Q1.define dispersion. discuss the main measure of dispersion.

ans.Dispersion is a measure of the variation of the items from central value. the main measure of
dispersion is standard deviation which is calculated by the the square root of sum of squared deviation
from the mean divided by the number of observations.

q2.difference between positive and negative correlation

or

how is karl pearson coefficient of correlaion calculated amd what are the limits of the correlation
coefficiemt

ans.The difference between positive and negative correlation is that in positive correlation , variables
move in the same direction whereas in the negative correlation, they move in different directions .

or

karl pearsons coefficiant of corelation is calculated by :

r= sum of (X-X')(Y-Y')/N.sd of Xseries.sd of Y series

limits of karl pearsons coefficient of correlation:

1. Uncorrelated : Uncorrelated (r = 0) implies no ‘linear relationship’. But there may exist non-linear
relationship (curvilinear relationship).

Spurious Correlation : The word ‘spurious’ from Latin means ‘false’ or ‘illegitimate’. Spurious correlation
means an association extracted from correlation coefficient that may not exist in reality.

Q.3. Name the consumer Groups for which consumer price index number is computed.

OR

State the two types of price index numbers

ans. The consumer groups for which consumer price index is computed are:

(i) Industrial Workers (IW),

(ii) Urban-Non Manual Employees (UNME), and

(iii) Agricultural Labourers (AL).

or

The two types of price index numbers are:

(i) Consumer Price Index, and

(ii) Wholesale Price Index.

Q.4. Explain the effect of subsidy on the supply of a good

When the government gives a subsidy on the production of a good, marginal and average costs of
production tend to fall. Accordingly, producers will supply more at the same price or supply the same
quantity at the lower price. This implies a forward or rightward shift in supply curve or increase in supply
as shown in Fig.

Q.5. Why is the demand curve of a firm under perfect competition parallel to x axis?

OR

Explain the free entry and exit feature of perfect competition.

Ans. A perfectly elastic demand curve is parallel to the x-axis. This is because if the elasticity of a
commodity is perfectly elastic when the producer can sell any quantity of the commodity for a particular
price and the demand becomes zero with a slight change in price. In other words, the quantity
demanded of the commodity can change without any change in price.

or

(i) Buyers and sellers are free to enter or leave the market at any time they like. New firms induced by
large profits can enter the industry whereas losses make inefficient firms to leave the industry.

(ii) The freedom of entry and exit of firms has an important implication. This ensures that no firm can
earn above normal profit in the long run. Each firm earns just the normal profit, i.e., minimum necessary
to carry on business.

(iii) Suppose the existing firms are earning above normal profits, i.e. positive economic profits. Attracted
by the positive profits, the new firms enter the industry. The industry.s output, i.e. market supply, goes
up. The prices come down. New firms continue to enter and the prices continue to fall till economic
profits are reduced to zero.

(iv) Now suppose the existing firms are incurring losses. The firms start leaving. The industry.s output
starts falling, prices going up, and all this continues till losses are wiped out. The remaining firms in the
industry then once again earn just the normal profits.

(v) Only zero economic profit in the long run is the basic outcome of a perfectly competitive market.

Q.6. What is standard deviation? what are its advantages and disadvantages?

the standard deviation is defined as the deviation of the values or data from an average mean.

Advantages:

The value of standard deviation is always fixed, and it is rigidly defined.

Mathematical operations and statistical analysis both are possible with the use of standard deviation.

Disadvantages:

The open end frequency distribution can be calculated using standard deviation.

The extreme values in the series affect the standard deviation.

Q.7. Make a scatter diagram of the data given below. does any relationship exist

between the two variables?

X 4 5 6 7 8 9 10 11 12 13 14 15

Y 78 72 66 60 54 48 42 36 30 24 18 12

OR

Describe the main problems which are faced in the construction of index number

of prices

ans.

or

Ans.

Difficulties in the Selection of the Base Period: The first difficulty relates to the selection of the base year.
The base year should be normal. But it is difficult to determine a truly normal year.

