Prasanna

Students can download 11th Economics Chapter 8 Indian Economy Before and After Independence Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 8 Indian Economy Before and After Independence

Samacheer Kalvi 11th Economics Indian Economy Before and After Independence Text Book Back Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
The arrival of Vasco da Gama in Calicut, India ………………………
(a) 1498
(b) 1948
(c) 1689
(d) 1849
Answer:
(a) 1498

Question 2.
In 1614 Sir Thomas Roe was successful in getting permission from ……………………
(a) Akbar
(b) Shajahan
(c) Jahangir
(d) Noorjahan
Answer:
(c) Jahangir

Question 3.
The power for governance of India was transferred from the East India Company (EIC) to the British crown in ………………………..
(a) 1758
(b) 1858
(c) 1958
(d) 1658
Answer:
(b) 1858

Question 4.
Ryotwari system was initially introduced in …………………….
(a) Kerala
(b) Bengal
(c) Tamil Nadu
(d) Maharashtra
Answer:
(c) Tamil Nadu

Question 5.
First World War started in the year ……………………..
(a) 1914
(b) 1814
(c) 1941
(d) 1841
Answer:
(a) 1914

Question 6.
When did the Government of India declared its first Industrial Policy?
(a) 1956
(b) 1991
(c) 1948
(d) 2000
Answer:
(c) 1948

Question 7.
The objective of the Industrial Policy 1956 was ………………………..
(a) Develop heavy industries
(b) Develop agricultural sector only
(c) Develop private sector only
(d) Develop cottage industries only
Answer:
(a) Develop heavy industries

Question 8.
The industry which was de-reserved in 1993.
(a) Railways
(b) Mining of copper and zinc
(c) Atomic energy
(d) Atomic minerals
Answer:
(b) Mining of copper and zinc

Question 9.
The father of Green Revolution in India was
(a) M.S. Swaminathan
(b) Gandhi
(c) Visweswaraiah
(d) N.R. Viswanathan
Answer:
(a) M.S. Swaminathan

Question 10.
How many commercial banks were nationalised in 1969?
(a) 10
(b) 12
(c) 14
(d) 16
Answer:
(c) 14

Question 11.
The main objective of nationalisation of banks was …………………………
(a) Private social welfare
(b) Social welfare
(c) To earn
(d) Industries monopoly
Answer:
(b) Social welfare

Question 12.
The Planning Commission was setup in the year ………………………….
(a) 1950
(b) 1955
(c) 1960
(d) 1952
Answer:
(a) 1950

Question 13.
In the first five year plan, The top priority was given to ……………………… Sector.
(a) Service
(b) Industrial
(c) Agriculture
(d) Bank
Answer:
(c) Agriculture

Question 14.
Tenth Five year plan period was ……………………….
(a) 1992 – 1997
(b) 2002 – 2007
(c) 2007 – 2012
(d) 1997 – 2002
Answer:
(b) 2002 – 2007

Question 15.
According to HDR (2016), India ranked …………………….. out of 188 coutries.
(a) 130
(b) 131
(c) 135
(d) 145
Answer:
(b) 131

Question 16.
Annual Plans formed in the year ………………………
(a) 1989 – 1991
(b) 1990 – 1992
(c) 2000 – 2001
(d) 1981 – 1983
Answer:
(b) 1990 – 1992

Question 17.
The Oldest large scale industry in India ………………………
(a) Cotton
(b) Jute
(c) Steel
(d) Cement
Answer:
(a) Cotton

Question 18.
Human Development Index (HDI) was developed by …………………………
(a) Jawaharlal Nehru
(b) M.K. Gandhi
(c) Amartiya Sen
(d) Tagore
Answer:
(c) Amartiya Sen

Question 19.
The main theme of the Twelth Five Year Plan ………………………..
(a) Faster and more inclusive growth
(b) Growth with social Justice
(c) Socialistic pattern of society
(d) Taster, more inclusive and sustainable growth
Answer:
(d) Taster, more inclusive and sustainable growth

Question 20.
The PQLI was developed by ……………………….
(a) Planning Commission
(b) Nehru
(c) Morris
(d) Morrisd.Biswajeet
Answer:
(c) Morris

PART – B

Answer the following questions in one or two sentences.

Question 21.
What are the Phases of colonial exploitation of India?
Answer:
The period of merchant capital, the period of industrial capital, the period of finance capital.

Question 22.
Name out the different types of land tenure that existed in India before independence?
Answer:
The three different types of land tenure existed in India before independence. They were:

1. Zamindari System (or) Landlord-Tenant System
2. Mahalwari System (or) Communal System of farming
3. Ryotwari System (or) the Owner-Cultivator System

Question 23.
State the features that distinguish a land tenure system from another system?
Answer:
The land tenure system differs as

1. Who owns the land?
2. Who cultivates the land?
3. Who is responsible for paying the land revenue to the government?

Question 24.
List out the weaknesses of the Green Revolution?
Answer:
Weaknesses of the Green Revolution:

1. Indian Agriculture was still a gamble of the monsoons.
2. This strategy needed heavy investment in seeds, fertilizers, pesticides, and water.
3. The income gap between large, marginal, and small farmers had increased.
4. The gap between irrigated and rain-fed areas had widened.
5. Except in Punjab, and to some extent in Haryana, Farm mechanization had created widespread unemployment among agricultural labourers in the rural areas.
6. Larger chemical use and inorganic materials reduced the soil fertility and spoiled human health. Now organic farming is encouraged.

Question 25.
What are the objectives of the Tenth Five Year plan?
Answer:

1. Double the per capita income in the next 10 years.
2. Aimed to reduce the poverty ratio to 15% by 2012.
3. The growth target was 8.0% but it achieved only 7.2%

Question 26.
What is the difference between HDI and PQLI?
Answer:

Question 27.
Mention the indicators which are used to calculate HDI?
Answer:

1. Life expectancy index.
2. Educational index.
3. GDP per capita.

PART – C

Answer the following questions in one paragraph:

Question 28.
Explain the Period of Merchant Capital?
Answer:

1. The period of merchant capital was from 1757 to 1813.
2. The only aim of the East India Company was to earn profit by establishing monopoly trade in the goods with India and East India.
3. During this period, India had been considered as the best hunting ground for capital by the East Indian company to develop industrial capitalism is Britain.
4. When Bengal and South India came under the political shake of the East India company in 1750s and 1760s, the objective of monopoly trade was fulfilled.
5. The company administration succeeded in generating huge surpluses which were repatriated to England, and the Indian leaders linked this problem of land revenue with that of the drain.
6. Above all, the officers of the company were unscrupulous and corrupt.

Question 29.
The Handicrafts declined in India in British Period. Why?
Answer:

1. Through discriminatory tariff policy, the British Government purposefully destroyed the handicrafts.
2. With the disappearance of Nawabs and Kings, there was no one to protect Indian handicrafts.
3. Indian products could not compete with machine-made products.
4. The introduction of railways in India increased the domestic market for British goods.

Question 30.
Elucidate the different types of land tenure systems in colonial India?
Answer:
Land Tenure refers to the system of land ownership and management. The features that distinguish a land tenure system from the others relate to the following:

• Who owns the land
• Who cultivates the land.
• Who is responsible for paying the land revenue to the government.

Based on these questions, three different types of land tenure existed in India before Independence. They were:

• Zamindari System or the Landlord-Tenant System.
• Mahalwari System or Communal System of Farming.
• Ryotwari System or the Owner-Cultivator System.

Zamindari System or the Landlord-Tenant System:

• This system was created by the British East India Company when in 1793, Lord Cornwallis introduced the ‘Permanent Settlement Act’.
• Under this system, the landlord or the Zamindars were declared as the owners of the land and they were responsible to pay the land revenue to the government.
• The share of the government in total rent collected was fixed as 10/11th, the balance going to the Zamindars as remuneration.

Mahalwari System or Communal System of Farming:

• After the introduction of this system, it was later extended to Madhya Pradesh and Punjab.
• The ownership of the land was maintained by the collective body usually the villagers which served as a unit of management.
• They distributed land among the peasants and collected revenue from them and pay it to the state.

Ryotwari System (or) the Owner-Cultivator System:

• This system was initially introduced in Tamil Nadu and later extended to Maharashtra, Gujarat, Assam, Coorg, East Punjab, and Madhya Pradesh.
• Under this system, the ownership rights of use and control of land were held by the tiller himself.
• There was a direct relationship between owners and tillers. This system was the least oppressive system before Independence.

Question 31.
State the reasons for the nationalization of commercial banks?
Answer:

1. The main objective of economic planning aimed at social welfare.
2. Before independence commercial banks were in the private sector.
3. These commercial banks failed in helping the government to achieve social objectives of planning.
4. Therefore, the government decided to nationalize 14 major commercial banks in 1969.

Question 32.
Write any three objectives of Industrial Policy 1991?
Answer:

1. The economic development of a country particularly depends on the process of Industrialisation.
2. At the time of Independence, India inherited a weak and shallow Industrial base.
3. Therefore during the post-Independence period, the Government of India took the special emphasis on the development of a solid Industrial base.

Question 33.
Give a note on Twelfth Five Year Plan?
Answer:
Twelfth Five Year Plan [2012 – 2017]

1. Twelfth five-year plan (2012 – 17).
2. Its main theme is “Faster more inclusive and sustainable growth”
3. Its growth rate target is 8%

Question 34.
What is PQLI?
Answer:

1. “PQLI” – means Physical Quality of Life Index [PQLI].
   Morris D Morris developed the Physical Quality of life Index ( PQLI).
2. The PQLI is a measure to calculate the quality of life (well being of a country) Three indicators are:
   • Life expectancy
   • Infant mortality rate
   • Literacy rate
3. A scale of each indicator ranges from the number 1 to 100.
4. Number 1 represents the worst performance by any country.
5. 100 is the best performance.

PART – D

Answer the following questions in about a page.

Question 35.
Discuss the Indian economy during the British Period?
Answer:
Britain had exploited India over a period of two centuries of its colonial rule. On the basis of the form of colonial exploitation, economic historians have divided the whole period into three phases namely the period of merchant capital, the period of industrial capital, and the period of finance capital.

1. Period of merchant capital (1757 to 1813):
The only aim of the East India company was to earn profit by establishing monopoly trade. India was considered as the best hunting ground for capital. By attaining political power the objective of monopoly trade was fulfilled. The company administration succeeded in generating huge surpluses which were repatriated to England.

2. Period of industrial capital (1813 to 1858):
India had become a market for British textiles. Indians were exploited by fixing low prices for exports and high price for imports. India’s traditional handicrafts were thrown out of gear.

3. Period of financial capital (Late 19th century – 1947) : Finance imperialism began to entrench. Britain decided to make massive investments in various fields by plundering Indian capital.

4. The land tenure system in India: Land tenure refers to the system of land ownership and management.
The Zamindari system, the Mahalwari system and the Ryotwari system were the systems of land tenure introduced by British.

5. Problems of British rule : Their profit motives led to drain of resources from India. The handicraft industries were collapsed.
The British rule stunted the growth of Indian enterprise. Capital formation in India was retarded.

Question 36.
Explain the role of SSIs in economic development?
Answer:
1. Provide Employment:

• SSIs use labor-intensive techniques. Hence, they provide employment opportunities to a large number of people. Thus, they reduce the unemployment problem to a great extent.
• SSIs provide employment to artisans, technically qualified persons and professionals, people engaged in traditional arts, people in villages and unorganized sectors.
• The employment-capital ratio is high for the SSIs.

2. Bring Balanced Regional Development:

• SSIs promote decentralized development of industries as most of the SSIs are set up in backward and rural areas.
• They remove regional disparities by industrializing rural and backward areas and bring balanced regional development.
• They help to reduce the problems of congestion, slums, sanitation and pollution in cities. They are mostly found in outside city limits.
• They help in improving the standard of living of people residing in suburban and rural areas in India.
• The entrepreneurial talent is tapped in different regions and the income is also distributed instead of being concentrated in the hands of a few individuals or business families.

3. Help in Mobilization of Local Resources:

• SSIs help to mobilize and utilize local resources like small savings, entrepreneurial talent etc., of the entrepreneurs, which might otherwise remain idle and unutilized.
• They pave way for promoting traditional family skills and handicrafts. There is a great demand for handicraft goods in developed countries.
• They help to improve the growth of local entrepreneurs and self-employed professionals in small towns and villages in India

4. Pave for Optimisation of Capital:

• SSIs require less capital per unit of output. They provide quick return on investment due to shorter gestation period. The payback period is quite short in SSIs.
• SSIs function as a stabilizing force by providing high output-capital ratio as well as high employment – capital ratio.
• They encourage the people living in rural areas and small towns to mobilize savings and channelize them into industrial activities.

5. Promote Exports:

• SSIs do not require sophisticated machinery. Hence, import the machines from abroad is not necessary. On the other hand, there is a great demand for goods produced by SSIs.
• Thus they reduce the pressure on the country’s balance of payments. However, in the recent past large scale industries are able to borrow large funds with a low-interest rates and spend large sums on advertisements. Hence SSSs are gradually vanishing.
• SSIs earn valuable foreign exchange through exports from India.

6. Complement Large Scale Industries:

• SSIs play a complementary role to large scale sector and support large scale industries.
• SSIs provide parts, components, accessories to large scale industries and meet the requirements of large scale industries through setting up units near the large scale units.
• SSIs serve as ancillaries to large scale units.

7. Meet Consumer Demands:

• SSIs produce a wide range of products required by consumers in India.
• Hence, they serve as an anti-inflationary force by providing goods of daily use.

8. Develop Entrepreneurship:

• SSIs, help to develop a class of entrepreneurs in society. They help the job seekers to become job givers.
• They promote self-employment and a spirit of self-reliance in society.
• SSIs, help to increase the per capita income of India in various ways.
• They facilitate the development of backward areas and weaker sections of the society.
• SSIs are adept in distributing national income in a more efficient and equitable manner among the various participants of the society.

Question 37.
Explain the objectives of the nationalization of a commercial bank?
Answer:

1. The main objective of nationalization was to attain social welfare. Sectors such as agriculture, small and village industries were in need of funds for their expansion and further economic development.
2. It helped to curb private monopolies in order to ensure a smooth supply of credit to socially desirable sections.
3. To encourage the banking habit among the rural population.
4. To reduce the regional imbalances where the banking facilities were not available.
5. After nationalization, new bank branches were opened in both rural and urban areas, and they created credit facilities mainly for the agriculture sector and its allied activities.

Question 38.
Describe the performance of the 12^th Five Year Plans in India?
Answer:
First Five Year Plan – [1951 – 1956]

• It was based on the Harrod-Domar Model.
• Its main focus was on the agricultural development of the country.
• This plan was successful and achieved a GDP growth rate of 3.6%. [more than its target]

Second Five Year Plan – [1956 -1961]

• It was based on the P.C. Mahalanobis Model.
• Its main focus was on the industrial development of the country.
• This plan was successful and achieved a growth rate of 4.1%

Third Five Year Plan – [1961- 1966]

• This plan was called ‘Gadgil Yojana’.
• The main target of this plan was to make the economy independent and to reach self-prepared position or take off.
• Due to the Indo-China war, this plan could not achieve its growth target of 5.6%. Indian Economy Before and After Independence 137

Fourth Five Year Plan – [1969 – 1974]

• There are two main objectives of this plan (i.e) growth with stability and progressive achievement of self-reliance.
• This plan failed and could achieve a growth rate of 3.3% only against the target of 5.7%.

Fifth Five Year Plan – [1974 – 1979]

• In this plan top priority was given to agriculture, next came industry and mines.
• This plan achieved a growth rate of 4.8% against the target of 4.4%.

Sixth Five Year Plan – [1980 -1985]

• The basic objective of this plan was poverty eradication and technological self-reliance. GARIBI-HATAO was the motto. It was based on investment yojana.
• Its growth target was 5.2% but it achieved 5.7%

Seventh Five Year Plan – [1985 – 1990]

• This plan included the establishment of a self-sufficient economy, opportunities for productive employment.
• For the first time, due to the pressure from the private sector, the private sector got priority over the public sector.
• Its growth target was 5.0% but it achieved 6.0%

Eighth Five Year Plan – [1992- 1997]

• In this plan, the top priority was given to the development of human resources (i.e) employment, education, and public health.
• During this plan, the New Economic Policy of India was introduced.
• This plan was successful and got an annual growth rate of 6.8% against the target of 5.6%.

Ninth Five Year Plan – [1997 – 2002]

• The main focus of this plan was “growth with justice and equity”.
• This plan failed to achieve the growth target of 7% and the Indian economy grew only at the rate of 5.6%.

Tenth Five Year Plan – [2002 – 2007]

• This plan aimed to double the per capita income of India in the next 10 years.
• It aimed to reduce the poverty ratio by 15% by 2012.
• Its growth target was 8.0% but it achieved only 7.2%

Eleventh Five Year Plan – [2007 – 2012]

• Its main theme was “faster and more inclusive growth”.
• Its growth rate target was 8.1% but it achieved only 7.9%

Twelfth Five Year Plan – [2012 – 2017]

• Its main theme is “faster, more inclusive and sustainable growth”.
• Its growth rate target is 8%
• Since the Indian Independence, the five-year plans of India played a very prominent role in the economic development of the country.

These plans had guided the Government as to how it should utilize scarce resources so that maximum benefits can be gained. It is worthy to mention here that Indian Government adopted the concept of five-year plans from Russia.

Samacheer Kalvi 11th Economics Indian Economy Before and After Independence Additional Important Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
……………………… is the backbone of our economic system.
(a) Agriculture
(b) Industry
(c) Service
(d) Banking
Answer:
(a) Agriculture

Question 2.
Disguised unemployment is related to the sector.
(a) Industry
(b) Service
(c) Agriculture
(d) Insurance
Answer:
(c) Agriculture

Question 3.
India’s major ……………………. crops are sugarcane, jute, cotton, tea, coffee, etc.
(a) Food
(b) Cash
(c) Marketing
(d) Commercial
Answer:
(b) Cash

Question 4.
Most modem and rich countries have well developed through their early ………………………… revolution.
(a) Agriculture
(b) Industrial
(c) French
(d) Green
Answer:
(b) Industrial

Question 5.
The income elasticity of Industrial goods is very higher than that of ………………………… goods.
(a) Primary
(b) Secondary
(c) Industrial
(d) Manufacturing.
Answer:
(a) Primary

Question 6.
Which of the following is called as an important agro-based industry?
(a) Steel
(b) Cement
(c) Sugar
(d) Jute
Answer:
(c) Sugar

Question 7.
……………………… Industries normally do not use power.
(a) Small scale
(b) Large scale
(c) Cottage
(d) Manufacturing
Answer:
(c) Cottage

Question 8.
Planning is India is ……………………..
(a) Centralized planning
(b) Democratic planning
(c) Partial planning
(d) Indicative planning
Answer:
(b) Democratic planning

Question 9.
The rate of ………………………. formation indicates its rate of improvement.
(a) Human capital
(b) Money capital
(c) Physical capital
(d) Monetary capital
Answer:
(a) Human capital

Question 10.
Nowadays investment in ……………………… capital is very important.
(a) Money
(b) Physical
(c) Monetary
(d) Human
Answer:
(d) Human

PART – B

Answer the following questions in one or two sentences.

Question 1.
Define “Green Revolution”?
Answer:

1. The term Green Revolution refers to the technological breakthrough in agricultural practices.
2. During the 1960s the traditional agricultural practices were gradually replaced by modem technology and agricultural practices in India.
3. Initially, the new technology was tried in 1960 – 1961 as a pilot project in Seven districts.
4. It was called the High Yielding Varieties Programme [HYVP].

Question 2.
Define “Silk Industry”?
Answer:

1. India is the second-largest [first being China] country in the world in producing natural silk.
2. At present, India produces about 16% of the silk of the world.
3. India enjoys the distinction of being the only country producing all the five known commercial varieties of silk viz Mulberry, Tropical Tussar, Oak Tussar, Eri, and Muga.

Question 3.
When did the petroleum and the natural gas commission was established?
Answer:

1. The first successful oil well was dug in India in 1889 at Digboi, Assam.
2. At present, a number of regions with oil reserves have been identified and oil is being extracted in these regions.
3. For exploration purposes, the Oil and Natural Gas Commission [ONGC] was established in 1956 at Dehradun, Uttarkhand.

PART – C

Answer the following questions in one paragraph:

Question 1.
Explain the Micro, Small, and Medium manufacturing Enterprises?
Answer:

1. Micro Manufacturing Enterprises: The investment in plant and machinery does not exceed ₹25 lakhs.
2. Small Manufacturing Enterprises: The investment in plant and machinery is more than twenty-five lakh rupees but does not exceed ₹5 crores.
3. Medium Manufacturing Enterprises: The investment in plant and machinery is more than ₹5 crores but not exceeding ₹10 crores.

Question 2.
Describe the Micro, Small, and medium service enterprises?
Answer:

1. Micro Service Enterprises: The investment in equipment does not exceed ₹10 lakhs.
2. Small Service Industries: The investment in equipment is more than ₹10 lakhs but does not exceed ₹2 crores.
3. Medium Service Enterprise: The investment in equipment is more than ₹2 crores but does not exceed ₹5 crores.

Question 3.
Explain the Iron and Steel Industry?
Answer:
Iron and Steel Industry:

1. First Steel Industry at Kulti, near Jharia, West Bengal – Bengal ironworks company in 1870.
2. First large-scale steel plant TISCO at Jamshedpur in 1907 followed by IISCO at Bumper in 1919. Both belonged to the private sector.
3. The first public sector unit was “Vishveshvaraya Iron and Steel Works” at Bhadrawati. All these are managed by SAIL (at present all-important steel plants except TISCO, are under the public sector).
4. Steel Authority of India Ltd. [SAIL] was established in 1974 and was made responsible for the development of the steel industry.
5. Presently India is the eighth largest steel producing country in the world.

PART – D

Answer the following questions in about a page.

Question 1.
Describe the Achievement of the Green Revolution?
Answer:
Achievement of the Green Revolution:

1. The major achievement of the new strategy was to boost the production of major cereals viz., wheat and rice.
2. The Green Revolution was confined only to High Yielding Varieties [HYV-] cereals, mainly rice, wheat, maize, and jowar.
3. This strategy was mainly directed to increase the production of commercial crops or cash crops such as sugarcane, cotton, jute oilseeds, and potatoes.
4. Per hectare productivity of all crops had increased due to better seeds.
5. Green Revolution had a positive effect on the development of Industries, which manufactured agricultural tools like tractors, engines, thrashers, and pumping sets.
6. Green Revolution had bought prosperity to rural people.
7. Increased production had generated employment opportunities for rural masses.
8. Due to this, their standard of living had increased.
9. Due to multiple cropping and more use of chemical fertilizers, the demand for labour increased.
10. Financial resources were provided by banks and co-operative societies.
11. These banks provided loans to farmers on easy terms.

Question 2.
Explain the problems of British Rule?
Answer:
Problems of British Rule

1. The British rule stunted the growth of Indian enterprise.
2. The economic policies of the British checked and retarded capital formation in India.
3. The drain of wealth financed capital development in Britain.
4. Indian agricultural sector became stagnant and deteriorated even when a large section of the Indian population was dependent on agriculture for subsistence.
5. The British rule in India led to the collapse of handicraft industries without making any significant contribution to the development of any modem industrial base.
6. Some efforts by the colonial British regime in developing the plantations, mines, jute mills, banking, and shipping, mainly promoted a system of capitalist firms that were managed by foreigners. These profit motives led to a further drain of resources from India.

ACTIVITY

Question 1.
To know the value of freedom, students can collect pictures of Places like Jallianwala Bagh, Meerut, Thandi, and photos of freedom fighters?
Answer:
The Jallianwalabagh Massacre in Amritsar

1. Jallianwala Bagh is one of the main tourist attractions around Amritsar.
2. The tourists, as well as the neighboring people, visited here.
3. Jallianwala bagh is situated at a throwaway distance from the Golden temple, a famous tourist spot in the Amritsar.
4. Jallianwala Bagh in Amritsar is a good looking garden and contains a Sikh spiritual shrine.
5. Jallianwala Bagh history was a well-liked ground for holding meetings and protests during the freedom movement in India.
6. The massacre memorial one of the monuments in India was inaugurated on 13th April in 1961.
7. Dr. Rajendra Prasad, the president of India, inaugurated the memorial in the Jallianwala Bagh, Amritsar at that time.
8. The Bagh has a well that is also fine cosseted by the Jallianwala Bagh Massacre memorial.
9. Jallianwala Bagh is connected with the most tragic day in the history of Indian Freedom.
10. Jallianwala Bagh is a large garden like space extended over to an area of 6.5 acres and the most noticeable structure in this place is the memorial of the 1919 massacre victims.
11. One can also witness the wall with gunshot marks.
12. Jallianwala Bagh National Memorial Trust administrates the activities of this place.

