Economics Qustion paper

SECTION – A (Statistics)

Q.01 Merits of Median

• Question: Write any two principal merits of the median.
• Answer:
  1. Unaffected by Extreme Values: The median is not influenced by very high or very low values in a dataset, making it a more stable measure of central tendency when data is skewed.
  2. Suitable for Qualitative Data: The median can be used for ordinal data (ranked data) where the mean cannot be calculated.

Q.02 Absolute Measures of Dispersion

• Question: What do you mean by absolute measure of dispersion? Mention any two absolute measures.
• Answer: Absolute measures of dispersion indicate the spread or variability of data points in their original units.
  • Two examples:
    1. Range
    2. Standard Deviation

Q.03 Interpretation of Correlation Coefficient (r)

• Question: Interpret the value of r as -1 and 0.
• Answer:
  • r = -1: Indicates a perfect negative correlation. As one variable increases, the other variable decreases proportionally.
  • r = 0: Indicates no linear correlation between the variables. Changes in one variable are not related to changes in the other.

Q.04 Desirable Properties of Base Year

• Question: What are the two desirable properties of the base year?
• Answer:
  1. Normal Year: The base year should be a normal year, free from unusual events like wars, famines, or economic crises that could distort the index.
  2. Representative Year: The base year should be representative of the typical conditions or patterns being measured.

OR

• Question: What is the barometer of economic progress? Why is it called so?
• Answer: Index numbers are often referred to as the “barometer of economic progress.” This is because they measure changes in economic variables over time, such as prices, production, or cost of living. By tracking these changes, we can assess the progress or decline of an economy.

Q.05 Interquartile Range

• Question: Calculate the interquartile range for the following: X – 28, 18, 20, 24, 27, 30, 15
• Answer:
  1. Arrange the data in ascending order: 15, 18, 20, 24, 27, 30, 28
  2. Find Q1 (median of the lower half): (15+18)/2 = 16.5
  3. Find Q3 (median of the upper half): (27+30)/2 = 28.5
  4. Interquartile Range = Q3 – Q1 = 28.5 – 16.5 = 12

Q.06 Partition Value

• Question: What is a partition value? Differentiate between the lower quartile and the upper quartile.
• Answer: Partition values are values that divide a dataset into equal parts.
  • Lower Quartile (Q1): The value that divides the lowest 25% of the data from the rest.
  • Upper Quartile (Q3): The value that divides the highest 25% of the data from the rest.

Q.07 Coefficient of Range

• Question: Calculate the coefficient of range from the following: X – 20-29, 30-39, 40-49, 50-59, 60-69; f – 8, 12, 20, 7, 3
• Answer:
  1. Find the lower limit of the lowest class: 20
  2. Find the upper limit of the highest class: 69
  3. Range = 69 – 20 = 49
  4. Coefficient of Range = (69 – 20)/(69 + 20) = 49/89 = 0.55 (approximately)

Q.08 Mean Deviation for Frequency Array

• Question: Write the steps for calculating the mean deviation for a frequency array. Also write the formula.

• Answer: Steps:

  1. Calculate the mean (x̄) of the data.
  2. Find the absolute deviations (|d|) of each value from the mean.
  3. Multiply each deviation by its corresponding frequency (f|d|).
  4. Sum the products (Σf|d|).
  5. Divide the sum by the total frequency (N) to get the mean deviation.

  Formula: Mean Deviation = (Σf|d|)/N

OR

• Question: Calculate the coefficient of mean deviation using the mean for the following: S No. – 1 to 9; Wages – 40, 42, 45, 47, 50, 51, 54, 55, 57
• Answer:
  1. Mean (x̄) = (40+42+45+47+50+51+54+55+57)/9 = 49
  2. Calculate deviations and their absolute values: |d| = |xi – x̄|
  3. Calculate f|d| (frequency is 1 for each value)
  4. Σf|d| = 9 + 7 + 4 + 2 + 1 + 2 + 5 + 6 + 8 = 44
  5. Mean Deviation = 44/9 = 4.89 (approximately)
  6. Coefficient of Mean Deviation = Mean Deviation / Mean = 4.89/49 = 0.10 (approximately)

Q.09 Types of Correlation

• Question: For the given examples, find the types of correlation.
• Answer:
  • a. As price falls, the supply for product ‘A’ increases. Negative correlation.
  • b. Effect of adequate irrigation facilities, fertilizers, and pesticides on per hectare productivity of wheat. Multiple correlation.

