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Economics

Chapter one :Nature of Economics # CONCEPT OF ECONOMICS The word economics is derived from Greek word ‘oeconomics’. In Greek “oeco” means household and “nomics” means study. So, literally it is the study of household management. According to Greek philosopher Xenophon, “Economics is the science of household management”. But in the view of Aristotle, “Economics is not only the science of household management but also the science of exchange. He regarded economics as an important pillar of politics. The mercantilist, who was the leader of economic thought, took wealth and foreign trade as the base of economics. There was a slogan,” More gold, more wealth, more power”. The motive of them was to make economics a study of wealth from the angle of state. Around the mid 18th century, a group of economists was appeared known as Physiocratic School. They emphasized in the development of agricultural sector. They said that human satisfaction can be increased through the natural law only. Before 18th century at different times, different philosophers and thinkers have defined and applied economics differently. At that time economics was treated as a part of political science, ethics and religion. But after the publication of Adam smith’s book “An enquiry into the nature and cause of wealth of nation” in 1776 A.D, economics got its independent identity. After that, economics has become a separate subject of study. Economics grew up as a separate science with a growth of human society. It is concerned with the economic behavior of human beings. So, there is no single universally acceptable definition of economics. Different economists have defined economics differently. Barbara Wotton has said that, “Whenever six economists are gathered, there are seven opinions”. Likewise, Jacob Vainer has said that, “Economics is what economists do”. So, at present there are various definitions of economics. Each definition lays stress on particular aspects of economic activities. The definitions of economics can be classified as three parts. 1. Wealth definition (Classical definition or Adam smith’s definition) 2. Welfare definition (Neo Classical definition or Marshall’s definition) 3. Scarcity definition (Modern, Robin’s definition) # ADAMSMITH’S DEFINITION Classical economists like Adam smith and his distinguished followers J.S. Mill, F.A. Walker, David Ricardo, etc. define economics as a science of wealth. Adam smith is the leader of classical school of economic thought. There were many economists before the emergence of classical school of economic thought. However, the first definition was given by Adam smith. He categorized economics as a separate science which was link with other subjects. For this great contribution of smith in economic science, he is respected with the honor of father of economics. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com After the publication of Adam smith’s book (An enquiry into nature and cause of wealth of nation) in 1776 A.D, economics got its independent identity. He defined economics as the science which studies about the nature and causes of wealth of nation. According to him economics maintain the relationship between consumption and production of wealth. It is concerned with the knowledge of earning money. Every individual of the society has a desire to earn wealth. So, economics provides guidelines to the individual in earning more wealth. The main points or ideas in the definition of Adam smith are: 1. Study of wealth of nation. Economics is the study of wealth of nation. It deals with consumption, production, exchange and distribution of wealth. 2. Study of economic activities. Economics is only concerned with the activities of economic man, who is involved in earning more wealth. But it is not a study of non-economic man, who is not involved in earning wealth. 3. Main goal is to earn wealth. The main goal of human beings is to earn wealth because wealth is only the means for satisfying human wants. 4. First place to wealth. Adam smith gave the first place to wealth and secondary place for man in the study of economics. In other words, the subject matter of economics is wealth. He advocated that man is made for wealth. 5. Only material goods constitute wealth. The definition has given emphasize only material goods constitute wealth in society and there is no concern of economics with non-material goods or like free goods: air, water, sunlight, water, etc. which do not play any role in creation of wealth in society. 6. Employed labour is the source of wealth. The source of wealth of nation is employed labour whose productivity would be increased through the division of labour in production and distribution of goods and services. # CRITICISIZATION OF ADAMSMITH’S DEFINITION Adam smith’s definition of economics as a science of wealth has been criticized bitterly because it assumed wealth as an end of human activities. If it is accepted in life, there will be no place for love, sympathy, and patriotism and it had made the man selfish. Economists like Ruskin, Carlyle, Maris, Marshall, etc. have criticized Adam smith’s definition as a science of bread and butter, a science of getting rich, a dismal science, a science of devil, etc. The major weakness or criticism points of this definition are as follows: 1. Narrow meaning of wealth. Adam smith considered that economics is the science of wealth and wealth includes only material goods. This is the narrow sense of defining wealth. In practice, wealth includes both material and non- material goods. The human wants can be fulfilled by using non material goods of services also. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 2. Too much importance to wealth. Adam smith gave more importance to wealth than man. He had given first place for wealth and secondary place for human beings. But according to Marshall, wealth is only a means of satisfying human needs. Thus, economics must emphasize the study of man much more than the study of wealth. 3. No meaning of human welfare. This definition gave no importance to the welfare of society. According to Marshall, the main aim of economics is to increase the welfare of human beings not to obtain wealth only. 4. Wrong assumption of economic man According to Adam smith, Economic man is one who is involved in earning wealth and this economic man is only the subject matter of economics. But no man can be limited only with earning wealth. Because man is equally influenced by moral and spiritual thoughts like love, self-esteem, sympathy, friendship, etc. 5. Labour is not only the source of wealth. According to Adam smith, main source of wealth is employed labour. In real, labour alone cannot produce anything. In production process, there are other factors of production like land, capital, and organization including labour. Adam smith has ignored these aspects. Thus, his definition provided an independent identity to the economics and separated economics which was linked with other subjects. Hence, he is known as the father of economics. # MARSHALL’S DEFINITION OF ECONOMICS Many economists have realized that there are serious mistakes in the Adam smith’s definition. His definition of economics made man selfish. People started thinking about the economics as a science of getting rich etc. In order to save economics from this shiver criticism, Marshall, the leader of neo-classical economists, gave a new concept about economics by publishing his book,” Principles of economics” in 1890 A.D. Marshall enlarged the scope of economics by shifting the emphasis from wealth to man. He said that people were not for wealth but wealth was made for the people. The objective of economics is to increase human welfare. Wealth is not the end but it is only the means. So, Marshall gave primary place to man and secondary place to wealth. Many economists like A.C. Pigou, Cannon, and Beverage etc. have supported the view of Marshall. The main points or ideas in the definition of Marshall are as follows: 1. Primary Concern to mankind. Economics is mainly concerned with the study of mankind in relation to wealth. Wealth is for the benefit of mankind and secondary importance should be given to mankind and secondary importance to wealth. 2. Study to ordinary man. According to Marshall, economics is related to the behavior of ordinary man. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Ordinary men are those who are involved not only in accumulating more wealth but also try to experience love, sympathy, good will etc. to make their social life more meaningful. 3. Study of material welfare. Economics does not study the hole of human welfare but only part of it called material welfare. Material welfare means satisfaction derived from the consumption of physical goods. Any forms of goods of economic value that provide satisfaction are regarded as the subject matter of economics. Non-material welfare is outside the scope of economics. 4. Study of social science. Marshall explains that economics studies those people who live in society. It does not study about an isolated people, not belonging to a society such as sadhu, priests, beggar, monks, etc. # CRITICIZATION OF MARSHALL’S DEFINITION OF ECONOMICS Alfred Marshall’s definition was quite popular until it was attacked by Lionel Robbins. In his book ‘An essay on the nature and significance of economic science’, published in 1932 A.D. The definition of Marshall has been strongly criticized by Robbins in the following points. 1. The definition is not analytical. Alfred Marshall has divided human activities into economic and non economic, material and non-material & ordinary and extra-ordinary. But he could not able to separate these terms clearly. Therefore, his definition is only classificatory rather than analytical in nature. 2. Economics is human science not only social science. According to Marshall, economics studies the economic activities of social man only. But in Robbins’s view this idea is wrong. The man who lives outside the society may be engaged in economic activities. Either the person lives in society or not, he has to face various economic problems. Hence, economics is not only social science but it is a human science also. 3. Focus on material activities only. According to Marshall, economics studies only material activities which are the base of happiness. An ultimate goal of man is to increase material welfare. But in Robbins’s view, the non-material activities may also promote human welfare. Because of the services provided by doctor, teacher, etc, there is possibility of promotion of human welfare. 4. All material goods may not provide welfare: According to Marshall, material goods provides welfare for person, but some of the goods like cigarette, alcoholic drinks etc. are not able to promote welfare for the user. When harmful goods are used, welfare can’t be achieved. Sanjaya chauwal

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5. Difficult to separate material & non-material things. Marshall includes only material things within the scope of economics and excludes all non-material things. But it is quite difficult to separate material and non material things. For example: - if a doctor services for fee, it is material and if he services for free, it is non-material. Anyway, Marshall’s definition of economics as a material welfare remains popular for a long time. It considered wealth as a means to satisfy the human needs. Thus, on the basis of entire analysis, his definition of economics can be taken suitable one theoretically. # ROBBIN’S DEFINITION OF ECONOMICS The modern economist Lionel Robbins has highly criticized Marshall’s definition economics. He gave the most scientific and logical definition of economics in his book (An essay on the nature and significance of economic science) in 1932 A.D. According to him, “Economics is the science which studies human behavior as a relationship between ends and scare means which have alternative uses”. His argument is that economics is concerned with the problems arising from scarcity. People solve the problem of scarcity by allocating scare resources to best possible use. Most of the man’s economic activities are moving around the problem of scarcity and choice. This is the central idea in Robbins’s definition. The main points or ideas in the Robbins’s definition are as follows: 1. Unlimited human wants or use. According to Robbins’s, human wants are unlimited. These unlimited wants are not possible to satisfy at a time. If one want is satisfied, another arises in our mind immediately. Thus there is a chain of wants, one want chasing another. There are no ends of human needs. 2. Limited resources. Human wants are unlimited but the means to satisfy them are limited relatively. The wants are more times than means. We called such a resource as a limited whose supply is less than demand. Limited resources mean time, money, wealth etc. 3. Scarce resources have alternative use. Human wants are unlimited but the means to satisfy this wants are scare but the scare means have alternative uses. For example: money can be used to buy food, a book or to go to cinema. 4. All wants are not equally urgent. According to Robbins’s, all wants are not equally urgent. They differ in urgency. Some wants are more urgent than the other ones. So, more urgent wants need more immediate satisfaction and others can wait. Current wants are more important than future wants. For example: - Medicine is more important than cosmetics for a sick girl. Sanjaya chauwal

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5. Problems of choice Although human wants are unlimited, all the wants are not equally important or urgent. More important wants have to be fulfilled immediately and less important wants have to be fulfilled immediately and less important can be postponed. So, human beings make choice of wants to derive maximum satisfaction. So, according to Robbins’s, choice making is really an economic problem. # CRITICIZATION OF ROBBIN’S DEFINITION OF ECONOMICS. The definition of economics given by Robbins is analytical, logical and scientific. Robbins’s definition is regarded as a superior definition to the rest of all definition of economics because he has provided newness in his definition. But several economists like Fraser, Samuelson, Wotton, etc have strongly criticized in the following points. 1. Hidden concept of welfare. Robbins has criticized the concept of Marshall but critics claimed that his definition itself includes the concept of welfare through the back door. Robbins’s definition of economics is concerned with the choice between wants and allocation of resources for maximum satisfaction. In fact, maximum satisfaction is sign of welfare. 2. Economic problem arises not only from society. According to Robbins’s definition, economic problem arises due to the scarcity of resources. But the problems like inflation, unemployment, etc. arise due to the abundance of resources. The problem of unemployment is due to abundance of manpower. So, it is not correct that economic problem arises due to scarcity only. 3. Confusion between means and end. Robin believes that means and end are easily separable. But in practice, it is difficult to distinguish between means and end for example:- a M.A. student aims getting M.A. degree. This is an end for him. Once he gets it, he uses it as a means to get employment. Thus the same thing may be means in one situation and the end in another. 4. Wider scope than need. Robbins’s definition includes the study of all human activities related to the alternative uses in economics. Since all of the activities of human life are included, its scope is being varied vastly. It makes difficult to draw the line of demarcation of economics. 5. It ignores the theory of economic growth. The theory of economic growth has recently become a very important branch of economics but Robbins’s definition does not cover it. Economics of growth explains how an economy grows by increasing the national income and productive capacity of the economy. But Robbins takes the resources as given and discusses only there allocation. Although, it was unable to address hot issues of present day economy such as unemployment, inequality, economic growth, national income, etc. Robbins’s definition is Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com more scientific, logical, and universally acceptable than other definition of economics. # COMPARISON BETWEEN MARSHALL’S AND ROBBIN’S DEFINITION’S OF ECONOMICS. According to Marshall, economics is a science of material welfare. His definition has focus on the role of mankind as well as wealth in economic life. But Robbins’s definition considered economics as a study of scarcity and choice. A comparative study of both definitions is made on the basis of their similarities and differences. >> SIMILARITIES Similarities between Robbins’s & Marshall’s definition can be shown in the following points. 1. Primary importance to man Both Marshall and Robbins have given primary importance to man. According to Marshall, economics studies man in relation to wealth. Robbins definition studies human behavior as a relationship between end and scare means which have alternative uses. The ultimate aim of the two definitions is the same about the study of human beings. 2. Wealth and scare means Marshall has used the word wealth in the process of defining economics. Robbins has used the phrase scare means instead of wealth. Though they are not same, but similar because in economics, wealth is goods which are scare. So, Marshall has directly explained about wealth and Robbins has indirectly explained about wealth. 3. Welfare and satisfaction. Marshall assume that main aims to utilize wealth to achieve maximum material welfare, where as Robbins maximum material welfare, whereas Robbins assume that main aims to utilize scare resources to achieve maximum satisfaction. In reality, there is no wider difference between welfare and satisfaction. Thus the definitions of both are similar. >>DISSIMILARITIES Some dissimilarities between Robbins and Marshall’s definition are as follows: Marshall’s definition 1. Marshall’s definition is simple and fair. 2. This definition is classifiable as material & non-material, economic & non-economic activities. 3. The objective of this definition is material welfare. 4. This definition considers economics as asocial science. 5. Marshall’s definition is based on normative science. 6. Economics is related with ordinary man. Sanjaya chauwal

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Robbins’s definition 1. This definition is complex. 2. This definition is analytic based on basic economical problems. 3. This definition is neutral about the objective. 4. This definition considers economics as a human science. 5. Robbins’s definition is based on the concept of positive science. 6. Economics is related with both ordinary Grade 11 Economics



For Updates : sanjayachauwal.wordpress.com and extra ordinary man. # SCOPE OF ECONOMICS Scope of economics means the area covered by economics for its study. The scope of economics is largely determined by the definition of economics. Under the scope of economics, mainly subject matter of economics, nature of economics and relationship of economics with other science are studied. # SUBJECT OF ECONOMICS Subject matter of economics is quite controversial (puzzle). Subject matter of economics means what we study in economics or what is the main focus of economic. Economics studies socio-economic behavior of human beings. As human behavior goes on changing according to time, needs and situation, the subject matter of economics also goes on changing. Subject matter can be divided on the following basis:1. On the basis of representative definitions. Different economists have given different views regarding the subject matter of economics. The classical economists have defined economics as the nature and causes of wealth as the subject matter of economics. But according to Marshall, the subject matter of economics includes all those activities of social man which promote material welfares. However, Robbins has given the priority to the alternative uses of limited means and included all human activities related to choices in its subject matter of economics. 2. On the basis of economic activities. Human beings have various wants. In order to fulfill their wants, they make efforts and effort leads to satisfaction as the subject matter of economics. In economics, the study of wants, efforts and satisfaction involves consumption, production, exchange, distribution and public finance. Wants

Effort s

Satisfaction

 Consumption: It is the process of getting satisfaction by consuming goods and services.  Production: It is the process of creating economic activities.  Exchange: It is the link between product and consumption. Exchange refers to buying selling activities of the people in to various markets.  Distribution: It is the allocation of national income to all factors of production, in proportion in their contribution.  Public finance: The process of obtaining income and spending it by the government is called public finance. 3. On the basis of modern  Micro economics: It is that branch of economics which studies the small units of Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com economics. It is seems like the study of each particular tree of whole forest. It is the study of individual firm, household, industry, consumer, etc.  Macro economics: It is that branch of economics which studies economy as a whole. It seems like the study of whole forest, not an individual tree. It studies the aggregate variables such as total consumption, savings, national income, trade cycle. # Difference between Microeconomics and Macroeconomics Micro and macro economics, both are the branches of economics. On the one thing, micro economics deals with individual facts, that is branches, flowers, leaf, etc. and on the other hand macro economics deals with aggregate facts that is whole tree. Both play an important role in formulation of economic principles. Micro economics Macro economics 1. Micro is derived from Greek word 1. Macro is derived from Greek word ‘micros’ which means small. ‘macros’ which means large. 2. It is a study of individual economic 2. It is a study of aggregate economic variables like firm, industries, variable like total consumption, saving, consumers, etc. etc. 3. It is based on partial equilibrium 3. It is based on general equilibrium analysis, other things remaining the analysis. same. 4. Laws and principles are based on 4. Laws and principles are far from assumptions. assumptions. 5. Evolution of micro economics took place 5. It evolved only after the publication of earlier than macro economics. Keynesian’s book, ‘The theory of Employment, Interest, and Money’. 6. Market equilibrium is determined by 6. Market equilibrium is determined by individual market demand and supply. aggregate market demand and supply. 7. It is suitable to study the problems of 7. It is suitable to study the problem of individual economic unit. economy as a whole like: level of employment, income etc. 8. It is static economic analysis. 8. It is dynamic economic analysis. 9. It is called price theory or value theory. 9. It is also called theory of income and employment or Keynesian’s theory. 10. It has very narrow scope that is an 10. It has very wide scope that is a country. individual market, etc. # Difference between positive and normative economics As we know that economics is a science and positive and normative economics are the two different aspects of economics. Positive economics studies the real nature of the subject and normative economics studies the facts not as they are but as they ought to be. So, there are several differences between positive and normative economics which are as follows:Positive economics Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 1. Classical and modern economists 1. Neo-classical economists describe describe economics as a positive economics as a normative economics. science. 2. Positive economics studies what is. 2. Normative economics studies what ought to be. 3. Statements can be empirically 3. Statements may or may not be verified. verified. 4. It is universal and value does not 4. It is related to personal belief and value differ from person to person. judgment and may differ from person to person 5. It depends upon scientific logic or 5. It depends upon ethical logic or values. facts. 6. It is objective and quantitative in 6. It is subjective and descriptive in nature. nature. 7. It studies the cause and effect 7. It studies the outcome which is right or relationship. wrong and suggests what should be. 8. It deals with how economic problems 8. It deals with how economic problems are solved. should be solved. 9. Positive analysis is independent of 9. Normative analysis depends upon positive normative analysis. analysis. 10. According to Keynesians,” A positive 10. According to Keynesians, “A normative science may be defined as a body of science is a body of systematized systematized knowledge concerning knowledge relating to the criteria of what what is. ought to be.

Chapter 2:

Scarcity and Choice

# CONCEPTS OF SCARCITY Scarcity refers to the condition of insufficiency where the human beings are incapable to fulfill their wants in sufficient manner. In other words, it is a situation of fewer resources in comparison to unlimited human wants. Human wants are unlimited. We may satisfy some of our wants but soon new wants arise. It is impossible to produce goods and services so as to satisfy all wants of people. Thus scarcity explains this relationship between limited resources and unlimited wants and the problem there in. Economic problems arise due to the scare goods. These scare goods have many alternative uses. For example: a land can be used to construct a factory building or to make a beautiful park or to raise agricultural crops. So, it is very essential to think how limited resources can be used alternatively to satisfy some wants of people to get maximum satisfaction as possible. The problem of scarcity is present not only in developing countries but also in highly developed countries such as Japan, Canada, etc. Thus, scarcity is the heart of all economic problems. # CONCEPTS OF CHOICE Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Choice is the process of selecting few goods or wants from the bundles of goods or wants. Human wants are unlimited. So, they are unable to fulfill all their wants at once. They can satisfy only some their wants. Some wants should be sacrificed to get some other wants. Hence, people postponed less urgent wants to satisfy more urgent wants. For example: a boy desiring to buy a book does not visit cinema hall. Thus, the problem of choice deals with utilization of scare resources in such a way that it satisfies human wants in the best possible way. If human wants were limited or resources were unlimited, then, there would be no scarcity and there would be no problem of choice. Because of scarcity we are forced to choose. Unlimited wants and limited resources lead economic problem and problem of choice which can be shown as follows

Limited resources

Unlimited wants Economic problems

Choice

# ALLOCATION OF RESOURCE Allocation of resource means scientific management of resources in the production, distribution and exchange. It deals with how much of resource is necessary in what sector. It is the basic problem of every economy. We can satisfy only limited wants because we have limited resources. So, these limited resources are used in such a manner that the satisfaction derived from it is maximum. As the resources are limited in comparison to wants, the proper allocation of resources is necessary. The proper allocation of resources deals with the following fundamental problems of an economy. 1. What to produce: This means what amount of goods to be produced. Every demand of every individual can’t be satisfied. So, before producing anything, a decision should be made what goods are to be produced and to what extent. 2. How to produce: This means which techniques of production (labour intensive or capital intensive technique to be selected). After the decision of what to produce we must next determine what techniques should be adopted to produce goods. 3. For whom to produce: This means how the produced goods and services are to be distributed among different income groups of people that is who should get how much. This is the problem of sharing of the national product. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 4. 5. Problem of full employment: This means the efficient use of scare resources that is no waste or misuse of resources. Since, resources are scare in relation to human wants. It is necessary to utilize the available resources to achieve full employment for maximum possible satisfaction. 6. Problem of growth: This means how to achieve the growth of resources. The growth of resources is related to increase the level of production. Each economy faced the problem of how to increase its production capacity. For this, the economy has to decide about the rate of capital formation, investment, and savings. # PRODUCTION POSSIBILITY CURVE (PPC) Production possibility curve analysis graphically the problem of scarcity and choice present in an economy. It shows the maximum possible production of different combinations of two goods that can be produced with the given technology and resources. It also analysis how much the production of one commodity has to be decreased when producing some other commodity. The curve is also known as product transformation curve because when moving from one point to another, the uses of resources from one commodity transfer to the production of other commodity. The concept of production possibility curve is based on the following assumptions: 1. The factors of production are limited. 2. The factors are used only for the production of two goods x and y. 3. Production technique is given. 4. The factors are full utilized. 5. It is based on short run. Based on the above assumptions, the PPC can be explained with the help of table and diagram as follows:Production Possibility curve (PPC) Production possibilities A B C D E F

Goods x(In thousands) 0 1 2 3 4 5

Goods y(In thousands) 15 14 12 9 5 0

Above table shows the various production possibility of goods x and y. If all the resources are used for the production of goods x, 5000 of goods x are produced. Similarly, if all the resources are employed for the production of goods y, 15000 of goods y are produced. These are the two extremes production possibilities. In between these two extremes, there are many other production possibilities, like at combination B, thousand of goods x and 14000 of goods y can be produced. Similarly, at combination ‘C’, ‘D’ and Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com ‘E’, the production possibilities of goods x are 2,3,&4 thousand and goods y are 12, 9 and 5 thousand are produced. Therefore, it is clear that more of one goods can be obtained by cutting down the production of other goods. For example, if the producer produces within the combination ‘C’, the producer is ready to sacrifice two units of goods y for the production of one more units of goods x.

A possibility schedule has been shown by the following figure:In the above figure, goods x and y are measured along x-axis and y-axis respectively. AF is production possibility curve which is derived by joining the production possibility points A, B, C, D, E and F. Each point on PPC shows the efficient for the production. # Shift in Production Possibility curve (PPC) Production Possibility Curve shift either downward or upward. PPC shift downward or upward due to following reasons: 1. Change in capital. Increase in capital increases the quantity of production due to which PPC shift upward. And if capital investment decreases, then the production will also decrease which causes downward shift in PPC. 2. Change in labour force. If efficiency of labour force increases, then production of goods also increases, as a result, burden of labour force production will decrease. As a result, PPC shift downward. 3. Change in technology. If the production technique is improved, then the production will increase which brings upward shift in PPC. If old technology is used in production process, production will decrease which brings downward shift in PPC. 4. Change in Time period. PPC can shift due to the change in time period. In the long run, economy can gain efficiency which results increase in productivity. As a result, PPC shift upward, but the economy can’t get efficiency in production, the production decreases and PPC Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com shift downward. Similarly, proper management of available resources, increase in economic growth, new raw materials, education, trainings to labour etc. increase the production which will shift the PPC upward. But mismanagement of available resources, decrease in economic growth, adequate raw materials, etc. decrease the production which will shift the PPC downward.

# Why PPC expands outwards? Ans] PPC expands outwards due to different factors. Investment in new plants and machinery will increase the stock of capital. New raw materials may be discovered. Technological advances take place through new inventions; education and training make labour more productive. All these factors lead to increase the production possibility of the country and while illustrating this growth of potential output in PPC, there will be an outward expansion of PPC.