The Jallianwala Bagh Massacre:

1. Jallianwala Bagh reminds us about the great tragedy and it evokes a nationalistic feeling in every Indian.
2. It is the place where the crudest massacre in the history of Indian freedom fight took place in the year 1919.
3. To offer tribute to the innocent people who died in the massacre, this place was built at the spot of the horrible event.
4. On 13th April 1919, a large crowd gathered to protect the take into custody of two Indian Freedom leaders.
5. The crowd was defenseless and included women as well as children.
6. The British General, Edward Dyer ordered his soldiers to fire on the unarmed and helpless crowd.
7. The continuous firing went on targeting the crowd while the people were trapped inside the Jallianwala Bagh, which had only one narrow gate.

Question 2.
Display the demonstration effect of present Indians in culture, dressing, and lifestyle to emphasize the Swadhesi?
Answer:
Swadeshi Movement was a popular strategy for eradicating British rule and for improving the economic conditions of the country.

Mahatma Gandhi:

1. The concept of swadeshi, as per Mahatma Gandhi was to attain self-sufficiency which included the employment of unemployed people by encouraging village Industries and towards building a non-violent society.
2. The main policies of the swadeshi movement included boycotting all types of British products and the restoration of all domestic products.

Bal Gangadhar Tilak, Lala Lajpat Rai, Bipin chandra pal. [Bal, Lai, Pal].

1. The chief forerunners of the swadeshi movement were Bal, Lai. Pal.
2. The writings and speeches of Bal Gangadhar Tilak and his associates paved the initial way.
3. Tilak reaches out to the masses through popular festivals.
4. He transformed the traditional Ganapathi Utsav into a public celebration where patriotic ideas could be spread.
5. Later he inaugurated a Shivaji festival for the same purpose.
6. In 1906, Bengal honoured the great Maratha as a national hero.

Students can download 11th Economics Chapter 7 Indian Economy Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 7 Indian Economy

Samacheer Kalvi 11th Economics Indian Economy Text Book Back Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
The main gold mine region in Karnataka is ………………………….
(a) Kolar
(b) Ramgiri
(c) Anantpur
(d) Cochin
Answer:
(a) Kolar

Question 2.
Economic growth of a country is measured by national income indicated by …………………………..
(a) GNP
(b) GDP
(c) NNP
(d) Per capita income
Answer:
(b) GDP

Question 3.
Which one of the following is a developed nations?
(a) Mexico
(b) Ghana
(c) France
(d) Sri Lanka
Answer:
(c) France

Question 4.
The position of Indian Economy among the other strongest economies in the world is ……………………….
(a) Fourth
(b) Seventh
(c) Fifth
(d) Tenth
Answer:
(b) Seventh

Question 5.
Mixed economy means ………………………..
(a) Private sectors and banks
(b) Co-existence of Public and Private sectors
(c) Public sectors and banks
(d) Public sectors only
Answer:
(b) Co-existence of Public and Private sectors

Question 6.
The weakness of Indian Economy is ………………………..
(a) Economic disparities
(b) Mixed economy
(c) Urbanisation
(d) Adequate employment opportunities
Answer:
(a) Economic disparities

Question 7.
A scientific study of the characteristics of population is …………………………..
(a) Topography
(b) Demography
(c) Geography
(d) Philosophy
Answer:
(b) Demography

Question 8.
The year 1961 is known as ……………………………
(a) Year of small divide
(b) Year of Population Explosion
(c) Year of Urbanisation
(d) Year of Great Divide
Answer:
(b) Year of Population Explosion

Question 9.
In which year the population of India crossed one billion mark?
(a) 2000
(b) 2001
(c) 2005
(d) 1991
Answer:
(b) 2001

Question 10.
The number of deaths per thousand population is called as ………………………
(a) Crude Death Rate
(b) Crude Birth Rate
(c) Crude Infant Rate
(d) Maternal Mortality Rate
Answer:
(a) Crude Death Rate

Question 11.
The number of births per thousand population is called as ………………………
(a) Crude death rate
(b) Mortality rate
(c) Morbidity rate
(d) Crude Birth Rate
Answer:
(d) Crude Birth Rate

Question 12.
Density of population = ………………………
(a) Land area / Total Population
(b) Land area / Employment
(c) Total Population / Land area of the region
(d) Total Population / Employment
Answer:
(c) Total Population / Land area of the region

Question 13.
Who introduced the National Development Council in India?
(a) Ambedkar
(b) Jawaharlal Nehru
(c) Radhakrishanan
(d) VKRV Rao
Answer:
(b) Jawaharlal Nehru

Question 14.
Who among the following propagated Gandhian Economic thinkings?
(a) Jawaharlar Nehru
(b) VKRV Rao
(c) JC Kumarappa
(d) A.K.Sen
Answer:
(c) JC Kumarappa

Question 15.
The advocate of democratic socialism was ………………………..
(a) Jawaharlal Nehru
(b) P C Mahalanobis
(c) Dr. Rajendra Prasad
(d) Indira Gandhi
Answer:
(a) Jawaharlal Nehru

Question 16.
Ambedkar the problem studied by in the context of Indian Economy is ………………………..
(a) Small land holdings and their remedies
(b) Problem of Indian Currency
(c) Economics of socialism
(d) All of them
Answer:
(b) Problem of Indian Currency

Question 17.
Gandhian Economics is based on the Principle ………………………..
(a) Socialistic idea
(b) Ethical foundation
(c) Gopala Krishna Gokhale
(d) Dadabhai Naoroji
Answer:
(b) Ethical foundation

Question 18.
VKRV Rao was a student of ………………………….
(a) JM Keynes
(b) Colin Clark
(c) Adam smith
(d) Alfred Marshal
Answer:
(a) JM Keynes

Question 19.
Amartya Kumara Sen received the Nobel prize in Economics in the year …………………………
(a) 1998
(b) 2000
(c) 2008
(d) 2010
Answer:
(a) 1998

Question 20.
Thiruvalluvar economic ideas mainly dealt with ………………………….
(a) Wealth
(b) Poverty is the curse in the society
(c) Agriculture
(d) All of them
Answer:
(d) All of them

PART – B

Answer the following questions in one or two sentences.

Question 21.
Write the meaning of Economic Growth?
Answer:
A country’s economic growth is usually indicated by Gross Domestic Product (GDP). The GDP is the total monetary value of the goods and services produced by that country over a specific period of time, usually one year.

Question 22.
State any two features of a developed economy?
Answer:

1. High National Income
2. High Per Capita Income

Question 23.
Write a short note on natural resources?
Answer:
Natural resources are stock or reserve that can be drawn from nature. The major natural resources are land, forest, water, mineral, and energy.

Question 24.
Point out any one feature of the Indian economy?
Answer:
India has a mixed economy.

1. Indian economy is a typical example of a mixed economy.
2. This means both the private and public sectors co-exist and function smoothly.
3. The fundamental and heavy industrial units are being operated under the public sector, while, due to the liberalization of the economy, the private sector has gained importance.
4. This makes it a perfect model for public-private partnerships.

Question 25.
Give the meaning of non-renewable energy?
Answer:
The sources of energy which cannot be renewed or re-used are called non-renewable energy.
(Eg.) Coal, Oil, Gas, etc.

Question 26.
Give a short note on Sen’s ‘Choice of Technique’?
Answer:
Sen’s ‘Choice of Technique’ was a research work where he argued that in a labour surplus economy, generation of employment cannot be increased at the initial stage by the adaptation of capital – intensive technique.

Question 27.
List out the reasons for low per capita income as given by VKRV Rao?
Answer:
Rao gave the following reasons for low per capita income and low levels of per capita nutrition in India:

1. Uneconomic holdings.
2. Low levels of water availability for crops.
3. Excess population pressure on agriculture due to the absence of a large industrial sector.
4. Absence of capital.
5. Absence of autonomy in currency policy.

PART – C

Answer the following questions in one paragraph.

Question 28.
Define Economic Development?
Answer:

1. The level of economic development is indicated not just by GDP, but by an increase in citizen’s quality of life or well-being.
2. The quality of life is being assessed by several indices such as Human Development Index [HDI]
3. On the basis of the level of economic development, nations are classified as developed and developing economies.
4. Developed economies are those countries which are industrialized.
5. Developed economics are also termed as Advanced Countries.
6. On the other hand, countries that have not fully utilized their resources like land, mines, workers, etc., and have low per capita income are termed as underdeveloped economics.

Question 29.
State Ambedkar’s Economic ideas on agricultural economics?
Answer:
Dr. B.R.Ambedkar was a versatile personality. In 1918, he published a paper “Smallholding in India and their remedies” citing Adam Smith’s “Wealth of Nations”, he made a fine distinction between “Consolidation of holdings” and “Enlargement of holdings”.

Question 30.
Write a short note on Village Sarvodhaya?
Answer:

1. According to Gandhi, “Real India was to be found in the village and not in towns or cities”.
2. So he suggested the development of self-sufficient self-dependent villages.

Question 31.
Write the strategy of Jawaharlal Nehru in India’s planning?
Answer:

1. Jawahar lal Nehru was responsible for the introduction of planning in our country.
2. To Nehru, the plan was essentially an integrated approach for development.
3. He said the essence of planning is to find the best way to utilize all resources of manpower, money and so on.
4. Planning for Nehru was essentially linked up with industrialization and eventual self-reliance for the country’s economic growth on a self-accelerating growth.
5. Nehru carried through this basic strategy of planned development.

Question 32.
Write the VKRV Rao’s contribution on the multiplier concept?
Answer:

1. VKRV Rao’s examination of the “Interrelation between investment, income and multiplier is an underdeveloped economy” [1952] was his major contribution to macroeconomic theory.
2. Asa thinker, teacher, economic adviser, and direct policymaker, VKRV Rao followed the footstep of his great teacher, John Maynard Keynes.

Question 33.
Write a short note on Welfare Economics given by Amartya Sen?
Answer:

1. Amartya Sen was awarded the Nobel prize for his contributions to welfare economics.
2. Sen’s major point has been that the distribution of income/consumption among the persons below the poverty line is to be taken into account.
3. Sen has focused on the poor, viewing them not as objects of pity requiring charitable hand-outs, but as disempowered folk needing empowerment in all aspects.

Question 34.
Explain social infrastructure?
Answer:

1. Social infrastructure refers to those structures which are improving the quality of manpower and contribute indirectly towards the growth of an economy.
2. These structures are outside the system of production and distribution.
3. The development of these social structures help in increasing the efficiency and productivity of manpower.
4. For example, schools, colleges, hospitals and other civic amenities.
5. It is a fact that one of the reasons for the low productivity of Indian workers is the lack of development of social infrastructure.

Education in India:

1. The Indian education system has flourished and developed with the growing needs of the economy.

Health in India:

1. Health in India is a state government responsibility.
2. The Central Council of Health and Welfare formulates the various health care projects and health department reform policies.

PART – D

Answer the following questions in about a page.

Question 35.
Explain the strong features of the Indian economy?
Answer:

1. India has a mixed economy: In India, both private and public sectors coexist.
2. Agriculture plays the key role: Around 60% of the people in India depend upon agriculture for their livelihood.
3. An emerging market: India has a high potential for prospective growth which attracts FDI and FII.
4. Emerging economy: As a result of rapid economic growth Indian economy has a place among the G20 countries.
5. Fast-growing economy: India has emerged as the world’s fastest-growing economy in 2016-17 with 7.1% GDP next to China.
6. Fast-growing service sector: The service sector, contributes a lion’s share of the GDP in India.
7. Large domestic consumption: Due to large domestic consumption the standard of living has considerably improved and lifestyle has changed.
8. paid growth of urban areas: Improved connectivity in transport and communication, education, and health have speeded up the pace of urbanization.
9. Stable macroeconomy: The current year’s economic survey represents the Indian economy to be a heaven of macroeconomic stability, resilence and optimism.
10. Demographic dividend: India is a proud owner of the maximum percentage of youth. This has invited foreign investments to the country and outsourcing opportunities.

Question 36.
Write the importance of mineral resources in India?
Answer:
Important Mineral Resources:
1. Iron -ore:

• India possesses high-quality iron-ore in abundance.
• The total reserves of iron ore in the country are about 14.630 million tonnes of hematite and 10,619 million tonnes of magnetite.
• Hematite iron is mainly found is Chattisgarh, Jharkhand, Odisha, Goa, and Karnataka.
• Some deposits of iron ore are also found in Kerala, Tamilnadu, and Andra Pradesh.

2. Coal and Lignite:

• Coal is the largest available mineral resource.
• India ranks third in the world after China and the USA in coal production.
• The main centers of coal in India are West Bengal, Bihar, Madhya Pradesh, Maharashtra, Odisha, and Andhra Pradesh.
• The bulk of the coal production comes from Bengal-Jharkhand coalfields.

3. Bauxite:

• Bauxite is a main source of metal like aluminium.
• Major reserves are concentrated in the East Coast bauxite deposits of Odisha and Andhra Pradesh.

4. Mica:

• Mica is a heat-resisting mineral which is also a bad conductor of electricity.
• It is used in electrical equipment as an insulator.
• India stands first in sheet mica production and contributes 60% of mica trade in the world.
• The important mica bearing pegmatite is found in Andhra Pradesh, Jharkhand, Bihar and Rajasthan.

5. Crude Oil:

• Oil is being explored in India at many places of Assam and Gujarat.
• Digboi, Badarpur, Naharkatia, Kasimpur, Palliaria, Rudrapur, Shivsagar, Mourn [All in Assam], and Hay of Khambhat, Ankleshwar and Kalor [All in Gujarat] are the important places of oil exploration in India.

6. Gold:

• India possesses only a limited gold reserve.
• There are only three main gold mine regions-Kolar Goldfield, Kolar district and Hutti Goldfield in Raichur district [both in Karnataka] and Ramgiri Goldfield in Anantpur district [Andhra Pradesh].

7. Diamond:

• The total reserves of a diamond is estimated at around 4582, thousand carats which are mostly available in Panna [Madhya Pradesh], Rammallakota of Kumar district of Andhra
  Pradesh and also in the Basin of Krishna River.
• The new Kimberlile fields have been discovered in Raipur and Bastar districts of Chhattisgarh, Nuapada and Bargarh districts of Odisha, Narayanpet-Maddur Krishna areas of Andhra Pradesh, and Raichur-Gulbarga districts of Karnataka.

Question 37.
Bring out Jawaharlal Nehru’s contribution to the idea of economic development?
Answer:
Jawahar Lal Nehru was one of the Chief builders of modem India. He was a great patriot, thinker and statesman. His ideas of economic development are :

1. Democracy : He was a firm believer in democracy. He believed in free speech, civil liberty, adult franchise and the rule of law and parliamentary democracy.

2. Secularism : Secularism is another signal contribution of Nehru to India. There are so many religions in India but there is no domination by religious majority.

3. Planning : Nehru was responsible for the introduction of planning in our country. The plan was essentially an integrated approach for development. Planning for Nehru was essentially linked up with industrialization and eventual self-reliance for the country’s economic growth on a self-accelerating growth.

4. Advancement of Science : Nehru made a great contribution to the advancement of Science, research, technology and industrial development. In his period, many IITs and research institutions were established. He always insisted on scientific temper.

5. Democratic socialism : Nehru put the country on the road towards a socialistic pattern of society. Nehru’s socialism is democratic socialism.

Question 38.
Write a brief note on the Gandhian economic ideas?
Answer:
Gandhian Economics is based on ethical foundations. Gandhi wrote, “Economics that hurts the moral well-being of an individual or a nation is immoral, and therefore, Sinful”. Again in 1924, Gandhi repeated the same belief “ that economy is untrue which ignores or disregards moral values”.

Salient features of Gandhian Economic Thought:
1. Village Republics:

• India lives in villages.
• He was interested in developing the villages as self-sufficient units.
• He opposed the extensive use of machinery, urbanization, and industrialization.

2. On Machinery:

• Gandhi described machinery as ‘Great sin’. He said that “Books could be written to demonstrate its evils”.
• It is necessary to realize that machinery is bad.
• Instead of welcoming machinery as a boon, we should look upon it as evil.
• It would ultimately cease.

3. Industrialism:

• Gandhi considered industrialism as a curse on mankind.
• He thought industrialism depended entirely on a country’s capacity to exploit.

4. Decentralization :

• Gandhi advocated a decentralized economy i. e., production at a large number of places on a small scale or production in the people’s homes.

5. Village Sarvodaya:

• According to Gandhi, “ Real India was to be found in villages and not in towns or cities”.
• So, he suggested the development of self-sufficient, self-dependent villages.

6. Bread Labour:

• Gandhi realized the dignity of human labour.
• He believed that God created man to eat his bread by the sweat of his brow.
• Bread labour or body labour was the expression that Gandhi used to mean manual labour.

7. The Doctrine of Trusteeship:

• Trusteeship provides a means of transforming the present capitalist order of society into an egalitarian one.

8. On the Food Problem:

• Gandhi was against any sort of food controls.
• Once India was begging for food grain, but now India tops the world with very large production of food grains, fruits, vegetables, milk, egg, meat etc.

9. On Population:

• Gandhi opposed the method of population control through contraceptives.
• He was, however, in favour of birth control through Brahmacharya or self-control.
• He considered self-control as a sovereign remedy to the problem of over-population.

10. On Prohibition:

• Gandhi advocated cent percent prohibition.
• Gandhi regarded the use of liquor as a disease rather than a vice.
• He felt that it was better for India to be poor than to have thousands of drunkards.
• Many states depend on revenue from liquor sales.

Samacheer Kalvi 11th Economics Indian Economy Additional Important Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
The basic factors determining population growth are ………………………..
(a) Birth rate
(b) Death rate
(c) Migration
(d) All the above
Answer:
(d) All the above

Question 2.
……………………… is a crude indicator for living standard.
(a) Gross National Product [GNP]
(b) Gross Domestic Product [GDP]
(c) Net National Product [NNP]
(d) Per Capita Income [PCI]
Answer:
(a) Gross National Product [GNP]

Question 3.
India followed the ……………………… plan.
(a) Short term
(b) Long term
(c) Midterm
(d) Perspective
Answer:
(c) Midterm

Question 4.
…………………….. is the basic causes of poverty.
(a) Low agriculture productivity
(b) Rapid growth of population
(c) Low saving and disguised unemployment
(d) All the above
Answer:
(d) All the above

Question 5.
In recent time India followed the ……………………… planning.
(a) Five year
(b) Indicative
(c) Modified
(d) Innovative
Answer:
(b) Indicative

Question 6.
……………………………. was responsible for the introduction of planning in our Country.
(a) Ambedkar
(b) Jawaharlal Nehru
(c) Radhakrishnan
(d) VKRV Rao.
Answer:
(b) Jawaharlal Nehru

Question 7.
………………………. is the largest available mineral resource.
(a) Coal
(b) Iron-ore
(c) Bauxite
(d) Mica
Answer:
(a) Coal

Question 8.
The National Harbour board was set up in ………………………
(a) 1947
(b) 1948
(c) 1949
(d) 1950
Answer:
(d) 1950

Question 9.
India stands first in sheet mica production and contributes ……………………. % of mica trade in the world.
(a) 50%
(b) 60%
(c) 70%
(d) 80%
Answer:
(b) 60%

Question 10.
……………………… is thereby also called as the backbone of the Indian economy.
(a) Agricultural
(b) Industrial
(c) Small Scale Industries
(d) Cottage industries
Answer:
(a) Agricultural

PART – B

Answer the following questions in one or two sentences.

Question 1.
List out the education system in India?
Answer:
The education system in India consists of primarily six levels:

1. Nursery class
2. Primary class
3. Secondary level
4. Higher secondary level
5. Graduation
6. Post-graduation

Question 2.
Define “Renewable Resources’?
Answer:
Renewable energy sources
These are the kind of energy source which can be renewed or reused again and again. These kinds of materials do not exhaust or literally speaking these are available in abundant or infinite quantity. Example for this kind include

1. Solar energy
2. Wind energy
3. Tidal energy
4. Geothermal energy
5. Biomass energy

Question 3.
Write a short note on Infrastructure development?
Answer:
Infrastructural development means the development of many support facilities. These facilities may be divided into (z) economic infrastructure and (ii) social infrastructure. Economic infrastructure includes – transport, communication, energy, irrigation, monetary and financial institutions. Social infrastructure includes – education, training and research, health, housing and civic amenities.

PART – C

Answer the following questions in one paragraph.

Question 1.
Explain the education in India?
Answer:
Education in India:

1. Imparting education on an organized basis dates back to the days of ‘Gurukul’ in India.
2. The Indian education system has flourished and developed with the growing needs of the economy.
3. The Ministry & Human Resource Development (MHRD) in India formulates education policy in India and also undertakes education programs.

The education system in India:

1. Education in India until 1976 was the responsibility of the State governments.
2. It was then brought under concurrent list [both Centre and State]
3. The Centre is represented by the Ministry of Human Resource Development decides India’s education budget.
4. The education system in India consists of primarily six levels:
   • Nursery class
   • Primary class
   • Secondary level
   • Higher secondary level
   • Graduation
   • Post-graduation

Education Institutions in India:

1. Education in India follows the 10, +2 pattern.
2. The accreditation of the universities is decided under the University Grant Commission Act.
3. The Education Department consists of various schools, colleges, and universities imparting education on fair means for all sections of the society.

Question 2.
List out the density of the population?
Answer:
The density of population:
The density of population refers to the average number of persons residing per square kilometer. It represents the man-land ratio. As the total land area remains the same, an increase in population causes the density of the population to rise.
The density of population =

• Just before Independence, the density of the population was less than 100.
• After Independence, it has increased rapidly from 117 in 1951 to 325 in 2001.
• According to the 2011 census, the present Density of the population is 382.
• The pressure of population on land has been rising.
• Kerala, West Bengal, Bihar, and Uttar Pradesh have density higher than India’s average density.
• Bihar is the most densely populated state.
• Arunachal Pradesh has a low density of population of only 17 persons. Indian Economy 125

Question 3.
Explain “Transport”?
Answer:
Transport:

1. For the sustained economic growth of a country, a well-connected and efficient transport system is needed.
2. India has a good network of rail, road coastal shipping, and air transport.
3. The total length of roads in India being over 30 lakh km.
4. India has one of the largest road networks in the world.
5. In terms of railroads, India has a broad network of railroad lines, the largest in Asia and the fourth largest in the world.
6. The total rail route length is about 63,000 km and of this 13,000 km is electrified.
7. The major Indian ports including Calcutta, Mumbai, Chennai, Vishakhapatnam and Goa handle about 90% of sea-borne trade and are visited by cargo carriers and passenger liners from all parts of the world.
8. A comprehensive network of air routes connects the major cities and towns of the country.
9. The domestic air services are being looked after by Indian Airlines and private airlines.
10. The international airport service is looked after by Air India.

PART – D

Answer the following questions in about a page.

Question 1.
Explain the weakness of the Indian Economy?
Answer:
1. Large Population:

• India stands second in terms of size of the population next to China and our country is likely to overtake China in near future.
• The population growth rate of India is very high and this is always a hurdle to the growth rate.

2. Inequality and poverty:

• There exists a huge economic disparity in the Indian economy.
• The proportion of income and assets owned by top 10% of Indians goes on increasing.
• Increase in the poverty level in society and still a higher percentage of individuals are living Below Poverty Line [BPL].
• Asa result of unequal distribution of the rich becomes richer and poor becomes poorer.

3. Increasing Prices of Essential Goods:

• Even though there has been a constant growth in the GDP and growth opportunities in the Indian economy, there have been steady increase in the prices of essential goods.
• The continuous rise in prices erodes the purchasing power and adversely affects the poor people, whose income is not protected.

4. Weak Infrastructure:

• A gradual improvement in the infrastructural development.
• There is still a scarcity of the basic infrastructure like power, transport, storage etc.

5. Inadequate Employment generation:

• Growing youth population, there is a huge need of employment opportunities.
• The growth in production is not accompanied by creation of job.
• The Indian economy is characterized by “ Jobless growth”.

6. Outdated technology:

• The level of technology in agriculture and small scale Industries is still outdated and obsolete.

Question 2.
Explain the VKRV Rao’s National Income Methodology and Industrialization?
Answer:
1. Rao’s National Income Methodology:

• Rao’s name is remembered for his pioneering work on the enumeration of national income of India.
• He attempted
• To develop the national income concepts suited to India and developing countries.
• To analyze the concepts of investment, saving and multipliers is an underdeveloped economy.
• To study the compatibility of the national incomes of Industrialized and underdeveloped countries.
• Rao’s paper on “Full Employment and Economic Development” was one of the earliest contributions in the field of development towards employment.

2. Rao’s views on Industrialization:

• Rao gave the following reasons for low per Capita income and low levels of per capita nutrition in India.
• Uneconomic holdings with sub-divisions and fragmentation.
• Low levels of water availability for crops.
• Excess population pressure on agriculture due to the absence of a large industrial sector.
• Absence of capital.
• Absence of autonomy in currency policy, and in general in monetary matters encouraging holding of gold.

