Class
XII
Microeconomics
Microeconomics
Microeconomics
Introductory
Introductory
Introductory
Workbook
Workbook
Workbook
4323/3, Ansari Road, Darya Ganj, New Delhi-110002Ph: 91-11-23250105, 23250106 Fax: 91-11-23250141 [email protected] www.vkpublications.com
Contents
Contents
Worksheet
Introduction
3
Worksheet 2
Consumer Equilibrium and Demand
9
Worksheet 3A
Producer Behaviour and Supply
17
Worksheet 3B
Cost and Revenue
25
Worksheet 4
Forms of Market and Price Determination
31
Solutions
Numericals (with Solutions)
CBSE Question Paper–2012
1
W WOO R RKKSSHHEEEE TT 3
1
1
QUESTION SET–I
Define the following concepts: 1. _________________________________________________________________________________________ _________________________________________________________________________________________ 2. _________________________________________________________________________________________ _________________________________________________________________________________________ 3. _________________________________________________________________________________________ _________________________________________________________________________________________ 4. _________________________________________________________________________________________ _________________________________________________________________________________________ 5. _________________________________________________________________________________________ _________________________________________________________________________________________ 6. _________________________________________________________________________________________ _________________________________________________________________________________________ 7. _________________________________________________________________________________________ _________________________________________________________________________________________ 8. _________________________________________________________________________________________ _________________________________________________________________________________________ 9. _________________________________________________________________________________________ _________________________________________________________________________________________ Microeconomics. Economy. Scarcity.
Central problems of an economy.
Mixed economy.
Market economy.
Centrally planned economy.
Production possibility curve.
Opportunity cost.
Introduction
Economics–XII Introductory Microeconomics
10. _________________________________________________________________________________________ _________________________________________________________________________________________ 11. _________________________________________________________________________________________ _________________________________________________________________________________________ 12. _________________________________________________________________________________________ _________________________________________________________________________________________ 13. _________________________________________________________________________________________ _________________________________________________________________________________________ Marginal opportunity cost.
Marginal rate of transformation.
Macroeconomics.
Macro variables.
4 Economics–XII
Introductory Microeconomics Introductory Microeconomics 5 Economics–XII
QUESTION SET–II
1. _________________________________________________________________________________________ _________________________________________________________________________________________ 2. _________________________________________________________________________________________ _________________________________________________________________________________________ 3. _________________________________________________________________________________________ _________________________________________________________________________________________ 4. _________________________________________________________________________________________ _________________________________________________________________________________________ 5. _________________________________________________________________________________________ _________________________________________________________________________________________Defend or refute the following statements. Write ‘yes’ or ‘no’ with reason:
Microeconomics does not deal with aggregates.
Opportunity cost refers to explicit cost of production.
Production possibility curve may sometimes be convex to the origin.
Central problems of an economy are found only in those economies which are not governed or regulated by the government.
Scarcity exists even when certain goods are available at zero price.
6. _________________________________________________________________________________________ _________________________________________________________________________________________ 7. _________________________________________________________________________________________ _________________________________________________________________________________________ 8. _________________________________________________________________________________________ _________________________________________________________________________________________ 9. _________________________________________________________________________________________ _________________________________________________________________________________________ 10. _________________________________________________________________________________________ _________________________________________________________________________________________ Marginal opportunity cost falls as resources are shifted from Use-1 to Use-2.
PPC is drawn on the assumption of constant technology.
Economising the use of resources means saving the resources for future use.
If resources are not efficiently utilised, we are outside PPC.
An economy produces goods and services in a manner such that it always operates on the PPC.
QUESTION SET–III
1. _________________________________________________________________________________________ _________________________________________________________________________________________ 2. _________________________________________________________________________________________ _________________________________________________________________________________________ 3. _________________________________________________________________________________________ _________________________________________________________________________________________ 4. _________________________________________________________________________________________ _________________________________________________________________________________________Write your comment on each of the following statements in a sentence or two:
Choice between consumer goods and capital goods refers to the problem of ‘how to produce’.
Choice between labour intensive technology and capital intensive technology refers to the problem of ‘what to produce’.
Choice between ‘production for the poor’ and ‘production for the rich’ refers to the problem of what to produce.
