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Prepare yourself- Macroeconomics

1. How Money is instrumental in removing drawbacks of barter system.

2. Explain the Redistributive activity objective of government budget.

3. Differentiate between Revenue expenditure and Revenue receipt.

4. Give the meaning of following

      Fiscal deficit, Revenue deficit, Primary deficit and Budget deficit

5. What does large Primary deficit indicate?

6. Explain the Problem of Double coincidence of wants and how money has solved this problem.

7. What is Problem of double counting? How can it be avoided?

8. Determine the equilibrium level of income output and employment with the help of AD=AS approach. Using diagram and schedule.

9. Equilibrium is determined where planned saving is equal to planned investment. Explain this statement using schedule and diagram.

10. Differentiate between following

1.     Domestic income and National income

2.     Private income and National income

3.     Final goods and Intermediate goods

4.     Net factor income from abroad and net current transfers from abroad

11. Explain the following objectives of budget

1.     Reallocation of resources

2.     Economic stability

12. Classify the following in to revenue receipts and capital receipts with reasons

1.     Interest earned by Government from its investment

2.     Selling of share of public sector enterprises

3.     Recovery of old loans

4.     Financial help received from abroad

5.     Borrowing from abroad

13. What do you mean by deficient demand .How can it be removed by fiscal policy measures.

14. What do you mean by excess demand or inflationary gap? Suggest two monetary measures to reduce it.

15. Why the demand curve for foreign exchange is downward slopping.

16. Why there is direct relationship exists between foreign exchange rate and its supply.

17. Differentiate between Balance of payments and Balance of trade.

18. Write any three sources each of demand and supply of foreign exchange.

19. Explain the following functions of central Bank

1.     Sole authority to issue currency notes

2.     Banker to the government

3.     Controller of credit in the economy

4.     Lender to the last resort.

20. What are the limitations of GDP as indicator of welfare?

21. How Price level, level of employment and non- monetary transactions in the economy challenges GDP as true index of welfare.

22. How commercial banks create new deposits from initial deposits.

23. What do you mean by investment multiplier? Explain its working.

24. Explain the following

   1. Expenditure method

   2. Income method

   3. Value added method

Prepare yourself for Boards -: Microeconomics

1. Explain the law of variable proportion with the help of a schedule and diagram.

2. How is the equilibrium price and equilibrium quantity of a good affected if rate of excise tax on this good falls.

3. Determine market equilibrium with the help of a schedule.

4. Why must a consumer obtains equilibrium when Marginal Rate of Substitution between two goods becomes equal to price ratio of two goods?

5. Explain the relationship between ATC, AVC and MC with the help of a diagram.

6. Explain the following

          i. Increasing returns to a factor and its reasons

          ii. Negative returns to a factor and its reasons

7. Determine producer’s equilibrium with the help of a diagram and Schedule.

8. Explain the effect of following on the demand of a good. With diagram

          i. Rise in own price of a good

          ii. Fall in the price of its substitutes

          iii. Fall in the income of buyer

          iv. Rise in price of complimentary good.