Students can download 11th Economics Chapter 6 Distribution Analysis Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 6 Distribution Analysis

Samacheer Kalvi 11th Economics Distribution Analysis Text Book Back Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
In Economics, distribution of income is among the ……………………….
(a) Factors of production
(b) Individual
(c) Firms
(d) Traders
Answer:
(a) Factors of production

Question 2.
Theory of distribution is popularly known as
(a) Theory of product-pricing
(b) Theory of factor-pricing
(c) Theory of wages
(d) Theory of Interest
Answer:
(b) Theory of factor-pricing

Question 3.
Rent is the reward for the use of ………………………..
(a) Capital
(b) Labour
(c) Land
(d) Organization
Answer:
(c) Land

Question 4.
The concept of ‘Quasi-Rent’ is associated with
(a) Ricardo
(b) Keynes
(c) Walker
(d) Marshall
Answer:
(d) Marshall

Question 5.
The Classical Theory or Rent was propounded by ………………………..
(a) Ricardo
(b) Keynes
(c) Marshall
(d) Walker
Answer:
(a) Ricardo

Question 6.
‘Original and indestructible powers of the soil’ is the term used by
(a) J.S.Mill
(b) Walker
(c) Clark
(d) Ricardo
Answer:
(d) Ricardo

Question 7.
The reward for labour is ………………………
(a) Rent
(b) Wage
(c) Profit
(d) Interest
Answer:
(b) Wage

Question 8.
Money wages are also known as
(a) real wages
(b) nominal wages
(c) original wages
(d) transfer wages
Answer:
(b) nominal wages

Question 9.
Residual Claimant Theory is propounded by ………………………..
(a) Keynes
(b) Walker
(c) Hawley
(d) Knight
Answer:
(b) Walker

Question 10.
The reward given for the use of capital
(a) rent
(b) wage
(c) interest
(d) profit
Answer:
(c) interest

Question 11.
Keynesian Theory of interest is popularly known as ………………………
(a) Abstinence Theory
(b) Liquidity Preference Theory
(c) Loanable Funds Theory
(d) Agio Theory
Answer:
(b) Liquidity Preference Theory

Question 12.
According to the Loanable Funds Theory, supply of loanable funds is equal to
(a) S + BC + DH + DI
(b) I + DS + DH + BM
(c) S + DS + BM + DI
(d) S + BM + DH + DS
Answer:
(a) S + BC + DH + DI

Question 13.
The concept of meeting unexpected expenditure according to Keynes is …………………………
(a) Transaction motive
(b) Precautionary motive
(c) Speculative motive
(d) Personal motive
Answer:
(b) Precautionary motive

Question 14.
The distribution of income or wealth of a country among the individuals are
(a) functional distribution
(b) personal distribution
(c) goods distribution
(d) services distribution
Answer:
(b) personal distribution

Question 15.
Profit is the reward for ………………………..
(a) Land
(b) Organization
(c) Capital
(d) Labour
Answer:
(b) Organization

Question 16.
Innovation Theory of profit was given by
(a) Hawley
(b) Schumpeter
(c) Keynes
(d) Knight
Answer:
(b) Schumpeter

Question 17.
Quasi – rent arises in ………………………..
(a) Man-made appliances
(b) Homemade items
(c) Imported items
(d) None of these
Answer:
(a) Man-made appliances

Question 18.
“Wages as a sum of money are paid under contract by an employer to a worker for services rendered” -Who said this?
(a) Benham
(b) Marshall
(c) Walker
(d) J.S.Mill
Answer:
(a) Benham

Question 19.
Abstinence Theory of Interest was propounded by …………………………
(a) Alfred Marshall
(b) N.W Senior
(c) Bohm – Bawerk
(d) Knut Wicksell
Answer:
(b) N.W Senior

Question 20.
Loanable Funds Theory of Interest is called as
(a) Classical Theory
(b) Modem Theory
(c) Traditional Theory
(d) Neo-Classical Theory
Answer:
(d) Neo-Classical Theory

Part – B

Answer the following questions in one or two sentences.

Question 21.
What is meant by distribution?
Answer:
Distribution means division of income among the four factors of production as rent, wage, interest and profit.

Question 22.
Mention the types of distribution.
Answer:

1. Personal Distribution
2. Functional Distribution

Question 23.
Define ‘Rent’?
Answer:
Rent is that part of payment made by a tenant to his landlords for the use of land only.

Question 24.
Distinguish between real and money wages?
Answer:

Question 25.
What do you mean by interest?
Answer:

1. Interest is the reward paid by the borrower to the lender for the use of capital.
2. Interest is the price paid for the use of capital in any market.
3. Generally speaking, interest is a payment made by a borrower to the lender for the money borrowed.

Question 26.
What is profit?
Answer:

1. The entrepreneur coordinates all the other three factors (land, labour and capital) of production.
2. Entrepreneur is rewarded for his services in the form of profit.
3. Profit is a return to the entrepreneur for the use of his entrepreneurial ability.
4. It is the net income of the organizer.
5. Profit is the amount left with the entrepreneur after he has payments made for all the other factors (land, labour and capital) used by him in the production process.

Question 27.
State the meaning of liquidity preference.
Answer:
Liquidity preference is the preference to have an amount of cash rather than of claims against others.

PART – C

Answer the following questions in a paragraph.

Question 28.
What are the motives of demand for money?
Answer:
Motives of Demand for Money:
According to Keynes, there are three motives for liquidity preference. They are:

1. The Transaction Motive:

• The transaction motive relates to the desire of the people to hold cash for the current transactions.
• The amount saved under this motive depends on the level of income.
• M_t = f(y)

2. The Precautionary Motive:

• The precautionary motive relates to the desire of the people to hold cash to meet unexpected or unforeseen expenditures such as sickness, accidents, fire and theft. The amount saved for this motive also depends on the level of income.
  M_p = f(y)

3. The Speculative Motive:
The speculative motive relates to the desire of the people to hold cash in order to take advantage of market movements regarding the future changes in the price of bonds and securities in the capital market. The amount saved for this motive depends on the rate of interest.
M_S = f(i). There is inverse relation between liquidity preference and rate of interest.

Question 29.
List the kinds of wages.
Answer:
1. Nominal wages or money wages :
Nominal wages are referred to as the wages paid in terms of money.

2. Real wages :
Real wages are the wages paid in terms of goods and services. Hence, real wages are the purchasing power of money wages.

3. Piece wages :
Wages that are paid on the basis of quantum of work done.

4. Time wages :
Wages are paid on the basis of the amount of time that the worker works.

Question 30.
Distinguish between rent and quasi – rent?
Answer:

Question 31.
Briefly explain the Subsistence Theory of Wages.
Answer:

• Subsistence theory was first explained by physiocrats and restated by Ricardo.
• According to this theory, wage must be equal to the subsistence level of the labourer and his family.
• If workers are paid higher wages they would be better off and will have large families. Hence, the population would increase, which results in increased supply of labourer and so wages will come down.
• If wages are lower, there would be a reduction in population and thereby the supply of labour falls and wages increase to the subsistence level.
• This theory holds that the wages of workers would not be above or below the subsistence level of the labourer and his family.

Question 32.
State the Dynamic Theory of Profit?
Answer:
Dynamic Theory of Profit:

• J.B. Clark propounded this theory in 1900. To him, profit is the difference between price and cost of production of the commodity.
• Profit is the reward for dynamic changes in society. He points out that, profit cannot arise in a static society. In static society, everything remains stationary.
• The following changes take place in a dynamic society.
  1. The population is increasing.
  2. The volume of capital is increasing.
  3. Methods of production are improving.
  4. Forms of the industrial organization are changing.
  5. The wants of consumers are multiplying.

Question 33.
Describe briefly the Innovation Theory of Profit.
Answer:

• Innovation theory was propounded by Joseph. A. Schumpeter.
• Profit is the reward for “Innovation”. Innovation means invention put into commercial practice.
• An innovation may consist of:
  1. Introduction of a new product.
  2. Introduction of a new method of production.
  3. Opening up of a new market.
  4. Discovery of new raw materials.
  5. Reorganization of an industry/firm.
  6. Anyone of these innovations leads to a reduction in the cost of production and thereby brings profit to an entrepreneur.

Question 34.
Write a note on the Risk-bearing Theory of Profit?
Answer:

• Risk – the bearing theory was propounded by F.B.Hawley in 1907.
• Profit is the reward for “risk-taking” in business.
• Every business involves some risks. So risk-taking is an essential function of the entrepreneur and is the basis of profit.
• Higher the risks, the greater are the profit.
• Profit induces entrepreneurs to undertake risks.

PART – D

Answer the following questions on one page.

Question 35.
Explain the Marginal Productivity Theory of Distribution?
Answer:
Introduction:

1. This theory was developed by Clark, Wicksteed and Walras. The Marginal productivity theory of distribution explains how the prices of various factors of production are determined.
2. This theory explains how rent, wages, interest and profit are determined.
3. This theory is also known as the “General Theory of Distribution ” or “ National Dividend Theory of Distribution”.

Assumptions:

1. All the factors of production are homogenous.
2. Factors of production can be substituted for each other.
3. There is perfect competition both in the factor market and product market.
4. There is perfect mobility of factors of production.
5. There is full employment of factors.
6. This theory is applicable only in the long-run.
7. The entrepreneurs aim at profit maximization.
8. There is no government intervention in fixing the price of a factor.
9. There is no technological change.

Explanation of the Theory:
According to the Marginal Productivity Theory of Distribution, the.price or the reward for any factor of production is equal to the marginal productivity of that factor. Each factor is rewarded according to its marginal productivity.

Marginal Product:
The Marginal Product is also known as “ Marginal Physical Product “ [MPP]. The Marginal Product of a factor of production means the addition made to the total product by the employment of an additional unit of that factor. The Marginal Product may be expressed as MPP, VMP, and MRP.

1. Marginal Physical product [MPP]: The Marginal Physical Product of a factor is the increment in the total product obtained by the employment of an additional unit of that factor.

2. Value of a marginal product [VMP]: The Value of Marginal Product is obtained by multiplying the marginal physical product of the factor by the price of the product. Symbolically VMP = MPP × Price

3. Marginal Revenue product [MRP]: The Marginal Revenue Product of a factor is the increment in the total revenue which is obtained by the employment of an additional unit of that factor.
MRP = MPP × MR

The Marginal Productivity Theory of Distribution states that

1. The price of a factor of production depends upon its productivity.
2. The price of a factor is determined by and will be equal to the marginal revenue product of that factor.
3. Under certain conditions, the price of a factor will be equal to both the average and marginal products of that factor.

Question 36.
Illustrate the Ricardian Theory of Rent?
Answer:

1. The Classical Theory of Rent is called the “Ricardian Theory of Rent.”
2. “ Rent is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil” – David Ricardo

Assumptions:
Ricardian theory of rent assumes the following:

1. Land differs in fertility.
2. The law of diminishing returns operates in agriculture.
3. Rent depends upon fertility and location of the land.
4. The theory assumes perfect competition.
5. It is based on the assumption of a long period.
6. There is the existence of marginal land or no-rent land.
7. The land has certain “Original and indestructible powers”.
8. The land is used for cultivation only.
9. Most fertile lands are cultivated first.

Statement of the Theory with Illustration:
There are three grades of land, namely A, B, and C on that island. ‘A’ being most fertile ‘B’ less fertile and ‘C’ the least fertile. They will first cultivate all the most fertile land. The yield per acre on ‘A’ grade land is 40 bags of paddy.

The same amount labour and capital employed in ‘A’ grade land. The yield per acre on ‘B’ grade land is 30 bags of paddy.
The Surplus of 10 bags [40-30] per acre appears on ‘A’ grade land. This is “ Economic Rent” land of ‘A’ grade land.

The yield per acre on ‘C’ grade land is 20 bags of paddy. This surplus of ‘A’ grade land is now raised to 20 bags [40-20] and it is the “ Economic Rent” of ‘A’ grade land.

The ‘C’ grade land, cost of production is just equal to the price of its products and therefore does not yield any rent [20-20], Hence, ‘C’ grade land is called ‘no-rent land or marginal land ’. The land which yields rent is called “intra-marginal land”.

Diagrammatic Explanation:

1. In the diagram, X-axis represents various grades of land, and Y-axis represents yield per acre [in bags],
2. OA, AB, and BC are the ‘A’ grade ‘B’ grade and ‘C’ grade lands respectively.
3. The ‘C’ grade land is the no rent land.”
4. ‘A’ land ‘B’ grade lands are “intra – marginal lands”.
5. The economic rent yielded by ‘A’ and ‘B’ grade lands is equal to the shaded area of their respective rectangles.

Question 37.
Elucidate the Loanable Funds Theory of Interest?
Answer:

1. The loanable fund’s theory, also known as the “Neoclassical theory”. This theory was developed by Swedish economists like Wicksell, Bertilohlin, Viner, Gunnar Myrdal, and others.
2. Interest is the price paid for the use of loanable funds.
3. The rate of interest is determined by the equilibrium between the demand for and supply of loanable funds in the credit market.

Demand for loanable funds :

1. Demand for Investment (I)
2. Demand for Consumption (C)
3. Demand for Hoarding (H)

Supply of loanable funds :
1. Savings (S) :
Savings may be of two types, namely.

1. Savings planned by individuals are “ex-ante savings”. (Eg.) LIC premium
2. Unplanned savings are called “ex-post savings”

2. Bank credit:
Commercial banks create credit and supply loanable funds to the investors.

3. Dishoarding (DH) :
Dishoarding means bringing out the hoarded money into use and thus it constitutes a source of supply of loanable funds.

4. Disinvestment (DI):
Disinvestment is the opposite of investment. It means not providing sufficient funds for the depreciation of equipment.

Explanation:
The X-axis represents the demand for and supply of loanable funds, Y-axis represents the rate of interest. The LS curve represents the total supply curve of loanable funds. The LD curve represents the total demand for loanable funds. The LD and LS curves, intersect each other at the point “E” the equilibrium point. At this point OR rate of interest and OM is the number of loanable funds.

Criticisms :

1. Many factors have been included in this theory’. Still, there are many more factors like
   • Asymmetric information
   • Moral Hazard.
2. It is very difficult to combine real factors with monetary factors.

Question 38.
Explain the Keynesian Theory of Interest?
Answer:
Keynes’ Liquidity Preference Theory of Interest or The monetary Theory of Interest

1. Keynes propounded the Liquidity Preference Theory of Interest in his famous book,
   “ The General Theory of Employment, Interest, and Money “ in 1936.
2. According to Keynes, interest is purely a monetary phenomenon because the rate of interest is calculated in terms of money.
3. “Interest is the reward for parting with liquidity for a specified period of time”.

Meaning of Liquidity Preference:

1. Liquidity preference means the preference of the people to hold wealth in the form of liquid cash rather than in other non-liquid assets like bonds, securities, bills of exchange, land, building, gold etc.
2. “Liquidity Preference is the preference to have an amount of cash rather than of claims against others”. – Meyer.

Motives of Demand for Money:
According to Keynes, there are three motives for liquidity preferences. They are:

1. The Transaction Motive:
The transaction motive relates to the desire of the people to hold cash for the current transactions [or-day-to-day expenses] M = f(y)

2. The Precautionary Motive:

• The precautionary motive relates to the desire of the people to hold cash to meet unexpected or unforeseen expenditures such as sickness, accidents, fire, and theft.
• The amount saved for this motive also depends on the level of Income Mp = f(y).

3. The Speculative Motive:

• The speculative motive relates to the desire of the people to hold cash in order to take advantage of market movements regarding the future changes in the price of bonds and securities in the capital market. M = f(i)
• There is an inverse relation between liquidity preference and rate of interest.

Samacheer Kalvi 11th Economics Distribution Analysis Additional Important Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
The theory of factor prices is popularly known as the theory of _______
(a) Distribution
(b) Exchange
(c) Wages
(d) Profit
Answer:
(a) Distribution

Question 2.
Net profit is otherwise called ………………………
(a) Profit
(b) Risk profit
(c) Dynamic profit
(d) Pure profit
Answer:
(d) Pure profit

Question 3.
F.A. Walker wrote a book _______ in 1875.
(a) Political economy
(b) Social economy
(c) Principles of economics
(d) Wealth of nations
Answer:
(a) Political economy

Question 4.
Which is the gift of nature?
(a) Land
(b) Interest
(c) Profit
(d) Capital
Answer:
(a) Land

Question 5.
Keynes liquidity preference theory is also called as_______
(a) Classical theory of interest
(b) Psychological theory of interest
(c) The monetary theory of interest
(d) Abstinence theory of interest
Answer:
(c) The monetary theory of interest

Question 6.
Which one is considered a homogeneous factor?
(a) Labour
(b) Land
(c) Capital
(d) All the above
Answer:
(d) All the above

Question 7.
Risk bearing theory of profit was propounded by _______
(a) J.B. Clark
(b) J.M. Keynes
(c) F.B. Hawley
(d) H.Knight
Answer:
(c) F.B. Hawley

Question 8.
What is the payment for the service of labour?
(a) Wages
(b) Income
(c) Salary
(d) Profit
Answer:
(a) Wages

Question 9.
_______ is the produced means of production.
(a) Land
(b) Labour
(c) Capital
(d) Organisation
Answer:
(c) Capital

Question 10.
Organization is done by the ………………………
(a) Private sector
(b) Public sector
(c) Service sector
(d) Entrepreneur
Answer:
(d) Entrepreneur

PART – B

Answer the following questions in one or two sentences.

Question 1.
Define Marginal product?
Answer:

1. The marginal product of a factor of production means the addition made to the total product by the employment of an additional unit of that factor.
2. The Marginal Product may be expressed as MPP, VMP, and MRP.

Question 2.
What are the other names of the marginal productivity theory of distribution?
Answer:

1. The general theory of distribution
2. National dividend theory of distribution

Question 3.
What do you mean by the Marginal Productivity theory of distribution?
Answer:

1. Marginal Productivity Theory of Distribution was developed by Clark, Wicksteed, and Walras.
2. This theory explains how the prices of various factors of production are determined.
3. This theory explains how rent, wages, interest, and profit are determined.
4. This theory is also known as the “General Theory of Distribution” or “National Dividend Theory of Distribution”.

PART – C

Answer the following questions in a paragraph.

Question 1.
List out the Concepts of Profit?
Answer:
Concepts of Profit:

1. Gross Profit:
Gross Profit is the surplus that accrues to a firm when it subtracts its Total expenditure from its Total Revenue.
Gross Profit = Total Revenue – Total cost

2. Net profit or Pure Profit or Economic Profit or True Profit:
Net or pure or economic or true profit is the residual left with the entrepreneur after deducting from Gross profit The remuneration for the self-owned factors of production which are called implicit cost.
Net Profit = Gross Profit – implicit costs.

3. Normal Profit:
It refers to the minimum expected to return to stay in business

4. SuperNormal Profit:
Supernormal profits are over and above the normal profit.
SuperNormal Profit = Actual profit – Normal profit

Question 2.
Describe briefly the equilibrium between Demand and Supply of Money?
Answer:
1. The equilibrium between liquidity preference and demand for money determines the rate of interest.
2. In the short – run, the supply of money is assumed to be constant.

3. LP is the liquidity preference curve [demand curve.]

4. M₂M₂ shows the supply curve of money to satisfy speculative motives. Both curves intersect at point E, which is the equilibrium point. Hence, the rate of interest is 2.5. If liquidity preference increases from LP to L₁P₁ the supply of money remains constant, the rate of interest would increase from OI to OI_1.

5. Suppose LP remains constant. If the supply of money is OM₂, the interest is OI₂ and if the supply of money is reduced from OM₂ to OM₄, the interest would increase from OI₂ to OI₃. If the supply of money is increased from OM₂ to OM₄, the interest could decrease from OI₂ to OI₄.

Question 3.
Define the kinds of interest.
Answer:
Gross interest:
Gross interest is the total interest amount received by creditors from debtors.
Gross interest = Net interest + reward for inconvenience + insurance against the risk of non-repayment + payment for service of debt management.

Net interest:
Net interest is only a part of the gross interest. It is the payment for use of capital only. (Eg.) Interest payable for government securities.

PART – D

Answer the following questions on one page.

Question 1.
Explain the classical theory of Interest?
Answer:
The classical theory of Interest:

1. The equilibrium interest rate, according to classical theory, is determined by the intersection of demand and supply curves, Demand for money refers to investment.
2. The supply of money is referred to as savings. S = I.

Equilibrium:

1. The rate of interest is determined by the equilibrium between the total demand for and the total supply of loanable funds.
2. Supply of and Demand for Loanable funds:
3. Supply of loanable funds = Savings + Bank Credit + Dishoarding + Disinvestment = S + BC + DH + DI
4. Demand for loanable funds = Investment + consumption + Hoarding = I + C + H

• In Diagram X-axis represents the demand for and supply of loanable funds and the Y-axis represents the rate of interest.
• The LS curve represents the total supply curve of loanable funds.
• The summation of the Saving Curve [S], Bank credit curve [BC], Dishoarding curve [DH], and Disinvestment curve [DI],
• The LD curve represents the total demand for loanable funds.
• This is obtained by the summation of the demand for investment curve I, the demand curve for consumption demand or dissaving curve, and the curve for the demand for hoarding curve H.
• The LD and LS curves, intersect each other at the point “E” the equilibrium point.
• At this point, the OR rate of interest and OM is the number of loanable funds.

Question 2.
Illustrate the uncertainty Bearing Theory of profit?
Answer:
Uncertainty theory was propounded by the American economist Frank H.Knight. Profit is the reward for “ uncertainty bearing”. He distinguishes between “insurable” and “non-insurable” risks.

Insurable Risks:

1. Certain risks are measurable or calculable.
2. Some of the examples of these risks are the risk of fire, theft, and natural disasters.
3. Such risks are compensated by the Insurance companies.

Non-Insurable Risks:

1. There are some risks which are immeasurable or incalculable.
2. Examples of these risks are competition,, market condition, technology change, and public policy.
3. No Insurance Company can undertake these risks.
4. The term “risks” covers the first type of events (measurables-insurable)
5. The term “uncertainty” covers the second type of events (unforeseeable or incalculable or not measurable or non-insurable).
6. According to Knight, profit does not arise on account of risk-taking, because the entrepreneur can guard himself against risk by taking a suitable insurance policy.
7. Uncertain events cannot be guarded against in that way.
8. An entrepreneur takes himself the burden of facing an uncertain event, he secures remuneration.
9. That remuneration is “profit”.

Students can download 11th Economics Chapter 5 Market Structure and Pricing Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 5 Market Structure and Pricing

Samacheer Kalvi 11th Economics Market Structure and Pricing Text Book Back Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
In which of the following is not a type of market structure Price will be very high?
(a) Perfect competition
(b) Monopoly
(c) Duopoly
(d) Oligopoly
Answer:
(b) Monopoly

Question 2.
Equilibrium condition of a firm is ______
(a) MC = MR
(b) MC > MR
(c) MC < MR
(d) MR = Price
Answer:
(a) MC = MR

Question 3.
Which of the following is a feature of monopolistic competition?
(a) One seller
(b) Few sellers
(c) Product differentiation
(d) No entry
Answer:
(c) Product differentiation

Question 4.
A firm under monopoly can earn ______ in the short run.
(a) Normal profit
(b) Loss
(c) Supernormal profit
(d) More loss
Answer:
(c) Supernormal profit

Question 5.
There is no excess capacity under ……………………..
(a) Monopoly
(b) Monopolistic competition
(c) Oligopoly
(d) Perfect competition
Answer:
(d) Perfect competition

Question 6.
Profit of a firm is obtained when ______
(a) TR < TC
(b) TR – MC
(c) TR >TC
(d) TR = TC
Answer:
(c) TR > TC

Question 7.
Another name of the price is …………………..
(a) Average Revenue
(b) Marginal Revenue
(c) Total Revenue
(d) Average Cost
Answer:
(a) Average Revenue

Question 8.
In which type of market, AR and MR are equal ______
(a) Duopoly
(b) Perfect competition
(c) Monopolistic competition
(d) Oligopoly
Answer:
(b) Perfect competition

Question 9.
In a monopoly, the MR curve lies below …………………….
(a) TR
(b) MC
(c) AR
(d) AC
Answer:
(c) AR

Question 10.
Perfect competition assumes ______
(a) Luxury goods
(b) Producer goods
(c) Differentiated goods
(d) Homogeneous goods
Answer:
(d) Homogeneous goods

Question 11.
Group equilibrium is analysed in ……………………
(a) Monopolistic competition
(b) Monopoly
(c) Duopoly
(d) Pure competition
Answer:
(a) Monopolistic competition

Question 12.
In monopolistic competition, the essential feature is ______
(a) Same product
(b) selling cost
(c) Single seller
(d) Single buyer
Answer:
(b) selling cost

Question 13.
Monopolistic competition is a form of ……………………
(a) Oligopoly
(b) Duopoly
(c) Imperfect competition
(d) Monopoly
Answer:
(c) Imperfect competition

Question 14.
Price leadership is the attribute of ______
(a) Perfect competition
(b) Monopoly
(c) Oligopoly
(d) Monopolistic competition
Answer:
(c) Oligopoly

Question 15.
Price discrimination will always lead to ……………………
(a) Increase in output
(b) Increase in profit
(c) Different prices
(d) (b) and (c)
Answer:
(d) (b) and (c)

Question 16.
curve under monopolistic competition will be ______
(a) Perfectly inelastic
(b) Perfectly elastic
(c) Relaively elastic
(d) Unitary elastic
Answer:
(c) Relaively elastic

Question 17.
Under perfect competition, the shape of demand curve of firm is …………………
(a) Vertical
(b) Horizontal
(c) Negatively sloped
(d) Positively sloped
Answer:
(b) Horizontal

Question 18.
In which market form, does absence of competition prevail?
(a) Perfect competition
(b) Monopoly
(c) Duopoly
(d) Oligopoly
Answer:
(b) Monopoly

Question 19.
Which of the following involves maximum exploitation of consumers?
(a) Perfect competition
(b) Monopoly
(c) Monopolistic competition
(d) Oligopoly
Answer:
(b) Monopoly

Question 20.
An example of selling cost is ______
(a) Raw material cost
(b) Transport cost
(c) Advertisement cost
(d) Purchasing cost
Answer:
(c) Advertisement cost

Part – B

Answer the following questions in one or two sentences.