10. _________________________________________________________________________________________ _________________________________________________________________________________________ 11. _________________________________________________________________________________________ _________________________________________________________________________________________ 12. _________________________________________________________________________________________ _________________________________________________________________________________________ 13. _________________________________________________________________________________________ _________________________________________________________________________________________ Marginal opportunity cost.
Marginal rate of transformation.
Macroeconomics.
Macro variables.
4 Economics–XII
Introductory Microeconomics Introductory Microeconomics 5 Economics–XII
QUESTION SET–II
1. _________________________________________________________________________________________ _________________________________________________________________________________________ 2. _________________________________________________________________________________________ _________________________________________________________________________________________ 3. _________________________________________________________________________________________ _________________________________________________________________________________________ 4. _________________________________________________________________________________________ _________________________________________________________________________________________ 5. _________________________________________________________________________________________ _________________________________________________________________________________________Defend or refute the following statements. Write ‘yes’ or ‘no’ with reason:
Microeconomics does not deal with aggregates.
Opportunity cost refers to explicit cost of production.
Production possibility curve may sometimes be convex to the origin.
Central problems of an economy are found only in those economies which are not governed or regulated by the government.
Scarcity exists even when certain goods are available at zero price.
6. _________________________________________________________________________________________ _________________________________________________________________________________________ 7. _________________________________________________________________________________________ _________________________________________________________________________________________ 8. _________________________________________________________________________________________ _________________________________________________________________________________________ 9. _________________________________________________________________________________________ _________________________________________________________________________________________ 10. _________________________________________________________________________________________ _________________________________________________________________________________________ Marginal opportunity cost falls as resources are shifted from Use-1 to Use-2.
PPC is drawn on the assumption of constant technology.
Economising the use of resources means saving the resources for future use.
If resources are not efficiently utilised, we are outside PPC.
An economy produces goods and services in a manner such that it always operates on the PPC.
QUESTION SET–III
1. _________________________________________________________________________________________ _________________________________________________________________________________________ 2. _________________________________________________________________________________________ _________________________________________________________________________________________ 3. _________________________________________________________________________________________ _________________________________________________________________________________________ 4. _________________________________________________________________________________________ _________________________________________________________________________________________Write your comment on each of the following statements in a sentence or two:
Choice between consumer goods and capital goods refers to the problem of ‘how to produce’.
Choice between labour intensive technology and capital intensive technology refers to the problem of ‘what to produce’.
Choice between ‘production for the poor’ and ‘production for the rich’ refers to the problem of what to produce.
5. _________________________________________________________________________________________ _________________________________________________________________________________________ 6. _________________________________________________________________________________________ _________________________________________________________________________________________ 7. _________________________________________________________________________________________ _________________________________________________________________________________________ 8. _________________________________________________________________________________________ _________________________________________________________________________________________ 9. _________________________________________________________________________________________ _________________________________________________________________________________________ 10. _________________________________________________________________________________________ _________________________________________________________________________________________
In a centrally planned economy, the central problems are solved by the forces of supply and demand.
In a mixed economy, only public sector is engaged in the process of production.
Problem of resource allocation is automatically solved in a mixed economy.
Production possibility curve shows possibilities of production when different technologies are used.
Economic activity would not exist if resources were not scarce.
A point below PPC points to under utilisation of resources.
QUESTION SET–IV
Complete the following sentences:
1. __________________________________________________________ . 2. ____________________________ . 3. ___________ _________________________________________________________________________________________ . 4. ____________________________ . 5. _______________________________________________ . 6. _________________________________ . _________________________________________________ . 8. ____________________________________________ . 9. ____________________________ .
Mixed economy is the one in which
In a capitalist economy, the problem of resource allocation is solved by
In a centrally planned economy, the decision regarding resource allocation is taken by the
Marginal opportunity cost refers to the loss of output of Good-1 when Growth of resources causes a shift in PPC to the
When an economy is operating inside the PPC, it is a situation of
7. In a state of economic slowdown (or recession) when there is massive unemployment and the economy
fails to operate on the PPC, it tends to operate Destruction of resources causes a shift in PPC to the
Discovery of resources (or new technology) causes a shift in PPC to the
NUMERICALS
1. Ans. ________________________________________________________________________________________ 2. Ans. ________________________________________________________________________________________ 3. Ans. ________________________________________________________________________________________ 4. Ans. ________________________________________________________________________________________ 5. Ans. ________________________________________________________________________________________Find opportunity cost, given the following possibilities of employment of Mr. X. Possibility 1: employment in firm-A at the wage of ™1,500 P.M. Possibility 2: employment in firm-B at the wage of ™2,500 P.M. Possibility 3: employment in firm-C at the wage of ™4,000 P.M.