Chapter : 3

National Income

# MEANING OF NATIONAL INCOME National Income is the sum of all incomes of the people of a country in a particular period of time. In other words, the monetary value of final goods produce in a country during a year is called national income. Alternatively, national income includes payments made to productive resources in the form of wage interest, rent, profit etc. Thus, N.I. =Wage + Rent + Interest + Profit. National Income shows the economic condition of the country. A country with high national income is said to be a prosperous country and low is said to be a poor country. # DIFFERENT CONCEPTS OF NATIONAL INCOME 1. Gross Domestic product. (GDP) GDP is the sum of money value of all final goods and services produced with in the domestic territory of country during a year. It should be noted that goods and services must be produced with in the country. In order to calculate the value of GDP, all goods and services produced are multiplied by their market prices. GDP=∑ (P X Q) Where, P= Price of goods and services. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Q= Quantity of goods and services. In other words, GDP measures expenditures made on goods and services by consumer, business man, government and net foreign export of a country during a year. GDP= C + I + G + (X – M) Where, C= Consumption expenditure. I= Investment expenditure. G= Government expenditure. X= export. M= Import. (X – M) = Net export. 2. Gross National Product (GNP) GNP is the most widely used concepts among different concepts of national income. GNP is defined as the total market value of all final goods and services produced annually form a country including net factor income from abroad. Net factor income from abroad is the difference between the foreign income earned by our residents from other countries and factor income earned by foreigners from our country. The income earned by our residence from foreign country is added and income earned by the foreign country is added and income earned by the foreigners from our country must be subtracted while measuring the GNP. GNP= C + I + G+(X-M) +NFIA Where, C + I + G + (X – M) = GDP NFIA = Net factor income from abroad. 3. Net National Product (NNP) Net National Product is the market value of all final goods and services after allowing for depreciation. When capital assets wear out or tear, they decline the value. The measure of that decrease in value due to their constant use is called depreciation. When charges for depreciation are deducted from GNP we get NNP. NNP= GDP – Depreciation. 4. National Income (NI) It is also known as national income at factor cost. National income at factor cost means the sum of all incomes earned by the factors of production like land, labour, capital, and entrepreneur through the participation in the production process for a period of one year. The sum of income received by factors of production in the form of rent, wage interest, and profit is called National Income. The indirect taxes are not available to the factors of production. So, it should be deducted from NNP and subsidies are available to factors of production. So, it should be added to NNP to find NI. NI= NNP + Subsidies – Indirect Taxes. 5. Personal Income (PI) Personal income is the sum of all incomes actually received by all individuals of a Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com country from all possible sources before paying direct taxes. Thus, PI = NI – Social security contribution – corporate income taxes – undistributed corporate profits + transfer payments. 6. Disposable Income (DI) Income left after the payment of direct taxes from personal income is called disposable income. Disposable income means actual income which can be spent on consumption by individual. Thus, DI= PI – direct taxes. But all the total disposable income is not spend on consumption, some part is saved. So, DI = C + S Where, (C= Consumption and S= Saving) 7. Per capita income (PCI) Per capita income of a country refers to the average income of individual in a particular year. It is obtained by dividing national income of the country by the total National Income of 2011 population. Thus, PCI of the year =

Total population of 2011

PCI of the people is useful to compare people’s standard of living in different countries. # DIFFERENCE BETWEEN GDP AND GNP : GDP GNP 1. It refers to the monetary value of all final 1. It refers to the monetary value of goods and services produced with in the all final goods and services produced domestic territory of the country. by the normal residence of the country. 2. It includes all the final goods and services 2. It includes all final goods and produced by both residence and non-residence services produced by the normal with in the domestic territory of the country. residence any where in the world. 3. It is domestic of narrower concept. 3. It is national or wider concepts. 4. If net factor income from abroad is added to 4. If we subtract net factor income GDP, we get GNP. from abroad from GNP, we get GDP. 5. If net factor income from abroad in negative, 5. GNP will be greater than GDP, if then, GDP will be greater than GNP. net factor income from abroad is negative. 6. GDP = C + I + G + ( X – M ) 6. GNP = C + I + G + ( X – M ) + NFIA # COMPUTATION OR MEASUREMENT OF NATIONAL INCOME National income can be measured by using several methods upon the availability of particular method depend upon the availability of the data in the country and objective of measurement. First of all Schumpeter suggested three methods of measuring national Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com income. 1. Product method or output method. In Nepal, product method is very common to calculate National Income. In this method, national income is measured in terms of output of the country in a given period of time. This method is also called inventory method or commodity service method. According to this method, the economy is divided into different sectors such as agriculture, mineral, industries, transportation, communication, and other services, and then national income is calculated by adding the money value of final goods and services produced in these sectors during a year. Though, this method is very popular in application, it is not free from the problem of double counting. In order to solve this problem, we can use any of the following two methods. a. Final Product Method In this method, national income is measured by finding only the market value of all final goods and services produced in the country during a year but in this method, the problem of double counting may also be appeared, For example, cotton and tobacco of agriculture sector may also be counted as clothes and cigarettes of industrial products. b. Value added method In this method, the value at different stage of production is calculated and then added for estimation national income. The cost of intermediate product not produced in that stage, should be deducted from total value created in that stage, thus, (Value added = the value of out put – cost of intermediate.) The value added method can be shown in the following table. Production Value of output. Cost of intermediate Value added. stage. products. Wheat(farmer) 100 – 100 Flour(flour 150 100 (150–100)=50 mill) Bread(Bakery) 200 150 (200–150)=50 Total 450 250 200 Let us suppose that there are three stages in bread production, till the products reaches to the final consumer. A farmer produces wheat = Rs100. Hence, Rs100 is the value added to the economy. He sells the wheat to the flour mill. The flour mill grinds the wheat and sells the flour to the baker at Rs150. Hence, the value added by the economy is Rs50 (150–100). Similarly, the baker sells bread at Rs200 and he adds the value equal to Rs50 (200–150). The sum of value added in each stage of production is Rs200. Rs200 is the final value added of economy. According to the formula, Value added = Total value of output – Cost of intermediate products. = Rs 450 – Rs 250 = Rs 200 2. Income method In this method, national income is measured from distribution side of the economy. The income method is also called distributed share method and factor payment Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com method. Goods and services are produced by joint efforts of various factors. Hence, national income is distributed among different factors. Therefore net incomes received by all factors of production are added to obtain the national income it means national income is calculated by adding of the net rent paid to land, net wage paid to labour, net interest paid to capital, net profit earned by entrepreneurs. Thus, (G.N.I = Rent + wages + interest + corporate profit + depreciation + net export + net factor income from abroad + indirect tax.) In the context of developing countries, where must of the residence do not pay income tax, this method is not suitable. Thus, this method is mostly popular is developed countries. 3. Expenditure method In this method, national income is measured on the basis of final expenditure. This method is also called income disposal method or consumption and investment method. Final expenditure means expenditure on final products. In this method, national is calculated by adding all the expenditures made by individuals, business man, government on goods and services, net export and net factor income from abroad. G.N.E = C + I + G + (X – M) + NFIA C = Consumption expenditure. I = Investment expenditure. G = Government expenditure. X = export. M = Import. It is very difficult to collect the data on consumption and investment expenditure of millions of people, business firm and government in the estimation of national income by expenditure method. Hence this method is less practical and less useful. # DIFFICULTIES IN MEASUREMENT OF N.I There are many difficulties in measuring national income of a country accurately because it is a multi-dimensional concept. So, the calculation of national income itself is a complex and challenging activities. While measuring the national income, there arise some conceptual and statistical difficulties which are as follows: 1. Problems of double counting While calculating national income, only final goods and services should be included, but some goods may be final for one sector and intermediate for another sector. For example, sugarcane is final goods for agricultural sector but it may be intermediate goods in industrial sector for producing sugar. Thus, there is very high possibility of double counting. 2. Existence of non-monetized sector In developing country, there is still barter system in backward areas. Thus, all agricultural outputs do not reach to the market. Either it is consumed at home or exchange for other goods in the village. Hence, it is difficult to calculate the national income accurately. 3. Illegal income Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Different people can earn income through illegal activities, such as, black marketing, dacoits, gambling, smuggling etc. But these incomes are not included in national incomes which make national income less than the actual amount. 4. Calculation of depreciation Capital depreciation should be deducted to find the net national income. But present depreciation rate of capital goods can not be accurately measured because of having long life. 5. Transfer payment Transfer payment like pension, unemployment allowances, disable allowances, etc. are apart of individual income but these are also a part of government expenditure. So, it creates problem whether it should be included in N.I. or not. 6. Frequently change in price National income is the money value of goods and services. Money value depends upon the market price of goods and services. But market price of goods and services often changes which creates the problem in measuring national income. There are other difficulties in measurement of national income such as, lack of occupational specialization. Lack of statistical data, lack of illiteracy and ignorance, income earned from abroad.

Chapter 4 : Economic development :Meaning and indicators # MEANING OF ECONOMIC DEVELOPMENT Economic development implies the progressive changes in socio-economic structure of a country. In other words, economic development is a process of changing poor people and nation to an advanced living standard, better health, better education, increase in per capita income, etc. economic development brings social, institutional and organizational change of a country. Economic development shows the changes with economic growth. Thus, economic development = Economic growth + changes. # MEANING OF ECONOMIC GROWTH Economic growth means the transformation of economy from the stage of under developed to the stage of development. This transformation is mainly reflected in a sustained and steady raise in national income and P.C.I. economic growth is related to a quantitative change only. Thus, economic growth refers to an increase in the aggregate level of national income, output and employment over a long period of time. # DIFFERENCE BETWEEN ECONOMIC DEVELOPMENT AND ECONOMIC GROWTH Economic growth and economic development is used by different economists in different ways. The main differences between these two terms are as follows: -

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For Updates : sanjayachauwal.wordpress.com Economic development 1. It is concerned with developing countries. 2. It refers to the change in quantitative as well as qualitative aspects like political, social, historical, cultural etc. 3. It is multi-dimensional process so; it is a more complex phenomenon. 4. It is a discontinuous and spontaneous concept. 5. It is the cause or process.

Economic growth 1. It is concerned with developed countries. 2. It refers to a quantitative change in economic variables like P.C.I, output etc. 3. It is just an increase in economic variables, so it is a simple phenomenon. 4. It is a continuous concept.

5. It is an economic development’s effect or result. 6. It needs economic growth. 6. There may be growth without economic development. 7. the indicators of economic development 7. The indicators of economic growth are are PQLI(Physical Quality of Life Index), N.I, output, employment, P.C.I etc. HDI, PCI etc.

# CHARACTERISTICS OF DEVELOPING COUNTRIES A developing country is one where the process of economic development has started but not completed. In developing countries, most of people are compelled to live below poverty line. Thus, developing countries are generally poor countries. The developing countries are also known as under developed countries, least developed countries and third world countries. Many developing countries are differing from each other in physical, cultural, characteristics, but there are some common characteristics of developing countries which are as follows: 1. General poverty: There is wide spread poverty in developing countries. General living standard of people is very low due to their low income. That is why; they are not able to fulfill their basic necessities like food, shelter, cloth, etc. Majority of people are both in poverty and die in poverty. They live below the poverty line. Sanjaya chauwal

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2. Rapid population growth: There is rapid population growth in developing countries as compared to developed countries. The average annual growth rate of population in developing countries is about 1.5 % to 3 % whereas in developing countries, it is about 0.7 % or about 1 %. 3. High dependence on agriculture: Agriculture is main occupation in developing countries. Majority of population from 70 % to 80 % are engaged in developing countries whereas in developed countries 15 % or less depends on agriculture. The high dependency on agriculture is due to low development of non-agricultural sector. 4. Under utilization of natural resources: Most of developing countries are rich in natural resources. The natural resources in developing countries are either utilized or under utilized due to the various difficulties such as shortage of capital, small size of market, primitive technology. Nepal is rich in water resource but it is not being properly utilized due to the lack of capital. 5. Dualistic economic: Most developing countries have the mixer of two types of economic system, modern or marketing economy system, modern or marketing economy and subsistence or traditional economy. Market economy exist in limited urban areas where modern facilities can be utilized and traditional economy exist in most of the rural areas where there is no modern facilities and the life is full of difficulties. 6. Existence of unemployment: The rapid population growth has created the problem of unemployment. Due to the lack of developing agricultural sector like trade & industries and other services. Most of the increased population has to depend on agriculture provided employment for a few day and other day, they have to remain unemployment. There are other characteristics of developing countries like worthless social structure, political instability, gender discrimination, lack of skill technicians, foreign dependency, etc. # INDICATORS OF ECONOMIC DEVELOPMENT When a country goes on developing, changes takes place in its economy. These changes are known as indicators of economic development. Thus, the measures or criteria which are used to measure the degree of economic development are called indicators economic development is called indicators of economic development. As development is a dynamic concept, its indicators also changeable. So, there are different opinions of different economists regarding the indicators of economic development which are as follows: 1. Per capita income (PCI): PCI of a person in a country indicates the economic development. If the increase in Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com PCI is higher than population growth rate, then there is economic development. The economists like Meier, Paul Baron, Buchanan, and Elis have accepted the increase in PCI as the indicator of economic development. 2. Gross national products (GNP): According to these criteria, if there is sustained increase in production of a country over a long period of time, then there is economic development. Economic development is considered to be more, if GNP is more and vice versa. The economists such as Baldwin, Simon, Kuznets, Meier, etc. have considered GNP as an indicator of Economic development. 3. Physical quality of life index (PQLI): This criteria was developed by Morris D Morris. PQLI consists of three elements: Life expectancy, Infant Mortality rate and Literacy rate. The level of these components determines the level of economic development. If people live longer and are literate, PQLI value will be high and there is economic development. The levels of these three components are ranked from (1 - 100). If its value crosses 50, the country is supposed to be developed and if the value lies below 50, the country is supposed to be developing. 4. Basic human needs: This criteria was developed by World Bank. According to this criteria, the development is evaluated on the basis of fulfillment of basic needs of people in terms of health, education, water, food, cloth, shelter, etc. If these basic needs are available to then people, there is economic development and vice versa. 5. Human development index: This criteria was developed by UNDP (United Nation Development Programme) in 1990 A.D. This indicator is related to three aspects of human life: - Income for decent living, Educational attainment and Life expectancy. HDI is measured in a scale of (0 - 11). Zero indicates the lowest human development and one indicates the highest human development. HDI ranks the countries in three groups by using these three majors of development : 1. Lowest human development (0 – 0.49) 2. Medium human development (0.50 – 0.79) 3. Highest human development (0.80 – 1)

Chapter : 5

Natural Resources

# WATER RESOURCES # # RATE OR IMPORTANCE OF WATER RESOURCE IN ECONOMIC DEVELOPMENT OF NEPAL. Water resources are one of the important natural resources of Nepal. The economic development of Nepal largely depends upon the development of these resources. Nepal has not been able to utilize its water resource properly. The important of water resources are: Sanjaya chauwal

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1. Development of Agriculture. Agriculture is the backbone of the Nepalese economy. Economic growth in Nepal is possible only through the development of agriculture sector. Irrigation facility is a pre-condition for increasing agricultural productivity. Without proper irrigation facilities, development of agricultural sector is almost impossible. At present 66 % of the cultivated land is covered by irrigation. 2. Development of Transportation and Communication. Energy generated from water resources can be used to run electric means of transportation such as trolley bus, cable car, Railway, rope way etc. and water transportation like rafting, boating, in big rivers of Nepal. Similarly, modern means of communication like radio, television, email, fax, etc. are possible only from generated energy from water resources. 3. Industries' development. Water is the most essential source of energy to run small, medium and large scale industries. Other sources of energy such as coal, gas, etc. are expensive which increase the cost of production. The availability of electricity at cheaper prices reduce the cost and makes goods available at lower prices. Therefore, it has a great importance in development of industries of Nepal. 4. Development of tourism industries. Tourism industries depend upon the natural beauty of the country. Nepal is rich in rivers, lakes, water falls, etc. which add to the natural beauty of the country. The development and conservation of these natural beauties is essential in order to increase the number of tourists from different parts. 5. Preservation of forest resources. Firewood provides about 75 % of the present domestic energy consumption in Nepal. Most of the rural people depend upon firewood. The development of hydro-electricity substitutes the use of firewood for energy. The excessive use of firewood is one of the causes of rapid deforestation. Thus, the development of water resources helps to preserve forest resources. 6. Export promotion. Water resource is considered as white gold for Nepalese Economy. It can be used for the development of industrial sector which can increase the export of goods and services. Besides, electricity is generated from water resources can be exported to earn foreign currency. 7. Employment promotion. Proper utilization of water resources helps to develop agriculture, industry and tourism sector. Many people can get employment opportunity in these sectors.

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For Updates : sanjayachauwal.wordpress.com 8. Source of power. Water resources are the source of power because hydroelectricity is an outcome of it. Nowadays, it is being used in household and industrial sector as the means of power. It can substitute the demand for petroleum products as fuel, for different sectors. 9. Source of government revenue. The development of hydroelectricity is the source of government revenue. Increasing the production and consumption of hydropower would lead to higher revenue to the government. 10. House hold use. Water is important for almost all house hold uses. Most of the people either rich or poor use water for different purposes. Drinking, bathing, irrigation, etc. are important uses of water resources at house hold level. # POTENTIALITY OF HYDRO-ELECTRICITY IN NEPAL Water is the most important natural resource of Nepal. Nepal is the second richest in after resources after Brazil. There are more than 6,000 rivers including big and small. The total water power potentiality in Nepal has been estimated to be 83,000 Mega watts. Out of these about 42,000 MW is economically feasible. Hydro-potentiality of different rivers in Nepal Rivers

Theoretical hydro-potentiality of different rivers(in Mega watt) Koshi 22.35 Gandaki 20.65 Karnali 36018 Others 4.11 Total 83.29 Source: Water and Energy Corporation, 2004 A.D. # CURRENT SITUATION OF WATER RESOURCES IN NEPAL. Water resources are the most important resource of Nepal. It can be used for generating hydroelectricity, irrigation facilities, and supplying drinking water. The current situation of water resource is Nepal is given below. 1. Hydroelectricity: Hydroelectricity is the most important output of the water resource. Nepal has theoretical hydropower potentiality of 83,000 MW but, only 42,000 MW is economically feasible. The development of hydroelectricity was initiated in Nepal is 1911 A.D. at Pharping with a capacity of 500 KW. By the end of tenth plan, total capacity of hydroelectricity reached 560.80 megawatt, which was only 0.67 % of total potentiality. The target of three year interim plan (2063/64 – 2066/67) was to reach 704 megawatt but only 691 megawatt has been achieved, which is 0.83 % of Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com total potentiality. The goal of running three year interim plan (2067/68 – 2069/70) is to reach 972 Megawatt. Now all 75 districts of the country have access to electricity. More than 65 % of the population has access to electricity. 2. Irrigation. Nepal is an agricultural country and irrigation plays the important role for the development of agriculture by raising the land productivity. Due to the lack of adequate irrigation facilities, there is slow development of agriculture sectors. But now, the government of Nepal has launched various irrigation projects in different parts of the country. By the end of tenth plan, the irrigation facilities have reached 66% of cultivated land. The target of 11th 3 year interim plan was to reach 71.4 % of the potentially irrigable. 3. Drinking water. Pure drinking water is the pre-requisite of healthy manpower and the basic needs of the people. Although there is enough water resources, people face the shortage of safe drinking water in both urban and rural areas various projects were launched to supply pure drinking water but it could not provide expected facilities. By the end of 11th three year interim plan, 80% of the population has got pure drinking water facilities. The goal of current 12th three year interim plan is to reach 85 % pure drinking facilities to the people. # PROBLEMS OF WATER RESOURCE DEVELOPMENT IN NEPAL / OBSTACLES OF HYDRO-ELECTRICITY DEVELOPMENT Water resource is the most important natural resource of Nepal. Although Nepal Government has introduced a number of plans, policies and programme for the development of water resources. It has not achieved the desire goal yet. There are some problems that handicapped the development of water resource in Nepal. The major problems are as follows: 1. Lack of capital: For the development of water resource in Nepal, a large amount of capital is necessary. Being a poor country Nepal is not able to invest such a large amount in the development of water resource. 2. Lack of skilled manpower: The development of water resource needs skill manpower and technicians but there is lack of technicians. Therefore, Nepal is compelled to hire expensive technicians from abroad to operate the project of hydroelectricity, irrigation, and even for drinking water. 3. Problems of transportation: Due to the geographical structure of Nepal, it is very difficult to construct hydroelectricity project. Most of the hydroelectricity projects lie in hilly region. But construction of road is difficult as well as costly because of this situation, essential materials can't be delivered n time. At proper place to construct these projects.

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For Updates : sanjayachauwal.wordpress.com 4. Political Instability: There is frequent change of government whenever government changes, there has also change in policies. There is lack of proper coordination between political parties which delay to launch the project effectively. 5. Lack of people's participation: Without people's participation in the construction of projects, it is difficult to launch and implement such projects. Government should adopt a policy of encouraging public participation on such projects which help in successful implementation, repair & maintenance. 6. Shortage of modern technology: Development of water resources needs modern technology. Use of machines, tools and equipment needs sufficient capital, efficient human resources etc. which are still lacking in Nepal. Besides these, there is the problem of effective government policy, in adequate market, fall in water fall etc. # What do you mean by Natural resources? Ans] Natural resources are free gifts of Nature to the Human beings. The natural resources fulfill the certain basic needs of human life. The natural resources can be classified as: a) Renewable natural resources: Resources that can be regenerated after they are used are called renewable natural resources. Example: winds, water, air, etc. b) Non-Renewable Natural resources: Resources that cannot be regenerated after they are used are called non-renewable natural resources. Example gas, petrol, etc. # FOREST RESOURCES # # ROLE OR IMPORTANCE OF FOREST RESOURCE IN NEPAL: The proverb 'Green forest is the wealth of Nepal' shows the forest resources have important resource in Nepal. It helps to fulfill the needs of human life and to accelerate to economic development. It also helps to maintain the environmental balance. The role of forest resource in economic development can be explained as follows: 1. Main source of energy. Firewood is the best alternative source of energy in Nepal especially it is important for the ruler area of Nepal. Firewood fulfils 75 % of the total energy demand of Nepal. 2. Source of raw materials. Most of the industries in Nepal are based on forest based industries. The industries which make paper, rubber, furniture, gum etc. use forest products as their raw materials. 3. Preservation of wildlife. Forest management can preserve wildlife such as leopard, panda etc. The Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com preservation of wild life helps to maintain ecological balance. 4. Source of fodder. Forest is used as grazing ground for cattle. It provides the grass for cows, buffalo, sheep etc. Hence, it provides essential fodder for cattle. 5. Development of tourism industry. The beautiful scenery of the forest, rare and attractive wild animals and birds etc. are the attraction for the tourists. If the forest resources can be developed and saved, the number of tourists can be increased. As a result, the tourism industry can be developed. 6. Source of foreign currency. The forest product has been the source of foreign currency earning. The forest products like timbers, medical herbs, furniture, paper, wooden handicraft can be exported to foreign countries to earn foreign currencies. There are other role of forest resources such as source of water, increase in employment, helpful in rainfall prevents landslide. # CURRENT SITUATION OF FOREST RESOURCES: The current situation of forest resource in Nepal is critical. The forest resource which was considered as the wealth of Nepal before some years is rapidly destructing and reaching at the stage of disappearance due to the rapid increase of population and other various causes. 45 % of the land area should be covered with forest for ecological balance. Year of estimation 2021 B.S. 2036 B.S. 2042 B.S. 2055 B.S. 2065 B.S. 2067 B.S. Annual deforestation rate (Terai region only)

Area covered by forest (%) 45.6 43.0 37.4 29.0 29.0 39.6 1.3

Source: 11th plan, NPC (2064-2067) # CAUSES OF DEFORESTATION Deforestation is the process of destroying the forest area day to day in the country; it means reduction in forest area for many purposes. The forest area of Nepal was 45.6 % of the total land area in 2021 B.S. Now, it gradually decrease and limited about to 39.6 %. So, deforestation has become the great challenge in the developing countries like Nepal. There are several reasons behind rapid deforestation in Nepal which are as follows:

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For Updates : sanjayachauwal.wordpress.com 1. Rapid Population Growth. The population of Nepal is increasing rapidly with 1.4 % per annum. It leads to the increase in the demand of more things to eat, places to live, source of income and employment. Due to these reasons, the deforestation in Nepal has been very high during the last 4 decades. 2. Migration. Due to various pulling factors, people are migrating towards Terai region, from hills and mountains; they destroy the forest for the purpose of settlement as well as cultivation. 3. Demand for raw materials. Forest based industries, such as paper, herbal; furniture etc. collects raw materials from forest. The collection of raw materials from forest leads to deforestation in Nepal. 4. Illegal trade. Nepal has open border to India. The supply of timber as well as other important trees I encouraged by corrupted forest officials for their benefit. As a result, forest resources of Nepal are gradually decreasing. 5. Uneducated People. Uneducated People are not aware of the future problems of landslide, rainfall, fodder, firewood, etc. They cut down trees without any fear. Due to the reasons, there is rapid deforestation in Nepal. 6. Defective government policy. There is no any suitable policy for the preservation and development of forest resources. There is lack of people's participation in afforestation and preservation programmes. Even the existing government policies are not implemented effectively. There are other causes of deforestation such as lack of employment opportunity, political region, high dependency on agriculture, major source of firewood, etc. # CONSEQUENCES OF DEFORESTATION Deforestation has serious effects on ecological and economic condition of the country. The decreasing situation of forest resource has various types of negative effects in the economy which are as follows: 1. Environmental deterioration. Deforestation adversely affects on the environment of an economy. It affects climate, rainfall pattern and causes floods, soil erosion, landslide etc. 2. Danger for wildlife and plants. Forest is only the residence of all wild animals various types herbs and plants are grown in the forest. Deforestation destroys all these animals and plants.

