MOST EXPECTED QUESTIONS

ECONOMICS
SECTION A
MICRO
Q1. Why is PPC concave?
Q2. How will government’s initiatives like ‘Make in India’ and Skill India Mission affect the Production Possibility
Curve of India’s economy.
Q3. Explain the central problems of
(a) How to produce (b) What to produce in what quantity?
Q4. Explain the law of Diminishing Marginal Utility?
Q5. Price of commodity X is Rs.25 and that of Y is Rs.5. Marginal Utilities derived from X and Y are 50 utils and 15 utils
respectively. Is the consumer in equilibrium? If not how will a rational Consumer behave?
Q6. Price of commodity X is Rs.6 and that of Y is Rs.2. The consumer is willing to sacrifice 4 units of Y to gain 1 unit of
X. Is the consumer in equilibrium? If not how will a rational consumer behave?
Q7. Derive Law of Demand using utility analysis.
Q8. Explain 5 factors affecting demand for a commodity.
Q9.How will ‘change in price of related goods’ and ‘change in income of a consumer’ affect the demand curve for a
commodity. Use diagram.
Q10. When the price of a commodity falls from Rs.50 to Rs.45, the quantity demanded rises by 20%.How elastic is
the commodity? Explain.
Q11. When the price of the commodity rises from Rs.10 to Rs.12, the quantity demanded falls from 400 units to 300
units. Calculate price elasticity of demand.
Q12. Explain the Law of Variable Proportion using Total product.
Q13. Using diagrams explain the relationship between
(a) MP and AP (b) MC and AVC
Q14. Calculate Total Variable Cost and Marginal Cost from the following cost schedule of a firm
Output Total Cost
0 12
1 20
2 26
3 31
(b) Complete the following table:
Output Average Fixed Cost(AFC) Marginal Cost(MC) Total Cost(TC)
1 - - -
2 - 10 82
3 - 8 -
4 - - 99
5 12 10 -
Q15. On the basis of the information given below, determine the level of output at which the producer will be in
equilibrium. Use the marginal cost-marginal revenue approach. Give reasons for your answer.
Output AR TC
1 7 8
2 7 15
3 7 21
4 7 26
5 7 33
6 7 41
Q16. Explain Producer’s Equilibrium using MR-MC approach.
Q17. Explain any four factors affecting supply of a commodity?
Q18. How will ‘State of Technology’ and ‘Taxation Policy’ affect the supply curve of a commodity?
Q19. When the price of a commodity was Rs.10, the seller was willing to supply 200 units. When the price rose by
20% he was willing to supply 300 units. Calculate elasticity of supply.
Q20. Explain the following features of market forms and also mention their implications.
(a) Free entry or exit (b) Restricted entry
(c) Product differentiation (d) large number of buyers and sellers
(e) Few large sellers
Q21. What are the main reasons for emergence of a monopoly?
Q22. Explain types of oligopoly on the basis of
(a) Nature of Product (b) Cooperation
Q23. What is Price Ceiling? Give its implications.
Q24. What is Price Floor? Give its implications.
Q25. If Qd =50-2p and Qs = 10+2p, Find the equilibrium price and equilibrium quantity. Also mention the situation if
price is Rs.15.
SECTION B (MACRO)
Q26. How can rise in GDP/GNP be a limitation to economic welfare?
Q27. How is Real Income different from Nominal Income? Which of the two is a better indicator of development?
Q28. Write the precautions taken while calculating National Income.
Q29. From the following data relating to a firm, calculate its net value added at factor cost:
(i) Subsidy 40
(ii) Sales 800
(iii) Depreciation 30
(iv) Exports 100
(v)Closing Stock 20
(vi) Opening Stock 50
(vii) Intermediate purchases 500
(viii) Purchase of machinery for own use 200
(ix) Import of raw material 60
Q30. From the following data calculate National Income by Income and Expenditure Method:
(i) Government final consumption expenditure 100
(ii) Subsidies 10
(iii) Rent 200
(iv) Wages and Salaries 600
(v) Indirect Taxes 60
(vi) Private final consumption expenditure 800
(vii) Gross domestic capital formation 120
(viii) Social security contributions by employers’ 55
(ix) Royalty 25
(x) Net factor income from abroad (-)30
(xi) Interest 20
(xii) Consumption of fixed capital 10
(xiii) Profit 130
(xiv) Net imports (-)70
(xv) Change in stock 50
Q31. How will you treat the following while calculating Domestic Income of India?
(a) Compensation paid to Korean employees working in Indian Embassy in Korea.
(b) Old Age Pension
(c) Rent paid by Russian Embassy to the resident of India.
(d) Scholarship paid to engineering students.
(e) Profits earned by Pepsi Co. in India.
Q32. Explain the process of Credit creation by commercial banks.
Q33. Explain the following functions of the Central Bank
(a) Banker’s Bank (b) Banker to the Government (c) Currency Authority
Q34How will Central Bank use the following measures to control limitations?
(a) Repo Rate (b) CRR (c) SLR (d) Open Market Operations (e) Margin Requirement
Q35. Using diagram derive Saving Curve from Consumption Curve.
Q36. Using C+I approach explain equilibrium level of Income and Employment.
Q37. Using Saving-Investment approach explain equilibrium level of Income and Employment.
Q38. An economy is in equilibrium. Calculate the Investment Expenditure from the following:
National Income=800 Marginal Propensity to save=0.3 Autonomous Consumption=100
Q39.Complete the following table:
Income Consumption MPS APC
0 15 - -
50 50 - -
100 85 - -
150 120 - -
Q40.What is Inflationary Gap? How can government use its fiscal policy to correct this gap?
Q41.What is deficient demand? How will qualitative monetary measures help in correcting the situation?
Q42. Explain the following objectives of making Government Budget.
(a) Reallocation of Resources (b) Redistribution of Income and Wealth
Q43. Write the meaning and formula of calculating
(a) Fiscal Deficit (b) Revenue Deficit (c) Primary Deficit
Q44. Differentiate between:
(a) Direct Tax and Indirect Tax
(b) Revenue Expenditure and Capital Expenditure
Q45. Classify the following as Revenue or Capital Receipts (With Reasons)
(a) License Fees (b) Borrowings from Abroad (c) Sale of a PSU
(d) Corporate Tax (e) Recovery of Loan
Q46.Give 3 sources of Demand and Supply of foreign exchange?
Q47. How is Fixed Exchange Rate system different from Flexible Exchange Rate system?
Q48.How does depreciation of domestic currency affect
(a) Exports of the country?
(b) Imports of the country?
Q49. Write the main components of Current and Capital Accounts of Balance of Payment account.
Q50. How are Autonomous items in BOP A/C different from accommodating items?

AMIT ARORA