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What is the difference between Individual Demand and Market Demand?

Individual Demand and Market Demand

The quantity of a good or service demanded by an individual household is called the Individual Demand. The sum total of all such demands over a period of time for any commodity in the market is described as Market Demand.

What is Demand?

In economics, demand is how much of a product or service is demanded at a given price. In the real world, this can be quantified in terms of wholesale prices and retail prices. A sudden change in demand will result in a shift along the supply curve if it results from a change that does not affect the cost of production.

What is the definition of Individual Demand?

Individual demand refers to the desire or wants for a particular product or service that an individual has. The amount of money that one is willing and able to spend on a good can be analyzed by looking at different types of products. For example, if you were to look at consumer goods versus capital goods, there could be a difference in the amount of money someone is willing to spend on each type.

What are some examples of Individual Demand?

Some examples include –

  • The amount of gasoline that is demanded by an individual on any given day.
  • The amount of money that someone spends on a pair of shoes versus the amount spent on a car.

What is the meaning of Market Demand?

Market demand refers to the total amount of a good or service that consumers in general are willing and able to buy at any given price. It is important to note that the Market Demand curve will shift based on changes in supply, prices, income levels, etc. Examples of Market Demand include –

  • The total amount of gasoline that is demanded by consumers in general.
  • The total amount of money that consumers, in general, will spend on a particular good or service.

Individual Demand vs Market Demand: What’s the difference?

The main difference between individual demand and market demand comes down to the fact that market demand includes everyone in a given market, while individual demand only takes into account, one person.

Some major differences between Individual Demand and Market Demand are –

  1. Individual demand only considers the wants and needs of one person. In contrast, Market demand can be measured as a whole, such as by looking at market data.
  2. Individual demand is based on an individual‘s willingness and ability to buy any given product or service at any given price point due to their own personal preferences. Market demand is based on the willingness and ability of all individuals in a market to buy a good at any given price.
  3. Individual demand can be analyzed by looking at individual preferences for specific goods, while market demands are determined by the entire population‘s preferences for products or services.
  4. Individual demand can take into account income, wealth, and any other economic factors that are specific to the person in question. Market demand only looks at macroeconomic factors such as inflation rates or GDP growth rates when determining how much of a good or service people will buy at any given point in time.
  5. Individual demand will change based on a person‘s age, economic status, and other factors that are specific to the individual in question. Market demand can only be altered by macroeconomic factors such as inflation rates or GDP growth rates.
  6. Individual demand has no relation to how much of a good or service is produced in a given market. Market demand is based on how much of a good or service is produced in a given market and will change if production levels rise or fall.
  7. Individual demand only takes into account how an individual views certain goods and services, while market demand can take into account the entire population‘s viewpoint on a product or service.
  8. Individual demand can be analyzed by looking at individual consumption patterns, while market demands are determined through consumption data that is collected for all individuals in a given population or economy.
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What is the difference between Collusive Oligopoly and Non-Collusive Oligopoly?

Collusive Oligopoly and Non-Collusive Oligopoly
What is the meaning of Oligopoly?
 
Oligopoly is a market structure that occurs when a few firms dominate the industry. It can occur naturally or as a result of government intervention. There are only very few oligopolies in the economy, and they have been studied extensively by economists due to their relatively rare occurrence and importance in shaping an economy.
 

What is Collusive Oligopoly?

 
Collusive oligopoly is a type of oligopoly where the firms decide among themselves to fix prices and production so as to take advantage of each other’s market power. It involves collusion or secret agreements between competitors. Collusive oligopolies can occur naturally in some industries due to economies of scale and product differentiation.
 
An example of a collusive oligopoly is OPEC, which involves a few oil-producing countries agreeing to limit the amount of oil they produce and thereby influencing prices in their favor. Another example is diamond mines, where the companies have historically had very close relationships with each other and have been more interested in maintaining the status quo than in increasing production.
 

What is Non-Collusive Oligopoly?

