ECONOMICS – 2017
Part – A (Marks : 60)
1. Answer the following questions (Alternatives are to be noted) : [2×10=20]
(a) Define a Giffen good.
Answer: A Giffen good may be defined as a strongly inferior good for which the negative income effect is stronger than the substitution effect.
Or, Mention any two exceptions to the law of demand.
Answer: Two exceptions of the law of demand are –
(i) In case of habituated goods, such as cigarette, and alcohol, the law of demand does not work.
(ii) In case of luxury items, such as diamonds, people will buy less if the price drops thinking there is a degrade in quality.
(b) What is 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 decreases from Rs. 8 to Rs. 4, the quantity demanded increases from 10 kg to 15 kg respectively. What is the magnitude of price elasticity of demand?
Answer:
(c) What do you mean by average cost of a firm?
Answer: Average cost can be defined as total cost per unit of output. Therefore, Average Cost (AC) = Total Cost (TC) / Total Output.
Or, Give two examples of a firm’s variable cost.
Answer: Two examples of variable costs are – raw material costs and transport costs.
(d) What will be the relation between price and marginal revenue, if the magnitude of price elasticity of demand is infinity?
Answer:
(e) What is meant by fiscal policy?
Answer: The policy of using the government budget in order to achieve certain pre-determined objectives is known as fiscal policy.
Or, What is deficit financing?
Answer: Budget deficit is the excess of government’s total expenditure over its total revenue. Financing of this budget deficit is called deficit financing.
(f) Define range as a measure of dispersion.
Answer: Range of a set of observations is the difference between the maximum value and the minimum value i.e., Range = Xmax – Xmin.
Or, Mention any two advantages of standard deviation.
Answer: Two advantages of standard deviation are:
(a) S.D is based on all observations.
(b) S.D is less affected by sampling fluctuations.
(g) What do you mean by technological unemployment?
Answer: Technological unemployment is unemployment that occurs due to the introduction of new technology. For example: when a new technology is introduced, old technicians lose their jobs.
Or, Define poverty line.
Answer: Poverty line refers to the money value of the minimum quantities of those goods and services which are needed for the subsistence of an individual.
(h) Why is general insurance called contract of indemnity?
Answer: In case of general insurance, compensation is paid only if the loss takes place due to any of events mentioned in the policy document. For this reason, general insurance is called a contract of indemnity.
(i) Mention any two recommendations of the Malhotra Committee for reforms in India’s insurance sector.
Answer: Two recommendations of the Malhotra Committee in 1993 are:
(a) The monopoly of the insurance sector should be abolished.
(b) The four subsidiaries of GICI should be organised as separate independent companies.
(j) Mention two disadvantages India suffers from as a member of the World Trade Organisation.
Answer: Two disadvantages India suffers as a result of establishment of the World Trade Organisation are:
(a) In the new system, India will have to change the patent law drastically.
(b) According to agreement of TRIMs, there should not be any discrimination between foreign and domestic investments.
2. Answer the following questions (Alternatives are to be noted) : [5×8=40]
(a) Explain, with the help of a diagram, the relation between average and marginal product.
Answer: Click here
Or, Explain the concepts of internal and external economies arising out of large scale production.
Answer: Click here
(b) Show how the price of a commodity is determined through the interaction of aggregate demand and aggregate supply in a perfectly competitive market.
Answer: Click here
Or, Explain how a firm reaches long run equilibrium in a perfectly competitive market.
Answer: Click here
(c) Explain how rent element can exist in the earnings of any factor of production.
Answer: Click here
Or, Discuss how wage rate is determined by the marginal productivity of labour.
Answer: Click here
(d) Briefly discuss the value added method of measuring national income.
Answer: Click here
(e) Describe the functions of the central bank.
Answer: Click here
Or, Give a brief account of the different methods of credit control by the central bank.
Answer: Click here
(f) Discuss the different components on the credit side and on the debit side of balance of payments of a country.
