ECONOMICS – 2016
Part – A (Marks : 60)
1. Answer the following questions (Alternatives are to be noted) : [2×10=20]
(a) State the law of demand.
Answer: Other things remaining constant, the law of demand expresses an inverse relationship between price and quantity demanded of any commodity.
Or, What is meant by an inferior good?
Answer: Inferior goods are those goods for which income effect is negative. The demand for such goods decreases when income of the consumer rises and vice versa. For example: When the income of people rises, people buy branded clothes rather than inferior quality clothes.
(b) Define income elasticity of demand.
Answer: Other things remaining constant, the percentage change in quantity demanded of any commodity due to one percent change in income, is called the income elasticity of demand for that commodity.
Or, As the price of a commodity increases from Rs. 6 to 9, the quantity demanded decreases from 10 kg to 5 kg. What is the magnitude of price elasticity of demand?
Answer:
(c) Define marginal cost of production.
Answer: Marginal cost refers to the additional cost of producing one additional unit of output. Therefore, Marginal Cost (MC) = TC(n) – TC(n-1) .
Or, Why long-run cost never exceeds short-run cost of production?
Answer: Whether increases of decreases the production, the firm has to bear the fixed cost which were incurred in the short run. That’s why short run cost will be be always equal or greater than long run cost. In other words, long run cost can never exceed short run cost of production.
(d) Show that average revenue and price of the product of a firm are equal to each other.
Answer:
Or. If price is variable, how are average revenue and marginal revenue related?
Answer: When price (p) is variable, the relation between average revenue (AR) and marginal revenue (MR) is –
(i) When P increases, MR>AR,
(ii) When P decreases, MR<AR.
[Where P=AR]
(e) What is meant by expansionary fiscal policy?
Answer: Fiscal policy that aims at raising the effective demand is known as expansionary fiscal policy.
Or, What is government expenditure multiplier?
Answer: It is seen that change in the equilibrium level of income is a multiple of the change in the level of government expenditure on goods and services. This is known as government expenditure multiplier which is represented by 1/1-b.
(f) What is the meaning of dispersion?
Answer: A measure of dispersion measures numerically the extent by which individual observations deviate from the central value on the average.
(g) What is disguised unemployment?
Answer: Disguised unemployment refers to those surplus workers who are apparently involved in any work but are not contributing to total output. Therefore, their contribution to total product is zero.
Or, Mention two causes of income inequality in India.
Answer: Two causes of income inequality in India are –
(i) Inheritance law and (ii) Tax evasion.
(h) Mention two advantages which India enjoys as a member of World Trade Organisation.
Answer: Two advantages that India enjoys as a member of the WTO are:
(a) Exports of agro-based industrial goods in India are likely to increase.
(b) If the export and import of services are liberalised in India, India can export labour services.
(i) Why is life insurance called contract of assurance?
Answer: Life insurance is called a contract of assurance because in the case of life insurance the insurer gives the assurance of payment of a certain sum of money either to the insured or to the legal heir or to the nominee of the insured.
(j) What do you mean by liberalisation of foreign trade?
Answer: Liberalisation of foreign trade refers to a reduction in the control of exports and imports, free exchange of capital, labour, service etc.
2. Answer the following questions (Alternatives are to be noted) : [5×8=40]
(a) Explain the law of returns to scale in production.
Answer: Click here
Or, Give an account of the law of variable proportions in the short-run.
Answer: Click here
(b) What are the main characteristics of a perfectly competitive market?
Answer: Click here
Or, Show how the short supply curve of a perfectly competitive firm can be derived from its marginal cost curve.
Answer: Click here
(c) Discuss the assumptions of marginal productivity theory of distribution.
Answer: Click here
Or, Explain how the rate of interest is determined by liquidity preference.
Answer: Click here
(d) Explain how national income is obtained as the sum total of incomes of the factors of production.
Answer: Click here
Or, Discuss the difficulties of measurement of national income of a country.
Answer: Click here
(e) Discuss the functions of commercial banks.
Answer: Click here
(f) Show the difference between Current account and Capital account in the balance of payments.
Answer: Click here
(g) Find the standard deviation of the numbers – 20, 19, 20, 19, 19, 20.
Answer: Click here
(h) Briefly discuss the features of different types of unemployment in India.
Answer: Click here
Or, What are the causes of persistence of poverty in India?
Answer: Click here
Part – B (Marks : 20)
1. Select the correct answer from the alternatives : [1×10=10]
(i) The second order or sufficient condition for maximization of profit of a firm in a perfectly competitive market is
(a) MR = MC
(b) MC curve is upward rising
(c) MC curve is downward sloping
(d) P = MR
(ii) A condition of equilibrium of a monopolist is
(a) MR = AC
(b) MR = MC
(c) AR = MC
(d) AR = AC
(iii) If government expenditure and taxes increase by equal amount then the value of the income multiplier will be
(a) 0
(b) 1
(c) more than 1
(d) less than 1
(iv) Which of the following economists is not associated with measurement of poverty?
(a) Minhas
(b) Mahalanobis
(c) Pranab Bardhan
(d) Dandekar and Rath
(v) World Trade Organisation was established in the year
(a) 1991
(b) 1992
(c) 1994
(d) 1995
(vi) If a firm stops its production in the short-run the amount of its total cost will be
(a) Total variable
(b) Average variable
(c) Total fixed cost
(d) Average fixed cost
(vii) Which one of the following factors causes the supply curve of a product to shift to the right?
(a) Fall in labour’s wage rate
(b) Reduction in government subsidy in the production of the commodity
(c) Natural calamity
(d) Disruption in the supply of raw materials
(viii) The sum of average propensity to consume and average propensity to save will be
(a) 0
(b) 1/2
(c) 1
(d) 2
(ix) The lowest value of standard deviation is
(a) -2
(b) -1
(c) 0
(d) 1
(x) What is measured by Head Count Ratio?
(a) National income
(b) Unemployment
(c) Inflation
(d) Poverty
2. Answer the following questions (alternatives are to be noted) : [1×10=10]
(i) Write true or false : Price discrimination is one of the features of a perfectly competitive market.
Answer: False.
Or, Write true or false : The market in which there are numerous buyers but only a few sellers, is called an oligopoly market.
Answer: True.
(ii) Write true or false : Mark up is nothing but planned profit.
Answer: True.
(iii) Fill in the blank : Variance is …………. of standard deviation.
Answer: Square.
(iv) Fill in the blank : Monopoly Enquiry commissions was set up in the year …………..
Answer: 1964.
(v) Fill in the blank : In 1993, the government of India appointed ……….. committee for reform in the insurance sector.
Answer: Malhotra.
(vi) Write true or false : A perishable good has a very low price elasticity of supply.
Answer: True.
Or, Write true or false : The supply curve will be horizontal if the supply is perfectly inelastic.
Answer: False.
(vii) Write true or false : There is no difference between firm and industry under monopoly.
Answer: True.
Or, Write true or false : In a monopoly market, MR is always greater than AR.
Answer: False.
(viii) Write true or false : The value of range of a set of observations cannot be negative.
Answer: True.
Or, Write true or false : The standard deviation of a set of 20 observations is 10. If 2 is added to each of these observations, the new standard deviation will be 12.
Answer: False.
(ix) Write true or false : There is close relation-between unemployment and poverty.
Answer: True.
Or, Write true or false : Income inequality has been increased in India during the plan period.
Answer: True.
(x) Fill in the blank : Life Insurance Corporation of India was established in the year ……………..
Answer: 1956.
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