UNIT – I
INTRODUCTION
(4 MARKS)
1. Calculate marginal rate of product transformation from the following data. Also
comment upon the shape of PPC with economic interpretation.(4)
combination A
B
C
D
E
F
G
H
GOOD
0
20
40
60
80
100
120
140
X(Units)
GOOD Y
100 90
93
85
70
54
30
0
(Units)
2. What is opportunity cost? IIIUSTRATE WITH THE HELP OF AN EXAMPLE.(3)
3. Why do we make the assumption of increasing marginal opportunity costs?(3)
4. ‘’Massive unemployment shifts the PPC to the left’’. Defend or Refute. (3)
5. Differentiate between Positive and Normative economics. (3)
6. What do you mean by scarcity? Why does the basic economic problem of scarcity
arise? (3)
7. Give three examples of growth of resources. (3)
8. State the limitation of microeconomic theory. (3)
9. Explain the problem of (a) efficient use of resources (b) inefficient use of resources (c)
economic growth with the help of a production possibility curve. (3)
10.Explain the central problem of resource allocation in an economy. (3)
11.What is meant by production possibility curve? IIIustrate with the help of a schedule
and a curve.(4)
12.Discuss the subject matter of economics. (3)
13.Why does an economic problem arise? (3)
14.Give two examples of micro and Macro Economics each. (3)
15.Explain the problem of what to produce with the help of production possibility curve.
(3)
16.Production in an economy is below its potential due to unemployment .Government
starts employment generation schemes. Explain its effect using production possibility
curve. (3)
17.Unemployment is reduced due to the measures taken by the government .State its
economic value in the context of production possibility curve. (3)
18.The government has started promoting foreign capital. What is its economic value in
the context of Production possibility curve? (3)
19.What is Marginal rate of transformation? Explain with the help of an example. (3)
20.What will be the impact of ‘’Education for all campaign’’ (Sarv Shiksha Abhiyaan) on
the production capacity curve of the Indian economy and why?(4)
21.Discuss the central problems of an economy. (3)
22. What do you mean by the production possibilities of an economy? (3)
23. What is a production possibility frontier? (1)
24. Discuss the subject matter of economics. (3)
25. Distinguish between a centrally planned economy and a market economy. (3)
26. What do you understand by positive economic analysis? (3)
27. What do you understand by normative economic analysis? (3)
28. Distinguish between microeconomics and macroeconomics. (3)
29.What economic measure can the Government take to reduce demand for commodity
x which is harmful for health ?(1)
30.Describe the problem of ‘what to produce’. (3)
31.The Government establishes a large number of Institutes of science and technology.
How will it affect the production possibility frontier ? Explain. (3)
32.Do rich countries also face central problems ? Give reasons for your answer. (3)
33. Explain the effects of floods in Jammu and Kashmir on its production possibilities
frontier. (3)
34.
(3)
35. Explain the problem of ‘’For Whom to produce’’.
(3)
UNIT - 2 Consumer’ Equilibrium and Demand (13 MARKS)
1. Find the missing values of total utility and marginal utility in the following
schedule:
(3)
Unit
1
2
3
4
5
6
7
consumed
Total utility ---- 30
--42
---43
---Marginal
17
---8
---1
0
(-)2
utility
2. State the consumer equilibrium in terms of marginal utility of money. (3)
3. How is consumer’s equilibrium determined? (3)
4. How many units of a commodity will you consume if price for the commodity is
Zero? Can you name any such thing? (3)
5. Define Utility. Explain the Law of diminishing marginal utility. (3)
6. A consumer consumes only two goods X and Y .Marginal utilities of each is
3.The price per unit of X and Y IS Rs 2 and Rs1 respectively .Is the consumer in
equilibrium? What will be the further reaction of the consumer? Give reason. (4)
7. What do you mean by the budget set of a consumer? (1)
8. What is budget line? Explain why the budget line is downward sloping. (3)
9. A consumer wants to consume two goods. The prices of the two goods are Rs 4
and Rs 5 respectively. The consumer’s income is Rs 20. (i) Write down the
equation of the budget line. (ii) How much of good 1 can the consumer consume if
she spends her entire income on that good? (iii) How much of good 2 can she
consume if she spends her entire income on that good? (iv) What is the slope of
the budget line?(4)
10. How does the budget line change if the consumer’s income increases to Rs 40
but the prices remain unchanged? (1)
11. How does the budget line change if the price of good 2 decreases by a rupee
but the price of good 1 and the consumer’s income remain unchanged? (1)
12. What happens to the budget set if both the prices as well as the income
double? (1)
13. Suppose a consumer can afford to buy 6 units of good 1 and 8 units of good 2
if she spends her entire income. The prices of the two goods are Rs 6 and Rs 8
respectively. How much is the consumer’s income? (3)
14. Suppose a consumer wants to consume two goods which are available only in
integer units. The two goods are equally priced at Rs 10 and the consumer’s
income is Rs 40. (i) Write down all the bundles that are available to the consumer.
