Microeconomics Paper 1

Unit 1: Introduction
1. Discuss the nature and scope of economics.
2. Economics is neutral between ends as such. Discuss.
3. Economics is the study of ordinary businesses of life. Analyse this definition of economics.
4. Economics is the logic of choice. Discuss. Or, critically examine the Robbins definition of
economics. Do you think that Robbins definition is superior to Marshallian definition?
5. Compare the definition of economics given by Marshall and Robbins. Which of the two you
prefer and why?
6. Define economics? Which of the definition is the best?
7. Discuss the comparative advantage and the limitations of inductive and deductive methods of
analysis in economics. Or, Induction and deduction both are needed for scientific thought as
right and left feet both needed for walking. Explain.
8. Discuss the main economic problems. Do they arise due the scarcity of resources?
9. Write notes on the following; Utility, marginal and total utility, demand, supply and market.
10. Discuss the role of price mechanism in free economy.
11. Why do demand curves slope downwards towards the right? Explain the conditions in which
demand curves slopes upwards.
12. Explain and illustrate the law of demand. Is there any exception to the law?
13. Write short notes on; increase or decrease in demand, contraction or expansion in demand,
factors affecting the demand, increase or decrease in supply, law of supply.
14. Explain the market equilibrium. Or how price is determined by a market? Explain. Or price is
determined neither by demand nor by supply but by the interaction of the two. Discuss.
15. Discuss static economics. Discuss its importance and limitations.
16. Discuss dynamic economics. Discuss its importance and limitations.

Unit 2: Consumers behaviour

1. What is utility? What do you understand by cardinal and ordinal measurement of utility?
2. Utility: Cardinal approach/Marshallian utility analysis/Consumers equilibrium according to
Marshall/ Marshallian theory of consumers behaviour/ Law of equi-marginal utility or law of
substitution/ what do you mean by Consumers equilibrium? Explain the process of achieving
this in Marshallian framework.
3. Critically explain the laws of equi-marginal utility or law of substitution.
4. What is indifference curve? Explain its nature.
 5. (Consumers equilibrium: Hicks and Slutsky) What is indifference curve? Explain the conditions
of equilibrium according to Hicks.
6. State and explain the law of diminishing marginal rate of substitution. Is it merely the law of
diminishing marginal utility?
7. Discuss with the help of indifference curve technique income effect and substitution effect of a
fall in the price of a commodity.
8. In what ways is the indifference curve approach to the theory of consumers demand
improvement over Marshallian utility approach?
9. Short note: Giffen paradox, income effect.
10. Distinguish between income elasticity, price elasticity and cross elasticity of demand. What are
the methods of measuring price elasticity?
11. Distinguish between (a) price and income elasticity of demand and (b) point and cross elasticity.
What are the practical uses of this concept in various areas of economics?
12. What is the price elasticity of demand? Explain the factors that determine the elasticity of
demand. Or, explain the concept of consumers surplus. What are its criticisms, theoretical and
practical limitations?
13. Explain the concept of consumers surplus and discuss its practical importance.
14. Engels law of consumption and Engels curve.

Unit 3: Theory of production and cost

1. What do you understand by production decision?
2. Write a short note on production function.
3. What do you understand by Cobb-Douglas production? Discuss its practical difficulties. Or,
critically examine Cobb-Douglas production.
4. What do you understand by iso-quants or equal product curves? Discuss.
5. How the producer chooses the least cost combination of factors with the help of iso-quants?
6. Write a short note on factor substitution or the principle of marginal rate of substitution.
7. Discuss the law of variable proportions. Explain the important causes of its operation. Is it a
fundamental law of production?
8. Explain what is meant by (a) constant returns to the scale and (b) diminishing returns to the
scale? Explain briefly how each of these might arise?
9. Discuss the economies of scale of large scale production.
10. What do you understand by real cost and opportunity cost? Explain the cost of opportunity cost.
 11. Explain the concepts of average cost and marginal cost. What is the relationship between the
two? Or, explain the behaviour of cost curve in short and long run. Or, define average fixed,
average variable cost. What is the relationship between average cost and marginal cost?
12. Why is the average cost curve of a firm U shaped in the short period of time? What will be the
shape of average cost curve in the long period?
13. Explain the conditions of equilibrium of a firm under perfect competition.
14. Write short note on expansion path.

