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## TN State Board 11th Economics Model Question Paper 3 English Medium

Instructions:

1.  The question paper comprises of four parts.
2.  You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. questions of Part I, II. III and IV are to be attempted separately
4. Question numbers 1 to 20 in Part I are objective type questions of one -mark each. These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-marks questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Parr III are three-marks questions, These are to be answered in about three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-marks questions. These are to be answered) in detail. Draw diagrams wherever necessary.

Time: 3 Hours
Maximum Marks: 90

Part – I

Choose the correct answer. Answer all the questions: [20 × 1 = 20]

Question 1.
The costs of self-owned resources are termed as ………………… cost.
(a) real
(b) explicit
(c) money
(d) implicit
(d) implicit

Question 2.
The concept of elasticity of demand was introduced by ………………………….
(a) Ferguson
(b) Keynes
(d) Marshall
(d) Marshall

Question 3.
Elasticity of demand is equal to one indicates………………………
(a) Unitary Elastic Demand
(b) Perfectly Elastic Demand
(c) Perfectly Inelastic Demand
(d) Relatively Elastic Demand
(a) Unitary Elastic Demand

Question 4.
When price remains constant, AR will be ……………………..MR.
(a) equal to
(b) greater than
(c) less than
(d) not related to
(a) equal to

Question 5.
Which is considered as the basic unit for rural areas?
(a) Panchayat
(b) Village
(c) Town
(d) Municipality
(b) Village

Question 6.
India is the largest producer of ……………….. in the world.
(a) fruits
(b) gold
(c) petrol
(d) diesel
(a) fruits

Question 7.
Under perfect competition, the shape of demand curve of a firm is …………………….
(a) vertical
(b) horizontal
(c) negatively sloped
(d) positively sloped
(b) horizontal

Question 8.
According to the Loanable Funds Theory, supply of loanable funds is equal to ……………………..
(a) S + BC + DH + DI
(b) I + DS + DH + BM
(c) S+ DS + BM + DI
(d) S + BM + DH + DS
(a) S + BC + DH + DI

Question 9.
A book seller sold 40 books with the price of ₹ 10 each. The total revenue of the seller is ₹ …………………
(a) 100
(b) 200
(c) 300
(d) 400
(d) 400

Question 10.
Increase in demand is caused by …………….
(a) increase in tax
(b) higher subsidy
(c) increase in interest rate
(d) decline in population
(b) higher subsidy

Question 11.
Density of population = …………………………..
(a) Land area / Total population
(b) Land area / Employment .
(c) Total population / land area of the region
(d) Total population / Employment
(c) Total population / land area of the region

Question 12.
The position of Indian Economy among the other strongest economies in the world is ……………..
(a) Fourth
(b) Sixth
(c) Fifth
(d) Tenth
(b) Sixth

Question 13.
A Statement of equality between two quantities is called ……………..
(a) Inequality
(b) Equality
(c) Equations
(d) Functions
(c) Equations

Question 14.
Product obtained from additional factors of production is terms as ……………
(a) Marginal product
(b) Total product
(c) Average product
(d) Annual product
(a) Marginal product

Question 15.
An example of selling cost is ……………..
(a) Raw material cost
(b) Transport cost

Question 16.
Indicate the cause for rural poverty……………..
(a) lack of non – farm employment
(b) high employment
(c) low inflation
(d) high Investment
(a) lack of non – farm employment

Question 17.
Knitted garment production is concentrated in……………..
(a) Coimbatore
(b) Tiruppur
(c) Erode
(d) Karur
(b) Tiruppur

Question 18.
Identify the feature of rural economy.
(a) Dependence on agriculture
(b) High population density
(c) Low level of population
(d) Low level of inequality
(a) Dependence on agriculture

Question 19.
Which of the following cities does not have international airport?
(b) Tiruchirapalli
(c) Paramakudi
(d) Coimbatore
(c) Paramakudi

Question 20.
Which of the following is the way of privatisation?
(a) Disinvestment
(b) Denationalization
(c) Franchising
(d) All the above
(d) All the above

Part-II

Answer any seven questions in which Question No. 30 is compulsory. [7 x 2 = 14]

Question 21.
What is Iso-cost line?

