CBSE-XII (2018) CBSE BOARD PAPER WITH SOLUTION ECONOMICS. Candidate must write the Code on the titile page of the answer-book.
|
|
- Evelyn Page
- 5 years ago
- Views:
Transcription
1 CBSE-II (2018) CBSE BOAR PAPER WITH SOLUTION ECONOMICS Code No. 58/3 Roll.No. Candidate must write the Code on the titile page of the answer-book. Time allowed : 3 hours Maximum Marks : 80 Code number given on the right hand side of the question paper should be written on the title page of the answer-book by the candidate. Please write down the Serial Number of the question before attempting it. 15 minute time has been allotted to read this question paper. The question paper will be distributed at am. From a.m. to a.m., the students will read the question paper only and will not write any answer on the answer-book during this period. GENERAL INSTRUCTIONS 1. There are 24 Questions in this Paper. All questions in both the Sections are Compulsory. 2. Q. Nos. 1 4 and are Very Short Answer Questions carrying 1 Mark each. They are required to be answered in One Sentence each. 3. Q. Nos. 5 6 and are Short Answer Questions carrying 3 Mark each. Answers to them should normally NOT ECEE 60 Words each. 4. Q. Nos. 7 9 and are also Short Answer Questions carrying 4 Mark each. Answers to them should normally NOT ECEE 70 Words each. 5. Q. Nos and are Long Answer Questions carrying 6 Mark each. Answers to them should normally NOT ECEE 100 Words each. 6. Answers should be brief and to the point and the above word limits should be adjered to as far as possible. PAGE - 1
2 (A) Q 1. 1 Mark Questions SECTION A MICRO ECONOMICS When the Total Fixed Cost (TFC) of producing 100 units is ` 30 and the Average Variable Cost (AVC) is ` 3, Total Cost (TC) is : (A) ` 3 (B) ` 30 (C) ` 270 () ` 330 Q TFC AVC TC TVC TC = AVC Q = = ` 300 = TFC + TVC = = ` 330 Ans. () Q 2. When the Average Product (AP) is Maximum, the Marginal Product (MP) is : (A) Equal to Average Product (AP) (B) Less than Average Product (AP) (C) More than Average Product (AP) () Can be any one of the above. (A) Equal to Average Product (AP) Output O Units of V.F.(N) MP AP Q 3. State ONE example of Positive Economics. More Quantity is emanded due to Fall in its Price and Less Quantity is emanded due to Rise in its Price. Q 4. efine Fixed Cost (FC). That Cost of Production which remains Constant, whether the Level of Output Increases / ecreases or becomes Zero. Such as Rent. PAGE - 2
3 (B) 3 Marks Questions Q 5. Explain the Central Problem of Choice of Technique. Explain the Central Problem of For Whom to Produce. After deciding the commodity and quantity of production, the economy has to decide that by which method they should produce this commodity because there are several methods and techniques available to produce the same commodity. This problem arises because available resources are limited and have alternative uses. For eg. in re-construction sector we have to choose among labour intensive technique (technique where ratio of labour is more than capital) and capital intensive technique (technique where ratio of capital is more than labour), in agriculture sector we have to make choice between extensive and intensive cultivation. Generally labour surplus economy prefers labour intensive techniques and capital surplus economy prefers capital intensive techniques. This problem is related with distribution of income generated or output produced. In this problem the economy has to decide that who should consume how much. As we know that output produced is the combined effort of different individuals or different means of production. So in this problem we studies how output produced or income generated is distributed among different means of production or different individuals. This distribution can be classified in personal distribution and functional distribution. (i) Personal distribution : The distribution of income generated or output produced among different individuals is termed as personal distribution. (ii) Functional distribution : The distribution of income generated or output produced among different means of production is termed as functional distribution. Such as rent to landlord, wages to labourer, interest to capitalist and profit to entrepreneur. In market economy the decision for whom to produce is taken by the distribution of income. Because this distribution determines the purchasing power of the people and a capitalist like to produce for that section of society which is capable to purchase so that his profit will be maximum. Q 6. What is meant by Inelastic emand? Compare it with Perfectly Inelastic emand. When the Percentage Change in Quantity emanded is Lesser than the Percentage Change in Price, then it is termed as Inelastic emand. Basis Inelastic emand Perfectly Inelastic emand P % P e P< 1 % Q..< % P P 1 (e = 0) P iagram P 1 Price % Q O Q Q 1 Quantity Price P P 2 O Q Quantity efinition When the percentage (or proportionate) When the quantity demanded remains change in quantity demanded is lesser constant (or changes very minutely) than the percentage (or proportionate) with the too much change in its price change in price, then it is termed as (whether price increases or decreases inelastic demand. then it is termed as perfectly inelastic demand. Co-efficient less than one (ep< 1). Zero (ep = 0). Real or Imaginary can be found in necessary goods cannot be found in practical world PAGE - 3
4 Price (C) Q 7. 4 Marks Questions When the Price of a Commodity changes from ` 4 Per Unit to ` 5 Per Unit, its Market Supply rises from 100 Units to 120 Units. Calculate the Price Elasticity of Supply. Is Supply Elastic? Give reason. P Q e s = Q P P Q = ( ) 4 (5 4) 100 = = 4 5 = 0.8 (e p < 1) No, the Supply is NOT Elastic. It is Inelastic because the Co-efficient is Less than ONE (or the Proportionate Change in Quantity Supplied is Lesser than Proportionate Change in Price. Q 8. What is meant by Price Ceiling? Explain its Implications. Price ceiling means, fixing the price of commodity by government below the equilibrium price to benifit the consumers (when the equilibrium price is presumed to be too high so that the common S buyer is unable to afford such commodities at that price). Sometimes the equilibrium price determined (OP) by the independent powers of demand and supply may be very high, P E so that most of the consumers are unable to purchase this P 1 commodity at the prevailling prices, specially in the case of necessary commodities like wheat, sugar, rice etc.. O In those cases government directly interfere in price Quantity determination and decide the price (OP 1 ) of the commodity below the equilibrium price. This price is also known as control price. In this condition government decides the maximum limit of price. At this price level the quantity demanded is more than the quantity supplied. The implication of Price Ceiling is as follows : (i) Shortage : Control price are lesser than equilibrium price, therefore sellers wants to sale less of the commodity whereas consumers wants to purchase more of the commodity, which creates the problem of shortage in market. (ii) Hoarding and Black Marketing : Because control price is lesser than the equilibrium price which will decrease the profit margin of sellers, therefore they will try to hoard the commodity as much as possible. ue to shortage and rationing some buyer will try to purchase more units by giving higher prices than control price, which lead to black-marketing. PAGE - 4
5 Q 9. Given the Price of a Good, how will a Consumer decide as to how much quantity to buy of that good? Explain. What is Indifference Curve? State THREE Properties of Indifference Curves. Consumer will buy that much amount of a commodity by which consumer receives maximum satisfaction from his given income and he has no tendency to make any changes in his existing consumption (or existing expenditure on commodity). Assumptions : (i) The consumer is assumed to be a rational person. His aim is to achieve maximum satisfaction through his limited monetary income. (ii) Utility derived from the consumption of commodity can be expressed in terms of numbers, such as 1, 2, 3, 4 etc. (iii) It is assumed that utility of commodity can be measured by money and marginal utility of money remains constant. (iv) Income and mental status of consumer remains constant during the act of consumption. (v) Price of concerned commodity and price of other commodities remains constant. (vi) Units of concerned commodity are homogenous. (vii) It is assumed that law of diminishing marginal utility operates for the commodity consumed. (viii) Other factors which can affect the utility are assumed to be remain constant. Condition for equilibrium :- MUx = Px Explaination of the law : Suppose Price of commodity = ` 10 per unit. MU of 1 ` (MU M ) = 5 utils As consumer buys any commodity