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Professor
UNIT I INTRODUCTION
The themes of economics – scarcity and efficiency – three fundamental economic problems –
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society’s capability – Production possibility frontiers (PPF) – Productive efficiency Vs economic
efficiency – economic growth & stability – Micro economies and Macro economies – the role of
markets and government – Positive Vs negative externalities
Q.NO UNIT - I - PART - A - QUESTION LEVEL COMPETENCE
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How would you define Economics?
Level 2
Remembering
Understanding
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State the importance of understanding
3 Level 3 Applying
Economic Problem
Can you outline difference between Micro and
4 Level 4 Analysing
Macro Economics?
5 Explain Production Possibility Frontier. Level 5 Evaluating
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Efficiency?
7 What is meant by Economic Growth? Level 1 Remembering
List the difference between Positive and
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Negative Externalities.
9 Describe Economic Stability Level 3 Applying
Identify the role of Government in present
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10 Level 4 Analysing
Economic Scenario
11 Explain Transformation Curve Level 5 Evaluating
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20 Discuss the importance of Micro Economics Level 1 Remembering
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Q.NO UNIT - I - PART - B - QUESTION LEVEL COMPETENCE
i) Write a detailed note on the nature of Macro Economics
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(7Marks)
1 Level 1 Remembering
ii) State the importance of Macro Economics.
(6Marks)
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i) Explain Economic Efficiency. (5Marks)
Efficiency?
Government plays a vital role in today’s economic scenario –
6 Level 6 Creating
Discuss
‘The markets and government play a significant role for the
7 Level 1 Remembering
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Unit - I - Part - C – Question
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1. The Government suddenly made a “U” turn in its economic policies in 1991, making a
fundamental departure from “Nehruvian Policies of Socialism”, even without discussing
the issue in the Parliament. Even Communist and Socialist members of the Parliament,
and also pro-labor organizations kept quiet – Discuss about these in groups, regarding the
significance and implications.
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2. The City of Pune has a hundred petrol pumps selling identical products, but owned by
different owners. The total market demand is given by Q = 50000 – 20000p. The total
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supply function is given by: Q = 2500P. Cone of the Oil companies decided to take over
all these pumps. There is no apparent cost advantage because the cost function remains
the same, regardless of whether it is one large company or many small ones. The users of
petrol are disturbed and annoyed at this because they anticipate exploitation. You are
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required to calculate the following:
i. The price prior to the merger. (8Marks)
ii. The price post-merger. (7Marks)
Note that the supply function is nothing but the rising part of the relevant cost function.
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Questions:
i. If the Government steps in and decides to regulate the price, would you recommend a
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3. Explain as to how the study of Economics helps you in better decision making in today’s
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business scenario?
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course is telling her that needs and wants and unlimited and the resource are limited. She
comes to school to get an answer on how to be an effective manager, and meeting unlimited
needs with limited resource is found to be difficult for her to concentrate.
Questions:
i. How would you relieve Ms. X’s anxiety? How is the course in going to help her (8Marks)
ii. How does a course in economics differ from other fields? (7Marks)
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1 Define Market Level 1 Remembering
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2 What are the different types of Markets? Level 2 Understanding
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4 Can you explain Demand Analysis? Level 4 Analysing
7
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Interpret the term Equi Marginal Utility?
Level 1
Creating
Remembering
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Why does the demand curve slopes
8 Level 2 Understanding
downwards?
9 What is meant by Elasticity of Demand? Level 3 Applying
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i) Explain the Law of Demand and the
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assumptions. (7Marks)
2 Understanding
ii) Explain why the demand curve slopes Level 2
downwards? (6Marks)
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(7Marks)
3 Applying
ii) Elaborate the significance of Elasticity of Level 3
demand. (6Marks)
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Explain the Law of Supply and state the
assumptions of Law of Supply.
7 Remembering
ii) Explain the types of Equilibrium. (8Marks)
Indifference Curve.
i) Describe Marginal Analysis and list its
assumptions. (7Marks)
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9 Applying
ii) Outline the approaches to Marginal Analysis Level 3
(6Marks)
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Managerial Decisions.
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(8 Marks)
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i) Discuss the nature of Short-Run and Long-
Run Average cost curves (7Marks)
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ii) Why is the Long-Run cost curve flatter than
Short-Run cost curve? (6Marks)
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Unit - II - Part - C – Question
i.
ii.
iii.