• The iso-cost line is an important component in analysing producer’s behaviour.
• The iso-cost line illustrates all the possible combinations of two factors that can be used at given costs and for a given producer’s budget.
• Simply stated, an iso-cost line represents different combinations of inputs which shows the same amount of cost.
• The iso-cost line gives information on factor prices and financial resources of the firm.
• It is otherwise called as “iso-price line” or “isO-income line” or “iso-expenditure line” or “total outlay curve”.

Question 22.
Who is price – taker?
‘A large number of buyers’ implies that each individual buyer buys a very very small quantum of a product as compared to that found in the market. This means that he has no power to fix . the price of the product. He is only a price taker.

Question 23.
State the various components of central sector schemes under post-harvest measures.

• Mega food parks, Integrated cold chain, Value Addition Preservation, Infrastructure and modernization of slaughter house.
• Scheme for quality Assurance, Codex Standards, Research and Development and other promotional activities.

Question 24.
What is the Value of marginal product?
The Value of Marginal Product is obtained by multiplying the marginal physical product of the factor by the price of product. Symbolically VMP = MPP x Price

Question 25
What are the degrees of price elasticity of demand?
The price elasticity of demand, commonly known as the elasticity of demand refers to the responsiveness and sensitiveness of demand for a product to the changes in its price. In other words, the price elasticity of demand is equal to

Question 26.
Define “Excess Capacity”.

• Excess capacity is the difference between the optimum output that can be produced and the actual output produced by the firm.
• In the long run, a monopolistic firm produces deliberately output which is less than the optimum output that is the output corresponding to the minimum average cost.
• This leads to excess capacity which is actually a waste in monopolistic competition.

Question 27.
What is meant by Economics?

• The term or word ‘Economics’ comes from the Ancient Greek “oikonomikos” [oikos means “households” and nomos means “management” “custom” or “law”].
• Thus, the term “Economics” means “management of households”.
• The subject was earlier known as “Political Economy” is renamed as Economics.

Question 28.
What are the objectives of Tenth five year plan.
Tenth Five Year Plan [2002 – 2007]

• This plan aimed to double the per capita income of India in the next 10 years.
• It aimed to reduce the poverty ratio to 15% by 2012.
• Its growth target was 8.0% but it achieved only 7.2%

Question 29.
Define Rural Electrification.

• Rural Electrification refers to providing electrical power to rural areas.
• The main aims of rural electrification are to provide electricity to agricultural operations and to enhance agricultural productivity.
• To increase cropped area, to promote rural industries and to lighting the villagers.
• In order to improve this facility the supply of electricity is almost free for agricultural purpose in many states and the electricity tariff is charged in rural areas is kept very low.

Question 30.
What are the phases of colonial exploitation of India?

• India was a colony for long time. Colonialism refers to a system of political and social relations between two countries, of which one is the ruler and the other is its colony.
• The ruling country not only has political control over the colony, but it also determines the economic policies of the subjugated country.
• The people living in a colony cannot take independent decisions in respect of utilisation of the country’s resources and important economic activities.
• India had the bitter experience of colonialism.

Part-III

Answer any seven questions in which Question No. 40 is compulsory. [7 x 3 = 21]

Question 31.
Explain about the period of Merchant capital.

• The period of merchant capital was from 1757 to 1813.
• The only aim of the East India Company was to earn profit by establishing monopoly trade in the goods with India and the East India’s.
• During this period, India had been considered as the best hunting ground for capital by the East Indian company to develop industrial capitalism is Britain.
• When Bengal and South India came under political shake of the East India company in 1750s and 1760s, the objective of monopoly trade was fulfilled.
• The company administration succeeded in generating huge surpluses which were repatriated to England, and the Indian leaders linked this problem of land revenue with that of the drain.
• Above all, the officers of the company were unscrupulous and corrupt.

Question 32.
Illustrate the uses of Mathematical Methods in Economics.
Uses of Mathematical Methods in Economics:

• Mathematical Methods help to present the economic problems in a more precise form.
• Mathematical Methods help to explain economic concepts.
• Mathematical Methods help to use a large number of variables in economic analyses.
• Mathematical Methods help to quantity the impact or effect of any economic activity implemented by Government or anybody. There are of course many other uses.

Question 33.
Elucidate the different types of land tenure system in colonial India.
Land Tenure refers to the system of land ownership and management. The features that distinguish a land tenure ‘system from the others relate to the following:

• Who owns the land
• Who cultivates the land.
• Who is responsible for paying the land revenue to the government.