then he has to make sacrifices in terms of money ( or in terms of utils) and in return he get some utility from the commodity. But due to application of law of diminishing marginal utility, the utility derived from every additional unit goes on diminishing. On the other hand the price of the commodity and marginal utility of money remains constant (due to assumptions of the law). Which means that the sacrifices made by the consumer remains constant. In our present example at first and second units of the commodity MUx > Px, which means that the sacrifices made by the consumer is lesser than the satisfaction gained by him at these units. So the consumer will increase the level of consumption in order to maximise the level of satisfaction until MUx becomes equal to the Px. But at fourth and fifth units of the commodity MUx < Px, which means that the sacrifices made by the consumer is greater than the satisfaction gained by him at these units. So the consumer will decrease the level of consumption in order to maximise the level of satisfaction until MUx becomes equal to the Px. Consumer will be in the state of equilibrium when marginal utility of commodity is equal to the marginal utility of money paid for it (or the sacrifices made by consumer becomes equal to the satisfaction gained by him). In our present example this condition is satisfied at 3rd unit of the commodity, which means that consumer will purchase 3 units of the commodity in order to maximise his satisfaction. y Q Mux (in utils) Px (in `) Px (in utils)=px (in `) MUm = = = = =50 P A B E O Q 1 Q Q 2 x C Units of commodity In present diagram at OQ 1 units of commodity MUx is AQ 1 and Px is BQ 1. Which means marginal utility of commodity is greater than price paid for the commodity (or satisfaction gained by consumer is more than the sacrifices made by him). In such conditions consumer will increase level of consumption until MUx becomes equal to Px in order to maximise his satisfaction. Similarly at OQ 2 units of commodity MUx is Q 2 and Px is CQ 2. Which means marginal utility of commodity is lesser than price paid for the commodity ( or satisfaction gained by consumer is lesser than sacrifices made by him). In such conditions consumer will decrease the level of consumption until MUx becomes equal to Px in order to maximise his satisfaction. At OQ level of consumption consumer will receive maximum satisfaction because at this level condition for consumer's equilibrium (MUx = Px) is satisfied where consumer is gaining maximum satisfaction. So at this level consumer has no tendency to change his existing level of consumption. So the consumer s equilibrium in present diagram is at OQ level of consumption. Utility P x MU x PAGE - 5
6 Indifference curve is a form of curve which shows all those combinations of two commodities which provides same level of satisfaction to the consumer, therefore the consumer is indifferent or neutral among chosing any of these combinations. He does not prefer any of the combination over the other combination because all of these combination provides same level of satisfaction. In the present diagram A, B, C, and E combinations provides same level of satisfaction. Units of y Three properties of indifference curves are as follows :- (i) Higher indifference curve represents higher level of satisfaction : Higher indifference curve shows higher level of satisfaction in comparison to lower indifference curve, because along the higher indifference curve we are using more units of one commodity with the same units of another commodity or more units of both the commodities. Therefore the satisfaction level of such 1 2 combinations will be more. As in the present diagram : At A combination O + O At B combination O + O 1 B > A At C combination O 1 + O C > A Commodity y O O A A B C E Units of x B C 2 1 Commodity x IC IC 2 IC 1 At combination O 2 + O 2 > A (ii) Indifference curves are negative sloping : Indifference curves are always slopes downwards to the right or negative sloping, because if consumer increases units of one commodity, then to maintain the same level of satisfaction consumer has to decrease the units of another commodity. So as the units of is increased then units of has to be decreased and vice-versa. ue to this negative relationship indifference curves are downward sloping. As in the present diagram as consumer moves from A to B the combination changes from O + O to O 1 + O 1. While moving from A to B, units of is increased and units of is decreased. Units of y y A O x x 1 Units of x Slope of indifference curve will never be horizontal, vertical or upward sloping because in all these three cases, the basic feature of indifference curve, i.e., same level of satisfaction is derived at different points along the same indifference curve, is neglected. (iii) Indifference curves are convex towards the origin : Indifference curves are convex towards the origin because marginal rate of substitution continously decreases (because as the stock of one commodity decreases its marginal importance for the consumer will continously increases and as the stock of another commodity increases its marginal importance for the consumer will continously decreases, therefore he is ready to sacrifice lesser and lesser units of one commodity for the every extra unit of another commodity to maintain the same level of satisfaction). As shown in the diagram when consumer increases one unit of commodity he decreases commodity P O A y 1 B C Commodity B IC Convex to origin equal to PQ, whereas for next unit of commodity he decreases commodity equal to QR. As we can see that PQ > QR, it represents that MRS xy is decreasing and due to that indifference curve will become convex towards the origin. Commodity Q R S IC PAGE - 6
7 () Q Marks Questions State THREE Characteristics of Monopolistic Competition. Which of the Characteristics separates it from Perfect Competition and Why? Explain the Implications of the following : (a) Freedom of Entry and Exit of Firms under Perfect Competition. (b) Non - Price Competition under Oligopoly. (i) (ii) (iii) Many Sellers : In monopolistic competition market, there are large number of firms producing the same commodity. An individual firm is not able to affect the market because the share of single firm is very minute proportion of total supply of the market. But the number of firms in this market is comparatively less than perfect competition market. Close Substitute Goods (Product ifferentiation) : In monopolistic competition market close substitutes of the commodity are available in the market. The commodity produced by different firms are similar but not identical. We can see the difference between commodities of different firms, in colour, taste, shape, size, brand name, trademark, etc. ue to this a firm can distinguish its product from others. In this market we can see a personal attachment by consumers to a particular firm. In monopolistic competition market a large number of firms produces the similar commodity. Every firm spends huge amount of monetary resources on advertisements, selling techniques, posters, banners etc. in order to increase their sales. This cost plays an important role in their sales. Free Entrance and Exit : In monopolistic competition market there is free entrance and exit of the firm. There is no barrier or restrictions on them just like perfect competition market. In monopolistic competition market the firm will receive only normal profit in long run period due to free entrance and exit of the firm. If in short run period the firms are getting super-normal profit, then some new firms will attracts towards the market and as the number of firms increases in the market, the supply of commodity also increases, which results in fall in price and this process will continue until AR becomes equal to AC and vice-versa. Therefore firms will receive normal profit in long run. BASIS Perfect Competition Monopolistic Competition 1. Selling Cost In this market selling cost is absent In this market selling cost exist and because goods produced by firms plays an important part in determination are homogenous. Firm did not get of sales of particular firm because the direct response from the consumers. commodity produced by different firm So it is a wasteful expenditure from is similar but not identical i.e. close firms part. substitute to each other. So they spent huge amount of money on sale promotions. 2. AR and MR In this market AR = MR and both In this market AR > MR and both these these curves are parallel to axis curves are downward sloping because because firms are price takers means firms are price makers means they are they are following dependent price following independent price policy. policy. They are charging same They are charging lesser amount of amount of money for every additional money for every additional unit of the unit of the commodity. Therefore MR commodity in order to increase their remains constant and AR equivalent sales to increase their profit. Therefore to MR. MR decreases and AR also decreases but AR is greater than MR. 3. emand curve In this market demand curve is In this market demand curve is elastic perfectly elastic because on large because of many sellers and many number of sellers and homogenous sellers and many close substitute goods. goods. PAGE - 7
