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11 Economics SP 05
11 Economics SP 05
Class 11 - Economics
Maximum Marks: 80
General Instructions:
Section A – Micro Economics
Section B – Statistics
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be answered in 60 to 80 words.
4. This paper contains 6 Short Answer Questions type questions of 4 marks each to be answered in 80 to 100 words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be answered in 100 to 150 words.
Section A
1. Assertion (A): Housewife working in the house is termed as Non-economic activity.
Reason (R): There is no monetary gain or salary paid to the housewife for working in the house.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
2. Inflation is measured in terms of weekly changes in:
a) Cost of Living Index
b) WPI
c) CPIAL
d) CPIIW
3. A correlation coefficient:
A. Efficiently summarises some of the information in a scatterplot.
B. Is a sort of index of how close the points of a scatter diagram deviate from the best-fitting straight line through those
points.
C. Tells you the direction of the slope of the scatter diagram.
a) Only B
b) All of these
c) Only C
d) Only A
4. From the data given below, find Paasche’s price index:
Commodity Base year Current year
A 4 2 6 3
B 3 5 2 1
C 8 2 4 6
3 5 4
2 6 6
1 5 8
5 2 2
7 8 1
What is the Spearman rank correlation coefficient between the Scale-Aand the Scale-C?
a) -0.1
b) -1.0
c) 0
d) 1
11. Mr. Ashok was getting Rs.400 in the base year and Rs.800 in the current year. If Consumer Price Index is Rs.350, then
what extra amount is required for maintaining the earlier standard of living?
Physics (P) 30 25
Economics (E) 15 12
Commerce (C) 25 13
Chemistry (Ch) 25 10
OR
Mr Ram has annual income of Rs,10,00,000 while Mr Raj has annual income of RS.70,00,000. Their average income has
been computed at Rs.40,00,000 per annum. Do you think average income is a good representation of their actual annual
incomes?
13. Present the following table in the form of more than series.
Class Interval Frequency
10-20 12
20-30 13
30-40 18
40-50 13
50-60 12
60-70 9
70-80 8
80-90 1
Total 86
14. Net domestic product by industry of origin (at 2004-05 prices) is given for the year: 2013-14 and 2014-15. Present this
data in terms on percentage bar diagram.
Net Domestic Product by Industry of Origin (at 2004-05 prices) in 2013-14 and 2014-15 (Rs. in crore)
Sector Year (2013-14) Year (2014-15)
Primary 6,65,751 6,71,674
OR
30-40 12
40-60 28
60-80 20
80-110 24
15. “A good sample is generally based on correctness and continuity”. In the context of above statement explain the
characteristics of good sample.
16. Calculate the correlation coefficient between the height of fathers in inches (X) and their sons (Y).
X 65 66 57 67 68 69 70 72
Y 67 56 65 68 72 72 69 71
17. Determine the missing frequencies when mode = 36 and total frequency is 30.
Class Interval 10-20 20-30 30-40 40-50 50-60
2
Frequency (f) - 5 12 -
OR
20 10
30 20
40 8
50 6
60 3
Section B
18. Supply curve shifts forward due to:
a) decrease in price of competing product
b) decrease in factor price
c) increase of firms in the market
d) all of these
19. Normative economics deals with:
A. facts
B. opinions
C. both facts and opinions
D. none of these
a) only D
b) Only B
c) Only C
d) Only A
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25. AR is more elastic in monopolistic competition than in monopoly as
a) Many close substitutes do not exist in monopolistic competition
b) Many close substitutes do not exist in monopoly competition
c) Many close substitutes exist in monopolistic competition
d) Many close substitutes exist in monopoly competition
26. TC increases at an increasing rate when MC is:
a) negative
b) constant
c) increasing
d) decreasing
27. The break- even point where TR=TC, the firm cannot earn abnormal profits
a) Can’t say
b) FALSE
c) True
d) None of these
28. Explain the problem of ‘what to produce’.
2 24 50
3 24 72
4 24 92
5 24 115
6 24 139
7 24 165
OR
How is producer’s equilibrium determined in case of perfect competition using MR and MC approach?
