AHSEC| CLASS 11| ECONOMICS| SOLVED PAPER - 2023| H.S. 1ST YEAR
2023
ECONOMICS
Full Marks: 100
Pass Marks: 30
Time: 3 hours
The figures in the margin indicate
full marks for the questions
PART
- A
(Introductory
Microeconomics)
1. Answer the following as directed: 1x6=6
(a) Define the term 'scarcity'.
Ans:- This means that the demand for a
good or service exceeds the availability of that good or service.
(b) Opportunity cost is also known as Economic
cost. (Fill in the blank)
(c) What is budget line?
Ans:- The budget line represents all the
bundles of goods on which the consumer's entire income is spent.
(d) Define variable cost.
Ans:- Variable costs refer to costs
incurred in various business operations that are not fixed and can change
depending on changes in the volume of production.
(e) TC = TVC + TFC. (Fill
in the blank)
(f) Why is the AC curve 'U' shaped?
Ans:- Firms generally enjoy three types
of economies: Technological economies, which help shift the AC curve down.
After the optimum point, with increase in output, the burden of diseconomies
increases on economies resulting in steepening of the AC curve. Thus, the AC
curve becomes U-shaped.
2. Answer the following questions:
2x6=12
(a) Distinguish between microeconomics and macro-economics. 2
Ans:- Microeconomics studies problems
related to the selection or allocation of resources at the level of an
individual, firm, family, or industry.
Macroeconomics studies problems related to the selection or
allocation of resources at the level of the entire economy.
Or
What are the central problems of an economy?
Ans:- Three basic economic problems
relate to the allocation of resources. These are what to produce, how to
produce and for whom to produce.
(i) What to produce: This problem refers
to decisions regarding the selection of different goods and the quantity to be
produced. Labour, land, machines, capital, equipment, tools and natural
resources are limited. Therefore, it is not possible to fulfill every demand of
the society.
(ii) How to produce: This problem is
about the choice of technologies that need to be adopted and used in the
production of goods and services.
(iii) For whom to produce: One of the
most important problems of the economy is to decide which goods will be
produced for which section of the society. For example, essential goods and
services are in demand in all sections of the society, but luxury goods are in
demand only in certain sections of the society.
(b) Write two determinants of individual demand. 2
Ans:- (i) Cost of the product, (ii)
Consumer expectation.
Or
What is inferior good? Give one example. 1+1=2
Ans:- Inferior goods refer to those
goods whose demand decreases with increase in income. For example, if the
demand for “Jaggery” decreases with increase in income, then “Jaggery” is an
inferior good.
(c) Define the following: 1+1=2
(i) Total product
Ans:- Total production is the total
amount of goods and services produced in a given period.
(ii) Marginal product
Ans:- Marginal product of an input is
defined as the change in output per unit change in input when all other inputs
are kept constant.
Or
Briefly explain the concepts of short run and long run. 1+1=2
Ans:- In the short run, a firm cannot
make changes to all inputs. One of the factors, factor 1 or factor 2, cannot be
changed and, therefore, remains constant in the short run.
In the long run, all factors of production may vary. A firm can
change both inputs simultaneously to produce different levels of output in the
long run. Therefore, in the long run, there is no fixed input.
(d) Distinguish between fixed cost and variable cost. 2
Ans:- According to Dooley, “Total cost
of production is the sum of all expenses incurred in producing a certain
quantity. Whether production is zero or maximum, fixed costs remain the same.
Total variable costs are those incurred on the use of variable
factors. Variable cost is one that varies according to the level of production.
Or
Draw a long-run marginal cost curve and long-run average cost curve.
1+1=2
Ans:- Long run marginal cost is defined
as the additional cost of producing an additional unit of output in the long
run, i.e. when all inputs are variable.
The
long-run average cost curve shows the cost of producing each quantity in the
long run, when the firm can choose the level of its fixed costs and thus choose
what short-run average cost it wants.
