Economics 2079
Section A
Long Answer Questions
Attempt any TWO questions. [2 × 10 = 20]
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1. Define price elasticity of demand. Discuss the various types of price elasticity of demand with diagrams. [10]
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2. What is an indifference curve? What are its properties? Explain. [10]
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3. What is a perfect competition market? How are price and output determined under it? [10]
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Section B
Short Answer Questions
Attempt any EIGHT questions. [8 × 5 = 40]
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4. Write short notes on scarcity and choice. [5]
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5. Consider the following table:
| Combination | A | B | C | D | E | F | G |
|---|---|---|---|---|---|---|---|
| Price (Rs.) | 7 | 6 | 5 | 4 | 3 | 2 | 1 |
| Quantity (Units) | 500 | 750 | 1250 | 2000 | 3250 | 4750 | 8000 |
a. Find the price elasticity of demand for movement from points A to C and C to A by the proportional method.
b. Compute the price elasticity of demand at the midway between A to C and C to A by the arc method. [5]
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6. Consider the following cost schedule:
| Output | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
|---|---|---|---|---|---|---|---|---|---|---|
| Total Cost (TC) | 300 | 330 | 354 | 372 | 396 | 450 | 540 | 672 | 840 | 1080 |
a. Compute TFC, AFC, AVC, MC, and AC.
b. Graph AC and MC and explain the relationship between AC and MC. [5]
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7. Let us suppose a consumer has a fixed income of Rs.2000. He selects two goods X and Y for consumption with prices Rs.400 and Rs.200, respectively.
a. Derive the budget line.
b. Show his equilibrium point when he allocates the entire budget equally on two goods. [5]
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8. Discuss the government intervention in the market through price floor, price ceiling, and tax effect. [5]
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9. What are the instruments of monetary policy? [5]
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10. Explain the condition for optimum employment of two variable inputs. [5]
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11. Explain the features of a free market economy. [5]
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12. Calculate Gross Domestic Product (GDP) and National Income from the following data:
| S.N. | Items | Rs. (in Millions) |
|---|---|---|
| 1 | Personal Consumption Expenditure | 6500 |
| 2 | Indirect tax less subsidies | 150 |
| 3 | Government consumption and investment expenditure | 2500 |
| 4 | Change in business inventories | 100 |
| 5 | Gross Private domestic fixed investment | 950 |
| 6 | Exports | 900 |
| 7 | Net factor payments to the rest of the world | -100 |
| 8 | Imports | 1200 |
| 9 | Depreciation | 200 |
| 10 | Foreign investment | 250 |
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