BOOK FIVE: PUBLIC FINANCE
60. NATURE AND SCOPE OF PUBLIC FINANCE 529-5!
Distinction Between Public Finance and Private Finance. Importance of Public Finance.
 XIV
Chapter
Classical Views on Public Finance. Keynesian Views on Public Finance The Principle of
Page
Maximum Social Advantage. Diagrammatic Representation. Criticism of the Principle of
Maximum Social Advantage. Concept of Functional Finance. Role of Public Finance in a
Developing Economy Roleof Public Finance Under different Economic Systems.
61. PUBLIC EXPENDITURE
540-547
Causes of Increase in Public Expenditure. Revenue and Capital Expenditure, Development and
Non-Development Expenditure Principles of Public Expenditure Effects of Public Expendi-
ture: Effects on Production Effects on Distribution Effects on Level of Income and
Employment. Effects on income and Employment in a Developing Economy. Role of' Public
Ex penditure in a Developing Economy. Pure Theory of Public ESpenditure

62. PUBLIC REVENUE

Sources of Revenue Taxes. Classification of Taxes. Direct and indirect Taxes. Specific and Ad
548-557
Valorm Taxes, Canons of Taxation Adam Smith's Canons. Other Canons. Social and
Economic Objectives of Taxation. Objectives in a Developing Economy Characteristics of a
Good Tax System. Role of Taxation in Developing Economics. fax Policy for Developing
Economics. The Theory of Tax Structure Uev
Impact of Economic Development elopmcnr, Changes in Tax Structure Under the
63 PROBLEM OF EQUITY
CosI of Service Principle. Benefit or 'Quid Pro Quo' Theory. 'Ability to Pay' Theor
558-563
Proportional vs. Progress i y.
Pro ve Taxation. Case for Proportional Taxation. Case Against. Case f'o' r
gressive Taxation. Case Against. Taxable Capacity: Meaning Limit of Taxable Capacity
Factors Governing Taxable Capacity. A Further Note oil
Case for Progressive Taxation.
64 INCIDENCE OF TAXATION
Meaning of Incidence. Impact and Incidence. Incidence and Effects. Money Burden and Real 564-575
Burden. Importance of Incidence, Factors Determining Incidence. Direct and Indirect Taxes.
Relative Merits and Demerits of Direct and Indirect
T axes. Rote of Indirect Taxationin a
Dcveloping Economy. Incidence of Sonic Taxes. Incidence of Taxes on Personal
income.
Incidence of Corporation Tax. Incidence of Tax on Profit. Effects of Wealth Tax. Incidence of
Property Tax, incidence of 'lax on Buildings. Incidence of' Death Duty. Incidence of Tax on
Monopoly. Incidence of a Commodity Tax. Incidence of Sales Tax. Incidence of Import and
Export Duties. Effects of Taxation on Production. Consumption and Distribution Modern
Theory of Shining and Incidence.
65. PUBLIC DEBT
Class 576-580
ification of Public Debt. Growth of Public Debt. Purposes of Public Debt. Methods of
Debt Redemption Some Revolutionary Proposals. Burden of Public Debt Burden of Internal
Debt Burden of External Debt Role of Public Borrowing in' a Developing Econom
y . Voluntary
or Forced Loans, Difficulties of Public Borrowing in Under-cleveloped Countries
Suggestions
for the Success of Public Borrowing Effects of Public Debt on Production . Distribution,
Consumption and Level of income and Employment.
66. DEFICIT FINANCING
Dflnition. Uses of' Deficit Financing. Deficit Financing during Depression. Role of Deiicju
581-585
Financing in a Developing Economy; Precautions, Deficit Financing in India's Five Year
Consequence of Deficit Financing. Df3ci Financing and Inflation. Not Plans.
ary. Minimising Inflationary Polenhial Ne cessarily inflation-
Finance. orDefi Cit Financing. Concept and Principles o: Federal

00K SIX: ECONOMIC SYSTEMS

67. CAPITALISM
Capitalism : Definition. 589.595
Outstanumg Features of Capitalism. Sovereignty of the
Merits of Capitalism. Demerits Consumer.
or Criticism of (. 'a puialis,n, Changing Face of Capitalism:
Towards Welfare State.

6. SOCIALISM
I)efinition. Marxian Socialism Materialistic Interpretation of Histor y 5966('9
. Criticism of Marian
 xv
Pages
Chapler
Theory. Some Other Forms of Socialism. Collectivism or State Socialism. Guild Sociajisirs,
Syndicalism. Communism. Anarchism. Fabian Socialists. General Feature of Socialism. C,c
for Socialism. Demerits of Socialism. Critiism Answered. Some Problems of Socialism.

610-614
69. MIXED ECONOMY
Meaning. Main Features of Mixed Economy. Critical Evaluation of Mixed Economy. Mixed
Economy in the Context of Indian Economy.

BOOK SEVEN; ECONOMICS OF DEVELOPMENT AND PLANNING

PART I: ECONOMICS OF DEVELOPMENT

617-622
70. ECONOMIC UNDER-DEVELOPMENT
Emergence of Theory of Growth. Definition of an Under-developed Economy. Characteristics
of Under-developed Economies. I)ualkm and Economic Under -developmcnt.
623-627
71. OBSTACLES TO ECONOMIC GROWTH
Economic Factors Impending Growth. Social and Political Obstacles to Growth. Conclusion.