32. Define Marginal Rate of Substitution. Why is an Indifference Curve convex?
33. State the behavior of marginal product in the law of variable proportions. Explain the causes of this behavior.
34. Answer the following questions
1. Explain the price elasticity of demand.
2. Explain the effect of the following on Price Elasticity of Demand of a commodity.
i. Number of substitutes.
ii. Nature of the commodity
Class 11 - Economics
Solution
Section A
1. (a) Both A and R are true and R is the correct explanation of A.
Explanation: The monthly WPI number shows the average price changes of goods usually expressed in ratios or
percentages. The index is based on the wholesale prices of a few relevant commodities available. The commodities are
chosen based on their significance in the region.
3. (b) All of these
Explanation: The correlation coefficient is a statistical measure of the strength of the relationship between the relative
movements of two variables. The values range between -1.0 and 1.0. A calculated number greater than 1.0 or less than
-1.0 shows that there was an error in the correlation measurement.
4. (c) 69.84
Explanation:
Base Year Current Year
Commodity P1q1 P0q1
Price (P0) Quantity (q0) Price (P1) Quantity (q1)
A 4 2 6 3 18 12
B 3 5 2 1 2 3
C 8 2 4 6 24 48
Total 44 63
Paasche’s price index= 44
63
× 100 = 69.84
p1 q1
(Paasche's price index = p0 q1
× 100
Under this method of calculating Price Index, the quantities of the current year are used as weights as compared to base
year quantities used by Laspeyres.
6. (c) Reciprocal of price index number
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Explanation: Statistics is used by the government as the role of government has increased and requires much greater
information in the form of numerical figures to fulfil the welfare objectives. Statistics is also an indispensable tool for a
proper understanding of various economic problems. Statistics is also useful for Industries as it helps in forecasting,
production planning, quality control etc.
8. (b) The column headings
Explanation: At the top of each column in a table, a column designation is given to explain figures of the column. This
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9. (b) price in period t/base period price)(100)
p
Explanation: By definition, we have, price relative = p
1
.It implies that we are comparing current year with base year
0
p0
price relative = , it implies that we are comparing base year with current year which is quite absurd both logically and
p1
Explanation: -1. 0 shows a perfect negative correlation between the two variables.
11. With the increase in prices, the amount of goods and services which money wages can buy goes on decreasing. Change
in real wages is computed as follows:
where 400 is his salary in base year and 350 is the Consumer Price Index.
400×350
= = 1400
100
When CPI goes up to Rs. 350, his salary should also increase to Rs. 1400, whereas his salary is only Rs. 800.
∴ Amount required for maintaining the same standard of living = 1400 - 800 = Rs. 600.
12. For finding out weighted mean, each item of the series is multiplied by its weights. Here price per book is multiplied by
Number of books sold. Number sold is the weight in this question. Then we have to find ΣXW and divide it by ΣW
S 20 40 800
P 30 25 750
E 15 12 180
C 25 13 325
Ch 25 10 250
ΣW = 100 ΣXW = 2305
Now, X
OR
In this particular case, Mr. Ram has an annual income of Rs,10,00,000 while Mr. Raj has annual income of
RS.70,00,000. Their average income has been computed at Rs.40,00,000 per annum.
As per the given case, the average income computed is not representative of the actual annual incomes of Mr. Ram and
Mr. Raj. The average income exceeds Mr. Ram’s actual income by Rs.30,00,000 and it falls short of Mr. Raj’s income by
Rs.30,00,000 So, it is not a good representation of their actual annual incomes.
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The given table in the form of more than series is shown below:
Item Frequency (f)
More than 40 61 - 18 = 43
More than 50 43 - 13 = 30
More than 60 30 - 12 = 18
6,65,751
Percentage share of primary sector= 36,47,041
× 100
OR
The above distribution has unequal class intervals. Therefore, the frequencies will be adjusted before constructing the
histogram. For calculating the adjusted frequency, we have to take the width of the lowest class interval, which in this
case is 10.