8 (a) (b) In long run peiod a perfect competitive firm always receives normal profit due to free entrance and exit of firms. In short run period if there is a situation of abnormal profits or super normal profits ( AR > AC ), then it will attracts new firms to the industry and existing firms try to expand their production process. New firms will easily enter into the market because of free entrance. ue to entrance of new firms, number of firms operating in the market will increases. It will increases the competition in the market. ue to this, supply of the commodity in the market will also increases, which will lower the prices and profits. This condition will continue until the price (AR) becomes equal to AC. So supernormal profit will converts into normal profit in long run period due to free entrance of firms in the market and vice versa. In oligopoly market there are few firms producing same commodity. Goods produced by them are either homogenous or ifferentiated (close substitute). They tend to avoid the price war because each firm ultimately loses huge amount of money in such conditions. So they try to focus on non price competition i.e. competition other than price. They spent huge amount of money on sale promotions, such as in India different firms are selling soft drinks in the market. To promote their sales they are spending huge money on advertisements, running different schemes to promote sales, sponsor different games and sports. ue to all these reasons the amount of selling tends to be very high and in certain cases it even becomes more than cost of production. So as a result its market price tends to be very high. It is considered as wastage of resourses and reduction in social welfare. Q 11. Explain the conditions of Consumer s Equilibrium using Indifference Curve Analysis. Consumer s equilibrium means the level of consumption at which the consumer gets maximum satisfaction with his limited monetary income and the consumer has no tendency to make any changes in his existing consumption or existing expenditure on commodities. Assumptions : In indifference curve analysis there are some assumptions which are used in explanation of consumer's equilibrium : (i) Consumer is rational and make rational expenditure on commodities to attain maximum satisfaction. (ii) The consumer has a fixed income to be spent entirely on two commodities. (The two commodities can be extended to many by using algebra). (iii) Prices of concerned commodities, prices of other commodities and income of consumer remain constant. (iv) MRS continously diminishes. Conditions for Consumer's Equilibrium : There are three conditions which are required for the consumer's equiiibrium. If these conditions applies, then the consumer is said to be in equiiibrium. (i) (ii) (iii) The total amount of money available should be equal to total money spent on two commodities. The budget line should be tangent with the indifference curve (or the slope of budget line should be equal to the slope of indifference curve or ratio of the prices of two commodities must be equal to the marginal rate of substitution). At the point of tangency indifference curve must be convex towards the origin. A Commodity O C Slope of IC> Slope of Budget line E (MRS > Commodity xy. Slope of IC= Slope of Budget line (MRS = P x P y ) B P x xy ) P y Slope of IC< Slope of Budget line P (MRS < x xy ) P y IC 2 IC 1 PAGE - 8
9 Explanation : (i) First condition : The total amount of money available to the consumer should be equal to the total expenditure made on these two commodities together. This condition fulfills only on the budget line. TOTAL MONETAR INCOME = ( Px Qx ) + ( Py Qy ) Point C,,E satisfies this condition of equilibrium. But the consumer give preference to combination of point E in comparison to C and because point E is on the IC 2 whereas point C and are on IC 1. As we know that higher indifference curve shows higher level of satisfaction. Therefore the consumer will give prefrence to E combination, as it provides higher level of satisfaction without any extra expenditure. (ii) (iii) Second condition : The budget line should be tangent to the indifference curve or we can say that the slope of budget line should be equal to the slope of indifference curve. Slope of the budget line = Px / Py, whereas the slope of indifference curve = MRSxy. In the present diagram at C point MRSxy > Px / Py (means units of commodity which a consumer is willing to sacrifice is more than units of commodity which a consumer has to sacrifice in order to consume one extra unit of commodity). So in order to maximise the total satisfaction consumer will shift the resourses from commodity to commodity (or increase the consumption of commodity and decrease the consumption of commodity) until marginal rate of substitution becomes equal to the ratio of the prices of two commodities or willingness to sacrifice becomes equal to the actual sacrifices. In the present diagram at point MRSyx > Py / Px (means units of commodity which a consumer is willing to sacrifice is more than units of commodity which a consumer has to sacrifice in order to consume one extra unit of commodity). So in order to maximise the total satisfaction consumer will shift the resourses from commodity to commodity (or increase the consumption of commodity and decrease the consumption of commodity) until marginal rate of substitution becomes equal to the ratio of the prices of two commodities or willingness to sacrifice becomes equal to the actual sacrifices. At E point MRSxy = Px / Py (means consumer is willing to sacrifice same amount of commodity which he has to sacrifice in order to consume one extra unit of commodity). So consumer will not shift its resourses from commodity to commodity, means point E represents consumer s equilibrium. Third condition : At the point of tangency indifference curve must be convex towards the origin. At point E indifference curve is convex towards the origin. Therefore point E satisfies the third condition also. So in order to attain the maximum satisfaction the above three conditions of equilibrium should be applied at the same point. In the present diagram at E point all three conditions are satisfied, therefore point E will be the equilibrium point and that s why consumer will consume O units of commodity and O units of commodity in order to maximise the level of satisfaction. Q 12. Explain the Conditions of Producer s Equilibrium in terms of Marginal Revenue (MR) and Marginal Cost (MC). The producer's equilibrium refers to the situation in which producer maximizes his profits (or minimizes his loss) and the producer has no intention to make any changes in his existing production or to make any changes in his existing expenditure on means of production. Profit of the firm operating in perfect competition market, is maximised where the price line ( AR = MR ) intersects the MC curve and MC should be rising. ASSUMPTIONS : (i) Rational behaviour of producer. (ii) The goal of producer is profit maximisation. (iii) Price of means of production remains constant. (iv) There is perfect competition exist in market. (vi) Technique of production and management remains constant. PAGE - 9
10 CONITIONS F PROUCER S EQUILIBRIUM : (a) MR = MC. (b) MC should be rising at that level of output. (or MC curve intersects MR curve from below). If the producer is producing OQ 1 units of commodity (output less than OQ), MR is equal to AQ 1 and MC is equal to BQ 1 which means MC < MR. W hich means that the cost incurred on producing additional unit is lesser than the revenue received from the sale of that unit, which indicates that the producer is receiving profit on that unit. So in order to maximise total profit producer will further increase the level of output until MC becomes equals to MR. C/R P O R Q3 Output A E B Q Q 1 MC C AR = MR Q 2 But if the producer is producing OQ 2 units of commodity (output more than OQ), MR is equal to Q 2 and MC is equal to CQ 2 which means MC > MR. Which means that the cost incurred on producing additional unit is more than the revenue received from the sale of that unit, which indicates that the producer is receiving loss on that unit. So in order to minimise the loss or to maximise the profit producer will decrease the level of output until MC becomes equals to MR. But if the producer is producing at OQ 3 units of the commodity then MR is equal to MC but MC is falling means first condition for equilibrium is satisfied but not the second condition. At this particular unit firm will receive only loses because on all unit before this output level MC > MR means firm recovered only loss on all those units but if firm further increases production beyond this level then they will receive super normal profit on all units. So the firm will increses the level of output till again MR and MC both becomes equal. At OQ units of commodity then MR and MC both are equal to EQ which means MC = MR and MC is rising. Which means both the conditions for producer s equilibrium are satisfied at this level means firm is receiving maximum total profit at this output level. So producer will maintain this level of output for maximum profit. PAGE - 10
