The Institute of Company Secretaries of India, CS Foundation Basic Economics & Busine

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1.
(a) State, with reasons in brief, whether the following statements are true or false: (3 marks each)

(i) A pure capitalistic economy is characterised by absence of State intervention in economic activity.

(ii) As a consumer moves along an indifference curve from left to right, the marginal rate of substitution of Commodity-X for Commodity-Y increases.

(iii) Two isoquants may intersect each other.

(iv) Monopolistic competition is characterised by the homogeneity of product.

(v) Commercial banks have unlimited capacity to create credit.


(b) Distinguish between any two of the following: (5 marks each)

(i) ‘Inferior goods’ and ‘status related goods’.

(ii) ‘Cardinal approach’ and ‘ordinal approach’ in utility analysis.

(iii) ‘National income at current prices’ and ‘national income at constant prices’.


2.
(a) When the price of Commodity-X is Rs.20 per unit, its quantity demanded is 50 units; and when the price goes up to Rs.40 per unit, its quantity demanded falls to 25 units. Find the price elasticity coefficient and give its interpretation. (4 marks)

(b) Fill in the blanks in the following table: (3 marks)

Agricultural Output with Fixed Land and Variable Units of Labour
Labour Total Average Marginal
(Units) Output (Tonnes) Output (Tonnes) Output (Tonnes)
1 .... .... 8
2 .... 10 ....
3 .... .... 16
4 48 .... ....
5 .... 11 ....
6 .... 10 ....
7 60 .... ....

(c) What is ‘inflationary gap’? (4 marks)

(d) Briefly explain the concept of ‘marginal propensity to save’. (4 marks)

3.
(a) What is meant by ‘selling expenses’ in the context of monopolistic competition? (3 marks)

(b) What are ‘ridge lines’? Explain giving a suitable diagram. (5 marks)

(c) What is meant by ‘monopoly’? Explain the equilibrium of a monopolist firm in the long run. (7 marks)

4.
(a) Write notes on any two of the following: (5 marks each)

(i) Investment multiplier

(ii) Demand pulls inflation

(iii) Net barter terms of trade.

(b) What is ‘bank rate’ ? How is it used by the central bank of a country to control credit creation by banks? (5 marks)

5.
(a) Critically analyse the comparative cost advantage theory of international trade. (8 marks)

(b)What is meant by ‘national income’? Can it be taken as a measure of welfare? Give reasons for your answer. (7 marks)



PART....B
(Answer ANY TWO questions from this part.)


6.
(a) What is meant by ‘government failure’ ? What are the reasons for government failure ? (8 marks)

(b) How does rapid growth of population create hurdles in economic development ? (7 marks)


7.
(a) Write short notes on the following : (4 marks each)


(i) Dualistic nature of Indian economy

(ii) Drawbacks of road transport system in India.

(b) What is meant by ‘economic environment of business’ ? Mention the factors which influence it. (7 marks)


8.
(a) Define ‘subsidy’. (2 marks)
(b) Briefly discuss the financial sector reforms initiated in India in recent years. (8 marks)

(c) “Changing composition of India’s external trade reflects the changing nature of the economy.” Elaborate. (5 marks)


1.
(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 analyses and ‘ordinal approach of utility analyses.
(ii) ‘Returns to a factor’ and ‘returns to scale’.
(iii) ‘Micro economics’ and ‘macro economics’.
(5 marks each)

2.
(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)

3.
(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)

(b)
(i) Fill-up the blanks in the following table: (4 marks)
Agricultural Output with Fixed Land and Variable Units of Labour



Labour (Units) Total Output Average Output Marginal Output
(Tonnes) (Tonnes) (Tonnes)
1 8 8 ....
2 20 .... 12
3 36 12 ....
4 .... 12 12
5 55 .... 7
6 60 .... 5
7 .... .... 0

(ii) Narrate few aspects relating to supply of Labour in a country. (4 marks)

4.
(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)

5.
(a) Briefly explain any two of the following concepts: (4 marks)
(i) Reflation
(ii) Hyper-inflation
(iii) Deflation.

(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.)


6.
(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: (4 marks each)
(i) Concept of X-inefficiency
(ii) Social goods
(iii) State regulation
(iii) Industrial sickness.

7.
(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)

OR
Quality of life of Indian population is related to its size and employment level. Comment.
8.
(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: (4 marks each)
(i) Liberalisation is the encouragement of direct foreign investment and technology.
(ii) Infrastructure, by their very nature, tends 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.

1.
(a) State, with reasons, whether the following statements are true or false: (3 marks each)


(i) Micro-economics and macro-economics analyse the same economic aggregates.
(ii) A firm under perfect competition is a price-taker.
(iii) GNP is always less than GDP.
(iv) Commercial banks have more liquidity when the CRR is raised by the central bank.
(v) There exists an inverse relationship between the multiplier and the MPS.

(b) Distinguish between any two of the following: (5 marks each)
(i) 'Positive science' and 'normative science',
(ii) 'External economies' and 'internal economies'.
(iii) 'Income effect' and 'substitution effect' with the help of indifference curves.

2.
(a) Define 'consumer equilibrium'. Determine this concept using the equi-marginal principle. (5 marks)
(b) Calculate the marginal rate of technical substitution of Y for X from the following table: (2 marks each)


Combination Factor-X Factor-Y
A 1 12
B 2 8
C 3 5
D 4 3
E 5 2

(c) Distinguish between 'expansion in demand' and 'contraction in demand' with the help of suitable diagrams. (4 marks)

(d) Explain the concept of 'stagflation'. (4 marks)

3.
(a) Explain the relationship between 'short-run average cost curves' and 'long-run average cost curves'.
(3 marks)
(b) Describe in brief the different components of the domestic factor income. (5 marks)

(c) What are the three types of price discrimination followed by monopoly firms ? Discuss. (7 marks)

4.
(a) "Inflation in small doses is desirable. But, if it is left uncontrolled, it will eat in to the very fabric of an economic system." Do you agree ? Substantiate your answer. (7 marks)

(b) Critically examine the 'quantity theory of money'. (8 marks)

5.
(a) Distinguish between 'autonomous investment' and induced investment'. Explain the determinants of investment in an economy. (7 marks)

(b) Explain and evaluate in brief the Ricardian theory of comparative cost advantage. (8 marks)


PART – B
(Answer ANY TWO questions from this part.)


6. (a) Analyse the importance of the market structure in the business environment of a firm. (7 marks)

(b) What do you mean by 'business environment'? What are its different components? (8 marks)

7.
(a)"India is a poor, but developing economy." Substantiate this claim by considering the features of Indian economy. (7 marks)

(b) Analyse the changes in the composition and direction of India's foreign trade since independence.(8 marks)

8.
(a) "An efficient system of transport forms the core of the infrastructure of an economy." Comment on this statement in the Indian context. (7 marks )

(b) Write short notes on the following: (4 marks each)
(i) Indian financial system
(ii) Current industrial policy.
Contact Details:
The Institute Of Company Secretaries Of India
ICSI House, Plot No.22,
Lodi Road, Institutional Area,
New Delhi,
Delhi 110003
011 4150 4444
India

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