Based on these questions, three different types of land tenure existed in India before Independence. They were:

• Zamindari System or the Land Lord – Tenant System.
• Mahalwari System or Communal System of Farming.
• Ryotwari System or the Owner Cultivator System.

Zamindari System or the Land lord Tenant System:

• Under this system the land lord or the Zamindars were declared as the owners of the land and.they were responsible to pay the land revenue to the government.
• The share of the government in total rent collected was fixed as 10/11th the balance going to the Zamindars as remuneration.

Mahalwari System or Communal System of Farming:

• After introduction of this system, it was later extended to Madhya Pradesh and Punjab.
• The ownership of the land was maintained by the collective body usually the villagers which served as a unit of management.

Ryotwari System (or) the Owner Cultivator System:

• This system was initially introduced in Tamil Nadu and later extended to Maharashtra, Gujarat, Assam, Coorg, East Punjab and Madhya Pradesh.
• Under this system the* ownership rights of use and control of land were held by the tiller himself.

Question 34.
What are the features of a market?

• Buyers and sellers of a commodity or a service.
• A commodity to be bought and sold.
• Price agreeable to buyer and seller.
• Direct or indirect exchange.

Question 35.
Explain GSDP in Tamil Nadu.

• The Gross State Domestic Product (GSDP) refers to the total money value of all the goods and services produced annually in the state.
• Tamil Nadu is the second largest economy in Jndia with a GSDP of $207.8 billion in 2016-2017 according to the Directorate of Economics and Statistics, Tamil Nadu. • The GSDP of Tamil Nadu is equal to the GDP of Kuwait on nominal term and GDP of UAE on PPP terms. Per capita GSDP would be better for intercountry or interstate comparisons. • Tamil Nadu GSDP =$207.8 billion in 2016-17.

Question 36.
Distinguish between micro economics and macro economics.
Micro Economics

1. It is that branch of economics which deals with the economic decision-making of individual economic agents such as the producer, the consumer etc.
2. It takes into account small components of the whole economy.
3. It deals with the process of price determination in case of individual products and factors of production.
4. It is known as price theory
5. It is concerned with the optimization goals of individual consumers and producers

Macro Economics :

1. It is that branch of economics which deals with aggregates and averages of the entire economy. E.g., aggregate output, national income, aggregate savings arid investment, etc.
2. It takes into consideration the economy of the country as a whole.
3. It deals with general price-level in any economy.
4. It is also known as the income theory.
5. It is concerned with the optimization of the growth process of the entire economy.

Question 37.
What are the important features of utility?

• Utility is psychological. It depends on the consumer’s mental attitude. For example, a vegetarian derives no utility from mutton.
• Utility is not equivalent to usefulness. For example, a smoker derives utility from a cigarette; but, his health gets affected.
• Utility is not the same a pleasure. A sick person derives utility from taking a medicine, but definitely it is not providing pleasure.
• Utility is personal and relative. An individual obtains varied utility from one and the same good in different situations and places.
• Utility is the function of the intensity of human want. An individual consumer faces a tendency of diminishing utility.
• Utility cannot be measured objectively. It is a subjective concept and it cannot be measured numerically.
• Utility has no ethical or moral significance. For example, a cook derives utility from a knife using which he cuts some vegetables, and a killer wants to stab his enemy by that knife. In economics, a commodity has utility if it satisfies a human want.

Question 38.
What are the steps involved in executing a MS Excel Sheet?

1. MS – excel is used in data analysis by using formula.
2. A spread sheet is a large sheet of paper which contains rows and columns.
3. The intersection of rows and columns is termed as cell.
4. MS – Excel 2007 version supports up to 1 million rows and 16 thousand columns per work sheet.

MS Excel Start From Various Options:

• Click Start → Program → Micro Soft Excel
• Double click the MS Excel Icon from the Desktop

Worksheet:
MS – Excel work sheet is a table like document containing rows and columns with data
and formula .

There are four kinds of calculation operators. They are:

1. Arithmetic
2. Comparison
3. Text Concatenation [link together]
4. Reference

MS – Excel helps to do data analysis and data presentation in the form of graphs, diagrams, area chart, line chart etc.

Question 39.
Write any three objectives of Industrial Policy 1991.

• Economic development of a country particularly depends on the process of Industrialisation.
• At the time of Independence, India inherited a weak and shallow Industrial base.
• Therefore during the post-Independence period, the Government of India took special emphasis on the development of a solid Industrial base.

