Download value based questions from all chapters

AHLCON PUBLIC SCHOOL
CLASS XII – ECONOMICS
VALUE BASED QUESTIONS FROM ALL CHAPTERS.
Q.1
How do you account for a rise in demand even when own price of the commodity is rising?
Ans.
1. Present or expected income of the consumers is rising
2. Severe scarcity of the commodity.
Q.2
Farmers may suffer a loss even when they reap a good harvest. Does your demand – supply
analysis provide an answer to this paradox?
Ans.
Owing to their poverty, farmers are often driven to a distressed sale of their produce. But good
harvest causes a glut (of supply) in the market which causes price crash. Implying a fall in
farmers in income.
Q.3
How is elasticity of demand relevant to you when as a monopolist, you are a price maker?
Q.4
Why do people buy inferior goods at the first instance, even when their consumption is phased
out as income rises?
Ans:
Because inferior goods are essentials of life.
Q.5
Imagine yourself as a CEO of a global software company like Microsoft. How will you decide
your price policy?
Ans:
It is the part of oligopoly market so it is decided in group.
Q.6
Imagine yourself a producer (a perfectly competitive market) focusing on profit maximization.
Will you prefer striking an equilibrium in a state of increasing returns.
Ans:
It is a situation when every additional unit of output adds more and more to total profits.
Q.7
Market economics promote disparities in income distribution even when resources are optimally
utilized substantiate this observation.
Q.8
Growth and equity are often confronted as conflicting issues while addressing the problem of
‘How to produce’. Explain.
Q.9
Why has the govt. of India failed to combat inflation even when a series of monetary measures
are available?
Ans:
These are related to control or lowering the demand for goods and services by making the
availability of credit costlier and difficult. It does not address the supply side of the problem.
Q.10
If disposable income of the people is raised by lowering the rate of taxation, how will it help rain
the level of GDP?
Ans:
It is expected to raise the level of Ad. A rise in AD will induce higher level of planned output.
Implying a higher level of GDP.
Q.11
Subsidy on diesel oil is a wasteful expenditure by the govt. Write one point in support of this
observation and one against it.
-
Q.12
Because subsidy is unduly reaped by a richer section of the society who get cheaper oil to run
their luxury cars.
Farmers need to be given diesel at the low price. So that, the cost of farming does not rise
and farming remains a profitable occupation.
If US dollar becomes costlier in terms of the Indian rupee, it is good as well as bad for the
domestic growth. How?
Ans:
It is good because purchasing power of USD dollar in the Indian market increases. Accordingly,
demand for the domestic goods is expected to rise. A rise in exports is a key factor in domestic
growth.
It is bad because imports of essential capital goods become expensive.
The market price of US dollar increased considerably leading to rise in the prices of imports of
essential goods. What can central bank do to ease the situation?
Ans:
The central bank can sell its reserves of US dollars in the money market to reduce the pressure of
demand for dollars. In case of supply aligns with demand, the price of dollar will fall in terms of
the Indian rupee.
Q.14
Explain how introduction of money has led to the expansion of markets.
Ans:
It enhanced the mobility of capital across different parts of the world.
Money has led to the emergence of money markets, availability of funds, both for consumption
and investment.
Money has broken the barriers of barter system.
Q.15
Why should rising MPs be cause of worry when it is a sign of rising GDP in the economy?
Ans:
Rising MPS means falling MPC, as MPS + MPC – 1. It indicates that lesser and lesser
proportion of the additional income goes to consumption expenditure. Implying a gradual
shrinkage of AD in relation to  . In such a situation, the economy might slip into a state of
recession or economic slow down.
Q.16
How would you argue for and against foreign investment?
Q.17
How would you comment on the statement that increase in interest rate leads to an appreciation
of domestic currency?
Q.18
Underemployment is a critical feature of the Indian. Can we really explain in terms of the
deficiency of demand?
Q.19
Identify two such situations when elasticity of supply is low when there is a substantial rise in
price related to rise in demand for a commodity.
Q.20
Output of food grain in India at one stage was less than its domestic demand. Now it was less
than its domestic demand. Now it is not. Does it mean that the law of diminishing returns has
failed in Indian agriculture?
Ans:
It does not mean failure of the law but postponement of the law.
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT – I
Q.1
With the help of suitable example explain the problem of ‘For whom to produce’.
Q,2
Explain the problem of ‘what to produce’.
Q.3
Determine the ‘marginal opportunity cost’ from the following data –
Goods X (units)
Good Y (units)
Q.4
120
100
An economy produces two goods X and Y. Its production possibilities are shown in the
following table. Calculate MRT and comment on the shape of PPC.
Possibility
Good X
Good Y
Q.5
100
140
A
20
0
B
14
1
C
9
2
Complete the following table:
Possibilities A
B
C
Good X
0
10
20
Good Y
200
180
_
MOC
_
_
4
D
5
3
E
2
4
D
_
80
6
E
40
0
_
F
0
5
Q.6
Dr. Parul runs an eye clinic at gurgaon and her annual earnings are 20 lakhs. If she works in
Fortis Hospital in the city, she can get a salary of 15 lakhs. What is the opportunity cost of
having clinic in the city?
Q.7
What is an opportunity cost? Explain with the help of a numerical example.
Q.8
What is ‘marginal rate of transformation’, explain with the help of an example.
Q.9
Explain the central problem of ‘how to produce’.
Q.10
Define production possibility curve. Explain why it is downward sloping from left to right.
Q.11
Why does an economic problem arise? Explain.
Q.12
Explain how a production possibility curve is affected when resources are inefficiently employed
in an economy.
Q.13
Production in an economy is below its potential due to unemployment. Government starts
employment generation schemes. Explain its effect using production possibility curve.
Q.14
Why is a production possibility curve concave? Explain.
Q.15
Define an economy. What are market, planned and mixed economics?
Q.16
Distinguish between market and mixed economy.
Q.17
Your are to simply tick () Yes or No
(a) Economics problem and scarcity of resources are not related to each other. Yes/No
(b) If there were no choices in resource allocation, microeconomics would have not existed.