Answer: Click here
Or, How is the equilibrium exchange rate determined under the flexible exchange rate system?
Answer: Click here
(g) Explain, with the help of a diagram, the properties of Lorenz curve.
Answer: Click here
Or, The number of members of six families are respectively :
10, 9, 10, 9, 9, 10.
Find the standard deviation of the number of members of these families.
Answer: Click here
(h) Describe the causes of income inequalities in India.
Answer: Click here
Part – B (Marks : 20)
1. Select the correct answer from the alternatives : [1×10=10]
(i) The average cost curve in the short run is
(a) concave
(b) downward sloping
(c) upward rising
(d) U-shaped
(ii) The minimum point of average cost curve is called
(a) shut down point
(b) point of minimum loss
(c) point of no-profit no-loss
(d) point of maximum revenue
(iii) If the percentage change in the quantity supplied is equal to the percentage change in price, then the price elasticity of supply is
(a) 0
(b) less than 1
(c) 1
(d) greater than 1
(iv) In a monopoly market at the equilibrium position market price will be
(a) equal to AC
(b) equal to MC
(c) equal to AR
(d) equal to MR
(v) If the value of marginal propensity to consume is 3/4, the value of marginal propensity to save will be
(a) 3
(b) 4
(c) 3/4
(d) 1/4
(vi) Increase in government expenditure by Rs. 10,000 results in an increase in national income by Rs. 60,000. In this case, the value of marginal propensity to consume is
(a) 2/3
(b) 3/4
(c) 4/5
(d) 5/6
(vii) The value of Lorenz Ratio must be
(a) negative
(b) greater than 0 but less than 1
(c) greater than 1 but less than 2
(d) greater than 2
(viii) The main cause of poverty in India is
(a) Black money
(b) Price rise
(c) Unemployment
(d) Negative trade balance
(ix) Seasonal unemployment exists mainly in the
(a) Educational sector
(b) Industrial sector
(c) Agricultural sector
(d) Transport sector
(x) Life Insurance Corporation of India was established in the year
(a) 1948
(b) 1951
(c) 1956
(d) 1961
2. Answer the following questions (alternatives are to be noted) : [1×10=10]
(i) Fill in the blank : If prices of factors of production rise, the supply curve of the commodity shifts to the …………
Answer: False.
Or, Fill in the blank : If percentage change in quantity supplied in less that the percentage change in price, the price elasticity of supply is …………. than unity.
Answer: Less.
(ii) Write true or false : All firms in a perfectly competitive market sell a homogeneous product.
Answer: True.
Or, Write true or false : In an oligopoly market numerous buyers and sellers compete with each other.
Answer: False.
(iii) Write true or false : In a monopoly market, AR is always equal to MR.
Answer: False.
Or, Write true or false : A monopolistic firm earns only normal profit in its short-run equilibrium position.
Answer: False.
(iv) Fill in the blank : In the mark-up theory, Price = …………. + mark up.
Answer: AVC.
(v) Determine the range of the following set the values :
228, 145, 315, 97, 113 and 298.
Answer: 218.
(vi) Fill in the blank : If the inequality of income is …….. the Lorenz curve coincides with the line of perfect equality.
Answer: Nil.
Or, Fill in the blank : If each value of a variable is the same, the value of standard deviation will be …………
Answer: Zero.
(vii) Fill in the blank : The number of persons below the poverty line is counted in the …………… method.
Answer: head count.
Or, Fill in the blank : In case of disguised unemployment, the marginal productivity of labour is …………..
Answer: Zero.
(viii) Write true or false : To enquire into the inequality of income distribution in India, a committee was appointed in 1960 under the chairmanship of Prof. Mahalanobis.
Answer: True.
(ix) Write true or false : Economic reforms programme was first adopted in India in the year 1996.
Answer: False.
(x) Which of the following insurance companies is not in the government sector?
(a) National Insurance
(b) United India Insurance
(c) New India Assurance
(d) Tata AIG General Insurance
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