10
=1 5
1
= 5
20-30 10 10
10
=1 10
1
= 10
30-40 12 10
10
= 1 12
1
= 12
40-60 28 20
10
=2 28
2
= 14
60-80 20 20
10
= 2
20
2
= 10
80-110 24 30
10
= 3
24
3
= 8
¯¯¯¯ ΣX 534 ¯
¯¯¯ ΣY 540
= = = =
n 8 n 8
Σxy
73 73 73
r = = = = = 0.438
√143.5×194 √27839 166.85
√Σ x2 ×Σ y 2
It indicates that there is low degree of positive correlation between height of fathers and sons.
17. Let the missing frequencies be x and y.
Class Interval Frequency (f)
10-20 x
20-30 5
30-40 12
40-50 y
50-60 2
n=30
1 0
∴ Mode , ( M0 ) = l1 + × c
2f −f −f
1 0 2
x+5+12+y+2=30
12−5
⇒ 36 = 30 + × 10
24−5−y
∴⇒ x+5+12+7+2=30 [∵ y=7]
⇒ 6 =
7
× 10
19−y ∵ x=4
⇒ 6(19-y)=70 ⇒114-6y=70
⇒ 6y=44 ⇒y = = 7.33 = 7
44
OR
30 20 34
40 8 42
50 6 48
60 3 51
n = Σf = 51
First quartile and third quartile can be calculated by using the formula given below:
Q1 Q3
n+1
51+1 (51+1)
= Size of (
4
) th item
= Size of 3
4
th item
Section B
18. (d) all of these
Explanation: Increase in supply refers to a situation when more is supplied at the existing price of the commodity. It
leads to a forward shift in the supply curve. Increase in supply may occur due to improvement in technology, reduction
in factor prices, a decrease in the price of a competing product etc.
19. (b) Only B
Explanation: opinions
20. (c) Quantity will decrease
Explanation: Due to a fall in income and number of sellers, supply decreases. We can conclude with certainty that the
Explanation: The revenue of a firm is its sale receipts or money received from the sale of a product.
22. (d) only variable cost
Explanation: Marginal cost is an additional cost and additional cost cannot be fixed cost, it can be a variable cost.
Accordingly, the sum total of marginal cost corresponding to different units of output becomes TVC.
23. (c) A is true but R is false.
Explanation: The resources(land, labour, capital and entrepreneurship) are free to move to the industry in which they
get the best price as there is freedom of entry and exit
25. (c) Many close substitutes exist in monopolistic competition
Explanation: In monopoly, there is a single seller and no close substitutes are available for the product. So the customer
cannot shift to any other product(as there are no substitutes) if the monopolist increases the price of the product. In such
a case the demand is less elastic or inelastic. Whereas in monopolistic competition, there are large number of sellers and
substitutes are available, so the customer will shift to substitute product if there is a increase in price. As such in this
situation the demand is more elastic.
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26. (c) increasing
Explanation: The firm can earn abnormal profits only when TR > TC
28. Problem of 'what to produce' arises as the economy has limited resources. Because of the scarcity of resources, producers
are unable to produce everything in desired quantity, so they have to make a choice as to which product or service is
important as a whole so that limited resources can be rationally managed. There is a problem of allocation of resources
among different goods.
For example, the production of more bread is possible only by reducing the production of other goods.
OR
There would not be any problem of choice or the problem of rational management of resources. The problem of choice
then ceases to exist; accordingly there should not be any economic problem and no economics as such.
Example: If farming land could be used only for the production of rice (and no other crop) then where is the problem.
Just grow rice and relax! The problem arises because farming land can be used for the production of different crops, like
rice and Bajra.
29.
The diagram shows an increase in demand while supply remains unchanged. Equilibrium price rises to OP1, and
equilibrium quantity rises to OQ1.
i. When the income of the consumer rises, the demand curve shifts to the right.
ii. When the number of consumers increases, market demand for the commodity increases. Again, it implies a forward
shift in the demand curve. It will shift towards the right thereby increasing the quantity demanded and price of the
product.