11 PART B MACRO ECONOMICS (A) 1 Mark Questions Q 13. efine Money Supply. The Supply of Money refers to the volume of money held by the public in an economy at any given time. The term public includes all economic units, such as householders, firms etc. (except Government and Banking system) Q 14. Which of the following affects National Income? (A) Goods and Services Tax (B) Corporation Tax (C) Subsidies () None of the above (B) Corporation Tax. Because Corporation Tax is a Part of Profit and Included in National Income. Q 15. Why does Consumption Curve NOT Start from the Origin? Because Consumption Exist even at Zero Level of Income i.e. Autonomous Consumption. It is must for Survival because you have to Consume even at Zero Income. It starts from above the origin. Q 16. The Central Bank can Increase Availability of Credit by : (A) Raising Repo Rate (B) Raising Reverse Repo Rate (C) Buying Government Securities () Selling Government Securities (C) Buying Government Securities (B) 3 Marks Questions Q 17. Given Nominal Income, how can we find Real Income? Explain. Which among the following are Final Goods and which are Intermediate Goods? Give reasons. (a) Milk Purchased by a Tea Stall (b) Bus Purchased by a School. (c) Juice Purchased by a Student from the School Canteen. Nominal Income : When Output Produced in Current ear is Valued on the Basis of Prices Prevailing in Current ear. Real Income : When Output Produced in Current ear is Valued on the Basis of Prices Prevailing in Base ear. Basic ifference between these concepts is Price Level (output considered in both these concepts belongs to same year). If Nominal Income is given and we have to find Real Income, then we can use this formula : Real Income = Nominal Income 100 Pr ice Index let us Assume : Nominal Income = ` 240 Crores ; Price Index (P I) = Real Income = 100 = ` 200 Crores 120 PAGE - 11
12 (a) (b) (c) Intermediate Goods. Because it is Purchased by Producer for Further Production and Used as Non-urable Producer Goods. Final Capital Goods. School is a Producing Enterprise and used as urable Producer Goods for Further Income Generation. Final Consumer Goods. Because Juice Purchased by a Student from School Canteen means a Good Purchased by Consumer for Consumption Purpose or to Satisfy his Needs. Q 18. efine Multiplier. What is the relation between Marginal Propensity to Consume (MPC) and Multiplier? Calculate the Marginal Propensity to Consume (MPC), if the Value of Multiplier is 4. The multiple increase in income due to increase in investment, is known as multiplier. or Multiplier means the ratio of change in income to the change in investment". K Here K = Multiplier ; = Change in Income; I I = Change in investment. There is a positive relationship between MPC and K. As the value of MPC increases the value of multiplier will also increases and as the value of MPC decreases the value of multiplier will also decreases. 1 K = 1 MPC As the value of MPC increases, means consumption expenditure increases and due to increase in consumption expenditure, income generation will also increases (because expenditure of one person is income of another person). ue to increase in income generation the effect of multiplier will also increases and that s why the value of multiplier will also increases and vice-versa. k = 4 MPC =? k = 1 1 MPC 4 = 1 1 MPC 4 4 MPC = 1 4 MPC = MPC = + 3 MPC = 3 4 = 0.75 PAGE - 12
13 (C) 4 Marks Questions Q 19. What is meant by Inflationary Gap? State THREE measures to Reduce this Gap. What is meant by Aggregate emand? State its Components. The extent at which present aggregate demand is greater A AS 1 > Af than the aggregate demand which is required for full Total (A > AS) employment level, is known as inflationary gap. This gap outlay is termed as Inflationary Gap because price of goods and E 1 services increases in this condition. This condition can be L found in economy in the case of Excess emand. In such { E cases Aggregate emand would be more than Aggregate C Supply. Inflationary Gap = A 1 A f O f = L 1 f E f National Income = LE (i) Increase in CRR : Central bank increase the CRR to control the condition of excess demand, due to this commercial bank has to keep more ratio of its deposits with central bank which decreases their credit creation ability and hence the credit creation also decreases which in turn decreases the money supply and aggregate demand of economy. (ii) Increase in SLR : Central bank increases the SLR to control the condition of excess demand, due to this commercial bank has to keep more ratio of its deposits with itself, which decreases their credit creation ability and hence the credit creatin also decreases which in turn decreases (iii) the money supply and aggregate demand also decreases. Selling of Securities in Open Market : Central bank starts to sale the securities in open market with the help of commercial banks, this will decreases the availability of cash with commercial banks and hence decreases the credit creation ability of commercial banks. Which would further decreases the credit creation and money supply in an economy and hence aggregate demand also decreases. emand of all final goods and services by all the consumers of an economy at given price level is known as aggregate demand. The components of aggregate demand are :- A.. = C + I + G + N.E. (a) (b) (c) (d) emand for Private Consumption (C) : The demand of goods and services by the households during a given time period, is included in this. It is affected by many variables such as, price of the goods, income of consumer, expected income, wealth, tastes and preferences of individuals, consumption function, propensity to consume, etc. emand for Private Investment (I) : It includes the investment in new fixed assets and change in stock, such as addition of new machinery, residential structures, etc. This investment demand is affected by rate of interest and marginal efficiency of investment. emand for Government Expenditure (G) : It includes the expenditure made by government for collective wants (such as Government schools, hospitals, roads, etc.) and investment expenditure on Government enterprises. This expenditure depends on the condition of economy, form of Government, policies of Government, needs of public, etc. emand for Net Exports (N.E.) : Net exports is the difference between exports and imports. It depends on the quality of goods produced, price of the commodity, availability of commodity, income and living standard of people of that country, etc. A 1 A f PAGE - 13
14 Q 20. The Value of Marginal Propensity to Consume is 0.6 and Initial Income in the Economy is ` 100 Crores. Prepare a schedule showing Income, Consumption and Saving. Also show the Equilibrium Level of Income by assuming Autonomous Investment of ` 80 Crores. MPC = 0.6 Autonomous Investment = ` 80 Crores Initial Income = ` 100 Crores Let us assume, Autonomous Consumption = ` 40 Crores Change in Income = ` 100 Crores. y C S I C = MPC 0.4 A = C + I = = = = = = = = = = = = = = At Equilibrium level of Income, Aggregate emand (A) = Aggregate Supply (AS) C + I = y C + b y + I = y 40 + (0.6 y) + 80 = y y = y 120 = y 0.6 y 120 = 0.4 y y = ` 300 Crores 0.4 Q 21. Explain the Role of the Reserve Bank of India (RBI) as the Lender of Last Resort. The central bank acts as a lender of the last resort for commercial banks. When commercial banks fail to meet obligations of their depositors or they are in some financial crisis, they try to arrange it from market or from other commercial bank. But if they fail to arrange the funds the last destination for them is Central bank. Central bank comes to their rescue. The central bank advances necessary credit against eligible securities subject to certain terms and conditions. This saves banks from a possible breakdown and hence works as ultimate financer to the commercial banks. Central bank never refuses to accommodate any eligible bank and help them in need. PAGE - 14