Find marginal rate of transformation, given the following information: Output of Good-Y Output of Good-X
200 200
160 220
Find marginal opportunity cost, given the following situation when some resources are shifted from Use-2 to Use-1.
Loss of output in Use-2 : 600 units Gain of output in Use-1 : 300 units
Find marginal opportunity cost of watches when production of watches increases from 10 units to 15 units while the production of shoes decreases from 500 units to 100 units.
The table shows production possibilities of two goods. Find marginal opportunity cost at different levels of the production of Good-1.
Good-1 Good-2 0 100 1 90 2 75 3 55 4 30 5 0
HOTS (Higher Order Thinking Skills)
1.
Write ‘true’ or ‘false’ with a reason:
With an efficient utilisation of resources, an economy can shift to point beyond the PPC. _________________________________________________________________________________ _________________________________________________________________________________
6 Economics–XII
5. _________________________________________________________________________________________ _________________________________________________________________________________________ 6. _________________________________________________________________________________________ _________________________________________________________________________________________ 7. _________________________________________________________________________________________ _________________________________________________________________________________________ 8. _________________________________________________________________________________________ _________________________________________________________________________________________ 9. _________________________________________________________________________________________ _________________________________________________________________________________________ 10. _________________________________________________________________________________________ _________________________________________________________________________________________
In a centrally planned economy, the central problems are solved by the forces of supply and demand.
In a mixed economy, only public sector is engaged in the process of production.
Problem of resource allocation is automatically solved in a mixed economy.
Production possibility curve shows possibilities of production when different technologies are used.
Economic activity would not exist if resources were not scarce.
A point below PPC points to under utilisation of resources.
QUESTION SET–IV
Complete the following sentences:
1. __________________________________________________________ . 2. ____________________________ . 3. ___________ _________________________________________________________________________________________ . 4. ____________________________ . 5. _______________________________________________ . 6. _________________________________ . _________________________________________________ . 8. ____________________________________________ . 9. ____________________________ .
Mixed economy is the one in which
In a capitalist economy, the problem of resource allocation is solved by
In a centrally planned economy, the decision regarding resource allocation is taken by the
Marginal opportunity cost refers to the loss of output of Good-1 when Growth of resources causes a shift in PPC to the
When an economy is operating inside the PPC, it is a situation of
7. In a state of economic slowdown (or recession) when there is massive unemployment and the economy
fails to operate on the PPC, it tends to operate Destruction of resources causes a shift in PPC to the
Discovery of resources (or new technology) causes a shift in PPC to the
NUMERICALS
1. Ans. ________________________________________________________________________________________ 2. Ans. ________________________________________________________________________________________ 3. Ans. ________________________________________________________________________________________ 4. Ans. ________________________________________________________________________________________ 5. Ans. ________________________________________________________________________________________Find opportunity cost, given the following possibilities of employment of Mr. X. Possibility 1: employment in firm-A at the wage of ™1,500 P.M. Possibility 2: employment in firm-B at the wage of ™2,500 P.M. Possibility 3: employment in firm-C at the wage of ™4,000 P.M.
Find marginal rate of transformation, given the following information: Output of Good-Y Output of Good-X
200 200
160 220
Find marginal opportunity cost, given the following situation when some resources are shifted from Use-2 to Use-1.
Loss of output in Use-2 : 600 units Gain of output in Use-1 : 300 units
Find marginal opportunity cost of watches when production of watches increases from 10 units to 15 units while the production of shoes decreases from 500 units to 100 units.
The table shows production possibilities of two goods. Find marginal opportunity cost at different levels of the production of Good-1.
Good-1 Good-2 0 100 1 90 2 75 3 55 4 30 5 0
HOTS (Higher Order Thinking Skills)
1.
Write ‘true’ or ‘false’ with a reason:
With an efficient utilisation of resources, an economy can shift to point beyond the PPC. _________________________________________________________________________________ _________________________________________________________________________________
6 Economics–XII
2. When output of Good-1 increases from 100 units to 110 units and output of Good-2
decreases from 400 units to 350 units, marginal opportunity cost = 50 units.