9. Draw AR, MR and TR curve of a firm when the firm is able to sell

          i. Entire output a the constant price

          ii more by lowering the price only

10. Explain the effect of following on the price elasticity of demand of a good.

          I. Substitutes

          ii. Habits

          iii. Nature of the commodity

          iv. Time period

11. Determine the nature of demand curve from the equality between Price = Marginal utility approach.

12. Define the following-:

          1. Law of demand

          2. Law of supply

          3. Law of diminishing Marginal Utility

          4. Law of diminishing marginal product

13. State true and false by giving reasons

          1. TP will increase at diminishing rate when MP falls.

          2. TC is the Sum of Variable cost and Average Fixed cost.

          3. When AC falls MC also falls.

          4. When MC Rises AVC also rises.

          5. When MC falls ATC also falls.

          6. When AR is constant and not equal to Zero TR also be constant.

Questions for Practice

1. Explain how scarcity and choice go together?
2. What are the central problems of an economy. Why do these problem arise.
3. What is meant by economic problem? How does an economic problem arise? Is it true that if the resources were not limited there would have been no economic problem?
4. What is the meaning of economising of resources? Why is there a need for economising resources?
5. Explain the problem ‘what to produce’ with the help of an example. Does it arise in every economy? Explain.
6. Explain the problem of ‘how to produce’. Why does this problem arise?
7. Explain the problem ‘how to produce’ with the help of an example.
8. Why does the PPC look concave to the origin?
9. Write a note on the problem ‘for whom to produce’.
10. State in brief the problem of fuller utilization of resources.
11. Explain the relationship between marginal opportunity cost and slope of ppc?
12. State the law of demand and explain its assumption.
13. Why does demand curve of a normal good slope downward from left to right
14. Explain the meaning of normal good and inferior good.
15. Distinguish between extension of demand and increase in demand with the help of a diagram
16. Explain with the help of diagrams the effect of the following changes on the demand of a commodity
An unfavourable change in taste of the buyer for the commodity.
A fall in the income of its buyer, if the commodity is inferior.
17. Explain with the help of diagrams, the effect of the following changes on the demand of a commodity.
A rise in the price of complementary goods.
A rise in the price of substitute goods.
18. Explain with the help of diagrams, the effect of the following changes on the demand of a commodity .
A fall in the price of complementary goods.
A rise in the income of its buyer.
19. Explain with the help of diagrams, the effect of the following changes on the demand of a commodity
Fall in the price of substitute good.
Fall in income of its buyers.
20. Mention any three factors that affect the price elasticity of demand of a commodity.
21. If a product price increases, a family’s spending on the product has to increase. Defend or refute.
22. When price of a commodity falls by 80%, the quantity demanded increases by 100%. Find out price elasticity of demand.
23. Price of a commodity rises from Rs 4 per unit to Rs 5 per unit and quantity demanded falls from 20 units to 10 units. Using (i) Proportionate Method and (ii) Total Expenditure Method, find out elasticity of demand.
24. When the price is Rs5 per unit, a consumer buys 40 units of a commodity and his price elasticity of demand is (-) 1.5. How much will he buys if the price is reduced to Rs 4 per unit?
25. When price of a good rises from Rs 10 per unit to Rs 20 per unit, its demand falls from 100 units to 50 units. Find out price elasticity of demand by the percentage method.
26. Originally, a product was selling for Rs10 and the quantity demanded was 1000 units. The product price changes to Rs14 and as a result, the quantity demanded changes to 500 units. Calculate the price elasticity.
27. The price elasticity is 0.5. The % change in quantity is 4. What is the % change in price?
28. Explain the law of variable proportions with the help of total product and marginal product curves
29. Explain the relationship between average product and marginal product.
30. Derive average revenue and marginal revenue from total revenue with the help of a table.
31. Define TR,AR and MR. Discuss the relationship between AR and MR.
32. Distinguish between total, average and marginal revenue curves.
33. Explain the average and marginal revenue curves of a firm under perfect competition and monopoly.
34. Explain average cost and marginal cost with the help of a schedule and diagram.
35. Why is short-run average cost curve U-shaped?
36. Draw one diagram showing average total cost curve,average variable cost curve and marginal cost curve.

6 Marks Questions from Microeconomics

6 marks questions

1. Using indifference approach, explain the condition of consumer’s equilibrium.

2. State whether the following statements are true or false giving suitable reasons.

i. When TR is constant AR will also be constant

ii. AVC can even fall when MC is rising

iii. When MP falls AP will also falls.

3. Explain the law of variable proportion with the help of TP and MP Curves.

4. Explain producer’s equilibrium with the help of MC and MR schedule.

5. State whether the following statements are true or fates giving suitable reasons.

i. When MR is constant and not equal to zero, then TR will also be Constant.

ii. As soon as MC starts rising, AVC also starts rising.

iii. Total product always increasing whether there is increasing returns or diminishing returns to factor.

6. What are the conditions of consumer’s equilibrium under the indifference curve approach? What changes will take place if the conditions are not fulfilled to reach the equilibrium?

7. From the following schedule find the level of output at which the producer is in equilibrium using MC and MR approach. Also give reasons for your answers

Price per unit	Output	Total cost
8	1	6
7	2	11
6	3	15
5	4	18
4	5	23

8. Explain the law of returns to a factor with the help of TP and MP schedule.

9. Given market equilibrium of a good what are effect of simultaneous increase in both demand and supply of that good on its equilibrium price and quantity.