(e) What is the relationship between AR and MR? 2
Ans:- The relationship between AR and MR
is important in understanding consumer behavior. AR is the revenue earned per
unit of output sold, while MR reflects the additional revenue earned from
selling an additional unit of output. The relationship between AR and MR is
important for companies to determine how they set prices.
Or
Prove that for a firm, price = average revenue.
Solution:-
(f) Write two factors that affect the market supply of a commodity.
2
Ans:- There are two factors affecting the market supply of a commodity:
-
(i) Own price of a commodity: The price
of a commodity is the most important determinant of its supply. The higher the
price the greater the supply.
(ii) Price of other goods: The supply of
a good also depends on the prices of other goods. An increase in the prices of
other goods makes their production more profitable for companies. Therefore,
they will increase their supply.
Or
If the percentage change in quantity supplied is 10 and percentage
change in price is 4, calculate price elasticity of supply.
3. Explain the law of diminishing
marginal utility with the help of schedule and diagram. 4
Ans: The law
of diminishing marginal utility states that as a person consumes a good or
product, the satisfaction or utility he gets from the product decreases as he
consumes more and more of that product. For example, a person may purchase a
certain type of chocolate for a certain period of time. Soon, they may buy less
and choose another type of chocolate or buy cookies instead because the
satisfaction they were initially getting from the chocolate is diminishing. In
economics, the law of diminishing marginal utility states that the marginal
utility of a good or service decreases as more of it is consumed by a person.
Consuming increasing amounts of a good give’s economic actors less and less
satisfaction.
Or
Define price elasticity of demand. Mention any three factors
influencing price elasticity of demand of a commodity. 1+3=4
Ans:- Price elasticity of demand is a
measure of the responsiveness of demand to changes in the price of a good. It
is defined as the percentage change in demand for a good divided by the
percentage change in price.
There are three factors affecting the price elasticity of demand for
a commodity: -
(i) Price of the commodity: Price is the
most important factor that influences the consumer's decision to purchase a
particular commodity. Low price of a good attracts more consumers and high
price limits their number.
(ii) Price of related goods: The demand
for a good depends not only on its own price but also on the prices of related
goods. If there is a change in the price of any commodity then the related
commodity is affected.
(iii) Income of the consumer: Other
things being equal, there is generally a direct relationship between the income
of the consumer and the demand for a commodity. However the effect of change in
income on consumer demand depends on the nature of the good.
4. What is meant by returns to a factor?
State the three phases of the law of variable proportions. 1+3=4
Ans:- The
law of returns to a factor state that holding other factors constant and when
the variable factor increases, the total product first increases at an
increasing rate, then increases at a decreasing rate and finally decreases.
The various steps or stages of the law of variable proportions are:
Stage 1: In this stage the curve of
total product or TP increases at an increasing rate up to a certain point. In
the first stage, marginal product increases and decreases while average product
continues to increase. This phase is also called the phase of increasing returns.
Stage 2: In the second stage of the law
of varying proportions the total product keeps increasing at a decreasing rate
until it reaches its maximum point of production and it marks the end of the
second stage. This is also known as the constant returns phase.
Stage 3: In the third stage, total
product decreases with increase in the variable factor of production. As a result,
the marginal product of the variable factor becomes negative. This phase is
also called the phase of negative returns.
Or
From the data given below, calculate (a) marginal cost and (b)
average cost: 2+2=4
|
Output |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
|
Total cost |
10 |
20 |
28 |
34 |
38 |
42 |
48 |
56 |
Solution: -
|
Output (Units) |
TC (Rs.) |
AC (Rs.) |
MC (Rs.) |
|
1 |
10 |
10 |
10 |
|
2 |
20 |
10 |
10 |
|
3 |
28 |
9.33 |
8 |
|
4 |
34 |
8.5 |
6 |
|
5 |
38 |
7.5 |
4 |
|
6 |
42 |
7 |
4 |
|
7 |
48 |
6.85 |
6 |
|
8 |
56 |
7 |
8 |
Average Cost = Total Cost / Number of
units produced
Marginal Cost = Change in Total Cost /
Change in Quantity
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