Distinguish between

   Basis              Positive Economics    Normative Economics
1. Meaning It is a body of systematized knowledge relating to WHAT IS? This body of knowledge relates to WHAT OUGHT TO BE?
2.Verification These statements can be empirically verified. These statement can not be verified with precise accuracy.
3. Basis This is based on true facts and given figures. Based on individual’s opinion and not backed by facts.
4. Nature This is not suggestive in nature. Being suggestive in nature can also be given the nomenclature as ‘Regulative science’
5. Objective  The objective is to make true description of economic activities. The objective behind this is to determine the ideals.
   Basis                 Micro economics    Macro economics
1. Meaning Micro economics studies behavior of individual units via individual firms, industry etc. Macro economics is that branch which deals with national aggregates like total production, supply, national income, employment etc.
2. Objective Its basic objective to study the principles, problems, policies relating to optimum use of resources. Its objective is to study problems and principles relation to full employment of resources.
3. Tools/ Components Its basic tools are demand and supply. The tools used in macro economics are aggregate demand and aggregate supply.
4. Alternative Names This is also known as Price theory as it mainly deals with determination of price of commodities and various factors of production. Also popularly called “Income theory “or ‘Employment theory’ as its objective is to study these.
5. Methods of study  It is called ‘partial equilibrium analyses as its laws and principles are formulated on assumption of ‘other things being equal’. It is ‘general economic analysis’ as it studies mutual interdependence of different economic variables.
  Basis          Expansion in demand   Contraction in demand
Meaning         Cause Effect  Example            5. Diagram                                                                                                                                                        Expansion in demand refers to the rise in demand of a good as a result of fall in price, provided other things remain equal.                It is caused due to fall in price. It results in rise in demand.   Price            Units Demand              200    75                   300   Contraction in demand refers to fall in demand of a good as a result of increase in price provided other things remain equal. It is caused to increase in price. It results in fall in demand.      Price           Units Demand 200   150                  125        
(a) it takes place due to change in the purchasing owner of the consumer. (a) Takes place as a result of relative change in price of goods
(b) According to the concept of income effect, when price of commodity decreases purchasing power of consumer increases and vice-versa.          Thus in such a case the income of the consumer does not increases or decreases but there seems an effect on the purchasing power as a result of change in price. (b) When good becomes cheaper, the consumer substitutes the same with costlier goods.
      Basis  Expansion in demand   Increase in demand
Meaning              2. Cause of occurrence         3. Example     4. Diagram     Expansion in demand refers to the rise in demand as a result of reduction in prices, when other things remain equal. It occurs due to reduction in price.              Price                     Demand 200250               As a result of decrease in price from OP to OP1 the quantity demanded has increased from OQ to OQ1 this is known as expansion.       Increase in demand refers to the increase in quantity demanded of a result of change in factors other than price of a good. It occurs due to changes in factors other than price like increase in income or increase in number of consumers or expected increase in prices in near future etc.      Price                 Demand 200250                      Price through remain constant at OP the demand increase from OQ to OQ1 due to other factor, This is known as increase in demand.
     Type of elasticity Numerical value of elasticity               Description
1. Perfect inelastic Ep =0 Quantity demanded does not change as price changes.
2. Inelastic Ep< 1 Quantity demanded changes by a smaller percentage than change in price.
3. Unitary elastic Ep=1 Quantity demanded changes at the same rate as change in price.
4. Elastic Ep>1 Quantity demanded changes by a large percentage than change in price.
5. Perfectly elastic Ep =∞ Consumers are ready to buy all they can get at some price but none at all at slightly higher price.
     Basis Movement along demand Curve    Shift in Demand Curve
1. Meaning A rise or fall in quantity demanded die to change in price is called movement along demand curve. Shift in demand is defined as change in quantity demanded due to factors other than price of good.
2. Types of movement/Shifts 1. Extension of demand 2. Contraction of demand 1.Increase in supply curve 2. Decrease in supply
3.Influence/cause It occurs due to change in price. It occurs due to change in other factors than price like change in income, price of related goods.