Yes/No
(c) In a free economy, decision relating ‘for whom to produce’ enhances the gulf between rich
and poor. Yes/No
(d) All resources are not equally scarce all the time. Yes/No
(e) Lack of scarcity implies lack of economic problem. Yes/No
AHLCON PUBLIC SCHOOL
CLASS XII – ECONOMICS ASSIGNMENT
UNIT I & II
Q.1
VERY SHORT ANSWER QUESTIONS
i)
Give two characteristics of economic resources.
ii)
What are two assumptions of PP curve?
iii)
When is PP curve is a straight line?
iv)
When is PP curve concave?
v)
When is PP curve convex?
vi)
Define opportunity cost.
vii)
How is market demand curve derived from individual demand curves?
viii)
Give the formulae for the calculation of total utility (TU).
ix)
What is marginal rate of substitution? Define it.
x)
Define market demand?
xi)
What is meant by price elasticity of demand?
Q.2
SHORT Answer questions (60/70 words)
i)
Explain the central problem of ‘what to produce’?
ii)
Why is there need for economizing of resources? Explain.
iii)
Draw a PP curve assuming marginal opportunity cost to be constant.
iv)
Draw a PP curve assuming marginal opportunity cost to be falling.
v)
Draw a PP curve assuming marginal opportunity cost to be rising.
vi)
Define utility. Describe the law of diminishing marginal utility.
vii)
What happens to the demand for a given good when prices of its related goods change.
(1) A rise in money income of the households.
(2) A fall in price of other commodities.
viii)
Distinguish between normal goods & inferior goods.
ix)
A consumer buys 80 units of a good at a price of Rs. 4 per unit. When the price falls, he
buys 100 units. If price elasticity of demand is (-)1, find out the new price.
x)
At a price of Rs. 4 per unit a consumer buys 50 units of a goods. The price elasticity of
demand is (-)2. How many units will the consumer buy at Rs. 3 per unit.
xi)
At a price of Rs. 50 per unit, the quantity demanded of a commodity is 1000 units. When its
price falls by 10%, its quantity demanded rises to 1080 units. Calculate its price elasticity of
demand. Is its demand inelastic & Give reasons for your answer.
xii)
Q.3
Explain what happens to a PP curve when resources increase: Use diagram.
LONG ANSWER QUESTIONS
i)
Explain consumer equilibrium with the help of utility approach.
ii)
How does concept of opportunity cost help us to obtain situation of full and efficient use of
resources of Production Possibility Curve?
AHLCON PUBLIC SCHOOL
CLASS – XII - ECONOMICS
UNIT - III
Very short Questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
Define supply.
Define market supply of a good.
How is elasticity of supply curve?
What is the shape of supply curve?
When does a seller more quantity on the same price or same quantity on a lower price?
What is the shape of supply curve when elasticity of supply is infinite?
What effect does an increase in input price have on supply curve?
What is supply curve?
If a farmer grows rive and wheat, how will an increase in the price of wheat effect the
supply curve of rice?
10. If two supply curves intersect which one has higher price elasticity at the po8int of
intersection.
11. How will an increase in the number of firms shift the market supply curve?
12. What is the price elasticity associated with a supply curve that is vertical?
13. Due to improvement of technology, the marginal cost of production of television has
gone down. How will it affect the supply curve of television?
14. What effect does an increase in excise tax rate have on the supply curve of the product?
15. What is meant by change in supply?
16. State the Law of supply.
Short answer Questions1. What is meant by change in supply? Explain with diagram.
2. What is meant by change in quantity supply? Explain with diagram.
3. The coefficient of elasticity of supply, of a commodity is 3. A seller supplies 20 units of this
commodity at a price of Rs. 8 per unit. How much quantity of this commodity will the seller
supply when price rises by Rs. 2 per unit?
4. The coefficient of elasticity of supply of a commodity is 1.2. What quantity of the commodity
will a seller supply at price of Rs. 5/unit if he supplies 80 units at Rs. 4/unit?
5. If the price of the commodity is Rs. 10/unit and its quantity supplied at this price is 500 units. If
its price falls by 10% and quantity supplied falls to 400 units, calculate its price elasticity of
supply.
6. Explain law of supply with supply schedule and a curve.
Long Answer questions1. Explain the determinants of supply curve.
2. Explain the factors affecting elasticity of supply.
3. Explain the concept of elasticity. Explain the types of elasticity with diagrams.
4. What are the reasons for the positive slope of supply?
5. Differentiate between expansion and increase, contraction and decrease.
6. What is market supply curve? Explain with schedule and diagram, also explain its determinants.
7. Explain the effect of technical progress and rise in input prices on the supply of good.
8. Distinguish between ‘change in supply’ and ‘change in quantity supplied’.
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT - III
Very short Answer Questions.
1. Define production function.
2. When TP increases at decreasing rate. What happens to MP?
3. What does division of labour mean?
4. What are fixed factors?
5. What is meant by marginal costs?
6. Which costs are present only in the short run and not in the long run?
7. What is the reason behind the ‘U’ shape of the MCV curve?
8. What is the general shape of the AFC curve?
9. Where does LMC curve cut the LAC curve?
10. Which is the most efficient ;eve; pf production of the LAC?
11. What will happen to ATC when MC > ATC?
12. What is meant by volume discounts?
13. Name two factors behind increasing returns to scale in the long run?
14. How is total product derived from marginal product schedule?
15. Define Average product.
16. What is explicit cost?
Short Answer Questions1. Explain the relationship between TP and MP with diagram.
2. Explain the relationship between MP and AP with diagram.
3. Explain the concept of opportunity cost with examples. Describe its significance.
4. What is meant b division of labour? Name its two advantages.
5. Distinguish between fixed cost and variable cost. Give an example of each.
6. Suppose, a firm’s TFc is Rs. 100 and its MC schedule is the following.
Out put (units)
MC (Rs.)
1
10
2
20
3
390
4
40
5
50
6
60
7
70
Calculate TC and AC.
7. Complete the following table:
Output (units)
TC(Rs.)
AVC (Rs)
MC (Rs.)
0
80
-
1
180
-
2
270
-
3
350
-
4
440
-
Long Answer Questions1. Explain the law of variable proportions.
2. Explain the laws of returns to scale.
3. Differentiate between laws of variable proportions and laws of returns to scale.
increasing returns to scale occur?
4. differentiate between Internal economies and external economies of scale.
Why do
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT – IV (FORMS OF MARKET AND PRICE DETERMINATION)
Q.1
Market for a good is in equilibrium. There is simultaneous ‘increase’ or ‘decrease’ both in
demand and supply of the good. Explain its effects on market price.
Q.2
What happens to equilibrium price of a commodity if there is an ‘increase’ in its demand and
‘decrease’ in its supply?
