Category: Class 11

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:

Money Wages	Real Wages
1. Money wages are referred to the wages paid in terms of money.	Real wages are the wages paid in terms of goods and services.
2. Depend upon the standard of living workers in a country.	Depend upon the purchasing power of money.

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:

Rent	Quasi-Rent
1. Rent accrues to land.	Quasi-Rent accrues to the man-made appliance.
2. The supply of land is fixed forever.	The supply of man-made appliances is fixed for a short period only.
3. It enters into the price.	It does not enter into price.

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:

Perfect Competition	Monopolistic Competition
1. Large number of buyers and sellers.	Large number of buyers and many sellers.
2. Homogeneous product & uniform price.	Close substitute commodity.
3. Free Entry and exit.	Free Entry and exit.
4. Very small size of market for each firm.	Small size of market.
5. It has no monopoly power	Limited power
6. Uniform power (or) low price	Moderate power
7. Price policy price taker	Low control elasticity of demand
8. Price elasticity – infinite	Some control over price depending on consumers brand loyalty.

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

Firm	Industry
1. A firm refers to a single production unit in the industry, producing a large or a small quantum of a commodity or service, and selling it at a price in the market.	The industry refers to a group of firms producing the same product or service in an economy.
2. Its main objective is to earn a profit. There may be other objectives as described by managerial and behavioral theories of the firm.	For example, A group of firms producing cement is called a cement industry.

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:

Fixed Cost	Variable Cost
1. Fixed cost does not change with the change in the quantity of output.	The variable cost varies with the level of output.
2. Fixed cost is also called “Supplementary Cost” or “overhead cost”.	Variable cost is also called “ Prime cost”, “Special cost” or Direct cost.
3. For example Watchman’s wages, Permanent worker’s Salary, machines Insurance Premium deposit for a power Licence fee, etc.	For example Temporary workers, cost of raw materials, fuel cost, electricity charges, etc.

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

Money cost	Real cost
1. Production cost expressed in money terms is called as money cost.	Real cost refers to the payment made to compensate the efforts and sacrifices of all factor owners for their services in production.
2. Money cost includes the expenditures such as cost of raw materials, payment of wages and- salaries, payment of rent, interest on capital, expenses on fuel and power, expenses on transportation, and other types of production-related costs.	Real cost includes the efforts and sacrifices of landlords in the use of land, capitalists to save and invest, and workers, in foregoing leisure.
3. Money costs are considered as out of pocket expenses.	Real costs are considered pains and sacrifices of labour as the real costs of production.

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

Explicit Cost	Implicit Cost
1. Payment made to others for the purchase of factors of production is known as Explicit Costs.	Payment made to the use of resources that the firm already owns is known as Implicit Cost.
2. It refers to the actual expenditures of the firm to purchase or hire the inputs the firm needs.	Implicit Cost refers to the imputed cost of a firm’s self-owned and self-employed resources.
3. Explicit cost includes wages, payment for raw material, rent for the building, interest for capital invested, expenditure on transport and advertisement, other expenses like license fee, depreciation, and insurance charges.	A firm or producer may use his own land, building, machinery, car, and other factors in the process of production.

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:

Short Run	Long Run
1. Period of one year.	Period of more than one year.
2. Atleast one of the inputs is fixed.	All the inputs are variable.
3. Demand is the main determinant in fixing the price.	Supply is the main determinant in fixing the price.

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.

1. 

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:

Internal Economies of Scale	External Economies of Scale
1. Expansion of the firm itself.	Expansion of the industry.
2. Lower long-run average cost.	Benefits most all firms.
3. Efficiencies from larger-scale production.	Agglomeration economies are important.
4. Range of economies (e.g) Technical and Financial.	Helps to explain the rapid growth of many cities.

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:

Marginal utility	Total utility
1. Marginal utility goes on diminishing.	1. Total utility goes on Increasing.
2. Marginal utility becomes zero.	2. Total utility maximum.
3. Marginal utility becomes negative.	3. Total utility diminishes.

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 11th Economics Chapter 1 Introduction to Micro Economics 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 1 Introduction to Micro Economics

Samacheer Kalvi 11th Economics Introduction to Micro Economics Text Book Back Questions and Answers

PART – A

Multiple Choice Questions.