_________________________________________________________________________________ _________________________________________________________________________________
3. When an economy moves from a situation of underemployment to full employment, PPC
curve shifts to the right.
_________________________________________________________________________________ _________________________________________________________________________________
4. Marginal rate of transformation refers to the slope of PPC.
_________________________________________________________________________________ _________________________________________________________________________________
5. Convexity of PPC to the origin points to increasing slope of PPC and increasing marginal
opportunity cost.
_________________________________________________________________________________ _________________________________________________________________________________
6. Problem of resource allocation would not arise if resources had not alternative uses.
_________________________________________________________________________________ _________________________________________________________________________________
7. If a country is operating inside the PPC, it is saving its resources for future growth.
_________________________________________________________________________________ _________________________________________________________________________________
8. If an economy is operating inside the PPC, it is possible to increase the production of
Good-1 without any decrease in the production of Good-2.
_________________________________________________________________________________ _________________________________________________________________________________
9. Opportunity cost is an avoidable cost.
_________________________________________________________________________________ _________________________________________________________________________________
10. Even when resources and technology are constant, an economy may not operate on the PPC.
_________________________________________________________________________________ _________________________________________________________________________________
8 Economics–XII
W WOO R RKKSSHHEEEE TT 9
2
2
QUESTION SET–I
Define the following concepts:
1. Demand and quantity demanded.
_________________________________________________________________________________________ _________________________________________________________________________________________
2. Marginal utility and total utility.
_________________________________________________________________________________________ _________________________________________________________________________________________
3. Indifference curve.
_________________________________________________________________________________________ _________________________________________________________________________________________
4. Budget line/price line.
_________________________________________________________________________________________ _________________________________________________________________________________________
5. Consumer’s equilibrium
_________________________________________________________________________________________ _________________________________________________________________________________________
6. Law of diminishing marginal utility
_________________________________________________________________________________________ _________________________________________________________________________________________
7. Law of demand
_________________________________________________________________________________________ _________________________________________________________________________________________
8. Price elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
9. Individual demand schedule and market demand schedule.
_________________________________________________________________________________________ _________________________________________________________________________________________ . . . Economics–XII Introductory Microeconomics
10. Demand curve _________________________________________________________________________________________ _________________________________________________________________________________________ 11. Demand function _________________________________________________________________________________________ _________________________________________________________________________________________
12. Substitute goods and complementary goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
13. Normal goods, inferior goods, and giffen goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
14. Extension and contraction of demand
_________________________________________________________________________________________ _________________________________________________________________________________________
15. Increase and decrease in demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
16. Movement along the demand curve and shift in demand curve.
_________________________________________________________________________________________ _________________________________________________________________________________________ . . . 10 Economics–XII
Introductory Microeconomics Introductory Microeconomics 11 Economics–XII
QUESTION SET–II
1. Demand for a commodity can exist independent of its price.
_________________________________________________________________________________________ _________________________________________________________________________________________
2. Quantity demanded is a specific amount of a commodity that the consumer is ready to buy against a
specific price, while demand is not.
_________________________________________________________________________________________ _________________________________________________________________________________________
3. Demand for a commodity refers to the entire demand schedule.
_________________________________________________________________________________________ _________________________________________________________________________________________
Defend or refute the following statements. Write ‘yes’ or ‘no’ with reason:
4. It is quantity demanded (and not demand for a commodity) that changes with respect to its own price.
_________________________________________________________________________________________ _________________________________________________________________________________________
5. Marginal utility of each unit of a commodity adds up to total utility.
_________________________________________________________________________________________ _________________________________________________________________________________________
6. Total utility will increase even when marginal utility decreases.
_________________________________________________________________________________________ _________________________________________________________________________________________
7. Total utility is maximum when marginal utility starts declining.
_________________________________________________________________________________________ _________________________________________________________________________________________
8. Increase in demand refers to extension of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
9. Decrease in demand refers to contraction of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
10. In case of inferior goods, law of demand fails.
_________________________________________________________________________________________ _________________________________________________________________________________________
11. Giffen goods must be inferior goods, while inferior goods, may or may not be giffen goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