 
Non-collusive oligopoly is a type of oligopoly where there are no secret agreements among the firms in an industry. It does not involve collusion between companies and can be difficult to distinguish from perfect competition at first glance. However, there are considerable differences between the two market structures that make non-collusive oligopoly far more difficult to sustain than perfect competition.
 
Non-collusive oligopolies can occur due to economies of scale, product differentiation, and high barriers to entry into the industry. An example of a non-collusive oligopoly is that found in banking. The banks are not colluding with each other, but the barriers to entry for a new bank into the industry are very high, due to economies of scale and customer loyalty.
 

Collusive Oligopoly vs Non-Collusive Oligopoly: What’s the difference?

 
The main difference between collusive oligopoly and non-collusive oligopoly is that in the former there are secret agreements between firms whereas, in the latter, such interactions do not take place.
 
The main similarity between both market structures is that they involve few competitors and a considerable degree of control over the industry by these companies.
 

Here are some important differences between Collusive & Non-Collusive Oligopoly –

 
  1. The collusion agreement is a secret in a collusive oligopoly whereas, it is not in a non-collusive oligopoly.
  2. Price and production are fixed by the firms themselves in the case of collusive oligopoly, while no such fixing occurs in non-collusive oligopoly. This means that prices are determined by the market forces of demand and supply in a non-collusive oligopoly.
  3. There is no collusion between firms in a non-collusive oligopoly, but there is in a collusive oligopoly. For example, OPEC is an example of a collusive oligopoly whereas, U.S.’s banking industry is an example of a non-collusive oligopoly.
  4. Collusion between firms can occur naturally in a collusive oligopoly whereas, it does not in a non-collusive oligopoly. For example, OPEC is a natural case of a collusive oligopoly because oil producers have a natural incentive to keep prices high.
  5. Non-collusive oligopoly can occur due to economies of scale and product differentiation whereas, collusive oligopoly does not require such reasons for its existence.
  6. Collusion is never sustained in non-collusive oligopoly whereas, collusion may be sustained for longer periods of time due to its inherent stability in collusive oligopoly.
  7. Collusion in a non-collusive oligopoly can lead to higher prices and profits for the firms involved, but collusion in a collusive oligopoly leads to lower prices and better efficiency of production. For example, OPEC has the power to keep global oil prices high due to its market share.
  8. Collusion in a non-collusive oligopoly is not illegal whereas, collusion in a collusive oligopoly is illegal because it violates antitrust laws which are designed to prevent monopolies from gaining too much control over an industry.
  9. There are high barriers to entry for firms in non-collusive oligopoly whereas, there are low barriers to entry for these companies in collusive oligopoly. For example, banks have a high barrier of entry due to economies of scale and customer loyalty that would take a long time and considerable investment to overcome.
  10. Collusion in a non-collusive oligopoly leads to a decline in the quality of goods and services since it results in less competition, while collusion in a collusive oligopoly can lead to an increase or no change at all depending on the extent of the collusion agreement.
These are some of the major differences between Collusive Oligopoly and Non-Collusive Oligopoly! Share your thoughts on Oligopoly by commenting below. Thank You 🙂
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What is the difference between Factor Income and Transfer Income?

Factor Income and Transfer Income

What is the meaning of Factor Income?

Factor Income refers to incomes that accrue as rewards for the services provided by land, labor, capital, and entrepreneur. These factor incomes are usually distributed among three main factors of production i.e. land or natural resources, labor, and capital.

For example, wages paid to a laborer after working 8 hours for a day, interest on money invested in the bank, rent on land which is used for cultivation or manufacturing, etc.

What is the definition of Transfer Income?

Transfer Income refers to a payment received by a person without providing any service in return. There is no exchange of goods and services during transfer income. An example of a transfer income is the payment received by a person as unemployment compensation, retirement benefits, or social security. These incomes are not added while calculating National Income.

Factor Income vs Transfer Income: What are the differences?

