CS Foundation :: Basic economics & business environment : June 2006

Roll No…………………
Time allowed : 3 hours	Maximum marks : 100
Total number of questions : 8	Total number of printed pages : 3
PART – A
(Answer Question No.1 which is compulsory and any three of the rest from this part.)

(a)

State, with reasons in brief, whether the following statements are true or false

(i)	The slope of indifference curve indicates marginal rate of substitution.
(ii)	At equilibrium of a firm under perfect competition, AR will be equal to MR.
(iii)	“Economics is the science of choice making.” Definition given by Samuelson.
(iv)	Negative balance of trade does not indicate negative balance of payments.
(v)	National income is the aggregative money value of all final goods and services produced in the country over a period of time, usually one year.

(3 marks each)

(b)

Distinguish between any two of the following :

(i)	‘Cardinal approach of utility analysis’ and ‘ordinal approach of utility analysis’.
(ii)	‘Returns to a factor’ and ‘returns to scale’.
(iii)	‘Micro economics’ and ‘macro economics’.

(5 marks each)

(a)

What do you understand by the concept of ‘demand function’ ?

(3 marks)

(b)

A consumer buys 50 units of a commodity at Rs.4 per unit. When its price falls by 25%, its demand rises to 100 units. Find out price elasticity of demand.

(6 marks)

(c)

“Product differentiation and selling expenses form the foundation of monopolistic competition.” Explain.

(8 marks)

(a)

Write short notes on any two of the following :

(i)	Marginal rate of technical substitution
(ii)	Iso–cost lines
(iii)	Ridge lines.

(4 marks each)

P.T.O

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112

(b)

(i)

Fill-up the blanks in the following table :
Agricultural Output with Fixed Land and Variable Units of Labour

Labour (Units)

1
2
3
4
5
6
7

Total Output
(Tonnes)
8
20
36
....
55
60
....

Average Output
(Tonnes)
8
....
12
12
....
....
....

Marginal Output
(Tonnes)
....
12
....
12
7
5
0

(4 marks)

(ii)	Narrate few aspects relating to supply of labour in a country.

(4 marks)

(a)

What is meant by ‘credit control’ ? What are its main categories ? Explain bank rate as a leading instrument of credit control.

(8 marks)

(b)

What do you understand by ‘consumption function’ ? State various factors that determine consumption function.

(7 marks)

(a)

Briefly explain any two of the following concepts :

(i)
(ii)
(iii)

Reflation
Hyper-inflation
Deflation.

(4 marks)

(b)

State and explain ‘comparative cost advantage theory’ of international trade as propounded by David Ricardo.

(7 marks)

PART - B

(Answer ANY TWO questions from this part.)

(a)

“Business environment of a firm is the totality of external circumstances which it faces and over which it has little or no control.” Comment.

(7 marks)

(b)

Explain briefly any two of the following :

(i)	Concept of X-inefficiency
(ii)	Social goods
(iii)	State regulation
(iii)	Industrial sickness.

(4 marks each)

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112

(a)

What do you mean by the term ‘dualism’ ? How far is it applicable to Indian economy ?

(7 marks)

(b)

Medium and large scale industries, financial institutions and other business establishments are important segments of mixed economy like India. Comment.

(8 marks)

Quality of life of Indian population is related to its size and employment level. Comment.

(a)

Write a note on various reforms that have been introduced in the Indian financial sector in recent years.

(7 marks)

(b)

Comment on any two of the following :

(i)	Liberalisation is the encouragement of direct foreign investment and technology.
(ii)	Infrastructure, by their very nature, tend to be commercially non-viable.
(iii)	A subsidy is a negative tax.
(iii)	Foreign trade of a country is believed to be a major contributor to its economic growth.

(4 marks each)

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