Question 1.
‘Economics is a study of mankind in the ordinary business of life’ – It is the statement of ………………………..
(a) Adam Smith
(b) Lionel Robbins
(c) Alfred Marshall
(d) Samuelson
Answer:
(c) Alfred Marshall

Question 2.
The basic problem studied in Economics is ……………………….
(a) Unlimited wants
(b) Unlimited means
(c) Scarcity
(d) Strategy to meet all our wants
Answer:
(c) Scarcity

Question 3.
Microeconomics is concerned with ……………………….
(a) The economy as a whole
(b) Different sectors of an economy
(c) The study of individual economic units behaviour
(d) The interactions within the entire economy
Answer:
(c) The study of individual economic units behaviour

Question 4.
Which of the following is a microeconomics statement?
(a) The real domestic output increased by 2.5 percent last year
(b) Unemployment was 9.8 percent of the labour force last year
(c) The price of wheat determines its demand
(d) The general price level increased by 4 percent last year
Answer:
(c) The price of wheat determines its demand

Question 5.
Find the odd one out.
(a) “An inquiry into the nature and the causes of the Wealth of Nations”
(b) “Principles of Economics”
(c) “Nature and Significance of Economic Science”
(d) “Ceteris paribus”
Answer:
(d) “Ceteris paribus”

Question 6.
The equilibrium price is the price at which ……………………….
(a) Everything is sold
(b) Buyers spend their money
(c) Quantity demanded equals quantity supplied
(d) Excess demand is zero
Answer:
(c) Quantity demanded equals quantity supplied

Question 7.
Author of “An Inquiry into the Nature and Causes of Wealth of Nations”.
(a) Alfred Marshall
(b) Adam Smith
(c) Lionel Robbins
(d) Paul A Samuelson
Answer:
(b) Adam Smith

Question 8.
“Economics studies human behaviour as a relationship between ends and scarce means which have alternative uses” is the definition of economics of …………………………
(a) Lionel Robbins
(b) Adam Smith
(c) Alfred Marshall
(d) Paul A Samuelson
Answer:
(a) Lionel Robbins

Question 9.
Who is the Father of Economics?
(a) Max Muller
(b) Adam smith
(c) Karl Marx
(d) Paul A Samuelson
Answer:
(b) Adam smith

Question 10.
“Economics is a science” The basis of this statement is …………………………
(a) Relation between cause and effect
(b) Use of deductive method and inductive method for the formations of laws
(c) Experiments
(d) All of the above
Answer:
(d) All of the above

Question 11.
Utility means ……………………..
(a) Equilibrium point at which demand and supply are equal
(b) Want – satisfying capacity of goods and services
(c) Total value of commodity
(d) Desire for goods and services
Answer:
(b) Want – satisfying capacity of goods and services

Question 12.
A market is ………………………
(a) Only a place to buy things
(b) Only a place to sell things
(c) Only a place where prices adjust
(d) A system where persons buy and sell goods directly or indirectly
Answer:
(d) A system where persons buy and sell goods directly or indirectly

Question 13.
Which one of the following is not a point in the Welfare Definition of Economics?
(a) Study of and ordinary man
(b) Economics does not focus on wealth alone
(c) Economics is the study of material welfare
(d) Economics deals with unlimited wants and limited means
Answer:
(d) Economics deals with unlimited wants and limited means

Question 14.
Growth definition takes into account ……………………….
(a) The problem of choice in the dynamic framework of Economics
(b) The problem of unlimited means in relation to wants
(c) The production and distribution of wealth
(d) The material welfare of human beings
Answer:
(a) The problem of choice in the dynamic framework of Economics

Question 15.
Which theory is generally included under micro economics?
(a) Price Theory
(b) Income Theory
(c) Employment Theory
(d) Trade Theory
Answer:
(a) Price Theory

Question 16.
……………………….. have exchange value and their ownership rights can be established and exchanged.
(a) Goods
(b) Services
(c) Markets
(d) Revenue
Answer:
(a) Goods

Question 17.
Identify the correct characteristics of utility ……………………..
(a) It is equivalent to ‘usefulness’
(b) It has moral significance
(c) It is the same as pleasure
(d) It depends upon the consumer’s mental attitude
Answer:
(d) It depends upon the consumer’s mental attitude

Question 18.
Who has given scarcity definition of economics?
(a) Adam Smith
(b) Marshall
(c) Robbins
(d) Robertson
Answer:
(c) Robbins

Question 19.
The process of reasoning from particular to the general is ………………………..
(a) Deductive method
(b) Inductive method
(c) Positive economics
(d) Normative economics
Answer:
(b) Inductive method

Question 20.
Total revenue is equal to total output sold multiplied by ………………………….
(a) Price
(b) Total cost
(c) Marginal revenue
(d) Marginal cost
Answer:
(a) Price

PART – B

Answer the following questions in one or two sentences.