Question 40.
What are the main menus of MS word?

Main Menus of MS word :

1. Home menu :
It is used to change the fonts, font size, change the text color and apply text style bold, italic, underline etc.
2. Insert :
It is used to insert page numbers, charts, tables, shapes, word art forms, equations, symbols and pictures
3. Page Lay out :
It is used to change the margin size, split the text into more columns, background colour of a page
4. Review:
Spell Check, Grammar, Translate
5. View:
Print layout, full screen, reading, document view

Ms word is a word processor, which helps to create, edit, print and save documents for future retrieval and reference.

Part – IV

Answer all the questions. [7 x 5 = 35]

Question 41.
(a) Bring out the relationship between AR and MR curves under various price conditions.
Relationship between AR and MR Curves:
If a firm is able to sell additional units at the same price then AR and MR will be constant and equal. If the firm is able to sell additional units only by reducing the price, then both AR and MR will fall and be different.

Constant AR and MR (at Fixed Price)
When price remains constant or fixed, the MR will be also constant and will coincide with AR. Under perfect competition as the price is uniform and fixed, AR is equal to MR and their shape will be a straight line horizontal to X – axis. The AR and MR Schedule under constant price is given in the below table and in the diagram.

Declining AR and MR (at Declining Price)
When a firm sells large quantities at lower prices both AR and MR will fall but the fall in MR will be more steeper than the fall in the AR.

It is to be noted that MR will be lower than AR. Both AR and MR will be sloping downwards straight from left to right. The MR curve divides the distance between AR Curve and Y-axis into two equal parts. The decline in AR need not be a straight line or linear. If the prices are declining with the increase in quantity sold, the AR can be non-linear, taking a shape of concave or convex to the origin.

[OR]

(b) Describe the features of oligopoly.
Features of oligopoly:

• Few large firms: Very few big firms own the major control of the whole market by producing major portion of the market demand.
• Interdependence among firms: The price and quality decisions of a particular firm are dependent on the price and quality decisions of the rival firms.
• Group behaviour: The firms under oligopoly realise the importance of mutual co-operation.
• Advertisement cost: The oligopolist could raise sales either by advertising or improving the quality of the product.
• Nature of product: Perfect oligopoly means homogeneous products and imperfect oligopoly deals with heterogeneous products.
• Price rigidity: It implies that prices are difficult to be changed. The oligopolistic firms do not change their prices due to the fear of rival’s reaction.

Question 42.
(a) Illustrate the Richardian theory of Rent.

• The Classical theory of Rent is called “ Ricardian Theory of Rent.”
• “Rent is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.” – David Ricardo

Ricardian theory of rent assumes the following:

• Land differs in fertility.
• The law of diminishing returns operates in agriculture
• Rent depends upon fertility and location of land
• Theory assumes perfect competition.
• It is based on the assumption of long period.
• There is existence of marginal land or no – rent land.
• Land has certain “Original and indestructible powers”.
• Land is used for cultivation only.
• Most fertile lands are cultivated first.

Statement of the Theory:
There are three grades of land, namely A, B and C in that island. ‘A’ being most fertile ‘B’ less fertile and ‘C’ the least fertile. They will first cultivate all the most fertile land. The yield per acre on ‘A’ grade land is 40 bags of paddy. The same amount labour and capital employed in ‘A’ grade land. The yield per acre on ‘B’ grade land is 30 bags of paddy.

The Surplus of 10 bags [ 40-30] per acre appears on ‘A’ grade land. This is “ Economic Rent” land of ‘A’ grade land.
The yield per acre on ‘C’ grade land is 20 bags of paddy. This surplus of ‘A’ grade land is now raised to 20 bags [40-20] and it is the “ Economic Rent” of ‘A’ grade land.

The ‘C’ grade land cost of production is just equal to the price of its produce and therefore does not yield any rent [20-20], Hence ‘C’ grade land is called ‘No – Rent land or marginal land ’. The land which yields rent is called Ricardian Theory of Rent “intra-marginal land”.

Diagrammatic Explanation:

• In diagram, X- axis represents various grades of land and Y-axis represents yield per acre [in bags].
• OA, AB and BC are the ‘A’ grade ‘B’ grade and ‘C’ grade lands respectively.
• The ‘C ’ grade land is the no – rent land.”
• ‘A’ land ‘B’ grade lands are “intra – marginal lands”.
• The economic rent yielded by ‘A’ and ‘B’ grade lands is equal to the shaded area of their respective rectangles.

