MUSINGS

Theory of Consumption - Indifference Curve Analysis The advocates of  Indifference Curve Analysis  make the following assumptions for the analysis of the behaviour of the consumer. 1. Utility cannot be measured 2. When the consumer is given more of a commodity, he will always prefer to have more to less of that commodity. 3. It is based on the Principle of Transitivity. If there are many combinations of two commodities, and if the consumer is indifferent between the combinations of A and B, and also indifferent between B and C, so he will be indifferent between the combinations of A and C. 4. The Indifference Curve Analysis is based on the  Law of Diminishing Marginal Rate of Substitution. Properties of Indifference Curve There are definite properties of the Indifference Curve(IC). On these properties is built the shape of the IC. 1.  An IC slopes downwards from left to right, because as the consumer increases the consumption of one commodity, ...

Theory of Consumption - Revealed Preference Analysis Introduction: In 1960 Mr. Samuelson  introduced the Revealed Preference Analysis to explain the behaviour of the consumer. The fundamental difference between the Utility Analysis, Indifference Curve Analysis and Revealed Preference Analysis is that when the first two are based on the psychology of the consumer, the revealed Preference is based on the actual behaviour of the consumer. Assumptions:  In order to explain the behaviour of the consumer with the help of Revealed preference Analysis, Mr. Samuelson made the following assumptions. 1. Utility cannot be measured. 2. The consumer always prefers more of a good to less, until his income is exhausted. 3. It is based on the Principle of Strong Ordering. This means that if the consumer is given many commodities, he can place them in order of his preference. 4. It is based on the Principle of Consistency, and the consumer acts consistently. 'Consistency in ch...

Creativity is at the heart and soul of advertising.It helps to transform strategic thinking into ideas that enable the advertiser and the ad agency to make ads that standout esp in the mind of the prospect. Creativity is the ability to generate novel and innovative ideas that can be used as a solution to communication problems. 3 aspects are most accepted: The creative process The creative person and The creative situation The Creative process 1. Preparation During the preparation step of the creative process model, an individual becomes curious after encountering a problem. Examples of problems can include an artistic challenge or an assignment to write a paper. During this stage, she may perform research, creates goals, organize thoughts and brainstorm as different ideas formulate. For example, a marketing professional may prepare for a marketing campaign by conducting market research and formulating different advertisement ideas. 2. Incubati...

Non-Banking Financial Intermediaries: Non-Banking financial Intermediaries are a heterogeneous group of financial institution, other than commercial and cooperative banks. These institutions are an integral part of the Indian financial system. A wide variety of financial institutions is included in it. These institutions raise funds from the public, directly and indirectly, to lend them to ultimate spenders. The Development Banks (such as the IDBI, IFCI, ICICI, SFCs, SIDCs, etc.) fall in this category. They specialize in making term loans to their borrowers. LIC, GIC and its subsidiaries and the UTI are its other all India big term-lending institutions. Out of these three, only UTI is a pure non-banking financial intermediary, the others raise funds in the shape of premium from the sale of insurance. Besides this, there are provident funds and post offices who mobilize public savings in a big way for onward transmission to ultimate borrowers or spenders. A large number of sm...

Self-Help Groups: SHGs have been launched to combat the problem of growing poverty at the grass roots level. Small, cohesive and participative groups of the poor are formed who regularly pool their savings to make small interest bearing loans to its members. In the process, they lean the nuances of financial discipline. Initially bank credit is not primary objective. It is only after the group stabilizes and gains ability to undertake productive activity and bear risk that micro-credit comes into play. The SHG bank linkage programme has proved to be the major supplementary credit delivery system with a wide acceptance by banks, NGOs and various government departments. It encourages the rural poor to build their capacity to manage their own finances, and then 10 negotiate bank credit on commercial terms. Certain norms have to be observed in the formation of SHGs. To become a member, a person has to be below the poverty line. Only one member of a family can become a member a...

Micro-Credit: In spite of the phenomenal outreach of formal credit institutions, the rural poor still depend upon the informal sources of credit. Two major causes for this are the large number of small borrowers with small and frequent needs. Also the ability of these borrowers to provide collateral is very limited. Besides, the long and cumbersome bank procedures and their risk perception have also been limiting factors. Micro-credit has emerged as the most suitable and practical alternative to conventional banking in reaching the hitherto untapped poor population. Micro-credit or micro-finance means providing very poor families with very small loans to help them engage in productive activities or grow their tiny businesses. Over time, the concept of micro-credit been broadened to include a whole range of financial and non-financial services like credit, equity and institution building support, savings, insurance etc. Micro-finance institution is an organization that provi...

Rural Banking: On the birth anniversary of Mahatma Gandhi on October 2, 1975, Rural Banks were established with a view to stepping up rural credit. In 1975, the Government of India appointed a working group under the Chairmanship of M. Narasimham, the Deputy Governor of the Reserve Bank of India to review the flow of institutional credit to the people in rural areas. The committee was to study the availability of institutional credit to the weaker section of the rural population and to suggest alternative agencies for this purpose. The committee concluded that the commercial banks would not be able to meet the credit requirements of the weaker sections of the rural areas in particular and rural community in general. The Government accepted the recommendations of the working group and passed an ordinance in September 1977 to establish Regional Rural Banks. Need to Establish Regional Rural Banks The main need and objective of the RBBs was to provide credit and other facilitie...