Richest Person of The World

Bill Gates

Net Worth: $79.2 B   

Source of wealth: Microsoft     

William Henry "Bill" Gates III (born October 28, 1955) is an American business magnate, philanthropist, investor, computer programmer, and inventor. In 1975, Gates co-founded Microsoft, the world’s largest PC software company, with Paul Allen. During his career at Microsoft, Gates held the positions of chairman, CEO and chief software architect, and was the largest individual shareholder until May 2014. Gates has authored and co-authored several books.

Starting in 1987, Gates was included in the Forbes list of the world's wealthiest people and was the wealthiest overall from 1995 to 2014—excluding a few years after the Financial crisis of 2007–08. Between 2009 and 2014 his wealth more than doubled from $40 billion to more than $82 billion.^[11] Between 2013 and 2014 his wealth increased by $15 billion. Gates is currently the richest man in the world.
Gates is one of the best-known entrepreneurs of the personal computer revolution. Gates has been criticized for his business tactics, which have been considered anti-competitive, an opinion which has in some cases been upheld by numerous court rulings.^[14][15] Later in his career Gates pursued a number of philanthropic endeavors, donating large amounts of money to various charitable organizations and scientific research programs through the Bill & Melinda Gates Foundation, established in 2000.

Gates stepped down as Chief Executive Officer of Microsoft in January 2000. He remained as Chairman and created the position of Chief Software Architect for himself. In June 2006, Gates announced that he would be transitioning from full-time work at Microsoft to part-time work, and full-time work at the Bill & Melinda Gates Foundation. He gradually transferred his duties to Ray Ozzie, chief software architect and Craig Mundie, chief research and strategy officer. Ozzie later left the company. Gates's last full-time day at Microsoft was June 27, 2008. He stepped down as Chairman of Microsoft in February 2014, taking on a new post as technology advisor to support newly appointed CEO Satya Nadella.

sales tax

A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow (or require) the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a governing body directly by a consumer, it is usually called a use tax. Often laws provide for the exemption of certain goods or services from sales and use tax.

Types

Cash register receipt showing sales tax of 8.5%

Conventional or retail sales tax are levied on the sale of a good to its final end user, and is charged every time that item is sold retail. Sales to businesses who later resell the goods are not charged the tax. A purchaser who is not an end user is usually issued a "resale certificate" by the taxing authority and required to provide the certificate (or its ID number) to a seller at the point of purchase, along with a statement that the item is for resale. The tax is otherwise charged on each item sold to purchasers who do not provide such a certificate and who are under the jurisdiction of the taxing authority.

Other types of sales taxes, or similar taxes, include:

• Manufacturers' sales tax: a tax on sales of tangible personal property by manufacturers and producers
• Wholesale sales tax: a tax on sales of wholesale of tangible personal property when in a form packaged and labeled ready for shipment or delivery to final users and consumers.
• Retail sales tax: a tax on sales of retail of tangible personal property to final consumers and industrial users
• Gross receipts taxes, levied on all sales of a business. This tax has been criticized for its "cascading" or "pyramiding" effect, in which an item is taxed more than once as it makes its way from production to final retail sale.
• Excise taxes, applied to a narrow range of products, such as gasoline or alcohol, usually imposed on the producer or wholesaler rather than the retail seller.
• Use tax, imposed directly on the consumer of goods purchased without sales tax, generally items purchased from a vendor who is not under the jurisdiction of the taxing authority (e.g., a vendor in another state). Use taxes are commonly imposed by states with a sales tax, but are usually only enforced for large items such as automobiles and boats.
• Securities turnover excise tax, a tax on the trade of securities.
• Value added taxes, in which tax is charged on all sales, thus avoiding the need for a system of resale certificates. Tax cascading is avoided by applying the tax only to the difference ("value added") between the price paid by the first purchaser and the price paid by each subsequent purchaser of the same item.
• FairTax, a proposed federal sales tax, intended to replace the U.S. federal income tax.
• Turnover tax, similar to a sales tax, but applied to intermediate and possibly capital goods as an indirect tax.