Question 21.
Define market?
Answer:
In economics, the term ‘Market’ refers to a system of exchange between the buyers and the sellers of a commodity. The exchange may be direct or indirect.

Question 22.
Who is the price-taker?
Answer:
A firm under perfect competition is a price-taker. Both buyer and seller accept the price fixed in the industry.

Question 23.
Point out the essential features of pure competition?
Answer:

1. The absence of any monopoly element.
2. There are large buyers and sellers.
3. Homogenous product and uniform price.
4. Free entry and exit.

Question 24.
What is the selling cost?
Answer:
Under monopolistic competition, as the products are differentiated, the producer has to incur expenses to make his brand popular. The expenditure involved in selling the product is called “selling cost’ Eg. Cost for advertisements.

Question 25.
Draw demand curve of a firm for the following:
Answer:
(a) Perfect competition
(b) Monopoly

(a) Perfect competition:
The average revenue of the firm is greater than its average cost.
The firm is earning supernormal profit.

Explanation:
In the figure, output is measured along the x-axis and price, revenue, and cost along the y-axis. OP is the prevailing price in the market. PL is the demand curve or average and the marginal
revenue curve. The firm is in equilibrium at point ‘E’ where MR = MC and MC cuts the MR curve from below at the point of equilibrium.

(b) Monopoly:
A monopoly is a market structure characterized by a single seller, selling the unique product with the restriction for a new firm to enter the market. A monopoly is a form of market where there is a single seller selling a particular commodity for which there are no close substitutes.

Question 26.
Mention any two types of price discrimination.
Answer:

1. Personal: Different prices are charged for different individuals. For example, the railways give tickets at a concessional rate to the ‘Senior citizens’ for the same journey.
2. Geographical: Different prices are charged at different places for the same product. For example, a book sold within India at a price is sold in a foreign country at a lower price.

Question 27.
Define “Excess capacity”?
Answer:
Excess capacity is the difference between the optimum output that can be produced and the actual output produced by the firm.

Part – C

Answer the following questions in one paragraph.

Question 28.
What are the features of a market?
Answer:

1. Buyers and sellers of a commodity or a service.
2. A commodity to be bought and sold.
3. Price agreeable to buyer and seller.
4. Direct or indirect exchange.

Question 29.
Specify the nature of entry of competitors in perfect competition and monopoly?
Answer:
Perfect competition:
Under perfect competition, there is the possibility of free entry and exit of the firm. In the short run, if an efficient producer produces supernormal profits, it attracts new firms to enter the industry. When a large number of firms enter, the supply would increase, resulting in lower prices. An inefficient producer, disturbed by the loss, quit the market. It results in a decrease in supply so the price will go up.

Monopoly:
In a monopoly, there is a strict barrier for entry of any new firm.

Question 30.
Describe the degrees of price discrimination.
Answer:
Price discrimination has become widespread in almost all monopoly markets. According to A.C. Pigou, there are three degrees of price discrimination.

1. First-degree price discrimination :
A monopolist charges the maximum price that a buyer is willing to pay. This is called perfect price discrimination. Joan Robinson named it as “Perfect discriminating monopoly.”

2. Second-degree price discrimination :
Under this degree, buyers are charged prices in such a way that a part of their consumer’s surplus is taken away by the sellers. This is called imperfect price discrimination. Joan Robinson named it as “Imperfect discriminating monopoly”. Under this degree, buyers are divided into different groups and a different price is charged for each group. (E.g) Ticket prices in cinema theatres.

3. Third-degree price discrimination :
The monopolist splits the entire market into a few sub-market and charges different prices in each submarket. The groups are divided on the basis of age, sex, and location. (E.g) Railways charge lower fares from senior citizens.

Question 31.
State the meaning of selling cost with an example?
Answer:
Under monopolistic competition as the products are differentiated, the producer has to incur expenses to make his brand popular. The expenditure involved in selling the product is called “selling cost”.

According to Prof.Chamberlin, selling cost is the cost incurred in order to alter the position or shape of the demand curve for a product.
Under perfect competition and monopoly there is soiling COM.
(Eg.) Advertisements, Free services, Home delivery etc.,

Question 32.
Mention the similarities between perfect competition and monopolistic competition?
Answer:

Question 33.
Differentiate between “firm” and Industry?
Answer:

Question 34.
State the features of duopoly?
Answer:

1. Each seller is fully aware of his rival’s motive and actions.
2. Both sellers may collude (they agree on all matters regarding the sale of a commodity)
3. They may enter into cut-throat competition.
4. There is no product differentiation.
5. They fix the price for their product with a view to maximizing their profit.

Part – D

Answer the following questions in about a page.

Question 35.
Bring out the features of perfect competition?
Answer:
According to Joan Robinson, “Perfect competition prevails when the demand for the output of each producer is perfectly elastic. It is an ideal but imaginary market. 100% of perfect competition cannot be seen.
Features of the perfect competition :

(a) a Large number of buyers and sellers :
Each individual buyer buys a very very small quantum of a product as compared to that found in the market. This means that he has no power to fix the price of the product. He is only a price-taker and not a price-maker. As the number of sellers is large the seller is also a price-taker.

(b) Homogenous product and uniform price :
The. products are homogenous in nature and are perfectly substitutable. All the units of the product are identical. Therefore a uniform price prevails in the market.

(c) Free entry and exit:
In the short run, if the very efficient producer earns supernormal profits, new firms enter the industry. When a large number of firms enter, the supply would increase, resulting in lower prices. If a inefficient producer incurs a loss, the loss incurring firms quit the market. So the existing firms could earn more profit as supply decreases.

(d) Absence of transport cost:
The prevalence of the uniform price is also due to the absence of the transport cost. . e) Perfect mobility of factors of production :
As there is perfect mobility of the factors of production, uniform price exists. As they enjoy perfect freedom of mobility the price gets adjusted.

(f) Perfect knowledge of the market:
All buyers and sellers have a thorough knowledge of the quality of the product, prevailing price, etc.

(g) No government intervention:
There is no government regulation on the supply of raw materials and in the determination of price etc.

Question 36.
How price and output are determined under the perfect competition?
Answer:
Perfect Competition: Firm’s Equilibrium in the Short Run

1. In the short run, at least a few factors of production are fixed. The firms under Perfect Competition take the price (10) from the industry and start adjusting their quantities produced. For example Q_d = 100 – 5P and Q_s = 5P.
2.  At equilibrium Q_d = Q_s
3. Therefore 100 – 5P = 5P

100 = 10P; 100/10 = P; Q_d = demand
P = 10 ; P = Price
Q_d = 100 – 5(10); Q_s = Supply
100 – 50 = 50
Q_s = 5 (10) = 50
Therefore 50 = 50

This diagram consists of three panels. The equilibrium of an industry is explained in the first panel. The demand and supply forces of all the firms interact and the price is fixed as 10. The equilibrium of an industry is obtained at 50 units of output.

In the second part of the diagram, AC curve is lower than the price line. The equilibrium condition is achieved where MC = MR. Its equilibrium quantity sold is 50. With the prevailing price, ₹10 it experiences supernormal profit. AC = ₹8, AR = ₹10.

Its total revenue is 50 × 10 = 500. Its total cost is 50 × 8 = 400.
Therefore, its total profit is 500 – 400 = 100.

In the third part of the diagram, the firm’s cost curve is above the price line. The equilibrium condition is achieved at the point where MR = MC. Its quantity sold is 50. With the prevailing price, it experiences loss. (AC > AR)

Its total revenue is 50 × 10 = 500. Its total cost is 50 × 12 = 600.
Therefore, its total loss is 600 – 500 = 100.

As profit prevails in the market, new firms will enter the industry, thus increasing the supply of the product. This means a decline in the price of the product and an increase in the cost of production. Thus, the abnormal profit will be wiped out; the loss will be incurred.

When loss prevails in the market, the existing loss-making firms will exit the industry, thus decreasing the supply of the product. This means a rise in the price of the product and a reduction in the cost of production. So the loss will vanish; Profit will emerge. Consequent to the entry and exit of new firms into the industry, firms always earn ‘normal profit’ in the long run as shown in the diagram.

Question 37.
Describe the features of oligopoly?
Answer:
Features of oligopoly:
1. Few large firms :
Very few big firms own the major control of the whole market by producing a major portion of the market demand.

2. Interdependence among firms :
The price and quality decisions of a particular firm are dependent on the price and quality decisions of the rival firms.

3. Group behaviour :
The firms under oligopoly realise the importance of mutual co-operation.

4. Advertisement cost :
The oligopolist could raise sales either by advertising or improving the quality of the product.

5. Nature of the product:
Perfect oligopoly means homogeneous products and imperfect oligopoly deals with heterogeneous products.

6. Price rigidity :
It implies that prices are difficult to be changed. The oligopolist firms do not change their prices due to the fear of rival’s reaction.

Question 38.
Illustrate price and output determination under Monopoly?
Answer:
Price and Output Determination under Monopoly:
A monopoly is a one firm-industry. Therefore, a firm under a monopoly faces a downward-sloping demand curve (or AR curve). Since, under monopoly AR falls, as more units of output are sold, the MR lies below the AR curve (MR < AR). The monopolist will continue to sell his product as long as his MR > MC.

He attains equilibrium at the level of output when its MC is equal to MR. Beyond this point, the producer will experience loss and hence will stop selling. Let us take the following hypothetical example of Total Revenue Function and Total cost function.

TR = 100Q – 4Q² and
TC = Q³ – 18Q² + 91Q + 12.
Therefore AR = 100 – 4Q;
MR = 100 – 8Q;
AC = Q² – 18Q + 91 + 12/Q;
= 3Q² – 36Q + 91;
When Q = 3,
AR = 100 – 4(3) = 88,
= (3)² – 18(3) + 91 + 12/3 = 9 – 54 + 91 + 4 = 50;
MR = 100 – 8(3) = 76;
= 3(3)² – 36(3) + 91 = 27 – 108 + 91 = 10
From this diagram, till he sells 3 units output, MR is greater than MC, and when he exceeds this output level, MR is less than MC. The monopoly firm will be in equilibrium at the level of output where MR is equal to MC. The price is 88.

To checkup how much profit the monopolist is making at the equilibrium output, the average revenue curves and the average cost curves are used. At the equilibrium level of output is 3; the average revenue is 88 and the average cost is 50. Therefore (88 – 50 =38) is the profit per unit.
Total profit = (Average. Revenue – Average Cost) × Total output = (88 – 50) × 3 = 38 × 3 = 114.

Question 39.
Explain price and output determined under monopolistic competition with help of the diagram?
Answer:
Price and Output Determination under Monopolistic competition:
The firm under monopolistic competition achieves its equilibrium when it’s MC = MR, and when its MC curve cuts its MR curve from below. If MC is less than MR, the sellers will find it profitable to expand their output.

Under Monopolistic Competition:

1. The demand curve is downwards sloping.
2. There are close substitutes.
3. The demand curve is fairly elastic.

Under monopolistic competition, different firms produce different varieties of the product and sell them at different prices. Each firm under monopolistic competition seeks to achieve equilibrium as regards.

1. Price and output
2. Product adjustment
3. Selling cost adjustment.

Short-run equilibrium:
The profit maximisation is achieved when MC = MR.

‘OM’ is the equilibrium output. ‘OP’ is the equilibrium price. The total revenue is ‘OMQP’. And the total cost is ‘OMRS’. Therefore, total profit is ‘PQRS’. This is super normal profit under short-run.

But under differing revenue and cost conditions, the monopolistically competitive firms may incur a loss.

As shown in the diagram, the AR and MR curves are fairly elastic. The equilibrium situation occurs at point ‘E’, where MC = MR and MC cuts MR from below.

The equilibrium output is OM and the equilibrium price is OP. The total revenue of the firm is ‘OMQP’ and the total cost of the firm is ‘OMLK’ and thus the total loss is ‘PQLK’. This firm incurs a loss in the short run.

Long-Run Equilibrium of the Firm and the Group Equilibrium:
In the short run, a firm under monopolistic competition may earn a supernormal profit or incur loss. But in the long run, the entry of the new firms in the industry will wipe out the supernormal profit earned by the existing firms. The entry of new firms and the exit of loss-making firms will result in normal profit for the firms in the industry.

In the long run, AR curve is more elastic or flatter because plenty of substitutes are available. Hence, the firms will earn an only normal profit.

Samacheer Kalvi 11th Economics Market Structure and Pricing Additional Important Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
The supply curve in the very short period is _______
(a) Horizontal
(b) Vertical
(c) Slopes downward
(d) Slopes upward
Answer:
(b) Vertical

Question 2.
Who was propounded by the concept of imperfect competition?
(a) Philip Kotler
(b) Joan Robinson
(c) (a) and (b)
(d) None of these
Answer:
(b) Joan Robinson

Question 3.
Second condition for equilibrium of the firm _______
(a) MC curve should cut MR curve from below
(b) MC curve should cut MR curve from above
(c) MC curve coincides with MR curve
(d) None of the above
Answer:
(a) MC curve should cut MR curve from below

Question 4.
Price discrimination is called ………………………. monopoly.
(a) Increasing
(b) Decreasing
(c) Equalization
(d) Discriminating
Answer:
(d) Discriminating

Question 5.
In which type of market the seller is a price taker?
(a) Perfect competition
(b) Monopoly
(c) Monopolistic competition
(d) Duopoly
Answer:
(a) Perfect competition

Question 6.
The perfect competitive firms are ……………………..
(a) Price maker
(b) Price in charge
(c) Price given
(d) Price taker
Answer:
(d) Price taker

Question 7.
There is a barrier for entry of new firm in _______
(a) Monopoly
(b) Monopolistic competition
(c) Perfect competition
(d) Duopoly
Answer:
(a) Monopoly

Question 8.
The most important form of selling cost is ………………………..
(a) Advertisement
(b) Sales
(c) Homogeneous product
(d) None
Answer:
(a) Advertisement

Question 9.
Supply curve in long run _______
(a) Perfectly elastic
(b) Perfectly inelastic
(c) Less elastic
(d) None
Answer:
(a) Perfectly elastic

Question 10.
_______ classified market based on time.
(a) Marshall
(b) Adamsmith
(c) Chamberlin
(d) Hicks
Answer:
(a) Marshall

Part – B

Answer the following questions in one or two sentences.

Question 1.
Define Dumping?
Answer:

1. Dumping refers to the practice of the monopolist charging a higher prices for his product in the local market and lower price in the foreign market.
2. Through dumping, a country expands its command over other countries for its product. This is also called as “ International Price Discrimination”. For example, India’s electronic market is flooded with China’s products.

Question 2.
Classify market-based on the area?
Answer:

1. Local market
2. Provincial market
3. National market
4. International market

Question 3.
What is the classification of markets?
Answer:
Markets are classified
1. On the Basis of Area

• Local market
• Provincial market
• National market
• International market

2. On the Basis of Time:

• Very short period market (or) Market period
• Short period market
• Long-period market
• Very long period market (or) A secular period market

3. On the Basis of Quality of the Commodity:

• Wholesale market
• Retail market

4. On the Basis of Competition:

• Perfect competition market
• Imperfect competition market

Part – C

Answer the following questions in one paragraph.

Question 1.
State the sources of monopoly power?
Answer:
1. Natural Monopoly:
Ownership of the natural raw materials [E.g. Gold mines – Africa, Coal mines, Nickel – Canada, etc]

2. State Monopoly:
Single supplier of some special services [E.g – Railways in India], (ill) Legal Monopoly: A Monopoly firm can get its monopoly power by getting patent rights, a trademark from the government.

Question 2.
Explain Long-Run Equilibrium of the Firm and the Group Equilibrium?
Answer:
In the short run, a firm under monopolistic competition may earn a supernormal profit or incur a loss. But in the long run, the entry of the new firms in the industry will wipe out the supernormal profit earned by the existing firms. The entry of new firms and the exit of loss-making firms will result in normal profit for the firms in the industry. In the long run, the AR curve is more elastic or flatter because plenty of substitutes are available. Hence, the firms will earn an only normal profit.

Question 3.
Classify markets based on time.
Answer:
Alfred Marshall classified the market on the basis of time.
1. Very short period or Market period :
If occurs when with the available time the quantum supplied of a product cannot be changed. The supply curve is vertical; it is inelastic. Demand plays a major role in price determination. (Eg.) During floods the price of food products raises.

2. Short period market:
Here the quantum supplied of a product can be changed to some extent. Supply curve is little more elastic to meet an increased demand.

3. Long-period market:
Here the quantum supplied of a product can be changed to a larger extent. The supply curve is very much elastic. All the factors are variable and the price of the product is moderate.

4. Very long period market (or a secular period market) :
It occurs when the entire economy undergoes a drastic change. Newer technologies are introduced and most modem products are produced.
(Eg.) The entry of pen-drive has driven out compact disc (CD)

Part – D

Answer the following questions in about a page.

Question 1.
Explain the wastes of monopolistic competition.
Answer:
1. Idle capacity :
Unutilized capacity is the difference between the optimum output and the actual output. In the long run, a monopolistic firm produces the output corresponding to the minimum average cost, which is less than the optimum output. It creates artificial scarcity. This leads to excess capacity which is actually a waste in monopolistic competition.

2. Unemployment:
As the firm produce less than optimum output, the productive capacity is not used to the fullest extent. This will lead to unemployment of human resources also.

3. Advertisement:
There is a lot of waste in competitive advertisements which leads to high cost to the consumers. It is also claimed that advertisements cheat consumers by giving false information about the product.

4. Too many varieties of goods :
Introducing too many varieties of a good is another waste here. The goods differ in size, shape, style and colour. A reasonable number of varieties would be sufficient. Cost per unit can also be reduced if only a few varieties are produced in larger quantity instead of larger varieties with small quantities.

5. Inefficient firms :
Inefficient firms charge prices higher than their marginal cost. These firms can be kept out of the industry. But the buyer’s preference for such products are large they continue to exist. Efficient firms cannot drive out the inefficient firms because the efficient firms cannot spend for an advertisement to attract buyers. In reality, consumers are mostly emotional rather than rational.

ACTIVITY

Question 1.
Divide the class into five groups. Assign each group a market structure; for first group perfect competition, second group monopoly, third group oligopoly, fourth group Duopoly and for fifth group monopolistic competition. Now each student is to identify a business or organization or seller that orperate in that market structure. Ask each student to prepare a brief description of the following?
Answer:

1. Name of the market structure
2. Business name
3. Industry
4. Identify the conditions of market structure
5. What are prices of a particular product, whether same price or different price?.
6. Is there non-price competition?

Activity to be done by the students in the classroom under the guidance of the teacher. (Group Activity)

Question 2.
Find out the number of firms in Tamil Nadu or India which are producing/selling TV and Mobile phones?
Answer:
Producing / selling of Television firms:

1. Samsung
2. L.G
3. Croma
4. Panasonic
5. Philips
6. Sharp
7. Mitsubishi
8. Sony
9. Red mi
10. Apple TV
11. Akai

Producing / Selling / of Mobile Phones Firms:

1. Samsung
2. Apple
3. Red mi
4. Oppo
5. Gionee
6. Infocus
7. Nokia
8. L.G
9. Mi
10. Lave
11. Micro max
12. Black bei
13. Moto
14. Letv

Students can download 11th Economics Chapter 4 Cost and Revenue Analysis Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 4 Cost and Revenue Analysis

Samacheer Kalvi 11th Economics Cost and Revenue Analysis Text Book Back Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
Cost refers to ……………………..
(a) Price
(b) Value
(c) Fixed cost
(d) Cost of production
Answer:
(d) Cost of production

Question 2.
Cost functions are also known _______ function.
(a) production
(b) investment
(c) demand
(d) consumption
Answer:
(a) production

Question 3.
Money cost is also known as …………………….. cost.
(a) Explicit
(b) Implicit
(c) Social
(d) Real
Answer:
(a) Explicit

Question 4.
Explicit cost plus implicit cost denote _______ cost.
(a) social
(b) economic
(c) money
(d) fixed
Answer:
(b) economic

Question 5.
Explicit costs are termed as ………………………
(a) Out of pocket expenses
(b) Real cost
(c) Social cost
(d) Sunk cost
Answer:
(a) Out of pocket expenses

Question 6.
The costs of self-owned resources are termed as _______ cost.
(a) real
(b) explicit
(c) money
(d) implicit
Answer:
(d) implicit

Question 7.
The cost that remains constant at all levels of output is ………………….. cost.
(a) Fixed
(b) Variable
(c) Real
(d) Social
Answer:
(a) Fixed

Question 8.
Identify the formula of estimating average variable _______ cost.
(a) TC/Q
(b) TVC/Q
(c) TFC/Q
(d) TAC/Q
Answer:
(b) TVC/Q

Question 9.
The cost incurred by producing one more unit of output is ……………… cost.
(a) Variable
(b) Fixed
(c) Marginal
(d) Total
Answer:
(c) Marginal

Question 10.
The cost that varies with the level of output is termed as _______ cost.
(a) money
(b) variable cost
(c) total cost
(d) fixed cost
Answer:
(b) variable cost

Question 11.
Wage is an example of………………….. cost of the production.
(a) Fixed
(b) Variable
(c) Marginal
(d) Opportunity
Answer:
(b) Variable

Question 12.
The cost per unit of output is denoted by _______ cost.
(a) average
(b) marginal
(c) variable
(d) total
Answer:
(a) average

Question 13.
Identify the formula for estimating average cost.
(a) AVC/Q
(b) TC/Q
(c) TVC/Q
(d) AFC/Q
Answer:
(b) TC/Q

Question 14.
Find total cost where TFC = 100 and TVC = 125.
(a) 125
(b) 175
(c) 225
(d) 325
Answer:
(c) 225

Question 15.
Long-run average cost curve is also called a………………….. curve.
(a) Demand
(b) Planning
(c) Production
(d) Sales
Answer:
(b) Planning

Question 16.
Revenue received from the sale of products is known as _______ revenue.
(a) profit
(b) total revenue
(c) average
(d) marginal
Answer:
(b) total revenue

Question 17.
Revenue received from the sale of an additional unit is termed as ……………………. revenue.
(a) Profit
(b) Average
(c) Marginal
(d) Total
Answer:
(c) Marginal

Question 18.
Marginal revenue is the addition made to the
(a) total sales
(b) total revenue
(c) total production
(d) total cost
Answer:
(b) total revenue

Question 19.
When price remains constant, AR will be …………………… MR.
(a) Equal to
(b) Greater than
(c) Less than
(d) Not related to
Answer:
(a) Equal to

Question 20.
A bookseller sold 40 books with a price of Rs.10 each. The total revenue of the seller is Rs. _______
(a) 100
(b) 200
(c) 300
(d) 400
Answer:
(d) 400

Part – B

Answer the following questions in one or two sentences.

Question 21.
Define cost?
Answer:
Cost refers to the total expenses incurred in the production of a commodity.

Question 22.
Define cost function.
Answer:
The functional relationship between cost and output is expressed as ‘Cost function’.
C= f (Q).

Question 23.
What do you mean by fixed cost?
Answer:
Fixed cost does not change with the change in the quantity of output. The expenses on fixed factors remain unchanged irrespective of the level of output and these expenses are called fixed costs.

Question 24.
Define Revenue.
Answer:
The amount of money that a producer receives in exchange for the sale of goods is known as revenue. Revenue means sales revenue.

Question 25.
Explicit Cost – Define?
Answer:
Explicit cost refers to the actual expenditures of the firm to purchase or hire the inputs.