12. In case of substitute goods, a fall in price of Good-X causes a fall in demand for Good-Y.
_________________________________________________________________________________________ _________________________________________________________________________________________
13. In case of complementary goods, a rise in price of Good-X causes a rise in demand for Good-Y.
_________________________________________________________________________________________ _________________________________________________________________________________________
14. Indifference curve is not convex to the origin.
_________________________________________________________________________________________ _________________________________________________________________________________________
10. Demand curve _________________________________________________________________________________________ _________________________________________________________________________________________ 11. Demand function _________________________________________________________________________________________ _________________________________________________________________________________________
12. Substitute goods and complementary goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
13. Normal goods, inferior goods, and giffen goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
14. Extension and contraction of demand
_________________________________________________________________________________________ _________________________________________________________________________________________
15. Increase and decrease in demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
16. Movement along the demand curve and shift in demand curve.
_________________________________________________________________________________________ _________________________________________________________________________________________ . . . 10 Economics–XII
Introductory Microeconomics Introductory Microeconomics 11 Economics–XII
QUESTION SET–II
1. Demand for a commodity can exist independent of its price.
_________________________________________________________________________________________ _________________________________________________________________________________________
2. Quantity demanded is a specific amount of a commodity that the consumer is ready to buy against a
specific price, while demand is not.
_________________________________________________________________________________________ _________________________________________________________________________________________
3. Demand for a commodity refers to the entire demand schedule.
_________________________________________________________________________________________ _________________________________________________________________________________________
Defend or refute the following statements. Write ‘yes’ or ‘no’ with reason:
4. It is quantity demanded (and not demand for a commodity) that changes with respect to its own price.
_________________________________________________________________________________________ _________________________________________________________________________________________
5. Marginal utility of each unit of a commodity adds up to total utility.
_________________________________________________________________________________________ _________________________________________________________________________________________
6. Total utility will increase even when marginal utility decreases.
_________________________________________________________________________________________ _________________________________________________________________________________________
7. Total utility is maximum when marginal utility starts declining.
_________________________________________________________________________________________ _________________________________________________________________________________________
8. Increase in demand refers to extension of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
9. Decrease in demand refers to contraction of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
10. In case of inferior goods, law of demand fails.
_________________________________________________________________________________________ _________________________________________________________________________________________
11. Giffen goods must be inferior goods, while inferior goods, may or may not be giffen goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
12. In case of substitute goods, a fall in price of Good-X causes a fall in demand for Good-Y.
_________________________________________________________________________________________ _________________________________________________________________________________________
13. In case of complementary goods, a rise in price of Good-X causes a rise in demand for Good-Y.
_________________________________________________________________________________________ _________________________________________________________________________________________
14. Indifference curve is not convex to the origin.
_________________________________________________________________________________________ _________________________________________________________________________________________
4. Changes in income causes a shift in demand curve, while change in price does not.
_________________________________________________________________________________________ _________________________________________________________________________________________
5. Even when P remains constant, Q may increase or decrease.X X
_________________________________________________________________________________________ _________________________________________________________________________________________
6. Elasticity of demand refers to change in quantity consequent upon change in price of the commodity.
_________________________________________________________________________________________ _________________________________________________________________________________________
7. When total expenditure on the commodity remains constant, price elasticity of demand also remains
constant, no matter what the change in price is.
_________________________________________________________________________________________ _________________________________________________________________________________________
8. Elasticity of demand (with respect to price of the commodity) is constant along a straight line demand
curve.
_________________________________________________________________________________________ _________________________________________________________________________________________
9. If price elasticity of demand is zero, it means expenditure on the commodity does not change with
change in price of the commodity.
_________________________________________________________________________________________ _________________________________________________________________________________________
10. A commodity showing high elasticity of demand often has a large number of close substitutes in the
market.
_________________________________________________________________________________________ _________________________________________________________________________________________
11. Elasticity of demand tends to be high over a short period of time than the long period.
_________________________________________________________________________________________ _________________________________________________________________________________________
12. Complementary goods often exhibit low elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
13. Luxuries of life often exhibit low elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
13 Economics–XII
Introductory Microeconomics
15. MRS (marginal rate of substitution) along an indifference curve tends to diminish.
_________________________________________________________________________________________ _________________________________________________________________________________________
