Indian Economic Development

In the intricate realm of business finance, fixed capital and working capital stand as crucial pillars, each playing a distinct yet complementary role in shaping an enterprise's financial structure. Fixed capital represents the long-term assets that contribute to a company's foundation and growth. These assets, including buildings, machinery, and equipment, are not intended for immediate turnover but serve as the infrastructure necessary for sustained operations over an extended period. Farmer's plough and computer are classified as fixed capital because they are long term assets that provide benefit over multiple production cycles. Hence pair 1 is not correctly matched and pair 2 is correctly matched.

Conversely, working capital addresses the short-term financial needs essential for day-to-day operational activities. Both petrol and yarn are raw materials consumed within a single production cycle and are essential for the day to day operations of their respective businesses. Hence they are categorised under working capital. Hence pair 3 is not correctly matched and pair 4 is correctly matched.

Source: NCERT

Law of Demand - Law of Demand states that other things being equal, there is a negative relation between demand for a commodity and its price. In other words, when price of the commodity increases, demand for it falls and when price of the commodity decreases, demand for it rises, other factors remaining the same. Hence, statement 4 is correct.

The quantity of a good that the consumer demands can increase or decrease with the rise in income depending on the nature of the good. For most goods, the quantity that a consumer chooses increases as the consumer’s income increases and decreases as the consumer’s income decreases. Such goods are called Normal Goods. Thus, a consumer’s demand for a normal good moves in the same direction as the income of the consumer. However, there are some goods the demands for which move in the opposite direction of the income of the consumer. Such goods are called Inferior Goods. As the income of the consumer increases, the demand for an inferior good falls, and as the income decreases, the demand for an inferior good rises. Examples of inferior goods include low quality food items like coarse cereals. Hence statement 3 is not correct.

The quantity of a good that the consumer chooses can increase or decrease with the rise in the price of a related good depending on whether the two goods are substitutes or complementary to each other. Goods which are consumed together are called complementary goods. Examples of goods which are complement to each other include tea and sugar, shoes and socks, pen and ink, etc. Since tea and sugar are used together, an increase in the price of sugar is likely to decrease the demand for tea and a decrease in the price of sugar is likely to increase the demand for tea. Similar is the case with other complements. With the increase in price of complement, demand reduces. Hence statement 2 is not correct.

In contrast to complements, goods like tea and coffee are not consumed together. In fact, they are substitutes for each other. Since tea is a substitute for coffee, if the price of coffee increases, the consumers can shift to tea, and hence, the consumption of tea is likely to go up. On the other hand, if the price of coffee decreases, the consumption of tea is likely to go down. The demand for a good usually moves in the direction of the price of its substitutes. Hence statement 1 is correct.

Source Citation: NCERT

Disguised unemployment means that more people are engaged in a job which can be done with fewer people, normally seen in agriculture where the whole family is involved. It means extra people can be removed without affecting the productivity, i.e., their marginal productivity is zero.

Source: NCERT: Class 11th Economy

The Financial Stability and Development Council (FSDC) was established by the government in December 2010 as the apex-level forum. It is chaired by the Union Finance Minister. The council is responsible for monitoring the macroprudential supervision of the economy.

In the context of the question, the correct statements are:

• Statement 2: It is headed by the Union Finance Minister.
• Statement 3: It monitors macroprudential supervision of the economy.

Therefore, the correct answer is (c) 2 and 3 only.

The balance of payments (BoP) records the transactions in goods, services, and assets between residents of a country with the rest of the world for a specified time period, typically a year. So the best option is A.

Source: NCERT: Class XII Macroeconomics