Q.3
State any three factors that can cause an ‘increase’ in demand of a commodity.
Q.4
Explain the implications of the following of perfect competition.
a) Large number of buyers and sellers.
b) Freedom of entry and exit of firms.
Q.5
Explain why are firms mutually interdependent in an oligopoly market.
Q.6
What is a price maker firm?
Q.7
Explain why there are only am few firms in an oligopoly market.
Q.8
Market for a good is in equilibrium. There is simultaneous ‘decrease’ both in demand and
supply but there is no change in market price. Explain with the help of a schedule how it is
possible.
Q.9
Explain the chain of reactions in the market if the price is a) higher than equilibrium price b)
lower than equilibrium price.
Q.10
What happens to the equilibrium price when demand for a commodity decreases, supply
remaining unchanged?
Q.11
What is the impact of excess supply on equilibrium price?
Q.12
Distinguish between oligopoly and monopoly markets.
Q.13
What prevents a perfectly competitive firm to lower the product price and capture the entire
market?
Q.14
‘A monopolist is a price maker’. How?
Q.15
What facilities partial control over price?
Q.16
Why are patent rights granted?
Q.17
Differentiate between price discrimination and product differentiation.
Q.18
What are cartels? Give an example.
Q.19
What form of market it is when there are only two firms producing a commodity?
Q.20
How are decisions taken by consumers and producers in a market co-ordinated?
Q.21
Why price remains unchanged when supply curve is perfectly elastic and demand curve shifts?
Q.22
With the help of a demand and supply schedule, explain the concepts of excess demand and
excess supply of a commodity. Also, explain their effect on the price of a commodity.
Explain the effects of price ceiling.
Q.23
Q.24 Explain economically viable and non- viable industry with help of diagram.
Q.25 What are the effects of ‘price’ floor (minimum price ceiling) on the market of a good ? use
diagram.
Q.26 What is meant by ‘excess supply’ of a good in a market? Explain its chain of effects on the
market for that good use diagram.
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT – VI (NATIONAL INCOME ACCOUNTING)
Q.1
What is national income accounting? What are its uses?
Q.2
What is the difference between real flow and money flow?
Q.3
What is nominal GNP?
Q.4
What is GNP deflator?
Q.5
What is Green GNP?
Q.6
Explain the concepts of injections and leakages in an open economy.
Q.7
Distinguish between stock and which is a flow? Compare net investment and capital with flow
of water into a tank?
Q.8
Write down some of the limitations of using GDP as an index of welfare of a country.
Q.9
Give examples of factor income earned from abroad by Indian residents.
Q.10
Are the following items included in estimating a country’s national income?
a) Expenditure on purchase of an old house
b) Brokerage on sale of shares
c) Meals given to the beggars.
Q.11
Are the following items included in estimating national income –
a)
b)
c)
d)
e)
receipts of scholarship from govt.
Sale of shares
Construction of new houses
Vegetables grown for self consumption
Cooking done by housewife.
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT – VI (NUMERICALS ON VALUE ADDES / PRODUCTION METHOD.)
Q.1
In the imaginary economy described below only the transactions shown take place –
(A, B, C are industries)
A sells to B for Rs.60 and to C for Rs.60
B sells to private consumption for Rs.50 and exports for Rs.40
C sells to public consumption for Rs.35 and accumulates unsold stocks worth Rs.35.
Find value added by industry of origin, and also value of different components or final
expenditure on national product.
[Ans: value added – Rs.160, components – Rs.160]
Q.2
Find value added by industry or origin .
a) A imports goods worth Rs.100 crores and exports worth Rs. 60 crores and sells for Rs.20 crores
to C and for Rs.60 crores to consumers.
b) B sells goods worth Rs.80 crores to C and for Rs.60 crores to consumers.
c) C imports goods worth Rs.120 crores and sells goods for Rs.50 crores to govt. [Ans. Rs.190]
Q.3
Calculate NVAFC
a.
b.
c.
d.
a.
b.
c.
d.
Opening stocks
Purchases
Wages
Operating surplus
IT
Depreciation
Unsold stock
sales
20
40
90
40
30
20
25
215
[Ans: Rs.130Cr)
Q.4
Calculate value added by firm X.
a.
Sales
600
b.
Purchases of raw material
200
c.
Import of raw material
100
d.
Import of machines
200
e.
Closing stock
40
f.
Opening stock
10
[Ans: Rs.430]
Q.5
An economy has only two firms A and B on the basis of the following information about these
firms, find out
a. Value added by firms A and B
b. GDPMP
a.
b.
Export by firm A
Import by firm A
30
60
c.
Sales to h.h. by firm A
100
d.
Sales to firm B by firm A
50
e.
Sales to firm A by firm B
40
f.
Sales to H.H by firm B
80
[Ans: by firm Rs.80, By firm Rs.70]
Q.6
Calculate GVAFC
a.
Purchases of raw material
1000
b.
Wages and salary
800
c.
Rent
200
d.
Interest
150
e.
Profit
800
f.
Depreciation
150
g.
I.T
300
h.
Subsidies
(-)150
i.
Closing Stock
1000
j.
Opening stock
(-)400
k.
Sales
2650
[Ans: Rs.2100]
Q.7
Calculate NVAFC
a.
Subsidy
40
b.
Sales
800
c.
Depreciation
30
d.
Exports
100
e.
Closing stock
20
f.
Opening stock
50
g.
Intermediate purchase
500
h.
Purchase of machinery for own use
200
i.
Import of raw material
60
[Ans: Rs.280]
Q.8
Calculate value added by A and B and GNPFC
a.
Sales by firm A
100
b.
Purchase from firm B by firm A
40
c.
Purchases from firm A by firm B.
60
d.
Sales by firm B.
200
e.
Closing stock of firm A
20
f.
Closing stock of firm B.
35
g.
Opening stock of firm A
25
h.
Opening stock of firm B.
45
i.
Indirect Taxes paid by both the firms
30
j.
Factor income to abroad
30
k.
Factor income from abroad
25
[Ans: By A – Rs.55, by B – Rs.130, GNPFC – 150]
Q.9
Calculate value of output
a.
NVAFC
100
b.
Intermediate consumption
75
c.
Excise duty
20
d.
Subsidy
05
e.
Depreciation
10
[Ans: Rs.200]
Q.10
Calculate intermediate consumption.
a.
b.
c.
d.
e.