Most countries in the world have sales taxes or value-added taxes at all or several of the national, state, county or city government levels. Countries in Western Europe, especially in Scandinavia have some of the world's highest valued-added taxes. Norway, Denmark and Sweden have higher VATs at 25%, Hungary has the highest at 27%, although reduced rates are used in some cases, as for groceries, art, books and newspapers.

In some jurisdictions of the United States, there are multiple levels of government which each impose a sales tax. For example, sales tax in Chicago (Cook County), IL is 10.25%—consisting of 6.25% state, 1.25% city, 1.75% county and 1% regional transportation authority. Chicago also has the Metropolitan Pier and Exposition Authority tax on food and beverage of 1% (which means eating out is taxed at 11.25%).

For Baton Rouge, Louisiana, the tax is 9%, consisting of 4% state and 5% local rate.

In California, sales taxes are made up of various state, county and city taxes. The state tax is "imposed upon all retailers" for the "privilege of selling tangible personal property at retail." Strictly speaking, only the retailer is responsible for the payment of the tax; when a retailer adds this tax to the purchase price, the consumer is merely reimbursing the retailer by contractual agreement. When consumers purchase goods from out-of-state (in which case the seller owes no tax to California) the consumer is required to pay a "use tax" which is identical to the sales tax. Use tax is levied upon the "storage, use, or other consumption in this state of tangible personal property."  Consumers are responsible for declaring these purchases in the same filing as their annual state income tax, but it is rare for them to do so. An exception is out of state purchase of automobiles, in which case use tax is collected by the state as part of registering the vehicle in California.

The trend has been for conventional sales taxes to be replaced by more broadly based value added taxes. Value added taxes provide an estimated 20 percent of worldwide tax revenue and have been adopted by more than 140 countries. The United States is now one of the few countries to retain conventional sales taxes.

Cost accounting

What is cost accounting?

Cost accounting involves the techniques for:

1. determining the costs of products, processes, projects, etc. in order to report the correct amounts on the financial statements, and
2. assisting management in making decisions and in the planning and control of an organization.

For example, cost accounting is used to compute the unit cost of a manufacturer's products in order to report the cost of inventory on its balance sheet and the cost of goods sold on its income statement. This is achieved with techniques such as the allocation of manufacturing overhead costs and through the use of process costing, operations costing, and job-order costing systems.

Cost accounting assists management by providing analysis of cost behavior, cost-volume-profit relationships, operational and capital budgeting, standard costing, variance analyses for costs and revenues, transfer pricing, activity-based costing, and more.

Cost accounting had its roots in manufacturing businesses, but today it extends to service businesses. For example, a bank will use cost accounting to determine the cost of processing a customer's check and/or a deposit. This in turn may provide management with guidance in the pricing of these services.

What Is Inflation?

Inflation:

Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. 

The value of a dollar does not stay constant when there is inflation. The value of a dollar is observed in terms of purchasing power, which is the real, tangible goods that money can buy. When inflation goes up, there is a decline in the purchasing power of money. For example, if the inflation rate is 2% annually, then theoretically a $1 pack of gum will cost $1.02 in a year. After inflation, your dollar can't buy the same goods it could beforehand. 

There are several variations on inflation:

• Deflation;

•  is when the general level of prices is falling. This is the opposite of inflation.

• Hyperinflation;

•  is unusually rapid inflation. In extreme cases, this can lead to the breakdown of a nation's monetary system. One of the most notable examples of hyperinflation occurred in Germany in 1923, when prices rose 2,500% in one month!

• Stagflation;

•  is the combination of high unemployment and economic stagnation with inflation. This happened in industrialized countries during the 1970s, when a bad economy was combined with OPEC raising oil prices.

