1. Show diagrammatically the effect of a change in the price of a commodity as a sum of the Income effect and Substitution effect.

2. Explain the relationship between Marginal Product and Average Product as more units of a variable input are employed. Can Average Product be rising while Marginal Product falls? Give reasons.

3. Distinguish between 'shut-down' point and 'break-even' point of a perfectly competitive firm. Can a perfectly competitive firm earn normal profits in long-run equilibrium situation? Why or why not

4. What do you understand by circular flow of income Explain with the help of a four sector model. In this context, explain· the 'justification or otherwise of the following identity:


5. What is meant by Current Account Deficit in Balance of Payments From the perspective of growth, is rising CAD good or bad?

6. Distinguish between Inflation and Deflation. How do these effect the growth process in an economy?

Can you estimate the value of Marginal Revenue at the middle point of a downward sloping straight line demand curve? Make use of a graph.

Given the following two demand elasticity coefficients. Explain which is more significant and why:

Cross elasticity coefficient between X and Y +0.1

Price elasticity coefficient for C

8. How is the zero-rent position propounded by David Ricardo different than the zero-rent situation explained by the modem economists

9. "Commercial banks create money. Central bank. regulates it." Explain.

10. Explain any three of the following concepts:

Giffen good and Inferior good

Monopolistic competition

Production function

Stagflation

Liquidity preference

11. Distinguish between any three of the following:

Microeconomics and Macroeconomics

Contraction in Demand and Decrease in Demand

Gross Domestic Product and Net National Product

Productive and Unproductive public expenditure

Average Variable Cost and Marginal Cost