The main difference between factor income and transfer income is that factor incomes are received as payment for services rendered whereas transfer incomes are not linked with the provision of any service. These incomes can be distributed among land, labor, capital, and entrepreneur. On the other hand, transfers cannot be shared between factors of production i.e. they do not form part of national income.

Other main differences between Factor Income & Transfer Income are –

  1. Factor Income is included in National Income whereas Transfer Income is not added.
  2. Factor income includes only factor incomes which are received by the factors of production while transfer income includes all types of payments without any exchange of goods and services.
  3. The source of factor income is mainly land, labor, capital, and entrepreneur while transfer income is not contributed by any of the factors.
  4. Factor income is distributed among three factors of production while transfer income can be received by any factor.
  5. Factor income is added to the national product whereas transfer income is not included in National Product.
  6. Factor Income causes the transfer of resources between different sectors and regions of the economy whereas Transfer incomes do not cause any transfer of Resources.
  7. Factor income comes in the form of profits and interest while transfer income can come in the form of pensions and subsidies too.
  8. Factor incomes are distributed among different factors while transfers cannot be distributed among different factors and regions of the economy.
  9. Factor income and Transfer Income refer to economic and financial concepts respectively.

These are some of the main differences between Factor Income and Transfer Income!!

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What is the difference between Re-Order Level (ROL) and Re-Order Quantity (ROQ)?

ROL vs ROQ

What is the meaning of Re-Order Level?

Re-Order Level (ROL) is the point at which new supplies are ordered. It usually occurs when the inventory level reaches some predetermined point, known as reorder point so that fresh supply can be received in time without any delay.

Reorder Point denotes the stock level at which a particular material will be considered to be exhausted and necessitate its replacement. ROL is also used to determine the optimal size of a purchase order.

What is the meaning of Re-Order Quantity?

Re-Order Quantity (ROQ) is the maximum number of units to be ordered when the stock on hand falls below a given reorder level. It can also be defined as the quantity of items in an inventory that will allow zero safety stock, i.e., no safety stock is needed between ordering points.

ROL vs ROQ: What’s the main difference?

The main difference between ROL and ROQ is that the first one denotes the point at which new supplies are ordered while the second one defines a quantity of items in an inventory that will allow zero safety stock between ordering points. The terms ROL and ROQ can be used interchangeably as long as they carry this meaning.

Other major differences between Re-order Level and Re-order Quantity include –

  1. Re-order Level is a fixed value while Re-order Quantity can be changed according to the needs of an organization.
  2. ROL definition includes the reference point from which reordering takes place while ROQ does not consider this factor.
  3. While Re-Order Level is used for all items, Re-Order Quantity is used to determine the optimal size of a purchase order.
  4. ROL is also known as reorder point while ROQ can be called reorder quantity or reorder level depending on the situation.
  5. ROL is often used in conjunction with EOQ (Economic Order Quantity) to determine the optimal purchase quantity and the best time at which it should be ordered.
  6. ROL is calculated based on safety stock while ROQ can be determined without taking into account any safety stock.
  7. ROL is calculated by dividing the number of units on hand with the reorder point while ROQ formula does not consider this factor.

These are some of the main differences between ROL and ROQ. It’s important to note that ROL denotes the point at which new supplies are ordered, while ROQ addresses the maximum number of units to be ordered when stock on hand falls below a given reorder level.

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What is the difference between Standard of Living and Quality of Life?

Standard of living vs Quality of life

Difference between Standard of Living and Quality of Life

What is the definition of Standard of Living?

Standard of living can be defined as the level of income and services available to an individual or society. It is a measure of the quality of life of an individual. It is calculated by comparing the average income of the residents of a region with the average income of the residents of other regions.

What is the definition of Quality of Life?

Quality of life can be defined as the ability to live comfortably, and the amount of enjoyment and happiness one has. It is a subjective concept and is based on the perception of the individual.

Standard of Living vs Quality of Life: What is the difference?