[OR]

(b) Differentiate between ‘firm’ and ‘Industry’.
Firm :
A firm refers to a single production unit in an industry, producing a large or a small quantum of a commodity or service, and selling it at a price in the market.

Its main objective is to earn a profit. There may be other objectives as described by managerial and behavioral theories of the firm.

Industry :
An industry refers to a group of firms producing the same product or service in an economy. For example: A group of firms producing cement is called a cement industry.

Question 43.
(a) List out the properties of Iso-quants with the help of diagrams.
Properties of Iso-quant Curve:

1. The iso-quant curve has negative slope.
It slopes downwards from left to right indicating that the factors are substitutable. If more of one factor is used, less of the other factor is needed for producing the same level of output. In the diagram combination A refers to more of capital K5 and less of labour Lr As the producer moves to B, C, and D, more labour and less capital are used.

2. Convex to the origin.
This explains the concept of diminishing Marginal Rate of Technical Substitution (MRTSLk). For example, the capital substituted by 1 unit of labour goes on decreasing when moved from top to bottom. If so, it is called diminishing MRTS. Constant MRTS (straight line) and increasing MRTS (concave) are also possible. It depends on the nature of iso-quant curve.

This means that factors of production are substitutable to each other. The capital substituted per unit of labour goes on decreasing when the iso-quant is convex to the origin.

3. Non inter-section of Iso-quant curves.
For instance, point A lie on the isoquants IQ1 and IQ2 But the point C shows a higher
output and the point B shows a lower level of output IQ1.
If C = A, B = A, then C = B.
But C > B which is illogical.

4. An upper iso-quant curve represents a higher level of output.
Higher IQS show higher outputs and lower IQS show lower outputs, for upper iso-quant curve implies the use of more factors than the lower isoquant curve.

The arrow in the figure shows an increase in the output with a right and upward shift of an iso-quant curve.

5. Iso-quant curve does not touch either X – axis or Y – axis.
No iso-quant curve touches the X axis or Y axis because in IQ1, only capital is used, and in IQ2 only labour is used.

[OR]

(b) If total cost = 10 + Q3, find out AC, AVC, TFC, AFC when Q = 5.
Formulas: TC = TFC + TVC

1. TC = 10 + Q3. Total cost has two components TFC and TVC.
2. TFC = is the total fixed cost which does not change with the level of output.
3. It is determined by putting the value of Q.

Given the total cost function TC = 10 + Q3
Q = units of output. Where Q = 5
Here TFC = 10 (TFC will not change when output changes.)
TC = 10 + (5)3
TC = 10 – 125
TC = 135
.’. 135 = 10 +TVC
135 – 10= TVC
TVC =125
TVC = 125, TC = 135 .’. TFC = ?
TC = (TFC + TVC)
135 = x + 125 .
135 – 125 = 10
.’. TFC =10

AC = AFC + AVC
AC = 2 + 25
AC = 27

Question 44.
(a) Explain the public transport system in Tamil Nadu.
Transport: Tamil Nadu has a well established transportation system that connects all parts of the State. This is partly responsible for the investment in the State. Tamil Nadu is served by an extensive road network in terms of its spread and quality, providing links between urban centres, agricultural market-places and rural habitations in the countryside. However, there is scope for improvement.

• There are 28 national highways in the State covering a total distance of 5,036 km.
• The State has a total road length of 167,000 km, of which 60,628 km are maintained by Highways Department.

Rail Transport:

• Tamil Nadu has a well-developed rail network as part of Southern Railway, Head quartered at Chennai.
• Tamil Nadu has a total railway track length of 6,693 km and there are 690 railway stations in the State.
• Main rail junctions in the State include Chennai, Coimbatore, Erode, Madurai, Salem, Tiruchirapalli and Tirunelveli.
• Chennai has a well-established suburban Railway network, a Mass Rapid Transport system and is currently developing a Metro System, with its first underground stretch operational since May 2017.

Air Transport:

• Tamil Nadu has four major international airports.
• Chennai International Airport is currently the third largest airport in India.
• Other international Airports in Tamil Nadu include Coimbatore International Airports, Madurai International

Airport and Tiruchirapalli International Airport.