Q.11
200
80
15
05
20
[Ans: Rs.90]
Calculate Sales –
a.
b.
c.
d.
e.
f.
Q.12
Value of output
NVAFC
Sales Tax
Subsidy
Depreciation
NVAFC
300
Net addition to stocks
(-)20
Sales tax
30
Depreciation
10
Intermediate consumption 100
Subsidy
5
[Ans: Rs.455]
Calculate GVAMP and National Income
a. Value of output by
1800 + 1200 + 1300
Primary, secondary, tertiary sectors
b. Value of intermediate inputs purchased by
Primary secondary, tertiary sectors
800 + 400 + 350
c. I T paid by all the sectors
150
d. Consumption of fixed capital by all sectors
180
e. Factor income received by residents from row
90
f. Factor income paid to non residents
120
g. Subsidies received by all the sectors
80
[Ans: Rs = GVAMP Rs.950cr.
NY Rs.2470 Cr.]
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT – VI (NATIONAL INCOME AND RELATED AGGREGATES)
Q.1
Items included or excluded in National Income.
a. Broper’s commission on the sale / purchase of second heand goods or financial assets like
shares and bonds. (Y)
b. Undistributed profit, corporate tax (Y)
c. Interest on loans paid by commercial banks (Y)
d. Services provided by the owners of production units like irrupted rent of owner occupied
house, production for self consumption. (Y)
e. Payment for goods and services for private consumption e.g. railway fare by households,
school fees paid by students. (Y)
f. Free services (dispensary, education) by govt., govt. expenditure on street lighting, water
supply etc. (Y)
g. Capital formation (investment) like purchase of machinery by a firm, construction of a new
house etc. (Y)
h. Payment of bonus, retirement pension, subsidized lunch, house rent allowance by employer.
(Y)
i. Profits earned by an Indian company from its branches abroad, wages received by Indian
employees working in foreign embassies, rent received by Indian residents on their buildings
rented out to foreign companies or banks. (Y)
j. Sale and purchase of financial assets like shares bonds etc. (N)
k. Compulsory transfer payment like wealth tax, death duties etc. (N)
l. National debt interest. (N)
m. Illegal incomes like income from smuggling, black marketing etc. (N)
n. Sale and purchase of second hand goods like old machinery, old house (N)
o. Windfall gains like winning of lottery etc. (N)
p. Financial help given to recover from capital loss (N)
q. Intermediate consumption expenditure like purchase of raw material, advertisement expenses
of a production unit (N)
r. Capital gains like profit due to increase in the price of land, etc. (N)
s. Non market transactions like services a house wife, leisure time activities like gardening (N)
t. Transfer incomes or payments like pocket money, donations to charitable trusts etc. (N)
u. Construction of a news house (Y)
v. Increase in the prices of stocks lying with a trader. (N)
w. Durable goods purchased by a household (Y)
x. Growing vegetables in a kitchen garden of the house (N)
y. Gifts received from abroad (N)
z. Wages received by Indian employees working in Pakistan Embassy.
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT – VI (NATIONAL INCOME)
Q.1
Are the following included in ‘Domestic Income.’ Give reasonsa)
b)
c)
d)
e)
f)
g)
h)
i)
j)
Q.2
How will you treat the following while estimating National Income –
a)
b)
c)
d)
Q.2
Car purchased by a dealer is a final good. (F)
Car purchased by a taxi driver is a final good. (T)
Car purchased by a household is a final good (T)
All producer goods are capital goods. (F)
Are the following True or False
a)
b)
c)
d)
Q.4
Salaries received by Indian residents working in Russian Embassy in India (Y)
Profits earned by an Indian bank from its branches abroad. (Y)
Entertainment tax received by the government. (N)
Profits earned by Indian company from its branch in London. (Y)
Are the following statements true or false –
a)
b)
c)
d)
Q.3
Profits earned by a resident of India from his company in Singapore. (N)
C.O.E to the residents of Japan working in Indian Embassy in Japan. (Y)
Profits earned by Indian employees working in the Japanese Embassy in India (N)
Pension on retirement (Y)
Capital gains. (N)
Profits earned by a branch of an American Bank in India. (Y)
Salaries paid to Koreans working in Indian Embassy in Korea. (Y)
Profits earned by foreign banks from their branches in India. (Y)
Salaries received by Indian residents, working in American Embassy in India. (N)
Profits earned by an Indian company from its branch in Singapore (N)
Tractor purchased by a farmer is a capital good. (T)
Fuel used by a transport a final good (F)
Milk used in a restaurant is a capital good. (F)
Spares of a truck is a capital good. (F)
Are the following residents of India –
a) Nigerian students studying in Delhi University (N)
b) The American High commissioner posted the US Commission in India. (N)
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS
UNIT – VI
Questions on GDP, NDP, GNP, NNP
Q.1 Find out NNPMP
a) GNPMP
b) Consumption of fixed capital
c) Net factor Income from abroad
45,800
1,580
-80
[Ans: 44,220]
24,900
1,100
450
[Ans: 24,250]
4500
150
320
100
(-)50
[Ans: 4400]
Q.2 Find out NDPFC
a) NDPMP
b) I T
c) Subsidies
Q.3 Find out NNPMP
a) Domestic Income
b) Excise duties
c) Consumption of fixed capital
d) Subsidies
e) Net factor income from abroad
Q.4 Find out GNPMP, NNPFC, NDPMP
a) GNPFC
b) I T
c) NFIA
d) Subsidies
e) Consumption of fixed capital
5,700
200
250
100
80
[Ans: 5800, 5620, 5470]
Q.5 Suppose the GDPMP of India in 2005 – 2006 was Rs.75000 Cr. And NFIA was (-) Rs.250 Crores.
Calculate GNPMP. [Ans: Rs.74,750Cr.]
Q.6 Find out NNPMP
a. GNPMP
b. Consumption of fixed capital
45,800
1,580
[ Ans: Rs.44,220 Cr.]