Question 26.
Give the definition for ‘Real Cost’.
Answer:
Adam Smith regarded pains and sacrifices of labour as real costs of production.

Question 27.
What is meant by Sunk Cost?
Answer:
A cost incurred in the past and cannot be recovered in the future is called a sunk cost.

Part – C

Answer the following questions in one paragraph.

Question 28.
Distinguish between Fixed Cost and Variable Cost?
Answer:

Question 29.
State the difference between money cost and real cost?
Answer:

Question 30.
Distinguish between Explicit Cost and Implicit Cost?
Answer:

Question 31.
Define opportunity cost and provide an example.
Answer:

1. Opportunity cost refers to the cost of the next best alternative use. In other words, it is the value of the next best alternative foregone.
2. For example, a farmer can cultivate both paddy and sugarcane in farmland.
3. If he cultivates paddy, the opportunity cost of paddy output is the amount of sugarcane output given up.
4. Opportunity Cost is also called “Alternative Cost” or Transfer cost.

Question 32.
State the relationship between AC and MC?
Answer:
There is a unique relationship between the AC and MC curves as shown in the diagram.

1. When AC is falling, MC lies below AC.
2. When AC becomes constant, MC also becomes equal to it.
3. When AC starts increasing, MC lies above the AC.
4. MC curve always cuts AC at its minimum point from below.

Question 33.
Write a short note on Marginal Revenue.
Answer:

1. Marginal Revenue [MR] is the addition to the total revenue by the sale of an additional unit of a commodity.
2. MR can be found out by dividing change in total revenue by the change in quantity sold out.
3. MR = ∆TR/∆Q where MR denotes Marginal Revenue, ∆TR denotes a change in Total Revenue and ∆Q denotes a change in total quantity.
4. The other method of estimating MR is:

MR = TR_n – TR_n-1, (or) TR_n+1 – TR_n
Where MR denotes Marginal Revenue,
TR_n denotes total revenue of n^th item,
TR_n-1 denotes Total Revenue of n – 1^th item and
TR_n+1 denotes Total Revenue of n + 1^th item.
If TR = PQ,
MR = dTR/dQ = P, which is equal to AR.

Question 34.
Discuss the Long run cost curves with a suitable diagram?
Answer:

1. In the long run, all factors of production become variable. The existing size of the firm can be increased in the case of the long run. There are neither fixed inputs nor fixed costs in the long run.
2. LAC is given in the diagram.
3. Long-run average cost (LAC) is equal to long-run total costs divided by the level of output.

LAC = LTC/Q where LAC denotes Long-Run Average Cost, LTC denotes Long-run Total Cost and Q denotes the quantity of output.

The LAC curve is derived from short-run average cost curves. It is the locus of points denoting the least cost curve of producing the corresponding output. The LAC curve is called a ‘Plant Curve’ or ‘Boat shape Curve’ or ‘Planning Curve’ or ‘Envelop Curve’.

Part – D

Answer the following questions in about a page.

Question 35.
If total cost = 10 + Q³, find out AC, AVC, TFC, AFC when Q = 5?
Answer:
TC = 10 + Q³
AC = \(\frac { TC }{ Q } \)
AC = \(\frac{10+Q^{3}}{Q}\)
If Q=5, Q = 5 × 5 × 5 = 125
AC = \(\frac { 10 + 125 }{ 5 } \) = \(\frac { 135 }{ 5 } \) = 27

AVC:
TC = 10 + Q³
TC = TFC + TVC
TVC = Q³
AVC = \(\frac { TVC }{ Q } \)
= \(\frac{Q^{3}}{Q} = Q\)²
If Q = 5, then AVC = 5²
AVC = 25

TFC:
TC = 10 + Q³
TC = TFC + TVC
TFC = 10

AFC:
AFC = \(\frac { TFC }{ Q } \)
= \(\frac { 10 }{ 5 } \)
AFC = 2

Question 36.
Discuss the short-run cost curves with a suitable diagram?
Short-run Cost Curves:
Total Fixed Cost (TFC):
All payments for the fixed factors of production are known as Total Fixed Cost. A hypothetical TFC is shown in the below table and the diagram.
Answer:

For instance if TC = Q³ – 18Q² + 91Q + 12. the fixed cost here is 12. That means, if Q is zero, the total cost will be 12, hence fixed cost.
It could be observed that TFC does not change with output. Even when the output is zero, the fixed cost is ₹1000. TFC is a horizontal straight line, parallel to X-axis.

Total Variable Cost (TVC):
All payments to the variable factors of production are called Total Variable Cost. Hypothetical TVC is shown in the below table and diagram.

In the diagram, the TVC is zero when nothing is produced. As output increases, TVC also increases. TVC curve slopes upward from left to right.

For instance in TC = Q³ – 18 Q² + 91Q + 12, variable cost, TVC = Q³ – 18Q² + 91Q

Total Cost Curves:
Total Cost means the sum total of all payments made in the production. It is also called as Total Cost of Production. Total cost is the summation of Total Fixed Cost (TFC) and Total Variable Cost (TVC). It is written symbolically as TC = TFC + TVC.

For example, when the total fixed cost is ₹1000 and the total variable cost is ₹200 then the Total cost is = ₹1200 (₹1000 + ₹200).
If TFC = 12 and
TVC = Q³ – 18Q² + 91Q
TC = 12 + Q³ – 18Q² + 91Q

Average Fixed Cost (AFC):
Average Fixed Cost refers to the fixed cost per unit of output. It is obtained by dividing the total fixed cost by the quantity of output. AFC = TFC / Q where AFC denotes average fixed cost, TFC denotes total fixed cost and Q denotes the quantity of output. For example, if TFC is 1000 and the quantity of output is 10, the AFC is ₹100, obtained by dividing ₹1000 by 10. TVC is shown in the below table and diagram?

It is to be noted that-

1. AFC declines as output increases, as fixed cost remains constant.
2. AFC curve is downward sloping throughout its length, never touching the X and Y-axis. It is asymptotic to both axes.
3. The shape of the AFC curve is a rectangular hyperbola.

Average Variable Cost (AVC):
Average Variable Cost refers to the total variable cost per unit of output. It is obtained by dividing total variable cost (TVC) by the quantity of output (Q). AVC = TVC / Q where, AVC denotes Average Variable cost, TVC denotes total variable cost and Q denotes the quantity of output. For example, When the TVC is ₹300 and the quantity produced is 2, the AVC is ₹150,
(AVC = 300/2 = 150) AVC is shown in the below table and diagram.

Average Total Cost (ATC) or Average Cost (AC):
Average Total Cost refers to the total cost per unit of output.

It can be obtained in two ways.

1. By dividing the firm’s total cost (TC) by the quantity of output (Q). ATC = TC / Q.
For example, if TC is ₹1600 and the quantity of output is Q = 4, the Average Total Cost is ₹400. (ATC = 1600/4 = 400)
If ATC is Q³ – 18Q² + 91Q + 12, then AC = Q² – 18Q + 91 + 12/Q

2. By ATC is derived by adding together Average Fixed Cost (AFC) and Average Variable Cost (AVC) at each level of output. ATC = AFC + AVC.
For example, when Q = 2, TFC = 1000, TVC = 300; AFC = 500; AVC = 150; ATC = 650. ATC or AC is shown in the below table and diagram.

Marginal Cost (MC):
Marginal Cost is the cost of the last single unit produced. It is defined as the change in total costs resulting from producing one extra unit of output. In other words, it is the addition made to the total cost by producing one extra unit of output.

Marginal cost is important for deciding whether any additional output can be produced or not. MC = ∆TC/∆Q where MC denotes Marginal Cost, ∆TC denotes a change in total cost and ∆Q denotes a change in total quantity.

For example, a firm produces 4 units of output and the Total cost is ₹1600. When the firm produces one more unit (4 + 1 = 5 units) of output at the total cost of ₹1900, the marginal cost is ₹300.
MC = 1900 – 1600 = ₹300

Question 37.
Bring out the relationship between AR and MR curves under various price conditions?
Answer:
Relationship between AR and MR Curves:
If a firm is able to sell additional units at the same price then AR and MR will be constant and equal. If the firm is able to sell additional units only by reducing the price, then both AR and MR will fall and be different.

Constant AR and MR (at Fixed Price):
When price remains constant or fixed, the MR will be also constant and will coincide with AR. Under perfect competition as the price is uniform and fixed, AR is equal to MR and their shape will be a straight line horizontal to X-axis. The AR and MR Schedule under constant price is given in the below table and in the diagram.

Declining AR and MR (at Declining Price):
When a firm sells large quantities at lower prices both AR and MR will fall but the fall in MR will be steeper than the fall in the AR.

It is to be noted that MR will be lower than AR. Both AR and MR will be sloping downwards straight from left to right. The MR curve divides the distance between AR Curve and Y-axis into two equal parts. The decline in AR need not be a straight line or linear. If the prices are declining with the increase in quantity sold, the AR can be non-linear, taking a shape of concave or convex to the origin.

Samacheer Kalvi 11th Economics Cost and Revenue Analysis Additional Important Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
Real cost is _______
(a) Pain and sacrifice
(b) Subjective
(c) Efforts and sacrifice
(d) All the above
Answer:
(d) All the above

Question 2.
Social Cost is those costs ………………………
(a) Not borne by the firms
(b) Incurred by the society
(c) Health hazards
(d) All the above
Answer:
(d) All the above

Question 3.
Economic profit is ______
(a) TR-TC
(b) TC-TR
(c) AC-MC
(d) None
Answer:
(a) TR-TC

Question 4.
Profit is the difference between Total Revenue and ………………………
(a) Total Cost
(b) Total Variable
(c) Total Fixed Cost
(d) Total Marginal Cost
Answer:
(a) Total Cost

Question 5.
How can you calculate the average cost?
(a) TVC + TFC
(b) TC – AC
(c) TC / Q
(d) AC / Q
Answer:
(c) TC / Q

Question 6.
What is an envelope curve?
(a) Planning curve
(b) Long-run cost curve
(c) U – shape curve
(d) V – shape curve
Answer:
(a) Planning curve

Question 7.
Social cost is _______
(a) Not borne by the firm
(b) Borne by the society
(c) Air pollution by the firm
(d) All the above
Answer:
(d) All the above

Question 8.
Implicit cost is also known as ……………………….
(a) Explicit Cost
(b) Economic Cost
(c) Social Cost
(d) Imputed Cost
Answer:
(d) Imputed Cost

Question 9.
Long-run average cost curve can also be called as _______
(a) Planning curve
(b) Envelope curve
(c) Boat-shaped curve
(d) All the above
Answer:
(d) All the above

Question 10.
How will you calculate AR?
(a) AR = \(\frac{TR}{Q}\)
(b) AR = \(\frac{TVR}{Q}\)
(c) AR = \(\frac{TFR}{Q}\)
(d) AR = \(\frac{TAR}{Q}\)
Answer:
(a) AR = \(\frac{TR}{Q}\)

Part – B

Answer the following questions in one or two sentences.

Question 1.
What does money cost?
Answer:
Production cost expressed in money terms is called money cost.
(OR)
The total money expenses incurred by a firm in producing a commodity.

Question 2.
Define Floating Cost?
Answer:
Floating cost refers to all expenses that are directly associated with business activities but not with asset creation. It does not include the purchase of raw material as it is part of current assets. It includes payments like wages to workers, transportation charges, fees for power, and administration. Floating cost is necessary to run the day-to-day business of a firm.

Question 3.
What is the social cost?
Answer:
Social cost refers to the total cost borne by society due to the production of a commodity. (OR) Alfred Marshall defined the term social cost to represent the efforts and sacrifices undergone by the various members of the society in producing a commodity.

Part – C

Answer the following questions in one paragraph.

Question 1.
Bring out the distinction between short-run and long Run?
Answer:

Question 2.
How is the average variable cost be calculated?
Answer:
It refers to the total variable cost per unit of output. It is obtained by dividing the total variable cost by the quantity of output.
AVC = \(\frac { TVC }{ Q } \)
(Eg.) If TFC is 300;
Q = 2 Find AVC
= \(\frac { 300 }{ 2 } \)
AVC = 150.

Question 3.
What is meant by Social Cost for example?
Answer:

1. Social cost refers to the total cost borne by the society due to the production of a commodity.
2. Alfred Marshall defined the term social cost to represent the efforts and sacrifices undergone by the various members of the society in producing a commodity.
3. Social Cost is the cost that is not borne by the firm but incurred by others in the society.
4. For example, large business firms cause air pollution, water pollution, and other damages ‘ in a particular area that involve a cost to society.
5. These costs are treated as social costs. It is also called External Cost.

Question 4.
Write a short note on Average Revenue?
Answer:
Average revenue is the revenue per unit of the commodity sold. It is calculated by dividing the Total Revenue (TR) by the number of units sold (Q)
AR = TR /Q ; if TR = PQ, AR = PQ/Q = P
AR denotes Average Revenue, TR denotes Total Revenue and Q denotes Quantity of unit sold.
For example, if the Total Revenue from the sale of 5 units is ₹30, the Average Revenue is ₹6. (AR = 30/5 = 6) It is to be noted that AR is equal to Price.
AR = TR/Q
= PQ/Q
= P

Part – D

Answer the following question in about a page.

Question 1.
Write a short note on Total Revenue?
Answer:
Total revenue is the amount of income received by the firm from the sale of its products. It is obtained by multiplying the price of the commodity by the number of units sold.

TR = P × Q
where TR denotes Total Revenue, P denotes Price, and Q denotes Quantity sold.
For example, a cell – phone company sold 100 cell – phones at the price of ₹500 each.
TR is ₹50,000. (TR = 500 × 100 = 50,000).
When the price is constant, the behaviour of TR is shown in the above table and diagram, assuming P = 5.
When P = 5; TR = PQ
When the price is declining with an increase in quantity sold. (Eg. Imperfect Competition on the goods market) the behaviour of TR is shown in the table and diagram. TR can be obtained from the Demand function: If Q = 11 – P,

When P = 1, Q = 10

TR = PQ = 1 × 10 = 10
When P = 3, Q = 8, TR = 24 When P = 0, Q = 1, TR = 10

Question 2.
Bring out the relationship between TR, AR, MR, and Elasticity of demand?
Answer:
The relationship among TR, AR, and MR Curves:
When marginal revenue is positive, total revenue rises, when MR is zero the total revenue becomes maximum. When marginal revenue becomes negative total revenue starts falling. When AR and MR both are falling, then MR falls at a faster rate than AR.

TR, AR, MR, and Elasticity of demand:
The relationship among AR, MR, and elasticity of demand (e) is stated as follows.
MR = AR (e – 1/e)

The relationship between the AR curve and MR curve depends upon the elasticity of the AR curve [AR = DD = Price]

1. When the price elasticity of demand is greater than one, MR is positive and TR is increasing.
2. When the price elasticity of demand is less than one, MR is negative and TR is decreasing.
3. When price elasticity of demand is equal to one, MR is equal to zero and TR is maximum and constant.

It is to be noted that, the output range of 1 to 5 units, the price elasticity of demand is greater than one according to the total outlay method. Hence, TR is increasing and MR is positive.

1. At the output range of 5 to 6 units, the price elasticity of demand is equal to one. Hence, TR is maximum and MR is equaled to zero.
2. At the output range of 6 units to 10 units, the price elasticity of demand is less than unity. Hence, TR is decreasing and MR is negative.

Students can download 11th Economics Chapter 3 Production Analysis Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 3 Production Analysis

Samacheer Kalvi 11th Economics Production Analysis Text Book Back Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
The primary factors of production are ………………………..
(a) Labour and Organisation
(b) Labour and Capital
(c) Land and Capital
(d) Land and Labour
Answer:
(d) Land and Labour

Question 2.
The man-made physical goods used to produce other goods and services are referred to as.
(a) Land
(b) Labour
(c) Capital
(d) Organization.
Answer:
(c) Capital

Question 3.
The formula for calculating AP is ………………………
(a) ∆TP/N
(b) ∆TP/∆N
(c) TP/MP
(d) TP/N
Answer:
(d) TP/N

Question 4.
Which factor is called the changing agent of the Society
(a) Labourer
(b) Land
(c) Organizer
(d) Capital
Answer:
(c) Organizer

Question 5.
Who said, that one of the keys of an entrepreneur is “uncertainty – bearing”?
(a) JB Clark
(b) Schumpeter
(c) Knight
(d) Adam Smith
Answer:
(c) Knight

Question 6.
The functional relationship between “inputs” and “outputs” is called as
(a) Consumption Function
(b) Production Function
(c) Savings Function
(d) Investment Function
Answer:
(b) Production Function

Question 7.
In a firm 5 units of factors produce 24 units of the product. When the number of factor increases by one, the production increases to 30 units. Calculate the Average Product.
(a) 30
(b) 6
(c) 5
(d) 24
Answer:
(c) 5

Question 8.
The short-run production is studied through
(a) The Laws of Returns to Scale
(b) The Law of Variable Proportions
(c) Iso-quants
(d) Law of Demand
Answer:
(b) The Law of Variable Proportions

Question 9.
The long-run production function is explained by ………………………
(a) Law of Demand
(b) Law of Supply
(c) Returns to Scale
(d) Law of Variable Proportions
Answer:
(c) Returns to Scale

Question 10.
An Iso-quant curve is also known as
(a) Inelastic Supply Curve
(b) Inelastic Demand Curve
(c) Equi-marginal Utility
(d) Equal Product Curve
Answer:
(d) Equal Product Curve

Question 11.
Mention the economies reaped from inside the firm.
(a) Financial
(b) Technical
(c) Managerial
(d) All of the above
Answer:
(d) All of the above

Question 12.
Cobb-Douglas production function assumes
(a) Increasing returns to scale
(b) Diminishing returns to scale
(c) Constant returns to scale
(d) All of the above
Answer:
(c) Constant returns to scale

Question 13.
Name the returns to scale when the output increases by more than 5%, for a 5% increase in the inputs.
(a) Increasing returns to scale
(b) Decreasing returns to scale
(c) Constant returns to scale
(d) All of the above
Answer:
(a) Increasing returns to scale

Question 14.
Which of the following is not a characteristic of land?
(a) It’s a limited supply
(b) It is mobile
(c) Heterogeneous
(d) Gift of Nature
Answer:
(b) It is mobile

Question 15.
The product obtained from additional factors of production is termed as ……………………….
(a) Marginal product
(b) Total product
(c) Average product
(d) Annual product
Answer:
(a) Marginal product

Question 16.
Modern economists have propounded the law of
(a) Increasing returns
(b) Decreasing returns
(c) Constant returns
(d) Variable proportions.
Answer:
(a) Increasing returns

Question 17.
Producer’s equilibrium is achieved at the point where ……………………….
(a) Marginal rate of technical substitution (MRTS) is greater the price ratio
(b) MRTS is lesser than the price ratio
(c) MRTS and price ratio are equal to each other
(d) The slopes of isoquant and isocost lines are different.
Answer:
(c) MRTS and price ratio are equal to each other

Question 18.
The relationship between the price of a commodity and the supply of a commodity is
(a) Negative
(b) Positive
(c) Zero
(d) Increase
Answer:
(b) Positive

Question 19.
If the average product is decreasing, then marginal product ……………………….
(a) Must be greater the average product
(b) Must be less than the average product
(c) Must be increasing
(d) Both a and c
Answer:
(b) Must be less than average product

Question 20.
A production function measures the relation between
(a) Input prices and output prices
(b) Input prices and the quantity of output
(c) The number of inputs and the quantity of output.
(d) The number of inputs and input prices.
Answer:
(c) The number of inputs and the quantity of output.

Part – B

Answer the following questions in one or two sentences.

Question 21.
Classify the factors of production?
Answer:
Factors of production are classified as land, labor, capital, and organization.

1. Land and Labour – Primary factors
2. Capital and organization – Secondary factors.

Question 22.
Define Labour.
Answer:
According to Marshall, labour represents services provided by the factor labour, which helps in yielding an income to the owner of the labor-power.

Question 23.
State the production function?
Answer:
The production function is the relationship between inputs of productive services and outputs of product per unit of time.

Question 24.
Define the Marginal Product of a factor.
Answer:
Marginal product is the addition made to the total product when one more unit of the variable input is employed.
MP = TP (n)-TP (n- 1)
(OR)
Marginal product is the ratio of the change in the total product to the change in the units of input.
MP = ∆TP / ∆N

Question 25.
What is the Iso – cost line?
Answer:
An Iso-cost line represents different combinations of inputs which show the same amount of cost.

Question 26.
What are the conditions for the producer’s equilibrium?
Answer:
The Conditions For Producer’S Equilibrium:

1. The Iso-cost line must be tangent to the Iso-quant curve.
2. At the point of tangency, the Iso-quant curve must be convex to the origin or MRTSLK must be declining.

Question 27.
What are the reasons for the upward-sloping supply curve?
Answer:
As the price of the commodity increases the quantum supplied also increases. So the supply curve has a positive slope.
The quantum supplied of commodity x is represented on X-axis. And the price of the commodity is represented on the Y-axis. The points such as a, b, c, d, and e on the supply curve SS’, represent various quantities at different prices.

PART – C

Answer the following questions in one paragraph.

Question 28.
What are the characteristics of land?
Answer:
The Characteristics of Land:

1. Land is a primary factor of production.
2. Land is a passive factor of production.
3. Land is the free gift of nature.
4. Land has no cost of production.
5. Land is inelastic in supply.
6. Land is permanent and immovable.
7. Land is heterogeneous and has alternative uses.
8. Land is subject to law of diminishing returns.

Question 29.
What are the factors governing the elasticity of supply?
Answer:
1. Nature of the commodity: The elasticity of supply of durable goods is high but perishables have a low elasticity of supply.

2. Cost of production: Under constant or increasing returns the elasticity of supply is greater, under diminishing returns elasticity is less.

3. Technical condition: In large-scale production, supply cannot be adjusted easily. So elasticity of supply is lesser and vice versa.

4. Time factor: During a very short period, supply cannot be adjusted. In a short period, variable factors can be changed so elasticity is more and in a long period, supply is highly elastic.

Question 30.
What are the functions of entrepreneurs?
Answer:

1. An organizer is the initiator of the business.
2. A successful entrepreneur is always an innovator.
3. An organizer co-ordinates the factors of production to start and run the business or production.
4. An organizer controls and directs the factors to get better results and he supervises for the efficient functioning of all.
5. There are risk-taking and uncertainty bearing obstacles.

Question 31.
State and explain the elasticity of supply?
Answer:
The elasticity of supply may be defined as the degree of responsiveness of change in supply to change in price on the part of sellers.
It is Mathematically expressed as,
Elasticity of supply = Proportionate change in supply / Proportionate change in price
e_s = \(\frac { \Delta Q_{ S } }{ Q_{ S } } \) / \(\frac { \Delta P }{ P } \)
e_s = \(\frac { \Delta Q_{ S } }{ \Delta P } \) × \(\frac{P}{Qs}\)
Where Q_s represents the supply, P represents price, ∆denotes a change.

Question 32.
Bring out the Relationship among Total, Average and Marginal Products?
Answer:

Question 33.
Illustrate the concept of producer’s Equilibrium?
Answer:
Producer equilibrium implies the situation where the producer maximizes his output. It is also known as the optimum combination of the factors of production. In short, the producer manufactures a given amount of output with the ‘least-cost combination of factors’, with his given budget.

Optimum Combination of Factors implies either there is output maximization for given inputs or there is cost minimization for the given output.

Conditions for Producer Equilibrium
The two conditions that are to be fulfilled for the attainment of producer equilibrium are:

1. The isocost line must be tangent to the iso-quant curve.
2. At the point of tangency, the iso-quant curve must be convex to the origin or MRTSLk must be declining.

Question 34.
State the Cobb-Douglas Production Function.
Answer:
The Cobb-Douglas production function was developed by Charles W.Cobb and Paul H. Douglas.
Cobb-Douglas production function describes how much output can be made with capital and labour inputs.
Q = AL^α K^βα
Q – output, A – positive constant, K – capital, L – Labour
α and β – Elasticity coefficients of outputs for the inputs,
α + β = 1 denotes constant returns to scale.

PART – D

Answer the following questions in about a page.

Question 35.
Examine the Law of Variable Proportions with the help of a diagram?
Answer:
The law states that if all other factors are fixed and one input is varied in the short run, the total output will increase at an increasing rate at first instance, be constant at a point and then eventually decrease. The marginal product will become negative at last.

According to G.Stigler, “As equal increments of one input are added, the inputs of other productive services being held constant, beyond a certain point, the resulting increments of the product will decrease, i.e., the marginal product will diminish”.

Assumptions:
The Law of Variable Proportions is based on the following assumptions.

1. Only one factor is variable while others are held constant.
2. All units of the variable factor are homogeneous.
3. The product is measured in physical units.
4. There is no change in the state of technology.
5. There is no change in the price of the product.

