The document discusses several economic concepts including break even analysis, government intervention in market prices, economic liberalization, and disinvestment. Break even analysis is used to determine the sales volume needed for revenue to equal costs. It involves calculating fixed costs and variable costs per unit to find the break even point. Government intervention aims to correct market failures through policies like price ceilings, price floors, and public distribution systems. Economic liberalization lessens government regulations to increase private participation in industries. Disinvestment involves governments or organizations selling public sector assets to private entities as a method of privatization.

1. PRINCIPLES OF ECONOMICS
BREAK EVEN ANALYSIS
GOVT. INTERVENTION IN MARKET PRICES
ECONOMIC LIBERALISATION
DISINVESTMENT

2. BREAK EVEN ANALYSIS

3. In economics, the break even point is the
point at which revenue equals expenses.
In investing, the break even point is the point
at which gains equal losses.
BREAK EVEN POINT

4. 1.Determine Variable Unit Costs
2.Determine Fixed Costs
3.Determine Unit Selling Price
4.Determine sales Volume & Unit
Price
5.Creating a Graph
FIVE STEPS TO
ESTIMATE BREAK
EVEN POINT

5. 1. Equation method:
SP*N=VC*N+FC
Where;
SP-sales price unit per unit.
N-number of units
VC-variable cost
FC-total fixed cost
2. Contribution margin method:
Total fixed cost/Contribution margin per unit
Contribution= VC-SP
3.Graphical Presentation:
Plot a graph and obtain a point of intersection to get the BEP.
COMPUTATION OF BREAK EVEN POINT:

8. Company Details-
Revenue 18.78 billion
Operating Income 1.48 billion
Net Income 683 million
Total Assets 25.4 billion
Total equity 6.96 billon
Company Mission-
To become the preferred leading European air carrier with a global
network of coverage thanks to its strict compliance with flight safety ,
reliability , product line, service quality and competitiveness while
maintaining its identity as the flag carrier of the Republic of Turkey in
the civil air transportation industry.
CASE STUDY:
TURKISH AIRLINES

9. 1} TURKISH AIRLINE has a total FC of 2 million tl
and VC of 3000tl and each seat in the aircraft sells
at 5000tl.How many seats will Turkish Airline have
to sell in 1 day to break even?
Sol:
FC=2,000,000 tl , VC=3000 tl , P=5000 tl
BE quantity= TFC/(P-VC) =2,000,000/(5000-3000)
= 1000 seats

10. 2} If Turkish Airlines were to sell a total of
2000 seats ,how much profit would it make?
Sol:
Profit=(R-VC)-FC
R=P*no. of seats = 5000*2000= 10,000,000
VC=VC* no. of seats=3000*2000=6,000,000
Profit=(10,000,000-6,000,000)-2,000,000
=2,00,000 tl

11. ADVANTAGES AND USES
Break even analysis enables a business organization to:
1.Measure profit and losses at different levels of production and sales.
2.Predict the effect of changes in sales prices.
3.Analyze the relationship between fixed and variable costs
4.For managerial analysis like product planning, activity planning,
safety margin etc.

12. DISADVANTAGES
1.Assumes the sales prices are constant at all levels of output.
2.Assumes production and sales are the same.
3.Break even charts maybe time consuming to prepare.
4.It can only apply to a single product or single mix of products.

13. GOVERNMENT
INTERVENTION IN MARKET
PRICES

14. Regulatory actions taken by a government in order to
affect or interfere with decisions made by individuals,
groups, or organizations regarding social and economic
matters.

15. NEED FOR GOVERNMENT INTERVENTION:
• Correct the market failures
• Promote general welfare of the people
• To achieve a more equitable distribution of income and wealth
• To improve the performance of the economy

16. Administered Prices
Control Price
(Ceiling
Support Token Price Dual Price

17. CONTROL PRICE
• To control the maximum prices that can be charged by suppliers for the
commodity.
• To make commodities affordable to the general public.
• Prolonged application of a price ceiling can lead to black marketing and unrest
in the supply side.

19. EXAMPLES:
• In 2017, the Government had fixed the ceiling prices
of orthopaedic implants used in knee surgeries
Type of Knee Implant
Average
MRP
Earlier
(Rupees)
Average
Price
Reduction
New Ceiling
Price and MRP*
(Rupees)
Cobalt
Chromium (most
widely used)
1,58,324 65% 54,720
Special Metal like
Titanium & Oxidized
Zirconium
2,49,251 69% 76,600
High Flexibility
Implant
1,81,728 69% 56,490
Revision Implants 2,76,869 59% 1,13,950
Specialised Implants
for Cancer & Tumour
Company specific prices; to be fixed by NPPA at Rs. 1,13,950

20. • Ceiling prices on Uber ride service during peak hours
Supply demands problems due to:
• Shortage of drivers
• Longer waiting time
• Deadweight loss

21. SUPPORT PRICE
• A price floor is a government- or group-imposed price control or limit on
how low a price can be charged for a product.
• Great importance in the labour-wage market
• Price floor must be higher than the equilibrium price in order to be
effective.

