SECTION-A
Answer ten questions, selecting two from each Unit ($2 \times 10 = 20$ Marks)
UNIT-I
1. Define opportunity cost.
Opportunity cost is the value of the next best alternative that is foregone when a choice is made between mutually exclusive options.
2. Mention any two basic problems of economics.
3. Write any two determinants of elasticity of demand.
UNIT-II
4. Define budget constraint.
A budget constraint represents all the combinations of goods and services that a consumer may purchase given current prices within their given income.
5. Distinguish between cardinal utility and ordinal utility.
6. Mention any two limitations of the law of diminishing marginal utility.
UNIT-III
7. What is production function?
A production function expresses the technical relationship between physical inputs (like labor and capital) and the resulting physical output.
8. Distinguish between returns to scale and returns to a factor.
9. What is cost of production? Give an example of fixed cost.
Cost of production refers to the total expenses incurred by a firm to produce a specific quantity of a product.
Example of Fixed Cost: Rent of a factory building.UNIT-IV
2 Marks10. Give any two examples of macroeconomic variables.
11. Distinguish between macro-statics and macro-dynamics.
Macro-statics studies the relationship between aggregate variables at a specific point of equilibrium without considering the process of change, whereas macro-dynamics analyzes the process of change and the path toward a new equilibrium over time.
UNIT-V
13. Define national income.
National income is the total value of all final goods and services produced by the residents of a country in a financial year, including net factor income from abroad.
15. Distinguish between NNP and NDP.
Net Domestic Product (NDP) is the value of output produced within the domestic boundaries of a country after subtracting depreciation.
Net National Product (NNP) includes NDP plus Net Factor Income from Abroad (NFIA).SECTION-B
Answer five questions, selecting one from each Unit ($10 \times 5 = 50$ Marks)
UNIT-I
16. Distinguish between positive and normative economics. Justify whether microeconomics is positive or normative in nature.
Positive vs Normative Economics:
- Positive Economics: Deals with "what is." It describes facts, cause-and-effect relationships, and objective data that can be tested (e.g., "An increase in tax leads to lower consumption").
- Normative Economics: Deals with "what ought to be." It involves value judgments, ethics, and subjective opinions (e.g., "The government should provide free healthcare").
Justification:
Microeconomics is primarily positive in nature because it analyzes how individual agents (consumers/firms) behave and how prices are determined based on objective laws like the Law of Demand. However, it also has normative elements, especially in "Welfare Economics," where it suggests how resources *should* be allocated to achieve maximum social welfare.
17. State and explain the law of demand with suitable table and diagram. Mention any three exceptions to law of demand.
Law of Demand:
The Law of Demand states that, other things being equal (Ceteris Paribus), the quantity demanded of a commodity increases when its price falls and decreases when its price rises.
Demand Schedule:
| Price (Rs) | Quantity Demanded (Units) |
|---|---|
| 10 | 100 |
| 8 | 150 |
| 6 | 200 |
Exceptions:
UNIT-II
2+6+2 = 10 Marks18. State and explain the law of diminishing marginal utility. Mention any two limitations of the law.
Definition:
As a person consumes more and more units of a specific commodity, the utility derived from each successive unit goes on diminishing.
Explanation:
Total Utility (TU) increases at a decreasing rate while Marginal Utility (MU) falls. When TU is maximum, MU is zero. When TU starts falling, MU becomes negative.
Limitations:
UNIT-III
10 Marks20. What are the conditions of producers equilibrium? Explain how a producer attains equilibrium with the help of iso-quant and iso-cost lines.
Conditions:
Explanation:
A producer is in equilibrium when they produce a given level of output with the minimum cost or maximize output with a given cost. This occurs where the slope of the Iso-quant ($MRTS_{LK}$) equals the slope of the Iso-cost line ($w/r$).
UNIT-V
6+4 = 10 Marks24. What are the different methods of estimating national income? Explain the difficulties of estimating national income.
Methods:
Difficulties:
Exam Focus Enhancements
Important Formulas List
- Real National Income: (Nominal Income / Price Index) x 100
- Marginal Utility (MU): $TU_n - TU_{n-1}$
- GDP at MP: C + I + G + (X - M)
Common Mistakes
Answer Presentation Strategy
Always draw a table (schedule) before the diagram for laws of demand or utility.
Clearly label the point of equilibrium in producer/consumer theory diagrams.