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.

Questions from LastFive Years Question Papers (3 Marks)

3 marks Questions

1. Distinguish between increase in demand and increase in quantity demanded
2. Explain the law of diminishing utility with the help of a schedule
3. Good x and good y are substitutes. Explain the effect of fall in price of good y on the demand for good x.
4. Explain the implication of free entry and exit of firms under Perfect Competition.
5. Given below is the cost schedule of a firm. Its average fixed cost of production is Rs20 when it produces 3 units.

Q	1	2	3
AVC	30	28	32

6. Calculate its marginal cost and average cost at all level of output.
7. Explain the effect of following on the demand of a good.

(1)     Number of substitute

(2)     Nature of the commodity.

8. Explain any two causes of increase in demand of a commodity.
9. Explain the inverse relationship between price and quantity demanded of a commodity.
10.  Given below is the cost schedule of a firm. Its average fixed cost of production is  Rs 30 when it produces 2 units.

Q	1	2	3
AVC	80	48	40

11. Why the number of firms is small in oligopoly.
12. Explain the problem of how to produce.
13.  Explain the central problem of choice of technique.
14. Price elasticity of demand of a good is (-) 1.At a given price the consumer buys 60 units of the good. how many units will the consumer buy if the price false by 10 percent
15. Given the market price of a good how a consumer does decides as to how many units of that good to buy? Explain
16. What is likely effect on the supply of a good if the prices of the inputs used in the production of that good fall? explain
17. Explain what happen to profits in the long run if the firms are free to enter the industry.
18. Explain what happen to losses in the long run if the firms are free to leave the industry.
19. State the law of demand and show it with the help of a schedule.
20. Explain the geometric method of measuring price elasticity of demand
21. Why do problems related to allocation of resources in an economy arise? Explain?
22. Explain the problem of for whom to produce.

23. Complete the following table.

Q	TR	MR	AR
1	--	--	8
2	--	4	--
3	12	--	4
4	8	--	2

24. Explain the effect of fall in prices of the other goods on the supply of a given good.
25. State three changes leading to the shift of demand curve of a consumer to the right?
26. What will be the price elasticity of supply curve is a positively sloped straight line?
27. Explain why a production possibility curve is concave.
28. OR
29. Explain the central pro0blem ‘for whom to produce’
30. With help of the table given below find producer’s equilibrium. Give reason for your answer.
31. Output (units)

Output (units)	TR (Rs.)	AC(Rs.)
1	20	20
2	40	15
3	60	12
4	80	10
5	100	12
6	120	15

32.   Define marginal revenue. State the relation between marginal revenue and average revenue  when a firm:

                                                               I.      Is able to sell more quantity of output at the same price.

                                                             II.      Is able to sell more quantity of output only by lowering the price.

33. From the following table calculate price elasticity of demand by the percentage method.

Price of x (per unit)	Total Expenditure
4	600
5	525

34. State any two features each of monopoly and monopolistic competition.
35. State four feature of perfectly competitive market.
36. Explain the effect of a fall in price of the other good on a commodities equilibrium price and equilibrium quantity. Use diagram.

37.   What is meant by consumer’s equilibrium? State its condition in case of a single commodity.

38.    State the ‘total expenditure method’ of measuring price elasticity of demand.

39.    What is meant by returns to a factor? State the law of diminishing returns to a factor.

40.    State any three causes of a rightward shift of supply curve.

41.   Define marginal utility. State the law of diminishing marginal utility.

42.    State any three factors that affect the price elasticity of demand of a commodity

43.   What is meant by returns to scale? State the reasons for increasing returns to scale.

44.    State any three causes of a leftward shift of supply curve.

45.   Draw and define production possibility curve. Why is it downward sloping from left to right?

46.   Explain the problem of ‘what to produce’.

47.   Define utility. Explain briefly the law of diminishing marginal utility.

48.    State clearly any three features of a perfectly competitive market.

49.   Explain ‘differentiated products’ characteristic of monopolistic competition.

50.   What is meant by returns to scale? Give one reason for increasing returns to scale.

51.   State clearly the three features of monopolistic competition.

52.   Draw Average Revenue and Marginal Revenue curves of a firm under

53. Perfect competition and monopoly.

54.   Distinguish between perfect competition and monopoly.

55.   How is price determined under perfect competition? Explain briefly.

56.   Explain the effect of increase in income of the consumer on the demand for a good.

57.   State three causes of increase in supply.

58.   Explain the relation between marginal cost and average cost.

59.   Explain producer’s equilibrium with the help of a diagram.

60.   Explain the meaning and conditions of producer’s equilibrium

61. Explain the effect of rise in the prices of related goods on the demand of a good.
62. State three causes of decrease in supply.
63. Explain the relation between marginal revenue and total revenue.
64. Draw straight line supply curves with price elasticity of supply equal to (i) one, (ii) less than one and (iii) more than one.
65. Distinguish between fixed cost and variable cost and give one example of each.

66.   Give meaning of (i) demand, (ii) normal good and (iii) inferior good.

67.   Explain the effect of ‘input price changes’ on the supply of a good.

68.   Explain the relation between marginal revenue and average revenue.

69.   Draw Average Total Cost, Average Variable Cost and Marginal Cost curves in a single diagram.

70. When is supply of a commodity said to be (i) elastic, (ii) inelastic and (iii) perfectly inelastic?