25,900
1,200
350
[Ans: Rs.25,050]
4500
100
300
50
(-) 100
[Ans: Rs.4450]
Q.7 NDPFC
a) NDPMP
b) I T
c) Subsidies
Q.8 Calculate GNPMP
a)
b)
c)
d)
e)
GDPFC
Excise duty
Consumption of fixed capital
Subsidies
NF IA
Q.9 GDPFC
a) NNPMP
33,650
b)
c)
d)
e)
NFIA
Consumption of fixed capital
Indirect Taxes
Subsidies
250
1030
600
300
[Ans: Rs.34,130]
Q.10 Calculate NNPMP
a)
b)
c)
d)
e)
Domestic Income
Excise duties
Consumption of fixed capital
Subsidies
NFIA
3500
200
400
100
(-)100
[Ans: Rs.3500]
4,520
850
310
1650
(-) 100
[Ans: Rs.7,230]
Q.11 Calculate NNPFC
a)
b)
c)
d)
e)
Wages and salaries
Rent
Interest
Profit
NFIA
AHLCON PUBLIC SCHOOL
Class : XII - ECONOMICS
UNIT - VI
Q.1
From the following data, calculate GNPMP by expenditure method:
Inventory Investment
Exports
NFIA
Personal consumption Expenditure
Gross residential construction investment
Govt. Purchases of Goods & Services
Gross Public Investment
Gross Business fixed Investment
Imports
Ans: (Rs.5450 Crores)
Q.2
Calculate GNPFC from the following data :
Net domestic capital formation
Closing stock
Govt. final consumption expenditure
NIT
Closing stock
Consumption of fixed capital
Net exports
Private final consumption expenditure
Imports
NFIA
Ans: (Rs.2030 Crores)
Q.3
(Rs. in crores)
350
100
200
50
60
50
(-)10
1500
20
(-)10
Calculate (a) GNPMP (b) NNPFC
Gross domestic capital formation
Net exports
Private final consumption expenditure
NFIA
Consumption of fixed capital
Net change in stocks
NIT
Government final consumption Expenditure
Ans: (Rs.310 crores)
Q.4
(Rs. in crores)
100
200
(-)50
3500
300
1000
200
300
100
(Rs. in crores)
94
(-)6
260
(-)3
39
11
43
47
Calculate NDPFC from the following data:
Private final consumption expenditure
Net fixed capital formation
Indirect taxes
Govt. Current transfers to household
Govt. final consumption expenditure
NFIA
MISE
Change in stock
(Rs. in crores)
1020
180
180
25
100
(-)10
560
60
Consumption of fixed capital
Subsidies
Exports
Imports
Ans: (Rs.1080 crores)
Q.5
Calculate National Income by:
(a) Income Method
(b) Expenditure Method
Compensation of employees
Govt. consumption expenditure
NIT
Operating surplus
Net exports
Gross fixed capital formation
Private final consumption expenditure
Net addition to stocks
NFIA
Consumption of fixed capital
Mixed Income of self employed
Ans: (Rs.14000 crores)
Q.6
(Rs. in crores)
5200
1500
1400
2000
(-)400
2500
12000
400
400
1000
6400
From the following data, calculate N.I
(a) Income Method
(b) Expenditure
Government final consumption expenditure
Indirect Taxes
Subsidies
Mixed Income of self employed
Gross fixed capital formation
Net addition to stocks
Operating surplus
Consumption of fixed capital
Private final consumption expenditure
Exports
Imports
NFIA
Compensation of employees
Ans: (Rs. 61700 crores)
Q.7
80
20
100
120
From the following data, calculate:
(a) GNPMP by Expenditure Method
(Rs. in crores)
7000
9000
1800
28000
13000
3000
10000
4000
51000
4800
5600
(-)300
24000
(b) GDPMP by Income Method
Private final consumption expenditure
Government final consumption expenditure
Gross Domestic Capital formation
Net exports
Wages & salaries
Employers contribution to social security schemes
Profits
Interests
Indirect taxes
Subsidies
Rent
NFIA
Consumption of fixed capital
Ans: (GNPMP = Rs. 260 crores)
(GDPMP = Rs. 255 crores)
(Rs. in crores)
200
20
40
(-)5
165
10
15
20
30
5
15
5
5
Q.8
From the following data calculate National Income by Income method & output method.
Value of output of primary sector
Value of output of other sectors
Raw materials purchased by primary sector
Raw materials purchased by other sector
Factor Income received from the ROW
Factor Income paid to ROW
Depriciation
Indirect Taxes
Subsidies
Mixed Income of Self Employed
Compensation of employees
Rent
Interest
Profits
Ans: (Rs.460 crores)
Q.9
(Rs. in crores)
1000
400
500
300
10
15
55
100
20
200
170
40
30
25
Calculate NNPMP by (a) Income method & (b) Expenditure method.
Compensation of employees
Mixed Income of self employed
Gross fixed capital formation
Consumption of fixed capital
Compensation of employees paid by Government
Employers contribution to social security schemes
Operating Surplus
Net capital formation
Exports
Imports
Indirect Taxes
Subsidies
Private final consumption expenditure
Government final consumption expenditure
Purchases by non-residential households in domestic market
NFIA
Ans: (Rs.3100 crores)
Q.10
(Rs. in crores)
1200
800
430
30
300
100
1000
450
10
40
140
20
2100
600
50
20
Calculate (i) Private Income (ii) Personal Income (iii) Personal Disposable Income
Factor Income from Net Domestic Product accruing to private sector
Income from property & entrepreneurship accruing to Govt. department
Savings of non-departmental enterprise
Factor Income from abroad
Depreciation
Current transfers
Factor Income to abroad
Corporate Tax
Current transfers from govt. administrative department
(Rs. in crores)
300
70
60
20
35
15
30
25
40
Direct Taxes paid by households
National debt Interest
Savings of private corporate sector
Ans: (Rs. 370, Rs.265, Rs.245)
Q.11
With the help of following data, calculate: (i) GNPMP
(ii) Private Income
(iii) Personal Income
(iv) National Disposable Income
GDPFC
Corporation tax
Savings of private corporate sector
Income from domestic product accruing to private sector
NIT
NFIA
Consumption of fixed capital
Net other current transfers from ROW
Q.12
20
5
80
From the information given below, calculate :
(i) NDPFC
(ii) Private Income
(Rs. in crores)
38400
1400
3200
27400
2500
(-)300
200
900
(iii) PDI
Corporation Tax
Undistributed profits
Personal Consumption Expenditure
Direct taxes on persons
Personal savings
National debt. Interest
Net Current transfers from ROW
NFIA
Transfer payment
Income from domestic product accruing to the government
Ans: (Rs. 79296, Rs.83111, Rs.81429)
Q.13
Calculate (a) Private Income
(b) PDI
(c) GNPFC
Consumption of fixed capital
NDPFC
NFIA
Income from property & entrepreneurship to Govt. administrative department
Savings of non-departmental enterprises
National debt interest
Current transfers from ROW
Current transfers from Govt. administrative departments
Savings of the private corporate
Direct personal taxes
Corporate profit tax
.14
(Rs. in crores)
1251
464
67890
2100
11406
964
1271
(-)201
1981
2333
With the help of following data, calculate (i) Private Income
(Rs. in crores)
195
2700
(-)45
75
9
90
27
72
48
75
27
(ii) National Income
(Rs. in crores)
Interest on National debt.