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For Updates : sanjayachauwal.wordpress.com 3. Decline in underground water. The forest resource helps to maintain underground water through absorbing water from its roots. So, the more the forest is destroyed the more will be the decrease in the level of underground water. Due to decline in underground water, people face the shortage of water. 4. Effects on tourism. Deforestation destroys the natural beauty and climate of the country. Similarly, it destroys the rare animals birds and other natural attraction of the forest. Due to these reasons, we never think that the development of tourism sector in the country. 5. Lack of raw materials for industries. Most of the industries in Nepal are forest based industries, they require woods, herbal plants etc. for their raw materials, but these raw materials are being lacked with the increase of deforestation. 6. Decline government revenue. Due to the deforestation, the forest based industries can't get enough raw material, reduces the export products, number of tourists etc. Such activities decrease government revenue. There are other consequences of deforestation such as decline in grazing land, decrease in employment, shortage of firewood, decline of fertility of soil, etc. # MINERAL RESOURCES # The materials which are obtained from the mine or extracted by digging the earth are known as mineral. # ROLE OR IMPORTANCE OF MINERAL RESOURCE IN ECONOMIC DEVELOPMENT OF NEPAL. Mineral resources play an important role in the economic development of the country. Nepal is rich in mineral resources, but poor in inability to extract them. If mineral resources can be developed and utilized, different benefits can be achieved. The role of mineral resource can be explained as follows: 1. Industrial development: If the mineral resources can be extracted and utilized, mineral based industries can be established and expanded. Petrol, diesel, iron, coal, etc. are minerals for industries. This accelerates the industrial development. 2. Increase in employment: The existence of mineral resource provides employment opportunity to the people. Mineral resources help to establish the new industries where skilled and unskilled people can get employment opportunity. 3. Agricultural development: Some mineral resources are used to make modern agricultural tools machines and Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com fertilizers, etc. They can be used for the modernization and commercialization of agriculture, which help to develop the agriculture. 4. Source of energy: There are various sources of energy like petrol, diesel, natural gas, etc. in Nepal. If these minerals can be extracted, they can provide the necessary energy for industrial sectors and house hold use. 5. Development of self dependency: If we develop mineral resource based industries, we can create more jobs with quality products. We will be independent when industrialization occurs with the uses of mineral resources. 6. Development of self dependency: If we develop mineral resource based industries, we can create more jobs with quality products. We will be independent when industrialization occurs with the uses of mineral resources. There are other roles of mineral resource such as source of foreign currency earning, development of transportation and communication, increase in export, supply of construction materials, etc. # What are the major mineral resource in Nepal? Ans] Nepal has several mineral deposits. It is a popular belier that Nepal is rich in mineral resources.The main mineral resources identified are as follows: Minerals 1. Iron 2. Copper 3. Mica 4. Gold 5. Lead & zinc 6. Coal 7. Nickel

Places Ramechhap, Chitwan etc. Taplejung, Phikkal etc. Bhojpur, Dhankuta etc. Sunkoshi, Set Nadi, Palpa etc. Ganesh Himal, Baglung etc. Kanchanpur, Kailali etc. Bhorle, Jamghat etc.

# PROBLEMS OF MINERAL RESOURCE DEVELOPMENT: There is no doubt that we have large variety of minerals and some of them are available in large quantity. But minerals development in Nepal in handicapped by various problems. Minerals deposits that have been identified are remaining unextracted. Some major problems of mineral resource development in Nepal can be explained as follows: 1. Lack of capital: Nepal is a poor country and to extract mineral resource, a large quantity of capital is required. The extraction of minerals need large amount of capital investment but the shortage of such capital has become the greatest problem in Nepal. 2. Lack of advance technology: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com The utilization of mineral resources requires advance technology and efficient technical man power. But require technical man power and technology are lacking in Nepal. So, Nepal is dependent on foreign experts who are very expenses. 3. Lack of infrastructures: The transportation and communication are the most essential infrastructures required for extraction of mineral resource. But such facilities are not available in hilly and mountain region where major mineral deposits are supposed to have been located. 4. Lack of research: Identification of new places with definite capacity of mineral deposits requires scientific research in different parts of the country. But, Nepal has not undertaken adequate research due to lack of capital & trained man power. 5. Shortage of energy: The sources like coal, petrol, diesel, etc are the pre-requisite for the extraction, purification & utilization of mineral resources. However, the supply of energy is still inadequate in Nepal. 6. Defective government policy: The government has not been able to adopt appropriate mineral policy. Government has not clear policy for the development of mineral resource due to frequently changing government. Therefore, foreign investors are not encouraged to invest their capital in Nepal. There are other problems of mineral resource in Nepal such as low rate of Capital formation, limited scope of market, growing political instability, lack of people's participation etc. # ENVIRONMENTAL AND NATURAL RESOURCE MANAGEMENT FOR SUSTAINABLE DEVELOPMENT # Environment is the collective form of natural resources or a set of surroundings, which enhance living and non-livings. There is a close relationship between environment and development. Environment plays protective role in the survival of humanity. But rapid economic development leads urbanization and environmental pollution. The maximum proper utilization of natural resources accelerates the economic growth. The economic development with environmental balance and proper management of natural resources is the long run aim of economic development. #CONSEQUENCES OF ENVIRONMENTAL MISMANAGEMENT ENVIRONMENTAL POLLUTION The growing environmental pollution has caused adverse effects in our environment. The environmental pollution has serious effects on human health and productivity. The major consequences are: 1. Deforestation: There is growing deforestation in Nepal. As a result of deforestation, natural disasters like flood, landslide, draught, etc. and increases diseases and mortality rate. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Similarly, it decreases the pure air, water and destruction of habitat of wild animals and birds. 2. Air pollution: It is mostly found in urban regions of Nepal. Air pollution from vehicles and industries is creating breathing related diseases: such as hypertension, lungs problem, etc. It adversely affects the working capacity of people. 3. Soil pollution: The soil pollution in Nepal has been growing rapidly due to the unscientific use of chemical fertilizers in agriculture. It has increase acidity in soil, reduced its fertility and accelerates the process of desertification in the country. 4. Water pollution: Water resources are being polluted due to negligence. Water pollution harms human health. Due to water pollution, people are suffering from water borne diseases like diarrhea, typhoid, etc. 5. Atmospheric change: The unscientific use of available water, forest and mineral resources has resulted many problems in the earth's surface. There is ozone depletion which causes, different disease related to air. 6. Loss of bio-diversity: The environmental pollution reduces bio-diversity. A large variety of rare animals, birds, insects and other creatures are being extinct. Due to thesis, the ecosystem and environmental balance disturb, which negatively affects mankind in many ways. 7. Noise Pollution: Growing noise pollution from the means of transportation and manufacturing industries in urban regions is one of the major problems of Nepal. 8. Low production: Growing environmental pollution directly affects the life of human beings. Air pollution and water pollution affects the health condition of human beings. Weak human resources can't produce more goods and services. As a result, there will be low production and productivity. 9. Reduce government revenue: As the country becomes polluted and weakened in many ways. There will be low government income from various sectors. 10. Tourism industry: Tourists visit those places where they enjoy their life. But due to air pollution, water pollution and noise pollution, no one would wish to visit the country. Therefore, if Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com we can't control these types of pollution in Nepal, it badly affects the Tourism industry. # PROBLEM OF NATURAL RESOURCES MANAGEMENT In spite of importance of natural resources and environment, the environmental situation is degrading condition in Nepal. Government efforts are not achieving the required target. Various awareness programmes have been implemented to manage the environmental situation, but it has not been improve. There are different problems to manage the natural resources in Nepal which are as follows: 1. Lack of capital: We need adequate capital to manage the existing natural resources. But Nepal being one of the poor countries is unable to manage natural resources. 2. Lack of technical manpower: Development and management of natural resources, we need adequate skilled manpower of varied levels. But here is lack of technical manpower. 3. Lack of infrastructure: Infrastructural development is the basic requirement for the natural resource development. In Nepal, infrastructural facilities like transportation and communication etc. are not adequate. So, we can't properly use natural resources. 4. Unemployment: The unemployment problem exists in rural area of Nepal. Most of the farmers are not fully employed in agricultural sector. There are not alternate opportunities beside the agriculture. Hence, people are illegally misusing natural resources for extra income. 5. Lack of public awareness: Most of the people are uneducated. They are not aware of future problem caused by mismanagement of natural resources. So, they destroy natural resources for fulfilling the present need. Hence, the destruction of natural resources increasing day by day. 6. Defective government policy: There is no any suitable policy for the management of natural resources. The government of natural resources. The government's policy has frequently changed and natural resources are not implemented properly. Illegal traders widely misuse the natural resources. However, they are not punished in right way due to political pressure.

Chapter : 6 Human Resources # INTRODUCTION In ordinary sense, human resource refers the population of the country but in economics, the healthy, educated, and skilled manpower is known as human resource. So, human resource is the process of improving quality and efficiency of the people.

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For Updates : sanjayachauwal.wordpress.com According to the National planning commission, "Human resource is the knowledge, skill, efficiency and physical and mental capacity to do work inherent in the people of the country". # ROLE OF HUMAN RESOURCE IN ECONOMIC DEVELOPMENT Human resources play the important role in overall development of a country. Capital, natural resources, as well as other productive resources remain inactive in the nature. Human resources are necessary to mobilize them. Nepal has sufficient natural resources and utilization of these resources in necessary for economic development. The role of human resource can be explained with the help of following points. 1. Utilization of Natural resources: Human resources is necessary for the utilization of natural resources like mineral, water, forest etc. Utilization of these resources is necessary for economic development. Thus, only human resources mobilize and utilize them properly. 2. Compensate the deficiency of natural resources: The utilization of human resource compensates the deficiency of natural resources. Many countries are poor in natural resources like Japan, Hong Kong, Singapore etc. but they are able to achieve high economic growth by properly utilizing human resource. 3. Utilization of physical capital: Only the existence of physical capital can't do anything for economic development. They should be properly utilized. To, operate machinery & equipment and to run factories and industries is impossible without the involvement of human resource. 4. Increase in production: The human resources of a country help to increase in the production of different goods and services. By using skilled human resources, a country can produce the variety of goods and services having high quality. 5. Changes in technology: Human resources of a country can bring the new technology. Advance technology is necessary to bring development in country. There are other role of human resources such as development of transportation and communication, supply of labour etc. # CURRENT SITUATION OF POPULATION IN NEPAL The population census was started in Nepal from 1968 B.S. But the census taken from 2018 B.S. is only regarded as scientific. The current population situation of Nepal according to the population census by the Central Bureau of Statistics is presented below. 1. Size of Population: The size of Population of Nepal according to census 2068 B.S. is 2,66,20,809. Out of Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com this total population, male population is 1,29,27,431 (48.56%) and female population is 1,36,93,378 (51.44%). 2. Composition of Population: The composition of Population is al following: a) On the basis of sex: If the population of the country is divided into male and female based on sex is called sex composition. Sex ratio is expressed as: sex ra tio =

tota l p op ula tion of ma le  100% tota l p op ula tion of fema le

b) On the basis of age group: Age group is that factor which shows inactive or dependent population and active or independent population in total population. According to this census, there are three age groups on the basis of economic engagement.  Age (0 - 14)/age (60 - 60+) = They are inactive population because they are not engaged in economic activities.  Age (16 - 59) = They are active population because they are engaged in economic activities. c) On the basis of religion: Nepal has declared as the religion secular country since 2006 A.D. However, more than 80% people are Hindus. Although, it is the birth place of Lord Buddha, Buddhists are only 10.7%, Muslim are 4.2%, others 5.1%. d) On the basis of mother tongue: According to population census 2058, there are 93 languages in Nepal. On the basis of mother tongue, the people having Nepali language are highest (48.6%). The population speaking Maithili (12.35%), Bhojpuri (7.53%), Tharu (5.86%), Tamang (5.91%), Newari (3.36%) and others (17.15%) 3. Density of Population: Density of population means the population residing within a square km. According to population census 2068, average density of population of Nepal is 181 persons per sq.km. In terms of density of population, the most population district is Kathmandu (4408 persons per sq. km), whereas, the least populated district is Manang (3 persons per sq.km.) 4. Distribution of population: The population residing in different geographical regions, development regions, zones and districts are called distribution of population. The distribution of population is as follows: a) On the basis of geographical regions: Geographically, Nepal is divided into Mountains, Hills and Terai. The size of Population in Mt. region is lowest (6.7%), Hilly region (43.1%), and terai region has highest number of people (50.2%). b) On the basis of development regions: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com  The distribution on eastern development region is 21.9 %  The distribution on central development region is 36.5 %  The distribution on western development region is 18.6 %  The distribution on Mid-western development region is 13.5 %  The distribution on Far-western development region is 9.6 %  5. Occupational classification: Occupational classification is the division of population among different occupation. About 74% of population is engaged in agriculture and 26% of population is engaged in non-agricultural sector. 6. Growth of population: The growth rate of population has been decreased from 2.24% to 1.4%. # CAUSES OF HIGH POPULATION GROWTH The population of Nepal is gradually increasing. Government has tried to control the population growth through different measures but due to various reasons, population in Nepal is increasing. Some causes are given below which are responsible for rapid population growth. 1. High birth rate: The birth rate is very high in Nepal. It is as high 2.6 children per mother during the fertility period. This means that a mother begets almost three children during her fertility period. Such high fertility rate increases population each and every year in the country. 2. Low death rate: Improvement in public health facilities provided health care for the people. Thus, the death rate is falling. Falling death rate means rising population. 3. High child mortality rate: The child mortality rate is also high in Nepal. Therefore, it is not certain whether a child would die early. That is why parent feel in secure and give birth to more children which lead to the high growth o population. 4. Poverty: Most of the people are poor in Nepal. They considered the child as the source of income and want to have more children. As a result the population in the country is increasing. 5. Religious belief: In Nepal, there is strong belief that each couple should have a son otherwise they would go to hell after their death. It is also believed that the birth of a son is essential to perform death rituals. To continue the clan (j+z) and for support in old age. Therefore, they go on begetting children till a son is born. Sanjaya chauwal

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6. Lack of means of family planning: The devices which are used to control birth rate are not available in sufficient quantity. They are not easily supplied to the couples. They are not trained how to use those devices to control the population. As a result, population of the country is effectively increasing. There are other causes of high population growth such as lack of education, polygamy, early marriage, migration. # CONSEQUENCES OF HIGH POPULATION GROWTH The population of Nepal is rapidly increasing both in urban and rural areas. The government has invested large amount of money to control population growth through different programs. But satisfactory achievements have not been achieved yet. Higher growth rate has created a lot different negative consequences in the economy which are as follows. 1. Shortage of food: Agriculture is the main source of food production. It has to supply the food for growing population in this sense; the food production should be increased along with the population growth. But agricultural production has not been increase along with the population growth. As a result, Nepal is facing food problems each and every year. 2. Unemployment: Increase in population, increases the problem of unemployment. Employment opportunities can't be increase according to the increase in population. As a result, the unemployment rate goes on increasing day by day. 3. Decline in social facilities: Since the population growth rate is high, social facilities like education health, drinking water, etc. can't be increased according to the increase in population As a result, the level o availability of social facilities is being decreased and people have to face the problem of lack of such facilities. 4. Increase in deforestation: Population growth has accelerated the process of deforestation in Nepal. More mouth means more consumption. Therefore, forests are destroyed for food, habitation, farming etc. The process of mass destruction of forest has resulted in devastating landslide, flood, etc. in the country every year. 5. Growing mass poverty: Rapid population growth has reduced the scope of employment opportunity. People are unable to make hand to mouth living from their income sources. Therefore, a large number of people are faced to survive in critical condition.

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For Updates : sanjayachauwal.wordpress.com 6. Fragmentation of land: The more population increases, the more people will start living separately. When people start living separately, the property of the family will be divided. The land is divided among the sons according to present legal provision. Fragmentation of land will decrease the productivity of land. There are other consequences by high population growth like slow development, low saving and investment, problems of security and social evils, problems of sanitation and drinking water. # REMEDIAL MEASURES OF HIGH POPULATION GROWTH The population growth in the country has not only become a national problem but also a family and individual problem. Though the population is a necessary factor of development uncontrolled population growth creates the problem in all sectors. Hence, it is essential to control the rapid population growth. Following measures should be adopted to check the rapid population growth: 1. Population education: As most of the people are uneducated, they can't learn about the importance of small family. Similarly, they don't know about the negative effects of large family size. Population education will provide knowledge to the people about the population growth and its effects in the future. As a result, population growth will be reduced. 2. Family planning: It is an important technique to control high population growth. Various types of family planning devices should be distributed to the people and they should be motivated towards it. It would help to reduce birth rate. 3. Social and religious reform: Nepalese society is still guided by traditional values and religious beliefs. These factors traveled the people to accept more children in the family as a gift of God. Therefore, they need motivation through social and religious reform. The government should effort for such reforms to control the rapid population growth. 4. Increase in health facilities: Population of a country can be controlled through increase in health facilities. The increase in health facilities reduces the child mortality rate and maternal mortality rate. As a result, people don't think of giving birth to more children. The expansion of health facilities reduces the birth rate automatically. 5. Late marriage: It is also one important method which reduces the birth rate. If women have late marriage then their fertility period will be reduced so that, it helps to control high population growth rate.

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For Updates : sanjayachauwal.wordpress.com 6. Control in immigration: Most of the people emigrate in Nepal from India due to the open border which increases the population of Nepal. If we control this immigration, the population growth rate will be controlled. There are other remedial measures such as poverty alleviation, advertisement, increase in women employment, effective population policy etc. # INDICATORS OF HUMAN DEVELOPMENT The factors which are used to measure the level of human development are known as Human Development Indicators. Human development is the process making the living standard of human beings better. It's basic objective is to make each and every individual physically healthy, mentally alert, economically sound and socially civilized. Some major indicators are as follows: 1. PCI (Per Ca pita Income) The level of human development is determined on the basis of the level of PCI of a country. The level of human development will be higher in those countries where PCI is higher and vice-versa. Thus, the level of PCI determines the level of human development. 2. Life expectancy: The level of human development can be measured on the basis of the level of life expectation of the people of a country. Life expectation is determined by the availability of nutritional diet, the level of health facilities, living standard etc. The higher level of life expectation shows the higher level of human development and vice-versa. 3. Educational attainment: There is direct relationship between the level of education and living standard of people. If the literacy rate, school enrollment rate, and average time of schooling are high, the level of human development and vice-versa. 4. Fulfillment of basic needs: Food, housing, clothing, education, health services etc. are the basic needs of people. The higher level of their availability shows the higher level of human development and vice-versa. 5. Level of Human Right: At present, the level of human right is also considered as an indicator of human development. If the level of human rights is high, the level of human development will be high and vice-versa.

Chapter : 7 Agriculture : # CHARACTERISTICS OF NEPALESE AGRICULTURE Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Nepal is an agro-based country. Agriculture is the backbone of Nepalese economy. So, there are several significant characteristics associated with Nepalese agriculture. The main characteristics of Nepalese agriculture are as follows: 1. Subsistence farming: Nepalese farmers have taken agriculture as the means of subsistence farming only. Majority of their production is used for self consumption and it is still inadequate for survival. Farming has not been taken from the commercial point of view. 2. Monsoon-based agriculture: Sufficient irrigation is required for agriculture. Though, Nepal is rich in water resources, the agriculture of Nepal depends on monsoon which is mostly uncertain and inadequate. So, agricultural production is directly affected. 3. Low productivity: Nepalese agriculture is characterized by low productivity in terms of output per hectare. There is low productivity because of the use of inferior seeds, traditional method of farming, lack of irrigation facilities etc. 4. Lack of crops diversification: Nepalese agriculture is not so much diversified in terms of crops. Farmers are giving importance on cereal crops and most of them do not want to change next suitable and alternative crops. So, limited crops are growth in Nepalese agriculture. 5. Primitive farming: Nepalese farming practices are still primitive. They still use the same tools and methods sued by their forefathers. Modern tools, improve seeds fertilizers etc are not commonly used by the majority of farmers in the country. 6. High population pressure on agriculture: The population pressure on agricultural sector in very high due to the slow development of other non-agriculture sectors. Thus, increase in pressure of population is badly affecting the agricultural productivity. There are other characteristics of agriculture such as fragmentation of land, geo-graphical variation, defective land tenure system, inadequate investment etc. # IMPORTANCE OF AGRICULTURE Agriculture is regarded as the primary sector of Nepalese economy. It does not provide food and raw material but also provides 74 % employment opportunities in the country. Therefore, development of overall economy depends on agriculture development. The role of agriculture in economy can be explained as follows. 1. Source of livelihood: Majority of the people of Nepal are dependent on agriculture. There I lack of employment of opportunities other sectors. Agriculture has provided 74 % employment opportunities to the people for their livelihood. 2. Source of food: Agriculture is the main source of food for rapidly growing population. It supplies the food products like paddy, vegetable, fruit etc. required for the livelihood of the people.