Total Product (TP):
Total product refers to the total amount of commodity produced by the combination of all inputs in a given period of time. Summation of marginal products, i.e. TP = LMP where, TP = Total Product, MP = Marginal Product

Average Product (TP):
Average Product is the result of the total product divided by the total units of the input employed. In other words, it refers to the output per unit of the input. Mathematically, AP = TP/N Where, AP = Average Product TP = Total Product N = Total units of inputs employed Marginal Product (MP)

Marginal Product is the addition or the increment made to the total product when one more unit of the variable input is employed. In other words, it is the ratio of the change in the total product to the change in the units of the input. It is expressed as MP = ∆TP/∆N

where MP = Marginal Product
TP(n) = Change in total product
∆N = Change in units of input

It is also expressed as
MP = TP (n) – TP (n – 1)
Where MP = Marginal Product
TP(n – 1) = Total product of employing nA unit of a factor
TP(n – 1) = Total product of employing the previous unit of a factor, that is, (n – 1)^th unit of a factor.
The Law of Variable Proportions is explained with the help of the following schedule and diagram:

In the above table, units of variable factor (labour) are employed along with other fixed factors of production. The table illustrates that there are three stages of production. Though total product increases steadily at the first instant, constant at the maximum point, and then diminishes, it is always positive forever.

While total product increases, the marginal product increases up to a point and then decreases. The total product increases up to the point where the marginal product is zero. When total product tends to diminish marginal product becomes negative.

In the diagram, the number of workers is measured on X-axis while TP_L, AP_L, and MP_L are denoted on Y-axis. The diagram explains the three stages of production as given in the above table.

Stage – I
In the first stage, MP_L increases up to the third labourer and it is higher than the average product so the total product is increasing at an increasing rate. The tendency of total production to increase at an increasing rate stops at point A and it begins to increase at a decreasing rate. This point is known as ‘Point of Inflexion’.

Stage – II
In the second stage, MP_L decreases up to the sixth unit of labor where the MP_L curve intersects the X-axis. At the fourth unit of labor MP_L = AP_L. After this, the MP_L curve is lower than the AP_L. TP_L increases at a decreasing rate.

Stage – III
The third stage of production shows that the sixth unit of labour is marked by negative MP_L, the AP_L continues to fall but remains positive. After the sixth unit, TP_L declines with the employment of more units of the variable factor, labour.

Question 36.
List out the properties of isoquants with the help of diagrams?
Answer:
Properties of Iso – quant Curve:

1. The isoquant curve has negative slope:
It slopes downwards from left to right indicating that the factors are substitutable. If more of one factor is used, less of the other factor is needed for producing the same level of output.

In the diagram combination, A refers to more capital K₅ and less labour L₂ As the producer moves to B, C, and D, more labour and less capital are used.

2. Convex to the origin.
This explains the concept of Diminishing Marginal Rate of Technical Substitution (MRTS_LK). For example, the capital substituted by 1 unit of labour goes on decreasing when moved from top to bottom. If so, it is called diminishing MRTS. Constant MRTS (straight line) and increasing MRTS (concave) are also possible. It depends on the nature of the isoquant curve.

This means that factors of production are substitutable to each other. The capital substituted per unit of labour goes on decreasing when the isoquant is convex to the origin.

3. Nonintersection of Iso – quant curves:
For instance, point A lies on the isoquants IQ₁ and IQ₂. But the point C shows a higher output and the point B shows a lower level of output IQ₁
If C = A, B = A, then C = B. But C > B which is illogical.

4. An upper isoquant curve represents a higher level of output:
Higher IQ_S show higher outputs and lower IQ_S show lower outputs, for the upper isoquant curve implies the use of more factors than the lower isoquant curve.
The arrow in the figure shows an increase in the output with a right and upward shift of an isoquant curve.

5. Isoquant curve does not touch either X-axis or Y-axis:
No isoquant curve touches the X-axis or Y-axis because in IQ₁ only capital is used, and in IQ₂ only labour is used.

Question 37.
Elucidate the Laws of Returns to scale. Illustrate?
Answer:

In the long-run all factors are variable. The laws of returns to scale explain the relationship between output and the scale of inputs in the long-run when all the inputs are increased in the same proportion.
Assumptions :

1. All the factors are variable except the organization.
2. There is no change in technology.
3. There is perfect competition in the market.
4. Outputs or returns are increased in physical quantities.

Three phases of returns to scale:
1. Increasing returns to scale:
If all inputs are increased by one percent, output increase by more than one percent.

2. Constant returns to scale:
In this case, if all inputs are increased by one percent, output increases by one percent.
Diagrammatic Illustration:

The three laws of returns to scale can be explained with the help of the diagram below.

In the figure, the movement from point a to point b represents increasing returns to scale. Because, between these two points output has doubled, but output has tripled. The law of constant returns to scale is implied by the movement from point b to point c.

Because between these two points inputs have doubled and output also has doubled. Decreasing returns to scale are denoted by the movement from the point c to point d since doubling the factors from 4 units to 8 units product less than the increase in inputs, that is by 33.33%.

Question 38.
Explain the internal and external economies of scale?
Answer:
Internal Economies of Scale:

1. Internal Economies of scale refer to the advantages enjoyed by the production unit which causes a reduction in the cost of production of the commodity.
2. For example, a firm enjoying the advantage of an application of most modem machinery, generation of internal capital, and improvement in managerial skill, etc. are sure to reduce the cost of production. They are of various types:

1. Technical Economies:

• When the size of the firm is large, a large amount of capital can be used.
• There is a possibility to introduce up-to-date technologies; this improves the productivity of the firm.
• Research and development strategies can be applied easily.

2. Financial Economies:

• Big firms can float shares in the market for capital expansion, while small firms cannot easily float shares in the market.

3. Managerial Economies:

• Large scale production facilitates specialization and delegation.

4. Labour Economies:

• Large scale production implies greater and minute division of labour.
• This leads to specialization which enhances the quality.
• This increases the productivity of the firm.

5. Marketing Economies:

• In the context of large-scale production, the producers can both buy raw-materials in bulk at a cheaper cost and can take the products to distant markets.
• They enjoy a huge bargaining power.

6. Economies of survival:

• Product diversification is possible when there is large scale production.
• This reduces the risk in production.
• Even if the market for one product collapses, the market for other commodities offsets it.

External Economies of Scale:

1. External Economies of Scale refer to changes in any factor outside the firm causing an improvement in the production process.
2. This can take place in the case of the industry also.
3. These are the advantages enjoyed by all the firms in the industry due to the structural growth.
4. Important external economies of scale are listed below:
   • Increased transport facilities
   • Banking facilities
   • Development of townships
   • Development of information and communication.

Samacheer Kalvi 11th Economics Production Analysis Additional Important Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
The labour exercised without expecting income is _______
(a) Service
(b) Physical labour
(c) Mental labour
(d) None of the above
Answer:
(a) Service

Question 2.
Land and Labour are called ……………………. factors.
(a) Primary
(b) Secondary
(c) Territory
(d) Service
Answer:
(a) Primary

Question 3.
Investment in an advertisement, expenses on capital. training programme are examples of _______ capital
(a) Tangible
(b) Intangible
(c) Visible
(d) Financial
Answer:
(c) Visible

Question 4.
Reward Paid to capital is ……………………….
(a) Interest
(b) Profit
(c) Wages
(d) Rent
Answer:
(a) Interest

Question 5.
Marginal product is
(a) MP = ∆TP / ∆N
(b) MP = ∆AP / ∆N
(c) MP = TP / N
(d) MP = ∆P / N
Answer:
(a) MP = ∆TP / ∆N

Question 6.
What does a successful entrepreneur will always be made?
(a) Organization
(b) Investment
(c) Capital
(d) Innovation
Answer:
(d) Innovation

Question 7.
_______ is the exertion of body or mind in the production process.
(a) Labour
(b) Capital
(c) Land
(d) Financial capital
Answer:
(a) Labour

Question 8.
Gifts of Nature is called ………………………
(a) Land
(b) Labour
(c) Capital
(d) Production
Answer:
(a) Land

Question 9.
_______ is the gift of nature.
(a) Labour
(b) Capital
(c) Land
(d) Organization
Answer:
(c) Land

Question 10.
Labour cannot be separated from ……………………….
(a) Capital
(b) Labourer
(c) Profit
(d) Organisation
Answer:
(b) Labourer

Part – B

Answer the following questions in one or two sentences.

Question 1.
What is production?
Answer:
Production is the process of using various factors of production (inputs)to make output for consumption.

Question 2.
Classify the factors determining supply?
Answer:

1. Price of the commodity
2. Price of other commodities
3. Price of factors
4. Price expectations
5. Technology
6. Natural factors
7. Discovery of new raw materials
8. Taxes and subsidies
9. The objective of the firm

Question 3.
What is capital?
Answer:
Capital is a produced means of production. – Bohm – Bawerk

Part – C

Answer the following questions in one paragraph.

Question 1.
Explain the difference between internal and external economies?
Answer:

Question 2.
What is financial capital?
Answer:
Financial capital means the assets needed by a firm to provide goods and services measured in terms of monetary value. It is normally raised through debt and equity issues. The prime aim of it is to mass wealth in terms of profit.

Question 3.
What are the Supply Function and its assumptions?
Answer:
The supply of a commodity depends on factors such as the price of the commodity, price of labour, price of capital, the state of technology, number of firms, prices of related goods, and future price expectations, and so on. Mathematically the supply function is Q_S = f(P_x, P_r, P_f, T, O, E)

Where Q_S = Quantity supplied of x commodity
P_x = Price of x Commodity
P_r = Price of related goods
P_f = Price of factors of production
T = Technology
O = Objective of the producer
E = Expected Price of the commodity.

Assumptions:
Law of Supply is based on the following assumptions.

1. There is no change in the prices of factors of production
2. There is no change in the price of capital goods
3. Natural resources and their availability remain the same
4. Prices of substitutes are constant
5. There is no change in technology
6. Climate remains unchanged
7. Political situations remain unchanged
8. There is no change in tax policy

Part – D

Answer the following questions in about a page?

Question 1.
What are the diseconomies of scale? Mention its types.
Answer:
The diseconomies of the scale are a disadvantage to a firm or an industry or an organization. It increases the cost of production. These diseconomies are of two types.

1. Internal diseconomies:
When the scale of production increases beyond the optimum limit, its efficiency may come down.

2. External diseconomies:
It refers to the threat or disturbance to a firm or an industry from factor lying outside it.
For example, a bus strike prevents the easy and correct entry of the workers into the firm. Similarly, the rent of a firm increases very much if new economic units are established in the locality.

Question 2.
What are the types of elasticity of supply?
Answer:
There are five types of elasticity of supply

1. Relatively Elastic Supply:
The coefficient of elastic supply is greater than 1 [E_S >1]. One percent change in the price of a commodity causes more than one percent change in the quantity supplied of the commodity.

2. Unitary Elastic Supply.
The coefficient of elastic supply is equal to 1 [E_S = 1]. One percent change in the price of a commodity causes an equal [one percent ] change in the quantity supplied of the commodity.

3. Relatively Inelastic Supply:
The coefficient of elasticity is less than one [E_S < 1], One percent change in the price of a commodity causes a less than one percent change in the quantity supplied of the commodity.

4. Perfectly Inelastic Supply:
The coefficient of elasticity is equal to zero [E_S = 0], One percent change in the price of a commodity causes no change in the quantity supplied of the commodity.

5. Perfectly Elastic Supply:
The coefficient of elasticity of supply is infinity [E_S – α]. One percent change in the price of a commodity causes an infinite change in the quantity supplied of the commodity.

ACTIVITY

Question 1.
Visit a market and write a report on the factors that influence the quantity of supply of a commodity of your locality?
Answer:
Things that cause changes in supply are also called influences of supply.
The influences on supply are:

1. Inputs
2. Productivity
3. Technology
4. Taxes
5. Subsidises
6. Government regulation
7. Number of sellers
8. Political conflict

Supply and Demand Balance:

1. It supply is more price goes down. Demand is more price goes up.
2. Commodity movement get these number [PIS]

P = Production
I = Import
S = Stock

These three represent supply of any commodity = [E × C]
E = Export;
C = Consumption

1. These two represent demand.
2. PIS is more than E × C., then that commodity price goes down.
3. E × C is more than PIS that commodity price goes up.
4. Prediction of any commodity price, you will predict it before that supply-demand imbalance.
5. That means today’s wheat or rice prices are reflections of what will happen to its supply-demand in the next few months rather than its current balance.
6. India’s largest commodity exchange currently working as a trader in Agricultural commodities.
7. The supply is interfered with by legal or illegal cartels.
8. The price is also inflated by opportunistic government charges.
9. A price ceiling prevents a price from rising above the ceiling.
10. Wheat has a price ceiling of 2400 per metric tonne, $400 is the highest amount supplier can charge.

Question 2.
Visit a factory and show how the four factors of production are effectively employed to produce the product in your locality?
Answer:

1. A Factory is considered capital in the factor of production.
2. Capital is any good that was used to create other goods.
3. A natural resource can’t be land, since it’s not the actual workers within the factory it can’t labor, so it has to be capital.

Factors affecting the location of Industries are as follows:

1. Raw Materials
2. Capital
3. Transport
4. Market
5. Water
6. Power
7. Land
8. Labour
9. Communication

The main factors affecting the location of Industries are as follows:

1. Land
2. Labour
3. Capital
4. Entrepreneurship
   • Factors of production refer to the inputs of the production process.
   • Factors of production are resources that produce goods and services.

These are four categories of factors of production:

Land:
Natural resources that we use to produce goods and services.

Example:
Oil, gas and goal, water, etc.

Labour:
The work time and work effort that people devote to producing goods and services. This includes human capital which is the quality of the labour forming from knowledge and skills of the person obtained from education, on-the-job training, and work experience.

Capital:

1. The tools, instruments, machine, buildings, and other items that are used to produce goods and services.
2. This includes machinery, hammers, etc.

Entrepreneurship:
The human resource that organizes labour, land, and capital. This includes the idea, plan, etc. about how and what to produce.

Students can download 11th Economics Chapter 2 Consumption Analysis Questions and Answers, Notes, Samcheer Kalvi 11th Economics Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 2 Consumption Analysis

Samacheer Kalvi 11th Economics Consumption Analysis Text Book Back Questions and Answers

Part – A

Multiple Choice Questions:

Question 1.
Pick the odd one out …………………….
(a) Luxuries
(b) Comforts
(c) Necessaries
(d) Agricultural goods
Answer:
(d) Agricultural goods

Question 2.
The choice is always constrained or limited by the ________ of our resources.
(a) Scarcity
(b) Supply
(c) Demand
(d) Abundance
Answer:
(a) Scarcity

Question 3.
The chief exponent of the Cardinal utility approach was ……………………..
(a) JR Hicks
(b) R G D Allen
(c) Marshall
(d) Stigler
Answer:
(c) Marshall

Question 4.
Marginal Utility is measured by using the formula of
(a) TU_n -TU_n-1
(b) TU_n-TU_n+1
(c) TU_n+TU_n+1
(d) TU_n-TU_n+1
Answer:
(a) TU_n -TU_n-1

Question 5.
When marginal utility reaches zero, the total utility will be …………………..
(a) Minimum
(b) Maximum
(c) Zero
(d) Negative
Answer:
(b) Maximum

Question 6.
Gossen’s first law is known as.
(a) Law of Equi-marginal utility.
(b) Law of diminishing marginal utility
(c) Law of demand.
(d) Law of Diminishing returns.
Answer:
(b) Law of diminishing marginal utility

Question 7.
The basis for the law of demand is related to ……………………..
(a) Law of diminishing marginal utility
(b) Law of supply
(c) Law of equi-marginal utility
(d) Gossen’s Law
Answer:
(a) Law of diminishing marginal utility

Question 8.
The concept of consumer’s surplus is associated with
(a) Adam Smith
(b) Marshall
(c) Robbins
(d) Ricardo
Answer:
(b) Marshall

Question 9.
Given potential price is Rs.250 and the actual price is Rs.200. Find the consumer surplus ……………………….
(a) 375
(b) 175
(c) 200
(d) 50
Answer:
(d) 50

Question 10.
Indifference curve approach is based on
(a) Ordinal approach
(b) Cardinal approach
(c) Subjective approach
(d) Psychological approach
Answer:
(a) Ordinal approach

Question 11.
The concept of elasticity of demand was introduced by …………………….
(a) Ferguson
(b) Keynes
(c) Adam Smith
(d) Marshall
Answer:
(d) Marshall

Question 12.
Increase in demand is caused by
(a) Increase in tax
(b) Higher subsidy
(c) Increase in interest rate
(d) decline in population
Answer:
(b) Higher subsidy

Question 13.
The movement on or along the given demand curve is known as ………………………..
(a) Extension and contraction of demand
(b) Shifts in the demand
(c) Increase and decrease in demand
(d) All the above
Answer:
(a) Extension and contraction of demand

Question 14.
In case of relatively more elastic demand, the shape of the curve is
(a) Horizontal
(b) Vertical
(c) Steeper
(d) Flatter
Answer:
(d) Flatter

Question 15.
A consumer is in equilibrium when marginal utilities from two goods are …………………….
(a) Minimum
(b) Inverse
(c) Equal
(d) Increasing
Answer:
(c) Equal

Question 16.
Indifference curve was first introduced by
(a) Hicks
(b) Allen
(c) Keynes
(d) Edgeworth
Answer:
(d) Edgeworth

Question 17.
Elasticity of demand is equal to one indicates ………………………
(a) Unitary Elastic Demand
(b) Perfectly Elastic Demand
(c) Perfectly Inelastic Demand
(d) Relatively Elastic Demand
Answer:
(a) Unitary Elastic Demand

Question 18.
The locus of the points which gives the same level of satisfaction is associated with
(a) Indifference Curves
(b) Cardinal Analysis
(c) Law of Demand
(d) Law of Supply
Answer:
(a) Indifference Curves

Question 19.
Ordinal utility can be measured by …………………………
(a) Ranking
(b) Numbering
(c) Wording
(d) None of these
Answer:
(a) Ranking

Question 20.
The indifference curve is
(a) Vertical
(b) Horizontal
(c) Positive sloped
(d) Negatively sloped
Answer:
(d) Negatively sloped

PART – B

Answer the following in one or two sentences.

Question 21.
Define Utility?
Answer:
The utility is the capacity of a commodity to satisfy human wants.

Question 22.
Mention the classification of wants?
Answer:
Wants are broadly classified into three categories

1. Necessaries: Goods which are indispensable for human beings to exist in the world are called “Necessaries”. For example, food, clothing, and shelter.
2. Comforts: Goods which are not indispensable for life but to make our life easy, convenient and comfortable are called “Comforts”. Ex: TV, Fan, Refrigerator and Air conditioner.
3. Luxuries: Goods which are not very essential but are very costly are known as “Luxuries”. Ex: Jewellery, Diamonds, and ars. However, for people with higher income, they may look necessaries or comforts.

Question 23.
Name the basic approaches to consumer behavior.
Answer:
There are two basic approaches, namely:
1. Utility approach

• The utility approach involves the use of measurable (cardinal) utility to study consumer behaviour.
• Marshall is the chief exponent of the utility approach to the theory of demand. It is known as cardinal utility analysis or Marginal utility analysis or Marshallian utility analysis.

2. Indifference curve approach

• The indifference curve approach was the idea of comparable utility [ordinal utility] J.R. Hicks and R.G.D. Allen introduced the indifference curve approach.

Question 24.
What are the degrees of price elasticity of demand?
Answer:
1. The price elasticity of demand, commonly known as the elasticity of demand refers to the responsiveness and sensitiveness of demand for a product to the changes in its price. In other words, the price elasticity of demand is equal to
E_P =
Numerically, E_P = \(\frac { \Delta Q }{ \Delta P } \) × \(\frac{P}{Q}\)
where, ∆Q = Q₁ – Q₀, ∆P = P₁ – P₀
Q₁ = New quantity, P₁ = New price
Q₀ = Original quantity, P₀ = Original price

Question 25.
State the meaning of indifference curves.
Answer:

1. The Consumer is rational and his aim is to derive maximum satisfaction.
2. The utility cannot be cardinally measured but can be ranked or compared or ordered by an ordinal number such as I, II, III, and so on.
3. The indifference curve approach is based on the concept “Diminishing Marginal Rate of Substitution”.
4. The consumer is consistent. This assumption is called the assumption of transitivity.

Question 26.
Write the formula of consumer surplus?
Answer:
Consumer’s Surplus = Total utility
[Actual price × Units of commodity]
– TU – [P × Q]
= 20 – [2 × 5] = 20 – 10 = 10
Total utility = 20
Actual price = 2
Quantity = 5

Question 27.
What are Giffen goods? Why it is called that?
Answer:
Giffen Paradox: The Giffen good or inferior good is an exception to the law of demand. When the price of inferior goods, falls, the poor will buy less and vice versa.

Part – C

Answer the following questions in one paragraph.

Question 28.
Describe the feature of human wants?
Answer:
In ordinary language desire and want mean the same thing. But in economics, they have different meanings. Wants are the basis for human behaviour to buy and consume goods.

Characteristics of Human Wants:

• Wants are unlimited: Human wants are countless in number and various in kinds. When one wants is satisfied another wants to crop up. Human wants to multiply with the growth of civilization and development.
• Wants become habits: Wants become habits; for example, when a man starts reading the newspaper in the morning, it becomes a habit. The same is the case with drinking tea or chewing pans.
• Wants are Satiable: Though we cannot satisfy all our wants, at the same time we can satisfy particular wants at a given time. When one feels hungry, he takes food and that want is satisfied.
• Wants are Alternative: There are alternative ways to satisfy a particular want eg. Idly, dosa or chappati.
• Wants are Competitive: All our wants are not equally important. So, there is competition among wants. Hence, we have to choose more urgent wants than less urgent wants.
• Wants are Complementary: Sometimes, the satisfaction of a particular want requires the use of more than one commodity. Example: Car and Petrol, Ink and Pen.
• Wants are Recurring: Some wants occur again and again. For example, if we feel hungry, we take food and satisfy our wants. But after some time, we again feel hungry and want food.

Question 29.
Mention the relationship between marginal utility and total utility?
Answer:

Question 30.
Explain the concept of consumer’s equilibrium with a diagram?
Answer:
Consumer Equilibrium: The consumer reaches equilibrium at the point where the budget line is tangent on the indifference curve.

‘T’ is the point of equilibrium as budget line AB is tangent on indifference curve IC₃ the uppermost IC which implies the maximum possible level of satisfaction.
At equilibrium point, the slope of IC refers to MRS_xy and the slope of BL (Budget Line) refers to the ratio of the price of x to the price of y.
i.e., \(\frac { P_{ x } }{ P_{ y } } \), Therefore MRS_xy = \(\frac { P_{ x } }{ P_{ y } } \)

Question 31.
Explain the theory of “consumer’s surplus”
Answer:
Alfred Marshall defines consumer’s surplus as “the excess of price which a person would be willing to pay a thing rather than go without the thing, over that which he actually does pay is the economic measure of this surplus satisfaction. This may be called consumer’s surplus”.

Question 32.
Distinguish between extension and contraction of demand?
Answer:

1. The changes in the quantity demanded a commodity due to the change in its price alone are called “ Extension and Contraction of demand”.
2. Buying more at a lower price and less at a higher price is known as “ Extension and Contraction of Demand”.

Question 33.
What are the properties of indifference curves?
Answer:
Indifference curves are subjective and unique to each person. Nevertheless, they have in common the following properties:

1. Indifference curve must have negative slope:
An indifference curve has a negative slope, which denotes that if the quantity of a commodity (y) decreases, the quantity of the other (x) must increase if the consumer is to stay on the same level of satisfaction.

2. Indifference curves are convex to the origin:
Indifference curves are not only negatively sloped but are also convex to the origin. The convexity of the indifference curves implies that not only two commodities are substitutes for each other but also the fact that the marginal rate of substitution (MRS) between the goods decreases as a consumer moves along an indifference curve.

3. Indifference curve cannot intersect:
IC₁ is a lower indifference curve denoting lesser satisfaction. Combination C and B Fallon IC₁.
IC₂ is the upper indifference curve denoting higher satisfaction. C and A combinations are on IC₂

At the point of intersection, C = B on IC₁ and C = A on IC₂. So A = B whereas, A is in upper IC and B is on lower IC.
This is not possible.

4. Indifference curves do not touch the horizontal or vertical axis.
If they touch the axis, it violates the basic assumption that the consumer purchases two commodities in a combination.

Question 34.
Briefly explain the concept of consumer’s equilibrium?
Answer:
Consumer’s equilibrium refers to a situation under which a consumer spends his entire income on the purchase of goods, in such a manner that it gives him maximum satisfaction.
The consumer reaches equilibrium at the point where the budget line is tangent on the indifference curve.
T is the point of Equilibrium as budget line AB is tangent on indifference curve IC₃, the upper IC implies a maximum level of satisfaction.

Part – D

Answer the following questions in about a page.