  1. Standard of living can be defined as the level of income and services available to an individual or society. On the other hand, quality of life can be defined as the ability to live comfortably, and the amount of enjoyment and happiness one has.
  2. Quality of life is a subjective concept, while the standard of living is objective.
  3. The standard of living is more concerned with the economic dimension of the society, while quality of life is more concerned with the experiences that an individual has at a certain time.
  4. Standard of living is an economic measure, while quality of life is a social one.
  5. Quality of life is a multidimensional concept, while standard of living is unidimensional.
  6. Standard of living is concerned with the material well-being of individuals, while quality of life is concerned with the spiritual well-being.
  7. Quality of life is an individual perception, while standard of living is a social perception.
  8. Standard of living is based on the economic performance of the country, while quality of life is based on the happiness of the country.
  9. Quality of life is more concerned with qualitative aspects, while standard of living is more concerned with quantitative aspects.
  10. Quality of life is more concerned with the happiness and well-being of the individual, while standard of living is more concerned with the finances of the individual.
  11. Quality of life is a subjective perception, while standard of living is an objective measurement.
  12. Quality of life is an individual concept, while standard of living is more of a social concept.
  13. Quality of life is an overall assessment of well-being, while the standard of living is a measurement of the quality of life of an individual.
  14. Quality of life refers to the average state of happiness of the citizens of a country. On the other hand, standard of living refers to the financial prosperity of the citizens of a country.
  15. Quality of life is more concerned with the happiness and well-being of the individual, while standard of living is more concerned with the finances of the individual.
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What is the difference between Strike and Lock-Out?

Strike vs Lock-Out

Difference between Strike and Lock-Out

What is the definition of a strike?

A strike is a form of industrial action. It is a group of workers who decide to stop working in order to achieve a personal or group goal. Strikes are done in a peaceful manner.

Purpose: A strike is done by the workers to gain their demands. It is done in a peaceful manner. It is used to put pressure on management to accept the demands of the workers.

What is the definition of a Lockout?

A lockout is also a form of industrial action. It is the act of barring employees, usually in the context of a labor dispute, from entering the premises of a workplace. It is also the temporary shutdown of the operations of a particular workplace by the management.

Purpose: A lock-out is done by the management of the company to make new contracts with the employees. It can also be done to change the old contract. It is also used to terminate the contract of an employee. It is also done to make the workers accept the conditions of the management and owners of the company.

Strike vs Lock-out: What is the difference?

  1. During a lockout, the management of the company refuses to hire the employee or worker. They also stop them from doing their work or job. In contrast, during a strike, the workers refuse to do their work by leaving their work.
  2. A lockout can be initiated by the management of a company or by the industry owners. But, a strike is initiated by the employees of a company.
  3. A lockout is the last option used by the management of the company. It is done when the company fails to convince the workers to do their work. In contrast, a strike is the last option used by the workers when they fail to convince the management or owners to meet their demands.
  4. A lockout can also occur when the management of the company decides to change the contract. They are also used to enter into new contracts with the workers. In contrast, a strike occurs when the workers and the management can’t agree on the terms.
  5. A lockout is used to make new contracts with the employees. It can also be used to change the old contract. In contrast, a strike is used by the workers to make the management accept their demands.
  6. A lockout can be used to renegotiate the contract of a worker. It can also be used to terminate the contract of an employee. In contrast, a strike is used to resolve a dispute between the management and the workers.
  7. A strike is against the employer, but a lockout is against the employees.
  8. A strike is a way to put pressure on the management to accept the demands of the workers. In contrast, a lockout is a way to put pressure on the workers to accept the terms and conditions of the management.
  9. During a strike, the workers stop working due to which it can affect the production of the company. However, during a lockout, the management stops the workers from doing their work. Thus, it does not affect the production of the company.
  10. During a strike, both the workers and the management try to convince the other party to agree to their demands. But, during a lockout, only the management convinces the workers to accept the terms and conditions.
  11. A strike is a series of work stoppages by employees, or a refusal by employees to work under certain conditions. In contrast, a lockout is a refusal by an employer to let employees work.
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What is the difference between Stock and Supply?

stock vs supply

Differences between Stock and Supply

What is the definition of Stock?