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For Updates : sanjayachauwal.wordpress.com 3. Source of national income: Agriculture is the main source of national income of Nepal. In Nepal, the non-agricultural sector is not properly developed. Agriculture sector contributes about 32.5 % of the total income to the National economy. 4. Source of industrial raw materials: In Nepal, various types of industries are based on agriculture. Agricultural sectors provide raw materials like sugar cane, cotton, jute, tobacco, etc. required for industries. 5. Basis of foreign trade: Agriculture is the main source of export trade. Agricultural products like pulse, jute, oil seeds, tea, animal skin etc. are the major exportable items of Nepal. Raw agricultural products contribute more than 50 % of the total Nepalese exports. 6. Source of government revenue: Agricultural sector is on of the major sources of government revenue. The government receives revenue from tax and fee from agro-based industries, land tax, registration fee, irrigation charges etc. There are other important role of agriculture such as development of trade and transportation, employment opportunities, improve living standard of rural people, help for economic development. # PROBLEMS OF AGRICULTURAL DEVELOPMENT Agricultural is regarded as the backbone of Nepalese economy. But agricultural development is not satisfactory. The agricultural production and productivity is low. Nepal, once a grain exporter country, but now has been a grain importer country. Agriculture in Nepal has been facing a number of problems as follows: 1. Pressure of population on land: The population on land is already very high and ever increasing. The annual growth rate of population is 1.4 %, since the non-agricultural sector has not been still developed. The increased population, all depend on agriculture. Due to this excessive pressure of population, the production and productivity are very low in agricultural sector. 2. Use of old technique: Agriculture in Nepal is based on traditional technology. Majority of farmers are illiterate and poor. So, most of them are either ignorant or unable to use appropriate new techniques, improve seeds, fertilizers, insecticides etc. As a result, there is no improvement in agricultural system. 3. Lack of agricultural credit: Majority of Nepalese farmers are poor. They need adequate credit to make investment in agriculture. Agricultural development banks have been established is Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com several parts of the Nepal, for providing agricultural credit. But the facilities do not reach to the majority of the poor farmers. 4. Lack of marketing facilities: The agricultural marketing system in Nepal is unorganized. The farmers are compelled to sell their products to local shopkeeper. Thus, they are not encouraged to invest and produced more. There is no guarantee of receiving reasonable price, due to the lack of marketing facilities. 5. Lack of irrigation facilities: Sufficient irrigation is required for agriculture; But Nepalese farmers are almost dependent on monsoon due to the lack of irrigation facilities which affect agricultural products badly. 6. Lack of agricultural research: Adequate research activities should be conducted for the improvement in agricultural practices and increase in agricultural productivity. But research activities, conducted in Nepal are not adequate and non farm-based. Thus, lack of agricultural research has hindered the agricultural development in Nepal. There are other problems of agriculture in Nepal such as lack of improve seeds and fertilizers, lack of transportation facilities, lack of storage facilities defective government policy. # REMEDIAL MEASURES The agricultural sector faces serious problems. Despite the continuous efforts by the government, for its development the remedial measure for these problems are as follows: 1. Control of population growth: The pressure of population on land has created various problems. Thus, the population pressure on agricultural land should be reduced by controlling the rapid growth of population and diverting agricultural labour to other sectors of the economy. 2. Technical improvement: The technical production techniques help to raise the agricultural productivity. Thus the production techniques should be improved to solve the problem. 3. Provisions of adequate credit: Most of the farmers are poor. So, the provision of agricultural credit should be made available at lowest possible rate of interest to small and marginal farmers. The credit facilities through different banks and financial institutions should be expanded so that maximum numbers of farmers have easy access to credit facilities. 4. Marketing and storage facilities: The farmers have not been able to get reasonable price due to the lack of adequate marketing and storage facilities. Hence, marketing and storage facilities should be made available so that they get reasonable price. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 5. Development of irrigation facilities: Nepalese agricultural production depends upon monsoon, which doesn't occur timely and also inadequate. So, that irrigation facility has to be extended throughout the country to increase the production and productivity. 6. Effective government policy: The government should help to adopt appropriate and effective policies for agricultural development. The government should help to make efforts to utilize the resources to the agricultural sector and make credit facilities easily available to the farmers. There are other remedial measures such as provides improved seed & fertilizers, adequate agricultural research, development of transportation & communication, promotion in agro-based industries etc. # SOURCES OF AGRICULTURAL FINANCE CREDITS Nepal is an agricultural country but majority of the farmers are poor. So, Nepalese farmers need the financial credit required for investment in agricultural sector. The farmers receive the required credit from different sources which can be classified into two sectors. 1. Traditional or informal or non-institutional or unorganized sector The local individuals who provide the credit to the farmers are unorganized sources of agricultural credit. The rural farmers of Nepal are dependent on the unorganized sector for their agricultural credit. About 60% agricultural credit comes from these sectors. The unorganized sources of agricultural credit are as follows: a) Friends and relatives: The friends and relatives of farmers provide credit to the farmers in small amount to meet day to day needs and emergency needs. They provide loan with or without interest and security. b) Land owners: Land owners provide the credits to the farmers for short terms as well as long term. Generally, short term credit is provided with the security of standing crops and cattle and long term credit is provided with the security of land and house. c) Merchant and traders: They also provide credit during the pre-harvest season. The farmers are forced to sell their products at a low price because the time to for repayment of loan is very short. d) Village money lenders: The farmer may receive credit from village money lenders. They provide credit with the security of movable and immovable credit with the security movable and immovable property. 2. Modern or formal or institutional or organized sector The institutional sources which provide the credit to the farmers are known as organized sources of agricultural credit. They are established especially for the Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com development of agricultural sector. In Nepal, 40% credits come from organized sources. The organized sources of agricultural credits are as follows: a) Cooperative societies: The cooperative movement was started in Nepal form 1953 A.D. with the concept of self help through mutual help. It was established as back at 1963 A.D. The main objective of this bank is to provide credit and other inputs in cheap rate to the farmers. b) Agricultural Development Bank (ADB): The ADB was established in 1968 A.D. for the development of agricultural sector in Nepal. ADB provides short term (less than one year), medium term (1 to 5 years) and long term (more than 5 years) credits to the farmers. c) Commercial Bank: They are second largest institution after Agricultural Development Bank of Nepal to provide credit to the farmers. Nepal Rastriya Bank directed the commercial bank to invest more than 12 % of their total credit under the priority sectors. d) Rural Development Bank (RDB): The first RDB was established in Nepal in 2047 B.S. At present there are 5 rural development banks established in each development regions with the objective to provide micro-credit to the poor farmers. e) Finance Companies: There are various finance companies established in different parts of the countries. Some of these companies are directly involved to provide loan to the poor farmers. # AGRICULTURAL MARKETING IN NEPAL Generally, agriculture marketing refers to the place where the agricultural products are purchased and sold. There are various activities like collection of agricultural products, quality determination, selling and buying management, development of organized market etc. Thus, agricultural marketing involves a number of operations and processes through which agricultural products and raw materials move to the ultimate consumers. # NATURE OR FEATURES OR CHARACTERISTICS OF NEPALESE AGRICULTURAL MARKETING Agricultural marketing has occupied the important place for the farmers. But the agricultural marketing is not still organized and developed in Nepal. Farmers are never benefited from their agricultural products, because of the following nature of agricultural market in Nepal. 1. Seasonal: Agricultural production and marketing, both are seasonal activities in rural area of Nepal. Agricultural products are affected by the situation of season. During harvesting season, there is over supply so, price is always low. Due to the lack of storage facilities, whatever the farmers grow and produce, are brought to the market Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com immediately. 2. Unorganized: The agricultural marketing system in Nepal is not found organized. The farmers produced small quantities of commodities and sell in the village to fulfill their basic needs. Due to this, unorganized market, the management system of measurement, price control, quality maintenance, and other facilities are unscientific. 3. Inadequate market centers: In Nepal, market centers are inadequate in number, especially in hills and mountain regions. People have to travel long distances to reach the nearest market centers. This limits the possibility of trading the agricultural products. 4. Small size of market: Due to subsistence farming, the volume of marketable surplus generated by farmers is very low. This situation discourages them to travel the better market where in they could obtain a better price. The low surplus limits the size of agricultural market in Nepal. 5. Influence of Indian market: There is long open border between India and Nepal. Due to this open border, agricultural marketing of Nepal is directly influence by Indian price and quality of commodities. Indian agro-products are cheaper then the products of Nepal which adversely affects the Nepalese agricultural market. 6. Price instability: Due to the various reasons, the price of goods keeps on changing almost every day in agricultural market of Nepal. In the same day the price of the same products differs from one place to another. There are other natures of agricultural markets like different measurement units, pre-dominance of middle man etc. # PROBLEMS OF AGRICULTURE MARKETING IN NEPAL Nepal is an agricultural country so, a well developed agricultural marketing system is necessary for encouraging farmers for higher production from land. But agricultural system in Nepal is highly exploitative because farmers don't get reasonable price for their products. There are many problems related to the management and development of agricultural marketing in Nepal which are as follows: 1. Lack of transportation and communication facilities: Especially, farmers in village can't carry their products to the market centers due to the lack of transportation facilities. Similarly due to the lack of communication facilities farmers are unable to get the market information like demand price etc. so, they don't know the actual price of their products. Thus, they have to sell their products in primary market at low price. 2. Lack of storage facilities: The farmers have to sell their products immediately after harvest due to the lack of Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com proper storage facilities. Generally, the price of agricultural products sharply falls during the harvesting season. Most of the food grains are destroyed or decayed if they are kept for the future. So, the farmers are compelled to sell their products at low price. 3. No uniformity of weight and measures: Standard uniform measurement system is not yet practice yet in rural area of Nepal. Most of the traders don't use proper weight and measures. They still use traditional weight and measures such as mana, pathi, dharni, etc. and they also use stone, bricks, etc in buying goods which are not reliable and appropriate. 4. Existence of middle man: There are middle men who purchase the agricultural products from the farmers at the low price and sell them to the consumers at higher price. Due to this the middle man exploits the farmers by providing low price of their products. 5. Problems of Adulteration: Adulteration or mixing of inferior products with superior on is a common practice among the traders in Nepal. Sand in food grains. Water in milk, salt with fertilizers etc. are commonly found adulteration method. Adulteration is generally practiced by middle man. 6. Lack of effective farmers' organization: Generally, farmers sell their products separately on the individual basis. The buyers usually organized and farmers are unorganized. So, they can't create joint demand and suitable condition for the welfare of them. Hence farmers are compelled to sell their products at determined price by buyers. There are other problems of agricultural marketing Nepal like inefficient marketing information, effect of Indian market, lack of monitoring system, lack of marketing co-ordination and planning etc. small size of market.

Chapter : 8

Poverty :

# MEANING Generally, poverty means economically poor. Poverty shows inability weakness and helplessness of a person in his economic, social and political life. In other words, Poverty is a situation where people are deprive of basic needs, basic rights and basic opportunities for their livelihood. Poverty line: The minimum amount of income required to meet the basic necessities of life is known as poverty. # TYPES OF POVERTY There are two types of poverty. They are as follows: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 1. Absolute poverty: The situation in which a person is unable to attain a standard of living such as food, cloth, shelter, health facilities, primary education, etc. is known as absolute poverty. In other words, absolute poverty refers to a situation in the poverty line. From 2005, the world band has defined whose income is les than US $ 1.5 per day as absolute poverty. 2. Relative poverty: The situation in which a person income to sustain life but which is low compared to rest of the community is known as relative poverty. It is concern with inequality of income distribution. The higher the inequality in income distribution, the higher will be the relative poverty and vice-versa. Relative poverty is used in a comparative sense. # CHARACTERISTICS OF POOR IN NEPAL Poor are those persons who are unable to fulfill their minimum basic needs. It is estimated that 25.4 % people are poor in the year 2067/2068 in Nepal. Poverty may have different structures and characteristics in different areas. The main characteristics are as follows: 1. Low income: The level of income of the poor is very low. The major source of income of poor is unskilled labour that they are compelled to sell at low wage rate. Most of these poor people earn less than 1.5 $ per day. So, the poor are unable to attain the daily expenditure. 2. Housing condition: The housing condition of majority of poor is very bad. Due to the large family size, there is always over crowing in house hold. All family members have to live in a limited space and without electricity and other physical facilities. 3. Expenditure pattern: The poor spend nearly all their incomes on consumption. They spend all most all their incomes on food in order to survive. Sometimes, they consume more than what their income is. In such situation expenditure is more than income. So, instead of saving, loan is required for consumption. 4. Lower educational status: Majority of poor are illiterate. High illiteracy rate is either due to ignorance or poverty or both. They can't get educational opportunity and they are not capable to provide education to their children. 5. Occupation: The occupation of the poor is generally agriculture. Majority of the poor people do not have their own land. They are compelled to do work at low wage rate. Their income is always insufficient for their subsistence. So, some poor become beggars, garbage shifters, prostitutes etc. 6. Weak physical and mental condition: The poor in Nepal are unable to get balanced diet and health facilities. They are illiterate and they don't know the importance of nuritutional diet for strong and metal & physical condition. Hence, they are physically and mentally weak. There are other characteristics of poor such as high gender discrimination, deprive from government Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com facilities, high dependency ratio, low life expectancy etc. # CAUSES OF POVERTY Poverty is a multi-dimensional and complex problem various factors. Such as historical, social, political etc. are responsible for growing poverty in Nepal. Various efforts have been made to eradicate the poverty but poverty of Nepal is at high level which is 25.4 % up to the end of 11th plan. The following are main causes of poverty: 1. High population growth: In Nepal, the growth rate of population (1.4 %) is very high as compared to the growth rate of the economy (4.4 %). Due to increase in population, there is also increase in the problem of unemployment and food scarcity. As a result, poverty is increasing year by year. 2. Law industrial development: The growth to industrial development in Nepal is very low due to the lack of capital. There is lack of employment opportunities in other sectors except in agriculture sector. Population pressure on land is increasing which makes the Nepalese People poor and poorer. 3. Unemployment: It is one of the important causes of poverty in Nepal. Agriculture provides only seasonal employment, only about (5 or 6 month in a year). The rest of the time, they have to be unemployed because there is lack of employment opportunity in other sectors. Thus, increasing unemployment rate results in an increasing poverty. 4. Inflation: General increase in price level is called inflation. Continuous rising in level price, decreases the purchasing power of money which mainly affects the middle and low income group of the society. As a result, they are unable to maintain their daily lives. 5. Political instability: Frequent changes in government, their plans, policies and programmes are very common in Nepal. Due to this instability in government, poverty alleviation programmes have been less effective. As a result, poverty in Nepal is increasing day b day. 6. Low utilization of local resources: Various types of resources are available in Nepal but all of these resources are not being used properly. One the one hand resources are idle in nature and on the other hand, unemployment in increasing. As a result, poverty is increasing gradually. There are other causes of poverty in Nepal, unequal distribution of income, inequality of opportunity, low rural development, and subsistence agriculture. # REMEDIAL MEASURES OF POVERTY ALLEVIATION The problem of poverty has been serious in Nepal. Poverty is standing as main hurdle (obstacles) in economic development of Nepal. The following remedial measures can be undertaken for poverty alleviation: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 1. Increase in employment opportunity: The best remedial measure for the reduction of poverty is to increase employment opportunities. The more the increase in employment opportunities, the more will be the reduction in poverty level. Establishment and development of industrial sector provides more employment opportunities. 2. Investment in human capital: Adequate investment in human capital also plays a key role in poverty reduction. Therefore, investment should be made in different social services like education, health, sanitation, nutrition and so on. Investment in such human capital increases productivity and income of poor. 3. Women empowerment: Special emphasis should be given for women education, health and employment. If women are educated, there will be control in population growth. Economic and social transformation is possible through women empowerment which helps to reduce the poverty level. 4. Increase in social security: The poverty can be reduced by providing social security to the old and those who are unable to work. For the reduction of poverty, old, widow, disable allowance, etc. has been provided by the government to the people. 5. Control the over population: Over population is the main cause of poverty inn developing countries like Nepal. Thus, government should launch programmes with participating couples which helps to reduce the birth rate. 6. Poor oriented programmes: Poor oriented programmes like skilled training etc. should be implemented by the government and non-governmental sectors. These programmes increase the employment opportunities and income level which helps to reduce the level of poverty. There are other remedial measures such as equal distribution of National income, development of rural infrastructure, increase in credit facilities to poor, implementation of appropriate economic policy etc.

Chapter : 9

Industry

# MEANING: Industry refers to the application of less labour and more capital in the extraction and manufacturing of material goods. The industry is regarded as the secondary sector of an economy. The contribution of industry sector to Gross Domestic Products (GDP) is only around 17 %. This shows that the size of the industrial sector is still very small in Nepal. For rapid economic development of Nepal, the industrial sectors should be promoted. # TYPES OF INDUSTRY According to industrial policy 2067, the industries of Nepal are classified in to 5 groups based on the scale of production and level of investment, which are as follows: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 1. Micro enterprises: According to industrial policy 2067, micro enterprises mean the fulfillment of the following conditions: a) Fixed capital investment not more than 0.2 million except the use of real state. b) Involvement of entrepreneur, himself on the management. c) Number of labour engaged are not more than 9 persons including entrepreneur. d) Not more than two million yearly economic transactions. e) Consuming less than 10 KW fuel engine capacities. 2. Traditional cottage industries: a) Uses of traditional skill and technology. b) Based on Local Raw Material. c) Related with natural art and culture. d) Small amount of capital investment. e) Electricity consuming capacity up to 10 KW. 3. Small scale industries: Industries with fixed capital investment up to 50 million are known as small medium scale industries. 4. Medium scale industries: Industries with fixed capital investment 50 million to 150 million are known as medium scale industries. 5. Large scale industries: Industries with fixed capital investment more than 150 million are known as large scale industries. # IMPORTANCE OF COTTAGE AND SMALL-SCALE INDUSTRIES Even Nepal is agricultural country; there is high unemployment because of seasonal nature of agriculture. This unemployment problem can be solved by establishing cottage and small scale industries. Due to the low level of saving, people can't invest the large amount in industries. Thus in Nepalese context, cottage and small scale industries are very important in economic development which are as follows: 1. Easy to establish: Cottage and small-scale industries are easy to establish because these industries do not require more capital and good technical knowledge. Such industries can be established and run by the house hold. 2. Increase in employment opportunity: Agricultural sector alone can't create a large number of employment opportunities. Agricultural provides only seasonal employment and rest of the period, people remain unemployed. Cottage and small scale industries provide employment during the off agricultural season and other time also. 3. Utilization of local resources: Various types of raw materials are found in different parts of the country. The local raw materials like stone, woods, herbs bamboos, etc. can be used by establishing cottage and small scale industries in rural areas. 4. Basis of development of large scale industries. Cottage and small scale industries are the basis for large scale industries. People Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com learn management techniques and skills from these industries which help to establish and develop large scale industries. 5. Preservation of local are and culture. Cottage and small scale industries play an important role in preserving local arts, skills and culture. The productions of goods from these industries depict local arts and skills and culture of different parts of the country. The handicraft goods of Nepal have become popular in foreign markets. 6. Source of National income. The products of cottage and small scale industries can be exported to the foreign countries which help to increase the national income. The government also receives fee charge and tax from cottage and small scale industries. There are other important role of cottage and small scale industries such as supportive for poverty alleviation, basis of foreign trade, source of earning foreign currency, development of tourism industries etc. # PROBLEMS OF COTTAGE AND SMALL-SCALE INDUSTRIES There is favorable condition for the establishment, operation and development of cottage and small scale industries in Nepal. There are high possibilities of expanding variety of production from cottage and small scale industries, which could help to develop Nepal's industrial sector. But, the position of cottage and small scale industries is not satisfactory due to the following problems: 1. Lack of capital: Adequate capital is required for the development of cottage and small scale industries. Even the entrepreneurs have skill and other resources; they do not have enough capital to mobilize the industries. As a result, the cottage and small scale industries couldn't be developed. 2. Shortage of raw materials: Generally, raw materials needed for cottage and small scale industries are exported to foreign countries in large quantities and remaining most of the raw materials are captured by large scale industries. Thus the cottage and small scale industries have to face the problem of regular supply of raw materials. 3. Unable to compete with large industries: Cottage and small scale industries are used traditional technologies for the production of goods. So, the low quality and more expensive goods are produced in comparison to the goods produced by large industries. Therefore, goods produced by these industries cannot compete with the goods produced by large industries. 4. Lack of transportation and advertisement: Transportation and advertisement both are most essential factors in order to develop these industries. Due to the lack of these factors; consumers are unaware about their products. So, that the demand of their products could not be increased. As a result, such industries can't be developed properly. 5. Limited market: The market for the products of cottage and small scale industries is small unorganized and unmanaged. Due to the low quality and production cost, the Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com products of these industries are unable to compete with foreign products. So, their demand would not be increased in foreign and even in national market. 6. Lack of protection policy: Cottage and small scale industries are the foundation of large scale industries so; each country should adopt a policy of protection for these industries at the beginning. But these industries do not have any protection or subsidies for their protection. So, due to the lack of protection policy, these industries are in the stage of death bed, instead of being developed. There are other problems of cottage and small scale industries such as lack of skill manpower, lack of modern technique of production, lack of fuel, no diversification in production etc. # IMPORTANCE OF MEDIUM AND LARGE SCALE INDUSTRIES The industries which produce the goods in large amount by using the improved technology, efficient man power and more capital are known as medium and large scale industries. The contribution of industrial sector to the total Gross Domestic Products (GDP) is only around 17 %. However, the importance of industrial sector, in the process of overall economic development of the country is very remarkable. The importance of medium and large scale industries can be explained as the following points. 1. Provides employment opportunities: In Nepal, there is the problem of unemployment due to the seasonal nature of agriculture. Development of medium and large scale industries help to remove the problem of unemployment by providing the large number of employment opportunities to unskilled, semi-skilled and highly skilled human resources. 2. Helps to modernize the agricultural sector: For the modernization of agriculture, modern tools and technology are needed. The medium and large scale industries produce the modern machine, chemical fertilizers, material of irrigation and transportation. Thus, establishment, of agro-based medium and large scale industries would help to increase the agricultural production and productivity. 3. Development of transportation and communication: The medium and large scale industries help to develop the transportation and communication, because these facilities are basic infrastructure of industrial development. The means of transportation are required to transport and distribute the industrial production to different places and the means of communication are required to have up to date market information. 4. Proper utilization of resources: Nepal has various significant natural resources but available resources are not fully utilized in Nepal due to the lack of industrial development. Medium and large scale industries can use the natural resources like forest, water mineral etc. properly which prevent the available resources from exported to foreign countries. 5. Development of basic industries: The industries producing the goods like iron, steel, copper, cement, etc are called basic industries. These industries help to establish and promote the other industries. Thus, the establishment of the large industries helps the development of basic industries. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 6. Improvement in living standard: The employment and income opportunity of the people increases with the establishment and development of these industries. The regular income of the people form these industries help to raise the living standard of the people. These are other importance of medium & large scale industries like sources of government revenue, expansion in soul facilities, increase in revenue, expansion in soul facilities, increase in export, key to rapid economic growth etc. # PROBLEMS OF MEDIUM AND LARGE SCALE INDUSTRIES The medium and large scale industries play a significant role in the overall economic development of a nation. The establishment of organized industries was started in Nepal in 1993 B.S. But there are very few large scale industries which can't be achieved in expected level of development in Nepal up to now. Medium and large scale industries are suffering from various problems, which are as follows: 1. Lack of capital: Large amount of capital investment is required for the establishment and development of medium and large scale industries, but Nepalese entrepreneurs don't have such sufficient amount to invest. Even the people who are able to invest are not interested to invest in these sectors due to the lack of favourable industrial policy. 2. Lack of raw material: Medium and large scale industries require raw materials in large amount in regular way. But most of the raw materials in Nepal are in remote areas and their availability is not at right time. So, these industries can't manage raw materials easily which hampers productivity. 3. Lack of energy: Medium and large scale industries require the high level of power energy like coal, petrol, diesel, electricity, etc. But these energy are not available in sufficient amount to these energy are not available in sufficient amount to these industries regularly. Due to this reason, some of these industries are closing down. 4. Lack of technical knowledge: High levels of technology and skill man power are essential for establishment and operation of these industries. But Nepal doesn’t have sufficient technical manpower. Therefore, foreign experts have to be imported, who are comparatively expensive and are no available when required. 5. Limited market: The medium and large scale industries produce large amount of goods. Therefore, the market for these goods should be also large. But the domestic market for Nepalese industrial products is very limited due to the low purchasing power of the people. The market expansion is also made more limited by the causes of land locked country. 6. Lack of appropriate government policy: Sound and stable industrial policy is needed for the industrial development of the country. But the policy changes frequency due to the unstable government. There is lack of proper coordination between political parties. Investors hesitate to invest their capital due to such unstable policies and uncertain environment. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com There are other problems of medium and large scale industries such as lack of transportation and communication facilities, unable to compete with foreign goods, lack of industrial security, and lack of sufficient research. # TOURISM INDUSTRY Meaning: Tourism is a process of traveling one place or a country to another place or country for entertainment, study, observe new place, culture, living activities. The traveler is called tourist and the business of occupation which provides different kinds of facilities such as hotel, lodge, rafting, trekking agent, guides and other related activities to the tourist is known as tourism industry. Nepal has celebrated the 'Tourism year 2011' with a slogan of 'Together for Tourism'. # IMPORTANCE: Tourism industry plays crucial role in economic development of Nepal. Tourism industry has been recognized as an important sector of the Nepalese economy. The existence of various natural beauties, cultural values and institutions and other religious places attract foreign visitors in Nepal. It has significant impact in Nepalese economy. Role of tourism industry in economic development can be explained as follows: 1. Source of foreign currency: Tourism industry is regarded as one of the major sources of foreign currency earning. Tourist spends their money in the course of visiting Nepal. The more the travel of tourist, more the transactions of foreign currency increased and earns more money. 2. Increase in employment opportunity: Tourism industry helps to generate the employment opportunities directly or indirectly to the people in different tourism related activities such as in hotels, trekking, traveling, mountaineering business etc. 3. Cultural exchange: Tourism is an important medium of cultural exchange. Due to tourism development people from different countries come to Nepal, which help to exchange art and culture between Nepal and rest of the old. It helps us to change the traditional concept and introduce modern thinking and other. 4. Development of handicraft industry: The development of handicraft industry also depends on the development of tourism industry. Tourists are interested to buy handicraft goods which represent Nepalese art and culture. 5. Development of backward areas: Most of the tourist places are situated in the rural areas. Transportation, communication, hotel lodge etc. are essential factors for tourists. Thus, expansion and development of tourism industry would help to develop the backward areas because most of the tourist destinations are in the remote areas. 6. Source of government revenue: Tourism is also a source of government revenue; government earns income from tourism activities. Such as hotel and restaurant tax, bars tax, visa fee, airport tax etc. This increases the government revenue. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com There are other important role of tourism industry such as change in living standard of people, increase in social facilities, promotion in trade and business, publicity of nation etc. # PROSPECTS OF TOURISM INDUSTRY Tourism industry has been becoming one of the major sectors of the Nepalese economy. Due to specific religious, Cultural and natural diversity and hospitality of the people, there are huge possibilities of expansion of tourism industry in Nepal. Some of the major prospects of Tourism industries are as follows: 1. Natural Beauty: Nepal is a country full of Natural beauties like Mount Everest, interesting caves, rare animals, dense and green forest, waterfalls, lakes etc. These heart-touching beauties have proved to be natural blessing to Nepal. Their development and protection helps to develop the tourism industries. 2. Historical and religious places: There are some places of historical and religious importance. Nepal is a holy place for Hindus as well as Buddhists and so on. Pashupati temple, Krishna temple, Janaki temple, etc are Hindus temple. Nepal is also the birth place of Gautam Buddha. And there are other religious and historical places where tourist wants to visit Nepal either for religious purpose of for study and research. 3. Cultural diversity: Nepal is a multy-ethnic nation with over 60 different ethnic groups living in different parts of the country. It is a common garden of various caste and communities. Each caste and ethnic groups has their own language, culture, way of living etc. This cultural diversity attracts the tourist for study and enjoy with them. 4. Wide range of Biodiversity: Nepal is rich in biodiversity. In Nepal, there are various places, where different varieties of wild animals, plants are found. All these provide additional attraction to tourists to visit Nepal. 5. Less expensive: The cost of living in Nepal is very low in comparison to other countries. Therefore, it is a suitable place for tourist of different countries and different status and stay for long duration at very low cost. 6. Unique places for recreation: There are various unique recreational places for enjoyment for tourist. Tourist always wants to visit such places. There are other prospects of tourism industries such as ancient art and culture, suitable climate birth places of brave persons, mountainous country etc. # PROBLEM OF TOURISM INDUSTRY Nepal is prosperous in natural, cultural, historical and religious and so many other unique recreational places and mountains. So, Nepal is a potential destination county. But there are various problems of tourism sector which are as follows: 1. Lack of transportation and communication facilities: There is lack of transportation and communication facilities in remote area where tourist destination places are located. Therefore, mostly tourist have to only visit Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com places like Kathmandu, Pokhara, Chitwan, Lumbini etc. where there is easy access to transportation and communication facilities. 2. Lack of trained guides: Trained guides are essential to provide services to the tourist but our country doesn't have trained guides who can guide the tourist to their destination. The available guides are neither well trained not adequate in number. 3. Lack of good quality hotels: There is lack of good quality hotels with modern facilities at tourist's destination. Most of the quality hotels are concentrated in Kathmandu and Pokhara. There are no such hotels in remote areas. Thus, the tourists have to return back due to the lack of high quality service for tourist. 4. Insecurity: There is lack of security in Nepal. Political disturbance, strike, dacoits, etc. are happening in Nepal frequently. These have been damaging Nepal's image in international level. Thus, tourist disagree to visit Nepal even they are interested. 5. Pollution: Nowadays, major towns and cities of Nepal are suffering form environmental pollution. This growing environmental pollution also affects the tourism industries because tourists hesitate to visit the polluted area. 6. Lack of tourism information centers: Nepal doesn't have adequate information center for tourist. Adequate advertisement and information are essential for tourist to identify the destination. Thus, tourists are unknown about the tourist spots and they are compelled to visit without information. There are other problems of tourism industries such as lack of recreational center, lack of handicraft activities, weak management of tourism, defective government polices. # REMEDIAL MEASURES OF PROBLEMS OF TOURISM INDUSTRIES There are various problems in the development of tourism industries in Nepal. If we can remove these problems, Nepal can achieve the economic miracle by tourism industries. Following are the suggestions for solving the problems of tourism industries: 1. Development of transportation and communication facilities: Transportation and communication facilities are the basic requirements for development tourism industries. Thus, these facilities should be made easily accessible all over the tourist's destinations of the country. 2. Establishment of quality hotels: Quality hotels are concentrated in limited urban areas of Nepal hampers the tourist so that special attention should be given for establishment of quality should be give for establishment of quality hotels in various parts o the country by involving the private sectors. 3. Control of pollution: Pollution badly affects the tourism sector. Thus, the government, the private sector and the civil society together should be controlled the growing urban pollution. 4. Arrangement of security: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com There should not be any kind of insecurity in the country. Thus, we should arrange proper security to maintain piece. So, that tourist feels themselves secured in any parts of the county. 5. Arrangement of adequate tourism center: In adequate tourism centers hampers the tourists for knowing different information. So, tourism centers should be established in all possible tourists' destinations with required facilities. 6. Effective tourism policy: The government should prepare and implement liberal tourism policy to attract tourists of different countries. There are other remedial measures such as development of tourist sites, publicity and advertisement, development of recreational sector, management of trained manpower/guide etc. # PUBLIC ENTERPRISES Public enterprise is an organization which is owned, managed and controlled by the government for the welfare of the public. The main objective of this organization is to provide goods and services to the public at a reasonable price. The government has invested more than 51 % in the public enterprise. Public enterprise is originated and developed after starting developing planning in 2030 B.S. Nepal Rastriya Banijaya Bank, Nepal Airlines Corporation, Nepal oil corporation, Nepal Telecom, National Insurance Company, Nepal Electricity Authority etc. # CURRENT STATUS OF PUBLIC ENTERPRISE More than half of the total share of public enterprise by the government directly or indirectly. Nepal has been adopting the mix economic system. Public enterprises are operation under six broad sectors in Nepal. At present, there are 37 public enterprises in Nepal. The government is investing large sum of public resources in public enterprises every year. Many of these enterprises in the initial years of their establishment recorded satisfactory performance. But now the overall performance of public enterprises in Nepal is not satisfactory. The large amount of investment of the government is being misutilized. The return unsearched investment is quite low and the government is bearing loss in large amount form these enterprises. Therefore, Nepal government stated privatization of public enterprises. The current situation of public enterprises in Nepal can be shown as follows: Sectors  Industrial  Business  Service  Social  Financial  Publicity Total

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No. of enterprises 7 6 7 5 9 3 37

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Profit/Loss -784.3 3033.1 1358.0 -292.5 1056.6 5032.4 10003.3

Capital investment 2388.4 5469.8 11733.5 1590.5 79930.4 121539.4 222652.0

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For Updates : sanjayachauwal.wordpress.com Source: Economic Survey 2009/10, Ministry of Finance.

