The measure of price elasticity of demand of a normal good carri

Subject

Economics

Class

CBSE Class 12

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Sample Papers

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 Multiple Choice QuestionsShort Answer Type

1.

Give equation of Budget Line.

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2.

When income of the consumer falls, the impact on price-demand curve of an inferior
good is: (choose the correct alternative)

  • Shifts to the right.

  • Shifts of the left.

  • There is upward movement along the curve.

  • There is upward movement along the curve.

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3.

If Marginal Rate of Substitution is constant throughout, the Indifference curve will
be

  • Parallel to the x-axis.

  • Downward sloping concave.

  • Downward sloping convex.

  • Downward sloping convex.

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 Multiple Choice QuestionsShort Answer Type

4.

Giving reason comment on the shape of Production Possibilities curve based on the
following schedule:

Good X (units) Good Y (units)
0 10
1 9
2 7
3 4
4 0
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5.

What will be the impact of recently launched 'Clean India Mission' (Swachh Bharat
Mission) on the Production Possibilities curve of the economy and why?
Or

What will likely be the impact of large scale outflow of foreign capital on Production
Possibilities curve of the economy and why?

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6.

The measure of price elasticity of demand of a normal good carries minus sign while
price elasticity of supply carries plus sign. Explain why?


The first law of demand states that as price increases, less quantity is demanded. This is
why the demand curve slopes down to the right. Because price and quantity move in
opposite directions on the demand curve, the price elasticity of demand is always negative.
Hence the measure of price elasticity of demand of a normal good carries minus sign as
there exists an inverse relationship between demand and price of the good.
On the other hand, a supply curve is characterized by a line that slopes up to the right.
Thus, as the price increases, more quantity is supplied. Because price and quantity move
in the same directions on the supply curve, the price elasticity of supply is usually positive.
Thus the price elasticity of supply always carries a plus sign.

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7.

There are large numbers of buyers in a perfectly competitive market. Explain the
significance of this feature.

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8.

Explain the effects of 'maximum price ceiling' on the market of a good'? Use diagram.

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9.

A consumer spends Rs. 1000 on a good priced at Rs. 8 per unit. When price rises by 25 per cent, the consumer continues to spend Rs. 1000 on the good. Calculate price elasticity of demand by percentage method.

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10.

Define cost. State the relation between marginal cost and average variable cost.
Or
Define revenue. State the relation between marginal revenue and average revenue.

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