BASAVESHWARA ENGINEERING COLLEGE,

BAGALKOT

DEPARTMENT OF MANAGEMENT STUDIES

Report on :Class report

Submitted to: Dr. Rajeshwari Tapashetti

Submitted by : kaveri kiragatagi

 Inflation and Deflation:
Inflation:

• Inflation is the rate at which the price for goods and

services increases inflation often affects the buying
capacity of consumers.
• Most central banks try to limit inflation in order to
keep their respective economic functioning efficiently.
• When money circulation exceeds the production of
good and services, then inflation takes place in the
economy.
 Types of Inflation:

1. Demand pull inflation

2. Cost push inflation

 Demand pull inflation:

This inflation occurs when household,

government, business, and foreign industries
collectively try to purchase more output than the
economy is capable of producing.

In effect, the demand side of the aggregate market is

“pulling” the price level higher.
 Cost Push inflation:

cost pull inflation is inflation attributable to

decreases in supply, primarily due to increases in
production cost
 Features of Inflation:

• It is continuous process.

• It refers to rise in prices in general.

• It involves a considerable increase in prices.

• It causes a decline in the purchasing power of money.

 Effects of inflation

Benefits:
• Debtors
• Entrepreneurs
• Investors
• Farmers
• Upper income groups

Loses of Inflation :
• Creditors
• Fixed income group
• Consumers
• Middle and lower income groups
 Measure to control the inflation:

• Fiscal measure

• Monetary measure

• General measure
 Deflation:

Deflation is that state in which the value

of goods and services falls A sustained decrease in
average price level is called deflation

• Increase income by reducing taxes

• Generate employment
• Adopt policies which enhance production Next
 Reasons of Deflation:
• Govt. withdraws money from circulation

• Govt. imposes heavy direct taxes or takes heavy loans from

the public

• Central bank sells the securities in open market

• Central bank controls the credit money and adopts various

measures such as increase in CRR, credit rationing and direct

action

• The central bank increases the bank rate

 Monopolistic markets

• Monopoly market:
mono means single, poly means seller and
hence monopoly is a market structure where only one
sells the goods and many buyers the same.
 Monopolistic Competition:

There are six characteristics of monopolistic

competition (MC):

• Product differentiation
• Many firms
• Freedom of Entry and Exit
• Independent decision making
• Some degree of market power
• Buyers and sellers do not have perfect information
(Imperfect Information)
 Advantages of monopolies

1. Economies of scale : In an industry with high fixed

costs, a single firm can gain lower long-run average
costs – through exploiting economies of scale
2. Innovation: Without patents and monopoly power,
drug companies would be unwilling to invest so much
in drug research
3. Firms with monopoly power may be the most
efficient and dynamic: Firms may gain monopoly
power by being better than their rivals. For example,
Google has monopoly power on search engines.
 Disadvantages of monopolies:

• 1. Higher prices than in competitive markets

• 2. A decline in consumer surplus
• 3. Monopolies have fewer incentives to be efficient
• 4. Possible diseconomies of scale
• 5. Monopolies often have monopsony power
THANK YOU