Chapter : 10 Transport and communication # INTRODUCTION They are basis infrastructure for economic development of the country. The means which carry people and goods and services from on place to another in called transportation. The medium of exchanging news, views etc. are called communication. # MEANS OF TRANSPORTATION (CURRENT SITUATION) There are 3 means of transportation in world: (Air, Water and Land transport). But the main means of transportation used in Nepal are land and air transport because of land locked country. 1. LAND OR SURFACE TRANSPORT The present condition of land or surface transportation in Nepal is as follows: a) Road transport: Road transport is the most important transport in Nepal. It is more reliable and cheapest transportation for the people than other means of transportation. But many of the existing roads are not in good condition due to the lack of proper repair and maintenance. The total networks have access to 71 districts (districts excluding Manang, Dolpa, Humla, Mugu) by the end of 11th plan. The 12th year three interim plan has set the target to connect all 75 districts with the road network. The total length of roadways available in the country accounted to 20,138 km in year 2067 B.S. Current situation in 2067 (in km) Types of road Stack Topped Road Gravel Road Fair weather Total

Length in km 6,304 4,832 9,002 20,138

Percentage 31.3 24 44.7 100

b) Rail way: In Nepal there are three rail ways transport in which two are not in operation. The first railway line in Nepal was constructed in 1929A.D. between Aamelekgunj to Raxaul. This was 48 km long but now it is out of operation. Another railway line was constructed during the phase of construction of Koshi project to transport stone and sand for the project. The line closed its business operation soon after the completion of Koshi project. Then, Janakpur to Jai nagar railway was constructed in 1936 A.D. which is 52 km long. Now it is only rail way line operated in Nepal. c) Rope way: The transportation system operated electric cable is called rope way. The first rope way was completed in 1927A.D about 22.4 km length from Dhursing to Matatirtha. Later it was linked Dhursing to Matatirtha to Teku which was closed in 1964. In the same year Kathmandu to Hetauda begun. It covered a length of 12 Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com km. Now, this rope way system is not in operation. The kursing ghat to Manakamana rope way service was started service in 1998. It covers a distance of 31 km. it is operated through private sector. d) Trolley bus service: Bus service operated by electric power is called trolley bus service. The trolley bus was established in 2032 B.S. under the Chinese assistance. Its distance ship was 13 km from Tripureshwor of Kathmandu to Suryabinayak of Bhaktapur. Later trolley bus service was only from Tripureshwor to Koteshwor. But at present it is not more in operation due to some difficulties. 2. AIR TRANSPORT Air transport is the fastest, easiest and most reliable means of transportation. The air service was started in Nepal in 1953 A.D. between Kathmandu and Patna with the establishment of RNAC in 1958 A.D. The air transportation system has been developing in the development of the country. The number of air field including small and large has reached 54 which consist one international and 5 are in construction. # MEANS OF COMMUNICATION (CURRENT SITUATION) The present age is the age of information and communication plays the vital role for convey the information and knowledge. There are two ways of communication. On is personal communication like postal service, telephone etc. and the other is mass communication like radio, television, newspaper, etc. The important means of communication are as follows: 1. Postal service: Postal service is one of the traditional means of communication in Nepal. The postal service started in Nepal in 18\9 A.D. several post man have been appointed to handle the postal deliveries. Internal as well as external postal services are operated by Hulak goshwara. There are altogether 2,991 post offices. Fast express mail services has also stated in 37 foreign countries by private as well as government sector. 2. Tele communication service: This service is the fastest and easiest means of communication. Tele communication service was established in 2016 B.S. in Nepal. Now, there has been a good progress in developing telecommunication service in both quantitative and qualitative aspects. Now all 75 districts have access to telecommunication service in Nepal. At present Nepal Telecom, Ncell, UTL are providing telecommunication service in Nepal. 3. Radio broadcasting service: It is one of the most important means of mass communication radio broadcasting services was established with the establishment of Radio Nepal in 2007 B.S. Radio broadcasting through frequency modulation has been stated since 1995/1996 A.D. Now radio Nepal has providing all 75 district radio facilities through different programmes through different language. At present there are 373 incensed radio Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com channels by the private sectors in different parts of the country out of which 317 such stations are now in operation. 4. Television telecasting service: Television telecasting service is an important effective and live medium of mass communication. It was started with the establishment of Nepal Television in 2042 B.S. Nepal Television (NTV) is also running its branch channel NTV 2. At present there are altogether 32 television channels issued for operations but only 11 T.V. channels are in operations. 5. Press media: Newspapers are also effective medium of mass communication. People can get real recent information about the events happened within and out of the country. At present, the no. of newspapers registers in various districts in Nepal has reached 5648. Similarly, internet news service is also available by various newspapers and other press media. # ROLE OF TRANSPORTATION AND COMMUNICATION The transportation and communication are important means and media for the development of socio-economic structure of Nepal. They are pre-requisite for the development of the country. They help to mobilize the existing resources and integrate the sectors of the economy. The important role of transportation can be explained as follows: 1. Development of agricultural and industrial sector: Transportation and communication plays a vital role in the development of agricultural and industrial sector. Without efficient transportation and communication facilities, development of agricultural market is very difficult. Transportation helps to carry final goods at the market and to bring raw materials from the market to specific site whereas communication helps to get information about the market structures of goods and services. 2. Basis of tourism development. Development of tourism is impossible without efficient transportation and communication system. Tourists require transportation and communication facilities to travel to various parts of the country. Most of the tourists who came to Nepal return back to their country after visiting some places where these facilities are easily accessible. So, to increase the average living of tourist stays, we most develop these facilities to the considerable level. 3. Market expansion: Transportation and communication network help to deliver the goods and services from one place to another place easily. People can send their products easily and cheaply to far distances. It helps to expand the market. 4. Utilization of natural resources: Nepal is reach in natural resources but it has not been possible to utilize the natural resources properly due to the slow development of transportation and communication facilities. If we develop the modern means of transportation and communication, natural resources can be utilized in proper manner. 5. Social reform: Improved and developed transportation and communication system help to increase Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com people to people contact, exchange their views and altitudes, change their life styles which help people to avoid their traditional attitudes and adopt scientific method o social system. 6. Creation of employment opportunities: Development of transportation and communication facilities, help to establish various industries, factories, hotels and other services where people can get job opportunities in these sectors. There are other roles of transportation and communication facilities like increase in trade and commerce, regional development, social benefit, increase in national income etc.

Chapter :11

Foreign Trade

# INTRODUCTION Exchange of goods and services between different persons is called trade. Such exchange between the people of different countries is called foreign trade. So, foreign trade means exchange of goods and services between two of more countries. Foreign trade creates specialization in production and provides benefits of specialization. All countries cannot produce all goods efficiently. So they engage in foreign trade. Foreign trade plays a vital role in the economic development of a country. An important aspect of foreign trade is efficient allocation of scarce resources among different countries. Some countries like Singapore, South Korea, Malaysia, Thailand and Hong Kong (China) have achieved economic prosperity through foreign trade. # Balance of trade: Export and import are two components of foreign trade between export and import is called trade balance. If export is greater than import then, it is called surplus trade balance. If import exceeds export then, it is called deficit trade balance. # Balance of payments: It refers to a comprehensive record of economic transactions of a country with other countries during a given period of time. If the income from abroad exceeds the payments, it is called favorable or surplus balance of payments. If the amount of payments made to abroad exceed the amount of income earned from foreign country, it is called unfavorable or deficit balance of payments. # GROWTH AND TREND OF NEPALESE FOREIGN TRADE Nepal's foreign trade was limited only to India and Tibet in the past. At that time Nepal face so many problems in foreign trade. After the establishment of democracy in 2007 B.S., Nepal has been gradually initiated trade relation with other countries. Nepal adopted liberal trade policy in 2046/ 2047 B.S. Now Nepal has trade relation with more than 100 countries. Growth and trade of Nepalese foreign trade can be shown as following table. Growth and Trend of Nepalese Foreign Trade (In millions) Fiscal year Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com import 2007/2008 592665 221937.7 2008/2009 676975 284571.0 2009/2010 608240 374335.2 Source: Economic Survey, 2011/12 A.D.

281204.2 352268.5 43559.2

162671.2 217323.9 209876.2

# COMPOSITION OF FOREIGN TRADE IN NEPAL Composition of foreign trade gives a real picture of an economy especially on trade. The commodities traded in foreign countries are classified according to SITC (Standard International Trade Classification). The SITC includes ten types of export and import commodities. The composition of foreign trade by SITC is presented in the table below: Commodity Trade by SITC Group in 2009/2010 (In millions) SITC GROUP 1. Food and live animals. 2. Tobacco and beverage. 3. Crude materials and inedible. 4. Minerals, fuels and lubricants. 5. Animals and vegetable oil and fats. 6. Chemical and drugs. 7. Classified by materials 8. Machinery and transport equipment 9. Miscellaneous manufacture article. 10. Not classified Total Source: Economic Survey, 2010/2011 A.D.

EXPORT 13155.2 18.4 2469.6 0.0 367.2 1676.9 33395.2 725.0 9116.5 0.0 60824.0

IMPORT 23765.5 2854.9 19888.9 56781.1 9320.5 39669.6 116129.8 84517.2 21366.6 41.1 3743335.2

# DIRECTION OF FOREIGN TRADE IN NEPAL The foreign trade of Nepal is being directed towards wide range of countries in the world after the membership of WTO 2004 and integrated to Global economy. But in the past, foreign trade was limited only to India and Tibet. Now Nepal has trade relation with more than 100 countries. The direction of foreign trade in Nepal can be presented in the following table. Direction of foreign trade of Nepal (RS in millions) Fiscal year 2007/2008 2008/2009 2009/2010

Total trade 281204.2 352167.1 435159.2

India (%) 64.34 57.77 59.08

Other countries 35.66 42.23 40.92

Source: Economic Survey, 2010/2011 A.D. # PROBLEMS OF FOREIGN TRADE IN NEPAL Nepal is facing a problem of ever increasing trade deficit. Import is rapidly increasing Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com but the increase in export is very low. Nepal is unable to take the advantage of Globalization. Due to some internal and external reasons, it is very difficult to maintain trade balance here. The followings are the main problems of foreign trade in Nepal: 1. Land locked country: Nepal is a land locked country. It is surrounded by India on three sides and by China on one side. Most of the transport facilities have to depend on India's will. So, Nepal has to depend entirely on India while making export to and import form other countries. Hence, land locked has been the obstacles in the foreign trade in Nepal. 2. Illegal trade between India and Nepal: Nepal has a long open border with India. Due to this long and open border various types of illegal trade are taking place. It increases corruption, black marketing, reduced tax etc. which create problem in foreign trade. 3. Top competition with foreign goods: Nepal has implemented free trade policy. So, foreign goods enter into Nepal without any barrier. The flow of foreign goods has highly dominated the products of Nepal in terms of price, quality and quantity. As a result, Nepalese products are losing their position both in international as well as domestic market. 4. Underdeveloped industrial sector: The industrial sector of Nepal is still in under-developed condition. Established industries are not functioning smoothly due to lack of capital, lack of fuel, electricity, etc. The exported oriented industries are not fully reliable and durable but they are mostly seasonable in nature which creates difficulties in Nepalese foreign trade. 5. Internal problems: Nepal is facing internal problems like political instability, strike, crime etc. which badly affects the production of exportable goods. Irregularity of electricity and shortage of fuel are also the internal problems of Nepal. 6. Lack of advertisement: Advertisement is necessary to promote the foreign trade. Nepal has not advertised its products. Therefore, foreigners are unknown about Nepalese products which hamper the Nepalese foreign trade. There are other problems of foreign trade in Nepal like lack of trade diversification, defective government policy, high cost of production, lack of capital, etc.

Chapter : 12

Public Finance

# MEANING: The branch of economics that deals with income and expenditure of the government and its effect on socio-economic aspects is called Public Finance (Government Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Finance). # SOURCE OF GOVERNMENT REVENUE: Government revenue refers to the income of a government from various sources to meet regular and development expenditure. There are generally two sources of government revenue, they are: 1. Tax revenue: Tax is the compulsory payment paid by the people to the government. Tax payer does not get direct benefit while paying tax, but they may get indirect benefit from various services provided by the government. Tax revenue is two types: a) Direct tax: If direct tax is levied on someone then the burden can't be shifted to others so, direct taxes are non-transferable. Generally, direct taxes are imposed on income and property of a person. The main sources or components of direct taxes are:  Land revenue and registration tax: Government charges tax on the purchase of land and house.  Property, profit & income tax: Government charges a certain amount of tax in income, property & profit or the general people. b) Indirect tax: If tax is levied on goods and services and the burden of tax can be shifted from one person to another then, it is called indirect tax. The producer can shift the burden of tax to ultimate consumers by raising the price of commodities. The main sources of component of indirect tax are:  Custom duty: The government can collect the revenue by imposing tax on the import and export of goods and services.  Tax on consumption & production of goods and services: Government can collect the revenue by imposing tax on the consumption and production of goods and services such as excise tax, entertainment tax, value added tax, etc. 2. Non-tax revenue: The income received by the government from various sources other than tax is known as non-tax revenue. There are various sources of non-tax revenue which are: a) Dividend tax: The revenue received from the profit of government investment in various sectors like financial institution, industrial sector, service sectors, etc. b) Receipts from sale of government commodities & services: It consists of income from drinking water, irrigation, electricity, education etc. c) Fines and penalties: People pay large amount of money to the government in the form of fines and penalties. d) Principal and interest payment: It consists of repayment of principal and interest of debt by the corporations to the government. Sanjaya chauwal

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e) Royalty and sale of fixed assets: It includes the income received from mine royalty and sell of mine and government fixed assets such as land, buildings etc. Foreign grants are also the major source of government revenue. Nepal can get grants from foreign government and institutions for development programmes and security expenses. # SOURCE OF GOVERNMENT REVENUE: Government expenditure refers to the expenditure made by the government and its various agencies for the promotion of public welfare. The sources of government expenditure are classified under two headings which are as follows: 1. Regular or administrative expenditure: Expenditure made on normal government services or administrative functions are called regular expenditure. It is related to expenditure on day to day activities like payment of salaries, pension, payment of interest and principal for external and internal debt etc. the regular expenditure consist of the following headings: a) Constitutional organs: It consists of the expenditure made by government of constitutional organs like Supreme Court, Election commission, Auditor general's office etc. b) General Administration: It consists of the expenditure made by government on council of ministers, district administrations, police, jail etc. c) Defense: It consists of the expenditure made by government on management and running of defense related offices. d) Social services: It consists of the expenditure made by government on education health, drinking water etc. There are other headings of regular expenditure such as revenue administration, economic administration & planning, judicial administration, foreign services, economic services, loan and investment, loan repayment and interest and miscellaneous. 2. Development & capital expenditure: Expenditure made on the development activities is called development expenditure. It is related to long term expenditure on development programmes. The development consists of the following headings: a) Constitutional organ: It includes the expenditure made on infrastructural development of Supreme Court, election commission, Auditor general's office etc. b) General administration: it includes the expenditure made on administrative reform. c) Social services: It includes the expenditure made on development of education drinking water, health etc. d) Economic administration and planning: It includes the expenditure made on planning & statistics of a nation. There are other headings of development expenditures such as economics services and miscellaneous. Sanjaya chauwal

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Chapter : 13 Development planning # DEVELOPMENT PLANNING A plan is a set of thing or activities to operate in systematic order to achieve definite target or objectives. In other words, the process of making plans, to meet definite goods is planning. Individuals, groups, firms or government can do planning but planning done by government is development planning. Development planning is closely related to economics activities of a nation. Therefore, it is also known as economic planning. The concept of development planning was first introduced in 1917 A.D. in the former Soviet Union. It became very popular after the end of 1930's great economic depression and Second World War. The systematic development planning in Nepal was started in 2013 B.S. which was for 5 years (2013 B.S. to 2018 B.S.). After the introduction of development planning in Nepal, 11th development plans were experience and one is running. In short, economic planning may be defined as the deliberate control and direction of the economy by the state for achieving certain targets and objectives with in a schedule time. The basic objective of development planning is to achieve sustainable economic development in primary secondary and tertiary sectors of the economy. # PLAN FORMULATION IN NEPAL Plan formulation is definitely a challenging issue because it's success, usually depends on it rationality and appropriateness. The plan should be formulated according to the economic condition for a nation. The success of any plan depends on the firm and process of plan formulation. In Nepal Development Council (NDC) gives direction to NPC (National Planning Commission) in plan formulation the process of plan formulation in Nepal consists of the following activities: 1. Past plan and estimation of new plans: At the time of making new plans, NPC evaluates past and current plans; it gives the clear ideas and projections for making new plans. On the process of evaluation drawbacks should be changed with improvement and should be included unsuccessful plans and policies in new plans. 2. Collection and proposal of new project proposal: NPC collects project proposal from each District Development Committee. District level government organization also sent proposals through their respective ministers. Then, NPC presents all proposals including some proposals propose by himself to NDC. 3. Discussion: Discussion is one of the most important steps in plan formulation. NDC, NPC, Ministries, secretaries, Experts of concern field, NGOs, INGOs, representatives of donor agencies etc. take part on discussion. Then, NPC prepares plan document according to the conclusion derived from discussion. 4. Determination of objectives, targets and priorities: Objectives should be determined in a complete plan document to meet the desired goal according to the economic condition. For good development plan, target and priorities should be determined which guide the overall activities and programmes during the purposed plan period. 5. Authorization & implementation of Plan: The final plan document prepared to NPC for Authorization. After the authorization, it is presented to the cabinet for its approval. Finally, the plan is executed after the cabinet approval. Then, the plan is implemented in association with government, private sectors, NGOs, INGOs, and Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com general people. 6. Monitoring & evaluation: Monitoring and evaluation is necessary in the process of plan formulation. It helps to determine the success by evaluating the implemented plan whether it is according to objectives, strategies of plan or not. It also keeps feed back while making future plan. #CURRENT INTERIM PLAN # [Draft Paper of Interim Plan/12th] # Long Term Vision: The long term vision of this plan if to transform the Nepalese economic status from least developed countries into developing country at the end of this plan, Nepal would be prosperous, justice and peaceful country. All forms of discrimination and inequalities would be ended from the society. # Goal: The goal of this plan is to improve the living standard of general public and reduce the poverty to 21% and achieve millennium development goals. By 2015 through sustainable economic growth by attending the following other goals: a) Generating employment opportunities. b) Reducing economic inequalities. c) Achieving regional balances. d) Eliminating social exclusions. # Objectives: The main objective of this plan is to enable people to feel change in their livelihood and quality of lives by establishment of sustainable peaceful situation and poverty alleviation through employment oriented, inclusive and equijustive economic growth. # Strategies: This plan has setup the following strategies:  To achieve employment and poverty alleviation, oriented, sustainable and broad-based economic growth.  To develop the physical infrastructures for support on federal structures and regional economic growth  To emphasize on inclusive and equijustice development to achieve sustainable piece.  To help in socio-economic transformation of the country by improving the socio-economic services.  To make result oriented development by good governmence and effective service delivery.  To attain economic growth and stability by developing private and community, cooperative sectors through industrialization, trade and services. # Policies: This plan has set up inter-related sector policies which are as follows: 1. Poverty alleviation and employment: Poverty alleviation is achieved through the expansion or socio-economic development programmes and creating more employment opportunities. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 2. To make a Federal Nepal: To make federal Nepal, by preparing the structural and illegal basis in a new form is one of the policies. 3. Adopting the system of market economy: There will be adopted the market economic system of public welfare and economic development. 4. To identify the people with poverty line: There will be starting the process of identifying the people living under poverty line by focusing development efforts on poverty alleviation. 5. Adopting the agriculture perspective: Using appropriate technologies to make modernization will help the development of agriculture, production and productivity. 6. Programmes in modern sectors of the economy: The priority of programmes on foreign trade, development of cooperative labour management and tourism promotion is necessary. 7. Opportunities of the self employment: The employment opportunities will be provided for youth especially those who are affected by the conflict and improvement of productive sectors for self-employment. 8. Especial targeted policies: Preparing the estimates for food scarcity and socio-economic empowerment of the deprive people, dalits, adibahsi, Janjatis, Madhesis, backward classes, people with disabilities etc. # Priority Sectors: The following priority sectors have been identified by this plan:  To make economic development sustainable and alleviate the poverty by attending the balance development.  To develop agriculture including tourism industries and export trade for attending economic growth and employment opportunities.  To assist in development by increasing the investment for marginalized group in all the process of state restructures.  To give emphasis on the quality of public services and make available in the reasonable price by implementing good governmence  Investment will be increase in education, health, water supply, sanitation sectors for the development of human resource. To set the programmes and projects to assist directly relief to the general people.