Q.10 Difficulties in Constructing Index Numbers

• Question: Explain difficulties in the construction of index numbers.
• Answer:
  • a. Selection of goods and services: It’s challenging to choose a representative basket of goods and services that accurately reflects the overall economy or the specific group being measured, as consumption patterns change over time.
  • b. Selection of prices of goods and services: Obtaining accurate and reliable price data for a wide range of goods and services can be difficult, especially for unorganized sectors or specialized items. Price fluctuations, quality variations, and discounts also pose challenges.

Q.11 Median, Q1, Q3

• Question: Calculate median, Q1, and Q3 from the following: No. of students – 100, 90, 80, 60, 32, 20, 13, 5; Marks less than – 80, 70, 60, 50, 40, 30, 20, 10
• Answer:
  1. Arrange the data in ascending order of “Marks less than”: 10, 20, 30, 40, 50, 60, 70, 80
  2. Corresponding cumulative frequencies: 5, 13, 20, 32, 60, 80, 90, 100
  3. N = 100
  4. Median (Q2): (N/2)th term = 50th term. Interpolating between 40 and 50 marks, Median = 40 + [(50-32)/(60-32)] * (50-40) = 46.43 (approximately)
  5. Q1: (N/4)th term = 25th term. Interpolating between 30 and 40 marks, Q1 = 30 + [(25-20)/(32-20)] * (40-30) = 34.17 (approximately)
  6. Q3: (3N/4)th term = 75th term. Interpolating between 60 and 70 marks, Q3 = 60 + [(75-60)/(80-60)] * (70-60) = 67.5

OR

• Question: Define mode. Calculate mode for the following using the grouping method: CI – >0, >10, >20, >30, >40, >50, >60; f – 55, 50, 38, 24, 14, 6, 0
• Answer: Mode is the value that appears most frequently in a dataset.

Calculation using Grouping Method:

1. Prepare a grouping table: | CI | f | 2-f |

Q.12 Standard Deviation

• Question: Define standard deviation. Calculate standard deviation for the following – MV – 5, 15, 25, 35, 45, 55, 65, 75; f – 5, 10, 20, 40, 30, 20, 10, 4

• Answer: Standard deviation is a measure of dispersion that calculates the average distance of each data point from the mean of the dataset. It indicates the absolute variability of the data. A low standard deviation suggests that the data points are clustered close to the mean, while a high standard deviation indicates that the data points are more spread out.

Calculation of Standard Deviation:

1. Calculate the mean (x̄):

   • Multiply each MV by its corresponding frequency (f).
   • Sum these products (ΣfMV).
   • Divide the sum by the total frequency (N = Σf).

   x̄ = (55 + 1510 + 2520 + 3540 + 4530 + 5520 + 6510 + 754) / (5+10+20+40+30+20+10+4) x̄ = (25 + 150 + 500 + 1400 + 1350 + 1100 + 650 + 300) / 140 x̄ = 5575 / 140 = 39.82 (approximately)

2. Calculate the deviations (d) of each MV from the mean: d = MV – x̄

3. Square the deviations (d²):

4. Multiply the squared deviations by their respective frequencies (fd²):

5. Sum the fd² values (Σfd²):

6. Divide Σfd² by N-1 (for sample standard deviation) or N (for population standard deviation). Since the question doesn’t specify which, I will calculate the sample standard deviation.

7. Take the square root of the result to get the standard deviation (s):

Here’s a table to organize the calculations:

s = √(24248.27 / (140-1)) = √(24248.27 / 139) = √174.45 = 13.21 (approximately)

Therefore, the sample standard deviation is approximately 13.21.