15 () 6 Marks Questions Q 22. (a) Explain the Impact of Rise in Exchange Rate on National Income. (b) Explain the Concept of eficit in Balance of Payments (BoPs). (a) (b) Rise in foreign exchange rate means now to arrange one unit of foreign currency we have to sacrifice more units of domestic currency. As a result exports now becomes cheaper and hence they increase and imports becomes costlier and hence they decreases. this will results in increase in national income. Means Indian goods will become cheaper for foreigners and foreign goods becomes costlier for Indians. So there will be more demand of Indian goods which results in more investments, more production and more income generation. Balance of payments is a systematic record of all economic transactions which are occuring between normal residents of reportin countries with rest of the world during an accounting year. eficit in Balance of Payments means that the sum of credit side of balance of payment is lesser than the sum of debit side of balance of payment. (or in other words sum of balance on current account and balance on capital account is negative). Which means inflow of currency is lesser than outflow of currency. That means that receipts of foreign exchange is lesser than the payment obligations. Which means we have to arrange foreign exchange to meet out this gap. Causes responsible for this deficit are increase in imports, decrease in exports, large scale outflow of foreign capital and decrease in inflow of foreign capital, etc. This deficit can be meet out through by selling gold in international market, by using reserves of foreign exchange held by Central bank or borrowings by Government from IMF. Q 23. Calculate : (a) Net National Product at Market Price and (b) Gross omestic Product at Factor Cost (` in Crores) (a) Rent and Interest 6,000 Wages and Salaries 1,800 Undistributed Profit 400 Net Indirect Taxes 100 Subsidies 20 Corporation Tax 120 Net Factor Income to Abroad 70 ividends 80 Consumption of Fixed Capital 50 Social Security Contribution by Employees 200 Mixed Income 1,000 NNP MP = (Wages and Salaries + Social Security Contribution by Employees) + Rent and Interest + (Undistributed Profit + Corporation Tax + ividends) + Mixed Income + Net Factor Income from Abroad + Net Indirect Taxes = (1, ) + 6,000 + ( ) + 1,000 + ( 70) = 2, , , (All figures in ` Crores) = ` 9,630 Crores Ans. (b) GP FC = NNP MP + Consumption of Fixed Capital Net Factor Income from Abroad Net Indirect Taxes = 9, ( 70) 100 = 9, (All figures in ` Crores) = ` 9,650 Crores Ans. PAGE - 15
16 Q 24. Explain the meaning of the following : (a) Revenue eficit (b) Fiscal eficit (c) Primary eficit Explain the following objectives of Government Budget. (a) Allocation of Resources (b) Reducing Income Inequalities (a) (b) Revenue eficit refers to the Excess of Total Revenue Expenditures over Total Revenue Receipts. Revenue eficit = Total Revenue Expenditures Total Revenue Receipts. It signifies that government will not be able to meet its revenue expenditures fully from its revenue receipts. It indicates that the Government has to make up for this shortfall from capital receipts, which will increase the liability or decrease the assets of the Government. Fiscal eficit refers to the Excess of Total Expenditures over the Sum of Revenue Receipts and Capital Receipts excluding Borrowings. Fiscal eficit = Revenue Expenditure + Capital Expenditure Revenue Receipts Capital Receipts (Excluding Borrowings) Fiscal eficit indicates borrowing requirements of the Government during the budget year. Borrowings may create the problem for the Government and the economy. It increases the future liability of the Government in two ways : (i) Government has to repay loans in the coming year. (ii) It has to pay interest on these loans also. (c) Primary eficit is the difference between Fiscal eficit and Interest Payments. Primary eficit = Fiscal eficit Interest Payment. Primary eficit is that part of Fiscal eficit which indicates borrowing requirements to make up Short fall in Receipts on accounts of Expenditure other than the Interest Payments. (a) (b) Allocation of Resources : Many times market fails to allocate the resources idealy and creates certain types of disparity and imbalances ( such as economic disparity, regional disparity and sectoral disparity ) which are not according to the social and economic requirement of the country. Then Government reallocate the resources by budget to decrease these disparity. For example government can invest in backward areas or provide facilities to private sector or provide tax concession or tax holidays to private sector in order to invest in remote areas, rural areas and backward areas which will help in reduction of regional disparity. Government can provide subsidies in agricultural inputs to encourage agriculture sector to reduce sectoral disparity. Reducing Inequalities of Income : Budget is a powerful tool which is used to reduce economic inequalities or disparity of income and wealth. To decrease the income and wealth gaps between rich and poor, Government imposes more taxes on income of rich persons and standard deduction on the income of economically weaker persons by progressive taxation on income (it will decrease the disposable income of rich person ) or increasing the exemption limit of income tax and make expenditure on social security, subsidies to poor, provide food items at cheaper rate for BPL families, public works, etc. which will raise the level of poor people. Allocation of funds on social welfare schemes such as MGNREGA helping much in rural areas to reduce the gap between rich and poor. PAGE - 16
Answers to RSPL/2. Section - A
Answers to RSL/2 1. (a) Section - A 2. Returns to a factor refers to a change in total output when only one input is changed, keeping other inputs unchanged. 3. (c) 4. Negative 5. While analysing the impact
More informationGOVERNMENT OF KARNATAKA SCHEME OF VALUATION. Subject Code : 22 ENGLISH VERSION Subject : ECONOMICS
GOVERNMENT OF KARNATAKA KARNATAKA STATE PRE-UNIVERSITY EUDCATION EXAMINATION BOARD II YEAR PUC EXAMINATION MARCH 27 SCHEME OF VALUATION Subject Code : 22 ENGLISH VERSION Subject : ECONOMICS Qn.No PART
More informationSUBJECT : ECONOMICS MICRO ECONOMICS
SUBJECT : ECONOMICS MICRO ECONOMICS CHAPTER-1 1. What is economic problem? Explain causes of economic problem. 2. Distinguish between Micro and Macro Economics. 3. Distinguish between Normative and Positive
More informationPRINCIPLES OF ECONOMICS PAPER 3 RD
PRINCIPLES OF ECONOMICS PAPER 3 RD Question 1 Objectives. Select appropriate alternative. (A) The meaning of the world Economic is most closely associated with the word. (a) Free (b) Scarce (c) Unlimited
More informationGraded exercise questions. Level (I, ii, iii)
Graded exercise questions Level (I, ii, iii) 248 MICRO ECONOMICS LEVEL 1 GRADED EXERCISE QUESTIONS (LEVEL I, II, III) INTRODUCTION 1. Why does an economic problem arise? 2. What is economics about? 3.
More informationECONOMICS ASSIGNMENT CLASS XII MICRO ECONOMICS UNIT I INTRODUCTION. 4. Is free medicine given to patients in Govt. Hospital a scarce commodity?
ECONOMICS ASSIGNMENT CLASS XII MICRO ECONOMICS UNIT I INTRODUCTION 1. What is the Slope of PPC? What does it show? 2. When can PPC be a straight line? 3. Do all attainable combination of two goods that
More informationSample Paper-05 ( ) Economics Class XII. Time allowed: 3 hours Maximum Marks: 100
Sample Paper-05 (2016-17) Economics Class XII Time allowed: 3 hours Maximum Marks: 100 Answers 1. (b) How to produce. 2. (c) tea and coffee 3. (c) Contraction of demand. 4. PPC shift when (i) resources
More informationECONOMIC ANALYSIS PART-A
ECONOMIC ANALYSIS TWO MARK QUESTIONS: PART-A 1. State Alfred Marshall s definition of economics? Alfred Marshall defines economics as, A study of mankind in the ordinary business of life. An altered form
More informationQuestion Paper Business Economics I (MB1B3): January 2009
Question Paper Business Economics I (MB1B3): January 2009 Answer all 78 questions. Marks are indicated against each question. 1. Which of the following is not responsible for an increase in demand for
More informationISC 2013 ECONOMICS. Md. Zeeshan Akhtar
ISC 2013 ECONOMICS Md. Zeeshan Akhtar Answer briefly of the following questions: (i) What does zero cross elasticity of demand between two goods imply? Give an example to explain. (ii) Why is the marginal
More informationPART: A Introductory Micro Economics Capsules UNIT: I TOPIC: INTRODUCTION
CLASS- XII ECONOMICS PART: A Introductory Micro Economics Capsules UNIT: I TOPIC: INTRODUCTION A: Basic concepts 1. Definition of Economics 2. Central problems of an economy 3. Production possibility curve
More informationPerfect competition: occurs when none of the individual market participants (ie buyers or sellers) can influence the price of the product.
