CS Foundation : Basic Economics and Business Environment - June 2008

CS Foundation • Basic Economics and Business Environment • June 2008

This Paper has 49 answerable questions with 0 answered.

Roll No…………………
Time allowed : 3 hours	Maximum marks : 100
Total number of questions : 8	Total number of printed pages : 2

PART — A
(Answer Question No.1 which is compulsory and any three of the rest from this part.)

(a)

State, with reasons in brief, whether the following statements are correct or incorrect :

(i)

Concept of scarcity is not valid in rich economies.

(0)

(ii)

Negative income elasticity for a product would indicate that the product is an inferior product.

(0)

(iii)

All costs are fixed in the long run.

(0)

(iv)

Price discrimination is an important characteristic of perfect competition.

(0)

(v)

‘National income’ and ‘national wealth’ are the same.

(0)

(2 marks each)

(b)

Comment on any two of the following :

(i)

Robbins definition of economics makes it a science of choice making.

(0)

(ii)

MC=MR is only a necessary condition for attaining equilibrium of a firm under the perfect competition.

(0)

(iii)

Saving is necessarily equal to investment.

(0)

(iv)

Inflation is unjust, deflation is inexpedient.

(0)

(5 marks each)

(c)

Choose the most appropriate answer from the given options in respect of the following :

(i)

Solution of central problems in a capitalistic economy is done through :
(a) Price mechanism
(b) Economic planning
(c) Government policies
(d) None of the above.

(0)

(ii)

When marginal utility (MU) is negative, then total utility (TU) would be :
(a) Zero
(b) Negative
(c) Increasing
(d) Decreasing.

(0)

(iii)

Which of the following is not a factor of production :
(a) Land
(b) Wages
(c) Capital
(d) Entrepreneurship.

(0)

(iv)

If the average total cost is Rs.30 for 5 units of output and Rs.32 for 6 units of output, the marginal cost of producing the 6th unit would be :
(a) Rs.2
(b) Rs.12
(c) Rs.32
(d) Rs.42.

(0)

(v)

The firm will have to shut down in the short run if the firm cannot cover its :
(a) Explicit and implicit costs
(b) Total costs
(c) Variable costs
(d) Fixed costs.

(0)

(1 mark each)

Distinguish between any two of the following :

(i)

‘External economies’ and ‘internal economies’.

(0)

(ii)

‘Monopoly’ and ‘monopolistic competition’.

(0)

(iii)

‘Demand pull inflation’ and ‘cost push inflation’.

(0)

(iv)

‘Qualitative credit control measures’ and ‘quantitative credit control measures’.

(0)

(4 marks each)

(b)

What is ‘quantity theory of money’ ? Explain it with the help of Cambridge equation.

(0)

(7 marks)

(a)

Write short notes on any three of the following :

(i)

Marginal propensity to consume

(0)

(ii)

Rate of exchange

(0)

(iii)

Stagflation

(0)

(iv)

Investment multiplier.

(0)

(3 marks each)

(b)

Compute marginal rate of technical substitution (MRTS) of labour (L) for capital (K) from the following table :

Combination	Units of Capital (K)	Units of Labour (L)	Output of Commodity–X (Units)
1 2 3 4 5	3 4 6 9 13	45 40 35 30 25	400 400 400 400 400

(0)

(3 marks)

(c)

Given below is the demand schedule for a commodity. What is the nature of elasticity of demand for the commodity ? Give reasons for your answer :

Price (Rs.)	Quantity Demanded (Units)
5 6 8 10	12 10 7.5 6

(0)

(3 marks)

(a)

“Measurement of national income in India continues to suffer because of conceptual and statistical difficulties.” What are these and how can these be overcome ?

(0)

(5 marks)

(b)

Explain the ‘law of variable proportions’ with suitable example and diagram.

(0)

(5 marks)

(c)

Show the determination of consumer’s equilibrium with the help of indifference curves.

(0)

(5 marks)

(a)

What is ‘credit creation’ by banks ? State the limitations on credit creation.

(0)

(5 marks)

(b)

What do you mean by ‘marginal efficiency of capital’ ? How is it different from ‘marginal productivity of capital’ ?

(0)

(5 marks)

(c)

What do you understand by ‘disequilibrium in the balance of payments’ ? What steps could be taken to overcome the problem ?

(0)

(5 marks)

PART — B
(Answer ANY TWO questions from this part.)

6.	(a)	State, with reasons in brief, whether the following statements are correct or incorrect :
		(i)	India is very rich in some minerals, but very poor in others.	(0)
		(ii)	The indicators of quality of India's population provide a mixed picture.	(0)
		(iii)	The primary sector in India generates both the largest share of national income and employment opportunities.	(0)
		(iv)	Public sector is the major source of saving and investment in the Indian economy.	(0)
		(v)	Poverty is more widespread in urban areas than in rural areas.	(0)
	(2 marks each)
	(b)	What do you understand by the following terms :
		(i)	Laissez faire	(0)
		(ii)	Social goods	(0)
		(iii)	Dualistic economy	(0)
		(iv)	Subsidy	(0)
		(v)	Industrial relations ?	(0)
	(1 mark each)
7.	(a)	Briefly explain the concept of 'business environment'. Explain the factors that affect the economic environment of a business firm.		(0)
	(5 marks)
	(b)	Explain the concept of 'market failure' and its causes.		(0)
	(5 marks)
	(c)	Discuss the composition and direction of India’s foreign trade in recent years.		(0)
	(5 marks)
8.	Attempt any three of the following :
	(i)	What are the main objectives of planning in India ?		(0)
	(ii)	What is meant by ‘financial system’ of an economy ? Discuss the major components of a financial system.		(0)
	(iii)	Write a note on 'power sector reforms in India'.		(0)
	(iv)	“Infrastructure framework constitutes the foundation of modern economic growth.” Comment.		(0)
	(v)	What do you understand by 'income inequalities' ? What are its causes ?		(0)
	(5 marks each)

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