(ii) Among the bundles that are available to the consumer, identify those which
cost her exactly Rs 40. (3)
15. What do you mean by ‘monotonic preferences’? If a consumer has monotonic
preferences, can she be indifferent between the bundles (10, 8) and (8, 6)? (3)
16. Suppose there are two consumers in the market for a good and their demand
functions are as follows: d1(p) = 20 – p for any price less than or equal to 20, and
d1(p) = 0 at any price greater than 20. d2(p) = 30 – 2p for any price less than or
equal to 15 and d1(p) = 0 at any price greater than 15. Find out the market
demand function. (4)
17. Suppose there are 20 consumers for a good and they have identical demand
functions:
d(p) = 10 – 3p for any price less than or equal to 10/ 3 and d1(p) = 0 at any price
greater than 10 /3 .What is the market demand function? (4)
18. What do you mean by an ‘inferior good’? Give some examples. (3)
19. What do you mean by substitutes? Give examples of two goods which are
substitutes of each other. (3)
20. What do you mean by complements? Give examples of two goods which are
complements of each other. (3)
21. Explain price elasticity of demand. (1)
22. Consider the demand for a good. At price Rs 4, the demand for the good is 25
units. Suppose price of the good increases to Rs 5, and as a result, the demand for
the good falls to 20 units. Calculate the price elasticity .(4)
23. What do you mean by a normal good?(1)
24. Suppose the price elasticity of demand for a good is – 0.2. If there is a 5 %
increase in the price of the good, by what percentage will the demand for the
good go down? (3)
25. Explain with the help of a numerical example, the meaning of diminishing
marginal rate of substitution. (3)
26. Explain the Law of
Diminishing Marginal Utility with the help of an example. (3)
27. Explain the difference between ‘change in demand’ and ‘change in quantity
demanded’.(4)
28. Explain the effect of the following on the demand for a good : (i) Increase in
income of its consumer (ii) Rise in price of its substitute good (6)
29.
30.
31. Show that price and demand of a commodity are inversely related ? Use utility
analysis. (4)
32. Explain any two factors that affect price elasticity of demand.(4)
33. Define ‘market demand’ for a goods. State the factors that affect it. (3)
34. Define consumer’s equilibrium. Explain its conditions under indifference curve
analysis.(6)
35.
(4)
36.Price elasticity of demand of good X is −2 and of good Y is −3. Which of the two goods
is more price elastic and why ? (3)
37.A consumer consumes only two goods X and Y. Marginal utilities of X and Y are 5 and
4 respectively. The prices of X and Y are Rs. 4 per unit and Rs. 5 per unit respectively.
Is the consumer in equilibrium? What will be the further reaction of the consumer?
Explain (4)
38.Explain the effect of change in prices of the related goods on demand for the given
good.
39.Assuming that no resource is equally efficient in production of all goods, name the
curve which shows production potential of the economy. Explain, giving reasons, its
properties.
40.When does ‘increase’ in demand take place ?
41.Why demand for water is inelastic?
42. Suppose the price elasticity of demand for a good is – 0.2. How will the expenditure
on the good be affected if there is a 10 % increase in the price of the good?
43. Suppose there was a 4 % decrease in the price of a good, and as a result, the
expenditure on the good increased by 2 %. What can you say about the elasticity of
demand?
44. 8 units of a good are demanded at a price of Rs. 7 per unit. Price elasticity
demand is (-)1. How many units will be demanded if the price rises to Rs. 8 per unit?
Use Percentage method of price elasticity of demand to answer this question.
45.
Explain how the demand for a good is affected by the prices of its related goods.
Give examples