Soap
Salt
Penicillin
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1. Which of the following commodities have most inelastic demand? Give reasons for
your answer:
(5Marks)
(5Marks)
(5Marks)
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2. Suppose you are a sales manager of an organization. Explain how the analysis of
demand contributes to business decision making in the light of the responsibilities of a
sales manager.
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3. You have been appointed in a Market Research Organization and your assignment is
to estimate the demand for Tea Packets. What factors would you like to consider
while estimating the demand for Tea Packets in the next two years?
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4. A controlled economy has a market clearance equations built over years. The policy
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makers looked at the domestic markets and found that product marketers are almost
perfect and that technical rate of substitution has been advantageous. The economic
fundamentals were strong enough to open up the economy. There was opposition
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1 What are the features of a Perfect Market? Level 1 Remembering
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2 Explain the term Market Structure. Level 2 Understanding
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4 Level 4 Analysing
and Monopolistic Competition
5 Explain the term Oligopoly Market Level 5 Evaluating
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and Monopoly
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Differentiate between Monopolistic Competition
Level 1
Level 2
Creating
Remembering
Understanding
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9 Explain the Competitive Market Level 3 Applying
12 Level 6
determined?
What are the determinants of Supply of Factors
13 Level 1 Remembering
of Production?
What are the features of a Monopolistic
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14 Level 2 Understanding
Competition?
15 How do you define a Kinked Demand Curve? Level 3 Applying
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Theory?
Explain Consumer Equilibrium and Producer
18 Level 2 Understanding
Equilibrium
19 How would you explain Market Failure? Level 1 Remembering
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i) Differentiate perfect & imperfect market.(6marks).
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2 ii) Explain the technique of maintaining the market & firm’s Level 2
Understanding
equilibrium. (7marks)
i) List out the different types of Market Structure. (7marks)
3 Applying
i) How would you determine price under perfect Level 3
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competition? Describe. (6marks)
‘Market Structures depends on relative cost and demand
4 Level 4 Analysing
factors’. Do you agree? Justify your stand with valid reasons.
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factor?
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i) Discuss about the interaction of product and market
(7marks)
ii) Explain about the producer who will be determining the
pricing factors (6marks)
Level5 Evaluating
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i) Discuss in detail about the general equilibrium. (6marks)
6 ii) Discuss about the efficiency of competitive market. Level 6 Creating
(7marks)
i) Discuss about the factors influencing the price in a perfect
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Competition (7marks)
9 ii) Explain characteristics of Monopolistic &Oligopolistic Level 3 Applying
Competition. (6marks)
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iii. Market for bus transport in New Delhi (3Marks)
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iv. Passenger cars
(3Marks)
v. Confectionary
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(3Marks)
2. Consider your two favorite soft drinks. Suppose the price of a two-liter bottle of your
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second choice falls. How much of a price decrease would it take to induce you to substitute
the second for your first choice? Estimate the cross elasticity of demand for the drinks. Are
they part of the same market?
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3. Retail sales at the airports had been growing fast and the sales touched $27.1 billion in
2007. Such impressive growth made the airport the fastest growing retail channel behind the
internet. The increased passenger traffic growth along with the soaring tourists' movements
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among countries was fueling the growth of airport retailing. But the global economic
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downturn with increasing oil prices etc. resulted in a rise in air fares, adversely affecting air
travel and retail spending at the airports. Whether the airports retailing remain a prominent
source of revenue in the global economic downturn remains to be seen.
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Pedagogical Objectives:
To the dynamics of airport revenues (aeronautical vs non-aeronautical).
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4. What is the solution to avoid black marketing of essential goods in short supply?
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2 Explain circular flow of income. Level 2 Understanding
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5 State the components of National Income Level 5 Evaluating
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Define Aggregate Demand.
Level 2
Remembering
Understanding
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9 How is Fiscal policy effectiveness measured? Level 3 Applying
11 Level 5 Evaluating
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2 ii) Discuss about its methods & factors influencing national Understanding
Level 2
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income. (6Marks)
i) What are the components of national income? (6Marks)
3 ii) Explain any two components on national income in brief. Applying
Level 3
(7Marks)
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How do different forces interact to determine over all
4 Level 4 Analysing
macroeconomics activity? Illustrate.
i) What is expenditure multiplier? (6Marks)
5 Level5 Evaluating
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ii) What is the role of budget in National Income? (7Marks)
i) Narrate in detail about macro-economic aggregate and the
performance of economy. (6Marks)
ii) How do different forces interact to determine over all macro-
economic activity? (7Marks)
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Discuss the compensatory fiscal policy as a device for
7 Level 1 Remembering
controlling cyclical fluctuation.
