(a) Rightward shift in the demand curve (increase in demand) refers to a situation when quantity demanded of a commodity increases, even when own price of the commodity is constant. In other words, increase in demand occurs when quantity demanded of a commodity increases because of the factors, other than ‘own price of the commodity’. It is illustrated by following table and diagram.
| Of px (₹) |
Qx (Units) |
| 10 |
20 |
| 10 |
30 |
The diagram shows that demand curve shifts from D, to D2, even when own price of the commodity remains constant at ? 10 per unit.
Determinants of rightward shift in demand curve are :
1. Change in income : With the increase in income demand curve shifts to the right.
2. Change in tastes and preferences: If the tastes of the consumer change in favour of the good then demand curve will shift to the right.
(b) ‘Central Bank’ is the institution which enjoys the monopoly of note issue. Functions of the Central Bank :
(i) As ‘Bankers’ Bank’: There are usually hundreds of banks in a country. There should be some agency to regulate and supervise their proper functioning. This duty is discharged by the Central Bank.
Central Bank acts as Banker’s Bank in three capacities :
(i) It is custodian of their cash resources. Banks of the country are required to keep a certain percentage of their deposits with the Central Bank; and in this way the Central Bank is the ultimate holder of the cash reserves of commercial banks,
(ii) Central Bank is lender of last resort. Whenever banks are short of funds, they can take loans from the Central Bank. Tlius Central Bank is a source of great strength to the banking system,
(iii) It acts as a bank of central clearance, settlements and transfers. Its moral persuasion is usually very effective, so far as commercial banks are concerned.
(ii) As ‘Banker to Government’: Central Bank functions as a banker to the government – both central and state governments. It carries out all banking business of the government. Government keeps their cash balances in the current account with the Central Bank. Similarly Central Bank accepts receipts and makes payment on behalf of the governments. Also Central Bank carries out exchange, remittance and other banking operations on behalf of the government. Central Bank gives loans and advances to governments for temporary periods, as and when necessary, and it also manages the public debt of the country.