16. All attainable combinations of Good-X and Good-Y are below the budget line of a consumer.
_________________________________________________________________________________________ _________________________________________________________________________________________
17. A consumer strikes his equilibrium when:
_________________________________________________________________________________________ _________________________________________________________________________________________
18. A consumer strikes his equilibrium when:
_________________________________________________________________________________________ _________________________________________________________________________________________
19. A consumer strikes his equilibrium when: MRS = .
_________________________________________________________________________________________ _________________________________________________________________________________________
20. A situation when MRS > is better than when MRS = .
_________________________________________________________________________________________ _________________________________________________________________________________________
21. A situation when is better than when
_________________________________________________________________________________________ _________________________________________________________________________________________ MUX PX MUX PX = MUM. MUY PY = MUM. MUX PX = PX PY PX PY PX PY PX PY PX PY MUX MUY = . PX PY PX PY MUX MUY >
QUESTION SET–III
1. MU must diminish as more and more standard units of a commodity are continuously consumed.
_________________________________________________________________________________________ _________________________________________________________________________________________
2. Cross price effect occurs in case of substitute goods, and not in case of complementary goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
3. In an indifference curve map, higher IC always points to higher level of satisfaction.
_________________________________________________________________________________________ _________________________________________________________________________________________
Write your comment on each of the following statements in a sentence or two:
12 Economics–XII
4. Changes in income causes a shift in demand curve, while change in price does not.
_________________________________________________________________________________________ _________________________________________________________________________________________
5. Even when P remains constant, Q may increase or decrease.X X
_________________________________________________________________________________________ _________________________________________________________________________________________
6. Elasticity of demand refers to change in quantity consequent upon change in price of the commodity.
_________________________________________________________________________________________ _________________________________________________________________________________________
7. When total expenditure on the commodity remains constant, price elasticity of demand also remains
constant, no matter what the change in price is.
_________________________________________________________________________________________ _________________________________________________________________________________________
8. Elasticity of demand (with respect to price of the commodity) is constant along a straight line demand
curve.
_________________________________________________________________________________________ _________________________________________________________________________________________
9. If price elasticity of demand is zero, it means expenditure on the commodity does not change with
change in price of the commodity.
_________________________________________________________________________________________ _________________________________________________________________________________________
10. A commodity showing high elasticity of demand often has a large number of close substitutes in the
market.
_________________________________________________________________________________________ _________________________________________________________________________________________
11. Elasticity of demand tends to be high over a short period of time than the long period.
_________________________________________________________________________________________ _________________________________________________________________________________________
12. Complementary goods often exhibit low elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
13. Luxuries of life often exhibit low elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
13 Economics–XII
Introductory Microeconomics
15. MRS (marginal rate of substitution) along an indifference curve tends to diminish.
_________________________________________________________________________________________ _________________________________________________________________________________________
16. All attainable combinations of Good-X and Good-Y are below the budget line of a consumer.
_________________________________________________________________________________________ _________________________________________________________________________________________
17. A consumer strikes his equilibrium when:
_________________________________________________________________________________________ _________________________________________________________________________________________
18. A consumer strikes his equilibrium when:
_________________________________________________________________________________________ _________________________________________________________________________________________
19. A consumer strikes his equilibrium when: MRS = .
_________________________________________________________________________________________ _________________________________________________________________________________________
20. A situation when MRS > is better than when MRS = .
_________________________________________________________________________________________ _________________________________________________________________________________________
21. A situation when is better than when
_________________________________________________________________________________________ _________________________________________________________________________________________ MUX PX MUX PX = MUM. MUY PY = MUM. MUX PX = PX PY PX PY PX PY PX PY PX PY MUX MUY = . PX PY PX PY MUX MUY >
QUESTION SET–III
1. MU must diminish as more and more standard units of a commodity are continuously consumed.
_________________________________________________________________________________________ _________________________________________________________________________________________
2. Cross price effect occurs in case of substitute goods, and not in case of complementary goods.
_________________________________________________________________________________________ _________________________________________________________________________________________
3. In an indifference curve map, higher IC always points to higher level of satisfaction.
_________________________________________________________________________________________ _________________________________________________________________________________________
Write your comment on each of the following statements in a sentence or two:
12 Economics–XII
14. Higher the price level, higher should be the elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
15. A horizontal straight line demand curve shows zero elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
16. A vertical straight line demand curve shows that demand rises to infinity even when price remains
constant.
