AHSEC| CLASS 11| ECONOMICS| SOLVED PAPER - 2022| H.S. 1ST YEAR
2022
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:
(a) State the
law of supply. 1
Ans: The
law of supply states that other things being equal, the quantity supplied
increases with an increase in price and decreases with a decrease in the price
of a good.
(b) What is
break-even point? 1
Ans: The
point on the supply curve at which a firm earns normal profit is called the
break-even point of the firm.
(c) What is
the shape of a perfectly inelastic demand curve? 1
Ans: Perfectly
inelastic demand is one in which there is no change in quantity demanded due to
change in price. This is a situation where demand remains unaffected even by
drastic changes in price.
(d) What does
a point below the production possibility curve indicate? 1
Ans: The
point below the curve indicates that the resources have not been used fully and
efficiently.
(e) What is
market economy? 1
Ans: Market
is an institution that organizes free interaction of individuals pursuing their
respective economic activities. In a market system, all goods and services come
with a price at which exchange takes place.
(f) What do
you understand by price ceiling? 1
Ans:- The
government sets the maximum price for a good or service. This means that if
essential commodities like sugar, rice, wheat etc. are released in the free
market, poor people will not be able to buy them at the price determined by the
market. Equilibrium price is considered high: In such a situation the
government sets the maximum acceptable price for goods which is called price
ceiling.
2. What is opportunity cost? Explain with an example.
1+1=2
Ans:- The opportunity cost of any good is the next
best alternative good that is sacrificed. The production of a particular good
involves the sacrifice of another good, which could have been produced using
the same amount of resources. For example, a farmer produces 60 kg of wheat
using the given quality resources per acre of land. Further, suppose, he can
also produce 50 kg of potatoes (which is the best option) with the same amount
of factors of production. Here, the opportunity cost of 60 kg wheat is 50 kg
potatoes.
3. Write the law of variable proportion. 2
Ans: The law of diminishing marginal product states
that if we keep increasing the employment of one input while other inputs
remain constant, a point will eventually be reached beyond which the resulting
increase in output will begin to diminish.
4. State the law of demand and draw a demand curve. 1+1=2
Ans: The law of demand is defined as "If the
price of a product increases, the quantity demanded of the product
decreases."
5. Prove that for a firm, price=average revenue. 2
Ans: Average revenue is the revenue per unit of
output sold.
6. Write the conditions of firm's equilibrium. 2
Ans: A firm is in equilibrium when there is no tendency
to modify its level of productivity. There is no need for either expansion or
retrenchment. It wants to earn maximum profit by equalizing its marginal cost
to its marginal revenue, i.e., MC = MR. Diagrammatically, the conditions for
equilibrium of the firm are (i) MC curve should be equal to MR curve. This is
the first order and necessary condition. But this is not a sufficient condition
which can be fulfilled yet the firm may not be in equilibrium. (ii) MC curve
should intersect MR curve from below and after the equilibrium point it should
be above MR. This is a second order condition. Under conditions of perfect
competition, the MR curve of a firm overlaps with the AR curve. MR curve is
parallel to the X axis. Therefore, when MC=MR=AR the firm is in equilibrium.
7. How does imposition of per unit tax affect supply
curve of a firm? 2
Ans: Unit tax is a tax imposed on per unit of output
sold. Imposing a unit tax increases the cost of production per unit of output
which increases marginal cost due to which supply falls and the supply curve
shifts to the left.
8. Discuss the characteristics of perfect competitive
market. 4
Ans: The characteristics of a perfectly competitive
market are:
(i) There are
very large numbers of buyers and sellers.
(ii) Buyers have
complete information about the market.
(iii) There is
freedom of entry and exit for new firms.
(iv) There is
complete mobility in the market for both goods and factors of production.
9. With the help of demand and supply curve, explain how
market equilibrium is attained. 4
Ans: The equilibrium of a perfectly competitive
market with a fixed number of firms is explained with the help of a diagram.
In the figure,
SS represents the market supply curve and DD represents the market demand curve
for a commodity. The market supply curve SS shows how much of a commodity firms
will be willing to supply at different prices and the demand curve DD shows how
much of a commodity consumers will be willing to buy at different prices.
Graphically, equilibrium is the point where the market supply curve intersects
the market demand curve because this is where market demand equals market
supply. At any other point, there is either excess supply or excess demand.
10. Explain the law of diminishing marginal utility. 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
What is price
elasticity of demand? Discuss any one method of calculating price elasticity of
demand. 1+3=4
Ans: Price
elasticity of demand is the percentage change in demand divided by the
percentage change in price. Price elasticity of demand tells us that a
percentage increase in price causes a percentage fall in demand and a
percentage fall in price causes a percentage increase in demand. In other
words, price elasticity of demand is the degree of responsiveness of demand for
a good to its effect on price. i.e. – percentage
Percentage
Method: The Percentage method is one of the widely used methods for calculating
demand price elasticities, where price elasticity is calculated in terms of the
rate of the percentage change in the quantity requested to the percentage
change in price. The price elasticity of demand can, according to this
approach, be mathematically expressed as -
PED= % change
in quantity demanded/% change in price, where
For example,
when the price of an item is Rs. 10 per unit, the market demand of that item
was 50 units per day. When the price of the product fell to Rs 8, the demand
increased to 60 units. Price elasticity of demand can be evaluated here as
follows-
PED=% change
in quantity demanded/% change in price, where
Compared to
supply price elasticity, demand price elasticity is often a negative number
because quantity requested and product stock price are inversely related. This
means that the higher the price, the lower the demand, and the lower the price,
the higher the demand for the product.
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