Causes of Inflation;

Economists wake up in the morning hoping for a chance to debate the causes of inflation. There is no one cause that's universally agreed upon, but at least two theories are generally accepted: 

Demand-Pull Inflation - This theory can be summarized as "too much money chasing too few goods". In other words, if demand is growing faster than supply, prices will increase. This usually occurs in growing economies.

Cost-Push Inflation - When companies' costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports.

Costs of Inflation 
Almost everyone thinks inflation is evil, but it isn't necessarily so. Inflation affects different people in different ways. It also depends on whether inflation is anticipated or unanticipated. If the inflation rate corresponds to what the majority of people are expecting (anticipated inflation), then we can compensate and the cost isn't high. For example, banks can vary their interest rates and workers can negotiate contracts that include automatic wage hikes as the price level goes up. 

Problems arise when there is unanticipated inflation: 

• Creditors lose and debtors gain if the lender does not anticipate inflation correctly. For those who borrow, this is similar to getting an interest-free loan.
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• Uncertainty about what will happen next makes corporations and consumers less likely to spend. This hurts economic output in the long run.
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• People living off a fixed-income, such as retirees, see a decline in their purchasing power and, consequently, their standard of living.
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• The entire economy must absorb repricing costs ("menu costs") as price lists, labels, menus and more have to be updated.
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• If the inflation rate is greater than that of other countries, domestic products become less competitive.

International monetary fund [IMF]

About the IMF

The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

Created in 1945, the IMF is governed by and accountable to the 188 countries that make up its near-global membership.

Why the IMF was created and how it works

The IMF, also known as the Fund, was conceived at a UN conference in Bretton Woods, New Hampshire, United States, in July 1944. The 44 countries at that conference sought to build a framework for economic cooperation to avoid a repetition of the competitive devaluations that had contributed to the Great Depression of the 1930s.

The IMF's responsibilities: The IMF's primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. The Fund's mandate was updated in 2012 to include all macroeconomic and financial sector issues that bear on global stability.

History

The IMF has played a part in shaping the global economy since the end of World War II.

Cooperation and reconstruction (1944–71)

As the Second World War ends, the job of rebuilding national economies begins. The IMF is charged with overseeing the international monetary system to ensure exchange rate stability and encouraging members to eliminate exchange restrictions that hinder trade.
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The end of the Bretton Woods System (1972–81)

After the system of fixed exchange rates collapses in 1971, countries are free to choose their exchange arrangement. Oil shocks occur in 1973–74 and 1979, and the IMF steps in to help countries deal with the consequences.

Debt and painful reforms (1982–89)

The oil shocks lead to an international debt crisis, and the IMF assists in coordinating the global response.

Societal Change for Eastern Europe and Asian Upheaval (1990–2004)

The IMF plays a central role in helping the countries of the former Soviet bloc transition from central planning to market-driven economies.

Globalization and the Crisis (2005 - present)

The implications of the continued rise of capital flows for economic policy and the stability of the international financial system are still not entirely clear. The current credit crisis and the food and oil price shock are clear signs that new challenges for the IMF are waiting just around the corner.

Demand Forecasting

Meaning:

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Forecasts are becoming the lifetime of business in a world, where the tidal waves of change are sweeping the most established of structures, inherited by human society. Commerce just happens to the one of the first casualties. Survival in this age of economic predators, requires the tact, talent and technique of predicting the future.

Forecast is becoming the sign of survival and the language of business. All requirements of the business sector need the technique of accurate and practical reading into the future. Forecasts are, therefore, very essential requirement for the survival of business. Man­agement requires forecasting information when making a wide range of decisions.

The sales forecast is particularly important as it is the foundation upon which all company plans are built in terms of markets and revenue. Management would be a simple matter if business was not in a continual state of change, the pace of which has quickened in recent years.

It is becoming increasingly important and necessary for business to predict their future prospects in terms of sales, cost and profits. The value of future sales is crucial as it affects costs profits, so the prediction of future sales is the logical starting point of all business planning.