4. Type of diagram In this expansion and contraction of demand are shown on a demand curve. In this increase and decrease are reflected graphically.
      Basis Movement along supply Curve  Shift in supply Curve
1. Meaning A rise or fall in the quantity supplied due to change in price is called movement along supply curve. Shift in supply is defined as change in quantity supplied due to the factors other than price of good.
2. Types of movement/Shifts 1. Extension of demand 2. Contraction of demand 1.Increase in supply curve 2. Decrease in supply
3. Influence Here, producer is under the influence of change in price of commodity only. In this case, producer is under the influence of factors other  than price like change in technology, tax etc.
4.type of diagram When expansion and contraction of supply are shown on a supply curve, it is movement along supply curve. When increase and decrease in the supply are reflected graphically, it is called shift in supply curve.
    Internal economic includes     External economic includes  
Managerial Economies: – Better qualified and specialized managers and workers leads to reduction in operation cost, there by leading to economies.Technical Economics: – when the scale of production increases it is in a position to upgrade its plant and machinery. This enhancement can lead to per unit reduction of cost.Financial Economies: – the credit worthiness enjoyed by the large firm is substantially more than those of small. They are able to procure finance at cheap rates from outside.Marketing Economies: – if a firm is big it can get all factor inputs at reduced price while the selling cost comes down as a result of bulk selling.Risk Economies: – Large firms by means of diversification can reduce the risk faced by it.Utilization of by products: – With large production, production of by products also increase. But a large firm is able to utilize (By conversion or scrap sale) by products in a much efficient manner than other wise    Economies of information: – Cheap information is available if the industry as a whole tries to procure information rather than individual firm doing it.Research and development: – Research and development if done by the industry on behalf of the industry turns out to be much economical than that undertaken by individual firms.Economics of Specialization:– When growth and expansion of industry takes place, related industries also get established nearly, adding up to the economies.Economies of concentration: – Spread of banking and credit facilities insurance, advertisement etc. also accelerate the development.  
       Basis   Returns to a variable   Returns to a Scale
(1.) Meaning By turns to a factor we mean change in physical output of good when only the quantity of one input is increased while that of other input kept constant. It means change in physical output of good on account of increase in all inputs required to produce. That good simultaneously & in the same proportion.
(2.) Time period It relates to short period. It is concerned with long period.
(3.) Factor proportion In this case, the proportion between fixed & variable factors goes on changing as more units of latter are applied. Factor proportion does not change at all.
(4.) Scale of production Scale of production does not change Scale of production change.
(5.) Changeable factors Only variable factors i.e. labor, raw material change. Fixed as well as variable i.e. land as well as labor & raw material change.
   Basis    Fixed cost Variable cost
(1.) Meaning Fixed cost are those cost which do not vary with the level of output. Variable cost are the cost which vary with the level of output.
(2.) Factors of production Fixed cost are the cost incurred on fixed factors of production like land, machine, building etc. Variable cost are incurred on the employment  of variable factors such as material labor etc.
(3.) Alternative name It is also known as indirect cost. It is also known as direct cost.
(4.) Shape Total fixed cost curve is parallel to x-axis. Total variable cost rises from the point of origin and moves upward to the right.
(5.) Example (i) License fees (ii) machinery (i) Material, wages to temporary staff, electricity charges etc.
    Basis   Short period        Long period
(1.) Meaning It is a time period which is less than the minimum required, to bring about change in fixed factors. It refers to time period in which all factors of production can be changed.
(2.) Output Output can only be increased by changing the quantity of variable factors. Output can only be increased by making changes in the quantity of both fixed as well as variable factor input.
(3.) Classification of factor of production  The two categories are Fixed factors.Variable factors In long run, the distinction between the fixed & the variable factor disappears.