Question 35.
Explain the law of demand and its exceptions?
Answer:
Definitions:
The Law of Demand says as “the quantity demanded increases with a fall in price and diminishes with a rise in price”. – Marshall
“The Law of Demand states that people will buy more at lower price and buy less at higher prices, other things remaining the same”. – Samuelson Assumptions of Law of Demand:

1. The income of the consumer remains constant.
2. The taste, habit and preference of the consumer remain the same.
3. The prices of other related goods should not change.
4. There should be no substitutes for the commodity in the study.
5. The demand for the commodity must be continuous.
6. There should not be any change in the quality of the commodity’.

Given these assumptions, the law of demand operates. If there is change even in one of these assumptions, the law will not operate.

Explanation:
The law of demand explains the relationship between the price of a commodity and the quantity demanded of it. This law states that the quantity demanded of a commodity expands with a fall in price and contracts with a rise in price. In other words, a rise in the price of a commodity is followed by a contraction demand, and a fall in price is followed by an extension in demand. Therefore, the law of demand states that there is an inverse relationship between the price and the quantity demanded of a commodity.

Exceptions to the law of demand:
Normally, the demand curve slopes downwards from left to right. But there are some unusual demand curves which do not obey the law and the reverse occurs. A fall in price brings about a contraction of demand and a rise in price results in an extension of demand. Therefore the demand curve slopes upwards from left to right. It is known as the exceptional demand curve.

In the above diagram, DD is the demand curve which slopes upwards from left to right. It shows that when the price is OP₁ OQ₁, is the demand and when the price rises to OP₂, demand also extends to OQ₂.

Question 36.
Elucidate the law of diminishing marginal utility with a diagram?
Answer:
Introduction:
H.H.Gossen, an Austrian Economist was the first to formulate this law in Economics in 1854. Therefore Jevons called this law “ Gossen’s First Law of Consumption”. But credit goes to
Marshall, because he perfected this law on the basis of Cardinal Analysis. This law is based on the characteristics of human wants, i.e. wants are satiable.

Definition:
Marshall states the law as “ the additional benefit which a person derives from a given increase of his stock of a thing, diminishes with every increase in the stock that he already has”.

Assumptions:

1. The utility can be measured by cardinal numbers such as 1, 2, 3, and so on.
2. The marginal utility of money of the consumer remains constant.
3. The consumer should be a rational consumer and his aim is to attain maximum satisfaction .with minimum expenditure.
4. The units of the commodity consumed must be reasonable in size.
5. The commodity consumed should be homogeneous or uniform in character like weight, quality, taste, colour etc.
6. The consumption of goods must take place continuously at a given period of time.
7. There should be no change in the taste, habits preferences, fashions, income, and character of the consumer during the process of consumption.

Explanation:
The Law of Diminishing Marginal utility states that if a consumer continues to consume more and more units of the same commodity, its marginal utility diminishes. This means that the more we have of a thing, the less is the satisfaction or utility that we derive from the additional unit of it.

The Law of Diminishing Marginal utility:

1. In this table, we find that the total utility goes on increasing but at a diminishing rate.
2. The law can be explained with a simple illustration.
3. The consumer wants to consume 7 apples one after another.
4. The utility from the first apple is 20.
5. But the utility from the second apple will be less than that of the first [say 15].
6. The third less than that of the second [say 10] and so on.
7. Finally, the utility from the fifth apple becomes zero, and the utilities from the sixth and seventh apples are negative for disutility or disliking.
8. This tendency is called the “ The Law of Diminishing Marginal Utility”.
9. In this table we find on the other hand, marginal utility goes on diminishing.
10. When marginal utility becomes zero, the total utility is maximum and when marginal utility becomes negative, the total utility diminishes.

The X-axis represents the number of apples consumed
Y-axis represents total utility and marginal utility
TU – represents total utility
MU – represents marginal utility

Criticisms:

1. The utility cannot be measured numerically, because the utility is subjective.
2. This law is based on unrealistic assumptions.
3. This law is not applicable to indivisible commodities.

Question 37.
Explain the law of Equi – marginal utility?
Answer:
The law of the Equi-marginal utility:

1. The law of diminishing marginal utility is applicable only to the want of a single commodity.
2. The law of equity – marginal utility explains the behavior of a consumer when he consumes more than one commodity.
3. Wants are unlimited but the income which is available is limited.
4. This law explains how the consumer spends his limited income on various commodities to get maximum satisfaction.
5. Law of Equi-Marginal Utility is also known as “The Law of Substitution” (or) “The Law of Consumer’s Equilibrium ” (or) “Gossen’s Second Law” and “ The Law of Maximum Satisfaction”.

Definition:
Marshall states the law as,“ If a person has a thing which he can put to several uses, he will distribute it among these uses in such a way that it has the same marginal utility in all. For, if it had a greater marginal utility in one use than another he would gain by taking away some of it from the second use and applying it to first”.

Assumptions:

1. The consumer is rational in the sense that he wants to get maximum satisfaction.
2. The utility of each commodity is measurable in cardinal numbers.
3. The marginal utility of money remains constant.
4. The income of the consumer is given.
5. There is perfect competition in the market.
6. The prices of the commodities are given.
7. The law of diminishing marginal utility operates.

Illustration:
This Law can be illustrated with the help of a table. Let us assume that the consumer has a given income of ₹11. He wants to spend this entire income [i.e. ₹11 ] on Apple and Orange. The price of an Apple and the price of an Orange is each.

The law of the Equi – Marginal Utility

If the consumer wants to attain maximum utility, he should buy 6 units of apples and 5 units of oranges, so that she can get [92 + 58] = 150 units. No other combination of Apple and Orange can give higher than 150 utilities. \(\frac{MUA}{PA}\) = \(\frac{MUD}{PO}\) i.e; \(\frac{4}{1}\) = \(\frac{4}{1}\)

Here,

Diagrammatic Illustration:

1. In the diagram, X-axis represents the amount of money spent and Y-axis represents the marginal utilities of Apple and Orange respectively.
2. If the consumer spends ₹6 on Apple and ₹5 on Orange, the marginal utilities of both are equal, i.e. AA₁ = BB₁ [4 = 4], Hence, he gets maximum utility.

Criticisms:

1.  In practice, the utility cannot be measured, only be felt.
2. This law cannot be applied to durable goods.

Question 38.
What are the methods of measuring the Elasticity of demand?
Answer:
There are three methods of measuring the price elasticity of demand.

1. The Percentage method: e_p = \(\frac{∆Q}{∆P}\) × \(\frac{P}{Q}\)
It is also known as ratio method, when we measure the ratio as:
e_p = \(\frac { %\Delta Q }{ %\Delta P } \) where,
% ∆Q = Percentage change in demand
% ∆P = Percentage change in price

2. Total Outlay Method:
Marshall suggested that the simplest way to decide whether demand is elastic or inelastic is to examine the change in total outlay of the consumer or total revenue of the firm. Total Revenue = (Price × Quantity Sold)
TR = ( P × Q)

Where there is an inverse relation between Price and Total Outlay, demand is elastic. Direct relation means inelastic. Elasticity is unity when Total Outlay is constant.

3. Point or Geometrical Elasticity:
When the demand curve is a straight line, it is said to be linear. Graphically, the point elasticity of a linear demand curve is shown by the ratio of the segments of the line to the right and to the left of the particular point. Where ‘e’ stands for point elasticity, ‘L’ stands for the lower segment, and ‘U’ for the upper segment.

Point Elasticity =

e_p = L/U

Where ‘e_p’ stands for point elasticity, ‘L’ stands for the lower segment, and ‘U’ for the upper segment.

Samacheer Kalvi 11th Economics Consumption Analysis Additional Important Questions and Answers

PART – A

Multiple Choice Questions:

Question 1.
_________ is the beginning of Economic Science.
(a) Production
(b) Consumption
(c) Exchange
(d) Distribution
Answer:
(b) Consumption

Question 2.
Single commodity consumption mode is ………………………
(a) Production possibility curve
(b) Law of Equi – marginal utility
(c) Law of supply
(d) Law of diminishing marginal utility
Answer:
(d) Law of diminishing marginal utility

Question 3.
If total utility is maximum, then marginal utility is _________.
(a) Negative
(b) Zero
(c) Positive
(d) Maximum
Answer:
(b) Zero

Question 4.
An indifference curve is ……………………. to the origin.
(a) Convex
(b) Concave
(c) Narrow
(d) Cardinal
Answer:
(a) Convex

Question 5.
‘Diamond – Water paradox’ was given by
(a) Marshall
(b) Robbins
(c) Adam Smith
(d) Samuelson
Answer:
(c) Adam Smith

Question 6.
Human wants to have the capacity to get satisfied only ……………………..
(a) Permanent
(b) Substitute
(c) Satisfaction
(d) Temporarily
Answer:
(d) Temporarily

Question 7.
The exceptional demand curve _________.
(a) Slopes downward
(b) Vertical
(c) Slopes upward
(d) Horizontal
Answer:
(c) Slopes upward

Question 8.
What is called conventional necessities?
(a) Comforts
(b) Luxuries
(c) Necessaries
(d) Necessary
Answer:
(a) Comforts

Question 9.
Mathematically consumer’s surplus is _________
(a) TU-TU
(b) TR- (P x Q)
(c) TU – (P x Q)
(d) TC – (Q x P)
Answer:
(c) TU – (P x Q)

Question 10.
What is the other name for the law of equity-mangìnal utility?
(a) Gossen’s First law
(b) Gossen’s Second law
(c) Gossen’s Third law
(d) Gossen’s Fourth law
Answer:
(b) Gossen’s Second law

Part – B

Answer the following in one-two sentences.

Question 1.
What are the criticisms of the law of equity-marginal utility?
Answer:

1. The utility cannot be measured, only be felt.
2. This law cannot be applied to durable goods.

Question 2.
What is Human wants conditions?
Answer:
Human wants are countless in number and various in kinds. When one want is satisfied another want crops up. Human wants to multiply with the growth of civilization and development.

Question 3.
Mention the types of elasticity of demand.
Answer:

1. Price elasticity of demand.
2. Income elasticity of demand
3. Cross elasticity of demand.
4. Advertising elasticity of demand

Part – C

Answer the following questions in one paragraph.

Question 1.
Write a note on the Price line or Budget line?
Answer:
Demand for a good depends upon (z) preference for that good and (z’z) purchasing power.
The preference pattern is represented by a set of indifference curves. The purchasing power depends on his money income and the price of the goods. The money income and price level are represented by the budget line. The budget line is a downward sloping straight line connecting X-axis and Y-axis as follows.

OA- income, OA/OB price of X good. The budget line is the line joining various combinations of the two goods which the consumer can buy at given prices and income.

Question 2.
Enumerate the characteristics of demand.
Answer:
Price: Demand is always related to price.
Time: Demand always means demand per unit of time, per day, per week, per month or per year
Market: Demand is always related to the market, buyers, and sellers.
Amount: Demand is always a specific quantity that a consumer is willing to purchase.

Part – D

Answer the following questions in about a page.

Question 1.
Explain the Determinants of Elasticity of demand?
Answer:
There are many factors that determine the degree of price elasticity Of demand. Some of them are described below:

1. Availability of Substitutes:
If close substitutes are available for a product, then the demand for that product tends to be very elastic. If the price of that product increases, buyers will buy its substitutes; hence fall in its demand will be very large. Hence, price elasticity will be larger, e.g., Vegetables.

For salt no close substitutes are available. Hence even if the price of salt increases the fall in demand may be zero or less. Hence salt is price inelastic.

2. Proportion of consumer’s income is spent’ if the smaller proportion of consumer’s income is spent on particular commodity say X, price elasticity of demand for X will be smaller. Take for example salt, people spend a very small proportion of their income on salt. Hence, the salt will have small elasticity of demand, or inelastic.

3. Number of uses of commodity:
If a commodity is used for a greater number of uses, its price elasticity will also be larger. For example, milk is used as buttermilk, curd, ghee, and for making ice cream, etc. Hence, even the small fall in the price of milk will tempt the consumers to use more milk for many purposes. Hence milk has a greater price elasticity of demand.

4. Complementarity between goods:
For example, along with petrol, lubricating oil is also used for running automobiles. Here a rise in the price of lubricating oil may not reduce the demand for lubricating oil. Hence, the complementary good, here, lubricating oil, will be price inelastic.

5. Time:
In the long run, the price elasticity of demand for many goods will be larger. This is so because, in the long run many substitutes can be discovered or invented. Therefore, the demand is generally more elastic in the long run, than in the short run. In the short run bringing out new substitutes is difficult.

Question 2.
What is the Importance of Elasticity of demand?
Answer:
The concept of elasticity of demand is of much practical importance.

1. Price fixation: Each seller under monopoly and imperfect competition has to take into account the elasticity of demand while fixing the price for his product. If the demand for the product is inelastic, he can fix a higher price.
2. Production: Producers generally decide their production level on the basis of demand for the product.
3. Distribution: The elasticity of demand also helps in the determination of rewards for factors of production.
4. International trade: The elasticity of demand helps in finding out the terms of trade between two countries. Terms of trade depend upon the elasticity of demand for the goods of the two countries.
5. Public finance: The elasticity of demand helps the government in formulating tax policies. For example, for imposing a tax on a commodity.
6. Nationalization: The concept of elasticity of demand enables the government to decide over the nationalization of industries.

Students can Download Tamil Nadu 11th Accountancy Model Question Paper 5 English Medium Pdf, Tamil Nadu 11th Accountancy Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Accountancy Model Question Paper 5 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
Two or more business units forming a single entity is known as ……………………….
(a) Joint
(b) Merger
(c) Link
(d) Compound
Answer:
(b) Merger

Question 2.
……………………… is irrecoverable debts.
(a) Debtors
(b) Creditors
(c) Bad debts
(d) Loan
Answer:
(c) Bad debts

Question 3.
The word convention refers ………………………
(a) Traditions
(b) Trade
(c) Business
(d) Accounting
Answer:
(a) Traditions

Question 4.
Outsider’s equity is otherwise called as ………………………
(a) Capital
(b) Liabilities
(c) Debtors
(d) Assets
Answer:
(b) Liabilities

Question 5.
Owner’s equity is otherwise called as ………………………..
(a) Capital
(b) Creditors
(c) Debtors
(d) Assets
Answer:
(a) Capital

Question 6.
Net position of an account can be ascertained from ……………………….
(a) Journal
(b) Ledger
(c) Trial balance
(d) Balance sheet
Answer:
(b) Ledger

Question 7.
Total of credit > total of debit = ……………………….
(a) Debit balance
(b) Credit balance
(c) Nil balance
(d) Trial balance
Answer:
(b) Credit balance

Question 8.
Which one of the following account would usually have a debit balance?
(a) Account payable
(b) Cash
(c) Owner equity
(d) Bank loan
Answer:
(b) Cash

Question 9.
Which of the following will be placed in the credit column of the trial balance?
(a) Purchases
(b) Accounts payable
(c) Salaries payable
(d) None
Answer:
(d) None

Question 10.
Suspense account in the trial balance is entered in the …………………….
(a) Trading A/c
(b) Profit & loss A/c
(c) Balance sheet
(d) None
Answer:
(c) Balance sheet

Question 11.
Goods are returned by customers are recorded in ……………………….
(a) Sales book
(b) Sales returns book
(c) Journal proper
(d) Purchase book
Answer:
(b) Sales returns book

Question 12.
If a cheque sent for collection is dishonoured, the debit is given to ……………………….
(a) Suppliers A/c
(b) Bank A/c
(c) Customers A/c
(d) None
Answer:
(c) Customers A/c

Question 13.
A bank pass book is a copy of ……………………….
(a) The cash column of a customer’s cash book
(b) The bank column of a customer’s cash book
(c) The customer’s account in the bank’s ledger
(d) None
Answer:
(c) The customer’s account in the bank’s ledger

Question 14.
Generally, one – sided errors are revealed by ………………………
(a) Credit balance
(b) Debit balance
(c) Trial balance
(d) Balance sheet
Answer:
(c) Trial balance

Question 15.
When a transaction is incorrectly recorded, it is known as ……………………….
(a) Error of principle
(b) Error of commission
(c) Error of omission
(d) Compensating error
Answer:
(b) Error of commission

Question 16.
Straight line method otherwise called ………………………..
(a) Original cost method
(b) Written down value method
(c) Annuity method
(d) Depletion method
Answer:
(a) Original cost method

Question 17.
Which one is matched correctly?
(a) Land purchased – capital expenditure
(b) Goods purchased – capital expenditure
(c) Issue of debentures – revenue receipts
(d) Rent received – Capital receipts
Answer:
(a) Land purchased – capital expenditure

Question 18.
Which one is not matched correctly?
(a) Trading account – wages
(b) Profit and loss account salaries
(c) Capital – asset
(d) Creditors liabilities
Answer:
(c) Capital – asset

Question 19.
Interest on capital is to be debited in ………………………
(a) Profit and loss A/c
(b) Capital A/c
(c) Balance sheet
(d) Trading A/c
Answer:
(a) Profit and loss A/c

Question 20.
There are three components namely input unit, CPU and ……………………….
(a) Data
(b) Secondary storage
(c) Output unit
(d) Primary storage
Answer:
(c) Output unit

PART – II

Answer any seven questions in which question No. 30 is compulsory: [7 × 2 = 14]

Question 21.
List any two functions of accounting?
Answer:

1. Measurement and
2. Forecasting

Question 22.
Define book – keeping?
Answer:
“Book-keeping is an art of recording business dealings in a set of books”. – J.R. Batli boi.

Question 23.
What is meant by journalising?
Answer:
Record of business transactions in the journal is known as Journal entry. The process of recording the transactions in journal is called as journalising.

Question 24.
Complete the accounting equation?

1. Assets = Capital + liabilities; ₹1,00,000 = ₹80,000 + ?
2. Assets = Capital + liabilities; ₹2,00,000 = ? + ₹40,000

Answer:
Assets = Capital + liabilities

1. ₹1,00,000 = ₹80,000 + ₹20,000
2. ₹2,00,000 = ₹1,60,000 + ₹40,000.

Question 25.
Prepare furniture account from the following transactions?

Answer:

Question 26.
What is trade discount?
Answer:
Trade discount is a deduction given by the supplier to the buyer on the list price or catalogue price of the goods.

Question 27.
What is meant by rectification of errors?
Answer:
Depending on the stage at which errors are located, they are subsequently rectified at the respective stage itself.

Question 28.
A firm purchased a plant for ₹40,000. Erection charges amounted to ₹2,000. Effective life of the plant is 5 years. Calculate the amount of depreciation per year under straight line method?
Answer:
Amount of depreciation =
= Cost of plant + erection charges
= ₹40,000 + 2,000
= ₹42,000
= \(\frac{42,000-0}{5 years}\)
= ₹8,400

Question 29.
What is Capital receipt?
Answer:
Receipt which is not revenue in nature is called capital receipt. It is non-recurring in nature.

Question 30.
What are wasting assets?
Answer:
These are the assets which get exhausted gradually in the process of excavation.
Example: mines and quarries.

PART – III

Answer any seven questions in which question No. 40 is compulsory. [7 × 3 = 21]

Question 31.
What are the methods of codification?
Answer:

1. Sequential codes
2. Block codes
3. Mnemonic codes

Question 32.
The trial balance on March 31, 2016 shows the following:
Sundry debtors ₹30,000; Bad debts ₹1,200. It is found that 3% of sundry debtors is doubtful of recovery andis to be provided for Pass adjusting entry and show it how will be appeared in final accounts?
Answer:

Question 33.
Find out the amount of sales from the following information:
Opening stock ₹30,000; Purchases less returns ₹2,00,000; Closing stock ₹20,000; Gross profit margin (oh sales) 30%?
Answer:
Cost of goods sold = opening stock + net purchases – closing stock
= 30,000 + 2,00,000 – 20,000 = 2,10,000

Therefore, percentage of gross profit on cost of goods sold is 30/70 × 100 = 42.85%.
Gross profit = ₹2,10,000 × 30/70
= ₹90,000.
Sales = Cost of goods sold + Gross profit = 2,10,000 + 90,000 = 3,00,000.

Question 34.
A company has purchased a machinery for ₹1,80,000 and spent ₹10,000 for its installation. The estimated life of the machinery is 5 years with a residual value of ₹15,000. Find out the amount of depreciation to be provided every year?
Answer:
Amount of depreciation =  = \(\frac{1,90,00-15,000}{5}\)
= \(\frac{1,75,00}{5}\)
= ₹35,000 per year.

Question 35.
State the account/s affected in each of the following errors:

1. Goods sold to Vasu on credit for ₹1,000 was not recorded in the sales book.
2. The total of sales book ₹2,500 was posted twice.

Answer:

1. Sales account should be credited with ₹1,000.
2. Sales account should be debited with ₹2,500.

Question 36.
Classify the following into personal, real and nominal accounts,

1. Capital
2. Buildings
3. Carriage inwards
4. Cash
5. Commission received
6. Bank

Answer:

1. Capital – Personal account
2. Buildings – Real account
3. Carriage inwards – Nominal account
4. Cash – Real account
5. Commission received – Nominal account
6. Bank – Personal account

Question 37.
Prepare Machinery A/c from the following transactions:

Answer:

Question 38.
State which account should be debited and which account should be credited?

1. Carriage outwards
2. Carriage inwards
3. Sales
4. Purchases
5. Bad debts
6. Interest paid

Answer:

1. Carriage outwards – debited
2. Carriage inwards – debited
3. Sales – credited
4. Purchases – debited
5. Bad debts – debited
6. Interest paid – debited

Question 39.
Mention the subsidiary books in which the following transactions are recorded?

1. Sale of goods for cash
2. Sale of goods on credit
3. Asset purchased on credit

Answer:

1. Sale of goods for cash – cash book
2. Sale of goods on credit – sales book
3. Asset purchased on credit – j oumal proper

Question 40.
From the following particulars of Veera traders, prepare a bank reconciliation statement as on 31^st December, 2017?

1. Credit balance as per bank statement ₹6,000.
2. Amount received by,bank through NEFT for ₹3,500 entered twice in the cash book.
3. Cheque dishonoured amounting to ₹2,500, not entered in cash book.

Answer:

PART – IV

Answer all the questions: [7 × 5 = 35]

Question 41 (a).
Write any five objectives of Accounting?
Answer:

1. To keep a systematic record of financial transactions and events.
2. To ascertain the profit or loss of the business enterprise.
3. To ascertain the financial position or status of the enterprise.
4. To provide information to various stakeholders for their requirements.
5. To protect the properties of an enterprise.

[OR]
(b) What are the differences between Book-keeping and Accounting?
Answer:

Question 42 (a).
Journalise the following transactions in the books of Ramesh who is dealing in computers:

Answer:

[OR]

(b) Show the accounting equation on the basis of the following transactions for Rani, who is dealing in automobiles.

1. Started business with cash ₹80,000.
2. Goods bought on credit from Ramesh ₹10,000.
3. Purchased furniture for cash ₹6,000.
4. Paid creditors by cash ₹8,000.
5. Paid rent by cash ₹500.

Answer:

Question 43 (a).
Prepare direct ledgers from the following transactions?

Answer:

[OR]

(b) Prepare Trial Balance of Murali as on 31.03.2017 from the following information?

Answer:

Question 44 (a).
From the following transactions write up the Sales Day Book of Kamala Stores, a furniture shop?

Answer:

[OR]

(b) Enter the following transactions in a simple cash book of Kunal:

Answer:

Question 45 (a).
From the following information, prepare Bank Reconciliation Statement to find out balance as per bank statement as on 31^st March, 2017?

Answer:

[OR]

(b) Rectify the following errors:

1. Sales book is undercast by ₹100.
2. Sales book is overcast by ₹200.
3. Purchase book is undercast by ₹300.
4. Purchase book is overcast by ₹400.
5. Purchase return boojt is undercast by ₹100.

Answer:

1. Sales account should be credited with ₹100,
2. Sales account should be debited with ₹200.
3. Purchase account should be debited with ₹300.
4. Purchase account should be credited with ₹400.
5. Purchase return account should be credited with ₹100.

Question 46 (a).
A firm purchased a machine for ₹1,00,000 on 01.07.2015. Depreciation is written off at 20% on reducing balance method. The firm closes its books on 31st December each year. Show the Machinery account upto 31.12.2017?
Workings:

Answer:

[OR]

(b) Prepare Trading and Profit and Loss account for the year ended 31^st March, 2016 and the Balance Sheet as on that date from the following informations?

Adjustments:

1. Closing Stock on 31st March, 2016 ₹2,100.
2. Commission received in advance ₹400.
3. Advertisement paid in advance ₹150.
4. Wages outstanding ₹2,000.

Answer:

Question 47 (a).
Enter the following transactions in the three column cash book of Chozhan?

Answer:

[OR]

(b) Prepare Analytical Petty Cash Book from the following particulars under Imprest system?