Question 21.
What is meant by Economics?
Answer:
The term ‘Economics’ comes from oikonomikos which means ‘Management of households’. ‘Political Economy’ is renamed as ‘Economics’ by Alfred Marshall.

Question 22.
Define microeconomics?
Answer:

1. Microeconomics is the study of the economic actions of individual units say households, firms or industries.
2. It studies how business firms operate under different market conditions.
3. The combined actions of buyers and sellers determine prices.
4. Microeconomics covers:
   • Value theory [product pricing and factor pricing]
   • Theory of economic welfare.

Question 23.
What are goods?
Answer:
The materialistic things and services which satisfy human wants are called goods in economics.

Question 24.
Distinguish goods from services?
Answer:

Goods	Services
1. Free and Economic goods. Ex: air and sunshine	Intangible Ex: brand image 1 pen drive
2. Consumer goods. Ex: TV, Furniture, Automobile, etc.	Heterogeneous Ex: Music, Consulting physicians etc.
3. Capital goods also called producer goods. Ex: Machines	Inseparable from their makers Ex: Labour and Labourer
4. Perishable goods Ex: Fish, Fruits, Flower.	Perishable. Ex: A ticket for a cricket match once the match is over.
5. Durable Goods Ex: table, chair	–

Question 25.
Name any two types of utility?
Answer:

1. Time Utility: A sick man derives time utility from blood, not at the time of its donation. but only at the operation – time, i.e., when it is used.
2. Place Utility: A student derives place utility from a book not at the place of its publication (production centre) but only at the place of his education (consumption centre).

Question 26.
Define positive economics?
Answer:

1. An increase in money supply implies a price rise in an economy.
2. As the irrigation facilities and application of chemical fertilizers expand, the production of food- grains increases.
3. Increases in the birth rate and a decrease in the death rate reflect the rate of growth of the population.

Question 27.
Give the meaning of the deductive method?
Answer:

1. The deductive method is also named an analytical or abstract method.
2. It consists of deriving conclusions from general truths.
3. It takes a few general principles and applies them to draw conclusions.
4. The classical and neoclassical schools of economists notably, Ricardo, JS Mill, Malthus Marshall, Pigou applied the deductive method in their economic investigations.

PART – C

Answer the following questions in one paragraph.

Question 28.
Explain the scarcity definition of Economics and assess it?
Answer:

1. Lionel Robbins published a book “An Essay on the Nature and Significance of Economic Science” in 1932.
2. According to him, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.”

The major features of Robbins’ definition are

1. Ends refer to human wants.
2. Human beings have an unlimited number of wants.
3. Resources or means that go to satisfy the unlimited human wants are limited or scarce in supply.
4. The scarcity of a commodity is to be considered only in relation to its demand.
5. Further, the scarce means are capable of having alternative uses.
6. An individual grades his wants and satisfies first his most urgent want.
7. Economics, according to Robbins, is a science of choice.

Criticism:

1. Robbins does not make any distinction between goods conducive to human welfare and goods that are not.
2. Economics deals not only with the microeconomic aspects of resource allocation and the determination of the price of a commodity.
3. Robbins’ definition does not cover the theory of economic growth and development.

Question 29.
What are the crucial decisions involved in ‘what to produce’?
Answer:
Every society much decides on what goods it will produce and how much of these it will produce.
In this process, the crucial decisions include:

1. Whether to produce more food, clothing, and housing or to have more luxury goods.
2. Whether to have more agricultural goods or to have industrial goods and services.
3. Whether to use more resources in education and health or to use more resources in military services.
4. Whether to have more consumption goods or to have investment goods.
5. Whether to spend more on basic education or higher education.

Question 30.
Explain different types of economic activities?
Answer:
The seven types of economic activities are:

1. Micro – Economics:
Micro Economics is the study of the economic actions of individuals say households, firms, or industries.

Microeconomics covers:

• Value theory [product pricing and factor pricing]
• Theory of economic welfare.

2. Macro – Economics:

• Macroeconomics is the obverse of microeconomics.
• The general theory of employment, Interest, and money published by Keynes is the basis of modem macroeconomics.

3. International Economics:

• In the modem world, no country can grow in isolation.
• Every country is having links with other countries through foreign capital, investment [foreign direct investment], and international trade.