1100
P.D.I.
36400
Corporations tax
2300
Direct taxes paid by household
3200
Income from property & entrepreneurship accruing to govt. administrative
5900
departments
Savings of private corporate sector
3700
Savings of non departmental enterprises
1400
Net other current transfers from ROW
700
Ans: Rs.45,600 ; Rs.51,100
Q.15
Find out private Income from the following data:
Income from domestic product accruing to private sector
Interest on National debt
NFIA
Consumption of fixed capital
NIT
Net exports
Income from domestic product accruing to government sector
(Rs. in crores)
20000
125
(-)350
200
100
(-)200
2000
AHLCON PUBLIC SCHOOL
Class : XII - ECONOMICS
UNIT – VII – MONEY AND BANKING
Q.1
What is cash reserve ratio?
Q.2
Explain the process of money creation by commercial banks, giving a numerical example.
Q.3
Explain the concept of ‘excess demand’ in macro economics’. Also explain the role of open
market operation’ in correcting it.
Q.4
Explain ‘bankers’ bank, function of central bank.
Q.5
Explain the components of legal reserve ratio.
Q.6
Explain the significance of the ‘store of value’ function of money.
Q.7
What are time deposits?
Q.8
What is ‘statutory liquidity ratio’?
Q.9
Distinguish between money value of money and commodity value of money.
Q.10
What are the principal components of money supply?
Q.11
What is barter system and what are its drawbacks?
Q.12
What is fiat money?
Q.13
How is central bank different from a commercial bank?
Q.14
Define bank rate.
Q.15
Explain the process of money / credit creation by commercial banks.
AHLCON PUBLIC SCHOOL
Class : XII - ECONOMICS
UNIT – VII –
CREDIT CREATION.:- It is one of the most significant functions performed by commercial banks.
Credit is defined as finance made available by one party to another party on a certain rate of
interest.
Depositors have current account in commercial banks and can meet their obligations through
cheques. These banks have the power to expand or contract demand deposits. This power is
known as credit creation or credit contract ion. For example - if cash reserves are Rs. 1000 and
if demand deposits are Rs.10,00 , then the commercial banks are creating credits ten times of
their cash reserves. So, on the basis of cash reserves of Rs.1000, the commercial banks are
contributing Rs.10,000 to the supply of money. Following is the brief description of how it
happens:a) The commercial banks know that, all the depositors would not show up in the banks to
withdraw all their deposits at a point of time.
b) The experience shows that withdrawls are generally around 10% of deposits as cash reserves.
c) If CRR = 10%, total cash reserves of Rs.1000 allows the banks to offer loans up to Rs.10,000
according to this formula –
Demand deposits =
1
1
 cash reserves =
 1000 =
CRR
10%
Rs. 10,000
d) We can thus conclude that if cash reserves of the commercial banks are increased by
Rs.1000, then credit supply in the economy will increase by Rs. 10,000 on the accumption
that CRR = 10%
Credit multiplier =
Demandeposits 10,000
 10
=
cashreserv e
1000
OR
1
1

 10
Credit multiplier =
CRR 10%
Primary and Secondary deposits –
Primary deposits are cash deposits with the commercial banks by the people. These are reflected
as a part of ‘demand deposits’ of the banks.
Secondary deposits are those which arise on account of loans by the banks to the people.
Primary deposits point to savings of the depositors with the banks while secondary deposits point
to barrowings of the depositors from the bank. Secondary deposits are also known as derivative
deposits.
AHLCON PUBLIC SCHOOL
Class : XII - ECONOMICS
UNIT – VIII– DETERMINATION OF INCOME AND EMPLOYMENT
Q.1
Give the meaning of involuntary unemployment.
Q.2
What is the relationship between MPC and MPS.
Q.3
What is cash reserve ratio?
Q.4
Explain the process of money creation by commercial banks, giving a numerical example.
Q.5
Explain equilibrium level of national income using savings and investment approach. Draw
diagram.
Q.6
Draw a straight line consumption curve. From it derive a saving curve explaining the process of
derivation. Use diagram to support your answer.
Q.7
Given consumption function C = 100 + .75 Y and investment expenditure Rs. 1000, calculate.
a) Equilibrium level of national income
b) Consumption expenditure at equilibrium level of national income.
Q.8
Find C, when c  200 , MPS = 0.5 and Y = 1,000
Q.9
Find S, when c  200 , MPS = 0.4 and Y = 1000.
Q.10
APC and MPC are two parameters. The value of which parameter can be greater than one and
when?
Q.11
Can APS be greater than one? Give reasons.
Q.12
Can APS ever be negative? If yes, give an example.
Q.13
If PDI is Rs.1000 Cr. And consumption expenditure is Rs.750 Cr, find out APS.
Q.14
Can MPS or MPC ever be negative? Give reasons in support of your answer.
Q.15
Complete the following table.
Income
0
Q.16
Consumption
MPC
40
120
200
280
APS
-
-
-
0.8
-
0.8
-
0.8
Complete the following table –
Income
Saving
APC
MPC
0
-30
-
-
Q.17
-
-
MPC
Saving
APC
-
-
0.75
30
0.75
-
0.75
-
50
-15
100
0
150
15
Complete the following table –
Income
0
100
200
300
Q.18
-
-
complete the following table –
Income
Consumption
MPS
APS
0
40
-
-
50
70
-
-
100
100
-
-
150
120
-
-
AHLCON PUBLIC SCHOOL
ASSINGMENT – XII
UNIT - 10
Chapter 9 – Foreign Exchange rate
MEANING AND DETERMINATION
Meaning: Foreign exchange rate is the price of one currency in terms of another. It is the rate at which
exports and imports of a nation is valued at a given point in time.
