R.N Institute of Professional Studies
D-12 Main Kanti Nagar Krishna Nagar Delhi-51
Introduction
1. What does a rightward (or an outward) shift of production possibility curve indicate?
2. What is the meaning of the problem ‘for whom to produce’?
3. State two characteristics of the economic resources which give rise to economic problem.
Or
State reasons why does an economic does problem arise?
4. Why is a PPC concave?
5. Define microeconomics.
6. Give two examples of micro economic studies.
7. Define ‘ Marginal Rate of Transformation’.
8. Give meaning of opportunity cost.
Or
What is ‘opportunity cost’?
9. Define production possibility curve.
10. Why does an economic problem arise?
11. Why is the study of consumer’s equilibrium a subject matter of microeconomics?
12. Define an economy.
Or
Give meaning of an economy.
13. State the three central problems of an economy.
14. Why does an economic problem arise? Explain the problem of ‘how to produce’.
Or
Explain the problem of ‘how to produce’.
15. Explain the central problem of “what to produce” with the help of an example.
Or
Explain the problem of ‘what to produce’.
16. What is an economic problem? How does it arise?
17. Explain the central problem of “for whom to produce” with the help of an example.
Or
Explain the problem of for whom to produce.
18. Why is a production possibility curve concave?
Or
Why is a production possibilities curve concave? Explain.
Or
Explain, giving reason, why production possibilities curve is concave.
19. Distinguish between microeconomics and macroeconomics. Give examples.
20. Giving suitable examples, explain the meaning of microeconomics and macroeconomics.
21. Explain the reasons that give rise to an economic problem.
22. How is production possibility curve affected by unemployment in the economy? Explain.
23.Explain how a production possibility curve is affected when resources are inefficiently employed
in an economy.
24. What is opportunity cost? Explain with the help of a numerical example.
25. Define Production Possibilities Curve. Explain why it is downward slopping from left to right.
Consumer’s Equilibrium and Demand
1.Define market demand of a commodity.
Or
Define market demand.
Or
What is market demand?
2. When is a good called a normal good?
Or
What is meant by normal good in economics?
3. What is meant by consumer’s equilibrium?
4. When does a demand curve shift?
5. When is the demand of a commodity said to be inelastic?
6. Give meaning of equilibrium.
7. Define demand by a consumer.
Or
What is meant by demand in economics?
8. When is a good called an inferior good?
Or
What is meant by inferior good in economics?
9. When is demand for the commodity called elastic?
10. Define an indifference curve.
Or
What does an indifference curve show?
11. Why is demand for water inelastic?
12. Define an indifference map.
13. What is law of demand?
14. Define a budget line.
15. When is the demand for a good said to be perfectly inelastic?
16. Give the meaning of marginal utility.
17. Give one reason for a shift in demand curve.
18. Distinguish between a change in quantity demanded and a change in demand of a commodity.
19. Distinguish between individual demand and market demand.
20. ‘X’ and ‘Y’ are substitute goods. Explain the effect of a fall in the price of X on the demand of
Y.
21. How does the expenditure method tell us about elasticity of demand?
22. Distinguish between ‘increase in quantity demanded’ and ‘increase in demand’.
Or
Distinguish between ‘increase in demand’ and ‘increase in quantity demanded’ of a commodity.
Or
Distinguish between ‘increase n demand’ and ‘increase in quantity demanded’.
23. What is meant by consumer’s equilibrium? State its condition in case of two commodities given
by the utility approach.
24. Distinguish between a normal good and an inferior good. Give example in each case.
25. How is the price elasticity of demand of a commodity affected by the number of its substitutes?
Explain.
26. Explain the law of demand with the help of a demand schedule.
27. Distinguish between individual demand schedule and market demand schedule.
28. Explain with the help of a diagram, the geometric method of measuring price elasticity of
demand.