Stock is the excess of goods that are already available with a seller over and above those demanded from him at any given time. Stock may be an outcome of production or it may have been obtained through resale, purchase, or even gift.

In case the stock is not equal to supply, then there will be a surplus in the market and a downward pressure on prices.

An Example Of Stock: Suppose a baker goes to the market with 100 loaves of bread. He buys 10 more loaves from another baker and also sells 50 loaves to consumers. The stocks that he has left after this transaction are 60 loaves, which is his stock or inventory of goods – in other words, the quantity of goods he has yet to sell.

What is the definition of Supply?

Supply represents a certain quantity of goods offered for sale in the market at any given time. The supply curve shows how much quantity will be supplied as price increases or decreases, but it does not indicate how fast prices are likely to change.

An Example Of Supply: Suppose a business is selling 100 units of its product for $100 each. The supply curve will show that the company will continue to sell at least 80, 70, and 60 units as the price reduces further – but it does not indicate how fast this reduction in price will take place.

Stock vs Supply: What is the difference?

  1. Supply represents a certain quantity of goods offered for sale in the market at any given time. Supply is derived from stock while stock is the result of production and its objective is to provide supply.
  2. Stock and supply are two independent variables in the price determination process of a product. Supply is obtained from stock which, again, is derived from production.
  3. Stock represents finished goods while supply refers to raw materials or intermediate products as well as finished goods.
  4. Supply can be obtained from stock. There may not necessarily be a direct relationship between supply and production, but there is always some relationship between the two variables.
  5. Supply refers to all kinds of goods that are offered for sale by the producers in the market at any given time while stock includes only finished goods.
  6. Stock is the result of production while supply is obtained from stock. Therefore, supply can be considered as a demand for items that are already available with the seller and not directly related to production.
  7. Stock is the excess of goods that are already available with a seller over and above those demanded from him at any given time while supply represents an excess in quantity offered for sale by producers over the existing stock.
  8. Supply can exist even when there is no demand for products, as long as they are produced. On the other hand, stocks are a result of demand.
  9. Stock is related to production while supply may not necessarily be so dependent on it. Supply can also be obtained from the stock even if there is no immediate relation between production and supply but both variables are in some way interrelated.
  10. Supply is the quantity of goods that are offered for sale by producers at a given price and time, while stock represents the excess in stocks over demand. Stock can be considered as a result of supply or production whereas it is not necessarily so with supply.
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What is the difference between National Income and Domestic Income?

Domestic Income vs National Income

Differences between National Income and Domestic Income

What is National Income?

National Income is defined as the total monetary value of all goods and services produced within a country during a given period. It represents an aggregate measure of national output or GDP and can be expressed in both nominal terms and real terms to ascertain whether economic growth is taking place at a constant rate (real) or at different rates (nominal).

It is also referred to as ‘GDP’ or Gross Domestic Product, which denotes the total net output produced by a nation during an accounting period. However, National Income can be measured in both nominal and real terms depending on the purpose of the analysis being undertaken.

For instance, when National Income is expressed in nominal terms, it refers to the total money value of a nation’s final output during an accounting period and can be calculated by adding up gross wage incomes, rent payments, rental income received from abroad, etc.

When National Income is expressed in real terms, for example when GDP is compared to a base year, it denotes the total net output in constant prices and can be calculated by adding up all the costs incurred from production units within a nation.

It is important to note that National Income doesn’t refer solely to the GDP of an economy but also includes income earned by its citizens abroad. In other words, when foreign income is included in National Income, it is known as ‘GNI’ or Gross National Income.

What is Domestic Income?

Domestic Income represents the total income earned by a country’s production units during an accounting period. It can be measured in terms of factor payments, such as wages and salaries (wage incomes), rent, interest received from abroad, etc., or in monetary terms, which is referred to as Gross National Product (GNP).