Perfect Competition In this section of work and the next one we derive the equilibrium positions of firms in order to determine whether or not it is profitable for a firm to produce and, if so, what quantities
More information12 ECONOMICS 3 MARKS MATERIAL LESSON 1 1. State Alfred Marshall s definition of Economics? Alfred Marshall defines; economics as a study of mankind in the ordinary business of Life 2. What is the main
More informationEconomics. In an economy, the production units are called (a) Firm (b) Household (c) Government (d) External Sector
Economics The author of the book "The General Theory of Employment Interest and Money" is (a) Adam Smith (b) John Maynard Keynes (c) Alfred Marshall (d) Amartya Sen In an economy, the production units
More informationnot to be republished NCERT Chapter 6 Non-competitive Markets 6.1 SIMPLE MONOPOLY IN THE COMMODITY MARKET
Chapter 6 We recall that perfect competition was theorised as a market structure where both consumers and firms were price takers. The behaviour of the firm in such circumstances was described in the Chapter
More information1.3. Levels and Rates of Change Levels: example, wages and income versus Rates: example, inflation and growth Example: Box 1.3
1 Chapter 1 1.1. Scarcity, Choice, Opportunity Cost Definition of Economics: Resources versus Wants Wants: more and better unlimited Versus Needs: essential limited Versus Demand: ability to pay + want
More informationUNIT 2 CONSUMER'S BEHAVIOUR & THEORY OF DEMAND POINTS TO REMEMBER Consumer : is an economic agent who consumes final goods and services. Total utility : It is the sum of satisfaction from consumption of
More informationIntroduction Question Bank
Introduction Question Bank 1. Science of wealth is the definition given by 2. Economics is the study of mankind of the ordinary business of life given by 3. Science which tells about what it is & what
More informationEconomic Analysis for Business Decisions Multiple Choice Questions Unit-2: Demand Analysis
Economic Analysis for Business Decisions Multiple Choice Questions Unit-2: Demand Analysis 1. The law of demand states that an increase in the price of a good: a. Increases the supply of that good. b.
More informationENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING 2 MARKS
ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING 2 MARKS 1. What is managerial economics? It is the integration of economic theory with business practice for the purpose of facilitating decision making and
More information07. Engel s Law of family expenditure and significance. - Consumer's surplus estimation and applications.
07. Engel s Law of family expenditure and significance. - Consumer's surplus estimation and applications. Engel s Law on Family Expenditure Every family has to spend money on necessaries of life, education,
More informationGACE Economics Assessment Test at a Glance
GACE Economics Assessment Test at a Glance Updated June 2017 See the GACE Economics Assessment Study Companion for practice questions and preparation resources. Assessment Name Economics Grade Level 6
More informationSection I (20 questions; 1 mark each)
Foundation Course in Managerial Economics- Solution Set- 1 Final Examination Marks- 100 Section I (20 questions; 1 mark each) 1. Which of the following statements is not true? a. Societies face an important
More informationMicro Economics M.A. Economics (Previous) External University of Karachi Micro-Economics
Micro Economics M.A. Economics (Previous) External University of Karachi Micro-Economics Annual Examination 1997 Time allowed: 3 hours Marks: 100 Maximum 1) Attempt any five questions. 2) All questions
More informationAP Microeconomics Review With Answers
AP Microeconomics Review With Answers 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry (which means show
More informationCONTENTS. Introduction to the Series. 1 Introduction to Economics 5 2 Competitive Markets, Demand and Supply Elasticities 37
CONTENTS Introduction to the Series iv 1 Introduction to Economics 5 2 Competitive Markets, Demand and Supply 17 3 Elasticities 37 4 Government Intervention in Markets 44 5 Market Failure 53 6 Costs of
More informationChapter 10 Pure Monopoly
Chapter 10 Pure Monopoly Multiple Choice Questions 1. Pure monopoly means: A. any market in which the demand curve to the firm is downsloping. B. a standardized product being produced by many firms. C.
More information23 Perfect Competition
23 Perfect Competition Learning Objectives After you have studied this chapter, you should be able to 1. define price taker, total revenues, marginal revenue, short-run shutdown price, short-run breakeven
More informationCAPSULE FOR SURE SHOT SUCCESS CLASS-XII
KENDRIYA VIDYALAYA SANGATHAN, RAIPUR REGION 2 days workshop for pgts (Economics) (Date: 29-11-2017 to 30-11-2017) CAPSULE FOR SURE SHOT SUCCESS CLASS-XII ECONOMICS Session 2017-18 Chief Patron Ms. Chandana
More informationECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions
www.liontutors.com ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions 1. A A large number of firms will be able to operate in the industry because you only need to produce a small amount
More informationMICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION. Professor Charles Fusi
MICROECONOMICS CHAPTER 10A/23 PERFECT COMPETITION Professor Charles Fusi Learning Objectives Identify the characteristics of a perfectly competitive market structure Discuss the process by which a perfectly
More informationCLEP Microeconomics Practice Test
Practice Test Time 90 Minutes 80 Questions For each of the questions below, choose the best answer from the choices given. 1. In economics, the opportunity cost of an item or entity is (A) the out-of-pocket
More informationPractice Exam 3: S201 Walker Fall with answers to MC
Practice Exam 3: S201 Walker Fall 2007 - with answers to MC Print Your Name: I. Multiple Choice (3 points each) 1. If marginal utility is falling then A. total utility must be falling. B. marginal utility
More information2010 Pearson Education Canada
What Is Perfect Competition? Perfect competition is an industry in which Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have
More informationECONOMICS CLASS - XII ( )
ECONOMICS CLASS - XII (2017-18) Theory: 80 Marks Project: 20 Marks Units Marks Periods Part A Introductory Microeconomics Introduction 4 8 Consumer's Equilibrium and Demand 13 32 Producer Behaviour and
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2
Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose
More informationPractice Exam 3: S201 Walker Fall 2004
Practice Exam 3: S201 Walker Fall 2004 I. Multiple Choice (3 points each) 1. Which of the following statements about the short-run is false? A. The marginal product of labor may increase or decrease. B.
More informationTheories of Returns. Total Product. Unit of workers
Theories of Returns Production Function: It shows a mathematical relationship between input factors and the output. Production function may be of the short run or the long run. A rational producer always
More information1 of 14 5/1/2014 4:56 PM
1 of 14 5/1/2014 4:56 PM Any point on the budget constraint Gives the consumer the highest level of utility. Represent a combination of two goods that are affordable. Represents combinations of two goods
More information2) All combinations of capital and labor along a given isoquant cost the same amount.