29. Explain any three/four factors that affect elasticity of demand.
30. Explain the law of diminishing marginal utility with the help of a utility schedule.
Or
What is ‘marginal utility’? Explain the law of diminishing marginal utility with the help of a utility
schedule.
31. Distinguish between contraction of demand and decrease in demand with the help of diagrams.
32. Distinguish between ‘decrease in demand’ and’ decrease in quantity demanded’.
33. Explain the effect of the following on the price elasticity of demand of a commodity:
(i) Number of substitutes
(ii) Nature of the commodity
34. Explain the inverse relationship between price and quantity demanded of a commodity.
35. Explain the conditions determining how many units of a good the consumer will buy at a given
price.
36. Derive the law of demand from the single commodity equilibrium condition “Marginal
utility=Price”.
37. When price of a good is Rs 13 per unit, the consumer buys 11 units of that good. When price
rises to Rs 15 per unit, the consumer continues to buy 11 units. Calculate price elasticity of demand.
38. A consumer consumes only two goods X and Y. At a consumption level of these wo goods, he
finds that the ratio of marginal utility of price in case of X is higher than in case of Y. Explain the
reaction of the consumer.
39. A consumer consumes only two goods X and Y. At a certain consumption level of these goods,
he finds that the ratio of marginal utility to price in case of X is lower that in case of Y. Explain the
reaction of the consumer.
40. Explain how a fall in prices of the related goods affects the demand for the given good. Give
example.
41. Explain the relation between total utility and marginal utility.
42. Given price of a good, how does a consumer decide as to how much of that good to buy?
43. Define an indifference curve. Explain why an indifference curve is downward sloping from left
to right.
44. Define marginal Rate of substitution. Explain why is an indifference curve convex?
45. Define a budget line. When can it shift to the right?
46. A consumer consumes only two goods X and Y and is in equilibrium. Price of X falls. Explain
the reaction of the consumer through the utility Analysis.
47. What is budget set? Explain what can lead to change in budget set.
48. A consumer consumes only two goods X and Y and is in equilibrium. Price of X rises. Explain th
reaction of the consumer with the help of utility analysis.
49. Explain why is an indifference curve downward sloping from left to right. State the conditions
of consumer’s equilibrium in Indifference Curve Analysis.
50. Explain the concept of Marginal Rate of Transformation with the help of an example.
51. What are monotonic preferences? Explain why an indifference curve to the right shows higher
utility.
52. Explain, with the help of diagrams, the effect of the following changes on the demand of a
commodity:
(i) A rise in the price of complementary good.
(ii) A rise in the price of substitute good.
53. Explain the term ‘change in demand’ and represent the same graphically. Also state three
factors responsible for change in demand.
54. A consumer consumes only two goods. Explain his equilibrium with the help of utility approach.
Or
A consumer consumes only two goods X and Y. State and explain the conditions of consumer’s
equilibrium with the help of utility analysis.
55. Explain the effect of the following on the demand of a good:
(i) Change in the income of the consumer
(ii) Change in the price of the related goods.
Or
Explain the effects of rise in the prices of related goods on the demand of a good.
Or
Explain the effects of changes in income of the buyers of a good on its demand.
56. Explain, by giving examples, how do the following determine price elasticity of demand:
(i) Nature of the good.
(ii) Availability of substitutes.
Or
Explain any two factors that affect price elasticity of demand.
57. Explain consumer’s equilibrium in case of a single commodity with the help of utility schedule.
58. State the factors that can cause a rightward shift of demand curve of a commodity.
Or
Explain any two causes of ‘increase’ in demand of a commodity.
59. State the factors that cause a leftward shift of demand curve of a commodity.
Or
Explain two causes of ‘decrease’ in demand of a commodity.
60. Using indifference curves approach, explain the conditions of consumer’s equilibrium.
Or
Explain consumer’s equilibrium with the help of indifference curves approach. Use diagram.
Or
Explain the conditions of consumer’s equilibrium with the help of the Indifference Curve Analysis.
61.State and explain the characteristics if indifference curves.