It is important to note that Domestic Income excludes net transfers, such as government subsidies and grants that are received from abroad. It also excludes indirect taxes paid by households on the goods and services they purchase during a given period.

Finally, it does not include income earned by non-residents and foreign residents, which is why it is also referred to as ‘Net National Income’.

It should also be noted that Domestic Income doesn’t represent the total income earned by a country or its citizens but only the factor payments made by them via its production units during an accounting period.

Domestic Income vs National Income: What is the difference?

  1. National Income is the total income earned by all the citizens of a country, whereas domestic income refers to the factor incomes earned by its production units.
  2. National Income is measured in monetary terms, as it denotes earnings from a nation’s economic activity and output during an accounting period. On the contrary, domestic income is measured in terms of factor incomes.
  3. National Income pertains to the total net output, whereas domestic income pertains to factor payments made by a nation during a particular period.
  4. When all production units are included under national income and when it is expressed in monetary terms, then it is called a national product. On the other hand, when it is expressed in terms of factor payments, then it is known as national income.
  5. National Income can be measured in both real and nominal terms to depict economic growth, whereas domestic income cannot be so measured.
  6. National Income is representative of the entire economy, whereas domestic income signifies a particular production unit in an economy.
  7. When ‘domestic income’ is expressed as ‘gross national product (GNP), it denotes the total net output earned by all citizens inside the country and when ‘national income’ is expressed as ‘gross domestic product (GDP), it denotes the total net output earned by all citizens within the country.
  8. National Income is a macroeconomic concept, whereas domestic income is microeconomic in nature and used to ascertain individual-level data for household consumption expenditure and savings.
  9. National income is a major determinant of the macroeconomic growth in an economy, as it determines the increase or decrease in monetary and real terms at which national output is growing over time. On the other hand, domestic income has no impact on economic growth because its sole purpose is to ascertain individual-level data for household consumption expenditure and savings.
  10. National income has no direct relationship with the concept of national product, as it is an accounting aggregate that represents the total net output earned by a nation during a given period. On the other hand, domestic income is directly related to the national product because it determines how much a nation is producing or not.
  11. National income pertains to the value of total final goods and services produced within a country, whereas domestic income refers to the factor payments made by an economy during an accounting period.
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What is the difference between Expense and Expenditure?

Expense vs Expenditure

Difference between Expense and Expenditure

What are expenses?

In business, an expense is any amount of money spent on a regular basis for the operation or maintenance of your business.

For example, the costs associated with operating and maintaining facilities (such as gas, electric, water/sewage), supplies that you use in making products (such as packaging materials or paper for invoices), raw material used to manufacture products or provide services (such as plastic resin used to make a toy), and the amount of money paid to your employees for their labor are all expenses.

What is Expenditure?

Expenditure is the amount of money spent on goods and services. Expenditures do not include capital expenditures, or amounts paid to acquire an asset that will have a useful life extending beyond one year.

For example, if you pay $1000 for a piece of heavy equipment used in your business, this would be a capital expenditure and not an expense.

Expense vs Expenditure: What is the difference?

  1. Expenditure is a general term that refers to the amount of money spent on goods or services. Whereas, the expense is a more specific term that refers to the cost of operating or maintaining your business.
  2. Expenditure is a broader term that includes both expenses and capital expenditures, while expense refers only to the operating costs.
  3. An expense is not included in the calculation of your business’s profits or losses, while expenditure is part of the calculation of profits or losses.
  4. Expense is used to refer to the amount of money spent on a regular basis for operating or maintaining your business, whereas expenditures refer to the total amount of money spent in an accounting period.
  5. An expense is not considered to be part of the capital cost of a business. However, an expenditure may or may not increase the value of your assets depending on whether it is a fixed asset or inventory.
  6. An expense is recorded in the accounting period during which it was incurred, whereas an expenditure may be treated as either a debit or credit depending on whether it increases or decreases assets.
  7. An expense is recognized as an asset when it is incurred, while a capital expenditure does not impact the accounting records until it is paid for.