    Basis     Monopoly Monopolistic competition
1. No. of sellers There is only single seller. There are many sellers.
2. Product type Homogeneous product Product differentiation is a feature of monopolistic competition.
3. Substitutes There are no close substitutes of commodity. Many close substitutes are available.
4. Selling cost No significant selling cost is incurred. It incurs significant effect of selling cost.
5. Freedom of Entry There is no freedom of entry of new firms. There is freedom of entry & exit.
6.Influence over market price It has a considerable influence over market price. It has a less influence over market price
        Basis    Perfect competition   Monopoly
(i) Number of sellers There are large no. of sellers in perfect competition. It has only one seller.
(ii) Influence over price It has no influence over the price. It has a greater influence over the price.
(iii) Freedom of entry & exit There is a freedom to entry & exit of the firms. There is no freedom of entry of the firms.
(iv) Knowledge about market In perfect competition, all firms are assumed to have perfect knowledge about market. In monopoly, there is no perfect knowledge about market.
(v) Type of firm It is a price taker firm It is price-maker firm.
(vi) selling cost There is no selling cost. It has some selling cost to incure.
    Basis      Perfect competition    Monopolistic competition
(i) No. of firms It has a large no. of firms. It has less firms as compared to perfect competition.
(ii) Product type Homogeneous product is a feature of perfect competition. Differentiated product is a feature of monopolistic competition.
(iii) Influence over price A firm can not have independent price A firm can have independent price policy.
(iv) selling costs Perfect competition does not have selling costs. Monopolistic competition incurs a selling costs.
(v) Close substitutes All firm produces same products. There are close substitutes in case of Monopolistic competition.
    Buyers Market   Seller Market
1. Meaning Buyers market may be defined as a market in which buyers have a dominant role to play and have an upper hand in such a market. Sellers market is one of which is characterized by greater influence of the seller.
2. Characteristics It is characterized by more choice and freedom to the buyers. In other words consumer is the king of such a market.  It is characterized by shortage and scarcity of goods since sellers play a dominant role.
3. Price Prices in such a market are competitive. Such market witnesses an increase in the prices.
4. Quantum of goods Producers seek to sell more goods that buyers are ready to buy. Shortage of goods exists.
5. Example Indian market after globalization Indian market before globalization
           Price competition       Non price competition
1. In case of price competition the seller tries to reduce the price and make the product economically acceptable to the consumer in comparison to competitor’s product. As opposed to price competition, here the seller deploys non price methods so as to create custom satisfaction and increase the market share.
2. It takes into account price reduction as its core strategy. Techniques such as advertisement, after sales service, schemes etc. are employed to seek more customers.
                National product                Domestic product
(i) The measure of national product is one which accounts for income attributable to factor services rendered by the normal resident of the country to the rest of the world less factor services rendered to them by the rest of the world. It is a measure of production arising out of the activities of economic agents within the country it is termed as domestic product.
(ii) When NFIA is taken into account we get a measure of national product. When NFIA is not taken into account we get domestic product.
(iii) If NFIA is positive, national product will be more than domestic product. If NFIA is negative, Domestic product will be more than National product.
      Basic        Market price          Factor price
Net indirect taxes Net indirect taxes are included in it. It is not included in it.
Estimation It is estimated at market price. It is estimated at factor cost.
Formula NDPmp = NDPfc + Indirect taxes – subsidies NPPfc = NDPmp – Indirect taxes + subsidies
        Basis     Balance of Trade      Balance of payment
Meaning             2.  Concepts       3.Nature of          items 4.Revenue   5.Favorable It refers to difference between exports and imports of goods by a country in a year.   It has narrow concept as it is a component of BOP. It includes only visible items.   It shows only revenue items.   Balance of trade is favorable when exports is more than imports. It is a statement of all economic transaction between the residents of country and rest of the world during a year. It has a wider concept.   It includes both visible and invisible items. It includes all capital and revenue receipts. BOP is always balanced.
         Basis             Central bank      Commercial bank
(i) Objective Its objective is to promote social welfare. Its objective is to earn profits.
(ii) Ownership It’s mainly a govt owned institution. It may be of private and government owned.
(iii) Note issue It has a monopoly right to issue notes. It do not have such rights.
(iv) Competition It does not complete with commercial banks. There is a sense of competition.
(v) Business It does not do the ordinary banking business with public.  It do ordinary banking business with general public.