Foreign Exchange Market – The foreign exchange market is the market where the national currencies
are traded for one another. Foreign exchange market performs mainly three functions.
d) to transfer the purchasing power between countries. (transfer function)
e) to provide credit channels for foreign trade (credit function)
f) to protect against foreign exchange risks (hedging function)
Demand for foreign exchange - The demand for foreign exchange arises because of the following –
a)
b)
c)
d)
for making payments of imports of goods and services.
For making investments and lending abroad by the domestic residents.
To speculate on the value of foreign currencies.
To send a gift abroad.
Supply side of foreign exchange - It comes from the following sources –
a)
b)
c)
d)
the domestic exporters of goods and services.
The foreigners who invest and lend in the home country.
Flow of foreign exchange due to speculation.
Inward unilateral transfers such as receiving of gifts from abroad.
Determination of rate of exchange - The determination will take place at that point where demand for
foreign exchange is equal to supply of foreign exchange. Foreign exchange market like any other
normal market contains a downward sloping demand curve and an upward sloping supply curve.
The price on the vertical axis is stated in terms of domestic currency ( that is, how many rupees
for one US dollars). The horizontal axis measures the quantity demanded or supplied.
It is necessary to understand the slope
of demand and supply curve
1) The demand curve is sloping down
because less foreign exchange
is demanded as the
exchange rate increases which means the rise in price
of foreign exchange well increase the
rupee cost of foreign goods..
2) The supply is upward sloping which means the supply of foreign exchange increases as the
exchange rate increases.
The increase in exchange rate means that more rupees are required to buy one US dollar.
When this occurs, rupee is said to be depreciating (currency depreciation)
When the exchange rate falls, the rupee cost of Us dollar is decreasing and the Indian rupee is
said to be appreciating ( currency appreciation)
Types of Exchange rate - The determination of foreign exchange depends on specific international
arrangements –
1) Fixed exchange rate system - It is a system where in the rate of exchange between two or
more countries does not vary or varies only within narrow limits.
This was associated with the gold standards system during 1880 – 1914. Under this the value of
each currency was fixed according to the gold value of currencies. For eg. if US dollar ($) is
exchangeable for 22 gms of gold and the British pound ( ) for 110 gms gold then one pound is
equal to 5 US $ (110 / 22)
Merits - i) Promotes international trade
iii)economic stabilization
ii) promotes international investment
Demerits - i) large reserver of foreign currencies
and stable prices.
ii) sacrifice of the objectives of full employment
2) Flexible exchange rate – is a system where the value of one currency in terms of another is
free to fluctuate and establish its equilbrium in the exchange market through the forces of
demand and supply.
Merits - a) simple in operation
b) no need for foreign exchange reserves
c) exchange controls not required.
Demerits – a) inflationary bias.
b) widespread speculation
c) unstable condition
Difference between Fixed
1) foreign is officially declared by the Government
2) foreign central banks stand ready to purchase and
sell their currencies.
3) very small variation from the fixed value is possible.
Flexible
1) determined by the demand and
supply forces.
2) no intervention of central
Banks.
3) changes in the exchange
rate all the terms.
Operation of foreign exchange market - It operates in two ways –
Spot market - In this market only spot transaction are taken up. This market is of daily nature and does
not deal in future transactions of foreign exchange.
EER
effective exchange rate
NEER
Nominal effective exchange rate
REER
Real effective exchange rate
Forward market - It is seen that most of the international transactions materialise much later than the
value date when the transaction is signed.
Crawling Peg - According to this system, a country specifies a parity value for its currency and permits
a small variation around that parity. In this system there is ceiling and floor limits so that it can
provide for some discipline on the part of monetary authorities.
Managed floating - In this system, there is official declaration of rules and guidelines for intervention,
no pre fixed parity values and no announced time for variation.
Wider bands system - This system allowed only 1% variation an either side of the parity values.
AHLCON PUBLIC SCHOOL, MAYUR VIHAR PHASE – 1, DELHI
ECONOMICS ASSIGNMENT – CLASS - XII
Chapter 8 – Unit 9– Government Budget and the economy (Notes)
Budget means the annual financial statement containing an estimate of all anticipated revenue
and expenditure of the govt. for the coming financial year.
Objectives of govt. budget –
1. Activities to secure a reallocation of resources - Sometimes market forces fail to allocate
resources efficiently. The govt. has to re – allocate them in time with social and economic
consideration. For example production of harmful consumption goods can be discouraged
through heavy taxation and production of socially useful goods can be encouraged through
subsidies.
2. Redistribution of income and wealth - Govt. through its budgetary policy tries to reduce
inequalities of income and wealthy. The govt. uses the instruments of taxation and
expenditure on social security, subsidy etc.
3. Economic stability – The govt. budget is used to prevent economic fluctuations (inflation and
deflation)
4. Management of public enterprises - Govt. undertakes commercial activities through its
public enterprises. There are certain industries which should come under state regulation to
promote social welfare.
Impact of budget on the economy - There are three levels at which the budget impacts the
economy –
1. Aggregate fiscal discipline – This means having control over expenditures, given the
quantum of revenues. This is necessary for proper macro economic performance.
2. The second is the allocation of resources based on social priorities.
3. The third is the effective and efficient provision of programmes and delivery of services.
Components of the budget - There are two main components of a budget –
Budget receipts and budget expenditure.
Budget receipts - refer to the estimated money receipts of a goct. from all sources during a fiscal
year. They may be classified into two –
a) revenue receipts – refer to choose receipts of the govt. which neither create any liability
for the govt. nor cause any reduction in the assets of the govt. for example revenue
from tax is revenue receipts but loans taken but the govt. from the public is not. This is
divided into two tax and non tax revenue.
b) Capital receipts – refer to those receipts which tend to create a liability for the govt. or
cause reduction in its assets. These kinds of receipts include
-
loans raised by the govt. from public, RBI, other parties though sale of treasury bills
loans from foreign govt. and international institution
recoveries of loans
disinvestment proceeds (revenue through the sale of shares of public sector undertakings
small savings (post office deposits) and deposits in the PPF etc.
Components of budgetary receipts
Revenue receipts
capital receipts
A. Receipts from the revenue
1.personal income tax
1. Recovery of loans and advances
2.corporate tax
2. small savings (deposits in post office, time
3.interest tax
deposits recurring deposits,
4.expenditure tax
NSC, India Vikas Patra)
5.wealth tax
3. Provident funds
6.custom tax
4. Disinvestment proceeds
7.central excise duties
5. External Assistance
B. Receipt from non term revenue
1.