4. Public Economics:

• Public finance is concerned with the income or revenue-raising and expenditure incurring activities of the public authorities.
• The scope of public finance covers public expenditure, public revenue, public debt, and financial administration.

5. Developmental Economics:

• Development economics deals with features of developed nations, obstacles for development, economic and non-economic factors influencing development, various growth models, and strategies.

6. Health Economics:

• Health economics is an area of applied economics.
• It covers health indicators, preventive and curative measures, medical research and education, rural health mission, drug price control, neonatal care, maternity and child health, budgetary allocation for health.

7. Environmental Economics:

• Depletion of natural resources stock and pollution result from rapid economic development.
• Environmental economics is a study of interdisciplinary tools for the problems of ecology, economy, and environment.

Question 31.
Elucidate different features of services?
Answer:
Along with goods, services are produced and consumed. They are generally, possess the following:

1. Intangible:

• Intangible things are not physical objects but exist in connection to other things, for example, brand image, goodwill, etc.
• The intangible things are converted and stored into tangible items such as recording a music piece into a pen – drive.

2. Heterogeneous:

• Services vary across regions or cultural backgrounds.
• A single type of service yields multiple experiences, e.g., music, consulting physicians, etc.

3. Inseparable from their makers:

• Services are inextricably connected to their makes. For example, labour and labourers are inseparable.

4. Perishable:

• Services cannot be stored as inventories like assets.
• For example, it is useless to possess a ticket for a cricket-match once the match is over.
• It cannot be stored and it has no value-in-exchange.

Question 32.
What are the important features of utility?
Answer:
The important features of utility:

1. The utility is psychological. It depends on the consumer’s mental attitude. For example, a vegetarian derives no utility from mutton.
2. The utility is not equivalent to usefulness. For example, a smoker derives utility from a cigarette; but, his health gets affected.
3. The utility is not the same a pleasure. A sick person derives utility from taking medicine, but definitely, it is not providing pleasure.
4. The utility is personal and relative. An individual obtains varied utility from one and the same good in different situations and places.
5. The utility is the function of the intensity of human want. An individual consumer faces a tendency of diminishing utility.
6. The utility cannot be measured objectively. It is a subjective concept and it cannot be measured numerically.
7. The utility has no ethical or moral significance. For example, a cook derives utility from a knife using which he cuts some vegetables, and a killer wants to stab his enemy with that knife. In Economics, a commodity has utility if it satisfies a human want.

Question 33.
Distinguish between microeconomics and macroeconomics?
Answer:

Micro Economics	Macro Economics
1. It is that branch of economics which deals with the economic decision-making of individual economic agents such as the producer, the consumer, etc.	1. It is that branch of economics which deals with aggregates and averages of the entire economy. E.g., aggregate output, national income, aggregate savings, and investment, etc.
2. It takes into account small components of the whole economy.	2. It takes into consideration the economy of the country as a whole.
3. It deals with the process of price, determination in the case of individual products, and factors of production.	3. It deals with the general price-level in any economy.
4. It is known as price theory	4. It is also known as the income theory.
5. It is concerned with the optimization goals of individual consumers and producers	5. It is concerned with the optimization of the growth process of the entire economy.

Question 34.
Compare positive economics and normative economics?
Answer:

Positive Economics	Normative Economics
1. An increase in money supply implies a price-rise is an economy.	1. Inflation is better than deflation.
2. As the irrigation facilities and application of chemical fertilizers expand, the production of food grains increases.	2. More production of luxury goods is not good for a less-developed country.
3. An increase in the birth rate and a decrease in the death rate reflect the rate of growth of the population.	3. Inequalities in the distribution of wealth and incomes should be reduced.

PART – D

Answer the following questions in about a page.

Question 35.
Compare and contrast various definitions of Economics.
Answer:
1. Adam Smith – Wealth definition:

1. Adam Smith [1723 – 1790], in his book “An Inquiry into Nature and Cause of Wealth of Nations” [1776] defines “Economics as the science of wealth”
2. He explains how a nation’s wealth is created and increased.
3. He considers that the individual in the society wants to promote his own gain and in this process, he is guided and led by an “invisible hand”
4. Adam Smith favours the introduction of the “division of labor” to increase the quantum of output.
5. Severe competition in factories and society helps in bettering the product.
6. The supply force is very active and a commodity is made available to the consumers at the lowest price.