10. Explain the implications of the following

I. The feature of differentiated products under monopolistic competition

II. The feature large number of seller in perfect competition.

11. Giving reasons state whether the following statements are true and false

I. AC falls only when MC falls

II. The difference between ATC and AVC is constant.

III. When TR is maximum, MR is also maximum.

12. Explain the effect of following on the market demand of a commodity.

I. Change in price of related goods

II. Change in the number of buyers

13. Why does the different between ATC and AVC decrease with an increase in the level of output? Can these two be equal at same level of output? Explain.

14. What is consumer’s equilibrium/ explain the condition of consumer’s equilibrium assuming that the consumer consumes only two goods.

15. What is the impact of the following on the demand curve for good x? Give reasons.

i. Consumer income rises and good x is a normal good.

ii. Consumer income falls and good x is an inferior good.

iii. Price of complementary good y rises.

16. Explain the reasons for 1) increasing returns to a factor and ii) decreasing returns to a factor.

17. The total fixed cost of a firm is Rs. 12. Given below is its marginal cost schedule. Calculate total cost and average variable cost for each given level of output.

Output (units)	1	2	3	4	5	6
Marginal cost (RS.)	9	7	2	4	8	12

18. State three causes each for a rightward shift and a leftward shift of demand curve.

19. How is the equilibrium price and equilibrium quantity of a normal commodity affected by an increase in the income of its buyers? Explain with the help of a diagram.

20. At a given price of a commodity, there is ‘excess demand’. Is this price an equilibrium price? If not, how will the equilibrium price be reached? (Use diagram)

21. Calculate total cost and average variable cost of a firm at each given level of output from its cost schedule given below.

Output (Units)	Average fixed cost (Rs.)	Marginal cost (Rs.)
1	60	32
2	30	30
3	20	28
4	15	30
5	12	35
6	10	43

22. Define market demand. State the factors that affect it.

23. How will an increase in the income of the buyers of an ‘inferior good’, affect its equilibrium price and equilibrium quantity? Explain with the help of a diagram.

24. At a given price of a commodity, there is excess supply. Is it an equilibrium price? If not, how will the equilibrium price be reached? (Use diagram)

25. Explain the effects of increase in income of the buyers of good ‘X’ cm the demand for ‘X’ use diagram showing demand for good on the x-axis and its price on the y-axis.

26. A consumer consumes good ‘X’. Explain the effects of fall in prices of related goods on the demand of ‘X’. Use diagram showing demand for good ‘X’ on the x-axis and its price on the y - axis.

27. Explain the effects of change in the income of the buyers of a good on its demand.

28. Explain the effects of change in the prices of related goods on the demand of a given good.

29. Explain briefly the following determinants of supply:

I. Increase in the prices of inputs

II. Decrease in tax on the product

III. Technological change

30. Draw Average Total Cost, Average Variable Cost and Marginal Cost curves in a single graph. Also explain the relation between Marginal Cost and Average Total Cost.

31. Explain the effect of the following on the demand of a good:

I. Change in the income of the consumer

II. Change in the prices of the related goods

32. Define price elasticity of demand. State any four factors that affect it.

33. Explain the law of variable proportions using Total Physical Product and Marginal Physical Product curves.

34. Explain the relation between marginal cost and average variable cost with the help of a diagram.

35. Explain the law of variable proportions with the help of a total and marginal physical product schedule.

36. Explain the relation between marginal cost and average variable cost with the help of a cost schedule

37. Distinguish between:

I. Individual demand and market demand.

II. Change in demand’ and ‘change in quantity demanded’

38. State the phases of the law of variable proportions in terms of total physical product and marginal physical product.

39. Explain the following features of perfect competition:

I. Large number of buyers and sellers

II. Homogeneous products

40. Explain the following:

I. ‘Free entry and exit’ feature of perfect competition,

II. ‘Differentiated products’ feature of monopolistic competition.

41. Distinguish between the following:

I. Normal good and Inferior good

II. Marginal utility and Total utility

III. Individual demand schedule and Market demand schedule

42. Identify the three phases of the Law of Variable Proportions from the following and also give reason behind each phase:

Unit of Variable Input	Total Physical Product (Unit)
1	10
2	22
3	30
4	35
5	30

43. Explain the features of monopoly market.

44. Explain the term ‘change in demand’ and represent the same graphically. Also state three factors responsible for ‘change in demand’.

45. Explain the terms ‘change in demand’ and ‘change in quantity demanded’. Also state three factors responsible for ‘change in demand’.

46. Explain briefly three features of monopolistic competition.