The Hindu Business Line : A study of choice and decision-making

CHOOSE the correct answer from among the given multiple options: a) Consumer's surplus is: i) the price before discount minus what a consumer actually pays; ii) what a consumer is ready to pay minus what he actually pays; iii) free gifts received by consumers on purchase of any commodity; iv) none of the above.

b) A condition needed for a perfectly competitive industry to exit is that: i) buyers are able to influence the price of the commodity; ii) units of a commodity are considered by buyers to be different; iii) buyers discriminate in their purchases based on non-price factors; iv) there are no obstacles to the free mobility of resources.

c) When as a result of increase in the price of a good, the total expenditure on it decreases, we say that price elasticity of demand is: a) less than unity; ii) unity; iii)

more than unity; iv) zero.

d) If as a result of 40 per cent increase in all inputs, the output increases by 25 per cent, this is a case of: i) increasing returns to scale; ii) constant returns to scale; iii) increasing returns to factor; iv) decreasing returns to scale.

e) The income of a household rises by 20 per cent, the demand for car increases by

25 per cent, car in economics is: a) necessity; b) Giffen good; c) luxury good; d) inferior good. (5x1= 5 marks)

2) Fill in the blanks:

i) In __________ method, reasoning proceeds from the particular to general.

ii) The cross elasticity between two complementary goods is ____________.

iii) According to _________, economics is neutral between ends.

iv) A firm is in equilibrium at a price where marginal cost in equal to _______.

v) In ___________market, the degree of control over price is maximum. (5x1= 5 marks)

3) Distinguish between any three of the following: a) increase in supply and expansion in supply; b) price elasticity and cross elasticity of demand; c) capital and wealth; d) monopoly and perfect competition; and e) fixed cost and variable cost. (3x5 = 15 marks)

4) Write essays on any five of the following:

a) Explain the main features of mixed economy.

b) Explain the nature and characteristics of economic laws.

c) State law of demand, what are the exceptions?

d) Show consumer's equilibrium with the help of indifference curve.

e) Explain any three methods of demand forecasting.

f) Explain the determinants of price elasticity of demand.

g) Show how price mechanism solves basic problems of a free market economy.

h) Explain the characteristics of an oligopoly market.

i) Explain the law of variable proportions with suitable diagrams.

j) Explain the short run equilibrium of firm with supernormal, normal profit and loss. (5x5 = 25 marks)

5) Explain any five of the following terms: a) poverty line; b) CRR and SLR;