CS Foundation :: Basic economics & business environment : December 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.)
 
1. (a) State, with reasons in brief, whether the following statements are true or false:
(i)

A production possibility curve is negatively sloped and is concave to the origin because the opportunity cost is not only positive but increases as more of a good is produced.

(ii)

When income alone of a consumer increases, the demand curve for a normal good shifts parallel upwards.

(iii)

If the marginal rate of substitution between two normal goods is constant, the shape of such an indifference curve will be convex to the origin.

(iv)

Giffen goods are an exception to the law of demand because these are ‘status-related goods’, the demand for which is not much dependent on changes in their prices.

(v)

The higher the marginal propensity to consume, the higher will be the value of (Keynesian) multiplier.
(3 marks each)
(b) Distinguish between any two of the following:
(i)‘Price competition’ and ‘non-price competition’.
(ii)‘Price-maker firm’ and ‘price-discriminator firm’.
(iii)‘Pure monopoly’ and ‘simple monopoly’.
(5 marks each)
2. (a) “A rational consumer attains an optimum basket of goods when the marginal utilities of individual goods and services are equal to each other.” Comment.
(4 marks )
(b) “A linear demand curve will have different price-elasticities of demand on its different points, ranging from zero to infinity.” Explain and illustrate with the help of appropriate figure(s).
(4 marks )
(c) Explain that at equilibrium level of income —
(i) ‘Aggregate demand’ is equal to ‘aggregate supply’; and
(ii) ‘Planned saving’ is equal to ‘planned investment’.
(7 marks )
3. (a)

“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 product will decrease, i.e., the marginal product will diminish.” Explain the above law and give causes of ‘increasing returns’ during its first stage.
(8 marks )
(b) Explain how does an industry (market) and firm(s) under perfect competition attain their price and output equilibrium under the short-run. Give appropriate figure(s).
(7 marks )
4. (a) What are the main functions performed by a central bank of a country ?
(8 marks )
(b) Critically explain the Ricardian theory of comparative cost advantage in international trade.
(7 marks )
5. (a) Explain the methods of measurement of national income in a country and suggest the most appropriate method for estimation of national income in India.
(8 marks )
(b) “A perceptible and sustained rise in the general price-level is known as inflation”. Explain the phenomenon and suggest ways to control it.
(7 marks )
2/2004/BEBE P.T.O.


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PART – B
(Answer ANY TWO questions from this part.)
 
6. (a) What is meant by ‘market-failure’ and what are its causes ?
(4 marks )
(b) Does the ‘business environment’ include ‘economic environment’ ? Give some important components of business environment.
(4 marks )
(c) Indian economy seems to have taken a U–turn in the present day liberalised economic regime from a command economy of pre-economic reforms period (before 1991). Explain the main areas of thrust of the Industrial Policy Resolution, 1991 in this context.
(7 marks )
7. (a) Explain the objectives and instruments of monetary policy. Do you agree that monetary policy is more effective during inflationary periods ?
(8 marks )
(b) Describe and explain how fiscal policy can be effectively used by a government to achieve accelerated economic growth and distributive justice.
(7 marks )
8. (a) Write short notes on the following :
(i)Need and justification of dis-investment process in India
(ii)Optimum foreign exchange reserves.
(4 marks each)
(b) What is meant by ‘financial system’ of an economy ? Does India have a sound financial system ?
(7 marks )

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2/2003/BEBE

 

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