A forecast is a prediction or estimation of future situation. It is an objective assessment of future course of action. Since future is uncertain, no forecast can be percent correct. Forecasts can be both physical as well as financial in nature. The more realistic the forecasts, the more effective decisions can be taken for tomorrow.

In the words of Cundiff and Still, “Demand forecasting is an estimate of sales during a specified future period which is tied to a proposed marketing plan and which assumes a particular set of uncon­trollable and competitive forces”. Therefore, demand forecasting is a projection of firm’s expected level of sales based on a chosen marketing plan and environment.

Business Economics

Business Economics

Business Economics is perhaps a new subject which has emerged in 1951, with the publication of 'Managerial Economics' by Joel Dean to bridge the gap between the theory and practice of economics. It consists of two words 'Business' and 'Economics'.

• According Joel Dean, ''The purpose of  business economics is to show how economic analysis can be used in formulating business policies.''      

DEFINITION OF 'BUSINESS ECONOMICS'

The study of the financial issues and challenges faced by corporations. Business economics is a field in economics that deals with issues such as business organization, management, expansion and strategy. Studies might include how and why corporations expand, the impact of entrepreneurs, the interactions between corporations and the role of governments in regulation.

1. Business economics is a field in applied economics which uses economic theory and quantitative methods to analyze business enterprises and the factors contributing to the diversity of organizational structures and the relationships of firms with labour , capital and product markets.

HAPPINESS INDEX

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Production Function

Production Function: Law of Variable Proportions and Law of Returns to Scale:

Introduction:

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In traditional production theory resources used for the production of a product are known as factors of production. Factors of production are now termed as inputs which may mean the use of the services of land, labour, capital and organization in the process of production. The term output refers to the commodity produced by the various inputs.

Production theory concerns itself with the problems of combining various inputs, given the state of technology, in order to produce a stipulated output. The technological relationships between inputs and outputs are known as production functions. 

Production:

Production in economic, terms is generally understood as the transformation of inputs into out­puts. The inputs are what the firm buys, namely productive resources, and outputs are what it sells. Production is not the creation of matter but it is the creation of value. Production is also defined as producing goods which satisfy some human want. Production is a sequence of technical processes requiring either directly or indirectly the mental and physical skill of craftsman and consists of changing the shape, size and properties of materials and ultimately converting them into more useful articles.

Methods of Production:

There are three methods of production:

a) Unit production

b) Mass production

c) Batch production

The unit production is otherwise known as job-order production. This type of production is used for things which cannot be produced on large scale, things of high artistic nature, i.e. production of exclusive goods. This is a method to meet the individual requirements of customers. This type of production requires lot of flexibility in operation.

Mass production uses mechanical aids for material handling. This type of production requires specially planned layout, special purpose machines, jigs and fixtures, automatic machines, etc. Mass production is continuous production, i.e. it does not have any non-producing time.

Batch production is generally adopted in medium size enterprises. It is a stage in-between unit production and mass production. It is bigger in scale than unit production while it is smaller than mass production. In this type of production, variety of products is manufactured in lots at regular interval. Therefore, this is known as batch production. The theory of production centres round the concept of production function which we explain now.

The Production Function:

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The production function expresses a functional relationship between quantities of inputs and outputs. It shows how and to what extent output changes with variations in inputs during a specified period of time. In the words of Stigler, “The production function is the name given to the relationship between rates of input of productive services and the rate of output of product.

It is the economist’s summary of technical knowledge.” Basically, the production function is a technological or engineering concept which can be expressed in the form of a table, graph and equation showing the amount of output obtained from various combinations of inputs used in production, given the state of technology. Algebraically, it may be expressed in the form of an equation as

Q =f (L, M, N, К, T)…………. (1)

where Q stands for the output of a good per unit of time, L for labour, M for management (or organisa­tion), N for land (or natural resources), К for capital and T for given technology, and refers to the functional relationship.