These are some of the important differences between expense and expenditure. Here are a few examples:

Example 1: The cost of the payroll in an accounting period is recorded as an expenditure because it does not increase or decrease your assets. However, if you buy supplies for your business during the accounting period, these are recorded as expenses because they increase your assets.

Example 2: If you purchase a new machine for your business, this is recorded as an expenditure because you have to pay cash. However, if you purchase a used machine from a friend or relative and pay him with the amount he paid when he bought it, then this would be considered an expense because there are no funds moving between accounts and hence cannot be considered as an expenditure.

Example 3: If you purchase a new computer for your office, this would be recorded as an expense because it increases your assets. However, if the computer was purchased with cash that had been in the business’s bank account for more than one year, then it would not increase assets and hence would not be recorded as an expenditure.

Example 4: If you purchase office furniture with cash, this is recorded as an expense because it increases your assets. However, if the office furniture was purchased on credit (such as a lease-to-own agreement) and the amount does not increase your assets, then the amount paid would be recorded as an expenditure.

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What is the difference between Sacrificing Ratio and Gaining Ratio?

Sacrificing Ratio vs Gaining Ratio

Difference between Sacrificing Ratio and Gaining Ratio

What is Sacrificing Ratio?

The ratio of sacrifice in favor of a partner who leaves the firm is known as the sacrificing ratio. When any partner leaves or resigns from the firm, then some partners gain and other partners lose to compensate their leaving profit share which leads to variation in the existing sharing ratio. Therefore, continuing partners make sacrifices for those who leave the firm.

What is Gaining Ratio?

The share of profit obtained by a continuing partner after compensating his exiting partner is known as the gaining ratio. If any partner buys the share from another partner and enters into a firm, then both partners make sacrifices. So if a continuing partner leaves or resigns from the firm after selling his share to an outsider then only he would suffer a loss

Sacrificing Ratio vs Gaining Ratio: What is the difference?

  1. Sacrifice ratio is the ratio of sacrifice in favor of a partner who is leaving or resigning from the firm, whereas the Gaining Ratio is the share obtained by a continuing partner after compensating his/her exiting partner.
  2. When any partner buys the share of profit from another partner and enters into a firm, then both partners make sacrifices. So, if a continuing partner leaves or resigns from the firm after selling his share to an outsider then only he would suffer loss.
  3. When one of the partners purchases all other shares from other partners, then he gains from another partner.
  4. Every time a partner leaves or resigns from the firm, it leads to a change in profit sharing ratio and thus some partners gain and others lose.
  5. Due to the change in the profit-sharing ratio, some partners gain and some partners lose and so a partner who makes a sacrifice compensates his exiting partner.
  6. Profit sharing ratio is dependent on mutual agreement of all parties concerned while sacrificing and gaining are not mutually agreed upon but due to external reasons such as the purchase of a share of profit by one partner from another, entry or exit of any partner.
  7. In case all partners decide to leave the firm voluntarily then it is known as Exit while if a continuing partner leaves or resigns from the firm after selling his share to an outsider then only he would suffer loss and this situation is called Exit.
  8. When a partner purchases all other shares from other partners then it is known as Purchase and the situation when one of the partners’ purchases all other shares from other partners, then he gains from another partner is known as Gaining.
  9. If any of the parties decides to leave or resigns from the firm due to some discontentment then it is known as Resignation, while if all partners decide to leave the firm voluntarily or mutually after taking a decision they call it Exit.
  10. When any partner leaves or resigns from the firm then the gain ratio decreases and the sacrifice ratio increases. On the other hand, when a partner purchases all other shares from other partners then the gain ratio increases, and the sacrifice ratio decreases.
  11. Purchase of share of profit by one partner leads to entry or exit of any partner while in case the firm is dissolved due to some reasons such as bankruptcy, liquidation, etc., both partners gain or lose.