Subject: Economics
Class XI
Time Allowed: 3 hours
Max. Marks: 80
General Instructions:
● This question paper contains two sections:
Section A – Statistics for Economics
Section B – Micro Economic
● This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
● This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to 80 words.
● This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 to 100 words.
● This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to 150 words
SECTION – A
1. ________ is the root of all economic problems.
a) Abundance
b) Allocation
c) Wants
d) Scarcity
2. Sampling scheme where the units constituting the sample are selected at regular interval after selecting the very first unit at random with equal chance is called
a) Cluster sampling
b) Stratified sampling
c) Systematic random sampling
d) Purposive sampling
3. Suppose the correlation coefficient between heights (as measured in feet) versus weight (as measured in pounds) is 0.40. What is the correlation coefficient of height measured in inches versus weight measured in ounces? [12 inches = one foot; 16 ounces = one pound]
a) 0.533
b) 0.40
c) 0.30
d) cannot be determined from information given
4. Continuous variable assumes _________
a) Increase in jumps
b) Both A range of values and Increase in jumps
c) None of these
d) A range of values
5. ________ is the benchmark index for the Indian stock market.
a) Price index
b) Agricultural index
c) Sensex
d) None of these
OR
________ in which current year quantities are used
a) Fisher’s
b) Laspeyre’s
c) Paasche’s
d) None of these
6. A person who actually collect the desired information is called _______.
a) Respondents
b) population
c) Investigator
d) Enumerator
OR
One of the drawbacks of the Direct personal investigation method is ______.
a) It is very costly and time taking process
b) Lacks reliability
c) Questions might be misinterpreted
d) Difficult to get original data
7. Which of the following statement can be called Statistics?
a) Technology of Japan is very advanced.
b) In our school there are 5000 students.
c) India has per capita income of Rs. 20,000 p.a.
d) USA is the richest country in the world.
8. Calculate the correlation coefficient of the marks obtained by 12 students in mathematics and statistics and interpret it
a) 0.76
b) 0.78
c) 0.77
d) +0.75
9. Assertion (A): Prepaid postage stamps should be affixed.
Reason (R): Informants should be required to spend for posting the questionnaires back.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
10. Assertion (A): Special purpose tables are small in size and design to highlight a particular set of facts in simple and analytical forms.
Reason (R): Special purpose tables are made to provide the results of the analysis in an ineffective way so that one finds it easy to make comparisons and clear relationships.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
11. Simple average of price relative method of computing index number suffers from certain limitations. Enumerate those limitations.
Ans. ● This method is not affected by change in the units of measurement or by extreme values. However, it suffers from the following limitations
● This method also gives equal weights to all the items and thus ignores their relative importance in the group. However, in actual practice, a few price relatives are more important than others.
● In this method, difficulty is faced with regard to the selection of an appropriate average. This method uses arithmetic mean for computing average, which is not suitable for study of index numbers.
12. Calculate mode from the following data
Ans.
OR
Find out the median of the data given below by arranging them in ascending order
Ans. The given series is a discrete series. So after arranging the data in ascending order, we have to find the cumulative frequency i.e., c multiplied by f.
Calculation of Median
= Size of 15th item
Since 15 is greater than 14 and less than 21, so the 15th item lies in cf 21, and the value corresponding to this cumulative frequency is 156.
Hence Median = 156
13. The marks obtained by 25 students in a class are as follows: 22, 28, 30, 32, 35, 37, 40, 41, 43, 44, 45, 45, 48, 49, 52, 53, 54, 56, 56, 58, 60, 62, 65, 68, 69
● Arrange the above data in the form of a frequency distribution taking class interval. 20-29, 30- 39, 40-49, 50-59, 60-69
● Form the less than cumulative frequency distribution also.
Ans. The frequency distribution of given data is shown below
b) Cumulative frequency distribution (less than) is given below:
14. Construct a frequency polygon without using histogram for the following data.
Ans.
OR
Construct a histogram for the following frequency distribution.
Ans.
15. Write any three uses of index number especially in economics.
Ans. Uses of index number are
● Index numbers are helpful in measuring the purchasing power i.e., value of the money: The value of money depends on its purchasing power and purchasing power of money depends on the price of commodities. The change in price adversely affects the value of money.
● These numbers are used to measure level of economic activities like import, export, production, population, etc.
● These numbers are helpful in evaluating economic policy e.g., index number helps in knowing the effect of export policy on export.
● Index numbers act as economic barometers. They measure the pulse of an economy and act as a barometer to indicate fluctuations in general economic conditions of a country.
