Assumptions of Law of Demand
Law of Demand can operate and remain valid only if certain things like income, population size, climate, consumer's tastes and expectations, etc., are assumed to remain constant or equal. In other words, there is a need for an assumption or a consideration that these things do not change at all under any circumstances.
The six basic assumptions of law of demand are as follows:
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Twelve demerits, disadvantages or limitations of planning in management.
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1. Time Consuming
Planning involves the collection of data, analysis of data, forecasting, etc. All this consumes a lot of precious time. Therefore, planning is a time-consuming activity.
Planning is the work of experts. They get paid very high salaries to make good plans. Companies spend an enormous amount of money in collecting and analysing data. Therefore, planning is a costly affair.
Proportional Reserve System
First let's understand the meaning of three words, namely:
- Proportion means a part, percentage or share of something regarded as a collective whole.
- Reserve implies something valuable stocked up systematically or stored carefully often on a large scale at a secured location.
- A System comprises a set of detailed procedures, routines, and methods that are supposed to be followed to perform certain activities.
In Proportional Reserve System (PRS), certain proportion or percentage of the reserves has to maintained in the form of precious metals like Gold. The remaining part of the reserves is to be kept in specific assets such as Government Securities and Commercial Bills. Such a balance is maintained to give backing (support) to the total volume of currency notes issued by the apex central bank of a nation like FED in the USA, RBI in India, etc.
For example, the Federal Reserve Act (1913) prescribed the Federal Reserve System (FED) of the USA to back currency notes issued by 40% Gold and remaining 60% by Government Securities.