CS Foundation :: Basic economics & business environment : December 2006

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 in brief, whether the following statements are true or false :

(i)	A pure capitalistic economy is characterised by absence of State intervention in economic activity.
(ii)	As a consumer moves along an indifference curve from left to right, the marginal rate of substitution of Commodity-X for Commodity-Y increases.
(iii)	Two isoquants may intersect each other.
(iv)	Monopolistic competition is characterised by the homogeneity of product.
(v)	Commercial banks have unlimited capacity to create credit.

(3 marks each)

(b)

Distinguish between any two of the following :

(i)	‘Inferior goods’ and ‘status related goods’.
(ii)	‘Cardinal approach’ and ‘ordinal approach’ in utility analysis.
(iii)	‘National income at current prices’ and ‘national income at constant prices’.

(5 marks each)

(a)

When the price of Commodity-X is Rs.20 per unit, its quantity demanded is 50 units; and when the price goes up to Rs.40 per unit, its quantity demanded falls to 25 units. Find the price elasticity coefficient and give its interpretation.

(4 marks)

(b)

Fill in the blanks in the following table :

Agricultural Output with Fixed Land and Variable Units of Labour
Labour (Units)	Total Output (Tonnes)	Average Output (Tonnes)	Marginal Output (Tonnes)
1 2 3 4 5 6 7	— — — 48 — — 60	— 10 — — 11 10 —	8 — 16 — — — —

(3 marks)

(c)

What is ‘inflationary gap’ ?

(4 marks)

(d)

Briefly explain the concept of ‘marginal propensity to save’.

(4 marks)

P.T.O

1/2006/BEBE

( 2 )

112

(a)

What is meant by ‘selling expenses’ in the context of monopolistic competition ?

(3 marks each)

(b)

What are ‘ridge lines’ ? Explain giving a suitable diagram.

(5 marks)

(c)

What is meant by ‘monopoly’ ? Explain the equilibrium of a monopolist firm in the long run.

(7 marks)

(a)

Write notes on any two of the following:

(i)	Investment multiplier
(ii)	Demand pull inflation
(iii)	Net barter terms of trade.

(5 marks each)

(b)

What is ‘bank rate’ ? How is it used by the central bank of a country to control credit creation by banks ?

(5 marks)

(a)

Critically analyse the comparative cost advantage theory of international trade.

(8 marks)

(b)

What is meant by ‘national income’ ? Can it be taken as a measure of welfare ? Give reasons for your answer.

(7 marks)

PART - B

(Answer ANY TWO questions from this part.)

(a)

What is meant by ‘government failure’ ? What are the reasons for government failure ?

(8 marks)

(b)

) How does rapid growth of population create hurdles in economic development ?

(7 marks)

(a)

Write short notes on the following :
(i) Dualistic nature of Indian economy
(ii) Drawbacks of road transport system in India.

(4 marks each)

(b)

What is meant by ‘economic environment of business’ ? Mention the factors which influence it.

(7 marks)

(a)

Define ‘subsidy’

(2 marks)

(b)

Briefly discuss the financial sector reforms initiated in India in recent years.

(8 marks)

(c)

“Changing composition of India’s external trade reflects the changing nature of the economy.” Elaborate.

(5 marks)

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1/2006/BEBE