CS Foundation :: Basic economics & business environment : June 2004

Roll No…………………
Time allowed : 3 hours	Maximum marks : 100
Total number of questions : 8	Total number of printed pages : 3
PART – A
(Answer Question No.1 which is compulsory and any three of the rest from this part.)

(a)

State, with reasons, whether the following statements are true or false :

(i)	Micro-economics and macro-economics analyse the same economic aggregates.
(ii)	A firm under perfect competition is a price-taker.
(iii)	GNP is always less than GDP.
(iv)	Commercial banks have more liquidity when the CRR is raised by the central bank.
(v)	There exists an inverse relationship between the multiplier and the MPS.

(3 marks each)

(b)

Distinguish between any two of the following :

(i)	'Positive science' and 'normative science',
(ii)	'External economies' and 'internal economies'.
(iii)	'Income effect' and 'substitution effect' with the help of indifference curves.

(5 marks each)

(a)

Define 'consumer equilibrium'. Determine this concept using the equi-marginal principle.

(5 marks)

(b)

Calculate the marginal rate of technical substitution of Y for X from the following table :

Combination

A
B
C
D
E

Factor-X

1
2
3
4
5

Factor-Y

12
8
5
3
2

(2 marks)

(c)

Distinguish between 'expansion in demand' and 'contraction in demand' with the help of suitable diagrams.

(4 marks)

(d)

Explain the concept of 'stagflation'.

(4 marks)

(a)

Explain the relationship between 'short-run average cost curves' and 'long-run average cost curves'.

(3 marks)

(b)

Describe in brief the different components of the domestic factor income.

(5 marks)

(c)

What are the three types of price discrimination followed by monopoly firms ? Discuss.

(7 marks)

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P.T.O.

112

: 2 :

(a)

"Inflation in small doses is desirable. But, if it is left uncontrolled, it will eat in to the very fabric of an economic system." Do you agree ? Substantiate your answer.

(7 marks)

(b)

Critically examine the 'quantity theory of money'.

(8 marks)

(a)

Distinguish between 'autonomous investment' and induced investment'. Explain the determinants of investment in an economy.

(7 marks)

(b)

Explain and evaluate in brief the Ricardian theory of comparative cost advantage.

(8 marks)

PART – B

(Answer ANY TWO questions from this part.)

(a)

Analyse the importance of the market structure in the business environment of a firm.

(7 marks)

(b)

What do you mean by 'business environment' ? What are its different components ?

(8 marks)

(a)

"India is a poor, but developing economy." Substantiate this claim by considering the features of Indian economy.

(7 marks)

(b)

Analyse the changes in the composition and direction of India's foreign trade since independence.

(8 marks)

(a)

"An efficient system of transport forms the core of the infrastructure of an economy." Comment on this statement in the Indian context.

(7 marks )

(b)

Write short notes on the following :

(i)	Indian financial system
(ii)	Current industrial policy.

(4 marks each)

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1/2004/BEBE