Practice Paper
TERM II (2021 – 2022)
Class – XI
Economics (030)
Time: 2 hours Maximum Marks: 40
General Instructions:
• This is a Subjective Question Paper containing 13 questions.
• This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each and 3 question of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case / Source Based Questions.
1. What do you mean by absolute measure and relative measure of dispersion?
Ans. Absolute measure: Measured in terms of original units.
Relative measure: Measured in terms of percentage or ratio.
2. Write any two importance of Index numbers.
Ans. (i) Indicator of inflation
(ii) Forecasting demand and supply
OR
State any two limitations of index numbers.
Ans. (i) There are no scientific techniques of according weightage to different items.
(ii) Weightage to different items is often influenced by personal bias.
3. Explain the concept of short run and long run in production function.
Ans. Short run: Some factors are fixed and some are variable
Long run: All the factors are variable
4. A firm is producing 20 units. At this level of output, ATC and AVC are respectively equal to Rs. 40 and Rs. 37. Find out the Total Fixed Cost of the firm.
AFC = ATC – AVC
So, AFC = 40 – 37 = 3
Also, TFC = AFC x units
So, TFC = 3 x 20 = Rs 60
OR
What does the average fixed cost curve look like? Why does it look so?
Ans. The Average Fixed Cost curve looks like a rectangular hyperbola. It happens because same amount of fixed cost is divided by increasing output. As a result, AFC curve slope downwards and is a rectangular hyperbola, i.e., area under AFC curve remains same at different points.
5. State any two merits of Scatter diagram method.
(i) It is a very simple method of studying correlation.
(ii) It indicates whether the relation is positive or negative
OR
Distinguish between simple and partial correlation.
Ans. (i) Simple correlation: When the relationship between only two variables is studied.
(ii) Partial correlation: When the relationship between only two or more than two variables is studied.
6. Write the steps for the calculation of standard deviation using Actual mean method in case of individual series.
Ans. (i) Obtaining mean
(ii) Obtaining deviations from mean and its total
(iii) applying the formula
7. Construct price index number from the following data by using Laspeyre’s method.
Ans.
8. When market price of a commodity is Rs 4 per unit, a seller is willing to sell 50 units of the commodity. As the price rises to Rs 5 per unit, he is willing to sell 60 units. Calculate the price elasticity of supply.
Ans. Correct answer: Es = 0.8
9. What difference does it make to a perfectly competitive market when we say that there is large number of buyers in it? Explain.
Ans. The large number of buyers is assumed to be so large that an individual buyer’s share in total purchases is so negligible that he cannot influence the market price on its own by purchasing more or less. The outcome is that price remains unchanged.
10. Distinguish between ‘Explicit Cost’ and ‘Implicit Cost’. Give one example of each.
Ans. Explicit cost: It is actual expenditure incurred by the producer on account of purchase of inputs from the market
Implicit cost: It is the cost which a firm incurs on account of the use of self-owned inputs.
OR
An individual is both the owner and the manager of a mall taken on rent. Identify implicit and explicit costs from this information. Give reasons.
Ans. As a manager, the owner is rendering his own services, managerial services are not hired from the market. So, they lead to implicit cost. Rent of the mall involves payment of rent. It is an explicit cost.
11. State with valid reasons, whether the following statements are true or false.
(i) Marginal revenue can never be equal to price of the commodity.
Ans. False. MR can be equal to price (AR) of the commodity when AR is constant, so that AR and MR are equal at all levels of output. This is true of a firm under perfect competition.
(ii) MR can be negative in case of perfect competition.
Ans. False. Under perfect competition, negative MR is not possible because price is given to a firm. MR can be negative only when price of a commodity is declining.
12. Calculate co-efficient of correlation between X and Y by actual mean method.
Ans. Mean (X) = 15; Mean (Y) = 20
r = 0.90
13. Read the following case study carefully and answer the following questions on the basis of the same:
With a price floor, the price is set above the equilibrium price. The government may decide that the equilibrium price is not high enough and is causing social problems. For instance: the American farmer, through technology and science, is a producer of large amounts of food products. This has, however, not been to the farmer’s advantage. When there is a large supply and not as much demand, the price drops. It has been the case with American farmers, large supplies, low demand, and low prices. Low prices result in low incomes. In order to offset this, the government has enacted price supports to raise the price of agricultural products.
(i) If the prevailing market price is above the equilibrium price, explain its chain of effects.
Ans. Equilibrium price is the price which is determined by the market demand and market supply, if the equilibrium price is less than the prevailing market price, there is excess supply. Pressure of excess supply leads to reduction in market price. Owing to a fall in price, quantity demanded tends to rise, leading to downward movement along the demand curve, a fall in price leads to backward movement along the supply curve, indicating a fall in quantity supplied.
(ii) Explain the concept of ‘Buffer Stock’ as a tool of price floor.
Ans. When minimum price fixed by the government higher than the equilibrium price, this implies that the government will buy the surplus stock of the farmers in case they fail to sell it in the open market at the floor price. By buying the surplus stocks of the formers, the government creates its own buffer stock. Thus, floor price is a tool of the buffer stock.