23. EXAMPLES:
• Minimum Support Price (MSP) - form of government intervention by
the insure agricultural producers against any sharp fall in farm price
• MSP announced by the Government at the beginning of the sowing
season for certain crops on the basis of the recommendations of the
Commission for Agricultural Costs and Prices (CACP).
• To protect the producer - farmers - against excessive fall in price during
bumper production years.

24. • Minimum daily wage set by government for different
states

25. TOKEN PRICE
• Some goods and services are necessary for the existence of life e.g.
medical services, education services , etc.
• Government provides these services at a price which is much below
even their per unit cost of production- token price
• Token price is charged in order to prevent the wasteful use of these
services

26. DUAL PRICING
• Dual pricing is a situation in which the same product or service is sold at
different prices in different markets.

27. PUBLIC DISTRIBUTION SYSTEM
• This scheme was launched in the current form in June 1947.
• Under this scheme the State Government through Government of India
distributes the items such as wheat, rice, etc in ration shops at different prices

28. Item Rate (APL) Rate (BPL) Rate (AAY)
Rice Rs. 889.98 pQ Rs.611.75 pQ Rs.3/kg
Wheat Rs. 659 pQ Rs.454.26.pQ Rs.2/kg
Kerosene Rs. 9.40-9.80/lit
Under this scheme the State Government through Government of India distributes the
following items:
The Beneficiaries under this scheme are divided into three categories
APL - Above poverty line
BPL - Below poverty line (Identified by ADC (D))
AAY - Poorest of poor amongst BPL families (Identified by ADC (D))

30. ECONOMIC LIBERALISATION
It is the lessening of government regulations and
restrictions in an economy in exchange for greater
participation by private entities.
Fastest growing economies– Brazil, China, India

31. New Economic Policy
1991
Liberalization Privatization Globalization
• Initiated in 1991 by Prime Minister Narsimha Rao
• Known as LPG Policy or ‘NEP-1991’

32. FACTORS THAT LED TO LIBERALISATION
Fixed exchange
rate system
Balance of Payments Crisis
since 1985
Central bank refused
new credit
Depletion of foreign
exchange reserves IMF bailout

33. REFORMS
BY THE
GOVERNMENT
DEVALUATIO
DISINVESTMEN
FOREIGN
DIRECT
INVESTMENT
NRI SCHEME

34. EFFECTS OF LIBERALISATION
Industrial
Growth Rate
Impact on
Agriculture
IT Industry
Banking
Impact on
small scale in
India
Globalization.

36. DISINVESTMENT

37. • The action of an organization or government selling or
liquidating an asset or subsidiary.
• It is a method of privatization of the public sector enterprises,
(started in 1992 in India)
WHAT IS DISINVESTMENT?

38. OBJECTIVES OF DISINVESTMENT
• To reduce financial burden on government
• To improve public finances
• To introduce competition and market discipline
• For fund growth

39. DISINVESTMENT TYPES
MINORITY
DISINVESTMEN
MAJORITY
DISINVESTMEN
COMPLETE
PRIVATISATION

40. MINORITY DISINVESTMENT
• Government retains majority stake in the company (> 51 %)
• Minority stakes can either be :
 Auctioned off to financial institutions
Eg: Andrew Yule and co. Ltd. , CMC Ltd.
 Offloaded to public by way of an offer or sale
Eg: Power electronic corp. of India ltd. , NTPC Ltd.

41. MAJORITY DISINVESTMENT
• Government retains a minority stake in the company.
• Majority stakes can either be :
Typically made to strategic partners
Eg.BRPL to IOC , MRL to IOC etc.
The stake can also be offloaded by way of an offer or sale

42. COMPLETE PRIVATISATION
Form of majority disinvestment where, 100% control of a
company is passed onto a buyer
Eg. 18 Hotel properties of ITDC

43. DISINVESTMENT PRIVATISATION
1. Could be limited to a level which would
permit govt. to retain control over
organisation (<50%)
2. Either the government stake is diluted to a
level where it results in the transfer of
management (>50%)
1. A change in ownership resulting in a
change in management.
2. Occurs only when the government sells
more than 50% of its ownership to private
companies

44. MERITS OF DISINVESTMENT
• Quick decision making, linked to competitive market changes
• Better corporate governance
• Exposure to competition
• Corporate responsibility
• Improvement in work environment
• Loss making PSUs can be successfully revived

45. DEMERITS OF DISINVESTMENT
• Loss of regular source of income to the govt.
• Loss of assets
• Disposal of both profit making and potentially viable PSUs

46. BALCO –
A DISINVESTMENT
STORY!

47. In 2000, it had a turnover of Rs.898 crores and a
profit after tax of Rs. 56 crores.
In February 2001, the Government of India (GoI)
approved the sale of its 51% stake in aluminium major,
Balco to SIL, for Rs. 551.5 crores.
The move was opposed by opposition parties and
workers of BALCO went on a strike.
Negotiation with workers
Disinvestment of BALCO by govt. followed by
Privatisation