Unit 4: Market Structure

1. Short note: perfect completion and imperfect competition.
2. Distinguish perfect competition from imperfect competition.
3. What do you mean by perfect competition? How price is determined under it? Or, what is
equilibrium price? How is it determined under perfect competition?
4. Value is determined at the margin not by the margin. Explain.
5. Discuss the role of time element in the determination of price. Or, generally the price of a
commodity is determined by demand in the short period and by supply in the long period. Or,
discuss the importance of time element in the theory of value.
6. Discuss Marshall Theory of value. Explain the importance of time in the determination of value
in his theory.
7. How is value determined under conditions of perfect completion (i) in short period market and
(ii) long period market?
8. Explain the equilibrium of industry under perfect competition.
9. Explain the condition of equilibrium of a firm in the short and long run under perfect
competition.
10. How value is determined under monopoly? Or, define monopoly and explain how price is
determined under conditions of monopoly?
11. Is monopoly price always higher than the competitive price?
12. What is discriminating monopoly? How is price determined under discriminating monopoly?
13. What are the essential conditions of price discrimination? Is price discrimination justified?
14. Write a note on measure of monopoly power.
15. Explain main characteristics of monopolistic competition. How price is determined under this
market?
16. What is duopoly? Discuss its nature.
17. What is oligopoly? Discuss the main characteristics of oligopoly.
18. How is price determined under oligopoly? Or, explain the difficulties in the way of explaining
the theory of oligopoly. Or, discuss the price and output determination under oligopoly without
product differentiation, assuming that there is perfect collusion among oligopolistic firm?
19. What do you understand by price rigidity under oligopoly? Oligopolists prefer secured profit
rather than maximum profit. Explain. Or, explain demand curve of a firm under oligopoly and
explain its effects. Or, Fundamental feature of oligopoly is price rigidity. Explain and comment
upon the uncertainty of demand curve.
Unit 5: Factor pricing
1. Critically examine the marginal productivity theory of distribution. Or, explain the marginal
productivity theory of distribution and mention its drawbacks.
2. Explain the modern theory of wages. Or, wages are determined by the demand and supply of
labour. Explain.
3. Explain the determination of wages under collective bargaining.
4. What are the causes of difference in wage-rates? Why the wages of women are generally low in
India?
5. Critically examine the Ricardian theory of rent. Or, rent is paid for the original and indestructible
power of soil. Discuss.
6. Evaluate the modern theory of rent. Or, Explain modern theory of rent. Does this theory
supersede Ricardian theory? Or, examine critically the modern theory of rent. Or, rent is a
reward for the specificity. Explain. Or, rent is not a payment for land but for the land element
in the factor. Discuss. Or, Land is a surplus return which an agent of production earns in a
particular industry over and above its opportunity cost. Explain. Or, Rent arises when the
supply of a factor of production is less than perfectly elastic. Explain. Or, Rent is the leading
species of a large genus. Explain.
7. The corn is not high because the rent is high, but the rent is high because the corn is high.
Discuss. Or, Rent doesnt determine price but is determined by price. Explain.
8. Rent doesnt enter into price. Explain this statement keeping in view the Ricardian theory of
rent.
9. Write note on quasi rent.
10. Explain the classical theory of interest.
11. Explain the Keynesian theory of interest. What are the short comings of this theory?
12. Profit is the reward for innovation. Explain. Or, innovation theory of profit. Or, Critically
examine Schumpeter theory of profit.
13. Critically explain the risk theory of profit. Or, evaluate the Prof. Hawley theory of profit.
 14. Profit is a payment for uncertainty bearing. Discuss.

Unit 6: Investment analysis

1. Discuss the pay-back period method of project appraisal with an illustration.
2. Write note on average annual rate of return.
3. Write notes on risk in investment decision.
4. Writes notes on (i) risk in investment decision and (ii) uncertainty in investment decision.
5. Describe the cost benefit analysis as a technique for evaluation and selecting a project.

Unit 7: Welfare Economics

1. What do you understand by social welfare concept? Can it be measured?
2. Critically evaluate the welfare economics of Pigou?
3. What do you understand by Paretos optimum? Explain it with suitable diagrams. Or, critically
evaluate the new welfare economics of Pareto.
4. Note on: (i) Welfare economics, (ii) new welfare economics and (iii) value judgement.
5. Evaluate the concept of social welfare function.
6. Critically evaluate the Kaldor- Hicksian theory of compensation.