The production function with many inputs cannot be depicted on a diagram. Moreover, given the specific values of the various inputs, it becomes difficult to solve such a production function math­ematically. Economists, therefore, use a two-input production function. If we take two inputs, labour and capital, the production function assumes the form

Q = f (L, K) ….(2)

The production function as determined by technical conditions of production is of two types:

It may be rigid ox flexible. The former relates to the short run and the latter to the long run.

The Nature of Production Function:

The production function depends upon the following factors:

(a) The quantities of inputs to be used.

(b) The state of technical knowledge.

(c) The possible processes of production.

(d) The size of the firm.

(e) The prices of inputs.

Now if these factors change the production function automatically changes.

Attributes of Production Function:

The following are the important attributes of production function:

(i) The production function is a flow concept.

(ii) A production function is a technical relationship between inputs and outputs expressed in physical terms.

(iii) The production function of a firm depends on the state of technology and inputs.

(iv) From the economic point of view, a rational firm is interested not in all the numerous possible levels of output but only in that combination which yields maximum outputs.

(v) The short run production function pertains to the given scale of production. The long run produc­tion function pertains to the changing scale of production.

The Short-Run Production Function:

In the short run, the technical conditions of production are rigid so that the various inputs used to produce a given output are in fixed proportions. However, in the short run, it is possible to increase the quantities of one input while keeping the quantities of other inputs constant in order to have more output. This aspect of the production function is known as the Law of Variable Proportions. The short-run production function in the case of two inputs, labour and capital, with capital as fixed and labour as the variable input can be expressed as

Q=f (L,K)

where K refers to the fixed input. … (3)

This production function is depicted in Figure 1 where the slope of the curve shows the marginal product of labour. A move­ment along the production function shows the increase in output as labour increases, given the amount of capital employed K;. If the amount of capital increases to K, at a point of time, the production function Q = f (L, K 1) shifts upwards to Q = f (L,K2 ), as shown in the figure.

On the other hand, if labour is taken as a fixed input and capital as the variable input, the production function takes the form Q =f (KL) …(4)

This production function is depicted in Figure 2 where the slope of the curve represents the marginal product of capi­tal. A movement along the production function shows the in­crease in output as capital increases, given the quantity of la­bour employed, L2 If the quantity of labour increases to L2 at a point of time, the production function Q = f (K,L 1) shifts upwards to Q=f(KL2).

The Long-Run Production Function:

In the long run, all inputs are variable. Production can be increased by changing one or more of the inputs. The firm can change its plants or scale of production. Equations (1) and (2) represent the long-run production function. Given the level of technology, a combination of the quantities of labour and capital produces a specified level of output.

The long-run production function is depicted in Figure 3 where the combination of OK of capital and OL of labour produces 100 Q. With the increase in inputs of capital and labour to OK1 and OL1, the output increases to 200 Q. The long-run production function is shown in terms of an isoquant such as 100 Q.

In the long run, it is possible for a firm to change all inputs up or down in accordance with its scale. This is known as returns to scale. The re­turns to scale are constant when output increases in the same proportion as the increase in the quan­tities of inputs. The returns to scale are increasing when the increase in output is more than propor­tional to the increase in inputs. They are decreas­ing if the increase in output is less than propor­tional to the increase in inputs.

Let us illustrate the case of constant returns to scale with the help of our production function.

Q = (L, M, N, К, T)

Given T, if the quantities of all inputs L, M, N, K are increased n-fold, the output Q also increases и-fold. Then the production function becomes nQ –f (nL, nM, nN, nK).

This is known as linear and homogeneous production function, or a homogeneous function of the first degree. If the homogeneous function is of the Kth degree, the production function is nk.Q = f (nL, nM, nN, nK) If k is equal to 1, it is a case of constant returns to scale; if it is greater than 1, it is a case of increasing returns of scale; and if it is less than 1, it is a case of decreasing returns to scale.

Thus a production function is of two types:

(i) Linear homogeneous of the first degree in which the output would change in exactly the same proportion as the change in inputs. Doubling the inputs would exactly double the output, and vice versa. Such a production function expresses constant returns to scale,

(ii) Non-homogeneous production function of a degree greater or less than one. The former relates to increasing returns to scale and the latter to decreasing returns to scale.