_________________________________________________________________________________________ _________________________________________________________________________________________
17. Price elasticity of demand is identical with slope of demand curve.
_________________________________________________________________________________________ _________________________________________________________________________________________
18. From a point of intersection, a flatter demand curve shows greater elasticity of demand than a steeper
demand curve.
_________________________________________________________________________________________ _________________________________________________________________________________________
19. In case of normal goods, income effect is positive, while in case of inferior goods, it is negative.
_________________________________________________________________________________________ _________________________________________________________________________________________
20. In case of giffen goods, income effect is always greater than the substitution effect.
_________________________________________________________________________________________ _________________________________________________________________________________________
QUESTION SET–IV
Complete the following sentences:
1. When price of the commodity increases, demand for the commodity _____________________________ . 2. When demand for the commodity increases, demand curve_____________________________________ . 3. When demand curve shifts, price of the commodity____________________________________________ . 4. In case of normal goods, there is a positive relationship between_________________________________ . 5. Moving along an indifference curve, we find that MRS tends to__________________________________ .
6. Moving along a price line, we find that price ratio (P /P ) remains________________________________ .X Y 7. In case of IC analysis, a consumer strikes his equilibrium when___________________________________. 8. In case of utility analysis (and one-commodity case) a consumer strikes his equilibrium when
_________________________________________________________________________________________.
9. In case of utility analysis (and 2-commodity case) a consumer strikes his equilibrium when _______
________________________________________________________________________________________ .
10. Demand curve slopes downward because of the law of__________________________________________ . 11. Downward sloping demand curve shows the law of_____________________________________________ . 12. Convexity of IC to the origin shows__________________________________________________________ . 13. Elasticity of demand (with respect to price of the commodity) shows______________________________ . 14. Law of demand fails in situations of (i) ______________, (ii) ______________ , and (iii) _______________ . 15. Demand curve shifts to the right because of (i) ________________________, (ii) _____________________,
and (iii) ______________________ .
16. When price of tea increases, demand for sugar will tend to ______________________________________ . 17. Even when price of the concerned commodity remains constant, people tend to buy less of it, because
(i) ________________________, (ii) _________________________, and (iii) _________________________ .
18. If demand curve is a rectangular hyperbola, elasticity of demand = _______________________________ . 19. At the mid-point of straight line downward sloping demand curve, elasticity of demand = ___________ . 20. In case of a perfectly elastic demand, demand curve for the concerned commodity is________________ . 21. In case of a perfectly inelastic demand, demand curve for the concerned commodity is ______________ .
HOTS (Higher Order Thinking Skills)
If 5% increase in P causes 5% increase in expenditure on Good-X, elasticity of demand = 1.X
2. If 5% increase in P is accompanied with constant expenditure on the commodity, elasticity X
of demand = 1.
Write ‘true’ or ‘false’ with a reason: 1. _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ 15 Economics–XII Introductory Microeconomics 14 Economics–XII Introductory Microeconomics
14. Higher the price level, higher should be the elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
15. A horizontal straight line demand curve shows zero elasticity of demand.
_________________________________________________________________________________________ _________________________________________________________________________________________
16. A vertical straight line demand curve shows that demand rises to infinity even when price remains
constant.
_________________________________________________________________________________________ _________________________________________________________________________________________
17. Price elasticity of demand is identical with slope of demand curve.
_________________________________________________________________________________________ _________________________________________________________________________________________
18. From a point of intersection, a flatter demand curve shows greater elasticity of demand than a steeper
demand curve.
_________________________________________________________________________________________ _________________________________________________________________________________________
19. In case of normal goods, income effect is positive, while in case of inferior goods, it is negative.
_________________________________________________________________________________________ _________________________________________________________________________________________
20. In case of giffen goods, income effect is always greater than the substitution effect.
_________________________________________________________________________________________ _________________________________________________________________________________________
QUESTION SET–IV
Complete the following sentences:
1. When price of the commodity increases, demand for the commodity _____________________________ . 2. When demand for the commodity increases, demand curve_____________________________________ . 3. When demand curve shifts, price of the commodity____________________________________________ . 4. In case of normal goods, there is a positive relationship between_________________________________ . 5. Moving along an indifference curve, we find that MRS tends to__________________________________ .