2.
3.
4.
Interest receipts
Dividends and profits
Revenue from services provided
Grants in aid
Budget Expenditure – may be classified into three ways –
1) Revenue Expenditure and capital expenditure - is the expenditure incurred for the normal
running of govt. departments and provision of various services, interest charges on department
incurred by the govt. subsidies etc. In general any expenditure that does not result in the caution
of assets is treated as revenue expenditure.
Capital expenditure consists mainly of expenditure on acquisition of assets like land,
buildings, machinery, equipment, investment in shares etc. and loans and advances granted by
the central govt. companies, corporation and other parties.
2) Plan and non plan expenditure - Plan expenditure is that public expenditure which represents
current development and investment outlays that arise due to plan proposals while non plan
expenditure is all other expenditure.
3) Developmental and non developmental expenditure – Developmental expenditure includes
plan expenditure of railways, posts and telecommunications, and non departmental
undertakings, market loans, term loans etc.
Non developmental expenditure include expenditures on defence, interest payments tax
collection, police and others.
Types of budget – There are three types
1) Balanced budget is said to be balanced when govt. revenue and expenditure are equal.
2) When govt’s expenditure is greater than govt. revenue than it is said a deficit budget.
3) When revenue of the govt. is greater than expenditure of the govt. than budget is said a
surplus budget merits and demerits of different types of budget.
Balanced budget’s merits
a) It keeps price rise under control
b) It restricts wasteful public expenditure.
Demerits - (a) It does not promote economic growth.
(b) It does not provide anyu solution to the problem of unemployment.
Surplus budget - merits - (a) It is helpful in reducing inflationary gap as it reduces the level
of aggregate demand in the economy.
(b) It restricts freedom of action on the part of govt.
Demerits - (a) It is harmful during the period of depression
(b) It is not suitable for underdeveloped countries like India.
Deficit budget – Merits (a) It is most desirable when the level of AD is low in
the economy.
(b) It accelerates growth
(c) It would be needed for the monetization of the economy.
Demerits – a) not desirable during inflation
b) It would lead to wasteful and unnecessary expenditure
Measures of budget deficits.
1) revenue deficits – refers to the excess of revenue expenditure over revenue receipts.
Implications – a) It indicates dis savings on govt. account
b) In this case capital receipts are used to finance consumption expenditure of the
govt.
c) It implies a repayment burden in future.
2. Fiscal deficit - is the excess of total expenditure (both on revenue and capital accounts) over
revenue receipts and capital receipts including borrowings.
Implications – (1) debt trap (2) Inflation (3) does not income increase development
expenditures expenditure (4) foreign debenture
Measures to correct it - (1) borrowly from internal and external sources.
(2) borrowly from the RBI
(3) Disinvestment
3. Primary deficit - It is simply fiscal deficit
interest payments.
Implication - (1) It shows real burden of govt.
(2) It shows how much govt. borrowly is going to meet expenses other than interest
payment.
Budget deficit - The budget deficit is the difference between the total expenditure on one hand
and current revenue and net internal and external capital receipts of the govt. on the other hand.
AHLCON PUBLIC SCHOOL
CLASS XII - ECONOMICS ASSIGNMENT
Government Budget and the Economy
Q.1
What is government budget? Explain various components of budget.
Q.2
Explain the main objectives of the govt. Budget.
Q.3
What do you mean by budget expenditure? Explain its various components.
Q.4
What is fiscal deficit? Explain its main implications.
Q.5
What do you mean by tax? Why it is considered as revenue receipts? Give difference between
direct and indirect tax.
Q.6
Distinguish between revenue expenditure and capital expenditure.
Q.7
Distinguish between revenue receipts and capital receipts in a govt. budget. Give two examples
of each.
Q.8
what are the different sources of non tax revenue receipts in a govt. budget?
Q.9
Explain the terms ‘plan’ and ‘non plan’ expenditure of govt. Give examples of each.
Q.10
Explain balanced budget, deficit budget and surplus budget.
Q.11
What is revenue deficit? Explain its main implications?
AHLCON PUBLIC SCHOOL
CLASS XII – ECONOMICS ASSIGNMENT
Foreign Exchange rate
Q.1
What do you mean by foreign exchange rate?
Q.2
Define fixed and flexible rate of exchange.
Q.3
What is forward exchange rate?
Q.4
Explain the concept of hedging and spot market.
Balance of Payment
Q.5
Define balance of payments.
Q.6
Define balance of payment on current account.
Q.7
What are visible and invisible items of balance of payments?
Q.8
When will there be a surplus in balance of trade?
Q.9
What are unilateral transfers? How are these accounted in BOP?
Q.10
What are autonomous and accommodating items ?
AHLCON PUBLIC SCHOOL
CLASS – XII – ECONOMICS NUMERICAL ASSIGNMENT
UNIT – 2 – CONSUMER EQUILIBRIUM AND DEMAND
Q.1
A persons marginal utility schedule is given below. Derive his total utility schedule (assume that
total utility of consuming zero is zero)
Amount consumed
Marginal utility
1
2
3
4
5
6
7
10
8
6
3
0
Q.2
Given below is the utility schedule of a consumer for commodity X. The price of the commodity
is Rs.6 per unit. How many units should the consumer purchase to maximize satisfaction?
(Assume that utility is expressed in utils and 1 util is Rs.1). Give reason for your answer.
Q.3
The consumer wants to consume two goods. The prices of the two goods are Rs.4 and Rs.5
respectively. The consumer income is Rs.20
a) Write down the equation of the budget line
b) How much of good 1 can the consumer consume, if she spends her entire income on that
good?
c) How much of good 2 can she consume if she spends her entire income on that good?
d) What is the slope of the budget line?
Q.4
Expenditure incurred on the purchase of petrol by Ajay is given below in the table at various
prices. Prepare demand schedule of Ajay.
Price of petrol
(Rs. Per litre)
Expenditure
(Rs. Per month)
40
41
42
44
45
200
164
126
88
45
Q.5 Following is the utility schedule of a consumer who wants to spend Rs. 20 on two goods X and
Y. Suppose prices of these goods are Rs.5 and Rs.2 respectively. How will the consumer attain
his equilibrium?
Units of goods
1
2
3
4
5
6
Marginal utility of
good X
Marginal utility of
good Y
50
40
30
20
10
0
24
22
20
18
16
14