Chapter : 14 Quantitative analysis in Economics # NEED FOR QUANTITATIVE ANALYSIS IN ECONOMICS The use of numbers or symbols in order of study is known as quantitative analysis. There are two aspects in quantitative techniques use in economics that is mathematics and statistics. In early days, economics was considered to be wholly a non-mathematical science. Verbal technique was supposed to be sufficient to explain and describe everything in economics. At that time mathematics and statistics had not any place in economics. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com When economics began to develop and became popular, economics theories and analysis became more and more complex and it was impact difficult to express them only in words. The introduction of mathematics in economics put the literary form of economic theories into mathematical language. It provides concrete form to economic principles and relationship and deals the economic matters more precisely and practically. Mathematics helps to represent the functional relationship between economic variables that is price and demand, consumption and income etc. Statistics helps to formulate the economic theory and policy by using the statistical facts of various economic variables. Thus, quantitative analysis helps us to find the information in numerical terms which makes easier, shorter and faster understanding and thereby facilitation on decision making process. Nowadays, economics is being the quantitative subject due to the increase use of quantitative analysis. Most of the economic concepts are set quantitative terms. # USES OF STATISTICS IN ECONOMICS In ancient times, statistics was regarded as the science of state craft and was used to collect information related to military force, population, wealth, etc. But in modern times, the use of statistics is broad. It is not only the device for collecting sound techniques for handling analysis and drawing valid conclusions. Statistics play a significant role in the solution of problems related to planning, economics, business, management, mathematics, etc. The uses of statistics in economics are as follows: 1. Helpful in calculating PCI: Statistics helps us to calculate the PCI. PCI is the one of the component of NI in economics. It is accounted by the help of NI and the size of population. Thus, statistics helps us in calculating PCI. 2. Helpful in analyzing consumer’s satisfaction: The statistical tools help the particular economy to analyze and make scientific and systematic report of consumer’s satisfaction. It helps in finding out the information about the consumer. So the degree of consumer’s satisfaction can be measured by the numerical evidence with the help of statistics. 3. Helpful in production functions: The relationship between the various factors of input and out put is termed as production function. In fact, such a production function is evaluated by the help of various statistical tools. 4. Helpful in income employment generation programme: It also helps in income employment generation programme through time series analysis and regression analysis which serves as the major tool of economics. 5. Helpful in formulating economic policies: The various statistical tools help in formulation of economic policies. In fact, the economic policies such as physical policies and monetary policies are determined by the help of statistics. 6. Helpful in analyzing relationship between economic variables and economic development: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Economic development means the growth of GNP along with the development of different aspects. Thus, statistics analyzes the relationship between economic variables and economic development. # USE OF MATHEMATICS IN ECONOMICS Different economics theories can be explained by the use of mathematical relations. Use of mathematics in economics translates the verbal form of economic theory into mathematical language. Mathematical tools like ratio equations, indices, logarithm, derivatives etc. are suitable for developing theories and models in economics. Mathematical symbols can be used instead of terms and equations instead of sentences. It provides concrete form to economic modes & theories and makes them more precise and practical. The uses of mathematics in economics are as follows: 1. To show the functional relationship Various economic variables are affected by other variables. Mathematical relations equations are used to show these relationships between dependent and independent variables. For example: Quantity demand of goods depends upon its price. In mathematical term we can express as: D = f (P) where D = (dependent variable), P = Price (independent variable) and f = function. 2. To determine equilibrium price & quantities Mathematics uses the equilibrium condition of the market and presents them in the form of equation. Then it finds the equilibrium quantity & price of the market by solving the equations. Therefore, it is used to determine equilibrium price and quantities. 3. For marginal and total analysis All marginal concepts such as marginal cost, marginal revenue, marginal product, etc. and all the total concepts such as total product, total revenue, total utility, etc. are discussed by the use of differential, calculus, and integral calculus respectively. 4. To reach faster conclusion The use of mathematical symbols, relations and mathematical tools helps to find the decisions to reach the conclusion in quick and easy way. 5. To determine optimum condition Mathematical methods and techniques help to determine the point of maximum profit of producers and business man and maximum satisfaction of consumers. Its uses the condition of maxima and minima. These are the some of the uses of mathematics in economics which have been increasingly used nowadays. The appropriate use of mathematical techniques can be powerful and essential tools in the hand of any economists. These mathematical tools can give a deeper in sight into the subject and help in deriving the conclusions. Chapter : 15 Statistics # SINGULAR AND PLURAL MEANING OF STATISTICS The history of statistics may be dated to several thousand of years ago. But day by day the word ‘statistics’ has become more popular and widely used. The word ‘statistics’ has been derived from Latin word ‘status’, German word ‘statistik’ and Italian word Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com ‘statista’. All denote the same meaning that is political state. In ancient times, the government used to collect the information regarding the size of population in the country, property of the country, military force etc. So, in those days, statistics was considered as the science of state craft. But at present, statistics is used by the economist, managers, scientist, politicians, etc. So these days, there is hardly a place where statistics is not used. The word ‘statistics’ can be used both singular as well as plural sense. # SINGULAR SENSE In singular sense, it means the science of counting or science of average. This definition has the following features: 1. Collection of data: Most of the statistical analysis is performed on the basis of collected data. The methods of data collection like primary and secondary, census and sampling etc. are related with data collection. 2. Organization of data: After collecting data, systematic arrangement is essential. They are organized and presented in table on the basis of rows and columns. This process is known as presentation of data. 3. Analysis of data: The organized data presented need to be analyzed. There are various tools of analysis in statistics like average, co-relation, regression, dispersion, etc. 4. Interpretation of data: After analysis, results are interpreted and conclusions are drawn. IT is the last and most essential part of the work. If findings are interpreted wrongly, wrong conclusion is obtained. # PLURAL SENSE In the plural sense, it refers to the numerical facts and figure systematically collected for some special purpose. This definition has the following features: 1. Statistics are aggregate of facts: In statistics, the single numerical figure has no meaning. It is not statistics. The numerical figures of production, income, price of commodities, students of the class etc. are statistics. 2. The values of statistics are numerically expressed: The values of statistics are countable as well as numerically expressed. For example, the numbers of students in Siddhartha College in grade 11 are 400. Among them 264 are female and 136 are male, which constitute statistics. 3. Statistics are collected in a systematic manner: Firstly, we have to think about the field of study. Then, data should be collected by applying suitable methods and work should be carried out in systematic manner. Otherwise, interpretation and conclusion may be wrong or misleading. 4. Statistics are collected for a pre-determined purpose: We must have well defined purpose, specific aims and objectives before we collect data. Suppose, if we want to compare the performance of students in grade XI in Siddhartha College in one subject or more, we must specify the subject and the year, for which comparison is carried out. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 5. Statistics makes easy to comparison: The collected numerical data constitute statistics if they are comparable. To make valid comparison, the data should be homogeneous. For example, the passed number of students of Siddhartha College and other College constitute statistics, as they are comparable. But weight of the students and their intelligence do not constitute statistics as they are not comparable. # SCOPE OR IMPORTANCE OF STATISTICS In ancient times, statistics was regarded as the science of state craft and was used to collect information related to military force, population, wealth, etc. But in modern times, the use of statistics is broad. It is not only the device for collecting sound techniques for handling analysis and drawing valid conclusions. Statistics play a significant role in the solution of problems related to planning, economics, business, management, mathematics, etc. which are as follows: 1. Statistics in economics: Statistical data and techniques are useful in economic analysis. Statistical analyses are used in solving different economic problems such as consumptions, production, distribution, investment, unemployment, etc. Index no. , Time series analysis, demand analysis, forecasting techniques, etc, are some tools in statistics which are frequently used in economics. 2. Statistics in planning: Planning is the logical combination of vision, goals, objectives, strategies, policies, etc. An efficient planning is needed for efficient working. Statistics helps to get the necessary information about the planning. The success of any planning depends upon the current and sound analysis of statistical data. Efficient planning can’t be imagined without statistics. 3. Statistics in business: Statistics plays an important role in business. A successful business man must be very quick and accurate in decision making. Statistics helps business man to plan production, according to the test of the customers. The business man can also make correct decision about the location of the business, marketing the product, financial resources, etc, based on the statistical information. 4. Statistics in state management: Statistics may be taken as the science of state craft. Different policies of the government to get the knowledge of National condition keep their records and allocate its resources in various sectors. Thus, statistics are the eyes of the state. 5. Statistics in pure science and other social science: Statistics is also a helpful tool in pure science like biology, physics, astronomy, medical science, etc. and also other social science such as environmental science, geographical science, etc. In these fields, different types of information and numerical facts and figures are required to study. Without using statistical tools in these subjects, the study becomes incomplete as well as difficult. Statistics is useful in every sphere of life and activities. The methods and ideas of statistics are so widely used nowadays that we can’t imagine our Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com life and different activities without statistics. # IMPORTANT OF STATISTICS IN ECONOMICS In ancient times, statistics was regarded as the science of state craft and was used to collect information related to military force, population, wealth, etc. But in modern times, the use of statistics is broad. It is not only the device for collecting sound techniques for handling analysis and drawing valid conclusions. Statistics play a significant role in the solution of problems related to planning, economics, business, management, mathematics, etc. The importance of statistics in economics are as follows: 7. Helpful in calculating PCI: Statistics helps us to calculate the PCI. PCI is the one of the component of NI in economics. It is accounted by the help of NI and the size of population. Thus, statistics helps us in calculating PCI. 8. Helpful in analyzing consumer’s satisfaction: The statistical tools help the particular economy to analyze and make scientific and systematic report of consumer’s satisfaction. It helps in finding out the information about the consumer. So the degree of consumer’s satisfaction can be measured by the numerical evidence with the help of statistics. 9. Helpful in production functions: The relationship between the various factors of input and out put is termed as production function. In fact, such a production function is evaluated by the help of various statistical tools. 10. Helpful in income employment generation programme: It also helps in income employment generation programme through time series analysis and regression analysis which serves as the major tool of economics. 11. Helpful in formulating economic policies: The various statistical tools help in formulation of economic policies. In fact, the economic policies such as physical policies and monetary policies are determined by the help of statistics. 12. Helpful in analyzing relationship between economic variables and economic development: Economic development means the growth of GNP along with the development of different aspects. Thus, statistics analyzes the relationship between economic variables and economic development. # LIMITATIONS OF STATISTICS Statistics has wide applications in almost every sphere of human activities. There is nearly no place where statistics is not used. In spite of being many applications, the following are few limitations of statistics: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 1. Statistics does not study individual: It deals with aggregate of facts and doesn’t give any individual measurement. Individual item do not constitute statistical data and are meaningless for statistical inquiry. For example, a student’s marks in economics can’t be considered as statistics but the marks obtained by all the students make statistics. 2. It is not suitable to the study of qualitative phenomenon: Statistics always studies the quantitative characteristics of the given problems. Qualitative phenomenon like honesty, culture, love, poverty, etc, can’t be expressed numerically or direct statistical analysis. However, those phenomenon can be expressed indirectly of numbers and analyzed in statistics. 3. Statistical relations are not exact: Most of the statistical analysis is based on the collected data that may not be 100% correct. If the data are not correct, then the result obtained from such data can’t be expected 100% accurate. Thus, it just describes the phenomenon on the average. 4. Statistics is liable to be misuse: There is a great possibility of the misuse of statistics. Any person can misuse statistics and draw any type of conclusions he likes. Only the experts can handle statistical data properly. When statistical data are in the hand of in-expert, at that condition, it may lead wrong information and most fallacious conclusions. So, statistics might be harmed in the hand of unskilled person. 5. One of the methods of solving problem: There are many methods of solving the given problem. It is one of method of solving the problem. It may not be suitable for all the problems. Part B Collection of data # DATA COLLECTION Collection of data is the first and most important statistical investigation. The process of collection necessary information from the field of enquiry by the investigators themselves or by their agents is called data collection. If the collected data are reliable, then the decision will be correct. Otherwise, the results will be misleading and may be harmful also. # SOURCES OF DATA On the basis of sources of data, there are two types of data: 1. Primary data: The data which are collected by an investigator originally from it's basic source for the first time for any statistical enquiry are known as primary data. The primary data are also called first hand data. As it is collected directly from the informants. Primary data are generally used in those cases where the secondary data do not provide an adequate basis for analysis. Primary data are also called field source. Example: Data obtained in a population census by C.B.S (Central Bureau of statistics) are primary data of same organization. 2. Secondary data: Those data which are collected by one agency organization or Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com person but used by other agency, organization or person is called secondary data. These types of data are not original for the user. These are also called second hand data. The data which are already collected by someone but obtained from some published and unpublished sources are called secondary data. Example: For Central Bureau of statistics, the census data are primary whereas for the all others we use, such data are secondary. # DIFFERENCES BETWEEN PRIMARY AND SECONDARY DATA. Primary data Secondary data 1. Data collected first time from the field 1. Data that are already collected and used by of study are called primary data. others are called secondary data. 2. They are first hand or original in nature. 2. They are second hand in nature. 3. It gives more accurate information. 3. Sometimes secondary data may not be accurate. 4. They are like raw materials and they 4. They are found in ready-made form just have to be processed after collection. like finished goods. 5. Collection of primary data takes a large 5. Secondary data save money, time and amount of money and efforts. efforts, because these are used from the existing sources. 6. There is no need to worry about while 6. Secondary data should be carefully and using primary data by the investigator. critically examined before they are used. # METHOD OF COLLECTION OF PRIMARY DATA There are various methods of collecting primary data which are as follows: 1. Direct Personal Interview: In this method, the investigator or his agent collects the data by asking the questions individually. There is face to face contact between the respondence and the interviewer. This method is suitable: a) When the area of inquiry is limited. b) When the data is to be kept secret. Merits: a) The data obtained by this method are pure and original in character. b) The investigator can clarify any doubts during the interview. Demerits: a) This method takes a lot of time so, it is expensive method. b) There is chance of getting biased information. 2. Indirect Personal Interview: In this method, the investigator does not directly ask the questions to the persons who are directly concerned with the problem. The investigator obtains the necessary information by contacting the third person who is familiar with the problem. The third person is said witness. This method is suitable: a) When the direct sources of information are not available. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com b) When the informants are unwilling to give the correct information. Merits: a) It can cover a wider area very easily. b) This method is cheaper, requires less time, money and labour Demerits: a) The witness may be biased to provide accurate information. b) The selected informants may not be appropriate people to answer the questions. 3. Information from Corresponds. In this method, the investigator appoints local agents or correspondence in different parts or field of enquiry to collect information. These corresponds collected and send to the central office. This method is suitable for: a) Newspaper agencies, televisions agency for regular information. Merits: a) The information through this method is accurate. b) This method is cheaper and less time consuming. Demerits: a) Information sent by agents may not be reliable. b) It is difficult to check the accuracy of the data. 4. Mail Questionnaire. In this method, the investigator prepares a questionnaire (a set of questions). The questionnaire is sent to the various informants by post of mail. They are requested to answer the questions and post back to the indicator. This method is suitable: a) When the field of investigation is large. b) When the investigator requires quick result at low cost. Merits: a) This method is cheaper, saves time and labour. b) The information can be collected from very far areas. Demerits: a) There is high degree of non-response error. b) Informants may feel fear to provide information. 5. Schedule sent through Enumerator. In this method, the enumerators go to the informants personally with the schedule (a list of questions) and fill off the list of questions in their own handwriting by interviewing the informants. Population census in Nepal is conducted by this method. This method is suitable: a) When the informants are illiterate Merits: a) The results obtained by this method are reliable and accurate. b) Some additional information can also be obtained. Demerits: a) This method is more expensive. b) The enumerators should be well trained, skilled and tactful. Otherwise, data may Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com not be correct. # PROBLEMS IN PRIMARY DATA COLLECTION. a) The informants may be uneducated and uncooperative. Thus, the relevant and accurate information may not be collected. b) If there is no transportation facility, the investigator may take the information without interviewing the informants. c) The real facts of the data are not available due to the different conclusions given by the different informants about the same topic. d) The limitation of time and money is the other problem involved in primary data collection. e) Only few questionnaires are send back to the investigators by informants while using mail questionnaire method. So, accurate data can't be expected. f) Due to the shame, hesitate, fear of respondence, the investigator may not be collected reliable information. # SOURCES OF SECONDARY DATA. Secondary data can be obtained from two sources. They are: 1. Published sources. Published can be categorized in to following chart: 2. Unpublished sources: All information may not be published but they may be suitable for the purpose of investigation. The sources of unpublished data are: a) Reports of private office. b) Hospital records. c) Records of VDCs. d) Records of schools and campus administration e) Thesis, field reports etc. of University students. # PROBLEMS IN SECONDARY DATA COLLECTION. 1. Necessary information may not be published during the period of investigation. 2. The data obtained from secondary sources may not be suitable for the further research study. 3. The data obtained from secondary source may not be adequate for the purpose of finding the solution of research problems. 4. The data obtained from secondary sources may not be reliable due to the limitations of primary data. # PRECAUTIONS IN THE USE OF SECONDARY DATA. Secondary data are collected by someone and used by others. So, the investigators should check about the reliability, suitability and adequacy before using secondary data. It is because the secondary data may be inadequate and unsuitable. Thus, following precautions should be adapted while using secondary data 1. Reliability of secondary data. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com The success or failure of any research work depends on reliability of data. If the collected data are accurate and reliable then the results becomes right and such type of investigation shows reality. If the collected data are wrong or insufficient, the result becomes wrong and the consequences become harmful. Thus, before using secondary data, we should check whether the data are reliable or not. While testing the reliability, the following things should be take n into consideration. a) Who collected the data, what were the objectives of collecting data? b) Was the investigator experienced, capable, honest, and unbiased? c) Whether the appropriate techniques of collecting data were applied or not? d) What degree of accuracy was maintained in the data? e) Was there checking about the accuracy of data? f) In which time period and in what sort of conditions were the data collected? 2. Suitability. While using secondary data, we have to examine thoroughly, whether the data are suitable for our investigation or not. The suitability of the data can be tested by comparing the nature, objectives and scope of the present enquiry with those of the original enquiry. If the nature of the data is different, such data will not be suitable for the study and can't be valid result. 3. Adequacy. Though the availability of data is suitable, it may not be adequate for enquiry. Data must cover the study area. Otherwise, the findings can't be generalized. For example: if we want to investigate about the success rate of grade 11 students of the Jhapa, the data from only Damak can't be adequate. Instead, we should also collect the data from other places. # TECHNIQUES METHODS OF DATA COLLECTION. There are two types of techniques of data collection: 1. Census: A census is a technique of data collection where the information is collected from each and every unit of the population associated with the subject matter of enquiry. In Nepal, census occurs every ten years. In such census information about each and every individual of the country is collected. Not a single individual is left out in such a census. Merits: a) It gives complete information about the population. b) This method is more suitable for limited area. Demerits: a) It is more expensive, labour requiring and time consuming. b) This method is impossible if the population size is infinite. 2. Sampling method: In this method, only the part of population units is selected as a representative of the whole population. The selected part of the units is called sample and the method of selecting sample is called sample method. The number of items in the sample is known as sample size. For example: 15 people are drawn from a population of 250 Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com people of a village to know the drinking habits of those 15 people are the sample for the study. Merits: a) This method is less time consuming, less labour requiring and cheaper. b) In case of infinite population, it is the suitable method. Demerits: a) The sample units may not represent the population. b) Due to the biasness of the indicator, the result obtained may be misleading.

Part D # CONCEPT The collected data are initially in raw form and cannot be easily used in statistical analysis. These can be presented in tabular forms as discussed in the previous unit. Another way of presenting the data is by diagrammatic and graphic methods. These methods of data presentation are aids or pictorial presentations which can be easily understood even by a layman. # GENERAL RULES FOR CONSTRUCTING DIAGRAMS 1. Choice of a diagram: Selection of an appropriate diagram is the most difficult task. It primarily depends on the nature of data, magnitude of the observations and the type of people for whom the diagrams are prepared. It requires great amount of expertise, skill and intelligence. 2. Selection of scale: There is no precise and concrete rule to select the scale. It should be selected as per the nature of the data and available space in the paper. But is should be remembered that if the data have to be compared the scale should be the same for each data set. 3. Proportion between width and height: The proportion between the width and the height should be according to the available space and it should look attractive and neat. 4. Title and footnotes: Appropriate title which covers the whole phenomena presented in the diagram must be mentioned at the top of the diagram. The title should be brief, self explanatory, clear and non-ambiguous. The footnote may be given at the left hand bottom of the diagram to explain certain points or facts. 5. Source of data: Source of the data from which the diagram is constructed should be mentioned at the left hand bottom of the diagram. 6. Index or legend: A brief index explaining various types of shades, colors, lines and designs used in the construction of the diagram should be given for clear understanding of the diagram. 7. Neatness and simplicity: Neatness is preferred in each and every part of ht functions and it is also necessary to maintain neatness while constructing diagrams. The designs, shades, etc. used in the construction of the diagrams hold be simple. 8. Labels: It must be remembered that the variables measured along the axe should be mentioned clearly with the units of measurement given. # DIFFERENCES BETWEEN DIAGRAMS AND GRAPHS The following are the major distinctions between diagrams and graphs.  Diagrams are used only for comparison and give mostly qualitative analysis like Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com higher or lower whereas a graph is used mainly to present qualitative data.  Diagrams show the approximated result whereas graphic presentation is more precise and accurate and drawn only inn graph papers for accuracy.  Graphical presentation is done in two dimensions and they present mathematical relationships between variables, whereas diagrams might be uni-dimensional or multidimensional.  Diagrammatic presentation looks attractive and can be understood even by illiterate people, but graphic presentation of data is relatively complex and can be used to further mathematical treatment.  Construction of graphs is easier as compared to the construction of diagrams, because graphs take concrete forms but drawing diagrams is like an art.  The presentation of frequency distribution is not used in diagrams, but these can be easily presented in graphic presentation. # ADVANTAGES OF DIAGRAMS AND GRAPHS The following are the advantages of diagrams and graphs:  Diagram gives an alternative and elegant presentation: Diagrammatic presentations of the data directly attract people, give delight to the eye and add to the statistics.  Diagrams leave good visual impact: The visual impact of the diagram stresses the mind of the people to think about the situation of the statistics.  They facilitate comparison: It makes easy to compare the data by visualizing the fact in front of the observer.  Saves time: Diagrams present the set of data in such a way that their significance known without loss of much time.  Diagrams simplify complexity and depict the characteristics of the data in simple manner.  Graphs reveal trend of the data series which is helpful for simple forecasting. # BAR DIAGRAMS Bar diagrams are the presentations of data in the form of rectangular bars, either vertical or horizontal (but vertical shapes are commonly used). Each rectangular represents the data for individual data. The magnitudes of the data are measured by the heights or the lengths of the bars. Following terms should be remembered before drawing the bar diagrams.  All bars must be drawn on the same base line.  The width of the bars should be equal.  The gap between consecutive bars on the base line must be equal.  Appropriate scale should be chosen so as to include the highest value of the data series.  The magnitudes of the bar may be written at the top of each bar so that any on can know the magnitude without looking the scale.  Bars may be drawn vertically or horizontally but the general trend is that they are drawn vertically. # TYPES OF BAR DIAGRAM Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 1. Simple Bar Diagram Simple bar diagrams are used when there is only one characteristic of the data and there may be many bars as the number of observations of the same variable. For example, the data obtained on the number of successful students in a college in various years can be presented by simple diagrams. It consists of a set of equidistant rectangles of equal width which heights represent the value of the variable. Example: Represent the following data of number of students enrolled in a college in grade XI. Year 2000 2001 2002 2003

No. of students 25 40 35 46

Bar diagram of No. of students enrolled in a college in Grade

3 5

30

3 0

25

2

No. of students

5 2 0

1

15

5

10

1 0

5 0

2000

200

Year

200

2003

2. Sub-Divided or Component bar Diagram Simple bar diagram represents only one characteristics and it is unable to present the components of the variable. Sub-divided bar diagrams can be represent more components of the variable. In general sub-divided bar diagrams are to be used if the total magnitude of the given variable is to be divided into various parts. For example, total number of students in a college can be divided by faculty, sex, etc. Example: Represent the following data of the consumption and saving pattern of the families by sub-divided bar diagram. Family Family B A Consumption (Rs.) 250 360 Savings (Rs.) 50 30 Total income (Rs.) 300 390 Sanjaya chauwal

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Consumption and saving (Rs.)

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Sub-divided bar diagram of consumption and saving of Family A and Family

450 400

30

350 300

50

250 200

Saving (Rs.) Consumption (Rs.)

360

150 250

100 50 0

Family A

Family B

3. Multiple-bar Diagram A limitation of a simple of a sub-divided bar diagram is that they can represent a single variable or single characteristic of the variable. If two or more sets of inter-related phenomenon or variables are to be presented graphically, multiple bar diagrams are used. In general, if the total magnitude of the multiple variables are additive, sub-divided bar diagram is used and if they are not additive in nature but they are related to each other they can be represented by multiple bar diagrams. The technique of drawing such a chart is same as that of a single bar chart with the difference that each set of data is represented in different shades or colors on the same scale. An index explaining shades or colors must be given. Example: Represent the following data of agriculture production by multiple bar diagram. Year

Agriculture production (In tons) Paddy Wheat Maize 60 10 12 30 20 10 70 25 30

2001 2002 2003

Multiple bar diagram of Agriculture Production (in tons)

70 60

Production

70

60

Paddy (In tons) Wheat (In tons)

50 40

30

30 20 10

25

20 10

12

30

Maize (In tons)

10

0 2001

2002

2003

Year

4. Percentage Bar diagrams When data should be compared between group and the variable is composed of Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com various interrelated components, it is appropriate to present these values by percentage bar diagrams. In other words, when the relative proportions of components of a bar are more important than their absolute values, then each bar can be constructed with the same size to represent 100 percent. The component values are then expressed in terms of percentage of the total to obtain the necessary length for each of these in the full length of the bars. The other rules regarding the shades, index and weight are same as in multiple bar diagram. Example: Expenditure of a family of the year 2010 is given. Represent the data by percentage bar diagram. Items Cloths Food Education Health Miscellaneous

Expenditure (Rs.) 500 800 400 200 100

Solution: Data in percentage form Items Cloths

Expenditure (In percentage) 500  100 % = 25 2000

%

Food

800  100 % =40 2000

%

Education

400  100 % =20 2000

%

Health

200  100 % =10 2000

%

Miscellaneous

100  100 % =5 2000

%

Expenditure in percentage

Expenditure of a family of the year 2010 10 090 80 70 60 50 40 30 20

Miscellaneous

Health Education Food Cloth

1 0

2010

Year

# ANGULAR OR PIE-DIAGRAM Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Pie-diagram is an alternative representation of the data set which can be presented in sub-divided and percentage bars or rectangles. These diagrams are normally used to show the total number of observations of different types of data set inside a circle into various slices according to the magnitudes in terms of angle. Usually the largest portion of the data in a pie-diagram is shown first at 12 O'clock position on the circle, whereas other observations are shown in clockwise succession in descending order of magnitude. But they can be shown in a logical order as well. The following are the steps to construct a pie-diagram. 1. Find the sum total of all the observations. 2. Convert the data set into corresponding degrees in the circle by using the formula: Total of observations = 3600 (Since total angle formed by a circle = 3600) Va lue of the ob serva tion in terms of d eg ree =

3600  va lue of the ob serva tion Tota l of ob serva tions

3. It should noted that the sum of the angles converted should be equal to 3600 4. Draw a circle of appropriate size by the help of compass. 5. Draw a radius at any point on the circle. (Better at 12 O' clock position). 6. Take the radius drawn as the baseline and draw the successive angles one after another in the circle by the protractor. 7. Different shades or colors can be used to represent various sectors.    