6. Moving along a price line, we find that price ratio (P /P ) remains________________________________ .X Y 7. In case of IC analysis, a consumer strikes his equilibrium when___________________________________. 8. In case of utility analysis (and one-commodity case) a consumer strikes his equilibrium when
_________________________________________________________________________________________.
9. In case of utility analysis (and 2-commodity case) a consumer strikes his equilibrium when _______
________________________________________________________________________________________ .
10. Demand curve slopes downward because of the law of__________________________________________ . 11. Downward sloping demand curve shows the law of_____________________________________________ . 12. Convexity of IC to the origin shows__________________________________________________________ . 13. Elasticity of demand (with respect to price of the commodity) shows______________________________ . 14. Law of demand fails in situations of (i) ______________, (ii) ______________ , and (iii) _______________ . 15. Demand curve shifts to the right because of (i) ________________________, (ii) _____________________,
and (iii) ______________________ .
16. When price of tea increases, demand for sugar will tend to ______________________________________ . 17. Even when price of the concerned commodity remains constant, people tend to buy less of it, because
(i) ________________________, (ii) _________________________, and (iii) _________________________ .
18. If demand curve is a rectangular hyperbola, elasticity of demand = _______________________________ . 19. At the mid-point of straight line downward sloping demand curve, elasticity of demand = ___________ . 20. In case of a perfectly elastic demand, demand curve for the concerned commodity is________________ . 21. In case of a perfectly inelastic demand, demand curve for the concerned commodity is ______________ .
HOTS (Higher Order Thinking Skills)
If 5% increase in P causes 5% increase in expenditure on Good-X, elasticity of demand = 1.X
2. If 5% increase in P is accompanied with constant expenditure on the commodity, elasticity X
of demand = 1.
Write ‘true’ or ‘false’ with a reason: 1. _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ 15 Economics–XII Introductory Microeconomics 14 Economics–XII Introductory Microeconomics
3. If slope of two demand curves is the same, they show the same elasticity of demand. 4. When slope of demand curve = 0, price elasticity of demand = ¥
5. When slope of demand curve =¥ , price elasticity of demand = 0.
_________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ __________________________________________________________________________________ __________________________________________________________________________________ 16 Economics–XII Introductory Microeconomics
W WOO R RKKSSHHEEEE TT 17
3A
3A
QUESTION SET–I
Define the following concepts: 1. Production function. _________________________________________________________________________________________ _________________________________________________________________________________________ 2. Producer’s equilibrium _________________________________________________________________________________________ _________________________________________________________________________________________
3. Supply and quantity supplied.
_________________________________________________________________________________________ _________________________________________________________________________________________
4. Individual supply schedule and market supply schedule.
_________________________________________________________________________________________ _________________________________________________________________________________________
5. Law of supply.
_________________________________________________________________________________________ _________________________________________________________________________________________
6. Contraction of supply and decrease in supply
_________________________________________________________________________________________ _________________________________________________________________________________________
7. Extension of supply and increase in supply.
_________________________________________________________________________________________ _________________________________________________________________________________________ 8. TP, AP and MP. _________________________________________________________________________________________ _________________________________________________________________________________________ 9. Returns to a factor. _________________________________________________________________________________________ _________________________________________________________________________________________ . Economics–XII Introductory Microeconomics
19 Economics–XII Introductory Microeconomics
QUESTION SET–II
1. Production function is only a technical relationship between physical inputs and physical output.
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2. A producer strikes his equilibrium when the difference between TR and TC is maximised.
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3. Supply may remain constant even when quantity supplied changes.
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4. Contraction of supply causes a shift in supply curve.
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5. Extension and contraction of supply are related to factors other than price of the concerned commodity.
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6. Supply increases in response to increase in price of the concerned commodity.
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7. TP is maximum only when MP = 0.
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8. MP can be negative, but not the AP.
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9. Law of variable proportions must operate, even when all factors of production are variable.
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10. Diminishing returns to a factor occur simply because supply of the factor cannot be increased.
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Defend or refute the following statements. Write ‘yes’ or ‘no’ with reason: 10. Law of variable proportions.
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11. Increasing returns to a factor.
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12. Diminishing returns to a factor.
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13. Movement along the supply curve and shift in supply curve.
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14. Joint supply and composite supply
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15. Price elasticity of supply.
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16. Perfectly elastic and perfectly inelastic supply.
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17. Elastic and inelastic supply.
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18. Market period, short period and long period.
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19. Fixed factors and variable factors.
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20. Supply and stock.
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18 Economics–XII
