DZEG

(For the candidates admitted form 2007-2008 onwards)

DIPLOMA IN BUSINESS MANAGEMENT EXAMINATION.
DECEMBER 2019
Non- Semester
PRINCIPLES OF ECONOMICS
Time : Three Hours Maximum : 100 marks
PART A- (10X1=10)
Answer ALL Questions
1. The economists who popularized indifference curve approach is
(a) Simon Kuznets (b) Sweezy (c) J.R. Hicks (d) Paul Samuelson
2. Cardinal measure of utility is required in
(a) Utility theory (b) Indifference curve (c) Revealed preference (d) None
3. The appropriate objective of an enterprise is
(a) Maximisation of sales (b) Maximisation of owner’s wealth (c) Maximisation of profits
(b) None of these.
4. Willingness to pay actual payment is equal to
(a) Supplier’s Surplus (b) Consumer’s Surplus (c) Producer’s Surplus (d) None
5. In case of Giffen goods, demand curve will slope
(a) Upward (b) Downward (c) Horizontal (d)Vertical
6. Price leadership is a form of
(a) Monopolistic competition (b) Monopoly (c) Non-collusive oligopoly (d) Collusive oligopoly
7. Full cost pricing was introduced by
(a) Clark (b) Hall Hitch (c) W. Andrews (d) None of these.
8. A firm’s marginal revenue
(a) Always negative (b) Can be positive (c) Is always positive (d) Positive at point at which the
total revenue is maximum.
9. A market in which only two firms exist is called
(a) Oligopoly (b) Duopoly (c) Duopsony (d) Oligopsony
10. In case of monopoly , a firm in the long run can have
(a) Loss (b) Profit (c) Break even (d) All of these
 PART B- (5X6=30)
Answer any FIVE Questions
11. What are the scopes of Economics?
12. Differentiate between micro economics and macro economics.
13. Define elasticity of demand. What are the factors that affect it.
14. What are the determinants of supply?
15. Mention the importance of Opportunity cost .
16. Distinguish between Urgent Costs and Postponable Costs.
17. Describe different market structure with suitable examples.
18. What are the primary functions of money?

PART C- (3X20=60)
Answer any THREE Questions
19. What is macro economics? How is it different from micro economics?
20. What is demand forecasting? Explain in brief the various methods of demand forecasting.
21. Discuss the cost Output relationship in the Long-run.
22. What is meaning of price leadership? What are the conditions necessary for effective price
Leadership?
23. Discuss the important functions of commercial banks in India.
 ANSWER KEYS
PART-A
1. C 2.A 3. C 4. B 5. A 6. D 7. B 8.D 9. B 10. D

PART-B
11. economics is “a social science concerned with the administration of scarce resources.
Subject matter, Science or Art, Positive or Normative, Problem-solving Nature.

12. Microeconomics deals with the economic interactions of a specific person, a single entity, or a
company. These interactions, which mainly are buying and selling goods, occur in markets.
Macroeconomics is the study of the performance, structure, behavior and decision-making of an
economy as a whole. Macroeconomists focus on the national, regional, and global scales.
13. A number of factors come into play in determining whether demand is price elastic or price
inelastic in a given market. The number of close substitutes, The cost of switching between products,
The degree of necessity or whether the good is a luxury, The proportion of a consumer's income
allocated to spending on the good , The time period allowed following a price change.

14. Number of Sellers. Greater the number of sellers, greater will be the quantity of a product or
service supplied in a market and vice versa Prices of Resources. ..Taxes and Subsidies. .Technology.
.Suppliers' Expectations. Prices of Related Products. Prices of Joint Products.

15. An opportunity cost is the cost of spending your time, money, and energy on one thing,
instead of another thing. As you can see, opportunity costs play a big role in Personal finance.
Awareness of these opportunity costs is very important. Everything that we do in life has an opportunity
cost attached to it.

16. Urgent and Postponable Cost: Urgent costs are those costs which must be incurred in order to
continue operations of the firm. Postponable costs refer to those costs which can be postponed at least
for some time e.g., maintenance relating to building and machinery.

17. There are quite a few different market structures that can characterize an economy.
The four basic types of market structures first: perfect competition, monopolistic competition,
oligopoly, and monopoly. These market structures exist in reality; some of them are just
theoretical constructs.

18. (a) Primary Functions:

Primary Functions include the most important functions of money, which it must perform in every
country, Medium of Exchange, Measure of Value (Unit of Value), Measure of Value (Unit of Value):
Standard of Deferred Payments. Medium of Exchange, Measure of value, Store of Value, Standard of
deferred payments.,
 PART- C

19. Microeconomics: The study of the behavior of individual households and firms in making
decisions on the allocation of limited resources. Macroeconomics: The study of the performance,
structure, behavior, and decision-making of an economy as a whole, rather than individual markets. It is
the study of individual economic units of an economy. It deals with Individual Income, Individual prices,
Individual output, etc. It is the study of economy as a whole and its aggregates, It deals with aggregates
like national Income, general price level, national output, etc.

20. Statistical methods are scientific, reliable and free from biases. The major
statistical methods used fordemand forecasting are: Trend Projection Method: This method is useful
where the organization has a sufficient amount of accumulated past data of the sales. Survey Methods,
Statistical Methods,etc..

21. The long run enables the firms to expand and scale of their operation by bringing or purchasing
larger quantities of all the inputs. Thus in the long run all factors become variable. The long-run cost-
output relations therefore imply the relationship between the total cost and the total output. Raw
material, semi-finished material, unskilled labour, energy, etc., are variable inputs which can be changed
during short run. Machines, capital, infrastructure, salaries of managers and technical experts are
included in fixed inputs.

22. Price leadership is also apparent where levels of consumer demand make a
particular price selected by the market leader viable because consumers are drawn from competing
products. Price leadership is assumed to stabilize prices and maintain pricing discipline. Price leadership
has a greater impact on goods or services that offer little differentiation from one producer to another.
Price leadership is also apparent where levels of consumer demand make a particular price selected by
the market leader viable because consumers are drawn from competing products.

23. The primary functions of a commercial bank are accepting deposits and also lending funds.
Deposits are savings, current, or time deposits. Also, a commercial bank lends funds to its customers in
the form of loans and advances, cash credit, overdraft and discounting of bills, etc. Accepting deposit,
lending of funds,