Limitations of Pie-diagram It is difficult to calculate the angles with respect to the given data in comparison the bar diagram. It is difficult to construct the pie-diagram in comparison to bar diagram. If there are more than 6 characteristics, it is not preferable to construct a pie-diagram. In pie-diagram, negative values cannot be presented. Example: The HSEB affiliated schools in five development regions are given in the following table. Represent these data by a pie-diagram. Development region Eastern Central Western Mid-western Far-western Total

No. of schools 165 325 190 49 60 789

Solution: Calculation of angles for pie-diagram Development region

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No. of schools

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Angle (in degrees)

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For Updates : sanjayachauwal.wordpress.com Eastern Central Western Mid-western Far-western Total

165 325 190 49 60 789

(360/789  165 = 75.8 (360/789)  325 = 148.28 (360/789)  190 = 86.70 (360/789)  49 = 22.36 (360/789)  60 = 27.38 360

HSEB Affiliated Schools in five Development Regions

Eastern Central Western Mid-western Far-western

# Graphical Presentation We have already discussed about the distinction between graphs and diagrams. Graphs are drawn on graph papers in which values of the variables are measured along the x-axis and the y-axis. It is better to take the independent variable along the x-axis and the dependent variable along the y-axis. Appropriate scale can be chosen for each of the axes and it is not necessary to be the same along both axes. Use of False Base Line If the first beginning value of any variable along the x-axis or the y-axis starts from a value which is much higher than 0, we can use false baseline or zigzag lines between them. It avoids the wastage of graph paper and even small fluctuations will be clearly visible. 300 250

False Base Line

200 50 0

10 100 110 120

CLASSIFICATION OF GRAPHS Graphs can be classified into two classes such as: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com 1. Graphs of time-series data 2. Graphs of frequency distribution 1. Graphs of Time-Series Data or Historigrams There are many variables like income, GDP, GNP money supply, inflation, production, export, import and so on, which change over time periods. The types of data series dependent on time are called time-series data. A graph of time-series shows the changes in the values of a variable with the changes in the time. In order to construct the time-series graph, the values of the variable are measured along the x-axis and the time periods are measured along the y-axis. Example: Prepare a historigram from the following time-series data of growth rate of development expenditure in Nepal. Fiscal year 1997/98 1998/99 1999/2000 2000/01 2001/0 2 % growth 12.5 14.5 11.2 24 14

30

Growth rate of Development Expenditure in Nepal (1997/98-2001/02)

Growth (%)

25 20 15 10 5 0 1997/98

1998/99

1999/00

2000/01

2001/02

Years

2. Graphs of Frequency Distribution If the variables with the corresponding frequencies are given in continuous frequency distribution, then these data can be presented in graphs. The most common graphs used to describe frequency distribution are:  Histogram  Frequency Polygon  Frequency curve  Ogive or cumulative frequency curve.  Histogram Histogram is the graphical presentation of the continuous frequency distribution drawn by the help of rectangular vertical bars whose heights represent the frequencies of the classes. The width of the bar remains same if the class interval is equal and the width may vary in case of unequal class intervals. In histograms, the class intervals are measured along the x-axis and frequencies along the y-axis. While constructing a histogram, the following considerations should be made.  For a histogram, the frequency distribution should be continuous and exclusive. Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com  Mid-points given: If only the mid-points are given, the distribution must be converted into a continuous one in the exclusive series.  Discrete frequency distribution: Histogram can be used to present discrete frequency distribution by converting the discrete values into continuous series.  Open-end classes: In case of open end classes, histogram cannot be constructed. But if a histogram is to be drawn, the class interval is assumed to be the same at the end class interval as in other classes.  Histogram with unequal classes: Incase of unequal class of frequency distribution, the class interval must be equal before constructing the histogram. Example:

Histogram of Monthly income of Workers

(No. of workers)

60 50

28 35 45 50 30 27 24

No. of workers

Monthly income (Rs.) 100 - 200 200 - 300 300 - 400 400 - 500 500 - 600 600 - 700 700 - 800

40 30 20 10 0 100 200 300 400 500 600 700 800

Monthly Income (Rs.)

 Frequency Polygon Frequency polygon is another device of graphic presentation of a frequency distribution. It is applicable in both discrete and continuous frequency distributions. In case of discrete frequency distribution, frequency polygon is drawn by noting the frequency along the y-axis and the value of the variable along the x-axis. By joining the points on the graphs, we get frequency polygon. In case of continuous frequency distributions, frequency polygon can be drawn in two ways: a) Frequency polygon and histogram: Frequency polygon is drawn by joining the mid-points of the tops (upper horizontal sides) of the variable along the x-axis. By joining the points on the graph, we get frequency polygon. In case of continuous frequency distributions, frequency polygon can be drawn in two ways: Example: Age (Years) 0 - 10 No. of movie viewers 2

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10 - 20 10

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20 - 30 12

30 - 40 8

40 - 50 5

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50 - 60 7

87

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14

Histogram and Frequency Polygon of Movie Viewers

12

No. of students

10 8 6 4 2 0 - 10

20

10

30

40

50

60

70

Age (years)

b) Frequency polygon without histogram: Frequency polygon can be drawn without drawing a histogram. For this, the mid-values of the class intervals should be calculated. The mid-values are measured along the x-axis and the corresponding frequencies along the y-axis. By plotting and joining the points, frequency polygon is obtained. The end of the frequency polygon should be joined with zero frequencies, one at the beginning of the given classes and the other at the end of the classes. It should be remembered that the area covered by histogram should be equal to the area of the frequency polygon. 14

Example:

Frequency Polygon of Movie Viewers

12

Frequency polygon

No. of students

10 8 6 4 2

- 10

0

10

20

30

40

50

60

70

Age (Years)

Age (Years)

Mid-value

0 - 10 10 - 20 20 - 30 30 - 40 40 - 50 50 - 60

5 15 25 35 45 55

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For Updates : sanjayachauwal.wordpress.com  Frequency Curve If we join the vertices of the frequency polygon by freehand, then the curve so drawn is called frequency curve. It is a smooth and regular curve without any sharp turns. The area under the frequency curve, frequency polygon and histogram should be equal. It should be carefully drawn. Example: Marks No. students

of

510 2

10 15 5

15 20 4

20 25 8

25 30 3

9 8

Frequency polygon

No. of students

7 6 Frequency curve

5 4 3 2 1 0

–5

5

10

15

20

25

30

35

Marks

 Ogive or cumulative frequency curve. There are two types of cumulative frequency curves. a) "Less than" cumulative frequency curve: these curves are drawn by using the "less than" values of the variable and their corresponding frequencies in "less than" cumulative distribution of data. Example: Draw the "less than" frequency curve of the following data: Price of shares 50 - 100 - 150 - 200 - 250 - 300 (Rs.) 100 150 200 250 300 350 No. of shares 15 20 22 21 10 5

-

Solution: Converting the data into "less than" frequency Price of share (Rs.) Less than 100 Less than 150 Less than 200 Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Less than 250 Less than 300 Less than 350

78 88 93

100 90

No. of shares

80

Less than cumulative frequency

70 60 50 40 30 20 10 0 100

50

150 200 Price of share

250

300

350

b) "More than" cumulative frequency curve: These curves are drawn by using the more than values of the variables and their corresponding frequencies in "more than" cumulative distribution of data. Example: "More than" frequency of the above share data is Price of share (Rs.)

Cumulative frequency 93 78 58 36 15 5

More than 50 More than 100 More than 150 More than 200 More than 250 More than 300 100 90

More than cumulative frequency

No. of shares

80 70 60 50 40 30 20 10 0 50

100

150

200

250

300

350

Price of share

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# DETERMINATION OF MEDIAN BY THE HELP OF OGIVE CURVES If we join the joint of intersection of "more than" and "less than" ogive curves in a graph, the point corresponding on the x-axis gives the value of the median (Median is discussed in detail under "Measure of Central Tendency"). Example: The median of the above data can be calculated as: Price of share (Rs.)

No. of shares

50 - 100

15

100 - 150

20

150 - 200

22

200 - 250

21

250 - 300

10

300 - 350

5

Less than frequency Class Frequenc y Less than 15 100 Less than 35 150 Less than 57 200 Less than 78 250 Less than 88 300 Less than 93 350

More than frequency Class Frequenc y More than 50 93 More than 100 More than 150 More than 200 More than 250 More than 300

78 58 36 15 5

100 90

No. of shares

80 70 60 50 40

Median

30 20 10 0 50

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100

150 200 Price of share

250

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300

350

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# MEASURES OF CENTRAL TENDENCY # Measures of central tendency refer to the process of finding the central value of the given statistical data around which other tends to concentrate. The central values are called average. # OBJECTIVES OF MEASURES OF CENTRAL TENDENCY  To find a single representative value of the entire data  To facilitate comparison  To know about the population from the sample  To help in decision making  To establish relationship among variables  To help for further statistical analysis (like to find standard deviation, correlation, regression etc.) # ARITHMETIC MEAN (A.M.) # The arithmetic mean, or simply the mean, of a set of n numbers X1, X2, X3 .......Xn is denoted by X (read "X" bar) defined as: X=

X1 +X 2 +X 3 +........+Xn  X = n n

The symbol '  ' (read as summation) denotes the sum and n is the total number of observations. CALCULATION OF ARITHMETIC MEAN The methods of calculating an A.M. differ from the nature of data series, such as individual, discrete and continuous series. Each series has again three methods of calculating A.M. direct, short-cut, and step-deviation method. 1. INDIVIDUAL SERIES a) Direct method A.M.(X) 

X n

Where, x = Mean x = Sum total of all observations, and n = Total number of observations Example: Find the A.M. of the expenditures (in Rs.) made by 6 house holds as: 5,000; 9,000; 7,500; 8,500; 10,000; 9,500 Solution: We know that, A.M.(X) 

X n

Here,  x = 5000 + 9000 + 7500 + 8500 + 10000 + 9500 = 49500 Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com n=6  X=

49500 6

= 8250

 Mean expenditure of the households = Rs.8,250. b) Short-cut method or assumed mean method: The formula to calculate A.M. for individual series from and assumed mean method is: A.M.(X)  A 

d n

Where, A = Assumed mean n = Number of observations d = (X – A) = Deviation of the values of the variable from the assumed mean. It is useful when the size of the values is very large and by taking deviations from the assumed mean, these values are converted into smaller values. The assumed mean may be any reasonable value of the variable lying in the range of the given data set. Example: Find the mean export of vegetable oil (in tons) in Nepal from 1995-2000. Year Soluti on:

Vegetable oil (In tons)

199 5 200 0

1996

1997

1998

1999

2000

2200

2600

2700

3000

4000

Vegetable oil (in tons) d = (X–A) 2000 2000 – 2700 = – 700 2200 2200 – 2700 = – 500 2600 2600 – 2700 = – 100 2700 (=A) 2700 – 2700 = 0 3000 3000 – 2700 = 4000 300 4000 – 2700 = 1300 n=6 d= 300 We know that, A.M.(X)  A 

d n

Here, A = 2700  d = 300 n=6  X = 2700 +

3000 6

= 2700 + 50 = 2750

 Mean export of vegetable oil = 2750 tons. Sanjaya chauwal

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c) Step-deviation method: The formula to calculate A.M. from this method is A.M.(X)  A 

 d' h n

Where, x = Arithmetic mean A = Assumed mean d' =

X A d = h h

h = common factor of all observations It is useful when the data in observations possess large values and they have some common factor to each observation. Example: Find the mean export of vegetable oil (in tons) in Nepal from 1995-2000. Year 1995 1996 1997 1998 1999 2000 Vegetable oil (In tons) 2000 2200 2600 2700 3000 4000 Solution: Vegetable oil (in tons)

d = (X–A)

2000 2200 2600 2700 (=A) 3000 4000

2000 – 2700 = – 700 2200 – 2700 = – 500 2600 – 2700 = – 100 2700 – 2700 = 0 3000 – 2700 = 300 4000 – 2700 = 1300 n=6

d XA or = d' h h –7 –5 –1 0 3 13

d'= 3

We know that, X  A

 d' h n

Here, A = 2700 d'= 3 h (common factor) = 100 n=6  X = 2700 + 

3 ×100 = 6

2750

Mean export of vegetable oil = 2750 tons.

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For Updates : sanjayachauwal.wordpress.com 2. DISCRETE SERIES In such series, the discrete observations are associated with their frequencies. Let f1, f2 …, fx be the frequency associated with the variate values X1, X2 …, Xn, respectively. Then, the A.M. can be calculated as: A.X.(X) =

f1 X1  f2 X2  fn Xn fX fX   f1  f2  ...fn f N

Where, N = f = Total no. of observations f = frequency X = variable value a) Direct method: Use the formula directly X=

fX N

Example: Find the salary of the employees in a factory of the following data. Salary (in Rs.) (X) 2000 2500 3000 3500 4000 5000 6000 Solution: By using direct method: Salary 'X' (in Rs.) 2,000 2,500 3,000 3,500 4,000 5,000 6,000

No. of employees (f) 5 7 9 11 5 2 1

No. of employees (f) 5 7 9 11 5 2 1 N = 40

f.X 2000 × 5 = 10000 2500 × 7 = 17500 3000 × 9 = 27000 3500 × 11 = 38500 4000 × 5 = 20000 5000 × 2 = 10000 6000 × 1 = 6000 fX = 129000

We know that, X=

fX 129000 = = 3225 N 40

 Mean salary of employees in the factory = Rs.3225.

b) Short-cut method or Assumed mean method: The formula to calculate A.M by Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com this method is A.M.(X)  A 

 fd N

Where, X = Arithmetic mean A = Assumed mean f = Frequency d = Deviation of the observation from the assumed mean = X–A N = No. of observations

Example: The above example of mean salary of employees in the factory can be calculated using short-cut method or assumed mean method as: Solution: Salary 'X' (in Rs.) 2,000 2,500 3,000 3,500 (=A) 4,000 5,000 6,000

No. of employees (f) 5 7 9 11 5 2 1

d = X–A (A=3,500)

f.d.

2,000 – 3,500 = –1500 2,500 – 3,500 = –1000 3,000 – 3,500 = – 500 3,500 – 3,500 = 0 4,000 – 3,500 = 500 5,000 – 3,500 = 1500 6,000 – 3,500 = 2500

5 × –1500 = –7500 7 × –1000 = –7000 9 × –500 = –4500 11 × 0 = 0 5 × 500 = 2500 2 × 1500 = 3000 1 × 2500 = 2500  fd = –11000

 d = 1500

N = 40 We know that

 fd N 11000 = 3500 – = 3500 – 275 = 3,225 40 XA

 Mean salary of employees in the factory = Rs.3225.

c) Step-deviation method: It is useful when the data are large and there is a common factor to each observation. The formula to calculate A.M. is X A

 fd' h N

Where, X = Arithmetic mean, A = Assumed mean,

d' =

f = Frequency N = No. of observations

X A d = h h

Example: The above example of mean salary by step-deviation method can be calculated as: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Salary 'X' (in Rs.) 2,000 2,500 3,000 3,500 (=A) 4,000 5,000 6,000

No. of employees (f)

d = X–A

5 7 9 11 5 2 1

–1500 –1000 –500 0 500 1500 2500

d' = (X–A)/h

fd'

–3 –2 –1 0 1 3 5

–15 –14 –9 0 5 6 5

 fd ' = – 22

N = 40

We know that, XA

 fd ' h N

Here, common factor (h) = 500 X = 3500 – 3500 

22  500 = 3500  275 = 3225 40

 Mean salary of employees in the factory = Rs.3225.

2. CONTINUOUS SERIES In a continuous series, the data are in class interval form associated with corresponding frequencies. To calculate the A.M. of the considered as the variate value. Then the A.M is calculated as in the case of discrete series. A.M.(X) 

 fX N

Where, X = Arithmetic mean

f = Frequency X = Mid-value N = Total no. of observations Example: Find the mean marks in economics from the following data Marks No. of students 0 - 20 1 20 - 40 5 40 - 60 10 60 - 80 6 80 - 100 3 It can be calculated from the following three methods: a) Direct method: The mean can be obtained by direct method as following: Marks Mid-marks No. of students f.X Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com (X) 0 - 20 20 - 40 40 - 60 60 - 80 80 100

(f) 10 30 50 70 90

1 5 10 6 3

10 × 1 = 10 30 × 5 = 150 50 × 10 = 500 70 × 6 = 420 90 × 3 = 270 fX = 1350

N = 25 We know that, X

 fX 1350 = = 54 N 25

 Mean marks in economics = 54.

b) Short-cut method: In this method any central value among the mid-values is assumed as the assumed mean and deviation of each variate is taken from that assumed value as following: The above example can be solved by short-cut method as: Marks Mid-marks (X) No. of students (f) d = X–A f.d. 0 - 20 10 1 10 – 50 = –40 1 × –40 = –40 20 - 40 30 5 30 – 50 = –20 5 × –20 = –100 40 - 60 50 10 50 – 50 = 0 10 × 0 = 0 60 - 80 (=A) 6 70 – 50 = 20 6 × 20 = 120 80 - 100 70 3 90 – 50 = 40 3 × 40 = 120 90 N = 25 fd = 100  XA

 fd 100 = 50 + = 50 + 4 = 54. N 25

 Mean marks in economics = 54.

c) Step-deviation method: If there is a common factor among the deviated values in assumed mean method, step deviation method is used as: X

 fd' h N

Where, X = Arithmetic mean A = Assumed mean f = Frequency d' =

X A d = h h

N = Total no. of observations Example: The above example can be solved by this method as: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Marks

Mid-marks (X)

0 - 20 20 - 40 40 - 60 60 - 80 80 100

No. of students (f)

10 30

d= X–A

1 5 10 6 3

50 (=A) 70 90

–40 –20 0 20 40

d' =

XA = h

d h –40  20 = –2 –20  20 = –1 0  20 = 0 20  20 =1 40  20 = 2

N = 25 We know that, X 

f.d.

1 × –40 = –40 5 × –20 = –100 10 × 0 = 0 6 × 20 = 120 3 × 40 = 120 fd' = 100

 fd ' h N

Here, h = 20 X = 50 +

5  20 25

= 50 + 4 = 54

 Mean marks in economics = 54.

# WEIGHTED ARITHMETIC MEAN Sometimes we associate the values X1, X2 …, Xn with certain weighting factors (or weights) W1, W2 …, Wn depending on the significance or importance attached to the numbers. In this case, X

W1 X1  W2 X2  Wn Xn WX  W1  W2  ...  Wn W

It is called the weighted arithmetic mean. It is like calculating arithmetic mean for discrete series. Example: If a final examination is evaluated in the weighted average of 1:2:3 to the class-test, term examination and send-up examination respectively. Find the mean marks obtained by a student getting 60, 70, and 65 marks in respective examination. Solution: Exam Marks Weight W.X (X) (W) Class-test 60 1 60 Term exam 70 2 140 Send-up 65 3 195 W = 6 WX = 395 We know that, Weighted A.M. = X =

WX 395 = = 65.8 W 6

 Mean marks obtained by the student = 65.8

# HARMONIC MEAN (H.M.) # Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Harmonic mean is defined as the reciprocal of the arithmetic mean of the reciprocals of the given non-zero observations. Harmonic mean is a more suitable average when we have to calculate the average rates ratios where time factor is the variable when an act is being performed. For example, if the distance covered within a certain time is given as X, we use harmonic mean if we have to calculate the average speed. 1. H.M. FOR INDIVIDUAL SERIES Let, X1, X2 …, Xn be the set of n non-zero observations, then their harmonic mean is defined by the following formula. n n  1  1  ... 1 1  x1 x 2 xn x

H.M. 

1  H.M.



1 x

n

Where, n = number of observations. Example: A cyclist pedals from his house to his college at a speed of 10 Km/hr. and back from the college to his house at 15 km/hr. Find the average speed. Solution: Here, First observations (X1) = 10 km/h Second observations (X2) = 15 km/h Number of observations (n) = 2 The appropriate average is H.M. and n H.M. = 1  x

=

2 1 1 + 10 15

=

2 3+2 30

=

60 = 12 5

 Average speed = 12 km/hr.

2. H.M. FOR DISCRETE SERIES The formula to calculate H.M. is H.M. 

N f 1x

Where, N = f = total number of observations f = frequency X = value of the observations Example: Sanjaya chauwal

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Find the H.M from the following data. X 200 220 225 250 275 Solution: Computation of H.M.

f 2 3 4 3 1

X

f

1/x

f 1x

200 220 225 250 275

2 3 4 3 1 N = 13

0.0050 0.0045 0.0044 0.0040 0.0036

0.0100 0.0136 0.0178 0.0120 0.0036

 H.M. =

f 1x 0.0570

=

N 13 = = 228.07 1 0.0570 f x

3. H.M. FOR CONTINUOUS SERIES It is similar to the calculation of H.M. from discrete series in which X is the mid-value of the class. The formula is: H.M. =

N f 1x

Where, N = f = total number of observations f = frequency X = value of the observations Example: Find the H.M of the following data: Marks 5 – 15 15 - 25 25 - 35 35 - 45 45 - 55

No. of students 2 6 10 5 2

Solution: Marks Sanjaya chauwal

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1/x

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For Updates : sanjayachauwal.wordpress.com (X) 10 20 30 40 50

5 – 15 15 - 25 25 - 35 35 - 45 45 - 55

students 2 6 10 5 2

0.1000 0.0500 0.0333 0.0250 0.0200

0.2000 0.3000 0.3330 0.1250 0.0400 f

1 x

=

0.998  H.M. =

N 25 = = 25.050 f 1x 0.998

 Mean marks = 25.050

# GEOMETRIC MEAN (G.M.) # The geometric mean (G.M.) of a set of n observations is the nth root of their product. If X1, X2…,Xn are the n observations, the their G.M. is G.M.  n X1, X 2 , X 3 ...X n

By using logarithms, it can be calculated as: Log of both sides, 1

log G.M. = log(X1, X2…Xn) n log G.M. =

1 1 [lo g X1  lo g X2  ...  lo g Xn ]  [  lo g X] n n

Taking antilog of both sides, 1  G.M.  Antilog   log X  n  

Application: The application of G.M. is made mainly in the construction of index numbers, in averaging ratio, percentage, or rates of increase. In case of computing the average of growth rate of population or the rate of population or the rate of profit etc. G.M. is the most appropriate measure. 1. G.M. FOR INDIVIDUAL SERIES 1  G.M.  Antilog   log X  n 

Where, X = Value of the observation N = total number of observations Example: Find the average annual inflation rate in Nepal form 1997/98 to 2001/02 of the following data. Year 1997/ 1998/9 1999/0 2000/0 2001/0 98 9 0 1 2 Inflation rate 7.76 11.3 3.5 3.2 2.9 Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com % Solution: Inflation rate % 7.76 11.30 3.50 3.20 2.90 1 n

Price Index (X) 107.76 111.30 103.50 103.20 102.90 N=5

log X 2.0325 2.0465 2.0149 2.0137 2.0124  log X =10.1200



 G.M.  Antilo g   lo g X 

= Antilo g  (10.1200) 1 5



= Antilog (2.0240) = 105.68  Average inflation during the period = 105.68% – 100% = 5.68%

Note: Price index is calculated in percentage by assuming the base value as 100 of the previous period and adding this rate to 100 in each case. 2. G.M. FOR DISCRETE SERIES If X1, X2…Xn are the values of the variables and their corresponding frequencies are f1, f2…,fn respectively. The G.M. is calculated as: 1  G.M.  Antilog  flog X  n  number of observations = f

Where, N = Total f = Frequency X = Variable value Example:

Find the G.M. of the following distribution: X: f:

2 2

3 4

4 6

5 2

6 3

7 2

8 1

Solution: X 2 3 4 5 6 7 8 Sanjaya chauwal

F 2 4 6 2 3 2 1

log X log 2 = 0.3010 log 3 = 0.4771 log 4 = 0.6021 log 5 = 0.6990 log 6 = 0.7782 log 7 = 0.8451 log 8 = 0.9031 Credit :Rupen

f log X 2 × 0.3010 = 0.6021 4 × 0.4771 = 1.9085 6 × 0.6021 = 3.6124 2 × 0.6990 = 1.3979 3 × 0.7782 = 2.3345 2 × 0.8451 = 1.6902 1 × 0.9031 = 0.9031

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For Updates : sanjayachauwal.wordpress.com flog X = 12.4487 1 n



 G.M.  Antilo g  f lo g X 

= Antilo g 

1  (12.4487)  20 

= Antilog (0.6224) = 4.1921  G.M. = 4.1921

2. G.M. FOR CONTINUOUS SERIES The formula to calculate G.M. for such series is the same as indiscrete series, but X is obtained by calculating the mid-values of the class-intervals. 1  G.M.  Antilog  flog X  n 

Where, N = f = Total number of observations f = Frequency X = Mid-value of the class Example: Find the geometric mean from the following distribution. Marks No. of students 10 – 20 2 20 – 30 5 30 – 40 8 40 – 50 10 50 – 60 3 60 – 70 2 Solution: Marks 10 – 20 20 – 30 30 – 40 40 – 50 50 – 60 60 – 70

Mid marks (X) 15 25 35 45 55 65 1 n

No. of students (f) 2 5 8 10 3 2 n = 30

log x 1.1761 1.3979 1.5441 1.6532 1.704 1.8129

f log x 2.3522 6.9895 12.3525 16.5321 5.2211 3.6258 flog X = 47.0732



 G.M.  Antilo g  f lo g X 

= Antilo g  (47.0732)  30  = Antilog (1.5691) 1

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For Updates : sanjayachauwal.wordpress.com = 37.02772  Mean marks = 37.022. # MEDIAN # The median of a set of numbers arranged in order of magnitude is either the middle value in case of odd number of observations or the magnitude of the arithmetic mean of the two middle values in case of even number of observations. It is also known as positional average and lies centrally among the statistical data. Median divides the whole observations into two equal parts. The calculation procedures of median are mentioned below: 1. Median In Case Of Individual Series To find the median of individual observations, we have to arrange the given observations in ascending or descending order. Then, median (Md) is defined as: th

 n  1 M d  Size of the   item.  2 

Where, n = Number of observations. The calculation of median depends on whether the number of observations is odd or even, which are discussed below: Case 1: If the number of observations is odd, then the median value becomes the value of the most middle observation. If 20, 30, 40, 50 and 60 are the marks secured by the students then 40, the middle-most positional value, is the median. By using the above formula, we also get the same value as: th

 n  1 M d  Size o f the   ite m  2  th

5  1 rd  ite m = Size of the 3 item = 40.  2 

= Size o f the 

Case 2: If the number of observations is even, then the median value is the arithmetic mean of the two middle values. If 20, 30, 40, 50, 60 and 70 are the marks obtained by 6 students, then two marks 40 and 50 lie in the middle position, where we cannot take a single mark as the middle – most value out of these two marks. In this case, Median = Arithmetic Mean of 40 and 50 =

40  50 =45 marks. 2

By using the above formula, it can be calculated as: th

 n  1 M d  Size o f the   ite m  2  th

6  1 = Size o f the   ite m  2 

= Size of 3.5th item  3rd item  4th item  = Size of the   2  

Sanjaya chauwal

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th

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=

40  50 = 45. 2

2. Median for Discrete Series The formula to calculate median for discrete series is: th

 n  1 M d  va lue of the   item.  2 

Example: Find the median age from the following data. Age (years) 20 15 25 30 35 45 50

Population 5 2 7 40 6 3 1

Solution: Computation of median of the given data Age (Years) 15 20 25 30 35 40 45 50 Here, N = 30

Population 2 5 7 4 6 2 3 1

c.f. 2 7 14 18 24 26 29 30

th

30  1  n  1 = 15.5  ite m = 2 2  

 M d  va lue o f the 

The just greater than 15.5 in c.f. is 18. Thus, the age corresponding to c.f. 18 is the median age, i.e. 30 years,  Median = 30 years. 3. Median for Continuous Series. The formula to calculate median for continuous series is: th

N   2  c.f.  M d  L   h f    

Where, L = lower limit of the median class = 30. N/2 = 8.5 Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com c.f. = cumulative frequency of the class preceding the median class = 6 f = frequency of the median class = 5 h = width of the class or class interval = 45 – 30 = 15  M d  30 

8.5 - 6 2.5  15  15  30   30  7.5  37.5 5 5

 Median age = 37.5 years.