Answer:

Students can Download Tamil Nadu 11th Accountancy Model Question Paper 4 English Medium Pdf, Tamil Nadu 11th Accountancy Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Accountancy Model Question Paper 4 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
On the basis of ledger balances the …………………….. are prepared.
(a) Trading A/c
(b) Financial statement
(c) Profit and loss A/c
(d) Balance sheet
Answer:
(b) Financial statement

Question 2.
Accounting is a basic necessity for all ……………………
(a) Human being
(b) Governments
(c) Enterprises
(d) Customers
Answer:
(c) Enterprises

Question 3.
What is GAAP?
(a) Generally Accepted Accounting Principles
(b) Government Accepted Accounting Principles
(c) Generally Accounting and Accountancy Principles
(d) None of these
Answer:
(a) Generally Accepted Accounting Principles

Question 4.
……………………… concept assumes that business enterprise and its owners are two separate independent entities.
(a) Business concern
(b) Business entity concepts
(c) Going Concern concept
(d) Matching concept
Answer:
(b) Business entity concepts

Question 5.
Which of the following is a personal account?
(a) Debtors
(b) Stationary
(c) Cash
(d) Sales
Answer:
(a) Debtors

Question 6.
Which of the following is a real account?
(a) Wages
(b) Salaries
(c) Bank account
(d) Shares and debentures of companies
Answer:
(d) Shares and debentures of companies\

Question 7.
Which of the following accounts is expected to have a debit balance?
(a) Assets
(b) Loss
(c) Expense
(d) All of these
Answer:
(d) All of these

Question 8.
A collection or group of all accounts of a business enterprises is known as …………………………
(a) Balance sheet
(b) Trial balance
(c) Ledger
(d) Journal
Answer:
(c) Ledger

Question 9.
Which account usually has debit balance?
(a) Discount received
(b) Purchase returns
(c) Purchases
(d) Owner equity
Answer:
(c) Purchases

Question 10.
A trial balance is a …………………… ?
(a) Nominal account
(b) Personal account
(c) Real account
(d) None
Answer:
(d) None

Question 11.
Which of the following is not only a subsidiary books of account?
(a) Purchase book
(b) Sales book
(c) Purchase return book
(d) Cash book
Answer:
(d) Cash book

Question 12.
If a cheque issued by us is dishonoured the credit is given to ……………………..
(a) Customer’s A/c
(b) Bank A/c
(c) Supplier’s A/c
(d) None
Answer:
(c) Supplier’s A/c

Question 13.
Cheques issued but not presented to bank …………………….
(a) Cash book – Add
(b) Cash book (Cr) – Add
(c) Bank statement (Cr) – Add
(d) Bank statement (Dr) subtract
Answer:
(a) Cash book – Add

Question 14.
Generally, one – sided errors are revealed by ……………………..
(a) Credit balance
(b) Debit balance
(c) Balance sheet
(d) Trial balance
Answer:
(d) Trial balance

Question 15.
Two – sided errors are not revealed by ……………………..
(a) Debit balance
(b) Trial balance
(c) Credit balance
(d) Balance sheet
Answer:
(b) Trial balance

Question 16.
The amount which is expected to be realised at the end of the estimated useful life of an asset is known as ………………………….
(a) Life of an asset
(b) Actual cost of asset
(c) Other factors
(d) Scrap value of an asset
Answer:
(d) Scrap value of an asset

Question 17.
There are various methods used for providing depreciation on …………………………
(a) Life of an asset
(b) Actual cost of asset
(c) Fixed asset
(d) Other factors
Answer:
(c) Fixed asset

Question 18.
Revenue receipts are ……………………. in the business.
(a) Non – recurring
(b) Recurring
(c) Neither of the above
(d) All the above
Answer:
(b) Recurring

Question 19.
Income statement is divided into …………………….. parts.
(a) One
(b) Two
(c) Three
(d) Four
Answer:
(b) Two

Question 20.
Components of CAS can be classified into ………………………. categories.
(a) One
(b) Two
(c) Six
(d) Three
Answer:
(c) Six

PART – II

Answer any seven questions in which question No. 21 is compulsory: [7 × 2 = 14]

Question 21.
Discuss briefly the branches of accounting?
Answer:
The various branches of accounting are:

1. Financial Accounting:
It involves recording of financial transactions and events.

2. Cost Accounting:
It involves the collection, recording, classification and appropriate allocation of expenditure for the determination of the costs of products or services and for the presentation of data for the purposes of cost control and managerial decision making.

3. Management Accounting:
It is concerned with the presentation of accounting information in such a way as to assist management in decision making and in the day-to-day operations of an enterprise.

4. Social Responsibility Accounting:
It is concerned with presentation of accounting information by business entities and other organizations from the view point of the society by showing the social costs incurred such as environmental pollution by the enterprise and social benefits such as infrastructure development and employment opportunities created by them.

5. Human Resources Accounting:
It is concerned with identification, qualification and reporting of investments made in human resources of an enterprise.

Question 22.
State the principles of double entry system of book – keeping?
Answer:

1. In every business transaction, there are two aspects.
2. The two aspects involved are the benefit or value receiving aspect and benefit or value giving aspect.
3. These two aspects involve minimum two accounts; atleast one debit and atleast one credit.
4. For every debit, there is a corresponding and equivalent credit. If one account is debited . the other account must be credited.

Question 23.
Journalise the following transactions?

Answer:

Question 24.
What are the objectives of preparing trial balance (any two)?
Answer:

1. Test of arithmetical accuracy: Trial balance is the means by which the arithmetical accuracy of the book-keeping work is checked.
2. Basis for preparing final accounts: Financial statements, namely, trading and profit and loss account and balance sheet are prepared on the basis of summary of ledger balances obtained from the trial balance.

Question 25.
What is Journal proper?
Answer:
Journal proper is a residuary book which contains records of transactions, which do not find a place in the subsidiary »books such as cash book, purchases book, sales book, purchases returns book, sales returns book, bills receivable books and bills payable book.

Question 26.
What is Cash Book?
Answer:
Cash book is the book in which only cash transactions are recorded in the chronological order. The cash book is the book of original entry or prime entry as cash transactions are recorded for the first time in it. Cash transactions here may include bank transactions also.

Question 27.
Give any two expenses which may be paid by the banker as per standing instruction?
Answer:

1. Insurance premium paid by the bank as per the standing instruction.
2. Loan instalment, paid by the bank as per the instruction.

Question 28.
What is meant by error of partial omission?
Answer:
When the accountant has failed to record a part of the transaction, it is known as error of partial omission. This error usually occurs in posting. This error affects only one account.

Question 29.
What is Sinking Fund method?
Answer:
This method is adopted especially when it is desired not merely to write off an asset but also to provide enough funds to replace an asset at the end of its working life.

Question 30.
What is capital expenditure?
Answer:
It is an expenditure incurred during an accounting period, the benefits of which will be available for more than one accounting period.

PART – III

Answer any seven questions in which question No. 31 is compulsory: [7 × 3 = 21]

Question 31.
Write any three differences among the readymade software, customised software and tailor made software?
Answer:

Question 32.
Abstracts from the trial balance as on 31^st March, 2016?
Answer:

Adjustments:

1. Additional bad debts ₹2,000.
2. Create 5% provision for bad and doubtful debts. You are required to pass adjusting entries.

Answer:

Question 33.
A firm purchased a plant for ₹40,000. Erection charges amounted to ₹2,000. Effective life of the plant is 5 years. Calculate the amount of depreciation per year under straight line method?
Answer:
Caluculation of amount of depreciation:

Question 34.
Complete the missing items:

Answer:

Question 35.
Give journal entries for the following transactions and post them to cash A/c and sales A/c?

Answer:

Question 36.
The following balances are extracted from the books of Murali, as on 31^st March, 2017. Prepare Trial balance?

Answer:

Question 37.
Enter the following transactions in the purchase book of M/s. Subhashree Electric Co., which deals in electric goods?

Answer:

Question 38.
Briefly explain about contra entry with examples?
Answer:
When the two accounts involved in a transactions are cash account and bank account, then both the aspects are entered in cash book itself. As both the debit and credit aspect of a transaction are recorded in the cash book, such entries are called contra entries.

Example: When cash is paid into bank, it is recorded in the bank column on the debit side and in the cash column on the credit side of the cash book.

Question 39.
Rectify the following errors:

1. Sales returns book is overcast by ₹1,000.
2. Purchases book is undercast by ₹2,000.
3. Purchase returns book is overcast by ₹500.

Answer:

1. Sales returns account should be credited with ₹1,000.
2. Purchases account should be debited with ₹2,000.
3. Purchase returns account should be debited with ₹500.

Question 40.
Classify the following receipts into capital and revenue:

1. Sale proceeds of goods ₹75,000.
2. Loan borrowed from bank ₹2,50,000.
3. Sale of investment ₹1,20,000.

Answer:

1. Revenue
2. Capital
3. Capital

PART – IV

Answer all the questions: [7 × 5 = 35]

Question 41(a).
Jayaseeli is a sole proprietor having a provisions store. Following are the transactions?

Answer:

[OR]

(b) Show the accounting equation on the basis of the following:

1. Started business with cash ₹60,000
2. Purchased goods fof cash ₹20,000
3. Sold goods for cash (costing ₹10,000) for ₹15,000
4. Paid rent by cash ₹500
5. Cash withdrawn for personal use ₹5,000

Answer:

Question 42 (a).
Pass journal entries and prepare ledger accounts in the books of Thamizhanban?

Answer:

`

[OR]

(b) Prepare Trial balance from the following ledger abstract of Rathna Kumar?

Answer:

Question 43 (a).
Record the following transactions in the purchases book of Shanthi furniture mart:

Answer:

[OR]

(b) Enter the following transactions of Fathima in the cash book with cash, bank and discount columns for the month of May, 2017?

Answer:

Question 44 (a).
From the following information, prepare bank reconciliation statement as on 31^st December, 2017 to find out the balance as per bank statement?

Answer:

[OR]

(b) Rectify the following errors:

1. Sales book is undercast by ₹100
2. Sales book is overcast by ₹200
3. Purchases book is undercast by ₹300
4. Purchases book is overcast by ₹400
5. Purchases returns book is undercast by ₹500

Answer:

1. Sales account should be credited with ₹100
2. Sales account should be debited with ₹200
3. Purchases account should be debited with ₹300
4. Purchases account should be credited with ₹400
5. Purchases returns account should be credited with ₹500

Question 45 (a).
On 1^st April 2015, Kumar purchased a machine for ₹80,000 and spent ₹20,000 on its installation. The residual value at the end of its expected useful life of 8 years is estimated at ₹4,000. On 30^th September 2017, the machine is sold for v50,000. Depreciation is to be provided according to straight line method. Prepare machinery account. Accounts are closed on 31^st December every year?
Answer:

= Total  cost = Cost price of machine + installation
= 80,000 + 20,000
= 1,00,000
= \(\frac{12,000}{1,00,000}\) × 100
= 12%

[OR]

(b) State whether the following are capital, revenue or deferred revenue?

1. Legal fees paid to the lawyer after acquiring a land ₹20,000.
2. Heavy advertising cost of ₹12,00,000 spent on introducing a new product.
3. Renewal of factory licence ₹12,000.
4. A sum of ₹4,000 was spent on painting the factory.
5. Carriage paid on goods sold.

Answer:

1. Capital
2. Deferred revenue
3. Revenue
4. Revenue
5. Revenue

Question 46 (a).
The following is the extract of a trial balance as on 31^st December, 2017. Prepare Trading account:

Answer:

(b) From the following information, prepare profit and loss account for the year ended 31^st December, 2017?

Answer:

Question 47 (a).
From the following information, prepare final account of Mr. Jain for the year ended 31^st December, 2016?

Adjustments:

1. Salaries outstanding ₹600
2. Depreciation on furniture ₹1,000
3. Interest on capital₹1,000
4. Closing Stock ₹14,000

Answer:

[OR]

(b) What are the differences among the three types of software? (Any five)
Answer:

Students can Download Tamil Nadu 11th Accountancy Model Question Paper 3 English Medium Pdf, Tamil Nadu 11th Accountancy Model Question Papers helps you to revise the complete Tamilnadu State Board New Syllabus, helps students complete homework assignments and to score high marks in board exams.

TN State Board 11th Accountancy Model Question Paper 3 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
   These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Answer all the questions. Choose the correct answer: [20 × 1 = 20]

Question 1.
One of the major role of an accountant is ……………………..
(a) Record keeper
(b) Owner
(c) Employee
(d) Investors
Answer:
(a) Record keeper

Question 2.
…………………….. is the amount invested by the owner or proprietor in an organisation.
(a) Capital
(b) Drawings
(c) Goods
(d) Asset
Answer:
(a) Capital

Question 3.
………………………… is analytical in nature.
(a) Book – keeping
(b) Accounting
(c) Journal
(d) Ledger
Answer:
(b) Accounting

Question 4.
………………………. Accounts are closed at the end of accounting period.
(a) Periodicity
(b) Dual aspect
(c) Matching
(d) Cost
Answer:
(a) Periodicity

Question 5.
……………………. is a negotiable instrument.
(a) Pay – in – slip
(b) Cheque
(c) Voucher
(d) Invoice
Answer:
(b) Cheque

Question 6.
Rectifying entries are passed to make correction of errors in ……………………… accounting.
(a) Single entry
(b) Opening entry
(c) Rectifying entry
(d) Closing entry
Answer:
(c) Rectifying entry

Question 7.
A journal entry has more than one debit or more than one credit or both is called as ………………………
(a) Single entry
(b) Opening entry
(c) Compound entry
(d) Closing entry
Answer:
(c) Compound entry

Question 8.
…………………….. is normally prepared at the end of the accounting period.
(a) Trial balance
(b) Journal
(c) Ledger
(d) Proper journal
Answer:
(a) Trial balance

Question 9.
The page number of the ledger in which the supplier’s account appears is recorded in …………………….. column.
(a) Date
(b) Particulars
(c) Invoice number
(d) Ledger folio
Answer:
(d) Ledger folio

Question 10.
……………………… motivates the debtor to make the payment at an earlier date to avail discount facility.
(a) Trade discount
(b) Cash discount
(c) Sales
(d) Purchases
Answer:
(b) Cash discount

Question 11.
The two accounts involved in a transaction are cash account and bank account is called as ………………………
(a) Contra entry
(b) Single entry
(c) Compound entry
(d) Opening entry
Answer:
(a) Contra entry

Question 12.
…………………….. are recorded on the debit side of cash book.
(a) Cash receipts
(b) Cash payments
(c) Expenses paid
(d) Salary paid
Answer:
(a) Cash receipts

Question 13.
Favourable balance as per bank statement will appear as a …………………………
(a) Credit balance
(b) Debit balance
(c) Unfavourable
(d) Cash book
Answer:
(a) Credit balance

Question 14.
Sales book is overcast by ? 200 is an example of …………………………
(a) Errors of casting
(b) Principle error
(c) Compensating error
(d) Suspense account
Answer:
(a) Errors of casting

Question 15.
Fixed installment method is otherwise called ………………………….
(a) Straight line
(b) Written down value
(c) Diminishing balance
(d) Annuity
Answer:
(a) Straight line

Question 16.
……………………. gives benefit for more than one accounting period.
(a) Capital expenditure
(b) Revenue expenditure
(c) Revenue receipt
(d) None of these
Answer:
(a) Capital expenditure

Question 17.
……………………… are assets of a relatively permanent nature used in the operations of business and not intended for sale.
(a) Fixed assets
(b) Current assets
(c) Liquid assets
(d) None of these
Answer:
(a) Fixed assets

Question 18.
Goodwill is an example of ………………………
(a) Intangible fixed asset
(b) Fixed asset
(c) Current asset
(d) Furniture
Answer:
(b) Fixed asset

Question 19.
The decrease in book value of fixed assets due to usage or passage of time is called ………………………….
(a) Depreciation
(b) Prepaid
(c) Accrued
(d) Bad debts
Answer:
(a) Depreciation

Question 20.
Which one is matched correctly?
(a) Finacle – banking software
(b) DOS – programming software
(c) COBOL – operating software
(d) MS – Office – specific purpose software
Answer:
(a) Finacle – banking software

PART – II

Answer any seven questions in which question No. 21 is compulsory: [7 × 2 = 14]

Question 21.
Who are the parties interested in accounting information?
Answer:

1. Internal users and
2. External users

Question 22.
What is meant by accounting concepts?
Answer:
Accounting concepts are the basic assumptions or conditions upon which accounting has been laid. Accounting concepts are the results of broad consensus. The word concept means a notion or abstraction which is generally accepted.

Question 23.
What is real account?
Answer:
All accounts relating to tangible and intangible properties and possessions are called real accounts. In case of real accounts, the rule is debit what comes in and credit what goes out.

Question 24.
What is a ledger?
Answer:
Ledger is known as principal book of accounts. It is a book which contains all sets of accounts, namely, personal, real and nominal accounts.

Question 25.
What is trial balance?
Answer:
Trial balance is a statement containing the debit and credit balances of all ledger accounts on a particular date. It is arranged in the form of debit and credit columns placed side by side and prepared with the object of checking the arithmetical accuracy of entries made in the books of accounts and to facilitate preparation of financial statements.

Question 26.
Give the format of Purchase Book?
Answer:

Question 27.
What is Cash discount?
Answer:
Cash discount is allowed to the parties making prompt payment within the stipulated period of time or early payment. It is discount allowed (loss) for the creditor and discount received (gain) for the debtor who makes payment.

Question 28.
Rectify the following errors?

1. Sales book was undercast by ₹100.
2. Purchases returns book was overcast by ₹200.

Answer:

1. Sales account should be credited with ₹100.
2. Purchases returns account should be debited with ₹200

Question 29.
A company purchased a building for ₹50,000. The useful life of the building is 10 years and the residual value is ₹2000. Find out the amount and rate of depreciation under straight line method?
Answer:

Question 30.
From the following information, prepare Trading account for the year ended 31.12.2016. Opening stock ₹10,000; Purchases ₹26,100; Sales ₹40,600; Closing Stock ₹13,500?
Answer:

PART – III

Answer any seven questions in which question No. 31 is compulsory: [7 × 3 = 21]

Question 31.
What are the components of computerised accounting system?
Answer:

1. Hardware
2. Software
3. People
4. Procedure
5. Data and
6. Connectivity

Question 32.
The following are the extracts from the trial balance. Sundry debtors ₹30,000; bad debts ₹5,000;
Additional information:

1. Write off bad debts ₹3,000.
2. Create 10% provision for bad and doubtful debts. You are required to pass necessary adjusting entries and show how these items will appear in profit and loss account and balance sheet.

Answer:

Question 33.
Classify the following items into capital and revenue:

1. ₹50,000 spent for railway siding.
2. Loss on sale of old furniture.
3. Carriage paid on goods sold.

Answer:

1. Capital
2. Revenue
3. Revenue

Question 34.
A firm purchased a plant on 01.01.2018 for ₹9,000 and spent ₹1,000 as erection charges. Calculate the amount of depreciation for the year 2018 @ 15% per annum under the written down value method. Accounts are closed on 31^st March every year?
Answer:
Original cost = 9,000 + 1,000 = 10,000
Rate of depreciation = 15%
Date of purchase = 01.01.2018
Number of months used = 01.01.2018 to 3 1.03.2018 = 3 months
Amount of depreciation = 15% on 10,000 for 3 months
= 10,000 × 15/100×3/12
= ₹375.

Question 35.
Rectify the following errors discounted after the preparation of the trial balance:

1. Rent paid was carried forward to the next page ₹500 short.
2. Wages paid was carried forward ₹250 excess.
3. The sales book was overcast by ₹1,500.

Answer:

1. Rent account should be debited with ₹500.
2. Wages account should be credited with ₹250.
3. Sales account should be debited with ₹1,500.

Question 36.
Expand the following terms:

1. ATM
2. CDM
3. POS
4. NEFT
5. RTGS
6. L.F

Answer:

1. Automated Teller Machine (ATM)
2. Cash Deposit Machine (CDM)
3. Point of Sale (POS)
4. National Electronic Funds Transfer (NEFT)
5. Real Time Gross Settlement (RTGS)
6. Ledger folio (L.F.)

Question 37.
Complete the followings:

1. Total of debit > Total of credit = ?
2. Total of credit > Total of debit = ?
3. Total of debit = Total of credit = ?

Answer:

1. Debit balance
2. Credit balance
3. Nil balance

Question 38.
Define bill of exchange?
Answer:
According to the Negotiable Instruments Act, 1881, “Bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument.

Question 39.
Write any three advantages of Petty cash book?
Answer:

1. There can be better control over petty payments.
2. There is saving of time of the main cashier.
3. Cash book is not loaded with many cash payments.

Question 40.
From the followings prepare a bank reconciliation statement of Jayakumar as on 31^st December, 2016?

1. Balance as per cash book ₹7,130.
2. Cheque deposited but not cleared ₹1,000.
3. A customer has deposited ₹800 into the bank directly.

Answer:

PART – IV

Answer all the questions: [7 × 5 = 35]

Question 41 (a).
Complete the missing informations:

Answer:

[OR]

(b) Prepare Ledger accounts directly from the following informations:

Answer:

Question 42 (a).
Show the effect of following business transactions on the accounting equation:

1. Anbu started business with cash ₹20,000; goods ₹12,000; and machine ₹8,000;
2. Goods purchased from Ramani on credit ₹7,000;
3. Payment made to Ramani’s in full settlement ₹6,900;
4. Sold goods to Rajan on credit costing ₹5,400 for ₹6,000;

Answer:

(b) From the following balances extracted from the books of Raj an a trader on automobiles, prepare Trial Balance as on 31^stMarch, 2017?

Answer:

Question 43 (a).
Prepare Purchases Book and Sales Book in the books of Santhosh Textiles Ltd., from the following transactions given for April, 2017?

Answer:

[OR]

(b) Enter the following transactions in a single column Cash Book of Pradeep for April, 2017?

Answer:

Question 44 (a).
From the following data, ascertain the cash book balance as on 31^st December, 2017?

Answer:

[OR]

(b) Pass journal entries to rectify the following errors located after the preparation of the trial balance. Assume that there exists a suspense account?

1. The total of sales book was undercast by ₹2,000.
2. The purchase of machinery for ₹3,000 was entered in the purchases book.
3. A credit sale of goods for ₹45 to Mathi was posted in his account as ₹54.
4. The purchases returns book was overcast by ₹200.
5. The total of sales book ₹1,122 were wrongly posted in the ledger as ₹1,222.

Answer:

Question 45 (a).
M/s Ramco Textile Mills purchased machinery on 1^st April, 2014 for 2,00,000 on credit from M/s. Nila and Co., and spent ₹10,000 on its installation. Depreciation is provided at 10% per annum on the written down value method. Prepare machinery account and depreciation account for the first three years. Books are closed on 31^st March every year?
Answer:

[OR]

(b) State whether the following are capital or revenue items:

1. ₹5,000 spent towards addition to buildings.
2. Second-hand motor car purchased for ₹30,000 and paid ₹2,000 as repairs immediately.
3. ₹10,000 was spent on painting the new factory.
4. Freight and cartage on the new machine ₹150, erection charges ₹200.
5. ₹150 spent on repairs before using a second-hand car purchased recently.

Answer:

1. Capital expenditure
2. Capital expenditure
3. Capital expenditure
4. Capital expenditure
5. Capital expenditure

Question 46 (a).
From the following particulars, prepare Profit and Loss account for the year ended 31^st December, 2017?

Answer:

[OR]

(b) What are the features of Capital Expenditure?
Answer:
The following are the features of Capital expenditure:

1. It gives benefits for more than one accounting period.
2. It includes acquisition of fixed assets and all expenditure incurred upto the point an asset is ready for use.
3. It contributes to the revenue earning capacity of the business.
4. It is non-recurring in nature.
5. It is shown on the assets side of the balance sheet.

Question 47 (a).
The following balances were extracted from the books of Thomas as on 31^st March, 2018. Dr?

Adjustments:

1. Closing Stock ₹9,000.
2. Provide depreciation @ 10% on machinery.
3. Interest accrued on investments ₹2,000

Prepare Trading A/c, Profit and Loss A/c and Balance Sheet as on 31^st March, 2018. In the Books of Thomas
Dr. Trading A/c and Profit and Loss Account for the year ended 31^st March, 2018 Cr.

Answer:

[OR]

(b) Write any five advantages of computerised accounting system?
Answer:

• Faster Processing: Computers require far less time than human beings in performing a particular task. Therefore, accounting data are processed faster using a computerised accounting system.
• Accurate Information: There is less space for error because only one account entry is needed for each transaction unlike repeated posting of the same accounting data in manual system.
• Reliability: Computer systems are immune to boredom, tiredness or fatigue. Therefore, these can perform repetitive functions effectively and are highly reliable.
• Easy Availability of Information: The data are easily available and can be communicated to different users at the same time.
• Up-to-date Information: Account balances will always be up-to-date since the records are automatically updated as and when accounting data are entered or stored.