• It also has domestic airports at Tuticorin, Salem, and Madurai.
• Increased industrial activity has given rise to an increase in passenger traffic as well as freight movement which has been growing at over 18% per year.

Ports:

• Tamil Nadu has three major ports; one each at Chennai, Ennore and Tuticorin, as well as one intermediate port in Nagapattinam, and 23 minor ports.
• The ports are currently capable of handling over 73 million metric tonnes of cargo annually (24 % share of India).
• All the minor ports are managed by the Tamil Nadu Maritime Board, Chennai Port.
• This is an artificial harbour and the second principal port in the country for handling containers.
• It is currently being upgraded to have a dedicated terminal for cars capable of handling 4,00,000 vehicles.
• Ennore port was recently converted from an intennediate port to a major port and handles all the coal and ore traffic in Tamil Nadu.

[OR]

(b) What are the ideas of Information and communication technology used in economics?
Introduction: Information and communication Technology [ICT] is the infrastructure that enables computing faster and accurate.
The following table gives an idea of range of technologies that fall under the category of ICT

 S.No. Information Technologies 1. Creation Personal computers, Digital Camera, Scanner, Smart Phone 2. Processing Calculator, PC – Personal Computer, Smart Phone 3. Storage CD, DVD, Pen Drive, Microchip, Cloud 4. Display PC – Personal computer, TV – Television, Projector, Smart Phone 5. Transmission Internet, Teleconference, Video, Conferencing, Mobile, Technology, Radio 6. Exchange E – mail, Cell Phone

The evaluation of ICT has five phases:
They are evaluation in: (a) Computer (b) PC – Personal Computer (c) Micro Processor
(d) Internet (e) Wireless links
In Economics, the uses of mathematical and statistical tools need the support of ICT for:
(a) Data Compiling (b) Editing (c) Manipulating (d) Presenting the results

Question 45.
(a) Mention the function of APMC?
The Agriculture Produce Market Committee [APMC] Act 2003, the Agricultural Produce Market Committee [AMPC] is a statutory body constituted by State Government in order to trade in agricultural or horticultural or livestock products.

Functions of APMC:

• To promote public private partnership in the ambit of agricultural markets.
• To provide market led extension services to farmer.
• To bring transparency in pricing system and transactions taking place in market in a transparent manner.
• To ensure payments to the farmers for the sale of agricultural produce on the same day.
• To promote agricultural activities.
• To display data on arrivals and rates of agricultural produce from time to time into the market.

[OR]

(b) List out the objectives of MUDRA Bank.

• Regulate the lender and the borrower of microfinance and bring stability to the microfinance system.
• Extend finance and credit support to Micro Finance Institutions [MFI] and agencies that lend money to small businesses, retailers, self-help groups and individuals.
• Register all MFIs and introduce a system of performance rating and accreditation for the first time.
• Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro businesses.
• Introduce appropriate technologies to assist in the process of efficient lending, borrowing and monitoring of distributed capital.

Question 46.
(a) Examine the law of variable proportions with the help of a diagram.
The law states that if all other factors are fixed and one input is varied in the short run, the total output will increase at an increasing rate at first instance, be constant at a point and then eventually decrease. Marginal product will become negative at last.

According to G.Stigler, “As equal increments of one input are added, the inputs of other productive services being held constant, beyond a certain point, the resulting increments , of product will decrease, i.e., the marginal product will diminish”.

Assumptions:
The Law of Variable Proportions is based on the following assumptions.

• Only one factor is variable while others are held constant.
• All units of the variable factor are homogeneous.
• The product is measured in physical units.
• There is no change in the state of technology.
• There is no change in the price of the product.

Total Product (TP)
Total product refers to the total amount of commodity produced by the combination of all inputs in a given period of time.
Summation of marginal products, i.e. TP = EMP where, TP = Total Product, MP = Marginal Product

Average Product (AP)
Average Product is the result of the total product divided by the total units of the input employed. In other words, it refers to the output per unit of the input.
Mathematically, AP = TP/N
Where, AP = Average Product
TP = Total Product
N = Total units of inputs employed

Marginal Product (MP)
Marginal Product is the addition or the increment made to the total product when one more unit of the variable input is employed. In other words, it is the ratio of the change in the total product to the change in the units of the input. It is expressed as

MP = ATP/AN
where, MP = Marginal Product
∆TP = Change in total product
∆N = Change in units of input
It is also expressed as
MP = TP (n) – TP (n -1)
Where, MP = Marginal Product
TP(n) = Total product of employing n’h unit of a factor .
TP(n – 1) = Total product of employing the previous unit of a factor, that is, (n – 1)th unit of a factor.