2. Alfred Marshall – Welfare definition:

1. Alfred Marshall [1842 – 1924] in his book “Principles of Economics” [1890] defines Economics thus “Political Economy” or Economics is a study of mankind in the ordinary business of life.
2. It examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well-being.
3. Thus, it is on one side a study of wealth and on the other and more important side, a part of the study of man”.

The important features of Marshall’s definition are:

1. Economics does not treat wealth as the be-all and end-all of economic activities.
2. The man promotes primarily welfare and not wealth. ‘
3. The science of economics contains the concerns of ordinary people who are moved by love and not merely guided or directed by the desire to get the maximum monetary benefit.
4. Economics is a social science. It studies people in the society who influence one another.

3. Lionel Robbins – Scarcity definition:

1. Lionel Robbins published a book “An Essay on the Nature and Significance of Economic Science” in 1932.
2. According to him, “Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses”.

The major features of Robbins’ definition:

1. Ends refer to human wants. Human beings have an unlimited number of wants.
2. On the other hand, resources or means that go to satisfy the unlimited human wants are limited or scarce in supply.
3. The scarce means are capable of having alternative uses.
4. An individual grades his wants and satisfies first his most urgent want.
5. Economics, according to Robbins, is a science of choice.

4. Samuelson’s – growth definition:
Paul Samuelson defines Economics as “the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses to produce various commodities over time, and distribute them for consumption, now and in the future among various people and groups of society”.

The major implications of this definition are as follows:

• Samuelson makes his definition dynamic by including the element of time in it.
• Samuelson’s definition is applicable also in a barter economy.
• His definition covers various aspects like production, distribution, and consumption.
• Samuelson treats Economics as a social science.
• Samuelson appears to be the most satisfactory.

Question 36.
Explain various Steps of Deductive and Inductive methods?
Answer:
Steps of the Deductive Method:

• Step 1: The analyst must have a clear and precise idea of the problem to be inquired into.
• Step 2: The analyst clearly defines the technical terms used in the analysis. Further, the assumptions of the theory are to be precise.
• Step 3: Deduce hypothesis from the assumptions taken.
• Step 4: Hypotheses should be verified through direct observation of events in the real world and through statistical methods, (eg) There exists an inverse relationship between price and quantity demanded of a good.

Steps of Inductive Method:

• Step 1: Data are collected about a certain economic phenomenon. These are systematically arranged and general conclusions are drawn from them.
• Step 2: By observing the data, conclusions are easily drawn.
• Step 3: Generalization of the data and then Hypothesis Formulation Step 4. Verification of the hypothesis (eg. Engel’s law)

Question 37.
Elaborate on the nature and scope of Economics?
Answer:
Nature of Economics:
The nature of a subject refers to its contents and how and why they find a place in the subject. This nature is understood by studying the various definitions given by Economists.
The nature of Economics can be clearly understood from the following definitions :

1. Adam Smith (classical Era) who considered Economics as a science of wealth gave wealth definition.
2. Alfred Marshall (Neo-classical era) considered Economics as a social science which studies wealth on one side and the material welfare of human beings on the other side.
3. Robbin’s Scarcity Definition (new age) He defined Economics as a science of choice.
4. Samuelson gave a growth definition which represents the modern age.
5. The scope of economics refers to the subject matter of economics. It throws light on whether it is an art or a science and science, whether positive or normative science.

Economics: It’s the subject matter:

Related to society:

1. Economics focuses on the behaviour and interactions among economic agents, individuals and groups belonging to an economic system.
2. It deals with the consumption and production of goods and services and the distribution of income among the factors of production.

Related to scarce resources:

1. Economics studies the ways in which people use the available resources to satisfy their multiplicity of wants.

Human science or Social science:

1. Economics is concerned with the activities of human beings.
2. The action of one member affects those of the others in the society. Hence, economics is called human science or social science.

Related to wealth:

1. Economics constitutes all human activities related to wealth.
2. Human activities not related to wealth are not included in Economics.

Economics as an art:

1. Art is the practical application of knowledge for achieving particular goals.
2. Economics provides guidance to the solutions to all the economic problems.

Economics as a science:

1. Science is a systematic study of knowledge. Science develops the co-relation between cause and effect based on facts.
2. Economics examines the relationship between the cause and effect of the problems. Hence, it is rightly considered as both an art and a science.

Economics: Positive and Normative science:

1. Positive- Economics is concerned with how? and why? and normative Economics with ‘What ought to be’.
2. Economics is both a positive and normative science.