Q.13 Coefficient of Correlation (Shortcut Method)

Data:

Calculations:

1. Calculate the means of X and Y:

   • ∑X = 351

   • ∑Y = 272

   • n (number of pairs) = 11

   • x̄ (mean of X) = 351 / 11 = 31.91 (approximately)

   • ȳ (mean of Y) = 272 / 11 = 24.73 (approximately)

2. Prepare a table to calculate deviations from assumed means:

   Since we’re using the shortcut method, we’ll assume means close to the actual means to simplify calculations. Let’s assume A (assumed mean of X) = 32 and B (assumed mean of Y) = 25.

3. Apply the shortcut formula for Karl Pearson’s coefficient of correlation (r):

   r = (n * Σ(dX * dY) – ΣdX * ΣdY) / √[(n * ΣdX² – (ΣdX)²) * (n * ΣdY² – (ΣdY)²)]

   Where:

   • n = number of pairs
   • ΣdX = sum of deviations of X from assumed mean
   • ΣdY = sum of deviations of Y from assumed mean
   • ΣdX² = sum of squared deviations of X
   • ΣdY² = sum of squared deviations of Y
   • Σ(dX * dY) = sum of the product of deviations

   From our table:

   • ΣdX = -1
   • ΣdY = -1
   • ΣdX² = 208
   • ΣdY² = 163
   • Σ(dX * dY) = 48

   r = (11 * 48 – (-1) * (-1)) / √[(11 * 208 – (-1)²) * (11 * 163 – (-1)²)] r = (528 – 1) / √[(2288 – 1) * (1793 – 1)] r = 527 / √(2287 * 1792) r = 527 / √4097424 r = 527 / 2024.16 r = 0.26 (approximately)

Therefore, the coefficient of correlation between X and Y is approximately 0.26. This indicates a weak positive correlation.

 SECTION – B (Microeconomics)

Q.14 Diminishing Returns and Total Product

• Question: When there is diminishing return to a factor, total product first increases and then starts falling? Defend or refute? Give reason.
• Answer: Defend. The law of diminishing returns states that as more of a variable input is added to a fixed amount of other inputs, eventually the marginal product of the variable input will decline. This doesn’t mean total product immediately falls. Initially, with increasing variable input, total product increases at an increasing rate (due to specialization). Then, it increases at a decreasing rate (diminishing returns set in). Finally, it reaches a maximum and then starts to decline (negative returns).

Q.15 Implicit and Explicit Costs

• Question: A producer borrows money and opens a shop. The shop premise is owned by him. Identify implicit cost and explicit cost from this information and give reasons.
• Answer:
  • Explicit Cost: The interest paid on the borrowed money is an explicit cost. This is a direct, out-of-pocket payment made by the producer.
  • Implicit Cost: The opportunity cost of using the shop premise that he owns is an implicit cost. This is the forgone rent he could have earned by leasing the premise to someone else. It’s a non-monetary cost representing the value of the next best use of the resource.

Q.16 Marginal Cost Calculation

• Question: The average cost of the 6th unit is 5 and the average cost of producing the 7th unit is 6. Calculate the marginal cost of the 7th unit.
• Answer:
  • Total cost of 6 units = Average cost * Quantity = 5 * 6 = 30
  • Total cost of 7 units = 6 * 7 = 42
  • Marginal cost of the 7th unit = Change in total cost = 42 – 30 = 12

Q.17 Freedom of Entry and Exit in Perfect Competition

• Question: Explain the implications of freedom of entry and exit of the firms under perfect market.
• Answer:
  • Freedom of Entry: If existing firms are earning supernormal profits, new firms will enter the market. This increases supply, driving down the market price and reducing profits until only normal profits are earned.
  • Freedom of Exit: If firms are incurring losses, they will exit the market. This decreases supply, driving up the market price and reducing losses until firms can earn at least normal profits.