The Law of Variable Properties is explained with the help of the following schedule and diagram.

In above table, units of variable factor (labour) are employed along with other fixed factors of production. The table illustrates that there are three stages of production. Though total product increases steadily at first instant, constant at the maximum point and then diminishes, it is always positive forever. While total product increases, marginal product increases up to a point and then decreases. Total product increases up to the point where the marginal product is zero. When total product tends to diminish marginal product becomes negative.

In diagram, the number of workers is measured on X axis while TPL, APL and MPL are denoted on Y axis. The diagram explains the three stages of production as given in the above table.

Stage I
In the first stage MPL increases up to third labourer and it is higher than the average product, so that total product is increasing at an increasing rate. The tendency of total product to increase at an increasing rate stops at the point A and it begins to increase at a decreasing rate. This point is known as ‘Point of Inflexion’.

Stage II
In the second stage, MPL decreases up to sixth unit of labour where MPL curve intersects the X-axis. At fourth unit of labour MPL = APL. After this, MPL curve is lower than the APL .TPL increases at a decreasing rate.

Stage III
Third stage of production shows that the sixth unit of labour is marked by negative MPL, the APL continues to fall but remains positive. After the sixth unit, TPL declines with the employment of more units of variable factor, labour.

[OR]

(b) Discuss the short run cost curves with suitable diagram.
Short run Cost Curves:
Total Fixed Cost (TFC):
All payments for the fixed factors of production are known as Total F ixed Cost. A hypothetical TFC is shown in below table and diagram.

 Output (in unit) Total Fixed Cost (in ₹) 0. 1000 1. 1000 2. 1000 3. 1000 4. 1000 5. 1000

For instance if TC = Q3 – 18Q2 + 91Q + 12, the fixed cost here is 12. That means, if Q is zero, the Total cost will be 12, hence fixed cost.
It could be observed that TFC does not change with output. Even when the output is zero, the fixed cost is ₹ 1000. TFC is a horizontal straight line, parallel to X axis.

Total Variable Cost (TVC):
All payments to the variable factors of production is called as Total Variable Cost. Hypothetical TVC is shown in the below table and diagram.

 Output (in unit) Total Fixed Cost (in ₹) 0. 0 1. 200 2. 300 3. 400 4. 600 5. 900

Output (in unit) Total Variable Cost (in ?)

In the diagram the TVC is zero when nothing is produced. As output increases TVC also increases. TVC curve slopes upward from left to right.

For instance in TC = Q3 – 18 Q2 + 91 Q + 12, variable cost, TVC = Q3 – 18 Q2 + 91 Q

Total Cost Curves:
Total Cost means the sum total of all payments made in the production. It is also called as Total Cost of Production. Total cost is the summation of Total Fixed Cost (TFC) and Total Variable Cost (TVC). It is written symbolically as

TC = TFC + TVC. For example, when the total fixed cost is ₹ 1000 and the total variable cost is ? 200 then the Total cost is = ₹ 1200 (₹ 1000 + ₹ 200).

If TFC = 12 and
TVC = Q3 – 18 Q2 + 91 Q
TC= 12 + Q3 – 18 Q2 + 91 Q

Average Fixed Cost (AFC):
Average Fixed Cost refers to the fixed cost per unit, of output. It is obtained by dividing the total fixed cost by the quantity of output. AFC = TFC / Q where, AFC denotes average fixed cost, TFC denotes total fixed cost and Q denotes quantity of output. For example, if TFC is 1000 and the quantity of output is 10, the AFC is ₹ 100, obtained by dividing ₹ 1000 by 10. TVC is shown in below table and diagram.

It is to be noted that

1. AFC declines as output increases, as fixed cost remains constant.
2. AFC curve is a downward sloping throughout its length, never touching X and Y axis. It is asymptotic to both the axes.
3. The shape of the AFC curve is a rectangular hyperbola.

Average Variable Cost (AVC):
Average Variable Cost refers to the total variable cost per unit of output. It is obtained by dividing total variable cost (TVC) by the quantity of output (Q). AVC = TVC / Q where, AVC denotes Average Variable cost, TVC denotes total variable cost and Q denotes quantity of output. For example, When the TVC is ₹ 300 and the quantity produced is 2, the AVC is ₹ 150, (AVC = 300/2 = 150) AVC is shown in the below table and diagram.