62. What are the conditions of consumer’s equilibrium under the indifference curve approach?
What changes will take place if the conditions are not fulfilled to reach equilibrium?
63. Explain the three properties of indifference curves.
64. Explain the concept of Marginal Rate of Substitution (MRS) by giving on example. What
happens to MRS when consumer moves downwards along the indifference curve? Give reasons for
you answer.
65. What are monotonic preferences? Explain why is an indifference curve (i) Downward sloping
from left to right and (ii) Convex.
66. Explain the concept of Marginal Rate of Substitution. Explain the reaction of the consumer
when Marginal Rate of Substitution is higher than the ratio of prices.
Or
Explain the concept of Marginal Rate of Substitution with the help of a numerical example.
67. Explain the difference between (i) inferior goods and normal goods (ii) cardinal utility and
ordinal utility. Give example in each case.
68. Explain the distinction between:
(i) ‘Change in demand’ and ‘Change in quantity demanded’
(ii)Budget set and Budget line
Producer Behaviour and Supply
1. What is meant by marginal physical product (MPP)?
2. Define total revenue.
3. Define revenue of a firm.
4. Define market supply.
5. What is meant by cost?
6. Define fixed costs.
7. How does average fixed cost behave as output is decreased?
8. Define supply.
9. What causes a downward movement along a supply curve of a commodity?
10. Give the meaning of producer’s equilibrium.
11. What is meant by returns to a factor?
12. What is meant by marginal cost?
Or
Define marginal cost.
13. Why is average total cost greater than average variable cost?
14. Define marginal revenue.
14. Mention one factor that causes a rightward shift of the supply curve.
15. Defined variable costs.
16. What causes an upward movement along a supply curve of commodity?
17. What is meant by ‘increase’ in supply?
18. Give meaning of “Change in quantity supplied”.
19. What is the behaviour of average fixed cost as output increases?
20. What is the behaviour of Total Variable Cost, as output increases?
21. What is meant by returns to a factor? What leads to increasing returns to a factor?
22. List any three determinants of supply of a commodity.
23. Define price elasticity of supply. Draw the supply curves showing price elasticity of supply (i)
equal to one (ii) greater than one(ii) less than one and(iv) equal to zero.
24. Define producer’s equilibrium. State its conditions.
25. Give the meaning of perfectly elastic supply and perfectly inelastic supply.
26. Explain the geometric method of measuring price elasticity of supply.
27. Define MR. State the relation between TR and MR.
28. When is the supply of a commodity said to be (i) elastic (ii) inelastic and(iii) unitary elastic?
29. Explain the relationship between average revenue and marginal revenue.
30. Distinguish between rise in quantity supplied (expansion of supply) and increase in supply with
the help of diagram.
31. How does a change in the price of inputs affect the supply curve of a commodity?
32. Draw TFC, TVC and TC curves in a single diagram.
33.What is the relationship between marginal revenue and average revenue under perfect
competition and monopoly?
34. Government imposes a tax on production of a good. Explain its effect on supply of that good.
Or
Define ‘Market supply’. What is the effect on the supply of a good when Government imposes a tax
on the production of that good? Explain.
35. Draw Total Fixed Cost and Average Fixed Cost curves. Explain their shape.
36. Give three reasons for a rightward shift of supply curve of a commodity.
37. Give three reasons for a leftward shift of supply curve of a commodity.
38. Explain the law of supply. Use diagrams.
39. Giving examples, explain the meaning of cost in economics.
40. What is a supply schedule? What is the effect on the supply of a good when Government gives a
subsidy on the production of that good? Explain.
41. Distinguish between explicit cost and implicit cost and give examples.
42. Draw in a single diagram the average revenue and marginal revenue curves of a firm which can
sell any quantity of the good at a given price. Explain.
43. Define variable cost. Explain the behaviour of total variable cost as output increases.
44. Giving examples, distinguish between fixed cost and variable cost.
45. Draw Total Revenue Curve and marginal revenue Curve of a firm which is free to sell any
quantity of the good at a given price. Explain.
