ECONOMICS ABT

Q. 1) Choose the correct option

1. The branch of economics that deals with allocations of resources is Micro economics.
2. The relationship between income and demand for inferior goods is inverse.
3. Net addition made to the total revenue by selling an extra unit of commodity is marginal
revenue.
EXTRAS:
4. Concepts studied under micro economics are: Factor pricing and product pricing.
5. Method adopted in micro economic analysis is slicing method.
6. Concepts studied under macroeconomics are: Whole economy, economic development and
aggregate supply.
7. In the law of diminishing marginal utility, Alfred Marshall assumes that marginal utility of
money remains constant.
8. As per the law if diminishing marginal utility, measurement of utility is assumed to be
cardinal.
9. MU of the commodity becomes negative when TU of a commodity is falling.
10. Point of Satiety means TU is maximum and MU is zero.
11. When MU is falling, TU is rising.
12. Time utility – Blood Bank
Place utility – Transport
Service utility – Doctor
Knowledge utility- Mobile phone
13. Statements indicating consumer equilibrium: MU is equal to price.
14. The relationship between demand for a good and price of its substitute is direct.
15. Symbolically, the functional relationship between Demand and Price can be expressed as Dx
= f(Px).
16. When less units are demanded at a high price it shows contraction of demand.
17. Price elasticity of demand on a linear curve at the X axis is zero.
18. Price elasticity of demand on a linear demand curve at the Y axis is equal to infinity.
19. Demand curve is parallel to X axis, in case of perfectly elastic demand.
20. When percentage change in quantity demanded is more than the percentage change in
price, the demand curve is flatter.
21. Ed=0 in case of necessities.
22. When supply curve is upward sloping, it’s slope is positive.
23. An upward movement along the same supply curve shows expansion of supply.
24. A rightward shift in supply curve shows increase in supply.
25. Other factors remaining constant, when the quantity is supplied only due to a fall in price, it
shows contraction in supply.
26. In economic sense, market includes following activities:
The place where goods are sold and purchased
An arrangement through which buyers and sellers come in close contact with each other
directly or indirectly
27. Classification of markets on the basis of place:
Local market, National market, international market
28. Homogenous product is a feature of Perfect Competition market.
29. Under Perfect Competition, sellers are Price takers.
30. Statements that are incorrect in relation to index numbers:
 Index number is a geographical tool
Index numbers measure changes in the air pressure
31. Statements that highlight the significance of index numbers:
Index numbers are useful for making future predictions
Index numbers help in the measurement of inflation
Index numbers help to frame suitable policies
32. Statements that apply to weighted index numbers:
It assigns suitable ‘weights’ to various commodities
In most of the cases, quantities are used as weights
Laaspeyre’s and Paasche’s method is used in the calculation of weighted index numbers
33. Statements related to limitations of index numbers:
Index numbers are not completely reliable
There may be a bias in the data collected
Every formula has some kind of defect
Index numbers ignore changes in the qualities of products
34. Price index – p1/p0 * 100
Value index – p1q1/p0q0 * 100
Quantity index – q1/q0 * 100
Paasche’s index – p1q1/p0q1 * 100
35. While estimating national income, we include only value of final goods and services in order
to avoid double counting.
36. NDP is obtained by deducting depreciation from GDP.
37. In India, national income is estimated using combination of output and income method.
38. National Income Committee is established in August 1949.
39. Financial year is from 1st April to 31st March.
40. Income method is National income = Rent + Wages + Interest + Profit + Mixed income + Net
income from abroad.
AKA NI = R+W+W+P+MI+(X-M) +(R-P)
41. Expenditure method is National income = Private Final Consumption Expenditure + Gross
Domestic Private Investment Expenditure + Government Final Consumption and Investment
Expenditure + Net Foreign Investment / Net Exports + Net Receipts
AKA NI = C+I+G+(X-M) +(R-P)
42. Optional functions of Government:
Provision of education and health services
Provision of social security measures
Collection of tax
43. Obligatory functions of the Government are maintaining internal law and order.
44. Public finance is “one of those subjects which are on the borderline between economics and
politics." is the view of Prof. Hugh Dalton
45. Non-tax sources of revenue:
Fees
Special Levy
46. Trends shown by public expenditure of any Government shows following trend of fluctuating
47. Identify the right group of pairs from the given options.
Direct tax - Personal income tax
Indirect tax - GST
Fees and Fines - Non-tax revenue
Surplus budget - Inflation
 48. Development financial institutions were established to develop industry, agriculture and
other key sectors.
Money market faces shortage of funds due to inadequate savings.
49. Individual investors have lost confidence in the capital market due to financial scams.
50. Commercial banks act as intermediaries in the financial system to make profits.
51. Types of foreign trade
Import trade
Export trade
Entrepot trade
52. Export trends of India’s foreign trade includes
Engineering goods
Gems and Jewellery
Textiles and ready-made garments
53. Role of foreign trade is
To earn foreign exchange
To encourage investment
Lead to division of labour

Q.2) Odd word

1. Legal monopoly: Patent, OPEC, Copyright, Trade mark.

Ans: OPEC

2. Financial Assets: Bonds, Land, Govt Securities, Derivatives.

Ans: Land

3. Selling cost: Free gifts, Advertisement hoardings, Window displays, Patents.

Ans: Patents

EXTRAS:
4. Market structure on the basis of competition: Monopoly, Oligopoly, Very Short Period market,
Perfect competition.