Difficulties in the Selection of Commodities:The selection of representative commodities for the index
number is another difficulty. The choice of representative commodities is not an easy matter. They have
to be selected from a wide range of commodities which the majority of people consume.

Difficulties in the Collection of Prices:Another difficulty is that of collecting adequate and accurate prices.
It is often not possible to get them from the same source or place.

Arbitrary Assigning of Weights:In calculating weighted price index, a number of difficulties arise.The
problem is to give different weights to commodities.The selection of higher weight for one commodity
and a lower weight for another is simply arbitrary. There is no set rule and it entirely depends on the
investigator.

Difficulty of Selecting the Method of Averaging:Another difficulty is to select an appropriate method of

calculating averages. There are a number of methods which can be used for this purpose.

Difficulties Arising from Changes Overtime:In the present times, changes in the nature of commodities
are taking place continuously overtime due to technological changes. As a result, new commodities are
introduced and people start consuming them in place of the old ones.

Not All Purpose:An index number constructed for a particular purpose cannot be used for some other
purpose.

International Comparisons not Possible:International price comparisons are not possible with index
numbers. The commodities consumed and included in the construction of an index number differ from
country to country.

Comparisons of Different Places not Possible:Even if different places within a country are taken, it is not
possible to apply the same index number to them. This is because of differences in the consumption
habits of people.

Not Applicable to an Individual:An index number is not applicable to an individual belonging to a group
for which it is constructed. If an index number shows a rise in the price level, an individual may not be
affected by it. This is because an index number reflects averages.

Q.8. The market price of a good changes from ₹ 52 to ₹ 20. as a result the quantity

supplied by a firm increases by 15 units. the price elasticity of the firm supply curve is

0.5 find the initial and final output levels of the firm.

ans. Elasticity of Supply, es = 0.5

Initial Price, P1 = Rs 5

Final price, P2 = Rs 20

ΔP = P2 - P1 = 20 - 5

ΔP = 15

ΔQ = 15

es = ΔQ/ΔP x P1/Q1 0.5

= 15/15 x 5/Q1 0.5

= 5/Q1

Q1 = 5/0.5 = 10units

Initial quantity = 10 units

Final quantity,Q2 = ΔQ + Q1 = 15 + 10

Therefore, Q2 = 25 units

Q.9. Describe the various type of production cost.explain the mutual relationship

between total cost and marginal cost.

ans. Fixed cost is referred to as the cost that does not register a change with an increase or decrease in
the quantity of goods produced by a firm. Fixed costs are those costs that a company should bear
irrespective of the levels of production.
Variable cost is referred to as the type of cost that will show variations as per the changes in the levels of
production. Depending on the volume of the production in a company, the variable cost increases or
decreases.

(i) When MC is rising, TC increases at an increasing rate.

(ii) When MC is falling, TC increases at a diminishing rate.

(iii) When MC is constant, TC increases at a constant rate.

Q.10. What is meant by price floor?

A Floor price is the minimum price at which a commodity can be sold legally. Floor price if fixed above
the equilibrium price, serves the purpose of welfare of the producers (say farmers). When price floor is
fixed at P” quantity demanded will contract to OQ” but at this price, suppliers will be ready to supply
OQ’. As a result, surplus of QQ” will emerge.

Q.11. Calculate the correlation Coefficient between the two variables X and YX 65 66 57 67 68 69 70 72

Y 67 56 65 68 72 72 69 71

OR

Calculate coefficient of variation from the following data

Variables 10 20 30 40 50 60 70

Frequencies 6 8 16 15 32 11 12

ANS.

Q.12. Explain the law of variable proportions in terms of the behaviour of total physical

product and total marginal product with the help of diagram.

Q.13. At a given price ,there is excess demand for a good. explain how the equilibrium price will be
reached .use diagram.

ANS,.Excess demand is a situation where market demand exceeds market supply. In the given figure
market demand is between Q(e) and Q2 i.e., Q1 to correct the situation of excess demand supply should
be increased such or price should be increased to 8 so the quantity demanded is reduced and reached
Q(e) level.