# PARTITION VALUES: QUARTILES, DECILES AND PERCENTILES # The median value of a data set separates the data into two equal parts. Likewise, other partition values can be used to divide the data set into desired number of partitions out of which quartiles, deciles and percentiles are in general use. They are discussed below: 1. Quartiles The values of observations in a data set, when arranged in an ordered sequence, can be divided into four equal parts or quarters. The values concerning with these quarters are known as quartile and represented by Q1, Q2, and Q3. These values can be determined as follows: a) Lower Quartile (Q1): The first quartile value is known as lower quartile which divides a distribution such a way that the lowest 25 percent (i.e. N/4) of observations have a value less than Q1 and 75% (3N/4) have a value more than Q1. b) Mid-Quartile or median (Q2): It separates the observations in a data, when arranged in ordered sequence into two equal parts. It is the median value. c) Upper Quartile (Q3): Q3 separates the observations in a data set, when arranged in ordered sequence in such a way that 75% of the observations have a value less than Q3 and 25 percent have the value more than Q3. 2. Deciles Deciles are also partition values which separate the observations of a data set into 10 equal parts. There are nine deciles values represented by D1, D2, D3…D9. Types of series: (individual series, discrete series and continuous series) 3. Percentile Percentiles separate the observations of a data set into 100 equal parts. There are 99 percentile values represented by P1, P2….P99. Types of series: (individual series, discrete series, continuous series) FORMULAS Note: Formula to calculate Quartiles, Deciles, and Percentiles in case of individual series and discrete series are same. QUARTILES (Q) [Q1, Q2, Q3]

Sanjaya chauwal

DECILES (D) [D1, D2, D3…D9]

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PERCENTILES (P) [P1, P2, P3…P99]

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For Updates : sanjayachauwal.wordpress.com Individual Series/Discrete Series

Individual Series/Discrete Series

th

 N  1 D1    ite m  10 

th

 N  1 D2    item  5 

 N  1 Q1    ite m  4   N  1 Q2    ite m  2  th

Individual Series/Discrete Series

th

 N  1 P1    ite m  100 

th

th

 N  1 P50    item  2 

th

th

th

 N  1 Q3  3  ite m  4 

 N  1 D9  9   item  10 

 N  1 P99  99   item  100 

Continuous Series

Continuous Series

Continuous Series

N - c .f. Q1 = L+ 4 ×h f N - c.f. Q2  L  2  h f 3N - c.f. Q3  L  4  h f

N - c.f. 10 D1  L   h f 3N - c.f. 10 D3  L   h f 9N - c.f. D9  L  10  h f

N - c.f. 100 P1  L   h f N - c.f. P50  L  2  h f 99N - c.f. P99  L  100  h f

# Example of individual series: Find a) Q3, b) D7 and c) P65 from the following data: Marks: 5, 7, 9, 12, 17, 25, 32, 37, 39, 40, 45, 54, 60, 61, 65, 70, 72 Solution: Here, No. of observations (n) = 17 a) Finding Q3 We know that th

 N  1 Q3  3  ite m  4   3(17+1)  =   4  

th

ite m

= 13.5th item = value of 14th item = 61. b) Finding the seventh decile (D7) We know that th

 N  1 D7  7   item .  10 

  17  1     10  

= 7 

th

item .

= 12.6th item. = 13th item = 60. c) Finding 65th Percentile (P65) We know that Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com th

 N  1 P65  65   item  100  th

 17  1  65   ite m  100 

= 11.7th item = 12th item = 54 # Example of discrete series: Find Q1, D6 and P75 from the following data. Marks No. students

10 of 1

15 3

20 7

25 13

30 17

35 12

40 8

45 7

50 6

55 2

Solution: Marks (X) 10 15 20 25 30 35 40 45 50 55

No. of students (f) 1 3 7 13 17 12 8 7 6 2

Cumulative frequency 1 4 11 24 41 53 61 68 74 76

f  N  76

a) Finding Q1 We know that, th

 N  1 Q1    ite m  4  th

(76  1)    item  4   19.25th item  25 ( Just g re a te r tha n 19.25 in c .f. is 24 a nd its c o rre sp o nd ing m a rks = 25)

b) Finding D6 We know that, th

 N  1 D6  6   item  10  th

 76  1  6  ite m  10 

Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com  46.2th ite m  35 ( Just g re a te r tha n 46.2 in c .f. is 53 a nd its c o rre sp o nd ing m a rks = 35)

c) Finding P65 We know that, th

 N  1 P75  75   item  100  th

 76  1  75   ite m  100   57.75th ite m  40 ( Just g re a te r tha n 57.75 in c .f. is 61 a nd its c o rre sp o nd ing m a rks = 40)

# Example of continuous series: Find Q3, D8 and P43 from the following data series. Age (in years) 20 - 25 No. of 7 workers

25 - 30 13

30 - 35 20

35 - 40 12

40 - 45 10

45 - 50 8

Solution: Age (in years) 20 - 25 25 - 30 30 - 35 35 - 40 40 - 45 45 - 50

No. of workers (f) 7 13 20 12 10 8 N = 70

Cumulative frequency (c.f.) 7 20 40 52 62 70

a) Finding Q3: Here, 3N 3  70 = = 52.5 4 4

Just greater than 52.5 is 62 in c.f. The corresponding class is 40 - 45. We know that, 3N - c.f. Q3  L  4  h f

Where, L = 40 3N/4 = 52.5 c.f. = 52 f = 10 h=5  Q 3  40 

52.5  52  5  40  0.25  40.25 ye a rs . 10

b) Finding D8: Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com Here, 8N 8  70 =  56 . 10 10

Just greater than 56 in c.f. is 62. The corresponding decile class is 40 - 45.  The required decile class is 40 - 45. We know that, 8N - c.f. 65  52  D8  L  10  h  40   5  40  2  42 ye a rs . f 10

c) Finding P43: Here, 43N 43  70   30.1 100 100

Just greater than 30.1 in c.f. is 40. Thus, the corresponding class 30 - 35 is the required percentile class. We know that, 43N - c.f. 30.1 20 100  P43  L   h  30   5  30  2.525  32.525 ye a rs f 20

# MODE # The mode is that value of the variable that occurs most frequently in the data set. That is, the variable value with the highest frequency is called the mode. The concept of mode is of great use in large scale manufactures of consumable items such as readymade garments, shoe-makers and so on. In all such cases, it is important to know the size that fits most persons rather than the 'mean' size. 1. Individual series: The item or data which is most frequently repeated is the mode in case of individual series. For example, Size of shoes: 35, 36, 34, 39, 38, 38, 36, 35, 38. The modal size of the shoes = 38, because it occurs most frequently (three times) in the series. 2. Discrete series: The item in the observation of data with highest frequency is known as mode. Find the mode of the following data. Size of trousers No. of customers (inches) (f) 30 5 32 7 34 9 36 15 38 13 40 5 42 1 In the above table, 15 is the maximum frequency among all. The variable Sanjaya chauwal

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For Updates : sanjayachauwal.wordpress.com corresponding to this frequency is 36. Thus, 36 inches is the mode. 3. Continuous series: In case of continuous series, the mode also occurs in the class associated with the highest frequency. Thus, the class with highest frequency is called the modal class. The actual value of the mode is calculated as following: Mode  L 

f1  f0 i 2f1  f0  f2

Where, L = lower limit of modal class. f1 = frequency of modal class. f0 = frequency before the modal class. f2 = frequency after the modal class. i = class interval. Example: Marks No. of students

0 - 10 4

10 - 20 12

20 - 30 15

30 - 40 20

40 - 50 32

50 - 60 14

Solution: Marks 0 - 10 10 - 20 20 - 30 30 - 40 40 - 50 50 - 60

No. of students 4 12 15 20 32 14

Highest frequency = 32, and its corresponding modal class is 40 – 50. Here, L = 40, f2 =14 f1 = 32, i = 10 Mo d e  L 

f0 = 20

f1  f0 i 2f1  f0  f2

 40 

32  20  10  44 64  20  14

 Mode = 44

# Calculation of Mode by the Method of Grouping Method of grouping is applicable under the following situations:  If the maximum frequency is repeated or approximately equal concentration is found in two or more neighboring values.  If the maximum frequency occurs either in the very beginning or at the end of the distribution.  If the frequencies in a data series are in a haphazard way, that is sometimes in increasing and sometimes in decreasing directions.

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For Updates : sanjayachauwal.wordpress.com # Procedure of Preparing a Grouping Table  Make a new table with seven columns and required number of rows.  Write the given observations in the first column with variable heading.  Write the captions of the table, I, II, III, IV, V, and VI.  Write the frequency is Ist column.  In column II, add the frequencies of column I in a group of two from the beginning and write the results.  In column III, add the frequencies in column I in a group of two leaving the first one and write the results.  In column IV, add the frequencies in column I in a group of three from the beginning and write the results.  In column V, add the frequencies in Column I in a group of three leaving the first frequencies and write the results.  In column VI, add the frequencies in I in a group of three leaving the first two frequencies and write the results.  Make another which is called the analysis table.  Present the results of first table by observing the highest values in columns I, II…, VI and their corresponding values.  Add the frequencies related with values and the frequency with the higher value gives the modal class. Example: Age (years) 15 16 17 18 19 20 21 22 23

No. of girls 4 2 5 8 7 4 7 1 2

Solution: The frequencies in the data are in haphazard way and also the maximum frequency is 8, which is near to its neighbor 7. (Here, the mode is ill - defined)

Analysis Table Column No. 15 I II III IV V VI Total

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16

17 II

I 2

Age (Table) 18 19 20 I I I I I I I I I I I 5 4 2

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22

23

I 1

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For Updates : sanjayachauwal.wordpress.com  Modal age = 18 years

# Note: If there is a repetition in the value of the maximum frequency in the method of grouping, the empirical relationship among mean, median and mode can be used to calculate the mode as: Mode = 3 Median – 2 Mean To use this formula, median, and arithmetic mean should be calculated. # Merits of Mode  It is easy to understand and simple to calculate.  Mode of the observations of the extreme observations can also be calculated by grouping method.  It can be calculated even in the case of open-end classes.  It can be located by inspection and by graphical method. # Demerits of Mode  It is not rigidly defined.  It is not based on all observations.  It is not suitable for further mathematical treatment. # Relationship between Mean, Median and Mode 1. When the observations of the data are symmetrically distributed the mean, median and mode become equal.

M = Md = Mo

2. In case of a skewed distribution, if M < Md < Mo, then the distribution is left skewed or negatively skewed.

M

Md

3. In case of skewed distribution, if M > Md > Mo, the distribution is right skewed or positively skewed.

Mo

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Md

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For Updates : sanjayachauwal.wordpress.com Where, M = Mean Md = Median Mo = Mode In case of moderately skewed distribution, Karl Pearson has found the empirical relationship among Mean, Median and Mode as: Mode = 3 Median – 2 Mean.

Part F Dispersion # RANGE The range is defined as difference between the largest and the smallest observed values in a data set. In other words, it measures the length or interval of the variation of the data set from smallest to the largest values. It is calculated as: Range for Individual and discrete series Range (R) = Value of the largest observation – Value of the smallest observation =H–L The range remains independent from the frequency (f) of the observations. Co-efficient of range =

HL H L

Range for Continuous distribution In case of continuous distribution, the range is the difference between the upper limit of the highest class lower limit of the lowest class. Range (R) = Highest limit of higher class – lower limit of lower class. =H–L Co-efficient of range =

HL H L

Note: Range is also called absolute range and co-efficient of range is also called relative range Absolute range = Range. Relative range = Co-efficient of range. Example: 1. Find the range and it's co-efficient from the following data. Days Sun Mon Potato (Kg) 10 25 Solution: Highest sale = 50 kgs Lowest sale = 10 kgs  Range = H – L = 50 – 10 = 40 kgs  Co-efficient of range =

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Tue 20

Wed 50

Thu 30

Fri 25

Sat 45

HL 40 = = 0.667. H  L 50  10 Credit :Rupen

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For Updates : sanjayachauwal.wordpress.com 2. Find the range and the coefficient of range from the following data. X f

10 2

20 8

30 9

40 2

50 3

60 1

Solution: Here, Highest value (H) = 60 Lowest value (L) = 10  Range (R) = H – L = 60 – 10 = 50 HL 50 = = 0.7142.  Co-efficient of range = H  L 60  10

3. Find the absolute and the relative range of the following marks. Marks No. of students

5 – 15 15 – 25 25 – 35 35 – 45 45 – 55 2 3 7 8 2

Solution: Here, Upper limit of the highest class (H) = 55 Lower limit of the lowest class (L) = 5  Absolute range = H – L = 55 – 5 = 50 HL 50  Relative range = = = 0.8334 H  L 55  5

Merits of Range  It is independent of the measure of central tendency.  It is easy to calculate and understand.  It is rigidly defined.  It is quite useful in cases where the purpose is only to find out the extent of extreme variation. Demerits of Range  It is not based on all observations.  Its value is sensitive to changes in sampling.  It cannot be computed in case of open end frequency distributions.  It is not suitable for further mathematical treatment. # MEAN DEVIATION (M.D.) The range and quartile deviations discussed earlier do not show how the observed values in a data set are scattered about a central value. The mean deviation, a measure of dispersion, is able to show the variation of the data from its central value like arithmetic mean, median and mode. The deviations are calculated by taking the difference between the value of the observations and its central measure (i.e. mean, median or mode). There is no significance of negative sign in deviation; thus we always take the sun of the absolute values of the deviations taken from mean or median or mode in mean deviation. Formulas

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For Updates : sanjayachauwal.wordpress.com 1. Individual Series. (Absolute measures)  M.D. from mean =

 xx

 M.D. from median =  M.D. from mode =

n  x  Md

n  x  Mo n

2. Discrete and continuous series. (Absolute measures)  M.D. from mean =

f x  x

 M.D. from median =  M.D. from mode =

n f x  M d

n f x  M o n

3. Co-efficient of Mean Deviation (Relative measures) M.D. fro m Me a n Me a n M.D. fro m Me d ia n median = Me a n M.D. fro m Mo d e mode = Me a n

 Co-efficient of M.D. from mean =  Co-efficient of M.D. from  Co-efficient of M.D. from

Example: Find the mean deviation about the mean, median and mode. Also find their relative measures. Age No. of employees Solution: Age (X)

25 2

No. of employees c.f (f) .

25 30 35 40 45 50 55

 A.M.(X) 

2 3 7 11 8 4 3 N = 38

2 5 12 23 31 35 38

30 3

35 7

40 11

45 8

50 4

fx

XX

X  Md

X  Mo

50 150 245 440 360 200 165 155 0

15.8 10.8 5.8 0.8 4.2 9.2 14.2

15 12 5 0 5 10 15

15 10 5 0 5 10 15

55 3 f X  X f X  Md

31.6 32.4 40.6 8.8 33.6 36.8 42.6 226.4

30 30 35 0 40 40 45 220

f x  Mo

30 30 35 0 40 40 45 220

fx 1550   40.8 N 38

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For Updates : sanjayachauwal.wordpress.com th

 N  1 Me d ia n (M d )  va lue o f the   ite m.  2  th

 38  1  va lue o f the   ite m.  2 

 va lue of the 19.5  item. th

 40  Just g rea ter tha n 19.5 in c.f. is 23  M o d e (M o )  va lue o f the m a xim um fre q ue nc y.  40 (  Ma xim um fre q ue nc y = 11)  M.D. from the mean =

f x  x N

M.D. from the median = M.D. from the mode =



226.4  5.96 38

f x  M d

N f x  M o N





220  5.8 38

220  5.8 38

Relative Measures are: M.D. fro m Me a n 5.96 = = 0.1461 Me a n 40.8 M.D. fro m Me d ia n 5.8 median = = = 0.145 Me a n 40 M.D. fro m Mo d e 5.8 mode = = = 0.145 Me a n 40

 Co-efficient of M.D. from mean =  Co-efficient of M.D. from  Co-efficient of M.D. from

Merits of M.D.  It is rigidly defined.  It is easy to compute and understand.  It is based on all the observations. Demerits of M.D.  The algebraic signs are ignored while calculating the M.D. Thus, how far is it lying above or below the central value cannot be observed.  In a skewed distribution, the M.D. about the mode is not a satisfactory measure.  It cannot be computed in an open-end class. # QUARTILE DEVIATION OR SEMI-INTER QUARTILE RANGE The inter quartile range is a measure of dispersion on spread of observed values in the data set between the third quartile, (Q3) and the first quartile, (Q1). Inter quartile range of data covers the range for the middle 50 % of the data as shown in figure below: Inter

25% of Q1

Value

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25% of

50% of Values

values Smallest

Quartile

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Q2

values Q3

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 Inte rq ua rtile ra ng e (IQ R) = Q 3  Q 1

Half of the distance between Q3 and Q1 is called the semi-inter quartile range of the quartile deviation (QD). QD =

Q 3  Q1 2

It is the absolute measure of quartile deviation. The relative measure of quartile deviation is Coefficient of QD =

Q 3  Q1 Q 3  Q1

Example: Calculate the quartile deviation and coefficient of quartile deviation of the following income distribution. Income (Rs.) 5000-1 0000 No. of households

10000-1 5000

15000-2 0000

20000-2 5000

25000-3 0000

30000-3 5000

35000-4 0000

Solution: Income 5000 – 10000 10000 – 15000 15000 – 20000 20000 – 25000 25000 – 30000 30000 – 35000 35000 – 40000

Here,

No. of households (f) c.f. 7 7 9 16 13 12 8 6 3 N = 58

29 41 49 55 58

N 58 3N 3  58   14.5 ,   43.5 4 4 4 4

The lower quartile class is 10000 -15000 and upper quartile class is 25000 - 30000 N  c.f.  Lower q ua rtile (Q1) =1+ 4 h f 14.5  7 = 10000   5000  11150.8 9 3N  c.f.  Up p er q ua rtile (Q 3 ) =1+ 4 h f

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For Updates : sanjayachauwal.wordpress.com = 25000 

43.5  41  5000  26562.5 8

Q 3  Q 1 26562.5  11150.8   7705.85 2 2 Q  Q 1 7705.85  Co e ffic ie nt o f q ua rtile d e via tio n  3   0.2043 Q 3  Q 1 3771373  Q ua rtile d e via tio n 

Merits of QD  It is easy to calculate.  Its value is not affected by the extreme values on the data set.  It can be calculated in open-end classes.  Since, it is a positional measure of variation; it is useful in case of distributions where other measures of variation get affected by extreme values in the data set. Demerits of QD  The value of QD only includes middle 50% observations and it is not based on all  The value of QD is very much affected by sampling fluctuations.  It is not suitable for further mathematical treatments. # STANDARD DEVIATION In the mean deviation method of calculating the dispersion we take only the absolute values of the deviations taken from various averages. One way to ignore the negative sign is to convert these deviations into squared form, which eliminates the signs of the deviated values. The dispersion measured by this method is called variance. It is denoted by σ 2 (read as 'sigma square'). The positive square root of the variance is called the standard deviation (S.D.), denoted by σ and calculated as: For individual series:

Variance  σ 2 Coefficient of S.D. =

σ

2

x 2  x  σ   n  n  series: For continuous

x

Coefficient of Variance =

σ x

 100 %

σ

fx 2  fx    N  N 

2

Where, f = frequency m = mid-value n = no. of observation N = f = total no. of observation Variance and Standard Deviation about an Assumed Mean Method The value of the variance and standard deviation about an assumed mean is the same as the value calculated from the actual mean. It saves time to calculate mean. The formula to calculate is: For individual series:

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Va ria nc e  σ 2 ,

σ

d 2  d    n  n 

Where, n = no. of observations

2

d = X – A A = Assumed mean

For discrete and continuous series: Va ria nc e  σ 2 ,

fd 2  fd    N  N 

σ

Where, N = f = Total no. of

2

observations d = X – A

A = Assumed mean Merits of Standard Deviation  It is rigidly defined.  It is based on all the observations.  It removes the drawbacks of ignoring minus signs.  It facilitates comparison.

Demerits of Standard Deviation  It is relatively difficult to calculate and understand.  It gives greater weight to extreme values. Example: The wholesale prices of a commodity for conceptive days in a month are as follows: Days: 1 2 3 4 5 Commodity Price 240 360 270 245 255 Calculate the variance and standard deviation. Solution: Required table to calculate the variance and standard deviation is: Price (X) 240 260 270 245 255 286 264

X2 57600 67600 72900 60025 65025 81796 69696

X = 1820

X 2 = 474642

 Standard deviation = σ =

=

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206

206



2

7 264

2

474642  1820    7  7 

=

 Variance = σ 2 =

x 2  x    n  n 

6 286

2

= 14.35

= 206 Credit :Rupen

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For Updates : sanjayachauwal.wordpress.com Calculation from the assumed mean method: X 240 260 270 245 255

d=X–A –15 5 15 –10 0

d2 225 25 225 100 0

31 9 d = 35

961 81 2 d = 1617

(= A) 286 264

Here, assumed mean = 255, n = 7  Standard deviation = σ =

d 2  d    n  n 

2

1617  35  =   7  7  =

 Variance = σ 2 =



206



2

2

206  14.35

= 206

Example: Find the standard deviation of the heights of 100 male students at Tribhuwan University given as below: Height (inches) Frequency (f)

60 63 5

– 63 66 18

– 66 69 42

– 69 72 27

– 72 75 8



Solution: Calculation table of S.D. Height (inches) 60 – 63

Mid-Height (X) 61.5

Frequency (f) 5

fX

X2

f X2

307.5

18911.25

63 – 66

64.5

18

1161

66 – 69

67.5

42

2835

69 – 72

70.5

27

1903.5

72 – 75

73.5

8

588

3782.2 5 4160.2 5 4556.2 5 4970.2 5 5402.2 5

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74884.5 191362.5 134196.75 43218

122

For Updates : sanjayachauwal.wordpress.com N = 100

fx

=

6795  Sta n d a rd d e via tio n (σ) =

fX2  fX    N  N 

fx 2

=

462573

2

2

=

462573  6795    100  100 

=

3411 = 2.92 inches. 400

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