Question 38.
Explain basic problems of the economy with the help of the production possibility curve?
Answer:
1. The problem of choice between relatively scarce commodities due to limited productive resources with the society can be illustrated with the help of a geometric device, which is known as the production possibility curve.

The production possibility curve shows the menu of choice along which a society can choose to substitute one good for another, assuming a given state of technology and given total resources.

2. The explanation and analysis of the production possibility curve are based upon certain assumptions, some of them are the following:

• The time period does not change. It remains the same throughout the curve.
• Techniques of production are fixed.
• There is full employment in the economy.
• Only two goods can be produced from the given resources.
• Resources of production are fully mobile.
• The factors of production are given in quantity and quality.
• The low of diminishing returns operates in production.

3. Every production possibility curve is based upon these assumptions. If some of these assumptions change or neglected, then it affects the nature of the production possibility curve.

4. To draw this curve we take the help of the production possibilities schedule, as shown below.

5. The schedule suggests that if all resources are thrown into the production of food, a maximum of 500 tons of food can be produced, given the existing technology.

If on the other hand, all resources are instead used for producing cars, 25 cars can be produced. In between these two extreme possibilities exist. If we are willing to give up some food, we can have some cars.

6. We can obtain a production possibility curve by drawing the production possibilities schedule graphically. The quantity of food is shown on the x-axis and the number of cars is shown on the y-axis, the different six production possibilities are being shown as point P₁ P₂ P₃ P₄ P₅ & P₆

Problems of the economy

1. The problem of choice:
The problem of choice arises because of the given limited resources and unlimited wants, which may relate to the allocation of resources between the goods for the higher income group and the lower-income group and the goods for the defense and the civilians. Since PPC is the locus of the combination of the goods the problem of choice will not arise when we choose any point on PPC.

2. Solution of central problems:
The central problems of an economy can be explained with the help of PPC. The solution to the problem of what to produce involves the decision regarding the choice of location on the production possibility carves.

A production combination represented by any point inside the PPC indicates that the economy is using inefficient methods of production and an inefficient combination of resources.

Samacheer Kalvi 11th Economics Introduction to Micro Economics Additional Important Questions and Answers

Part – A

Multiple Choice Questions.

Question 1.
Alfred Marshall renamed “Political Economy” as “Economics” in
(a) 18th century
(b) 19th century
(c) 20th century
(d) 21st century
Answer:
(b) 19th century

Question 2.
Marshall definition of Economics is known as ………………………
(a) Wealth
(b) Welfare
(c) Scarcity
(d) Modem
Answer:
(b) Welfare

Question 3.
Alfred Marshall wrote “Principles of Economics” in
(a) 1776
(b) 1890
(c) 1776
(d) 1932
Answer:
(b) 1890

Question 4.
The term “micro” means ………………………..
(a) Small
(b) Big
(c) Normal
(d) Abnormal
Answer:
(a) Small

Question 5.
Examples of perishable goods
(a) Television, Furnishers
(b) Fish, Fruits, Flowers
(c) Table, Chair
(d) Vehicles, Capital goods
Answer:
(b) Fish, Fruits, Flowers

Question 6.
……………………… means a place where commodities are bought and sold.
(a) Market
(b) Price
(c) Cost
(d) Revenue
Answer:
(a) Market

Question 7.
The value of goods expressed in money terms is
(a) Price
(b) Revenue
(c) Market
(d) Cost
Answer:
(a) Price

Question 8.
…………………. goods directly satisfy human wants.
(a) Consumer
(b) Capital
(c) Economic
(d) Producer
Answer:
(a) Consumer

Question 9.
__________ is the assumption in economics that makes the economic laws hypothetical
(a) Other things remaining the same
(b) Time remaining the same
(c) Money remaining the same
(d) Wants to remain the same
Answer:
(a) Other things remaining the same

Question 10.
Who defined “Economics as the science of wealth”?
(a) Karl Marx
(b) Paul A. Samuelson
(c) Max Muller
(d) Adam Smith
Answer:
(d) Adam Smith

Part – B

Answer the following questions in one or two sentences.

Question 1.
What is the scope of Economics?
Answer:
The scope of the subject of Economics refers to the subject matter of Economics. It throws light on whether it is an art or a science and if science, whether it is a positive science or normative science.

Question 2.
Write a note on Distribution.
Answer:
Distribution studies about the pricing of factors of production.