628-633
72, VICIOUS CIRCLE OF POVERTY
Vicious Circle on the Demand Side of Capital Formation. Vicious Circle of Poverty on the
Supply Side of Capital Formation. Measures to Bleak the Vicious Circle: Measures to Promote
Capital Formation. Foreign Aid and its Role in Economic Development.

73, DISGUISED UNEMPLOYMENT AND ECONOMIC GROWTH 634-639

Meaning of Disguised Unemployment. Extent of Disguised Unemployment, Disguised Unem.
ployment as a Potential Source of Capital Formation. Critical Evaluation of Disguised
Unemployment as a Source of Capital Formation. Conclusion. Solution of the Problem of
Disg'iced Unemployment. Lewis Model of Economic Devetopment with Unlimited Labour
Suppy.
640-651
74. ECONOMIC DEVELOPMENT
Meaning. Stages of Economic Development. Determinants of Economic Growth. Capital
Formation. Can capital accumulation take place without technological prog?ess? Capital-output
Ratio. Technological Progress. Dynamic Entrepreneurship. Population Growth. Non -e' onomic
or Institutional Factors. Harrod-Domar Growth Models. kelation Between Population Growth
and Economic Growth. Critical Minimum Effort Thesis. Relevance of HarroJ-D,mar Model
for Developing Countries.
75 STRATEGY OF ECONOMIC DEVELOPMENT: BALANCED 652-659
AND UNBALANCED GROWTH
Types of Strategies. Big Push Strategy. Balanced, Unbalanced, Big Push. Balanced vs.
Unbalanced Growth. Size of Market and Inducement to Invest. Nurksian Doctrine of Balanced
Growth. Singer's Critique of Balanced Growth Doctrine. Hirschman's Doctrine of Planned
Unbalanced Growth. Conclusion. Mahalanobis Strategy of Economic Growth, Conclusion.

76, INVESTMENT CRITERIA AND CHOICE OF TECHNIQUES 660-666

[Link] Analysis. What Costs and Benefits? Capital-output Ratio Criterion. Marginal
Social Productivity Criterion. Some General Guidelines. Balance of Payments Criterion.
Quick-yielding Investments. Labour-Intensive vs. Cap i tal-Intensive Techniques. Local Com-
munity Assets The Rate of Turnover Criterion. The Surplus Rate Criterion. Employment
Absorption Criterion. The lime Series Criterion. Conclusion. Socially Desirable Income
Distribution Criterion.
77. FINANCING OF ECONOMIC DEVELOPMENT 667-6 I
Capital. Protits of Public Undertakings.
Savings. Taxation, Government Borrowing. Foreign Capital.
Deficit Financing. Disguised Unemployment. Inflation and Forced Saving.

2-A
 xvi
C'hap:er
78. ROLE OF Pages
GOV ERNMENT It' ECONOMIC DEYELOPMENT
Importance of Government's Role in Economic Development. Government Measures to 672-675
Promote Economic Devehipment, Provision of Economic and Social Overheads. Provision of
Financial Facilities, institutional Changes. Direct Participation. Indirect Measures. Rationale of
Public Sector in Economic Dcvefopi-tegit.

PART II: DEVELOPMENT PLANNING

79. ECONOMIC PLANNING: MEANING AND TYPES
676-688
Popularity of Planning. Meaning of Planning. Forms of Planning. Authoritarian and Democra-
tic Planning. General and Partial Planning Functional and Structural Planning, Planning
Inducement and Planning by D by
irection, Centralised Planising vs. Decentralised Planning Case
for Planning.
Planning . Special Case of Under-developed Countries. Pre-requisites of Successful
Objective of Planning. Formulation and Implementation of a Plan. Physical vs.
Financial Planning. Features of a Planned Economy. (ullcept o[ Rolling Plan

BOOK EIGHT ECONOMICS OF WELFARE

80. WELFARE ECONOMICS

. 691-709
E)ctjfltt)fI of Welfare Eonomjcs Economic and Non-Economic or General Welfare. Positive
Economics and Welfare Economies Individual Welfare and Social Welfare, Divergence
between Individual and Social Welfare. Old Welfare Economics: Pigou's Analysis. New
Welfare Economics: Co
mpensation Principle, Social Welfare Function. Welfare Criteria.
Wellare PIOpOSjtjOflS: Conditions of the Paretian Optimum. Assumptions and Limitations of
Welfare Concept, Applications of Welfare Economics. Rationing. Taxation. National Income.
Soialist Ideology. Obstacles to Welfare Maximization. A Further Note on Compensation
I'rinciplc.. Kaldor's Compensation Principle. Hick's Compensation Principle. Sctovsk
ys
Com pensation Principle. Criticism of Compensation Principles. Market Structure and Social
Welfare. Fiscal Policy and Social Welfare: Impact of Income Distribution on Social Welfare
Impact of Tax Structure on Social Welfare. Arrow's Impossibility Theorem,
CLASSIFIED BIBLIOGRAPHY
711-714
TYPICAL QUESTIONS
715-72S
INDEX
731-740

2-E
 BOOK ONE:
PRICE THEORY OR
MICRO-ECONOMICS