16. Calculate the weighted average of price relative index for 2016 on the basis of 2012 from the following data.
Ans.
17. Determine the missing frequencies when mode = 36 and total frequency is 30.
Ans. Calculation of Missing Frequencies
OR
Calculate arithmetic mean from the following data using step deviation method.
Ans.
SECTION – B
18. Which of the following statements is correct?
a) Stock and supply are always equal.
b) Stock refers to the quantity which comes to market for sale.
c) Supply does not depend on government’s tax policy.
d) There is difference between supply and stock.
19. A point outside the PPF indicates:
a) Fuller utilization of resources
b) Unattainable combination
c) Attainable combination
d) Under utilization of resources
OR
Which of the following illustrates a decrease in the unemployment using the PPC?
a) A movement from a point inside the PPC to a point towards the PPC
b) A movement from a point on the PPC to a point inside the PPC
c) A movement down along the PPC
d) A rightward shift of the PPC
20. When a firm’s TR<<TC, it can still cover its normal profit
a) TRUE
b) None of these
c) Can’t say
d) False
OR
In case of perfect competition:
i. a firm is able to charge higher price
ii. a firm is able to charge uniform price
iii. a firm is able to sell any amount at the prevailing price
a) only i
b) Both ii and iii
c) only ii
d) only iii
21. Which of the following statement is true?
Average Revenue and Marginal Revenue curves have a positive slope.
i. MR curve lies above AR curve. (AR > MR)
ii. Marginal Revenue falls twice the rate of Average Revenue.
iii. So long as Marginal Revenue decreases and is negative, Total Revenue increases at a diminishing rate.
a) only iii
b) only i
c) only iv
d) only ii
22. Money costs mean
a) Money expenditure of a producer in the production process
b) Money expenditure on purchase of goods from the factory
c) Money spent by the consumers
d) Money expenditure on output
23. The substitute goods of a normal good are those that can be used
a) Does not exist
b) Along with each other
c) In place of each other
d) Together
24. What happens to total revenue when Marginal revenue is zero
a) TR rises
b) TR falls
c) TR is maximum and constant
d) TR is also zero
25. Can the AC be less than the MC when AC is falling
a) None of these
b) Can’t say
c) No
d) Yes
OR
Total cost is the vertical summation of:
a) TFC and TVC
b) AFC and AVC
c) none of these
d) AFC and AVC
26. Assertion (A): Total expenditure goes in the same direction as the price does.
Reason (R): With rising in the price of a commodity total expenditure decreases and with a fall in its price total expenditure increases.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true
27. Assertion (A): Each point on the indifference curve shows one combination of two commodities.
Reason (R): Each combination offers the same level of satisfaction to the consumer.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
28. Define marginal opportunity cost along with a PPC.
Ans. The slope of the production possibility curve is marginal opportunity cost or marginal rate of transformation which refers to the additional sacrifice that a firm makes when they shift resources and technology from the production unit of one commodity to the other commodity in an economy. It is the ratio between loss of output and gain of output when some resources are shifted from use 1 to use- 2
29. Explain any two factors that affect Price Elasticity of Demand.
Ans. The two factors that affect Price Elasticity of Demand are:
● Number of substitutes of goods: Demand for goods which have close substitutes (like tea and coffee) is relatively more elastic, because when the price of such a good rise, the consumers have the option of shifting to its substitute. Goods without close substitutes like wheat and salt etc are generally found to be less elastic or inelastic in demand. Thus the availability of close substitutes makes the demand sensitive to change in prices.
● Proportion of income spent on the goods: Goods on which consumers spend a small proportion of their income (toothpaste, needles etc) will have an inelastic demand i.e. when prices of such goods change, consumers continue to purchase the almost same quantity of these goods. On the other hand, goods on which the consumers spend a large proportion of their income (cloth, television etc) tend to have elastic demand. However, if the proportion of income spent on a commodity is large, then demand for such a commodity will be elastic.
OR
Price Elasticity of Demand of a good is (-) 0.75. Calculate the percentage fall in its price that will result in 15% rise in its demand.
Ans.
30. A and B are complementary goods. Explain the effects of change in price of A on demand for B.
Ans. Complementary goods: Those goods which are used together for the fulfillment of a demand For
Example: Car and Petrol.
● Graphical representation:
Change in price of A on demand for B can be studied with respect to the given two conditions:
●Price of A rises If the prince of A rises, then it will result in fall in the demand of A, and therefore demand for B will also fall. As a result, demand curve DD will shift leftwards to D2D2.