46. Draw Average Variable Cost, Average Total Cost and Marginal Cost Curves in a single
diagram.
47. An individual is both the owner and manager of a shop taken on rent. Identify implicit cost and
explicit cost from this information. Explain.
48. A producer borrows money and opens a shop. The shop premises is owned by him. Identify the
implicit and explicit costs from this information. Explain.
49. A producer invests his own savings in starting a business and employs a managers to look after
it. Identify implicit and explicit costs from this information. Explain.
50. Draw Total Variable Cost, Total Cost, and Total Fixed Cost Curves in a single diagram.
51. A producer starts a business by investing his own savings and hiring the labour. Identify
implicit and explicit costs from this information. Explain.
52. What does the Law of variable proportions show? State the behaviour of marginal product
according to this law.
53. Explain how changes in prices of inputs influence the supply of a product.
54. A farmer takes a farm on rent and carries on farming with the help of family members. Identify
explicit and implicit costs from this information. Explain.
55. A producer borrows money and starts a business. He himself looks after the business. Identify
explicit and implicit costs from this information. Explain.
56. A producer borrows money to start a business and looks after the business himself. Identify the
implicit and explicit costs from this information. Explain.
57. How does the change in tax on a product influence the supply of that product?
58. What is revenue? Explain the relation between marginal revenue and average revenue.
59. A producer takes a building on rent for carrying out business. He looks after the business
himself. Identify the implicit and explicit costs from this information. Explain.
60. Define marginal cost. Explain its relation with average cost.
61. Explain the law of variable proportions. Use diagram.
62. What is the likely effect on the supply of a good if the prices of the inputs used in production of
that good fall? Explain.
63. State whether the following statements are true or false. Give reasons for your answer.
(a) When total revenue is constant, average revenue will also be constant.
(b) Average variable cost can fall even when marginal cost is rising.
(c)When marginal product falls, average product will also fall.
63. Explain producer’s equilibrium with the help of a marginal cost and marginal revenue
schedule.
64. Explain the conditions of a producer’s equilibrium in terms of marginal cost and marginal
revenue.
65. What is producer’s equilibrium? Explain the conditions of producer’s equilibrium through the
‘marginal cost and marginal revenue’ approach. Use diagram.
66.Giving reason, explain the behaviour of total product under the Law of Variable Proportions.
Use diagram.
67. Explain the distinction between “change in quantity supplied” and “change in supply”. Use
diagram.
Forms of Market and Price Determination Under Perfect
Competition with Simple Applications
1. Define market.
2. What is equilibrium price?
3. Define monopoly.
4. Name the characteristic which makes monopolistic competition different from perfect
competition.
5. State one feature of oligopoly.
6. In which market form demand curve of a firm is perfectly elastic?
7. In which market form can a firm not influence the price of the product?
8. What can you say about the number of buyers and sellers under monopolistic competition?
9. In Under which market form is the product homogeneous?
10. In which market form is a firm a price taker?
11. When is a firm called ‘price-taker’?
12. When is a firm called ‘price maker’?
13. What is market equilibrium?
14. What is behaviour of average revenue in a market in which a firm can sell more only by
lowering the price?
15. What is price taker firm?
16. What is the behaviour of Marginal Revenue in a market in which a firm can sell any quantity of
the output it output it produces at a given price?
17. What is price taker firm?
18. What is the behaviour of Marginal Revenue in a market in which a firm can sell any quantity of
the output it produces at a given price?
19. What is a price-maker firm?
20. What is the behaviour of average revenue in a market in which a firm can sell any quantity of a
good at a given price?
21. Define oligopoly.
22. State three dissimilarities between perfect competition and monopoly.
23. Distinguish between perfect competition and monopolistic competition.
24. Explain what happens to the profits in the long run if the firms are free to enter the Industry.
25. Explain what happens to losses in the long run if the firms are free to leave the industry.
26. Market for good X is in equilibrium. Suppose price of its substitute good Y falls. Explain its
effects on equilibrium price and quantity of good X. Use diagram.