Q.18 Reasons for Monopoly

• Question: Explain any two reasons for the emergence of a monopoly market.
• Answer:
  1. Exclusive Control over a Key Resource: A firm may have exclusive control over a crucial raw material or input required to produce a particular good or service.
  2. Legal Barriers (Patents, Copyrights): Patents and copyrights grant exclusive rights to inventors and creators, preventing others from producing or selling their creations for a certain period.

OR

• Question: Discuss product differentiation and price discrimination with suitable examples.
• Answer:
  • Product Differentiation: Firms differentiate their products to make them more attractive to buyers and create brand loyalty. This can be done through features, quality, design, packaging, or branding. Example: Different brands of soap offer variations in scent, ingredients, and moisturizing properties.
  • Price Discrimination: A seller charges different prices to different buyers for the same product. This is possible when the seller has some market power and can segment the market. Example: Airlines charge different fares for the same flight based on booking time, class, and flexibility.

Q.19 Contraction vs. Decrease in Supply

• Question: Identify the contraction of supply and decrease in supply from the following:
  • a. Fall in supply of mobile phone due to fall in its price.
  • b. Fall in supply of gold due to increase in excise tax rate.
  • c. Fall in supply of Pepsi due to rise in the price of Coca-Cola.
• Answer:
  • a. Contraction of Supply: Movement along the supply curve to a higher price.
  • b. Decrease in Supply: Shift of the entire supply curve to the left.
  • c. Decrease in Supply: Shift of the entire supply curve to the left.

OR

• Question: The price elasticity of supply of commodities X and Y are equal… Calculate the percentage increase in its supply.
• Answer:
  • Price elasticity of supply (PES) = (% change in quantity supplied) / (% change in price)
  • For X: PES = (-16%) / (-100%/8) = 1.28
  • For Y: Let the percentage change in supply be ‘x’.
  • 1.28 = x / 10%
  • x = 1.28 * 10% = 12.8% increase

Q.20 Causes of Increasing Returns to a Factor

• Question: Discuss any three causes of increasing returns to a factor.
• Answer:
  1. Increased Specialization and Division of Labor: As more units of a variable factor are employed with fixed factors, specialization and division of labor become possible. This leads to increased efficiency and higher productivity.
  2. Better Utilization of Fixed Factors: With more units of the variable factor, the fixed factors can be utilized more effectively. This reduces wastage and increases output.
  3. Technological Improvements: Improvements in technology or production methods can also lead to increasing returns, as they enhance the productivity of all factors combined.

Q.21 Completing the Table

• Question: Complete the following table:

Answer:

• AFC (Average Fixed Cost): AFC = TFC / Output. We need to find TFC first.

  • At output 4, AFC is 12. So, TFC = AFC * Output = 12 * 4 = 48. TFC is constant.
  • AFC at output 1 = 48 / 1 = 48
  • AFC at output 3 = 48 / 3 = 16
  • AFC at output 5 = 48 / 5 = 9.6

• MC (Marginal Cost): MC = Change in TC / Change in Output

  • TC at output 2 = TC at output 1 + MC = 72 + 10 = 82
  • TC at output 3 = TC at output 2 + MC = 82 + 8 = 90
  • MC at output 4 = TC at output 4 – TC at output 3 = 99 – 90 = 9
  • TC at output 5 = TC at output 4 + MC = 99 + 10 = 109

Completed Table:

Q.22 Monopoly vs. Monopolistic Competition

• Question: Differentiate monopoly and monopolistic markets on the basis of: 1-Price of the products, 2-Nature of the product.
• Answer:

Q.23 Increase in Supply vs. Increase in Quantity Supplied

• Question: When will an increase in supply imply an increase in quantity supplied but no change in price? Discuss with a diagram.
• Answer: An increase in supply implies an increase in quantity supplied at every price level. This occurs when the supply curve shifts to the right. However, if demand is perfectly elastic (a horizontal demand curve), the increase in supply will lead to an increase in quantity supplied without a change in price.

Diagram:

Price
|
|-------------- Demand (Perfectly Elastic)
|              |
|---S1---------S2---------> Quantity
|              |
|--------------|

• S1 and S2 are two supply curves. The horizontal demand curve indicates that