ECONOMICS APPLICATIONS

(Two hours)

Answers to this Paper must be written on the paper provided separately.

You will not be allowed to write during the first 15 minutes.

This time is to be spent in reading the question paper.

The time given at the head of this Paper is the time aUowed for writing the answers.

 Attempt all questions from Section A and any four questions from Section B.

The intended marks for questions or parts of questions are given in brackets [ ].

 

 

SECTION A (40 Mark)

Attempt all questions from this Sect/on

Question 1.

(a) Mention two assumptions of the law of demand. [2]

(b) Briefly explain the impact of division of labour on cost of production by a firm. [2]

(c) A moderate does of inflation is necessary for the development of an economy. Briefly explain.            [2]

(d) With the help of a suitable example explain the effect of a rise in price on the demand for complementary goods.         [2]

(e) Explain in brief the first stage of capital formation.      [2]

Question 2.

 State whether the following statements are true or false. Give reasons for each of  the following:

(a) Commercial Banks act as the lender of the last resort.                                                                                              [2]

(b) The privatisation of PSUs do not guarantee social welfare.                                                                                      [2]

(c) Producers in a perfect market are price takers.                                                                                                          [2]

(d) There is an inverse relationship between quantity supplied and price of a  commodity.        [2]

(e) A rise in income leads to a fall in demand for normal goods.                                                                                    [2]

Question 3.

(a) Differentiate between a tax and subsidy.                                                                                                                      [2]

(b) Why do producers incur high selling costs in an Imperfect Market ?                                                                          [2]

(c) The extent of division of labour depends on the size of the market. Briefly explain. [2]

(d) Define fiscal policy.      [2]

(e) State the effect of inflation on creditors.       [2]

Question 4.

(a) “Entrepreneurs are innovators” said Schumpeter. Briefly explain.              [2]

(b) State one similarity between Monopolistic competition and Monopoly.     [2]

(c) Price of a good rises by 2%. As a result, its supply rises by 4%. Find out the price elasticity of supply.         [2]

(d) State the difference between Income tax and Expenditure tax.      [2]

(e) Distinguish between Fixed deposits and Demand deposits.       [2]

  SECTION B (60 Marks)
Attempt any four questions from this Section

Question 5.

(a) With the help of a hypothetical supply schedule draw a supply curve. State one  exception to the law of supply.                [7]

(b) Define efficiency of labour and explain any three of its benefits.  Briefly explain two causes of the low efficiency of labour in India. [8]

Question 6.

(a) The Central Bank is the apex monetary institution of the country. Explain its role as a: [7]

(i) Banker of the Government.

(ii) Lender of the last resort.

(iiil Custodian of foreign exchange reserves.

(b)   How does the state fulfill the following soclo-economlc objectives ?  [8]

(i) Reducing Income inequality.

(ii) Promoting industrial growth.

(iii) Environment protection.

Question 7.

(a) With the help of suitable diagrams explain the difference between decrease in demand and contraction in demand.        [7]

(b) Read the article given below carefully and answer the question that follow:

Business Standard, Friday, 26th November, 2010

Food inflation declined to a 17 month low of 10.15 percent for the week ended November 13, as vegetable prices softened on fresh crop arrival, raising hopes that the Reserve Bank of India (RBI) would not raise key rates for now.

This is the sixth week in a row that food inflation has declined on the back of improved crop arrivals in markets across the country, as also the impact of RBI’s monetary tightening which arl;ested pressure on demand.

(i) Define inflation.

(ii) What according to the article are two causes of a fall in food price ?

(iii) What is meant by demand pull inflation ?

Briefly explain two factors which determine this phenomenon.             [8]

Question 8.

(a)   Define land and explain any three of its important characteristics. Suggest two measures to improve productivity of land.

(b) Imperfect market.

 Question 9.

(a) What are Public Sector Undertakings (PSU)? Give two of its examples. Explain any four problems faced by PSUs in recent times.        [7]

(b) Define elasticity of supply and explain any four of its determinants.                                                        [8]

Question 10.

(a) State the following:

(i) Four merits of a Direct tax.

(ii) Three demerits of an Indirect tax.                                                                                                               [7]

(b) Read the extract given bepow and answer the questions that follow:

The Hindu, 19th July 2010

The new symbol of the Rupee: a step towards globalisation. Evoking national spirit and international attention, the Indian Rupee attained a new avtar in its new symbol Rs. the Indian currency will be joining the elite club of the US Dollar, European Euro, British Pound Sterling, and Japanese Yen.

(i) State one positive effect of globalisation.

(ii) Name the institution that has the sole authority to print currency notes in India.

(iii) Distinguish between limited legal tender and unlimited legal tender currency.

(iv) Define cash reserve ratio. What purpose does it serve?
(v) Write the new symbol for the Indian Rupee.[8]
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