●Price of A falls If the price of A falls, then it will result in an increase in the demand of A, and therefore demand for B will also increase. As a result demand curve, DD will shift rightwards to D1D1.
31. Explain the problem of what to produce with the help of an example. Does it arise in every economy?
Ans. Every economy faces the problem of what to produce. Because resources are scarce, we cannot produce everything in whatever quantity we wish to, we are bound to face the problems of what to produce and how much.
Illustration: Let us assume that resources available are worth 25 crore. Assuming technology to be constant, we can utilise resources entirely for the production of (say) guns and produce 500 guns, or utilise these resources entirely for the production of (say) bread and produce 500 tons of bread. We need guns for the defense and bread for the masses.
Accordingly, both the guns and bread are to be produced. How much of each is to be produced depends on the wisdom of the planners in a planned economy, also upon the market forces of demand and supply in a free economy.
OR
Assuming that no resources are equally efficient in production of all good name the curve which shows production
Ans. The curve is called Production Possibility Curve. Production Possibility Curve (PPC) is the locus of various combinations of two goods that an economy can produce when the resources are fully and efficiently employed at a given level of technology.
Properties of PPC:
● PPC is downward sloping, which means that if the country wants to produce more of one good it has to produce less of the other good since resources are limited.
● PPC is a concave-shaped curve because of increasing MOC. This is explained below: We know that resources are not equally efficient in the production of both the goods: guns and butter. If initially all the resources are being used for the production of guns, then we are at point A on the PPC. If the producer now wants to shift some resources from the production of guns to butter, he would shift the least efficient resources. Thus, the amount of butter sacrificed will be less. If the producer wants to shift some more resources from the production of guns to butter, more efficient resources will then be shifted. Thus, the amount sacrificed of guns will be more. This implies that MOC will increase.
32. Define a budget line. When can it shift to the right?
Ans. Budget line is a line showing different combinations of two goods which a consumer can buy or afford, at his given income and market price of the goods. The Budget Line also called as Budget Constraint. Consumer theory uses the concepts of a budget constraint and a preference map to analyze consumer choices. The equation of the budget line is:
Px . Qx + Py . Qy = M,
Where Px = Price of good X
Py = Price of good Y
Qx = Quantity of good X
Qy = Quantity of good Y
M = Money income.
It can shift to the right when the consumer is able to increase the consumption of both the goods. It will be possible due to the following reasons:
When the level of income increases, the consumer will be able to buy more bundle of goods, which were previously not possible.
When prices of both the goods fall, the consumer can now purchase more goods with the same income level.
33. Complete the following Table
Ans.
34. Explain three properties of Indifference Curves.
Ans. Properties of Indifference Curve:
● Indifference Curves are negatively sloped or they slope downwards: It shows that more of one commodity implies less of the other, so that the total satisfaction (at any point on Indifference Curve) remains the same.”
● Indifference Curves are convex to the point of origin: An Indifference Curve will ordinarily be convex to the origin. This is because of Diminishing Marginal Rate of Substitution.
● Indifference Curve neither touches X-axis nor Y-axis: It is often assumed that a consumer buys a combination of two goods. Hence, an Indifference Curve neither touches X-axis nor Y-axis.
● Indifference Curves never touch or intersect each other: Each Indifference Curve represents a different level of satisfaction. So, their intersection is ruled out.
● Higher Indifference Curve represents higher level of satisfaction: This is based on the assumption of monotonic preferences which means that greater consumption of a commodity by the consumer gives higher level of satisfaction.
OR
Explain the outcome of the following features of a perfectly competitive market.
a. Freedom to the firms to enter the industry.
Ans. In a perfectly competitive market, firms are free to enter the industry. There are no legal or statutory restrictions on the entry of new firms in the market. The outcome of this feature is that all the firms in the industry are able to earn only normal profits in the long run. If, the firms are earning super normal profits (that is, the price is greater than the minimum of LAC) then, it attracts new firms in the market. Consequently, the total output in the industry increases and the price falls. Price continues to fall till it becomes equal to the minimum of the LAC curve and the supernormal profits are wiped out.
b. Freedom to the firms to leave the industry.
Ans. In a perfectly competitive market, firms are free to leave the industry. There are no legal or statutory restrictions to this regard. The outcome of this feature is that all the firms in the industry are able to earn normal profits in the long-run. If the firms are suffering abnormal losses (that is, the price is less than the minimum of LAC) then, it leads some of the firms to exit the market. Consequently, the total output in the industry falls and the price rises. Price continues to rise till it becomes equal to the minimum of the LAC curve and the abnormal losses are wiped out.