Ans: Very Short Period market

5. Features of monopoly: Price maker, Entry barriers, Many sellers, Lack of substitutes

Ans: Many sellers

6. Types of Bank Accounts: Saving a/c, Demat a/c, Recurring a/c, Current a/c

Ans: Demat a/c

7. Unregulated Financial intermediates: Mutual fund, Nidhi, Chit fund, Loan Companies

Ans: Mutual fund

8. Quantitative Tools: Bank rate, Open market operations, Foreign Exchange rate, Variable reserve
ratios

Ans: Foreign Exchange rate

1. Total cost: TFC + TVC: Average cost: TC/TQ

2. p0: Base year prices: p1: Current year prices

3. RBI: Central Bank: SBI: Commercial Bank

4. Theoretical difficulty: Transfer payments: Practical difficulty: Valuation of Inventories

EXTRAS:

5. Micro economics: Slicing method: Macroeconomics: Lumping Method

6. Micro economics: Tree: Macroeconomics: Forest

7. Macro-economic theory: Income and employment: Micro economics: Price theory

8. Macros: Macroeconomics: Micros: Micro economics

9. General equilibrium: Macroeconomics: Partial equilibrium: Micro economics

10. Perfectly elastic demand: Ed = f: Perfectly inelastic demand: Ed = 0

11. Rectangular hyperbola: Unitary elastic demand: Steeper demand curve: Relatively inelastic
demand.

12. Straight line demand curve: Linear demand curve: Demand curve is convex to origin: nonlinear
demand curve.

13. Pen and ink: Complementary demand: Tea or Coffee: Substitutes.

15. Expansion of supply: Price rises: Contraction of supply: Price falls

16. Total revenue: T*Q: Average revenue: TR/TQ

17. Demand curve: Downward: Supply curve: Upward

18. Other factors change: Change in supply: Other factors constant: Variation of supply

19. Perfect competition: Free entry and exit: Monopoly: Barriers to entry.

20. Price taker: Perfect Competition: Price maker: Monopoly.

21. Single price: Perfect competition: Discriminated prices: Monopoly

22. Price Index: Inflation: Quantity Index Number: Agricultural production

23. Laaspeyre's index: Base year: Paasche's index: Current year quantities

24. Univariate index: Single variable: Composite index: Group of variables

25. GDP: C + I + G + (X-M): GNP: C + I + G + (X-M) + (R-P).

26. Output method: Product Method: Income method: Factor cost method

27. Money market: Short term funds: Capital Market: Long term funds
28. Co-operative banks: Organized sector: Indigenous bankers: Unorganized sector

29. Primary market: New issues: Secondary market: Old issues

Q.4) Economic terms

1. A commodity which can be put to several uses – Composite demand

2. The market where there are few sellers – Oligopoly

3. Cost incurred on fixed factor – Total Fixed Cost

EXTRAS:

4. Gauri collected the information about the income of a particular firm – Micro economics

5. Ramesh decided to take all decisions related to production, such as what and how to produce? –
Free market economy

6. Shabana paid wages to workers in her factory and interest on her bank loan – Theory of factor
pricing

7. Salma purchased sweater for her father in winter season – Relative concept

8. Nilesh purchased ornaments for his sister – Subjective concept

9. Kavita consumed five units of oranges one after the other – Total Utility

10. Bhushan refused to eat fifth chapati after eating four chapatis – Point of Satisfaction

11. Lalita satisfied her want of writing on essay by using pen and notebook – Utility

12. A situation where more quantity is demanded at lower price – Expansion of demand

13. Graphical representation of demand schedule – Demand Curve

15. A desire which is backed by willingness to purchase and ability to pay – Demand

16. Degree of responsiveness of quantity demanded to change in income only – Income elasticity

17. Degree of responsiveness of a change in quantity demanded of one commodity due to change in

the price of another commodity – Cross elasticity

18. Degree of responsiveness of a change of quantity demanded of a good to a change in its price –
Price elasticity

19. Elasticity resulting from infinite change in quantity demanded – Perfectly Elastic Demand

20. Elasticity resulting from a proportionate change in quantity demanded due to a proportionate

change in price – Elasticity of Demand

21. Cost incurred per unit of output – Average cost

22. Net addition made to total cost of production – Marginal cost

23. Revenue per unit of output sold – Average revenue

25. The cost incurred by the firm to promote sales – Selling cost

26. Number of firms producing identical product – Homogenous product

27. Charging different prices to different consumers for the same product or services – Price
discrimination

28. Vrinda receives monthly pension of Rs.5,000/- from the State Government – Transfer payment

29. Viru kept aside 100 kgs. out of 500 kgs. of wheat produced in his farm for his family – Self
consumption

30. Sheetal purchased wheat flour for her bakery from the flour mill – Intermediate goods

31. Shobha collected data regarding the money value of all final goods and services produced in the
country for the financial year 2018-2019 – National income

32. Rajendra has a total stock of 500 gel pens in his shop which includes 200 gel pens produced in
the previous financial year – Valuation of inventories

33. Raghu’s father regularly invests his money in stocks and bonds – Investment in stock market

34. Sara makes a monthly contribution to a fund jointly created by her friends. The collected fund is
then given to a chosen member through lucky draw – Chit fund

35. Tina deposited a lumpsum amount of 50,000 in the bank for a period of one year – Fixed deposit
36. ABC bank provides d-mat facility, safe deposit lockers, internet banking facilities to its customers
– Auxiliary function of Commercial Bank

37. India purchased petroleum from Iran – Import trade

38. Maharashtra purchased wheat from Punjab – Internal trade

39. England imported cotton from India, made readymade garments from it and sold them to
Malaysia – Entrepot trade

40. Japan sells smart phones to Myanmar – External trade