Average Total Cost (ATC) or Average Cost (AC):
Average Total Cost refers to the total cost per unit of output.
It can be obtained in two ways.

1. By dividing the firm’s total cost (TC) by the quantity of output (Q). ATC = TC / Q.
For example, if TC is ₹ 1600 and quantity of output is Q = 4, the Average Total Cost is ₹ 400. (ATC = 1600/4 = 400)
If ATC is Q3 – 18 Q2 + 91 Q + 12, then AC = Q2 – 18 Q +91 + 12/Q

2. By ATC is derived by adding together Average Fixed Cost (AFC) and Average Variable Cost (AVC) at each level of output. ATC = AFC + AVC.

For example, when Q = 2, TFC = 1000, TVC = 300; AFC = 500; AVC =150; ATC=650.
ATC or AC is shown in the below table and diagram

Marginal Cost (MC):
Marginal Cost is the cost of the last single unit produced. It is defined as the change in total costs resulting from producing one extra unit of output. In other words, it is the addition made to the total cost by producing one extra unit of output. Marginal cost is important for deciding whether any additional output can be produced or not. MC = ∆TC / AQ where MC denotes Marginal Cost, ∆TC denotes change in total cost and ∆Q denotes change in total quantity.

For example, a firm produces 4 units of output and the Total cost is ₹ 1600. When the firm produces one more unit (4+1 = 5 units) of output at the total cost of ₹ 1900, the marginal cost is ₹ 300. MC = 1900 – 1600 = ₹ 300

Question 47.
(a) Describe the performance of Tenth, Eleventh and Twelfth five year plan in India.
Performance of Five Year Plans:
First Five Year Plan-[1951-1956]

• It was based on the Harrod – Domar Model.
• Its main focus was on the agricultural development of the country.
• This plan was successful and achieved the GDP growth rate of 3.6%. [more than its target]

Second Five Year Plan-[1956-1961]

• It was based on the P.C. Mahalanobis Model.
• Its main focus was on the industrial development of the country.
• This plan was successful and achieved growth rate of 4.1 %

Third Five Year Plan- [1961-1966]

• This plan was called ‘Gadgil Yojana’.
• The main target of this plan was to make the economy independent and to reach self propelled position or take off.
• Due to Indo – China war, this plan could not achieve its growth target of 5.6%.

Fourth Five Year Plan – [1969 – 1974]

• There are two main objectives of this plan (i.e) growth with stability and progressive achievement of self reliance. ‘
• This plan failed and could achieve growth rate of 3.3% only against the target of 5.7%.

Fifth Five Year Plan-[1974-1979]

• In this plan top priority was given to agriculture, next came industry and mines.
• This plan achieved the growth of 4.8% against the target of 4.4%.

Sixth Five Year Plan – [1980 – 1985]

• The basic objective of this plan was poverty eradication and technological self reliance.
• Its growth target was 5.2% but it achieved 5.7%

Seventh Five Year Plan – [1985 – 1990]

• This plan establishment of the self sufficient economy, opportunities for productive employment.
• Its growth target was 5.0% but it achieved 6.0% ‘

Eighth Five Year Plan-[1992-1997]

• In this plan the top priority was given to development of the human resources (i.e) employment, education and public health.
• This plan was successful and got annual growth rate of 6.8%.

Ninth Five Year Plan – [1997 – 2002]

• The main focus of this plan was “growth with justice and equity”.
• This plan failed to achieve the growth target of 7% and Indian economy grew only at the rate of 5.6%.

Tenth Five Year Plan – [2002 – 2007]

• This plan aimed to double the per capita income of India in the next 10 years.
• It aimed to reduce the poverty ratio of 15%
• Its growth target was 8.0% but it achieved only 7.2%

Eleventh Five Year Plan – [2007 – 2012]

• Its main theme was “faster and more inclusive growth”.
• Its growth rate target was 8.1 % but it achieved only 7.9%

Twelfth Five Year Plan – [2012 – 2017]

• Its main theme is “faster, more inclusive and sustainable growth”.
• Its growth rate target is 8%
• Since the Indian Independence the five year plans of India played a very prominent role in the economic development of the country.

[OR]

(b) Explain the Foreign Investment policy.