Micro Problem Set III WCC Fall 2014 A=True / B=False 15 Points 1) If MC is greater than AVC, AVC must be rising. 2) All combinations of capital and labor along a given isoquant cost the same amount. 3)
More informationE.C.O.-6 Economic Theory
N 1 ASSIGNMENT SOLUTIONS GUIDE (2015-2016) E.C.O.-6 Economic Theory Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the Assignments. These
More informationOCR Economics A-level
OCR Economics A-level Microeconomics Topic 2: How Competitive Markets Work 2.3 Supply and demand, and the interaction of markets Notes A market is created when buyers and sellers interact. A sub-market
More informationProf. S.K. Garg Former Dean and Director, HPU, Shimla
Subject: Managerial Economics Paper: Managerial Economics Module 21: Monopolistic Competition Principal Investigator Co-Principal Investigator Paper Coordinator Content Writer Prof. S P Bansal Vice Chancellor
More informationShort-Run Costs and Output Decisions
Semester-I Course: 01 (Introductory Microeconomics) Unit IV - The Firm and Perfect Market Structure Lesson: Short-Run Costs and Output Decisions Lesson Developer: Jasmin Jawaharlal Nehru University Institute
More informationIntroduction. Learning Objectives. Chapter 24. Perfect Competition
Chapter 24 Perfect Competition Introduction Estimates indicate that since 2003, the total amount of stored digital data on planet Earth has increased from 5 exabytes to more than 200 exabytes. Accompanying
More informationEdexcel (B) Economics A-level
Edexcel (B) Economics A-level Theme 4: Making Markets Work 4.1 Competition and Market Power 4.1.1 Spectrum of competition Notes Characteristics of monopoly, oligopoly, imperfect and perfect competition
More informationMONOPOLY. Characteristics
OBJECTIVES Explain how managers should set price and output when they have market power With monopoly power, the firm s demand curve is the market demand curve. A monopolist is the only seller of a product
More informationMonopoly. 3 Microeconomics LESSON 5. Introduction and Description. Time Required. Materials
LESSON 5 Monopoly Introduction and Description Lesson 5 extends the theory of the firm to the model of a Students will see that the profit-maximization rules for the monopoly are the same as they were
More informationMICROECONOMICS SECTION I. Time - 70 minutes 60 Questions
MICROECONOMICS SECTION I Time - 70 minutes 60 Questions Directions: Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best
More informationFINALTERM EXAMINATION FALL 2006
FINALTERM EXAMINATION FALL 2006 QUESTION NO: 1 (MARKS: 1) - PLEASE CHOOSE ONE Compared to the equilibrium price and quantity sold in a competitive market, a monopolist Will charge a price and sell a quantity.
More informationECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela
ECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Profit is defined as a. net revenue
More informationECO401 All Past Solved Mid Term Papers of ECO401 By
ECO401 All Past Solved Mid Term Papers of ECO401 By http://vustudents.ning.com MIDTERM EXAMINATION Spring 2009 ECO401- Economics (Session - 2) Question No: 1 ( Marks: 1 ) - Please choose one An individual
More informationCome & Join Us at VUSTUDENTS.net
Come & Join Us at VUSTUDENTS.net For Assignment Solution, GDB, Online Quizzes, Helping Study material, Past Solved Papers, Solved MCQs, Current Papers, E-Books & more. Go to http://www.vustudents.net and
More informationWallingford Public Schools - HIGH SCHOOL COURSE OUTLINE
Wallingford Public Schools - HIGH SCHOOL COURSE OUTLINE Course Title: Advanced Placement Economics Course Number: 3552 Department: Social Studies Grade(s): 11-12 Level(s): Advanced Placement Credit: 1
More informationMODEL QUESTION PAPER SECTION A-(1X40)
MODEL QUESTION PAPER SUBJECT CODE : MB0042 SUBJECT : Managerial Economics SECTION A-(1X40) 1. Production cost is concerned with to produce a given quantity of output. a. Demand Forecast b. Estimation of
More informationQ.1 Distinguish between increase in demand and increase in quantity demanded of a commodity.
Q.1 Distinguish between increase in demand and increase in quantity demanded of a commodity. Q. 2 Given price of a good, how does a consumer decide as to how much of that good to buy? Q. 3 A consumer consumers
More informationMICRO EXAM REVIEW SHEET
MICRO EXAM REVIEW SHEET 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return
More information1. If the per unit cost of production falls, then... A.) the supply curve shifts right (or down)
1. If the per unit cost of production falls, then... A.) the supply curve shifts right (or down) B.) there is a downward movement along the existing supply curve which does not shift C.) the supply curve
More informationLesson 3-2 Profit Maximization
Lesson 3-2 rofit Maximization E: What is a Market Graph? 13-3 (4) Standard 3b: Students will explain the 5 dimensions of market structure and identify how perfect competition, monopoly, monopolistic competition,
More informationProfessor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 2
Economics 2 Spring 2016 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 2 1.a. Recall that the price elasticity of supply is the percentage change in quantity supplied divided
More informationEconomics 101 Midterm Exam #2. April 9, Instructions
Economics 101 Spring 2009 Professor Wallace Economics 101 Midterm Exam #2 April 9, 2009 Instructions Do not open the exam until you are instructed to begin. You will need a #2 lead pencil. If you do not
More information2.2 Aggregate Demand and Aggregate Supply
2.2 Aggregate Demand and Aggregate Supply Aggregate Demand (AD): the total spending on all goods and services in an economy at a given price level over a period of time. The macroeconomic concept of aggregate
More informationCompetitive Markets. Chapter 5 CHAPTER SUMMARY
Chapter 5 Competitive Markets CHAPTER SUMMARY This chapter discusses the conditions for perfect competition. It also investigates the significance of competitive equilibrium in a perfectly competitive
More informationChapter Summary and Learning Objectives
CHAPTER 11 Firms in Perfectly Competitive Markets Chapter Summary and Learning Objectives 11.1 Perfectly Competitive Markets (pages 369 371) Explain what a perfectly competitive market is and why a perfect
More informationCommerce 295 Midterm Answers
Commerce 295 Midterm Answers October 27, 2010 PART I MULTIPLE CHOICE QUESTIONS Each question has one correct response. Please circle the letter in front of the correct response for each question. There
More informationGross Domestic Product
Question 1: What is GDP? Answer 1: From a macroperspective, the broadest measure of economic activity is gross domestic product (GDP). GDP represents all the goods and services that are produced within
More informationSTUDY MATERIAL ECONOMICS (030) CLASS XII
STUDY MATERIAL ECONOMICS (030) 2017-18 Rationale Behind teaching Economics CLASS XII Economics is a subject of study which influences every human being. As economic life and the economy go through changes,
More informationSpecific Learning Goals/Benchmarks and Student Assessment. AP Macroeconomics
Unit Bartram Trail HS Specific Learning Goals/Benchmarks and Student Assessment AP Macroeconomics # Benchmark Assessment 1 1 1 2 1 3 1 4 2 5 2 6 3 7 3 8 3 9 3 10 3 11 4 12 4 13 4 14 4 15 4 16 4 17 Define
More informationLabour Demand Lecturer: Dr. Priscilla T. Baffour
Lecture 3 Labour Demand Lecturer: Dr. Priscilla T. Baffour Determinants of Short Run Demand for Labour The wage rate: The wage rate is a very important determinant of labour demand. Thus the higher the
More informationAP Microeconomics Review Session #3 Key Terms & Concepts
The Firm, Profit, and the Costs of Production 1. Explicit vs. implicit costs 2. Short-run vs. long-run decisions 3. Fixed inputs vs. variable inputs 4. Short-run production measures: be able to calculate/graph
More informationChapter 13. Microeconomics. Monopolistic Competition: The Competitive Model in a More Realistic Setting
Microeconomics Modified by: Yun Wang Florida International University Spring, 2018 1 Chapter 13 Monopolistic Competition: The Competitive Model in a More Realistic Setting Chapter Outline 13.1 Demand and
More informationECONOMICS (856) CLASS XI
ECONOMICS (856) Aims: 1. To enable candidates to acquire knowledge (information) and develop an understanding of facts, terms, concepts, conventions, trends, principles, generalisations, assumptions, hypotheses,
More informationmicro economics - ii
micro economics - ii II SEMESTER Core course For B A ECONOMICS (CUCBCSS) (2014 Admission onwards) UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION Calicut university P.O, Malappuram Kerala, India 673
More informationPICK ONLY ONE BEST ANSWER FOR EACH BINARY CHOICE OR MULTIPLE CHOICE QUESTION.
