IGNOU SOLVED QUESTION PAPERS - ECO 01 (JUNE' 2014)

1. It facilitates trade by assembling and distributing goods. Goods are produced at one place and consumed at another place.
2. Transport brings the goods from the place of production to all the far and distant places of consumption.
3. It helps the consumers in getting a wide variety of goods at reasonable prices.
4. Transport widens the market and helps to equalize prices at different places. It results in the equitable distribution of goods among far flung areas.
5. Transport helps to increase the size and scale of business.
6. Well-developed facilities of transport help industrial units to locate at the most economical places and grow to their optimum size.

1. Agreement: A partnership is formed by an agreement. The agreement may be either oral or in writing. It defines the relationship between the persons, who agree to carry on business. It may contain the terms of sharing profit and the capital to be invested by each partner, etc. The written agreement is known as partnership deed.
2. Number of persons: There must be at least two persons to form a partnership. The maximum number of partners in a partnership firm can be ten in case of banking business and twenty in case of non-banking business.
3. Business: The Partnership is formed to carry on business with a purpose of earning profits. The business should be lawful, thus, if two or more persons agree to carry on unlawful activities, it will not be termed as partnership.
4. Sharing Profits: The partners agree to share profits in the agreed ratio. In case of loss, all the partners have to bear it in the same agreed profit sharing ratio.
5. Mutual Agency: Every partner is an agent of the other partners. Every partner can bind the firm and all other partners by his/her acts. Each partner will be responsible and liable for the acts of all other partners.
6. Unlimited liability: The liability of each partner, except that of a minor, is unlimited. Their liability extends to their personal assets also. If the assets of the firm are insufficient to pay off its debts, the partners’ personal property can be used to satisfy the claim of the creditors of the partnership firm.
7. Management: All the partners have a right to manage the business. However, they may authorize one or more partners to manage the affairs of the business on their behalf.
8. Transferability of share: No partner can transfer his/her share to anyone including his/her family member without the consent of all other partners.

1. Encourages capital formation: A common investor is attracted to capital market. Today investor prefers to divert his surplus and savings in the securities like shares, debentures, mutual funds etc. As a result new capital formation is speeded up.
2. Resource Mobilsation: Due to continuous buying and selling of the securities the resources of the economy flow from one company to other company giving comparatively higher returns. This helps mobilisation of resources.
3. Flexibility in investments: The stock exchanges provide liquidity to the investment made in the securities. As there are multiple options, investors can flexibly go on switching their investment where it is more beneficial?
4. Value addition to the securities: Listing of shares on a stock exchange adds to the prestige and reputation to companies. With the advantage of listed shares it can raise loans from corporate sector.
5. Protects investor’s interest: All the transactions in the stock exchanges are effected and controlled by the Securities Control (Regulation) Act 1956. The stock exchanges protect the interests of the investors through the strict enforcement of their rules and regulations. The malpractices of the brokers are punishable with heavy fine, suspension of their membership and even imprisonment.

1. Motivation to Management: A stock exchange allows the trading of listed securities only. Listing procedure requires to comply with certain guidelines for protecting the interests of investors and obviously are under strict supervision of stock exchange. If companies do not comply with the rules and regulations of the exchange, the shares of a company can be delisted. To avoid such unfavorable and undesirable consequences every company manages its affairs more cautiously and effectively.
2. Best utilization of capital: The stock exchange regulates and controls the flow of investment from unproductive to productive, uneconomic to economic, unprofitable to profitable enterprises. Thus, savings of the people are channelized into industry yielding good returns and underutilization of, capital is avoided. As the stock exchange provides an account of price variations of the securities listed on it (upward or downward fluctuations) it would be an opportunity for the investors to switch their investments. This would, keep companies performing in the best possible way. 
3. Help in repaid economic development: The stock exchanges help in the process of rapid economic development by speeding up the process of capital formation and resource mobilization. It helps in raising the medium and long term capital for the development and expansion of the companies. New industries and commercial enterprises easily get capital funds through a stock exchange.    

1. Advertisements attracts new buyers and maintains existing customers and to the society in general.
2. Advertisements inform the consumers about the quality and uses of the product.
3. Advertising also acts as an information service and educates the consumer. It enables him to know exactly what he wants and where to get it. 
4. Advertising stimulates production and reduces the cost per unit. This reduction in the cost is generally passed on to the consumer.
5. Advertising also makes it possible to sell direct to the consumer by Mail Order Business. 
6. Advertising helps in creating goodwill, brand image and brand loyalty.
7. Advertisements help the retailers in selling the advertised products.
8. It is also helpful in getting better employees and executives.

1. Creates Monopoly in the Market: Advertisement leads to promotion and cover mass level of customers at a time. Sometimes it will create a monopoly in the market with the help of advertisement. Large firms can bear the advertisement expenditure but not the small firms, due to that it can eliminate the small firms from the market and creates its monopoly authority in the market. But the monopoly is only for a temporary basis as there is availability of competition in the market.
2. Higher the Prices of Product: Investment of money in advertisement leads to increase in the price of goods and services for which consumer has to face high prices and pay for it.
3. Misleading the consumers: Now days, advertisement misleads the consumers on false representation regarding their goods. Consumer attracts to those goods which are not necessary for them. Producers misguide the consumers by giving bogus testimonials and false representation regarding particular commodity.
4. Wasteful Consumption by the Consumers: Advertisement attracts the consumers for wasteful products which are not necessary for consumers. Due to advertisement businessmen takes undue advantage from them.
5. Wastage of National Resources: There will be wastage of national resources, valuable stationary, time and energy used by the people or is ignored by them.

1. Relationship as debtor and creditor.
2. Banker as a trustee.
3. Banker as an agent.

1. Obligation to honour cheques- banker accepts the deposits from the customer with an obligation to repay it to him on demand or otherwise. The banker is therefore under a statutory obligation to honour his customer’s cheques.
2. Obligation to maintain secrecy and disclosure of information required by law- the banker is under an obligation to take utmost care in keeping secrecy about the accounts of the customers since it may affect his reputation, credit-worthiness and business. The duty to maintain secrecy will be continuing even after the account is closed or the death of the customer. This obligation is subject to certain exceptions.
3. Obligation to keep a proper record of transactions- the banker must keep a proper record of transactions of the customer. If he wrongly credits the account of the customer and intimates him with the same and the customer acts upon the intimation bonafide and withdraws cash the banker cannot contend that the entries were wrongly made. He shall not succeed in recovery of money from the customer.
4. Obligation to abide by the instructions of the customer- the banker must abide by any express instructions of the customer provided it is within the scope of their banker-customer relationship. In the absence of any express instructions, the banker must according to prevailing usages at the place where the banker conducts his business.