“Decline in aggregate demand leads to an economic downturn”?
8 Level 2 Understanding
Explain.
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income. (6Marks)
i) What are the objectives of Fiscal policy? (7Marks)
ii) Explain the various instruments of fiscal policy. Level4
13 Analysing
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(6Marks)
How is aggregate price and output determined by the interaction
14 of aggregate supply and demand? Explain with suitable Remembering
Level 1
illustration.
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1. Why do national income accountants include only final goods in measuring GDP for a
particular year? Why don’t they include the value of stocks and bonds sold? Why don’t
they include the value of used furniture bought and sold? What are government’s fiscal
policy options for ending severe demand-pull inflation? Use the aggregate demand-
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aggregate supply model to show the impact of these policies on the price level. Which of
these fiscal policy options do you think a “conservative” economist might favor?
2. ‘A strong Fiscal Policy is very important for the economy of a nation.’
i. State and evaluate the problem of time lags in enacting and applying fiscal
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policy. (5Marks)
ii. Explain the notion of a political business cycle. (5Marks)
iii.
i.
ii.
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What is the crowding-out effect & why is it relevant to fiscal policy? (5Marks)
3. Banks are required to maintain reserves. In this context, answer the following questions:
Why are commercial banks required to have reserves? (3Marks)
Explain why reserves are an asset to commercial banks but liabilities to the
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Federal Reserve Banks. (3Marks)
iii. What are excess reserves? (3Marks)
iv. How do you calculate the amount of excess reserves held by a bank? (3Marks)
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iii. What are the major strengths and weaknesses of monetary policy? (5Marks)
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1 What is Inflation Rate? Level 1 Remembering
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2 State the Okun’s law. Level 2 Understanding
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4 Bring out the meaning of inflation rate. Level 4 Analysing
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Explain the term frictional unemployment.
Define unemployment.
Level 1
Level 2
Creating
Remembering
Understanding
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9 What are the measures for reducing inflation? Level 3 Applying
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2 Level 2
ii) Discuss the government policies for removing
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unemployment in India. (7Marks)
i) What do you understand by inflation? (7Marks)
3 Level 3
ii) Discuss the various remedies to check inflation.
Applying
(6Marks)
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Describe the impact of Unemployment and offer
4 Level 4 Analysing
suitable measures to reduce unemployment.
How do different forces interact to determine overall
5 Level5 Evaluating
macro-economic activity? –Illustrate
6 ep
i) Explain the concept of Philips Curve
ii) Discuss Long run and Short run Philip Curve
(8Marks)
i) List and Explain the nature of Money Market
(5Marks)
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(8Marks)
7 Level 1 Remembering
ii) Explain the importance of Money market in a
nation’s economy. (5Marks)
8 Discuss the reasons and impact of Inflation. Level 2 Understanding
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(6Marks)
What is meant by Supply Side Policy and explain its
10 Level 4 Analysing
implications?
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1. Suppose the government misjudges the natural rate of unemployment to be much lower
than it actually is, and thus undertakes expansionary fiscal and monetary policy to try to
achieve the lower rate. In the short-run there is probably a tradeoff between
unemployment and inflation. The government’s expansionary policy should reduce
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unemployment as aggregate demand increases. However, the government has misjudged
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the natural rate and will continue its expansionary policy beyond the point of the natural
level of unemployment. As aggregate demand continues to rise, prices begin to rise. In
the long-run, workers demand higher wages to compensate for these higher prices.
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Aggregate supply will decrease (shift leftward) toward the natural rate of unemployment.
In other words, any reduction of unemployment below the natural rate is only temporary
and involves a short-run rise in inflation. This, in turn, causes long-run costs to rise and a
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decrease in aggregate supply. The end result should be an equilibrium at the natural rate
of unemployment and a higher price level than the beginning level. The long-run Phillips
curve is thus a vertical line connecting the price levels possible at the natural rate of
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unemployment found on the horizontal axis.
ii) Long-run Phillips Curve to explain the long-run outcome of these policies. (7Marks)
i) What are the two main ways the size of the public debt is measured? (5Marks)
ii) Distinguish between refinancing and retiring the debt. How does and internally held
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3. How can government fiscal policy be used to offset fluctuations in the level of income in
the country?
4. “The budget is an instrument for attaining and maintaining full employment with
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stability” – Elucidate
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