CS Foundation :: Basic economics & business environment : June 2005

Roll No…………………
Time allowed : 3 hours Maximum marks : 100
Total number of questions : 8 Total number of printed pages : 4
PART – A
(Answer Question No.1 which is compulsory
and any three of the rest from this part.)
1. (a) State, with reasons in brief, whether the following statements are true or false :
(i)The cross elasticity of demand is negative in case of substitute goods.
(ii)Under monopoly, marginal revenue is equal to average revenue.
(iii)

Average fixed cost curve is a horizontal straight line indicating that the average fixed cost remains the same at all levels of output.

(iv)Fixed wage earners suffer both in inflation and deflation.
(v)Robbins definition of economics makes it a science of choice making.
(3 marks each)
(b) (i)

Given below is the demand schedule for a commodity. What is the nature of elasticity of demand for the commodity ? Give reasons for your answer :
Price
Rs.
5
6
8
10		 Quantity Demanded
(units)
12.0
10.0
7.5
6.0
(3 marks each)
(ii) Given below is the long-run production function. Which type of returns to scale are being shown in the table ? Give reasons for your answer :
Units of Inputs
(Labour+Capital)
1 + 1
2 + 2
4 + 4
8 + 8
16 + 16		Quantity Demanded
(units)
10
30
60
100
180
(3 marks each)
2. (a) Distinguish between M1 and M3 measures of money supply as used in India.
(3 marks )
(b) “Saving is necessarily equal to investment.” Comment.
(4 marks )
(c) Explain the properties of an isoquant curve.
(4 marks )
(d) An investment of Rs.100 crore results in generation of additional Rs.400 crore of income in an economy. Estimate the value of marginal propensity to consume.
(4 marks )
3. (a) State and explain the ‘law of variable proportions’. Out of the three stages in its operation, which do you think is the most relevant for the producer ?
(7 marks )
(b) Define ‘income elasticity of demand’. How will the income elasticity of demand for an inferior good be different from that of a normal good ?
(5 marks )
(c) What do you mean by ‘open market operations’ (OMO) ?
(3 marks )
1/2005/BEBE P.T.O.


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: 2 :

4. (a) Distinguish between any two of the following :
(i)‘Perfect competition’ and ‘monopolistic competition’.
(ii)‘Inflationary gap’ and ‘deflationary gap’.
(iii)‘Fisher’s version’ and ‘Cambridge version’ of quantity theory of money.
(5 marks each )
(b) Define —
(i)Gross Domestic Product (GDP).
(2 marks each )
(ii)Stagflation.
(3 marks)
5. (a) Define ‘national income’. Explain the significance of national income estimates.
(7 marks )
(b) What do you mean by ‘rate of exchange’ ? How is the rate of exchange of a currency determined ?
(8 marks )
PART – B
(Answer ANY TWO questions from this part.)
6. (a) What do you mean by ‘business environment’ ? State the factors that affect the economic environment of a business firm.
(8 marks )
(b) Discuss in brief the basic features of the Indian economy.
(7 marks )
7. (a) Discuss in brief the following :
(i)Salient features of Indian tax system.
(ii)Composition of India’s national income.
(iii)Principal objectives of economic planning in India.
(3 marks each )
(b) Explain the concept of ‘balance of payments’.
(6 marks )
8. (a) What do you mean by ‘disinvestment’ ? Account for the declining role of public sector in the Indian economy.
(7 marks )
(b) Write notes on any two of the following :
(i)Financial instruments
(ii)Financial institutions
(iii)Financial markets.
(4 marks each)

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1/2005/BEBE

 

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