Econ 101 Summer 2015 Answers to Second Mid-term Date: June 15, 2015 Student Name Version 1 READ THESE INSTRUCTIONS CAREFULLY. DO NOT BEGIN WORKING UNTIL THE PROCTOR TELLS YOU TO DO SO You have 75 minutes
More informationTHE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) SOLUTION: ECONOMICS, NOVEMBER, 2014
SOLUTION 1 (a) The Economic name of the table is a Production Possibility Curve or a Production Possibility Boundary or a Production Frontier or a Transformation Curve. (b) (iii) (iv) The opportunity cost
More informationJacob: W hat if Framer Jacob has 10% percent of the U.S. wheat production? Is he still a competitive producer?
Microeconomics, Module 7: Competition in the Short Run (Chapter 7) Additional Illustrative Test Questions (The attached PDF file has better formatting.) Updated: June 9, 2005 Question 7.1: Pricing in a
More informationChapter 2 Supply and Demand
Managerial Economics and Strategy 2nd Edition Perloff SOLUTIONS MANUAL Full download at: https://testbankreal.com/download/managerial-economics-and-strategy- 2nd-edition-perloff-solutions-manual/ Chapter
More informationUnit 5. Producer theory: revenues and costs
Unit 5. Producer theory: revenues and costs Learning objectives to understand the concept of the short-run production function, describing the relationship between the quantity of inputs and the quantity
More informationECON 311 MICROECONOMICS THEORY I
ECON 311 MICROECONOMICS THEORY I Profit Maximisation & Perfect Competition (Short-Run) Dr. F. Kwame Agyire-Tettey Department of Economics Contact Information: fagyire-tettey@ug.edu.gh Session Overview
More informationChapter 33: Terms of Trade
Chapter 33: Terms of Trade 1 The Terms of Trade The division of the gains from trade depends on the terms of trade. The terms of trade are measured by the ratio of the price of exports to the price of
More informationAdvanced Microeconomic Theory. Chapter 7: Monopoly
Advanced Microeconomic Theory Chapter 7: Monopoly Outline Barriers to Entry Profit Maximization under Monopoly Welfare Loss of Monopoly Multiplant Monopolist Price Discrimination Advertising in Monopoly
More informationECONOMICS (Code No. 030) ( )
ECONOMICS (Code No. 030) (2018-19) Rationale Economics is one of the social sciences, which has great influence on every human being. As economic life and the economy go through changes, the need to ground
More informationMICRO-ECONOMIC THEORY I STUDY NOTES CHAPTER ONE
MICRO-ECONOMIC THEORY I STUDY NOTES CHAPTER ONE UNIT 1 BASIC CONCEPT OF CONSUMER BEHAVIOUR CHAPTER ONE CONTENTS Introduction Objectives Main Content Theory of Consumer Behaviour Consumer Preferences Decisiveness
More informationCOST OF PRODUCTION & THEORY OF THE FIRM
MICROECONOMICS: UNIT III COST OF PRODUCTION & THEORY OF THE FIRM One of the concepts mentioned in both Units I and II was and its components, total cost and total revenue. In this unit, costs and revenue
More informationPractice Test for Midterm 2 Econ Fall 2009 Instructor: Soojae Moon
Practice Test for Midterm 2 Econ 2010-200 Fall 2009 Instructor: Soojae Moon Please read carefully and choose the choice that best completes the statement or answers the question. Table 7-2 This table refers
More informationIntroduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1
1 Name Introduction to Agricultural Economics Agricultural Economics 105 Spring 2017 First Hour Exam Version 1 There is only ONE best, correct answer per question. Place your answer on the attached sheet.
More informationName Date/Period Economics Final Exam review - Key
Name Date/Period Economics Final Exam review - Key 1. Explain the difference between shortage and scarcity. Give an example of each. Shortage is temporary, scarcity is permanent Introduction of new gaming
More informationChapter 1. Introduction
Chapter 1 You must have already been introduced to a study of basic microeconomics. This chapter begins by giving you a simplified account of how macroeconomics differs from the microeconomics that you
More informationExtra Credit. Student:
Extra Credit Student: 1. A glass company making windows for houses also makes windows for other things (cars, boats, planes, etc.). We would expect its supply curve for house windows to be: A. Dependent
More informationJANUARY EXAMINATIONS 2008
No. of Pages: (A) 9 No. of Questions: 38 EC1000A micro 2008 JANUARY EXAMINATIONS 2008 Subject Title of Paper ECONOMICS EC1000 MICROECONOMICS Time Allowed Two Hours (2 Hours) Instructions to candidates
More informationMINISTRY OF EDUCATION
Republic of Namibia MINISTRY OF EDUCATION NAMIBIA SENIOR SECONDARY CERTIFICATE (NSSC) ECONOMICS SYLLABUS HIGHER LEVEL SYLLABUS CODE: 8337 GRADES 11-12 FOR IMPLEMENTATION IN 2010 FOR FIRST EXAMINATION IN
More informationEconomics : Principles of Microeconomics Spring 2014 Instructor: Robert Munk April 24, Final Exam
Economics 001.01: Principles of Microeconomics Spring 01 Instructor: Robert Munk April, 01 Final Exam Exam Guidelines: The exam consists of 5 multiple choice questions. The exam is closed book and closed
More informationWe lead you to your success
Page1 Sample Paper 1 Section A MM :100 Time : 3 Hrs Instructions All questions in both the sections are compulsory. Questions Nos 1-5 and 17 21 are very short answer questions carrying 1 mark each. They
More informationMonopolistic Competition. Chapter 17
Monopolistic Competition Chapter 17 The Four Types of Market Structure Number of Firms? Many firms One firm Few firms Differentiated products Type of Products? Identical products Monopoly Oligopoly Monopolistic
More informationCHAPTER 3. Economic Challenges Facing Contemporary Business
CHAPTER 3 Economic Challenges Facing Contemporary Business Chapter Summary: Key Concepts Opening Overview Economics Microeconomics Macroeconomics A social science that analyzes the choices people and governments
More informationEcn Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman. Final Exam
Ecn 100 - Intermediate Microeconomic Theory University of California - Davis December 10, 2009 Instructor: John Parman Final Exam You have until 12:30pm to complete this exam. Be certain to put your name,
More informationfoundations of economics fourth edition Andrew Gillespie OXFORD UNIVERSITY PRESS
foundations of economics fourth edition Andrew Gillespie OXFORD UNIVERSITY PRESS Detailed contents Preface How to use this book About the Online Resource Centre Guided tour of Dashboard Acknowledgements
More informationChapter 8 Profit Maximization and Competitive Supply. Read Pindyck and Rubinfeld (2013), Chapter 8
Chapter 8 Profit Maximization and Competitive Supply Read Pindyck and Rubinfeld (2013), Chapter 8 1/29/2017 CHAPTER 8 OUTLINE 8.1 Perfectly Competitive Market 8.2 Profit Maximization 8.3 Marginal Revenue,
More informationMicro Economics Review
Micro Economics Review 1. Intro to Economics a. What is Economics? i. Scarcity and the factors of production 1. Explain why scarcity and choice are basic problems of economics 2. Identify the factors of
More informationMicro Semester Review Name:
Micro Semester Review Name: The following review is set up to emphasize certain concepts, graphs and terms. It is the responsibility of the individual teachers to emphasize and review the analysis aspects
More information