30. It is true to say that a good may be inferior for one consumer and normal for other. Whether a good is considered as
inferior or normal depends upon income of the consumer. Any good is identified as inferior good when income effect is
negative i.e., with increase in income the demand for good falls.
(i) If a poor person's income increases and because of this increases he switches from coarse grains to low quality grains,
then for him low quality grains is a normal good. Whereas for a person in the middle income group low quality grains is
an inferior good.
(ii) Even a normal car can also be an inferior good for some people. A person may be owning a normal car due to his low
income, but when his income increases he will start demanding luxury cars. So, for him normal car is an inferior good
and luxury car is a normal good.
31. Total and Marginal Cost and Revenue Schedule
Total
Output Revenue
Profit Marginal
Price Total Marginal
(Q)
(TR in (Rs)
Revenue
1 24 26 24 -2 24 26
2 24 50 48 -2 24 24
3 24 72 72 0 24 22
4 24 92 96 4 24 20
5 24 115 120 5 24 23
6 24 139 144 5 24 24
7 24 165 168 3 24 26
Reason :
At 2nd and 6th unit, MR=MC. But at 7th unit MC>MR. Thus, by this both the condition of producer equilibrium is
satisfied.
In order to get maximum profit under perfect competition, a firm must compare its marginal cost with marginal revenue.
According to marginal analysis, a firm would, therefore, be in equilibrium when the following two conditions are
fulfilled :
i. MC = MR.
ii. The MC curve cuts the MR curve from below.
In this figure, MC cuts MR at two points A and ‘E’. Point ‘A’ cannot indicate the position of equilibrium of the firm as
at point A Marginal cost of the firm is still falling or we can say MC is not cutting MR from below.
Here point ‘E’ represents the equilibrium of the firm. At this point, both the conditions of equilibrium are being fulfilled:
Marginal cost is equal to marginal revenue (MC = MR) and the marginal cost curve is cutting the marginal revenue curve
from below. At point ‘E’, the firm gets a maximum profit. In case, the firm produces more or less than OM output, then
its profits will be less than the maximum.
32. Marginal Rate of Substitution (MRS) refers to the rate at which the consumer is willing to sacrifice one good to obtain
one more unit of the other good. Symbolically,
Indifference Curve (IC) is convex to origin due to diminishing Marginal Rate of Substitution. It means that a consumer is
willing to sacrifice less and less units of a good to gain an additional unit of the other good because the utility that he
gets from consuming an additional unit of a good goes on diminishing. As the consumer substitutes commodity X for
commodity Y, the marginal rate of substitution diminishes as X for Y along an indifference curve. Thus indifference
curve is steeper towards the Y axis and gradual towards the X axis. It is convex to the origin.
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33. The behavior of Marginal Product in the law of variable proportion is as under:
i. When total product increases at an increasing rate (convex shape) (till point P), MP also increases.(till the point P 1
ii. when total product increases at a diminishing rate (concave shape) (till point A)., then Marginal product falls and
remains positive (Till point B1),
iii. when total product is at its maximum and constant (At point B), Marginal Product is zero (at point B1),
ΔQ
Price elasticity of demand (Ed) = (−)
P
Q
×
ΔP
Here, ΔQ = Change in quantity demanded; ΔP = Change in price; Q = Initial quantity; P = Initial price.
2. i. Number of substitutes of goods: Demand for goods which have close substitutes (like tea and coffee) is
relatively more elastic, because when the price of such a good rise, the consumers have the option of shifting to
its substitute. Goods without close substitutes like cigarettes etc are generally found to be less elastic or inelastic
in demand. Thus, the availability of close substitutes makes demand sensitive to change in prices.
ii. Nature of the commodity: Ordinarily, necessaries like salt, matchboxes, medicines etc have inelastic demand as
it is required for human survival and its demand does not fluctuate much with a change in price. Luxuries, like air
conditioner, costly furniture, car etc have more elastic demand as compared to the demand for comforts. Comforts
like, cooler, fans etc have an elastic demand as consumers can postpone their consumption.