Conclusion:

The production function exhibits technological relationships between physical inputs and outputs and is thus said to belong to the domain of engineering. Prof. Stigler does not agree with this commonly held view. The function of management is to sort out the right type of combination of inputs for the quantity of output he desires.

For this, he has to know the prices of his inputs and the technique to be used for producing a specified output within a specified period of time. All these technical possibilities
are derived from applied sciences, but cannot be worked out by technologists or engineers alone. ‘The entrepreneurs also provide productive services and they are far from standardized.

Some men can get gang of workers to do their best, others are better at luring customers, still others at borrowing money, and each will have a different production function. If we take account of activities such as selling, settling strikes and anticipating future styles of product, it is clear that large segments of what we mean by technique are matters of business knowledge and talents, not to be acquired in the best engineering schools.” The production function is, in fact, “the economist’s summary of technological knowledge,” as pointed out by Prof. Stigler.

The Law of Variable Proportions:

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If one input is variable and all other inputs are fixed the firm’s production function exhibits the law of variable proportions. If the number of units of a variable factor is increased, keeping other factors constant, how output changes is the concern of this law. Suppose land, plant and equipment are the fixed factors, and labour the variable factor.

When the number of labourers is increased successively to have larger output, the proportion between fixed and variable factors is altered and the law of variable proportions sets in. The law states that as the quantity of a variable input is increased by equal doses keeping the quantities of other inputs constant, total product will increase, but after a point at a dimin­ishing rate.

This principle can also be defined thus:

When more and more units of the variable factor are used, holding the quantities of fixed factors constant, a point is reached beyond which the marginal product, then the average and finally the total product will diminish. The law of variable proportions (or the law of non-proportional returns) is also known as the law of diminishing returns. But, as we shall see below, the law of diminishing returns is only one phase of the more comprehensive law of variable proportions.

Its Assumption:

The law of diminishing returns is based on the following assumptions:

(1) Only one factor is variable while others are held constant.

(2) All units of the variable factor are homogeneous.

(3) There is no change in technology.

(4) It is possible to vary the proportions in which different inputs are combined.

(5) It assumes a short-run situation, for in the long-run all factors are variable.

(6) The product is measured in physical units, i.e., in quintals, tonnes, etc. The use of money in measuring the product may show increasing rather than decreasing returns if the price of the product rises, even though the output might have declined.

Its Explanation:

Given these assumptions, let us illustrate the law with the help of Table 1, where on the fixed input land of 4 acres, units of the variable input labour are employed and the resultant output is obtained. The production function is revealed in the first two columns. The average product and marginal product columns are derived from the total product column.

The average product per worker is obtained by dividing column (2) by a corresponding unit in column (1). The marginal product is the addition to total product by employing an extra worker. 3 workers produce 36 units and 4 produce 48 units. Thus the marginal product is 12 i.e., (48-36) units.

An analysis of the Table shows that the total, average and marginal products increase at first, reach a maximum and then start declining. The total product reaches its maximum when 7 units of labour are used and then it declines. The average product continues to rise till the 4th unit while the marginal prod­uct reaches its maximum at the 3rd unit of la­bour, then they also fall. It should be noted that the point of falling output is not the same for total, average and marginal product.

The mar­ginal product starts declining first, the average product following it and the total product is the last to fall. This observation points out that the tendency to diminishing returns is ultimately found in the three productivity concepts.

The law of variable proportions is pre­sented diagrammatically in Figure 4. The TP curve first rises at an increasing rate up to point A where its slope is the highest. From point A upwards, the total product increases at a dimin­ishing rate till it reaches its highest point С and then it starts falling.

Point A where the tangent touches the TP curve is called the inflection point up to which the total product increases at an increasing rate and from where it starts increasing at a diminish­ing rate. The marginal product curve (MP) and the average product curve (AP) also rise with.