27. Why is a firm under Perfect Competition a price taker? Explain.
28. How is the equilibrium price determined under perfect competition? Explain with the help of a
diagram.
29. Explain with the help of a diagram the effect of a decrease in demand for a commodity on its
equilibrium price and quantity.
30. Explain with the help of a diagram, the effect of a decrease in the supply of a commodity on its
equilibrium price and quantity.
31. Give any three points of difference between monopoly and monopolistic competition.
32. Explain with the help of a diagram, the effect of an increase in supply of a commodity on its
equilibrium price and quantity.
33. How is the equilibrium quantity of a normal commodity affected by an increase in the income of
its buyers? Explain with the help of a diagram.
34. Explain the implications of freedom of entry and exit of firms under perfect competition.
35. Explain the implication of ‘homogeneous products’ feature of perfect competition.
36. Why is the number of firms small in an oligopoly market? Explain.
37. Giving reason, distinguish between the behaviour of demand curves of firms under perfect
competition and monopolistic competition.
38. Why is the demand curve more elastic under monopolistic competition than under monopoly?
Explain.
39. Explain how firms are interdependent in an oligopoly market.
40. How is the equilibrium price of a commodity affected by a rise in the price of its substitute?
Explain the chain of effects.
41. Explain the chain of effects of an ‘increase’ in supply of a commodity on its equilibrium price.
42. Explain the chain of effects of increase in income of buyer of a commodity on its demand.
43. Explain the chain of effects of ‘decrease’ in supply of a commodity on its equilibrium price and
quantity.
44. Draw average revenue and marginal revenue curves in a single diagram of a firm which can sell
more units of a good only by lowering the price of that good. Explain.
45. Draw in a single diagram, the average revenue and marginal revenue curves of a firm which can
sell any quantity of the good at a given price. Explain.
46. Explain the implications of the feature ‘large number of buyers’ in a perfectly competitive
market.
47. Explain the implications of large number of sellers in a perfectly competitive market.
48. Explain briefly three features of perfect competition.
49. Explain the three features of monopoly market.
50. Explain briefly three features of monopolistic competition.
51. How is the equilibrium price of a good determined? Explain, with the help of diagram, a
situation when both demand and curves shift to the right but equilibrium price remains the same.
52. Market for a good is in equilibrium. What is the effect on equilibrium price and quantity if both
market demand and market supply of the good increase in the same proportion? Use diagram.
53. Market for a good is in equilibrium. Price and quantity if the proportionate increase in market
supply? Use diagram.
54. Explain the implications of the following:
(i) The feature ‘differentiated products’ under monopolistic competition.
(ii) The feature ‘large number of sellers’ under perfect competition.
55. What do you mean by excess demand? Explain with the help of a diagram as to what will be the
effect of an excess demand on the price of the commodity.
56. Market for a good is in equilibrium. There is an ‘increase’ in demand for this good. Explain the
chain of effects of this change. Use diagram.
57. Market for a good is in equilibrium. There is ‘increase’ in supply of the good. Explain the chain
of effects of this change. Use diagram.
58. Market for a good is in equilibrium. Supply of the good ‘decrease’. Explain the chain of effect of
this change. Use diagram.
59. Market for a good is in equilibrium. There is simultaneous “decrease” both in demand and
supply of the good. Explain its effect on market price.
60. Market for a good is in equilibrium. There is simultaneous “decrease” both in demand and
supply but there is no change in market price. Explain with the help of a schedule how it is possible.
61. Market for a good is in equilibrium. Explain the chain of reactions in the market if the price is
(i) higher than equilibrium price and (ii) lower than equilibrium price.
62. Market for a good is in equilibrium. Explain the chain of reactions in the market when there is
(i) “decrease” in supply.
(ii) “decrease” in demand.