Question 3.
Define macroeconomics?
Answer:

1. Macroeconomics is the obverse of microeconomics. It is concerned with the economy as a whole.
2. It is the study of aggregates such as national output, inflation, unemployment, and taxes.
3. The General Theory of Employment, Interest, and Money published by Keynes is the basis of modem macroeconomics.

Part – C

Answer the following questions in one paragraph.

Question 1.
Explain different types of utility?
Answer:
The different types of utility are:

1. Form utility: An individual consumer obtains utility from a good or service only when it is available in a particular form. Raw materials in their original form may not possess utility for a consumer.
2. Time utility: A sick man derives time utility from blood not at the time of its donation, but only at the operation-time (i.e.,) when it is used.
3. Place utility: A student derives place utility from a book not at the place of its publication but only at the place of his education.
4. Service utility: An individual consumer derives service utility a service made available at the time when he most needs it.
5. Possession utility: When a student buys a book or dictionary from a bookseller, then only it gives utility.
6. Knowledge utility: It is the utility derived by having knowledge of a particular thing. Advertisement serves as a source of information on an object.
7. Measurability of utility: Wants of a person are satisfied by the act of consumption. The consumer derives utility, measured in terms of ‘Utils’. A “Util” is a unit of measurement of utility.

Question 2.
What are the major implications of Samuelson’s growth definition?
Answer:

1. Like Robbins, Samuelson states that the means which have alternative uses are scarce in relation to unlimited ends.
2. His definition is dynamic by including the element of time and it covers the theory of economic growth.
3. This definition is applicable also in a non-monetary, barter economy.
4. His definition covers various aspects like production, distribution, and consumption.
5. Samuelson treats economics as a social science.

Question 3.
What is the importance of microeconomics?
Answer:

1. To understand the operation of an economy.
2. To provide tools for economic policies.
3. To examine the condition of economic welfare.
4. Efficient utilization of resources.
5. Useful in international trade.
6. Useful in decision making.
7. Optimal resources allocation.
8. The basis for prediction.
9. Price determination.

Part – D

Answer the following questions in about a page.

Question 1.
What is the nature of economic laws?
Answer:

1. A Law expresses a causal relation between two or more than two phenomena.
2. Marshall states that the Economics laws are statements of tendencies and those social laws, which relate to those branches of conduct in which the strength of the motives chiefly concerned can be measured by money price.
3. In natural sciences, a definite result is expected to follow from a particular cause.
4. In Economics science, the laws function with cause and effect.
5. The consequences predicted by the data, necessarily and invariably follow.
6. Economics laws are not as precise and certain as the laws in the physical sciences.
7. A physical scientist carrying out controlled experiments in his laboratory can test the scientific laws very easily by changing the conditions obtaining there.
8. Change in Economics science cannot be brought about easily.
9. Unpredictability is invariably associated with Economic laws.
10. Economics laws are not assertive but they are indicative.
11. The use of the assumption “other things remaining the same” in economics makes the economics laws hypothetical.
12. The hypothetical elements in-laws are a little less pronounced than in the laws of physical sciences.
13. As the value of the measuring-rod money is not constant, there are always hypothetical elements surrounding the laws of Economics.
14. Some economics laws are simply truisms.
15. For example, saving is a function of income.
16. Another example of truism is human wants are unlimited.

Question 2.
Explain the types of economics.
Answer:
1. Micro-Economics:
Microeconomics is the study of the economic actions of individual units say households, firms, or industries.

2. Macro-Economics:
Macroeconomics is concerned with the economy as a whole. It is the study of aggregates such as national output, inflation, unemployment, and taxes.

3. International economics:
No country can grow in isolation, every country is having links with other countries through foreign capital, investment, and international trade.

4. Public economics:
Public finance is concerned with the income or revenue-raising and expenditure incurring activities of the public authorities. It covers public expenditure, public revenue, public debt, and financial administration.

5. Developmental economics:
Development economics deals with features of developed nations, obstacles for development. Economic and non-economic factors influencing development, various growth models, and strategies.

6. Health economics:
Health economics is an area of applied economics. It covers health indicators, preventive and curative measures, medical research, and education. Rural health and budgetary allocation for health etc.

7. Environmental economics:
Environmental economics analyses the interrelationship between economy and environment. It is a study of interdisciplinary tools for the problems of ecology, economy, and environment.

ACTIVITY

Meet ten of your classmates and prepare a report on the advantages of studying Economics?
Advantages of Studying Economics:

Student: 1

1. Economic policy is financial supporters.
2. Many treatments of economics are inexact and can contradict each other.
3. These is analytic or mathematical theories.
4. The Economic subject in a logical and Pseudo-Scientific manner.
5. The future of our daily lives in regards to the economic status and happenings of the world.
6. Economics is basically called the “Queen Subject” of all subjects of social sciences.
7. Economics is one of the most useful of all sciences.
8. To learn how to distribute scarce resources efficiently.
9. To understand how the market will react to certain actions.
10. Economics is described as the study of production, distribution, and consumption of goods and services, along with the transfer of wealth.

Student: 2

1. People like it.
2. It studies people’s behaviors in different markets.
3. They make economics a social study.
4. Economics is a study of how money is distributed.
5. Economic policies are good.
6. Its connection to human behavior is clear.
7. They save, spend, or invest funds.
8. It studies how market decisions are made.
9. In Economics you will study how to work in the financial and learn how to manage money.
10. Economics is the study of Economic Activities.
11. The resources that are needed to satisfy everyone’s wants.
12. Economics studies how scarcity causes people to make different choices.
13. They like the analysis.
14. It is an empirical study.

Student: 3

1. Economics is the study of the effects of social, emotional, and cognitive factors on the economic decisions of people and companies.
2. Economics enables us to understand money.
3. Economics makes a nation prosper.
4. It makes a person educated in a real sense.
5. Economics is defined as the science of money.
6. The most important factor in modem man’s life.
7. It is most important to study.
8. Economics addresses many interesting problems in modem society.
9. We encourage growth in developing countries.
10. An opportunity to get an education.
11. To prove to a prospective employer.
12. The primacy of Economic life.
13. Economics studies the way the world works as a human society.
14. The priorities of its wants and needs.
15. It is a huge subject covering natural resources.
16. The contributions of humans.
17. The contributions of investors.

Student: 4

1. I am interested in economics.
2. Economics addresses many interesting problems in modem society.
3. The valuation of nonmarket goods.
4. We encourage growth in developing countries.
5. A business relevant analytical skillset.
6. An opportunity to get an education to prove to a prospective employer.
7. Economics teaches you how to know what is needed and wanted.

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:

Subject Matter Experts at SamacheerKalvi.Guide have created Tamil Nadu State Board Samacheer Kalvi 11th Economics Book Answers Solutions Guide Pdf Free Download in English Medium and Tamil Medium are part of Samacheer Kalvi 11th Books Solutions.

Let us look at these TN State Board New Syllabus Samacheer Kalvi 11th Std Economics Guide Pdf of Text Book Back Questions and Answers, Notes, Chapter Wise Important Questions, Model Question Papers with Answers, Study Material, Question Bank and revise our understanding of the subject.

Students can also read Tamil Nadu 11th Economics Model Question Papers 2020-2021 English & Tamil Medium.

Samacheer Kalvi 11th Economics Book Solutions Answers Guide

Tamilnadu State Board Samacheer Kalvi 11th Economics Book Back Answers Solutions Guide.

Samacheer Kalvi 11th Economics Book Back Answers

• Chapter 1 Introduction to Micro Economics
• Chapter 2 Consumption Analysis
• Chapter 3 Production Analysis
• Chapter 4 Cost and Revenue Analysis
• Chapter 5 Market Structure and Pricing
• Chapter 6 Distribution Analysis
• Chapter 7 Indian Economy
• Chapter 8 Indian Economy Before and After Independence
• Chapter 9 Development Experiences in India
• Chapter 10 Rural Economy
• Chapter 11 Tamil Nadu Economy
• Chapter 12 Mathematical Methods for Economics

We have also created Samacheer Kalvi 11th Economics Notes for students to help them prepare for the exam like scenario.

We hope these Tamilnadu State Board Samacheer Kalvi Class 11th Economics Book Solutions Answers Guide Pdf Free Download in English Medium and Tamil Medium will help you get through your subjective questions in the exam.

Let us know if you have any concerns regarding TN State Board New Syllabus Samacheer Kalvi 11th Standard Economics Guide Pdf of Text Book Back Questions and Answers, Notes, Chapter Wise Important Questions, Model Question Papers with Answers, Study Material, Question Bank, drop a comment below and we will get back to you as soon as possible.

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:

Basis	Readymade Software	Customised Software	Tailor made Software
1. Nature of business	Small, conventional business	Large, medium business	Large
2. Cost of installation and maintenance	Low	Relatively high	High
3. Expected level of secrecy (software and data)	Low	Relatively high	Relatively high

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: