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Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part II Chapter 2 National Income Accounting.

Kerala Plus Two Macroeconomics Chapter Wise Previous Questions Chapter 2 National Income Accounting

Question 1.
The national product can be measured by using the expenditure method, income method, and value-added method. Prepare the equations to find out GNP_MP with these separate methods. (MARCH-2008)
Answer:
National Income is the sum total of the value of goods and services produced in a country during a year. It can be measured using 3 methods namely product method, expenditure method, and income method.
Product Method
The process to obtain GNP_MP by the production method is: Value added in the primary sector + valued added in the secondary sector + value-added in the tertiary sector + Net factor income from abroad.
Income method
The process to obtain GNP_MP by the income method is: Compensation of employees + Profit + rent + interest + Mixed-Income + Depreciation + Net indirect taxes + Net factor income from abroad
Expenditure method
The process to obtain GNP_MP by the expenditure method is: Private consumption expenditure + Investment expenditure + Govt, purchase of goods and services + net exports + Net factor income from abroad.

Question 2.
Prepare self explanatory charts to explain the various concepts related to National Income concepts. (MARCH-2008)
a) GDP
b) PCI
c) NNP
d) PDI
Answer:
a) GDP – > GNP -> Net factor income from abroad
National Income
b) PCI – > \(\frac{\text { National Income }}{\text { Population }}\)
c) NNP – > GNP- depreciation
d) PDI -> Personal Income-direct taxes

Question 3.
Identify the Boxes and flows and complete the following. (MARCH-2009)

Answer:

Question 4.
The following table shows the different components of domestic factor income for the economy of Malasia. Complete the table by calculating the necessary figures. (MARCH-2009)

Answer:
Domestic Factor Income = Compensation of employees + Operating surplus + Mixed income of the self-employed.
1)250
2)450
3)-750
4) 1400

Question 5.
Give one word for the following statement: (MAY-2009)
a) National income + population
b) A pictural illustration of the interdependence between major sectors and their economic activities.
c) Personal income – direct tax.
d) GNP – Depreciation
Answer:
a) Per capita income
b) Circular flow
c) Disposable income
d) NNP

Question 6.
Suppose that in a two-sector economy the value of finished goods is equal to 200 crores and the income generated as factor reward is also equal to 200 crores. The household spends only 160 crores. Then (MAY-2009)
a) What will happen to circular flow?
b) Which system can be introduced to correct circular flow?
c) Name the leakages and injunctions.
d) Draw the flowchart by incorporating the new system
Answer:
a) Circular flow of income and expenditure will be disturbed when households spend less than their earnings.
b) Financial system can be introduced to correct the circular flow.
c) Saving is a leakage Borrowing is an injection

Question 7.
between income method and the expenditure method of national income measurement. (MARCH-2010)
Hint: The report should have
a) Title
b) Introduction
c) The main points
d) Conclusion win own observation
Answer:
Measurement of National income
Respected teachers and dear friends,
The topic of my seminar paper is ‘measurement of national income or the methods of measuring national income’. The concept of national income occupies an important place in economic theory. National income is the aggregate money value of all goods and services produced in a country during an accounting year. In this seminar paper I would like to present various methods of measuring national income. Introduction
National income can be measured in different ways. Generally, there are three methods for measuring national income. They are

• Value added method
•  Income method
• Expenditure method Value added method

The term that is used to denote the net contribution made by a firm is called its value-added. We have seen that the raw materials that a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’. Therefore the value-added of a firm is, value of production of the firm – value of intermediate goods used by the firm. The value-added of a firm is distributed among its four factors of production, namely, labour, capital, entrepreneurship and land. Therefore wages, interest, profits and rents paid out by the firm must add up to the value-added of the firm. Value-added is a flow variable.

Expenditure Method

An alternative way to calculate the GDP is by looking at the demand side of the products. This method is referred to as the expenditure method. The aggregate value of the output in the economy by expenditure method will be calculated. In this method, we add the final expenditures that each firm makes. Final expenditure is that part of expenditure which is undertaken not for intermediate purposes.

Income Method

As we mentioned in the beginning, the sum of final expenditures in the economy must be equal to the incomes received by all the factors of production taken together (final expenditure is the spending on final goods, it does not include spending on intermediate goods). This follows from the simple idea that the revenues earned by all the firms put together must be distributed among the factors of production as salaries, wages, profits, interest earnings and rents.
That is GDP = W+ P + ln + R
Conclusion:
Thus it can be concluded that there are three methods for measuring national income. These methods are the value-added method, income method, and expenditure method. Usually, in estimating national income, different methods are employed for different sectors and sub-sectors.

Question 8.

a) Complete the chart showing circular flow of economic activity. (MARCH-2010)
b) Identify money flow and real flow from the figure.
Answer:
a)

b) Consumption expenditure and factor payments are money flows, flow of goods and services and factor services are real flows.

Question 9.
The GNP is considered as an index of welfare of a country, but there are some limitations of using GNP. Explain the three limitations. (MAY-2010)
Answer:
It is usually argued that GDP is not always a true index of welfare of a country. There are several limitations in using GDP as an index of welfare as discussed below.
1) Distribution of GDP- how uniform is it: If the GDP of the country is rising, the welfare may not rise as a consequence. This is because the rise in GDP maybe concentrated in the hands of very few individuals or firms. For the rest, the income may in fact have fallen. In such a case the welfare of the entire country cannot be said to have increased. If we relate welfare improvement in the country to the percentage of people who are better off, then surely GDP is not a good index.

2) Non-monetary exchanges: Many activities in an economy are not evaluated in monetary terms. For example, the domestic services women perform at home are not paid for. The exchanges which take place in the informal sector without the help of money are called barter exchanges. In barter exchanges goods (or services) are directly exchanged against each other. But since money is not being used here, these exchanges are not registered as part of economic activity. In developing countries, where many remote regions are underdeveloped, these kinds of exchanges do take place, but they are generally not counted in the GDPs of these countries.
This is a case of underestimation of GDP. Hence GDP calculated in the standard manner may not give us a clear indication of the productive activity and well-being of a country.
Externalities: Externalities refer to the benefits or harms a firm or individual causes to another for which they are not paid or penalized. Externalities do not have any market in which they can be bought and sold. In the case of externalities, whether positive or negative, it may not reflect the true picture of the economy. That is in the case of externality, GDP will underestimate the actual welfare of the economy.

Question 10.
using three methods: (MAY-2010)
a) Identify the three methods.
b) Prepare the equations to find out GDP with these separate methods.
Answer:
a) Product method, Income method, Expenditure method
b) Product method
Income method: GDP = C + S + T

Question 11.
Prepare a seminar report on the topic ‘Product Method and Income Method of National Income Measurement’. (MARCH-2011)
The report should contain
a) Title
b) Introduction
c) Main points
d) Conclusion with own observation
e) Order of presentation
Answer:
Measurement of National income Respected teachers and dear friends, The topic of my seminar paper is ‘measurement of national income or the methods of measuring national income’. The concept of national income occupies an important place in economic theory. National income is the aggregate money value of all goods and services produced in a country during an accounting year. In this seminar paper I would like to present various methods of measuring national income.
Introduction
National income can be measured in different ways. Generally there are three methods for measuring national income. They are

• Value added method
• Income method
• Expenditure method Value added method

The term that is used to denote the net contribution made by a firm is called its value added. We have seen that the raw materials that a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’. Therefore the value added of a firm is, value of production of the firm – value of intermediate goods used by the fine. The value added of a firm is distributed among its four factors of production, namely, labour, capital, entrepreneurship and land. Therefore wages, interest, profits and rents paid out by the firm must add up to the value added of the firm. Value added is a flow variable.

Expenditure Method

An alternative way to calculate the GDP is by looking at the demand side of the products. This method is referred to as the expenditure method. The aggregate value of the output in the economy by expenditure method will be calculated. In this method we add the final expenditures that each firm makes. Final expenditure is that part of expenditure which is undertaken not for intermediate purposes.

Income Method

As we mentioned in the beginning, the sum of final expenditures in the economy must be equal to the incomes received by all the factors of production taken together (final expenditure is the spending on final goods, it does not include spending on intermediate goods). This follows from the simple idea that the revenues earned by all the firms put together must be distributed among the factors of production as salaries, wages, profits, interest earnings and rents.
That is GDP = W+ P + In + R
Conclusion
Thus it can be concluded that there are three methods for measuring national income. These methods are value-added method, income method and expenditure method. Usually, in estimating national income, different methods are employed for different sectors and sub-sectors.

Question 12,
Pick out the correct equation. (MARCH-2011)
a) GDP = GNP + Net factor income from abroad
b) NNP = GNP – Depreciation
c) NDP = GDP – Net Indirect Tax
d) NNP = GNP-Net Indirect Tax
Answer:
NNP = GNP – Depreciation

Question 13.
The term used to refer the benefits (or harm) a firm or an individual causes to another firm or an individual for which they are not paid is (MARCH-2012)
a) Welfare
b) Externalities
c) Transfer Payments
d) Internal Economies
Answer:
b) Externalities

Question 14.
Identify the real and nominal flows in the circular flow of income. (MARCH-2012)

Answer:
Real flows
Factor services
Final goods and services Nominal flows
Factor incomes
Expenditure on goods and services

Question 15.
GDP Deflator refers to (MARCH-2012)
a) The ratio of real to nominal GDP.
b) The ratio of nominal to real GDP.
c) The ratio of nominal N to real GDP.
d) The ratio of nominal GDP to nominal GNP.
Answer:
b) The ratio of nominal to real GDP.

Question 16.
From the data given below, calculate (MARCH-2012)
a) GDP at market price.
b) Net National Income at Factor Cost.
c) Personal income.
Data :
1) NDP at market price – ₹74,905
2) Net indirect taxes – ₹8,344
3) Income from Domestic product accruing to Govt. – ₹1,972
4) Net factor income from abroad – ₹(-) 232
5) Current transfers to households – ₹2,305
6) Depreciation – ₹4,486
Answer:
a) GDP at market price
GDP_MP = NDP_MP + Depreciation
= ₹74905 + 4486 = ₹79,391 .
b) Net National Income at factor cost
NNP_FC = NDP_MP – Net indirect tax + Net factor income from abroad = 74905-8344+ (-) 232 = 7 66,329
c) Personal income
= NNP_FC+Current transfers to households = 66329 + 2305= ₹68,634

Question 17.
List of some variables are given below. Classify them in a table into stocks and flows. (MARCH-2013)
i) Wealth
ii) Income
iii) consumption
iv) Investment
v) Expenditure
vi) Capital stock
Answer:
Stock variables

• wealth
• capital stock

flow variables

• income
• consumption
• investment
• expenditure

Question 18.
From the following information, calculate GNP and NDP (₹ in crores) (MARCH-2013)
i) GDP_MP 65,665
ii) Consumption of fixed capital 2,250
iii) Net factor income from abroad 750
Answer:
GNP = GDP + Net factor income from abroad GNP =65,665 + 750 = 66415 Crores
NDP = GDP – depreciation (Consumption of fixed capital)
NDP =65665-2250 = 63415 Crores

Question 19.
The value of the nominal GDP of India was ₹ 2,800 crores during the year 2011. The value of GDP of the country during the same year evaluated at the price of some base year was ₹3,200 crores. Find the value of GDP deflator of the year in percentage terms. (MARCH-2013)
Answer:
The ratio of nominal GDP to real GDP is known as GDP deflator

Question 20.
Though Gross Domestic Product (GDP) is often used as an indicator of economic welfare, it is not a comprehensive indicator of welfare. Elaborate. (MAY-2014)
Answer:
GDP deflator = Current year GDP / Base year GDP x 100 = 1800/1200 x 100 = 1.5 x 100
= 1.5 (in percentage terms 150)

Question 21.
Pick the odd one and justify your answer. (MAY-2014)
a) Product method
b) Deductive method
c) Income method
d) Expenditure method
Answer:
deductive method. All others are methods for measuring national income.

Question 22.
Identify central/basic economic problems. (MAY-2014)
i) What is to be produced?
ii) What is to be regulated?
iii) How goods are to be produced?
iv) How sectors are to be divided?
v) How produced output is to be divided?
vi) How much is to be produced?
Answer:
Basic economic problems are
i) what to produce
iii) how goods are to be produced
vi) how much is to produced

Question 23.
Define value added method. A farmer produces 5 quintals of wheat, out of which he sells 3 quintals to a flour mill and 1.5 quintals to consumers at the rate of ₹1000 per quintal. He retains the balance of 0.5 quintals of self-consumption. For wheat cultivation he spends ? 2000 on account of purchasing seeds and fertilizers. Calculate value added by the farmer (MARCH-2015)
Answer:
The real value added in the production process is called Gross value added.
Gross value added = Value of output – Intermediate consumption
Gross value added = 5000 – 2000 = 3000

Question 24.
Suppose in a two sector economy goods worth ₹150 crores are produced and income generated is also equal to ₹150 crores. Draw circular flow of economic activities in this economy and explain. (MAY-2015)
Answer:
The inter related process of production, income generation and expenditure is called circular flow of income. In the given two sector economy, the flow of economic activities can be in the following way.

In this sector households receive ₹150 crore for their factor services given to firms. Firms in reply, provides goods and services to household sector to firms as consumption expenditure.

Question 25.
Write down the three identities of calculating the GDP of a country by the three methods. Also explain why each of these should give us the same value of GDP.(MAY-2015)
Answer:
Gross National Product (GNP) equals Gross National Income equals Gross national expenditure i.e.
GNP = GNI = GNE
These are equal because national income is a circular flow of income. Aggregate expenditure is equal to aggregate output which in turn, is equal to aggregate income. However each method has some different items, yet they show exactly identical results. Their identity can be shown in the following manner: Reconciling Three Methods of Measuring Gross

Question 26.
Fill in the blanks :
a) A balanced budget multiplier is unity implies that ₹100 increase in ‘G’ increases National Income by (MAY-2015)
b) Gross primary deficit = ________
Answer:
a) ₹100
b) Gross primary deficit = Gross fiscal deficit – net interest liabilities.

Question 27.
Fill in the blanks : (MARCH-2016)
a) GDP + ______ = GNP
b) GNP – Depreciation = ______
c) ________ – Net Indirect Taxes = NNP_FC
(GDP – Gross Domestic Products
GNP – Gross National Products
NNP_FC – Net National product at factor cost)
Answer:
a) Net factor income from abroad
b) NNP
c) NNP_MP

Question 28.
You are to be cautions while taking only GDP (Gross Domestic Product) as index of welfare. Why so? (MARCH-2016)
Answer:
GDP deflator = Current year GDP / Base year GDP x 100
= 1800/1200 x 100
= 1.5 x 100
= 1.5 (in percentage terms 150)

Question 29.
If the quantity demanded of ‘good’ X’ increases with a rise in the price of ‘good Y’, these goods are ________ (MAY-2016)
a) complementary goods
b) Inferior goods
c) Normal goods
d) Substitute goods
Answer:
d) Substitute goods

Question 30.
Differentiate between the stock variables and flow variables with examples. (MAY-2016)
Answer:
Stocks and flows
There are differences between the concepts of stocks and flows. Stock is a variable measured at appoint of time, whereas, flow is a variable measured over a period of time. Wealth, capital etc are variables which can be measured at a point of time. Therefore, they are stock variables. At the same time, income, output, profits etc are concepts that make sense only when a time period is specified. These are called flows because they occur in a period of time. Therefore we need to delineate a time period to get a quantitative measure of these.
Net Investment -> Flow
Capital -> Stock

Question 31.
Write down the three identities of calculating the GDP of a country by the three methods. Also briefly explain why each of these should give us the same value of GDP. (MAY-2016)
Answer:
Gross National Product (GNP) equals Gross National Income equals Gross National Expenditure,
i.e. GNP = GNI = GNE
These are equal because national income is a circular flow of income. Aggregate expenditure is equal to aggregate output which in turn, is equal to aggregate income. However each method has some different items, yet they show exactly identical results. Their identity can be shown in the following manner: Reconciling Three Methods of Measuring Gross.

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part II Chapter 1 Introduction.

Kerala Plus Two Macroeconomics Chapter Wise Previous Questions Chapter 1 Introduction to Macroeconomics

Question 1.
Classify the following statements into two branches of Economics. (MARCH-2008)
a) Reliance Communications reduced the STD charges by 20% from November onwards.
b) The Government proposed to reduce unemployment by introducing IT-related industries.
c) RBI hiked the cash reserve ratio.
d) Maruti Udyog decided to increase the production of the brand Estilo.
Answer:
a) Micro Economics
b) Macro Economics
c) Macro Economics
d) Micro Economics

Question 2.
them in a table based on two branches of Economics. Give suitable titles to the column. General price level, Aggregate consumption,Rent for a house in a city, Demand for fish in a local market. (MARCH-2009)
Answer:

Question 3.
Read the following statements carefully. (MARCH-2009)
Statement i:
M/s. Sathyam Computers Ltd. decided to introduce a wage cut of 10% for the labourers in the company in November, 2008.
Statement ii:
Reserve Bank of India introduced a new credit policy for the economy in the month of October, 2008.
In which Branc of Economics do you include the statement and why?
Answer:
Micro: Individual approach
Macro: Aggregate / General approach

Question 4.
In a seminar on “Definition of Economics” a group leader presented the definition as follows: “Economics is on the one side a study of wealth and on the other side study of man”. (MAY-2009)
State the correct definition. State the name of the economist.
Answer:
Wealth definition.
According to wealth definition, “Economics is the study of the nature of wealth, its generation, and its spending”. This definition was developed by Adam Smith.

Question 5.
Classify the following statements into two branches of economics: (MAY-2009)
a) Firm’s decision about how much to invest.
b) Govt, has adopted devaluation to overcome deficit in balance of payments.
c) RBI has increased Cash Reserve Ratio to control inflation.
d) Price elasticity of luxury good is elastic.
Answer:
a) Micro economics
b) Macroeconomics
c) Macroeconomics
d) Microeconomics

Question 6.
Classify the following economic variables under suitable heads. International trade, price theory, economic growth, partial equilibrium, aggregate demand, allocation of resources. (MARCH-2010)

Answer:

Question 7.
According to the macro economic point of view there are four major sectors in an economy. Name these sectors. (MAY-2010)
Answer:
1)Households
2) Firms
3) Government
4) External sector

Question 8.
Classify the following in a given table under the given titles. (MARCH-2011)

(National Saving Rate, Wage Rate of a KSRTC worker, Average Cost, Inflation)
Answer:

Question 9.
Some variables are given below. Classify them in a Table based on the two branches of Economics. (MARCH-2012)
i) Utility
ii) Price level
iii) Inflation
iv) Demand for pen Aggregate consumption
vi) Taxes
vii) GDP
viii) Rent
Answer:

Question 10.
Keyne’s book ‘‘General Theory of Employment, Interest and money” was published in (MARCH-2013 )
Answer:
i) 1926
ii) 1936
iii) 1946
iv) 1956
Answer:
ii) 1936

Question 11.
Classify the following under the heads micro and macro economics. (MARCH-2014)
a) Govt, regulations on auto emissions
b) Price elasticity of refrigerators
c) A family’s decision about how much income to save
d) The impact of higher National Savings on Economic Growth.
Answer:
a – Macroeconomics
b – Microeconomics
c – Microeconomics
d – Macroeconomics

Question 12.
Who is known as the father of modern Macro Economics? (MARCH-2015)
a) Adam Smith
b) Alfred Marshall
c) J.M.Keynes
d) J.B.Say
Answer:
c) J.M.Keynes

Question 13.
Classify the following under two heads Micro and Macro economics. (MAY-2015)
Utility, Inflation, Price of rice, taxes, GDP, Rent received by a shop owner, Extension in demand, Aggregate demand.
Answer:

Question 14.
Distinguish the following economics systems. (MARCH-2016)
a) Centrally Planned economy
b) Market economy
Answer:
a) Centrally planned economy is an economic system where all the economic decisions are taken by the government through planning.
b) In a market economy, economic problems are solved by market forces of demand and supply. Competition are profit are the driving forces.

Question 15.
What would come in the place of question mark: (MARCH-2016)
A) (a) Wealth of Nations : 1776
(b) The general theory : ____?____
B) (a) ___?____ : Economy as a whole
(b) Micro Economics : Individual units
Answer:
A) (b) 1936
B) (a) Macroeconomics

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part I Chapter 6 Non-Competitive Markets.

Kerala Plus Two Microeconomics Chapter Wise Previous Questions Chapter 6 Non-Competitive Markets

Question 1.
a) Draw the demand curves of perfect competition and monopoly market situations. (MARCH-2008)
b) Give reasons for the different shapes of demand curves in these markets?
Answer:
a) Demand curve of firm in perfect competition will be a horizontal straight line and that of monopoly will be a downward sloping. It is drawn below.

b) In perfect competition demand curve is horizontal because the price for every unit sale will be uniform. In monopoly, price varies for every unit of output. Therefore demand curve slopes downward.

Question 2.
From your experience identify two examples each for the following market forms: (MARCH-2008)
a) Monopoly
b) Monopolistic competition
Answer:
Monopoly
KSEB
Indian Railway
Monopolistic competition
Soap industry
Toothpaste industry

Question 3.
State whether the following statements are correct or false. Give justification for your answer. (MARCH-2009)
1) Price discrimination is an important feature of perfect competition.
2) Selling cost is the cost for producing the commodity.
3) Product differentiation is one of the main features of Monopoly.
4) Price leadership is an important feature of Oligopoly.
Answer:
1) False
2) False
3) False
4) True

Question 4.
Write the correct market form in which the following firms operate. (MARCH-2009)

Answer:
KSEB – Monopoly
Reliance – Communication Ltd. Oligopoly

Question 5.
Pick up the odd one and justify your answer. (MARCH-2009)
a) Monopolistic competition
b) Oligopoly
c) Monopsony
d) Perfect competition
Answer:
Monopsony

Question 6.
From the data given in table find TR and AR. Write any two relation between TR and MR. (MARCH-2009)

Answer:

When TR is maximum, MR becomes zero.
When TR reduces, MR becomes negative.

Question 7.
Fill up the following table appropriately: (MARCH-2009)

Answer:

Question 8.
The average revenue curves of two market situations are given below: (MAY-2009)

Draw MR curves corresponding to AR curves.
State the market situation corresponding to AR curves.
Give reasons for difference in AR and MR between two market forms.
Answer:
a)

b) First curve is related to perfect competition. Second curve is related to monopoly.
c) In perfect competition AR and MR are equal because every unit of the product is called sold at uniform price. Whereas, in monopoly firm can sell more only at lower prices. Therefore, different units are sold at different prices. This leads to difference in AR and MR curves.

Question 9.
Output and average revenue of firm are given below.
Fill up the missing columns and write the relevant equation of TR and MR : (MAY-2009)

Answer:

Question 10.
State whether the following statements are true or false. Rewrite if they are wrong: (MAY-2009)
a) The products in perfect competitive market are homogenous.
b) Seller in monopoly is a price taker.
c) Price leadership is an important feature of monopolistic competition.
d) Selling cost is a feature of monopoly.
e) Price discrimination under monopoly is always profitable.
1) Market in which there is only one buyer is called duopoly.
Answer:
True
b) False – price maker
c) False – a feature of Oligopoly
d) False – a feature of monopolistic competition
e) True
f) False – called monopsony

Question 11.
The average revenue curve of two market situation are given below: (MARCH-2010)

a) State the market situation corresponding to AR curves.
b) Give reasons for the different shapes.
c) Draw MR curves corresponding to AR curves.
Answer:
a) Perfect competition, monopoly
b) Under perfect competition, firm is price taker, therefore, AR = MR
Under monopoly, firm is price maker, therefore, AR > MR
c)

Question 12.
The main objective of the monopoly firm is profit maximisation. State the profit maximisation condition of a monopolist firm. (MARCH-2010)
Answer:
A monopolist maximises profit at that level of output for which the MC = MR and MC is rising. In other words, monopolist maximises profit at that level of output for which the vertical difference between TR and TC is maximum and TR is above the TC. In this level, the firm produces half of the market demand.

Question 13.
The following table shows the total cost schedule of a competitive firm. It is given that the price of the good is ₹15 (MARCH-2010)

a) Calculate profit at each level of output.
b) Find the profit maximising level of output.
Answer:
a)

b) The profit maximising level of outputs is 6, where the difference between TR and TC is highest.

Question 14.
Which of the following is a characteristic of oligopoly? (MARCH-2013)
i) A market situation with only a few buyers
ii) A market situation with only a few sellers
iii) A market situation with only one seller
iv) Government control overprice.
Answer:
ii) A market situation with only a few sellers

Question 15.
Which type of market have full control over price? (MARCH-2013)
i) Perfect competition
ii) Monopolistic competition
iii) Monopoly
iv) Oligopoly
Answer:
iii) Monopoly

Question 16.
Can you explain why the demand curve facing a firm under monopolistic competition is negatively sloped? (MAY-2014)
Answer:
Monopolistic competition

The demand curve under monopolistic competition is neither perfectly elastic nor elastic but more elastic then monopoly. This is basically beacuse, close substitutes are available in monopolistic competition but not in monopoly.
Monopolistically competitive firms maximize their profit when they produce at a level where its marginal costs equals its marginal revenues. Because the individual firm’s demand curve is downward sloping, reflecting market power, the price these firms will charge will exceed their marginal costs. Due to how products are priced in this market, consumer surplus decreases below the pare to optimal levels you would find in a perfectly competitive market, at least in the short run. As a result, the market will suffer dead weight loss. The suppliers in this market will also have excess production capacity.

Question 17.
Monopolistic competition consists of: (MAY-2015)
a) A few firms selling identical products.
b) A few firms selling differentiated products.
c) Large number of firms selling identical products.
d) Large number of firms selling differentiated products.
Answer:
d) Large number of firms selling differentiated products

Question 18.
Which of the following describes monopoly? (MAY-2015)
a) Large number of buyers
b) Large number of sellers
c) Only a single buyer
d) Only a single seller with complete control over industry.
Answer:
Only a single seller with complete control over industry.

Question 19.
Linder Oligopoly the output decision of any one firm necessarily affect the price and quantity sold by other firms. Hence the rivals may react to protect the profit. List the three different ways in which oligopoly firms may behave. (MAY-2015)
Answer:
If the market of a particular commodity consists of more than one seller but the number of sellers is few, the market structure is termed oligopoly. The special case of oligopoly where there are exactly two sellers is termed duopoly. We shall explain the different ways in which the oligopoly firms may behave.

• Firstly duopoly firms may collude together and decide not to compete with each other and maximize total profits of the two firms together. In such a case the two firms would behave like a single monopoly firm that has two different factories producing the commodity.
• Secondly, take the case of a duopoly where each of the two firms decide how much quantity to produce by maximizing its own profit assuming that the other firm would not change the quantity that it is supplying. We can examine the impact using a simple example where both the firms have zero cost.
• Thirdly, some economists argue that oligopoly market structure makes the market price of the commodity rigid, i.e., the market price does not move freely in response to changes in demand.

Question 20.
From the schedule given below, calculate the Total Revenue (TR) and derive the demand schedule. (MARCH-2016)

Answer:

Question 21.
The demand curve faced by a firm under monopolistic competition is negatively sloped. Explain. (MARCH-2016)
Answer:
The demand curve faced by a firm under monopolistic competition is negatively sloped because a firm under monopolistic competition could sell more of the commodity only by reducing the price.

Question 22.
What do you mean by monopoly market? Explain the features of monopoly. Also explain the short run equilibrium of a monopoly producer. (MAY-2016)
Answer:
Monopoly may be defined as a market situation in which there is only a single seller. He controls the entire market. The term monopoly has derived from two Greek words such as ‘mono’ means single and poly means ‘seller’. The meaning of the combined term is single seller. In a boarder sense, a monopolist is single seller of a commodity which does not have close substitutes. E.g. KSEB Features of Monopoly Market Some of the salient features of monopoly are as follows:
1) There is only a single firm producing the product
2) There is no close substitute for the product
3) Entry is denied for other producers
4) Since there is only one seller, the firm and the industry are same
5) The firm under monopoly is the price maker

Question 23.
Oligopoly is a market situation in which there is only (MAY-2016)
a) a few buyers
b) one seller
c) a few sellers
d) large number of sellers
Answer:
c) A few sellers

Question 24.
Why the Average Revenue Curve and Marginal Revenue Curve of a firm under monopolistic competition is negatively sloped? (MARCH-2017)
Answer:
The demand curve under monopolistic competition is much flatter, i.e, the demand curve of monopolistic competition is more price elastic, which can be explained with diagram.

Question 25.
Examine the diagram given below. Identify the mistake and redraw the diagram. What is the relation between Total Revenue and Marginal Revenue as the firm expands its output? (MARCH-2017)

Answer:
Relation between TR and MR
As more and more units of output is sold the TR increases at a decreasing rate MR decreases. When TR reaches maximum MR is zero.
When TR decreases MR is negative.

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part I Chapter 5 Market Equilibrium.

Kerala Plus Two Microeconomics Chapter Wise previous Questions Chapter 5 Market Equilibrium

Question 1.
Compared to rural areas, the wage rate is higher in urban areas. Discuss the reasons for this. (MARCH-2008)
Answer:
Wages are higher in urban areas compared to rural areas due to the following reasons.

• Availability of skilled workers in urban areas.
• Professionals in urban areas.
• Occupational and geographical mobility.
• Differences in risks in certain urban jobs.

Question 2.
When you conducted a survey among teachers working in parallel colleges in Trichur district it is found that there exists a difference in earnings among teachers teaching different subjects. Find the reason for the same with suitable examples. (MAY-2009)
Answer:
Wage differences are due to the following reasons.

• Difference in skill and productivity
• People are not the same in matter of tastes, talents and efficiency.
• Occupational and geographical mobility.
• Some professions require high cost and long period of training.
• Difference in risks involved in certain jobs.
• Due to these reasons, some are paid more and others are paid less.

Question 3.
Suppose the demand and supply curve of good x shift simultaneously. The simultaneous shift can happen in four possible cases. The impact on equilibrium price and quantity in all four cases is different. On the basis of this, complete the following table : (MARCH-2010)

Answer:
a) Leftward
b) Rightward
c) Decrease
d) Increase

Question 4.
Under fixed price analysis of a product market, if quantity supplied is either in excess or falls short of quantity demanded price will change because of excess supply or demand. In this occasion (MARCH-2010)
a) How the equilibrium is determined?
b) Name the principle.
Answer:
a) Assume that the elasticity of supply is infinite that is the supply schedule is horizontal. In this situation the equilibrium output will be solemnly determined by aggregate amount of demand at this price in the economy.
b) Keynesian analysis or effective demand Principle.

Question 5.
The demand function of a monopoly firm is given as q = 20 – 2P, substitute the values of P from 10 to 1. (MAY-2010)
a) Calculate the demand schedule of the commodity.
b) From the table calculate the TR, AR and MR values in a tabular form.
c) Draw the AR and MR curve in same set of axis.
d) When the price elasticity is more than one?
Answer:
a)

b)

c)

d) Price elasticity is more than one when MR is positive.

Question 6.
Find the correct term for the following : (MAY-2010)

Answer:
a) Equilibrium price
b) Price ceiling

Question 7.
The Government imposed lower limit on the price that may charged for a particular good is called price floor. Give two examples for imposition of price floor. The Government imposed lower limit on the price that may charged for a particular good is called price floor. Give two examples for imposition of price floor (MAY-2010)
Answer:
i) Price floor fixed for paddy
ii) Price floor fixed for food grains

Question 8.
This is a demand curve for a branded umbrella. (MARCH-2011)
a) If the demand for umbrella increases during rainy season, what term we use in economics to denote this change? Draw the curve.
b) What you call this change when the price of umbrella increased, the demand decreased.

Answer:
a) Rightward shift or increase in demand

b) Upward movement along the same demand curve or there is contraction of demand.

Question 9.
The demand and supply equations of a commodity in a perfectly competitive market are given as qd = 700 – P qs = 500 + 3P (MARCH-2011)
Calculate:
a) Equilibrium price
b) Equilibrium quantity
c) Based on the given supply and demand equations draw equilibrium situation on a diagram.
Answer:
a) Equilibrium price

b) Equilibrium quantity
qd = 700 – P
= 700 – 50
= 650
c)

Question 10.
Imposition of the price ceiling below the equilibrium price leads to (MARCH-2012)
a) Excess demand
b) Excess supply
c) Deficit demand
d) Deficit supply
Answer:
a) Excess demand

Question 11.
Match the following: (MARCH-2012)

Answer:

Question 12.
Welfare considerations enable the govt, to impose price floor for some goods and services. Mention any one example of imposition of price floor. (MARCH-2013)
Answer:
In India, floor prices are fixed for a variety of commodities like paddy, rubber, wheat, coconut etc.

Question 13.
The following diagram shows equilibrium market price determined by the equality between demand and supply. (MARCH-2013)
Show the effect of change in demand and supply on equilibrium price and output under the following situations (use diagrams)
i) Increase in demand or when the demand curve shift rightwards.
ii) Increase in supply or when supply curve shift rightwards.

Answer:
i) When demand curve shifts to right (increase in demand), there will be increase in equilibrium price and increase in equilibrium quantity. This change is shown in the diagram.

ii) When supply curve shifts to right (increase in supply), the equilibrium price decreases and the equilibrium quantity increases. This is given in the following diagram.

Question 14.
Diagrammatically illustrate the impact of (MAY-2014)
a) Price ceiling and
b) Price floor on market equilibrium
Answer:
a) Price Ceilings
A price ceiling occurs when the government puts a legal limit on how high the price of a product can be. In order for a price ceiling to be effective, it must be set below the natural market equilibrium.
When a price ceiling is set, a shortage occurs. For the price that the ceiling is set at, there is more demand than there is at the equilibrium price. There is also less supply than there is at the equilibrium price, thus there is more quantity demanded than quantity supplied. An inefficiency occurs since at the price ceiling quantity supplied the marginal benefit exceeds the marginal cost. This inefficiency is equal to the dead weight welfare loss.

This graph shows a price ceiling. P* shows the legal price the government has set, but MB shows the price the marginal consumer is willing to pay at Q*, which is the quantity that the industry is willing to supply. Since MB > P* (MC), a dead weight welfare loss results. P’ and Q’ show the equilibrium price. At P* the quantity demanded is greater than the quantity supplied. This is what causes the shortage,
b) Price Floors
A price floor is the lowest legal price a commodity can be sold at. Price floors are used by the government to prevent prices from being too low. The most common price floor is the minimum wage the minimum price that can be payed for labor. Price floors are also used often in agriculture to try to protect farmers.

Question 15.
From the list of goods given below, find out the one which cannot be provided through market mechanism? (MARCH-2015)
a) Private goods
b) Public goods
c) Merit goods
d) Club goods
Answer:
b) Public goods

Question 16.
The following diagram shows the equilibrium price of wheat determined by the supply curve ‘SS’ and market demand curve ‘DD’. With the help of the diagram answer the questions given below. (MARCH-2015)
a) If the Government imposes price ceiling on wheat, what happens to the demand for wheat?
b) Define price ceiling.
c) Write down two adverse impacts of price ceiling on the consumers.

Answer:

Question 17.
Explain through a diagram the effect of a rightward shift (increase) of both the demand and supply curves on the equilibrium price and quantity? (MAY-2015)
Answer:
When demand curve shifts to right (increase in demand), there will be increase in equilibrium price and increase in equilibrium quantity. This change is shown in the diagram.

When supply curve shifts to right (increase in supply), the equilibrium price decreases and the equilibrium quantity increases. This is given in the following diagram.

Question 18.
List the 3 different ways in which an oligopoly firm may behave. (MARCH-2016)
Answer:
If the market of a particular commodity consists of more than one seller but the number of sellers is few, the market structure is termed oligopoly. The special case of oligopoly where there are exactly two sellers is termed duopoly. We shall explain the different ways in which the oligopoly firms may behave.
Firstly duopoly firms may collude together and decide not to compete with each other and maximize total profits of the two firms together. In such a case the two firms would behave like a single monopoly firm that has two different factories producing the commodity.
Secondly, take the case of a duopoly where each of the two firms decide how much quantity to produce by maximizing its own profit assuming that the other firm would not change the quantity that it is supplying. We can examine the impact using a simple example where both the firms have zero cost.
Thirdly, some economists argue that oligopoly market structure makes the market price of the commodity rigid, i.e., the market price does not move freely in response to changes in demand.

Question 19.
Explain the consequence if price prevailing in the market is fixed: (MARCH-2016)
i) Above the equilibrium price (Price floor)
ii) Below the equilibrium price (Price ceiling)
Answer:
i) Excess supply
ii) Excess demand

Question 20.
Demand and supply equations of commodity X is given by (MARCH-2016)
qd = 100- P
qs = 70 + 2P
find the equilibrium price and quantity.
Answer:

Question 21.
Imposition of price floor leads to (MAY-2016)
a) an excess demand
b) an excess supply
c) normal demand
d) any of the above
Answer:
b) an excess supply

Question 22.
State whether the following statements are true or false: (MAY-2016)
a) With supply curve remaining unchanged, when demand curve shifts rightward, the equilibrium quantity decreases and equilibrium price decreases.
b) In a perfectly competitive market, equilibrium occurs where market demand equals market supply.
Answer:
a) False
b) True

Question 23.
Suppose onion price increases above ₹100 per kg and the government imposes price ceiling. (MAY-2016)
a) What is price ceiling?
b) What are the consequence of imposing price ceiling?
Answer:
a) Price ceiling mean maximum price. It is the maximum price fixed by the government. The aim of price ceiling is to protect consumers. Government fixes price ceiling for essential products and medicines to protect the interests of the consumers.
Consequence of imposing price ceiling:
1. Black marketing
2. Malpractices by fair price shops
3. Sale of inferior quality goods.

Question 24.
Suppose the demand and supply functions of wheat are given by Q_D = 800 – 4P and Q_S= 600 + 4P respectively.
i) Find the equilibrium price and quantity demanded. (MARCH-2017)
ii) Due to a shortage of fertilizers, the cost of production of wheat is increased. So that the new supply function is
Q_S = 400 + 4P. What will happen to the equilibrium price and quantity demanded?
Answer:


The equilibrium price will increase and equilibrium quantity will fall.

Question 25.
How does equilibrium price and quantity demand affect when (MARCH-2017)
i) Both demand and supply curves shift in the same direction.
ii) Demand and supply curves shift in the opposite directions.
Answer:
i) Both demand and supply curve shift in the same direction.
When the demand curve and supply curve shift to right: For a given price, more quantity is demanded as well as more quantity is supplied. The demand curve and supply curve shifted to right to show a greater quantity for a given price. If supply increases relatively greater than the equilibrium price is smaller, but if demand increases relatively greater than the intersection is higher and the price obtained will be higher. Only than it is certain that there will be more quantity at new equilibrium price.

When the demand curve and supply curve shifts to left: The price may increase or decrease depending whether supply decreases relatively more or demand decrease relatively more, respectively, and the only certainty is that there is less quantity at new equilibrium point

ii) Demand curve shifts left and supply curve shifts right: Demand decreases and supply increases. The price was fallen, but if supply curve shifts a lot more right than the demand curve shifts left, then the new equilibrium point will mean more quantity is supplied at a much lower price.

Demand curve shifts right and supply curve shift left: Demand increases and supply decreases. The price will increase but depending on how far the supply curve shifts left, the equilibrium quantity would be more or less or same. This shift will see a higher equilibrium point with less quantity demand.

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part I Chapter 4 The Theory of The Firm Under Perfect Competition.

Kerala Plus Two Microeconomics Chapter Wise previous Questions Chapter 4 The Theory of The Firm Under Perfect Competition

Question 1.
Correct the following statements, if necessary: (MARCH-2010)
Statement I : Liquidity trap is the situation in which speculative demand for money is infinitely elastic.
Statement II : The imposition of a unit tax shift the supply curve of a firm to the left.
Statement III : The profit level that is just cover the explicit cost and opportunity cost is supernormal profit.
Answer:
Statement I : No correction
Statement II : No correction
Statement III : The profit level that is just cover
the explicit cost and opportunity cost is normal profit

Question 2.
There are three identical firms in the market. The following table shows the supply schedule of a firm : (MARCH-2010)

1) Define market supply
2) Compute market supply schedule
3) Draw market supply curve
Answer:
1) The output level that firms in the market produce in aggregate, corresponding to different values of market prices.
2)

3) Draw a market supply curve that slopes upwards corresponding to the above values.

Question 3.
Any factor that affects a firm’s marginal cost curve is of course a determinant of its supply curve”, there are three factors – determining the supply curve of a firm. Identify them. (MAY-2010)
Answer:
Factors determining the supply curve of a firm are :
Technical progress
Input prices
Unit tax

Question 4.
Mr. Kameth is a textile mill owner. He is facing challenges in production and marketing screnario. The situations he faced are given in column A and corresponding outcomes in marginal cost and supply of output are given in column B and C. Match A with B and C. (MARCH-2011)

Answer:

Question 5.
Under perfect competition a firm’s profit in the short run is maximized when 3 conditions are satisfied. (MARCH-2011)
a) Discuss the 3 conditions.
b) From the following schedule, suggest profit
maximizing level of output in the short run if price is ₹10.

Answer:
a 1) MC must be equal to MR
2. MC must cut MR from below
3. Slope of MC must be greater than slope of MR.
b)

c) Since MC = MR = 10 at 6th unit of output, the profit maximising level of output is 6 units.

Question 6.
In the following diagram, at points E and E₁ MC and MR are equal. Among these, which point do you consider as producer’s equilibrium? Justify your answer. (MARCH-2012)

Answer:
In this diagram, producer’s equilibrium is at point E_r This is because this point satisfies all the conditions of equilibrium. The conditions for attaining equilibrium are,
i) MC = MR
ii) MC must cut MR from below
These two conditions are satisfied at point E₂.

Question 7.
Firm ‘A’ is operating under the condition of perfectly competitive market. Whether firm ‘A’ is capable of maintaining abnormal profit in the long run? Why? Hint: Long run equilibrium of a firm under perfect competition. (MARCH-2012)
Answer:
Yes, I do agree to the statement that a firm cannot make supernormal profit in the long run under perfect competition. This is because; freedom of entry will prevent super normal profit in the long run.
We first determine the firm’s profit-maximizing out-put level when the market price is greater than or equal to the minimum (long run) AC. This done, we determine the firm’s profit-maximizing output level when the market price is less than the minimum (long run) AC.
Case 1: Price greater than or equal to the minimum LRAC
Case 2: Price less than the minimum LRAC Combining cases 1 and 2, we reach an important conclusion. A firm’s long run supply curve is the rising part of the LRMC curve from and above the minimum LRAC together with zero output for all prices less than the minimum LRAC.

Question 8.
State whether the statements are true or false. (MARCH-2013)
i) In a perfect competitive market structure, firms are price takers.
ii) All firms in the market produce homogeneous product.
Answer:
i) True
ii) True

Question 9.
In an economy, the level of income is Rs. 1,000 crores and the MPC is 0.8. If the investment increases by 200 crores. Calculate the total increase in income. (MARCH-2013)
Answer:

Total increase in income is K x 200 Crores
That is 5 x 200 Crores = 1,000 Crores
Total increase in income = 1,000 Crores

Question 10.
Under perfect competition, a firm will not produce output level in cases under (MARCH-2013)
a) P > MC and
(b) P< MC. If so, what is the condition of profit maximising output in the short run. Give diagramatic illustration. (Hint: Short run equilibrium of a firm under perfect competition).
Answer:
Perfect Competition – Short Run Equilibrium In the model of price and output determination under perfectly competitive market conditions, price is determined by the impersonal market forces of supply and demand, and not by individual actions of buyers and sellers. The individual firm in such a market may be said to be a price-taker. Perfect competition is used by economists not so much as an attainable goal, but as a pure state against which all other markets can be measured.
For a market to be perfectly competitive, the following necessary conditions must, in general, prevail.
1) There must be many firms acting independently. Each firm is small enough relative to the size of the market, so that a single firm’s decision to either stop production entirely or to produce to full capacity will not have any perceptible effect on market supply to cause a change in market price.
2) Entry and exit from the market are free and frictionless for both the firms and consumers.
3) The products offered for sale are homogeneous and divisible into small units.
5) Buyers and sellers have perfect knowledge about the market conditions.
6) Price is determined by the impersonal market forces of supply and demand, and not by individual actions of buyers and sellers. The individual firm in such a market may be said to be a price-taker.
7) There is perfect knowledge among consumers about the price at which goods are being sold in the market. Sellers thus cannot manipulate the commodity price and thereby exploit the consumer.
8) There is perfect mobility of goods and factors of production among firms. Uniformity in factor prices is prevalent in the market.
If these necessary conditions prevail, the firm can lose its entire market if it sets its price above the market price. It can also expect no gain by lowering price, since it can sell all it wishes to produce at the market price. The competitive firm has no price discretion. Market price will not be affected by the independent action of a single firm. No firm is able to influence market price.
The objective of each firm is to maximize profit. Profit is the difference between revenue and cost of production. Marginal cost (MC) is the cost incurred to produce an additional unit of the product. If the per unit price of a commodity is greater than the marginal cost, the firm will be interested in producing more of the commodity. On the other hand if price falls below marginal cost, the firm will curtail its production. Equilibrium condition will prevail at a point where profit is maximized. This happens where price is equal to marginal cost (P = MC). Also at the point of equilibrium, the marginal cost curve must be upward sloping.

In the diagram the given price is P. Again the firm will produce the level of output for which MC = MR. This occurs at point E, giving a level of output of Q. Notice that at this point, AR = AC, so the firm is making normal profit.
So, in the short run, a perfectly competitive firm could be making super normal profit, or a loss, or just normal profit, depending on the given market price. Note that if the firm’s losses get too big in the short run (i.e. AR < AVC) then it will have to shut down.

Question 11. What are the conditions that are to be fulfilled for a firm to be in short run equillibrium under perfectly competitive market conditions? (MAY-2014)
Answer:
A firm is in equilibrium when it has no tendency to change its level of output. It needs neither expansion nor contraction. It wants to earn maximum profits. In the words of A. W. Stonier and D.C. Hague, “A firm will be in equilibrium when it is earning maximum money profits.” ’ Equilibrium of the firm can be analysed in both short- run and long-run periods. A firm can earn the maximum profits in the short run or may incur the minimum loss. But in the long run, it can earn only normal profit. Short-run Equilibrium of the Firm : The short run is a period of time in which the firm can vary its output by changing the variable factors of production in order to earn maximum profits or to incur minimum losses. The number of firms in the industry is fixed because neither the existing firms can leave nor new firms can enter it. It’s Conditions: The firm is in equilibrium when it is earning maximum profits as the difference between its total revenue and total cost. For this, it essential that it must satisfy two conditions:
(1) MC = MR, and
(2) the MC curve must cut the MR curve from below at the point of equality and then rise upwards. The price at which each firm sells its output is set by the market forces of demand and supply. Each firm will be able to sell as much as it chooses at that price. But due to competition, it will not be able to sell at all at a higher price than the market price. Thus the firm’s demand curve will be horizontal at that price so that P = AR = MR for the firm.

Marginal Revenue and Marginal Cost Approach : The short-run equilibrium of the firm can be explained with the help of the marginal analysis as well as with total cost-total revenue analysis. We first take the marginal analysis under identical cost conditions. This analysis is based on the following assumptions:
1) All firms in an industry use homogeneous factors of production.
2) Their costs are equal. Therefore, all cost curves are uniform.
3) They use homogeneous plants so that their SAC curves are equal.
4) All firms are of equal efficiency.
5) All firms sell their products at the same price determined by demand and supply of the industry so that the price of each firm is equal to AR = MR.
Determination of Equilibrium: Given these assumptions, suppose that price OP in the competitive market for the product of all the firms in the industry is determined by the equality of demand curve D and the supply curve S at point E in Figure 1 (A) so that their average revenue curve (AR) coincides with the marginal revenue curve (MR).

Question 12. A fruits seller sells 600 Kg. of grapes at market price of ₹40 per kg. When price increases to ₹50 per kg, he is ready to sell 750kg of grapes. Find out the price elasticity of supply. (MARCH-2015)
Answer:
Elasticity of supply

Question 13.
A firm that maximizes profit under perfect competition will not produce an output where (MARCH-2015)
(a) P > MC and
(b) P<MC.
If so, what is profit maximizing output condition in the short run? Briefly illustrate with diagram.
Answer:
A firm is in equilibrium when it has no tendency to change its level of output. It needs neither expansion nor contraction. It wants to earn maximum profits. In the words of A.W. Stonier and D.C. Hague, “A firm will be in equilibrium when it is earning maximum money profits.”
Equilibrium of the firm can be analysed in both short- run and long-run periods. A firm can earn the maximum profits in the short run or may incur the minimum loss. But in the long run, it can earn only normal profit.
Short-run Equilibrium of the Firm:
The short run is a period of time in which the firm can vary its output by changing the variable factors of production in order to earn maximum profits or to incur minimum losses. The number of firms in the industry is fixed because neither the existing firms can leave nor new firms can enter it.
It’s Conditions:
The firm is in equilibrium when it is earning maximum profits as the difference between its total revenue and total cost.
For this, it essential that it must satisfy two conditions:
(1) MC = MR, and
(2) the MC curve must cut the MR curve from below at the point of equality and then rise upwards.
The price at which each firm sells its output is set by the market forces of demand and supply. Each firm will be able to sell as much as it chooses at that price. But due to competition, it will not be able to sell at all at a higher price than the market price. Thus the firm’s demand curve will be horizontal at that price so that P = AR = MR for the firm.
1. Marginal Revenue and Marginal Cost Approach: The short-run equilibrium of the firm can be explained with the help of the marginal analysis as well as with total cost-total revenue analysis. We first take the marginal analysis under identical cost conditions. This analysis is based on the following assumptions:
1) All firms in an industry use homogeneous factors of production.
2) Their costs are equal. Therefore, all cost curves are uniform.
3) They use homogeneous plants so that their SAC curves are equal.
4) All firms are of equal efficiency.
5) All firms sell their products at the same price determined by demand and supply of the industry so that the price of each firm is equal to AR = MR.
Determination of Equilibrium:
Given these assumptions, suppose that price OP in the competitive market for the product of all the firms in the industry is determined by the equality of demand curve D and the supply curve S at point E in Figure 1(A) so that their average revenue curve (AR) coincides with the marginal revenue curve (MR).

Question 14.
Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? (MAY-2015)
Answer:
No, a profit maximising firm will not produce in the range where the marginal cost is falling. This is because, at this range, his profit is not maximised. So he fixes his level of out output at the point where marginal cost equals marginal revenue.
This can be explained with the help of a diagram.

As per the diagram, if the firm fixes output at the range where MC is falling his profit will not be maximised. Being profit maximising firm, he goes on producing OQ level of output corresponding to the point where MC=MR. This is at the rising part of MC. So his profit is maximised as shown in shaded area.

Question 15.
At the market price of ₹10, a firm supplies 4 units of output. The market price increases to ₹30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price? (MAY-2015)
Answer:

Question 16.
Distinguish: (MARCH-2016)
a) Break even point
b) Shutdown point
Answer:
a) The point on the supply curve at which a firm earns
normal profit is called the break even point. The point of minimum average cost at which the supply curve cuts the LRAC curve is therefore the break even point of a firm.
b) In the short run the firm continues to produce as long as the price remains greater than or equal to the minimum of AVC. Therefore, along the supply curve as we move down, the last price-output combination at which the firm produces positive output is the point of minimum AVC where the SMC curve cuts the AVC curve. Below this, there will be no production. This point is called the short run shutdown point of the firm. In the long run, the shut down point is the minimum of LRAC curve.

Question 17.
Identify the wrong statements and correct the same. (MARCH-2016)
i) A perfectly competitive market deals in heterogeneous product.
ii) Each buyer Under perfect competition is a price taker.
iii) A perfectly competitive market is a market where there is only a single seller.
Answer:
i) Wrong. A perfectly competitive market deals with homogenous products
ii) Wrong. Each seller under perfect competition is a price taker.
iii) Wrong. A monopoly market is the market where there is only a single seller.

Question 18.
A firm under perfect competition wishes to maximize its profit in the short run. State and explain the conditions must hold for profit maximization. (MAY-2016)
Answer:
Perfect competition is a market situation where there are large number of buyers and sellers dealing with homogeneous commodities.
Conditions of equilibrium
i) MC = MR
ii) MC must cut MR from below It can be explained as,

Question 19.
Differentiate between the shut-down point and break even point. (MAY-2016)
Answer:
Shut down point refers to a situation where average revenue is equal to average variable cost. In other words it is the minimum pint of AVC. On the other hand, break even point is the no-profit, no loss point. It is the point where TR = TC or AR = AC.

Question 20.
Which one of the following condition is not satisfied by the long run equilibrium of a firm under perfect condition? (MARCH-2017)
a) P = AR
b) AR = MR
c) MC = MR
d) AFC = AVC
Answer:
AFC = AVC

Question 21.
Graphically explain the short run equilibrium of the firm under Perfect Competition. Draw separate diagram depicting the following conditions: (MARCH-2017)
i) The firm is earning super normal profit.
ii) The firm is earning only normal profit.
iii) The firm is incurring a loss
Answer:
The firm is earning super normal profit
Under perfect competition a firm’s super normal profit in the short run is maximised when 3 conditions are satisfied.
1) Market price P should be equal to marginal cost (MC) at equilibrium output q i.e, MC = MR = P
2) MC should be non-decreasing at Q, i.e. MC should cut MR from below.
3) P ≥ AVC
i) Since at point e AC curve touches AR curve, the firm enjoys normal profit only
ii) The firm is incurring a loss because of the free entry and exit of firms and buyers.
This can be explained with diagram.

Profit maximization under short run graph

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part I Chapter 3 Production and Costs.

Kerala Plus Two Microeconomics Chapter Wise Previous Questions Chapter 3 Production and Costs

Question 1.
Classify the following costs into Fixed Costs and Variable costs. (MARCH-2008)
Raw material costs, Daily wages, Interest on capital, Rent, Salary to M.D, Electricity charges, Insurance, Transportation Charges.

Answer:

Question 2.
Following table shows the AC and total quantity of a firm. (MARCH-2008)

a) Complete the table.
b) Plot TFC, TVC and TC on the same set of axis.
c) Write relevant equations to find out AFC, AVC, AC and MC.
Answer:
a)

Question 3.
The cost incurred by a Toys Manufacturing Company is given below. Classify the cost into fixed cost and variable cost. (MARCH-2009)
Rent, Wages, Insurance Premium, Electricity Charges, Cost of raw material, Salary to the Managing Director.

Answer:

Question 4.
The total cost structure of a firm is given in the schedule (MARCH-2009)

a) Fill up the column appropriately from the data given.
b) On the same set of axis plot the AC and MC curves.
Answer:

Question 5.
Total cost of producing 1000 cell phone is ₹10 lakhs if the marginal cost of producing 1001 unit is ₹4,000. What will be the total cost of producing 1001 unit? (JUNE-2009)

Answer:
10,04,000

Question 6.
State whether the following statements are true or false. Rewrite the statement if they are false: (JUNE-2009)
a) TFC is zero at zero level of output.
b) AC is minimum at the point where AC = MC.
c) AVC curve is a rectangular hyperbola.
d) TFC curve is‘U’shaped.
Answer:
a) False. TFC is positive even when the level of output is zero.
b) True
c) False. AVC curve is‘U’ shaped.
d) False. TFC is horizontal straight line.

Question 7.
Reserve Bank of India has increased the bank rate and cash reserve ratio in, June 2008 to control inflationary tendencies in the Indian economy. How ever this effort of RBI became ineffective (JUNE-2009)
Answer:
a) Value of certain products went up and the petroleum prices increased. As a result of it RBI’s efforts to regulate the inflationary pressure failed. Thus monetary policy resulted ineffective.
b) In additional to monetary measures like CRR and bank rate policy, various other measures can be adopted to regulate the economy. Taxation and expenditure policy can be used by the government. Similarly government may provide subsidy or can introduce price ceiling and support prices.

Question 8.
Let the production function of a firm be Q = 3L²K² (MAY-2010)
a) Find out the maximum possible output that the firm can produce with 5 units of L and 3 units of K.
b) What is the maximum possible output that the firm can produce with 10 units of L and zero units of K?
Answer:

Question 9.
“In the long run, the shut down point of the firm is the minimum of LRAC curve.” (MAY-2010)
a) Which is the shut down point of a perfect competitive firm in short run?
b) Draw the diagram to explain the shut down condition of a firm under short run.
Answer:
a) Previously, while deriving the supply curve, we have discussed that in the short run the firm continues to produce as long as the price remains greater than or equal to the minimum of AVC. Therefore, along the down, the last price-output combination at which the firm produces positive output is the point of minimum AVC where the SMC curve cuts the AVC curve. Below this there will be no production. This point is called tiTe short run shutdown point of the firm. In the long run, however, the shut down point is the minimum of LRAC curve.

Question 10.
Correct the figure if there are any mistakes (MARCH-2011)

Answer:

Question 11.
Gireesh cultivates paddy on a piece of land. He employs labourers successively and total product is given here. (MARCH-2011)

a) Complete the given table.
b) Plot TP, APL and MPL on the same set of axis.
c) At what level of total product, the producer stops further employment? (Suggest from schedule)
d) Give reasons.
Answer:


c) 7th labour
d) When 7th labour is employed, TP becomes maximum or MP becomes zero.

Question 12.
The following table shows the TC schedule of a firm. What is the TFC of this firm? Calculate TVC, AFC, AVC, SAC and SMC of the firm. (MARCH-2012)

Answer:

Question 13.
Rajeev is a farmer who produces paddy in his 10 acres of land. He is trying to increase his total output by increasing the quantity of only one of his inputs – say labour. Which law of production explains this situation? What will be the effect on his total output? Give your suggestion to Rajeev with a suitable diagram. (MARCH-2012)
Answer:
Law of Variable Proportions The law of diminishing marginal product says that if we keep increasing the employment of an input, with other inputs fixed, eventually a point will be reached after which the resulting addition to output will start falling. A somewhat related concept with the law of diminishing marginal products is the law of variable proportions. It says that the marginal product of a factor input initially rises with its employment level. But after reaching a certain level of employment, it starts falling.
The reason behind the law of diminishing returns or the law of variable proportion is the following. As we hold one factor input fixed and keep increasing the other, the factor proportions change. Initially, as we increase the amount of the variable input, the factor proportions become more and more suitable for the production and marginal product increases. But after a certain level of employment, the production process becomes too crowded with the variable input and the factor proportions become less and less suitable for the production. It is from this point that the marginal product of the variable input starts falling. Since inputs cannot take negative values, marginal product is undefined at zero level of input employment. Marginal products are additions to total product. For any level of employment of an input, the sum of marginal products of every unit of that input up to that level gives the total product of that input at that employment level. Therefore, total product is the sum of marginal products. Average product of an input at any level of employment is the average of ail marginal products up to that level. Average and marginal products are often referred to as average and marginal returns, respectively, to the variable input.
The marginal product (MP) and total product (TP) of an input are related. The points of relationship are given below.
i) When MP increases, TP also increases
ii) When MP is zero, TP becomes maximum
iii) When MP becomes negative, TP turns negative The relationship between MP and TP are picturised below

Question 14.
The following table shows TFC and TVC of a firm. Find out TC, AFC, AVC, AC and MC of the firm. (MARCH-2013)

Answer:

Question 15.
From the table identify the different levels of TP which makes the different phases of the operation of the law of variable proportions. (MARCH-2013)

Answer:

Question 16.
Short run MC and AC curves are U-shaped. Write down any three relationships between Me and AC. (MAY-2014)
Answer:

marginal cost (MC) is above average cost (AC), the average cost rises, that is, the marginal cost (MC) pulls the average cost (AC) upwards.
ii) When marginal cost (MC) stands equal to the average cost (AC), the average cost remains the same, that is, the marginal cost pulls the average cost horizontally.
iii) if the marginal cost (MC) is below the average cost (AC); average cost falls, that is, the marginal cost pulls the average cost downwards.

Question 17.
‘Short run production functions are fixed proportion production functions’. Do you agree? Substantiate (MAY-2014)
Answer:
Yes, I agree with the statement that Short Run Production Functions are fixed proportion production functions. The short run is a time period where at least one factor of production is in fixed supply. A business has Ghosen it’s scale of production and must stick with this in the short run.
We assume that the quantity of plant and machinery is fixed and that production can be altered by changing variable inputs such as labour, raw materials and energy.
The time periods used differ from one industry to another; for example, the short-run in the electricity generation industry differs from local sandwich bars. If you are starting out in business with a new venture selling sandwiches and coffees to office workers, how long is your long run? It could be as short as a few days – enough time to lease a new van and a sandwich-making machine

Question 18.
Fill in the blanks: (MAY-2014)

Answer:

Question 19.
Which of the following cost will be zero when production is stopped? (MARCH-2015)
a) Average Fixed cost
b) Total Cost
c) Fixed cost
d) Variable cost
Answer:
d) variable cost

Question 20.
The following diagram represents TP, MP and AP curves of a firm. After studying the curves, answer the questions given below. (MARCH-2015)

a) When does ‘TP’ becomes maximum?
b) At what rate (increasing or decreasing) does ‘TP’ increase when ‘MP’ increases?
c) When does ‘MP’ become negative?
Answer:
a) MP becomes zero
b) Increasing rate
c) TP decreases

Question 21.
Following information about a firm is given below: (MARCH-2015)

From the given information estimate,
a) Total Fixed Cost
b) Total Variable Cost
c) Average cost
d) Marginal Cost
Answer:

Question 22.
Consider the following cost schedule of a firm and find AC, AVC and MC. (MAY-2015)

Answer:

Question 23.
“Production is the transformation of inputs into outputs”. Justify the statement by citing examples from your location. Also built a production function based on your example. (MAY-2015)
Answer:
Production is possible only through effective utilisation of factors of production. The factors of production like land, labour, capital and organisation are called inputs. In the production process, these inputs. In the production process, these inputs are transformed into output. Thus a production function stands for functional relationship between inputs and output.
In my locality paddy is produced by combining inputs like labour, machinery, land, bank loan and organisers efforts. These are inputs. Thus the paddy production function can be stated as follows.
Q = f(X₁, X₂, X₃ ,X_n)
Where Q = paddy, X₁, X₂ ……… X_n are inputs used.

Question 24.
i) There is an error in the diagram. Redraw the diagram by correcting the same (MARCH-2016)

ii) Explain the relationship between Average Product (AP) & Marginal Product (MP)
Answer:
i)

ii) a) When MP is greater than AP, AP rises.
b) When MP is less than AP, AP falls.
c) When MP = AP, AP is at its maximum.

Question 25.
The relationship between input & Output is ______ (MARCH-2016)
Answer:
Production function

Question 26.

Draw the diagram correctly (MARCH-2016)
(AFC – Average Fixed Costs)
Answer:

Question 27.
 is _____  (MARCH-2016)
а) MC
b) AC
c) FC
d) VC
[TC = Total Cost, q = Output, MC = Marginal Cost, AC = Average Cost, FC = Fixed Cost, VC = Variable Cost]
Answer:
a) MC

Question 28.
State and explain the ‘law of variable proportions’ (MAY-2016)
Answer:
When more and more units of a variable input are added with the fixed input, the marginal product would increase only upto a certain point. Thereafter, the marginal product declines. This phenomenon is known as the Law of Variable Proportions. It is also known as returns to a factor.
The shape of TP, AP and MP suggests that they are specifically passing through three phases.
They are:
First phase : In the first stage, both AP and MP increase. As a result TP also increases at an in-creasing rate. This stage is known as the stage of increasing return to a factor. AP reaches the maximum level in this stage.
Second phase : Both AP and MP decrease at this stage. The TP increases at a decreasing rate. More importantly, TP reaches maximum and MP touches zero. This stage is also known as the stage of diminishing returns to a factor.
Third phase : At this stage, the MP becomes negative. As a result, TP also starts declining. The decline of AP is continuous. In the graph, when TP reaches maximum and MP touches zero. When MP becomes negative, TP starts declining. This stage is known as the stage of negative returns to a factor.

Question 29.
The cost curve which is a rectangular hyperbola is (MAY-2016)
a) ATC
b) AFC
c) TFC
d) AVC
Answer:
b) AFC

Question 30.
Short run marginal cost curve cuts average variable cost curve from below at the (MAY-2016)
a) the minimum point of AVC
b) any point of AVC
c) the falling portion of AVC
d) the rising portion of AVC
Answer:
a) the minimum point of AVC

Question 31.
Match the following: (MARCH-2017)

Answer:

Question 32.
Rising portion of long run marginal cost curve from the minimum of long run average cost curve is known as (MARCH-2017)
a) Long run supply curve of the firm.
b) Long run demand curve of the firm.
c) Variable cost curve of the firm.
d) Fixed cost curve of the firm.
Answer:
Long run supply curve of the firm.

Question 33.
The following table shows the total cost schedule of a firm. Calculate TVC, AFC, AVC, SAC and SMC schedules. (MARCH-2017)

TVC = Total Variable Cost, AFC = Average Fixed Cost, AVC = Average Variable Cost, SAC = Short run Average Cost, SMC = Short run Marginal cost)
Answer:

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part I Chapter 2 Theory of Consumer Behaviour.

Kerala Plus Two Microeconomics Chapter Wise Previous Questions Chapter 2 Theory of Consumer Behaviour

Question 1.
The demand function of commodity X of three Households are given below: (MARCH-2008)
Household 1 – D_x = 50 – 5 P_x
Household 2 – D_x = 50 – 6 P_x
Household 3 – D_x = 50 – 3 P_x
If the values of P_x are (5,4, 3, 2,1)
a) Prepare the Household demand schedule.
b) Calculate the market demand schedule.
c) Draw the three Household demand curves on the same axis.
Answer:
a)

Question 2.
State whether the following statements are true or false. Justify your answer. (MARCH-2009)
a) Equilibrium price is the price at which the demand for the commodity is greater than its supply.
b) A rise in supply due to non-price factors is called
expansion in supply.
Answer:
a) False.
Equillibrium price is the price at which the demand for the commodity is equal to supply.
b) False.
Increase in supply.

Question 3.
Sree Ram buys 10kg of wheat at a price of ₹ 20 per kg. It is found that the price elasticity of demand is 2. At what price he will be ready to buy 15 kg. of wheat? Exhibit in a diagram. (MARCH-2009)
Answer:

Question 4.
The Demand function of Commodity ‘y’ of two households are given below: (MARCH-2009)
Household I: DY = 80 – 20P Household II: DY= 100 – 20P If the value of P_y are 1,2, 3,4, 5
a) Derive the demand schedule of two households.
b) Draw the two household demand curves on the
same axis.
Answer:
Demand Schedule of Household I

Demand Schedule of Household II

Question 5.
A seller supplies 100 Kg. of rice at price ₹25. It is found that price elasticity of supply is 2. At what price he will be ready to sell 150 Kg. of rice?
(MAY-2009)
Answer:
Price elasticity of supply is defined as the degree of responsiveness of change in supply due to change in price. That is,
–
Therefore, new price = 25 + 6.25 = 31.25

Question 6.
The demand function of commodity x for three households are given below: (MAY-2009)
D_x= 300-30 P_x (1)
D_x = 200 – 20 P_x (2)
D_x= 200 – 10 P_x (3)
If the value of Px are 5, 4, 3,2 and 1.
a) Prepare the individual demand schedule.
b) Prepare the market demand schedule.
c) Draw the market demand curve.
Answer:
a) There are Three individual demand schedules.

Question 7.
Calculate the elasticity of demand by using total expenditure method from the data given below: (MAY-2009)

Answer:

Change in price leading to changes in quantity demanded causes changes in total expenditure incurred on commodity. By looking at the variation in total expenditure, price elasticity can be calculated. Since total expenditure remaining the same when price changes, elasticity is equal to one (unitary elastic demand).

Question 8.
During Onam festival Govt, of Kerala offered 20% discount on the prices of Khadi items. As a result of this sales of Khadi items registered an increase of 30%. Find out price elasticity by applying appropriate method. (MAY-2009)
Answer:
Price elasticity of demand can be found out by using the formula

The method used here is percentage or proportional method.

Question 9.
What may happen to the supply of two wheelers if Tata introduces new car at low cost and supplies them in the market which is more or less equal to prices of two wheelers? (MAY-2009)
Answer:
When a new car is supplied in the market at a lower price, the demand for two wheelers will be reduced. This is because, more customers will switch over their demand of two wheelers and start demanding the new car.

Question 10.
The Govt, of Kerala decided to abolish lottery system from November2008 onwards. Do you agree with the policy of the Govt, of Kerala? Justify your answer. (MAY-2009)
Answer:
Yes/No
State any answer and substantiate the answer

Question 11.
A production possibility schedule for good x and y is given below: (MARCH-2010)

a) Define production possibility frontier.
b) Draw the PPC.
Answer:
a) A production possibility curve is a geometrical device representing all such combinations of two goods that can be produced with given technology and available resources,

Question 12.
A consumer purchased 4 kg. of good A when his income was ₹500 per month. He reduces the consumption of good A to 2 kg. when his income alone increase to ₹1,000 per month. If so, (MARCH-2010)
a) State the nature of good A and justify.
b) Give one example for commodity like good A.
Answer:
a) Inferior goods or Giffen goods
b) Bajra, Ragi, Tapioca, etc.

Question 13.
An indifference curve possesses several properties. One of them is that, it is a downward sloping curve from left to right. Write any other two properties. (MARCH-2010)
Answer:
a) Indifference curve is convex to origin
b) Higher and higher indifference curve represents higher level of satisfaction.
c) Indifference curves never intersect each other.

Question 14.
Observe the diagram (MARCH-2010)

a) Comment on the given demand curve.
b) Give any two reasons for the positional change of demand curve from D_d to D_p.
Answer:
a) Shift in demand / increase in demand
b) Increase in income of the consumers. Change in taste and preference of the consumers.

Question 15.
“The direction of change in equilibrium price and quantity is same whenever there is a shift in demand curve.” (MAY-2010)
a) Identify the two types of shift in demand curve.
b) Draw the relevant diagrams.
Answer:
a) Increase in demand and decrease in demand.
b)

Question 16.
Ramu has an income of ₹20 and suppose he wants to consume two commodities X and Y, both the goods are priced at ₹4 per unit. (MAY-2010)
a) Find out all the budget sets available to Ramu.
b) Draw the budget-line.
c) What factors can change the budget set of Ramu?
Answer:
a) 4x + 4y = 20

Question 17.
“Prices of related goods affect the household demand, and we can differentiate the related goods into two types.” (MAY-2010)
a) Which are the types of related goods that determine the demand?
b) Define them.
Answer:
) Substitutes
ii) Complementaries
b) Substitutes are those goods where one good can be used instead of other. Eg. Tea and Coffee. Complementary goods are those goods which are used together. Eg. Car and Petrol.

Question 18.

From the following indifference curve, mark (MARCH-2011)
a) monotonic preferences
b) inferior bundles
c) Preferred bundles
Answer:
a) D b) E c) D

Question 19.
Raghu, Yadav and Basheer are 3 customers who purchased mangoes from a market. Individual quantity demanded for mangoes are given in the schedule. (MARCH-2011)

a) Construct market demand schedule
b) Draw market demand curve.
c) Based on the given schedule, identify the nature of good (Hint: Normal, Inferior, Giffen).
Answer:

Question 20.
A consumer wants to consume two goods ‘x’ and ‘y’ with his income of ₹20. The prices of the two goods are ₹4 and ₹5 respectively.
a) Write down the equation of the budget line. (MARCH-2012)
b) Represent the budget line diagramatically.
c) How much of good x can the consumer consume if he spends his entire income on that good?
Answer:
a) 4x + 5y = 20

Question 21.
Consider the demand for a good. At a price ₹4 the demand for the good is 30 kg. Suppose price of the good increases to ₹5 and as a result the demand for the good falls to 20 kg. Calculate the price elasticity of demand. (MARCH-2012)
Answer:
Elasticity of demand

Question 22.
Consider the following figure: (MARCH-2012)
Why point E in the figure is considered as consumer’s optimum? Justify your answer.

Answer:
Point E is considered as consumers’s optimum. The optimum bundle of the consumer is located at the point where the budget line is tangent to one of the indifference curves. It is drawn below

Condition I : Budget line should be tangent to the indifference Curve
Condition II: Slope of IC ((MRS_xy)) should be equal to slope of budget line (Price Ratio)

Question 23.
In economics, it is generally assumed that consumer is rational. The consumer have well defined preference over a set of available bundle. He always tries to maximise his satisfaction or attain the optimum level. Diagrammatically illustrate the consumer’s optimum. (Hint: Consumer’s equilibrium). (MARCH-2013)
Answer:
Consumer’s Equilibrium
Consumer’s equilibrium shows a situation in which a consumer buys such a combination of goods from which he gets the maximum satisfaction with his given income and given prices of the goods.
The term consumer’s equilibrium refers to the amount of goods and services which the consumer may buy in the market given his income and given prices of goods in the market. The aim of the consumers is to get maximum satisfaction from his money income. Given the price line (budget line) and the indifference map, a consumer is said to be in equilibrium at a point where the price line is touching the highest attainable indifference curve from below. Thus the consumer’s equilibrium under the indifference curve theory must meet the following two conditions.
First order condition.
A given price line should be tangent to an indifference curve or marginal rate of substitution of good X for good Y (MRSxy) must be equal to the price ratio of the two goods.
(MRS_xy) = (P_x)/(P_y) Second order condition.
The second condition is that indifference curve must be convex to the origin at the point of tangency. Assumptions
The following assumptions are made to determine the consumer’s equilibrium position.
(1) Rationality. The consumer is rational. He wants to obtain maximum satisfaction given his income and prices.
(2) Utility is ordinal. It is assumed that the consumer can rank his preferences according to the satisfaction of each combination of goods.
(3) Consistency of choice. It is also assumed that the consumer is consistent in the choice of goods.
(4) Perfect competition. There is perfect competition in the market from where the consumer is purchasing the goods.
The optimum bundle of the consumer is located at the point where the budget line is tangent to one of the indifference curves. It is drawn below.

Condition I: Budget line should be tangent to the in-difference Curve
Condition II: Slope of IC ((MRS_xy)) should be equal to slope of budget line (Price Ratio)

Question 24.
Identify the relationship between good X and good Y. (MAY-2014)
i) Price of good X rises and demand for good Y rises, goods are
ii) Price of good X falls and demand for good Y rises, goods are
Answer:
i) Substitutes
ii) Complementary goods

Question 25.
Let Price of good X((P_x)) = ₹3 price of good Y((P_x)) = ₹5, income of the consumer (Y) = 130 and assume whole income is spend on good X and good Y. (MAY-2014)
a) Construct the budget equation and draw the budget line.
b) Suppose the prices of both goods, X and Y doubles, then what happens to the budget equation and the budget line?
c) Suppose income of the consumer (Y) doubles, then what happens to the budget equation and the budget line?
Answer:
a)

b) budget equation becomes 6X + 10 Y = 30 budget line will shift downward by half
c) budget equation becomes 3X+ 5 Y = 60 budget line will shift outward

Question 26.
Calculate the. price elasticity of demand from a movement from point A to B on the demand curve DD. (MAY-2014)

Answer:

Elasticity is 2.5. (Elastic demand)

Question 27.
If the demand curve is a rectangular hyperbola, elasticity is (MARCH-2015)
a) zero b) One
c) Less than one d) Infinity
Answer:
b) One

Question 28.
Mr. Abhi wants to consume two goods. The prices of two goods are ₹4 and ₹5 respectively. If Abhi’s income is ₹20, answer the following questions: (MARCH-2015)
a) Write down the equation of the budget line.
b) How much of good-1 that Abhi can consume if he spends his entire income on good-1?
c) How much of good-2 that Abhi can consume if he spends his entire income on good-2?
d) ‘ What is the slope of budget line?
e) How does the budget line change if the customer’s income increases from ₹20 to ₹40 but prices remain unchanged?
f) Show the change in budget line if the price is
good – 2 decreases by ₹1 but the price of good – 1 and consumers income remains unchanged.
Answer:

e) When income of the consumer increases without any changes in the price then the budget line shifts parallel upwards to the earlier budget line.

When only the price of good 2 decreases the budget line changes upwards in the good 2 axis, (vertical intercept)

Question 29.
“Consumer’s optimum bundle is located at the point of tangency between the budget indifference curve.” Explain with the help of a suitable diagram. Hint: Indifference Curve Analysis (MAY-2015)
Answer:
Consumer’s Equilibrium Consumer’s equilibrium shows a situation in which a consumer buys such a combination of goods from which he gets the maximum satisfaction with his given income and given prices of the goods.
The term consumer’s equilibrium refers to the amount of goods and services which the consumer may buy in the market given his income and given prices of goods in the market. The aim of the consumers is to get maximum satisfaction from his money income. Given the price line (budget line) and the indifference map, a consumer is said to be in equilibrium at a point where the price line is touching the highest attainable indifference curve from below. Thus the consumer’s equilibrium under the indifference curve theory must meet the following two conditions.
The following assumptions are made to determine the consumer’s equilibrium position.
1) Rationality. The consumer is rational. He wants to obtain maximum satisfaction given his income and prices.
2) Utility is ordinal. It is assumed that the consumer can rank his preferences according to the satisfaction of each combination of goods.
3) Consistency of choice. It is also assumed that the consumer is consistent in the choice of goods.
4) Perfect competition. There is perfect competition in the market from where the consumer is purchasing the goods.
The optimum bundle of the consumer is located at the point where the budget line is tangent to one of the indifference curves. It is drawn below.

Condition I: Budget line should be tangent to the indifference Curve
Condition II: Slope of IC (MRS_xy) should be equal to slope of budget line (Price Ratio)

Question 30.
Suppose there was a decrease in the price of good ‘X’ and as a result, the demand for good ‘Y’ increases. What will be the type of goods? (MAY-2015)
Answer:
Complementary goods.

Question 31.
Consider the demand curve D = 10 – 3p. What is the elasticity of price \(\frac { 5 }{ 3 }\) (MAY-2015)
Answer:

Elasticity is = 3

Question 32.
P₁ X₁+P₂ X₂ ≤ M is a budget constraint. Identify the constraints. (MARCH-2016)
Answer:
P₁, P₂, M

Question 33.
Given the diagram (MARCH-2016)

a) Identify:
i) AB
ii) Pont E
b) Elaborate the properties of indifference curve.
c) Point ‘C’ is not the equilibrium of the consumer,
do you agree? Explain.

Answer:
a) i) AB is the Budget line
ii) Point E is the equilibrium point
b) Properties of indifference curves are:
Indifferences curves are negatively sloped.
Indifference curves are convex to origin.
Higher and higher indifference curve represents higher level of satisfaction.
Two indifference curves never intersect each other.
c) I agree. Equilibrium point is reached by satisfying the following conductions.
1) IC must be tangent with budget line.
2) Slope of IC must be equal to slope of budget line.
These two conditions are satisfied at the point E. Hence ‘C’ is not the equilibrium point.

Question 34.
Distinguish between the movement along a demand . curve and the shifts in demand curve. (MAY-2016)
Answer:
Change in quantity demanded due to change in price leads to expansion and contraction of demand. In this case, there is the movement along a demand curve.
Change in quantity demanded due to change in factors other than price leads to increase and decrease in demand. In this case, there is shift in demand curve.

Question 35.
“The consumer’s optimum bundle is located at the point of tangency between the budget line and the highest indifference curve”. Explain the consumers’ equilibrium as per the indifference curve approach with a suitable diagram. (MAY-2016)
Answer:
The interest of the consumer is to purchase those goods and services which provides him maximum satisfaction. So the consumer chooses the best bundle available to him. The consumer always prefers to have bundles on the higher indifference curve. The preference of the consumer to have the bundle, which provides him maximum satisfaction, is known as consumer’s equilibrium. It is the optimum point, a point of maximum satisfaction.
The equilibrium of the consumers is possible only when the budget line is tangent to the indifference curve. The consumer purchases the goods and services on the budget line, which provides him maximum satisfaction. It is possible only when the slope of the budget line  and the slope of the indifference curve (MRS) are equal.

Question 36.
Why there is different price elasticity along a linear demand curve? Illustrate with the help of a diagram. (MARCH-2017)
Answer:
The price elasticity of a linear demand curve is based on slope of demand curve. Slope of the demand curve is the ratio between change in quantity demanded (∆q) to change in price (∆p). So the slope of a demand curve will be different at different points. This can be explained with diagram.

Question 37.
From the Budget line shown below, find the price of good X₂ given that the price of X₁ good is ? 30. The equation on the Budget line is given as P₁X₁+ P₂ X₂=1000 (MARCH-2017)

Answer:

Kerala State Board New Syllabus Plus Two Economics Chapter Wise Previous Questions and Answers Part I Chapter 1 Introduction.

Kerala Plus Two Microeconomics Chapter Wise Previous Questions Chapter 1 Introduction to Microeconomics

Question 1.
How each of the following affects the Production Possibility Curve of an Economy? (MARCH – 2008)
a) The number of employed workers increase.
b) Tsunami destroys some production facilities.
c) Introduction of capital intensive technique.
d) Increase in fuel price.
Answer:
PPC shifts outward
b) PPC shifts inwards
c) PPC shifts outwards
d) PPC shifts inwards

Question 2.
Below is given a Production Possibility Schedule (MARCH – 2008)

a) Draw the Production Possibility Curve.
b) Prepare the Marginal Opportunity cost in a table based o the PPC.
Answer:
a) 

b)

Question 3.
Micro Economics is otherwise known as “price theory”. Do you agree with this statement? Justify your answer. (MARCH – 2009)
Answer:
Yes.
It is related to the theory of product and factor pricing.

Question 4.
Some Economic Variables are given below. Classify them in a table based on two branches of Economics. Give suitable titles to the column.
General price level, Aggregate consumption,Rent for a house in a city, Demand forfish in a local market. (MARCH – 2009)
Answer:

Question 5.
A production possibility schedule is given below (MAY-2010)

a) Calculate M.O.C
b) What is the shape of PPC?
Answer:
a)

b) downward slope

Question 6.
Complete the following table : (MARCH-2012)

Answer:

Question 7.
Mention one example for each of the following market structures. (MARCH-2013)
i) Monopoly
ii) Monopolistic competition
Answer:
i) monopoly – Indian railway
ii) monopolistic competition – tooth paste

Question 8.
In a centrally planned economy all important decisions regarding production, exchange and consumption are taken by (MARCH-2014)
a) The Government
b) The Market
c) Either of (a) and (b)
d) The Central Bank
Answer:
The Government

Question 9.
Among the three statements given, which statement is a normative statement? (MAY-2014)
a) People work hard if wages are high.
b) The unemployment rate should be lower
c) Printing too much of money causes inflation.
Answer:
a) people work hard if wages are high.

Question 10.
Who is known as the father of modern Macro Economics? (MARCH-2015)
a) Adam Smith
b) Alfred Marshall
c) J.M.Keynes
d) J.B.Say
Answer:
c) J.M.Keynes

Question 11.
Prepare a production possibility Schedule and draw a production possibility curve on the basis of the schedule, how do you define the PPC? (MAY-2015)
Answer:
Production possibility curve is the locus of combinations of two goods that can be produced when the resources of the economy are fully utilized. Given below a production possible schedule and a production possibility curve.

Question 12.
The choice of technology is associated with (MARCH-2016)
a) What to produce?
b) Howto produce?
c) For whom to produce
d) None of these
Answer:
b) How to produce

Question 13.
Central problems faced by an economy can be solved through different ways by different economic systems. (MAY-2016)
a) Which are the important economic systems?
b) How each system solves the central problems?
Answer:
a) Economic systems are:
i) Capitalism
ii) Socialism
iii) Mixed economy
b) Solution of central problems
i) Capitalist economy solves the central economic problems through price mechanism
ii) Socialist economy solves the central economic problems through economic planning.
iii) Mixed economy solves the central economic problems through both price mechanism and central planning.

Question 14.
Identify the curve given below. What does the points A, B, C represents? (MARCH-2017)

Answer:
Production Possibility Curve: It shows various combinations of two goods that an economy can produce with a given level of resources and a given level of technology.
Point ‘A’shows efficient utilisation of resources. Point ‘B’ We can say that at any point above the existing PPC shows the growth of resources and Point ‘C’ inside the production possibility curve implies insufficient utilisation of resources.

Question 15.
Which among the following is not a characteristics of a Capitalist Economy? (MARCH-2017)
a) Wages and prices are administered by the government.
b) Private ownership of means of production.
c) Production takes place for exchange
d) Sale and purchase of labour services at a price is called wage rate.
Answer:
Wages and prices are administered by the government.

Kerala State Board New Syllabus Plus Two Business Studies Previous Year Question Papers and Answers.

Kerala Plus Two Business Studies Previous Year Question Paper Say 2018 with Answers

Time : 2 1/2 Hours
Cool off time : 15 Minutes
Maximum : 80 Score

General Instructions to Candidates:

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2 hrs.
• Your are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non programmable calculators are not allowed in the Examination Hall.

Answer all questions from 1 to 7. Each carries 1 score. (7 × 1 = 7)

Question 1.
Which of the following is a function of middle level management?
a) Formulation of plans and policies.
b) Directly Oversee the efforts of workforce.
c) Cooperate with other departments for smooth functioning of the organization.
d) Analyse the Enviornment.
Answer:
c) Co-operate with other departments for smooth functioning of the organization.

Question 2.
F. W. Taylor’s functional foremanship in an extension of Henry Fayol’s function.
a) Scalar chain
b) Order
c) Division of work
d) Discipline
Answer:
c) Division of work.

Question 3.
Complete the series Globalisation: Integration of various economies of the world into a global economy.
Liberalisation: ……..?………
Answer:
Minimise governmental restrictions.

Question 4.
Which of the following is not a part of the Responsibility Centre?
a) Cost centre
b) Profit centre
C) Investment centre
d) Management centre
Answer:
d) Management centre

Question 5.
The cheapest sources of finance are………..
a) Equity share
b) Retained earnings
c) Preference share
d) Debenture
Answer:
b) Retained earnings

Question 6.
The settlement cycle in NSE is ………..
a) T + 5
b) T + 3
c) T + 2
d) T + 1
Answer:
c) T + 2

Question 7.
Which of the following firms emphasizes benefits to customers rather than product attributes?
a) Product concept
b) Market concept
c) Sales concept
d) Production concept
Answer:
b) Market concept

Answer any 7 questions from 8 to 15. Each carries 2 scores. (2 × 1 = 2)

Question 8.
Write any two personal objects of management.
Answer:

1. Give adequate remuneration to employees
2. Provide good working condition

Question 9.
“Communication from top to bottom should follow the official chain of command.”
a) Identify the principles of management mentioned above.
b) Name the shortcut proposed by Henry Fayol for speedy communication.
Answer:
a) Scalar chain
b) GangPlank

Question 10.
List out any four types of tests used in the selection process.
Answer:

1. Intelligence tests
2. Aptitude tests
3. Personality test
4. Trade test

Question 11.
Describe the concept of trading on equity.
Answer:
It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.

Question 12.
Draw the pattern of any two types of formal communication network.
Answer:
a) Single chain: This chain network exists between a supervisor and his subordinates

b) Wheel Network: In wheel network, all subordinates under one superior communicate through him only.

Question 13.
Name any 2 important Acts framed to safeguard consumer interest in India.
Answer:

1. Consumer Protection Act 1986.
2. Prevention of Food Adulteration Act 1954.

Question 14.
Explain the importance of delegation. (any two)
Answer:

1. It reduces the workload of managers.
2. It helps employee development.

1) Reduces the work load of managers: The managers are able to function more efficiently as they get more time to concentrate on important matters.
2) Employee development: Delegation empowers the employees by providing them the chance to use their skills, gain experience and develop themselves for higher positions.

Question 15.
Give any four features of marketing.
Answer:
Features of Marketing:

1. Needs and Wants: Marketing focuses on the satisfaction of the needs and wants of consumers.
2. Creating a Market Offering: It refers to providing complete information about the product and services like name, type, price, size, etc.
3. Customer Value: A buyer analyses the cost and the satisfaction that a product provides before buying it. The seller should manufacture the product keeping in view this tendency of the customer.
4. Exchange Mechanism: The process of marketing involves the exchange of products and services. Exchange is the essence of marketing.

Answer any 4 questions from 16 to 20. Each carries 3 scores. (4 × 3 = 12)

Question 16.
Gopu argued that profit is the only organizational objectives of the business.
a) Do you agree with him?
b) Give reason
Answer:
a) No, I disagree with him
b) Other organisational objectives of the business are

• survival: Management must survive to ensure the survival of the organisation.
• Profit: Management has to ensure that the organization makes a reasonable profit.
• Growth: management must exploit fully the growth potential of the organisation.

Question 17.
“Though planning is an important tool of management, yet it is not a remedy to all problems.” Explain this statement.
Answer:
Limitations of Planning:

• Planning makes the activities rigid.
• Long term plans are insignificant in the rapidly changing business environment.
• It reduces creativity.

Question 18.
How can an organisation overcome the barriers to effective communication?
Answer:
Measures to overcome barriers to communication:

• The entire problem to be communicated should be studied in-depth, analysed, and stated in such a manner that is clearly conveyed to subordinates.
• Communication must be according to the education and understanding levels of subordinates.
• Before communicating the message, it is better to consult with subordinates.
• The contents of the message, tone, language used, etc. are important aspects of effective communication.
• While conveying a message to others, it is better to know the interests and needs of the receiver.
• Ensure proper feedback.

Question 19.
Describe the features of a good brand name.
Answer:
Qualities of a Good Brand Name:

• The brand name should be short, easy to pronounce, spell, recognise and remember.
• A brand should suggest the product’s benefits and qualities.
• A brand name should be distinctive.
• Brand name should be adaptable to packing or labelling requirements, to different advertising media and to different languages.
• The brand name should be sufficiently versatile to accommodate new products.
• It should be capable of being registered and protected legally.

Question 20.
Consumer grievances are redressed by the three tier machinery under the Consumer Protection Act. Name these three agencies and their jurisdiction limit.
Answer:
1) District Forum: This is established in each district by the state government. The District Forum consists of a president and two other members. A complaint can be made to the appropriate District Forum when the value of the goods or services and compensation claimed does not exceed Rs. 20 lakh. In case the aggrieved party is not satisfied with the order of the District Forum, he can appeal before the State Commission within 30 days of the passing of the order.

2) State Commission: It is established by the state government. The State Commission consists of a president and not less than two other members. A complaint can be filed before the State Commission where the value of goods or services and the compensation claimed exceeds Rs. 20 lakh but does not exceed Rs. 1 crore.ln case the aggrieved party is not satisfied with the order of the State Commission he can appeal to the National Commission within 30 days of passing of the order.

3) National Commission: The National commission was constituted by the central government. The National Commission consists of a president and at least four other members. It is the apex body in the three-tier judicial machinery set up by the government for redressal of consumer grievances. All complaints pertaining to those goods dr services and compensation whose value is more than RS. 1 crore can be filed directly before the National Commission. An appeal can be filed against the order of the National Commission to the Supreme Court within 30 days from the date of order passed.

Answer any 4 questions from 21 to 25. Each carries 4 scores. (4 × 4 = 16)

Question 21.
Write one example of the following plans:
a) Rule
b) Policy
c) Programme
d) Objective
Answer:
a) Rule – No smoking
b) Policy – Promotion is based on merit only
c) Programme – Three day training programme to mangers
d) Objects – Attain Rs. 20,00,000 profit

Question 22.
It is important for a business enterprise to understand its environment. Why?
Answer:
Importance of Business Environment:

1. Identification of opportunities: Environment provides numerous opportunities for business success. Early identification of opportunities helps an enterprise to be the first to exploit them.
2. Identification of threats: Environmental awareness help managers to identify various threats on time and serves as an early warning signal.
3. Tapping useful resources: Business environment helps to know the availability of resources and making them available on time.
4. Coping with rapid changes: Environmental scanning enables the firms to adapt themselves to the changes in the market.

Question 23.
Explain the limitations of controlling.
Answer:
Limitations of Controlling:

• Difficulty in setting quantitative standards: Control system loses some of its effectiveness when standards cannot be defined in quantitative terms.
• Little control on external factors: Generally an enterprise cannot control external factors such as government policies, technological changes, competition, etc.
• Resistance from employees: Control is often resisted by employees. They see it as a restriction on their freedom.
• Costly affair: Control is a costly affair as it involves a lot of expenditure, time and effort.

Question 24.
“Advertising misleads customers and increase the cost of product.”
a) Do you agree with this statement?
b) Give reason
Answer:
a) Yes, I agree with this statement
b) Disadvantages of Advertising

• Advertisement encourages consumers to buy unwanted goods.
• Most of the advertisements are misleading.
• Advertisement may lead to monopoly of a brand.
• Advertisement is a costly affair. So, ultimately it increases the price of the product.

(OR)

a) No. I diagree with this statement
b) Advantages of Advertising

• Advertising helps in introducing hew products.
• It stimulates the consumers to purchase the new products.
• It helps the consumers to know about the various products and their prices.
• Consumers can purchase the better products easily.
• Advertisement helps to create more employment opportunities.
• It provides an important source of income to the press, radio, T.V., etc.

Question 25.
“Entrepreneurship and Management are same.” Comment your views.
Answer:
a) Entreprenuership and management are different

b) Difference between Entreprenurship and Management
Entrepreneurship:

1. The main motive of an entrepreneur is to start a venture by setting up an enterprise.
2. An entrepreneur is the owner of the enterprise.
3. An entrepreneur assumes all risks and uncertainty.
4. An entrepreneur gets profit.

Management:

1. The main motive of a manager is to render his services in an enterprise already set up by someone.
2. A manager is the servant in the enterprise.
3. A manager does not bear any risk involved in the enterprise.
4. A manager gets salary.

Answer any 3 questions from 26 to 29. Each carries 5 scores. (3 × 5 = 15)

Question 26.
Metro Ltd. engaged in the production of soap and it has purchase, production, marketing and finance departments.
a) Suggest a suitable organisation structure.
b) State any two merits and demerits of this organisation structure.
Answer:
a) Functional Organisation Structure
b) Advantages

1. It promotes division of work which leads to specialisation.
2. It promotes control and coordination within a department.

Disadvantages:

1. Each departmental head gives more importance to their departmental objectives than overall organisation objectives.
2. In large functional organisations, taking quick decisions and co-ordination become difficult.

Question 27.
“It is the market for short terror funds which deals in financial assets whose period of maturity is upto one year.”
a) Identify the type of market referred above. (1)
b) Briefly explain the various instruments used in this market. (4)
Answer:
a) Money Market
b) 1) commercIal Paper: Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a maturity period of 15 days to one year. It is sold at a discount and redeemed at par.

2) Call Money: Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days, used for inter-bank transactions.

3) Certificate of Deposit: Certificates of Deposit (CDs) are short-term instruments issued by Commercial Banks and Special Financial Institutions (SFIs), which are freely transferable from one party to another. The maturity period of CDs ranges from 91 days to one year.

4) Commercial Bill: A commercial bill is a Bill of Exchange used to finance the working capital requirements of business firms. When goods are sold in credit, the seller draws the bill and the buyer accepts it. The seller can discount the bill before its maturity with the bank. When a trade bill is accepted by a commercial bank it is known as commercial bills.

Question 28.
Hantex offers 30% discount for all their products during Onam season as a part of their promotion technique.
a) Identify the promotion technique used by them.
b) Explain any 2 merits and demerits of this technique.
Answer:
a) Sales Promotion
b) Merits of Sales Promotion

1. Sales promotion activities attract attention of the people.
2. Sales promotion tools can be very effective at the time of introduction of a new product in the market.

Limitation of Sales Promotion:

1. If a firm frequently relys on sales promotion, it creates doubts in the minds of consumers about the quality of the product.
2. Use of sales promotion tools may affect the image of a product.

Question 29.
Explain the functional foremanship technique with a diagram.
Answer:
1. Functional foremanship: Functional foremanship is a technique in which planning and execution are separated. He classified 8 specialist foremen into two departments viz. Planning and Production department. Both departments have four foremen each. Functional foremanship is based on the principle of division of work.

Planning Department:

1. Route Clerk Gang Boss
2. Instruction Card Clerk Speed Boss
3. Time and Cost Clerk Repair Boss
4. Shop Disciplinarian Inspector

Production Department:

1. Gang Boss
2. Speed Boss
3. Repair Boss
4. Inspector

a. Route clerk: To lay down the sequence of operations through which the raw materials have to pass in the production process.
b. Time & cost clerk: To lay down the standard time for completion of the work.
c. Instruction card clerk: He is expected to deal with the instructions to be followed by workers in handling the job.
d. Disciplinarian: He maintains proper discipline in the factory.
e. Gang boss: He arranges material, machine, tool, etc. for operation.
f. Speed boss: He supervises matters relating to the speed of work.
g. Repair boss: He ensures repairs and maintenance of the tools and machines.
h. Inspector: He checks the quality of work done.

Answer any 2 questions from 30 to 32. Each carries 8 scores. (2 × 8 = 16)

Question 30.
It is the process of identifying and choosing the best person out of a number of prospective candidates for a job.
a) Name the process
b) Explain its steps
Answer:
a) Selection
b) Process of Selection
1. Preliminary Screening: Preliminary screening helps the manager to eliminate unqualified job seekers.

2. Selection Tests: Various tests are conducted to know the level of ability, knowledge, interest, aptitude, etc. of a particular candidate. The various types of tests are:

• Intelligence Tests
• Aptitude Test
• Personality Tests
• Trade Test
• Interest Tests

3. Employment Interview: Interview is a formal, in-depth conversation conducted to evaluate the applicant’s suitability for the job.

4. Reference and Background Checks: Many employers request names, addresses, and telephone numbers of references for the purpose of verifying information and; gaining additional information on an applicant.

5. Final Selection: The final decision has to be made from among the candidates who pass the tests, interviews and reference checks.

6. Medical Examination: After selection, the candidates are required to appear for a medical examination for ensuring that he is physically fit for the job.

7. Job Offer: After a candidate has cleared all the hurdles in the selection procedure, he is formally appointed through an order. It contains the terms and conditions of the employment, pay scale, joining time, etc.

8. Employment Contract: Basic information that should be included in a written contract of employment are job title, duties, responsibilities, date of joining, pay and allowances, hours of work, leave rules, disciplinary procedure, work rules, termination of employment, etc.

Question 31.
Explain briefly the elements of the directing function.
Answer:
Elements of Direction:

1. Supervision
2. Motivation
3. Leadership
4. Communication

1) Supervision: Supervision means overseeing the subordinates at work. Supervision is instructing, guiding and controlling the workforce with a view to see that they are working according to plans, policies, programmes and instructions.

Importance of Supervision:

• A good supervisor acts as a guide, friend and philosopher to the workers.
• Supervisor acts as a link between workers and management. It helps to avoid misunderstandings and conflicts between management and workers.
• Supervisor provides good On the Job training to the workers and employees.

2) Motivation: Motivation is the process of stimulating people to action to accomplish desired goals. Motivation depends upon satisfying needs of people.
Features of Motivation:

• Motivation is an internal feeling.
• Motivation produces goal-directed behaviour.
• Motivation can be either positive or negative.

3) Leadership: Leadership can be defined as the process of influencing the behaviour of employees at work towards the accomplishment of organisational objectives.
Features of Leadership:

• Leadership indicates ability of an individual to influence others.
• Leadership tries to bring change in the behaviour of others.
• Leadership indicates interpersonal relations between leaders and followers.

4) Communication: Communication may be defined as an exchange of facts, ideas, opinions or emotions between two or more persons to create mutual understanding.
Importance of Communication:

• Acts as basis of co-ordination: Communication acts as the basis of co-ordination.
• Helps in smooth working of an enterprise: It is only communication which makes smooth working of an enterprise possible.
• Acts as basis of decision making Communication provides needed information for decision making.

Question 32.
Describe the factors that affect the capital structure of a company.
Answer:
Capital Structure: Capital structure refers to the mix between owners, funds and borrowed funds. Owners, fund consists of equity share capital, preference share capital and reserves and surpluses or retained earnings. Borrowed funds can be in the form of loans, debentures, public deposits, etc.

A capital structure will be said to be optimal when the proportion of debt and equity is such that it results in an increase in the value of the equity share.

Factors Affecting Capital Structure:

• Trading on Equity (Financial Leverage): It refers to the use of fixed income securities such as debentures and preference capital in the capital structure so as to increase the return of equity shareholders.
• Stability of Earnings: If the company is earning regular and reasonable income, the management can rely on preference shares or debentures. Otherwise issue of equity shares is recommended.
• Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
• Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a Company covers the interest obligation. Higher the ratio, better is the position of the firm to raise debt.
• Desire for control: If the management has a desire to control the business, it will prefer preference shares and debentures in capital structure because they have no voting rights.
• Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
• Capital Market Conditions: In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
• Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are require for longer period company can issue shares and debentures.

Kerala State Board New Syllabus Plus Two Business Studies Previous Year Question Papers and Answers.

Kerala Plus Two Business Studies Previous Year Question Paper March 2019 with Answers

Time : 2 1/2 Hours
Cool off time : 15 Minutes
Maximum : 80 Score

General Instructions to Candidates:

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2 hrs.
• You are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non-programmable calculators are not allowed in the Examination Hall.

Answer all questions from 1 to 7. Each carries 1 score. (7 × 1 = 7)

Question 1.
Identify the management principle which states that a manager should repalce “I with We” in all his conversations with workers to foster team spirit.
a) Espirit De Corps
b) Initiate
c) Unity of Command
d) Unity of Direction
Answer:
a) Espirit De Corps

Question 2.
Identify the type of plan which specifies the steps to be carried out in different business activities in a sequential order.
a) Programme
b) Procedure
c) Method
d) Strategy
Answer:
a) Programme

Question 3.
Which among the following is not an organizational objectives of management?
a) Profit
b) Survival
c) Protecting Environment
d) Growth
Answer:
c) Protecting Environment

Question 4.
Grapevine relates to ……..
a) Formal communication
b) Informal communication
c) Formal organisation
d) Informal organisation
Answer:
b) Informal communication

Question 5.
Name the controlling technique which states that only the significant deviations which go beyond the permissible limit should be brought to the notice of management.
Answer:
Management by exception/Control by exception

Question 6.
A company offers 40% of extra shaving cream in a pack of 100 grams. Identify the sales promotion tool used here.
Answer:
Quantity gift

Question 7.
A company gets applications without declaring any vacancies. However, as and when vacancy arises, the company makes use of such applications. Name the source of recruitment mentioned here.
Answer:
Casual callers/Un Solicited applicants

Answer questions 8 and 9 after observing given hint. Each carries 1 score. (2 × 1 = 2)

Question 8.
Hint:- Delegation Transfer of Authority from superior to subordinate.
Decentralisation:- …………
Answer:
Decentralisation refers to systematic delegation of authority throughout all levels of management in an organisation.

Question 9.
Hint:- Long term investment decision:- Capital budgeting decision.
Short term investment decision:-
Answer:
Working Capital Decision

Answer all questions from 10 to 13. Each carries 2 scores. (4 × 2 = 8)

Question 10.
Briefly explain the meaning of financial planning.
Answer:
It ensures adequate funds from various sources.

Question 11.
Classify the following items into appropriate elements business environment:
a) Literacy rate
b) Public debt (Internal and External)
c) Rate of saving and investment
d) Birth and death rate
Answer:
a) Social environment
b) Economic environment
c) Economic environment
d) Social environment

Question 12.
State any two characteristics of a good brand name.
Answer:

1. The brand name should be short
2. A brand name should be distinctive

Question 13.
State the conditions under which a consumer can approach the State Commission forgetting relief for his grievances.
Answer:
It is established by the state government. The state Commission consists of a president and not less than two other members. A complaint can be field before the State Commission where the value of goods service and the compensation claimed exceeds Rs. 20 lakh but does not exceed Rs. 1 crore. In case the aggrieved party is not satisfied with the order of the State Commission he can appeal to the National Commission within 30 days of passing of the order.

Answer any 4 questions from 14 to 18. Each carries 3 scores. (4 × 3 = 12)

Question 14.
State any three significance of Principles of Management.
Answer:

1. Increase efficiency: The understanding of the management principles provides guidelines to the managers for handling effectively the complex problems.
2. Optimum utilization of resources: The principles of management helps in the optimum utilization of resources through division of work, delegation of authority, etc.
3. Scientific decision: Management principles help in thoughtful decision-making. Such decisions are free from bias and prejudices.

Question 15.
Briefly explain the different types of leadership styles.
Answer:
Leadership Styles:

1. Autocratic or Authoritarian Leader: An autocratic leader gives orders and expects his subordinates to obey those orders. Here communication is only one-way with the subordinate.
2. Democratic or Participative Leader: A democratic leader encourages subordinates to participate in decision-making. They respect the other’s opinion and support subordinates to perform their duties.
3. Laissez Faire or Free-rein Leader: Here the followers are given a high degree of independence to formulate their own objectives and ways to achieve them.

Question 16.
Compare Treasury Bill and Commercial Paper, both are used in Indian money market.
Answer:
Difference between Treasury Bills and Commercial papers:
Treasury Bills:

1. It is issued by RBI on behalf of the central Government
2. It is issued in the form of sequred promissiory notes.
3. Risk free money.

Commercial papers:

1. It is issued by Joint Stock Company.
2. It is issued in the form of unsecured promissery notes.
3. It is risky market instrument.

Question 17.
State any three responsibilities of consumers.
Answer:
Consumers’ Responsibilities:

1. Be aware about various goods and services available in the market.
2. Buy only standardised goods as they provide quality assurance.
3. Learn about the risks associated with products and services, follow manufacturer’s instructions and use the products safely.
4. Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.
5. Choose only from legal goods and services.
6. Ask for a cash memo on purchase of goods or services.

Question 18.
Explain any three impact of government policy changes on business and industry.
Answer:

1. Competition for Indian firms has increased.
2. The customer’s wider choice in purchasing better quality of goods and services.
3. Rapid technological advancement has changed/ improved the production process.
4. Enterprises are forced to continuously modify their operations.
5. Need for Developing Human Resources arise.
6. There is a shift from production oriented concept to market oriented concept.

Answer any 5 questions from 19 to 24. Each carries 4 scores. (5 × 4 = 20)

Question 19.
Explain the following types of training:
a) Vestibule training
b) Apprenticeship training
Answer:
a) Vestibule Training: This is an off the job training method. Actual work environments are created in a class room and employees use the same materials, files and equipments. This is ususally done when employees are required to handle sophisticated machinery and equipment.

b) Apprenticeship Training: Apprenticeship training is an on the job training method. Here trainee is put under the guidance of a master worker. These are designed to acquire a higher level of skills. The trainees spend a prescribed time with an experienced trainer.

Question 20.
This management function ensures that “all activities are performed as per predetermind plans”.
a) Identify the management function.
b) Explain its first three steps.
Answer:
a) Controlling

b) Steps in control process:

1. Setting Performance Standards: Standards are the criteria against which actual performance would be measured. Standards can be set in both quantitative as well as qualitative terms.
2. Measurement of Actual Performance: After establishing standards, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner.
3. Comparing Actual Performance with Standards: This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results.

Question 21.
Briefly explain any two characteristics of entreprenurship.
Answer:
Characteristics of entrepreneurship:

1. It is a systematic and purposeful activity.
2. The object of entrepreneurship is lawful business.
3. Entrepreneurship is a creative and innovative response to the environment and an ability to recognize, initiate and exploit an economic opportunity.
4. It is concerned with employing, managing, and developing the factors of production.

Question 22.
Under this technique of scientific management, one worker is supervised by eight specialist foreman.
a) Identify the technique.
b) Show this technique in a diagram.
Answer:
a) Functional foremanship

b)

Question 23.
State any four regulatory functions of SEBI.
Answer:
Regulatory Functions:

1. Registration of brokers and sub brokers and other players in the market.
2. Registration of Mutual Funds.
3. Regulation of stock brokers, portfolio exchanges, underwriters, etc.
4. Regulation of takeover bids by companies.

Question 24.
State any four differences between marketing and selling.
Answer:
Marketing:

1. Marketing is a wider term consisting of number of activities.
2. It is concerned with product planning arid development.
3. It focuses on maximum satisfaction of the customer.
4. It aims at profits through consumer satisfaction.

Selling:

1. It is a narrow concept.
2. It is concerned with sale of goods already produced.
3. It focuses on the maximum satisfaction of the sellers through the exchange of products.
4. It aims at maximum profit through maximisation of sales.

Answer any 3 questions from 25 to 28. Each carries 5 scores. (3 × 5 = 15)

Question 25.
Mr. Jojo is working as a production manager of a Joint Stock Company.
a) Identify the level of management he belongs to.
b) State any four functions performed by him.
Answer:
a) Middle level

b) Functions of Middle Level Management:

1. Carry out the plans formulated by the top managers.
2. To act as a link between Top Level Management and Lower Level Management.
3. Assign necessary duties and responsibilities to the subordinates.
4. Motivate them to achieve desired objectives.

Question 26.
This management function seeks to bridge the gap between where we are and where we want to go.
a) Identify the management function.
b) Explain any four importance of that function.
Answer:
a) Planning

b) Importance of Planning:

1. Planning provides directions: By stating in advance how work is to be done planning provides direction for all actions.
2. Planning reduces the risk of uncertainty: Planning enables an organisation to predict future events and prepare to face the unexpected events.
3. Planning reduces wasteful activities: Planning serves as the basis of coordinating the activities and efforts of different departments and individuals. It helps to eliminate useless and redundant activities.
4. Planning promotes innovative ideas: Since planning is thinking in advance, there is scope for finding better and different methods to achieve the desired objectives.

Question 27.
This management function begins with work force planning and putting people to job.
a) Name the management function.
b) Explain its first four steps/process
Answer:
a) Staffing

b) Staffing Process:

1. Manpower planning: it is concerned with forecasting the future manpower needs of the organisation, i.e., finding out number and type of employees need by the organisation in future.
2. Recruitment: Recruitment may be defined as the process of searching for prospective employees and stimulating them to apply for jobs in the organisation.
3. Selection: Selection is the process of selecting the most suitable candidates from a large number of applicants.
4. Placement and Orientation: Placement refers to putting the right person on the right job. Orientation is introducing the selected employee to other employees and familiarising him with the rules and policies of the organisation.

Question 28.
Star Ltd. produces three types of products such as cosmetics, garments and medicines.
a) Suggest a suitable organizational structure for Star Ltd.
b) Represent this structure in a diagram.
c) State any two advantages of it.
Answer:
a) Divisional Organisation Structure

b)

c) Advantages

• Each division functions as an autonomous unit which leads to faster decision making.
• It helps in fixation of responsibility in cases of poor performance of the division.

Answer any 2 questions from 29 to 31. Each carries 8 scores. (2 × 8 = 16)

Question 29.
One of the financial decision relates to the amount of profits to be retained in the business.
a) Identify the financial decision.
b) Explain any seven factors affecting this decision.
Answer:
a) Dividend decision

b) Factors affecting Dividend Decision:

• Stability Earnings: A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
• Stability of Dividends: Companies generally follow a policy of stabilising dividend per share. Dividend per share is not altered if the change in earnings is small.
• Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings to finance the required investment. In such a case, they can declare dividend at a lower rate.
• Cash Flow Positions: Availability of enough cash in the company is necessary for declaration of dividend.
• Shareholders’ Preference: While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
• Taxation Policy: A company is required to pay tax on dividend declared by it. If tax on dividend is higher, company will prefer to pay less by way of dividends whereas if tax rates are lower, then more dividends can be declared by the company.
• Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.

Question 30.
Sun Ltd. offers shares to its employees at a price which is lower than market price.
a) Identify the type incentive offered to the employees.
b) Name the incentive.
c) Explain any four similar types of incentives,
Answer:
a) Financial Incentive/Monetary Incentive
b) Employees stock Option Plan (ESOP)
c)

1. Pay and allowances: It includes basic pay, dearness allowances and other allowances.
2. Commission: Under this system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
3. Bonus: Bonus is an incentive offered over and above the wages/salary to the employees.
4. Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organization.

Question 31.
It is an impersonal form of communication which is paid for by the marketers (sponsors) to promote some goods and services.
a) Name the promotional tool mentioned above.
b) Explain its four merits and three limitations.
Answer:
a) Advertisement

b) Merits of Advertising
Advantages to Manufacturers and Traders:

• Advertising helps in introducing new products.
• It stimulates the consumers to purchase the new products.
• Advertisement helps to increase the sales of new and existing products.

Advantages to Consumers:

• It helps the consumers to know about the various products and their prices.
• Consumers can purchase the better products easily.
• It helps in maintaining high standard of living.

Advantages to the Society:

• Advertisement helps to create more employment opportunities.
• It provides an important source of income to the press, radio, T.V., etc.
• It is a source of encouragement to artists.

c) Disadvantages/Objections to Advertising:

• Advertisement encourages consumers to buy unwanted goods.
• Most of the advertisements are misleading.
• Advertisement may lead to monopoly of a brand.
• Advertisement is a costly affair. So, ultimately it increases the price of the product.

Kerala State Board New Syllabus Plus Two Economics Previous Year Question Papers and Answers.

Kerala Plus Two Economics Previous Year Question Paper Say 2018 with Answers

Time: 2½ Hours
Cool off time : 15 Minutes

General Instructions to candidates

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2½ hrs.
• Your are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non programmable calculators are not allowed in the Examination Hall.

Answer all questions from question No.1 to question No. 14 (Total Scores: 26)

Question 1.
The curve showing a set of all possible combinations of two factor inputs that give the same level of output is:
a) Indifference curve
b) Iso-quant
c) Budget Line
d) Rectangular Hyperbola
Answer:
b) Iso-quant

Question 2.
In the following diagrams which one is constant elasticity demand curve?

Answer:
Perfect inelastic demand curve

Question 3.
Identify the type of Economy/Economic System. Basic economic problems regarding allocation of resources are solved through Price Mechanism.
a) Centrally Planned Economy
b) Market Economy
c) Mixed Economy
d) None of the above
Answer:
b) Market Economy

Question 4.
The Great Depression of 1929 affected in the countries of Europe and North America. Which of the following is the outcome of the depression? (1)
a) Increase in GDP Growth rate
b) Increase in employment rate
c) Increase in unemployment rate
d) Increase in per capita income
Answer:
c) Increase in unemployment rate

Question 5.
Give Economic term for the following: (4 × 1 = 4)
a) Pictorial illustration of the interdependence between major sectors of the economy.
b) The total liability of the monetary authority of country.
c) Revenue Expenditure – Revenue Receipts
d) The record of the transactions in goods, services and assets between residents of a country with rest of the world for a specified time period.
Answer:
a) Circular flow of income
b) High powered money
c) Revenue deficit
d) Balance of payment (BoP)

Question 6.
Prepare a demand schedule if the demand function is D(P) = 20 – 2P, if the prices are 2, 4, 6, 8.
Answer:

DP = 20 – 2P
When p = 2, 4, 6, 8, etc……
P = 20 – 2 × 2 = 20 – 4 = 16
= 20 -2 × 4 = 20 – 8 =12
= 20 – 2 × 6 = 20 – 12 = 8
= 20 – 2 × 8 = 20 – 16 = 4

Question 7.
In a perfect competitive firm price must be greater than or equal to LRAC in the long-run. As per this condition verify there is any mistake in the following diagram. If so correct the diagram.

Answer:
Correct diagram showing
P = Minimum LRAC or P > Minimum LRAC

Question 8.
Complete the columns:

Answer:

Question 9.
Classify the following statements into Micro and Macro Economics:
a) RBI announces a new monetary policy.
b) Ramu purchased banana from the market.
c) GDP growth rate declined.
d) Abnormal profit earn by a monopoly firm.
Answer:
Micro Economics:

• Ramu purchased banana from market
• Abnormal profit earn by a monopoly firm

Macro Economics:

• RBI announces a new monetary policy
• GDP growth rate declared

Question 10.
Consider the items given below. Identify the most likely market situation in which they are produced.
a) Oil Producing Industry
b) Indian Railway
Answer:
a) Oligopoly
b) Monopoly

Question 11.
Explain tax revenue and non-tax revenue sources of revenue receipts of the government budget.
Answer:
Tax Revenue:
The most important source of governments revenue is tax revenue.
Taxes are of two types.

1. Direct tax
2. Indirect tax.
   eg. Income tax, Corporate tax

Non Tax Revenue:
It is the recurring income earned by the government from sources other than taxes.
eg. Customs duty, Service tax

Question 12.
The excess of private investment over saving of a country is ₹ 5,000 crores. The amount of Budget deficit is ₹ 500 crores. What was the volume of Trade deficit of that country?
Answer:
Trade deficit = (M – X) = (I – S) + (G – T)
= 5000 + 500
= 5,500

Question 13.
From the following data
a) Derive the consumption function equation
b) Calculate Aggregate consumption
National Income – 1000 crores
Autonomous consumption – 200 crores
Marginal Propensity of consume – 0.70
Answer:
a) Consumption function equation C = \(\overline{\mathrm{C}}\) + c.y
b) Aggregate consumption = 200 + 0.7 × 1000
= 900

Question 14.
The following figures are based on Balance of Payment accounts:

a) Write Balance of Trade Equation
b) Calculate Balance of Trade.
Answer:
a) Balance of trade equation = Export – Import
b) Balance of trade = 5000 – 3000 = 2,000

Write any 6 questions from question 15 to question 21. Each carry 3 scores. (6 × 3 = 18)

Question 15.

By using the production possibility set draw a production possibility frontier and mark the following points:
a) Fuller Utilisation of Resources
b) Under Utilisation of Resources
Answer:

Question 16.
Complete the table.

Answer:

Question 17.
Observe the following diagram

a) Define the liquidity trap and mark it on the diagram.
b) If r = r_max, what will be the speculative demand for money?
Answer:
a) Liquidity Trap: A situation in the economy may arise when everyone will hold their wealth in money balance. If additional money is injected into the economy, it will not be used to purchase bonds. It will be used to satisfy the people’s drawing for money balance without lowering the rate of interest. Such a situation is called ‘liquidity trap’. The liquidity trap is given in the diagram below.

b) O (M^d_s) = 0

Question 18.
If a shirt costs ₹ 500 in India and $10 in US. The rupee – dollar exchange rate should be ₹ 50 = $1.
Write the effects of the following changes.
(Hint: Increase or decrease)?

Answer:

Question 19.
Complete the flow chart:

Answer:

Question 20.
The aggregate demand function is AD = 100 + 0.754
a) Calculate the equilibrium income.
b) If Autonomous expenditure increased to ₹ 150 from ₹ 100 calculate the change in equilibrium income.
Answer:
Question is incomplete

Question 21.
a) State the conditions of shutdown point of a firm under perfect competition in the short-run.
b) Represent that shut-down point in a diagram.
Answer:
a) P = Minimum point of AVC
b) The minimum point of AVC is known as shut down point in the short run.

Write any 4 questions (Q. No. 22 to 27). Each carry 5 marks: (4 × 5 = 20)

Question 22.
Short-run cost curves are ‘U’ shaped.
a) Do you agree with this? Give reasons.
b) Draw the SMC and SAC curves on a diagram.
c) Write any two relationship between SAC and SMC.
Answer:
a) Short run cost curves AVC, AC and MC are shaped because of that law of variable proportions.
It operates under the increasing returns due to various internal economics.
b)

c) When due to the operation of the law of increasing returns, SAC falls, SMC also falls.
If a firm operates under the law of diminishing returns, SAC increases, SMC also increases.

Question 23.

a) Find Price, MR and TC in the above table.
b) From the table, find equilibrium level of output at the profit maximisation conditions of perfect competition in the long-run.
c) Find level of profit at the equilibrium output.
Answer:
a)

b) MC = MR
MC non decreasing
equilibrium output is 6. Here TR = TC

c) Profit = TR – TC
= 60 – 60 = 0

Question 24.
Suppose the equilibrium price of Rubber in the market is ₹ 150/kg.
a) The government intervene in the market and fix a price ₹ 200/kg for Rubber, with a view to protect the rubber cultivators. Name the strategy.
b) What are the effects of that strategy?
c) Draw the diagram to illustrate this.
Answer:
a) Price floor/Support price
b) Excess supply
c) It may lead to lower prices for consumers.

In the diagram ep is market determined price. Since this price is very low this, may lead to loss to producers. So the government will intervene in the market and fix p₁ as floor price. This floor price will be higher than market determined price.

Question 25.
Receipts and Expenditure of central government are given below:
Revenue Receipts – 5,250 crores
Revenue Expenditure – 6,200 crores
Borrowing – 1,700 crores
Capital Receipts – 1,800 crores
Capital Expenditure – 850 crores
Calculate by using formula :
a) Gross Fiscal Deficit
b) Revenue Deficit
Answer:
a) Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad.
GFD = 1700
b) Revenue deficit = Revenue expenditure – Revenue receipt
= 6200 – 5250 = 950 crores

Question 26.
Bi-monthly review of RBI reduces the Bank rate from 7% to 6.5%.
a) What are the effects of the policy on money supply and aggregate demand?
b) If cdr = 1 rdr = 0.2 and Higfi powered Money = ₹ 2000 crores. Calculate the total money supply in the economy by using the formula.
Answer:
a) The effect of monetary policy on money supply increases and aggregate demand also increases.

Question 27.
The diagram shows Aggregate equilibrium in the economy:

Show diagrammatically the following changes in the Aggregate demand.
a) Autonomous expenditure (\(\overline{\mathrm{A}}\)) increases.
b) Marginal propensity to consume (C) increases
c) Identify the slope parametric shill and intercept parametric shift in the diagrams (a or b)
Answer:
a) Diagram showing parallel upward shift of aggregate demand (AD)
b) In diagram AD swings upwards
c) Points a & b not given in the diagram

Write any 2 questions (28 – 30). Each carry 8 marks: (2 × 8 = 16)

Question 28.
Compare the market conditions of monopoly and perfect competition by considering Number of Sellers, Nature of Product, Freedom of Entry, Demand Curve and Longrun Equilibrium with AC and MC.
Answer:
Perfect Competition:
There are large number of sellers in perfect competition and the commodity is sold at a uniform price. There is no competition and no rivalry among the firms.

Nature of Product:
The output sold under perfect competition will be homogeneous or identical. There will be no difference among the products. Another feature is that the sellers are price takers.

Freedom of Entry:
There is no restriction among firms entering and existing into the market.

Demand Curve:
Under perfect competition whatever be the level of output, price will remain constant. The price line under perfect competition is parallel to x-axis. This shows that under perfect competition, whatever be the level of output, each firm takes the price that is determined in the market. Since the price line is the demand curve, the demand curve is also a straight line parallel to the X-axis.The demand curve is shown below.

Long run equilibrium with AC and MC:
In the longrun all the costs are variable. When a firm to be in equilibrium the price should be more than or equal to the minimum point of LRAC curve.

Profit maximisation conditions are explain with the help of figure which is given below.

In the diagram 0q0 is the profit maximising level of output. Here all the three conditions of profit maximisation are met
1) P = MR = MC
2) MC curve is non-decrasing
3) Price (p) is more than or equal to minimum point of LRAC.

Monopoly:
Number of sellers: In monopoly market, there is only single seller for a product.
Nature of Product: There is no close substitute in the market. So monopoly firms charge higher price for goods and receive higher profit even in the long run.
Freedom of Entry: There is no freedom of enter into the market. Here firm acts as industry in monopoly market.
Demand Curve: In a monopoly market the firm and the industry are the same. So the firm demand curve and market demand curve would be the same. Demand curve of a monopoly firm will slope negatively which are given below.

AR curve of a monopoly firm is the same as its demand curve. It slopes downwards from left to right. This means, the monopolist firm can sell less quantity at high price and more quantity at lower price.

Long run equilibrium in monopoly:
Under monopoly finan attains equilibrium when two conditions are fulfilled. They are
i) Marginal revenue and marginal cost should be equal. (MR = MC)
ii) MC curve should cut MR curve from below.
Under monopoly since entry of other firms is prohibited. Firm will get the same level of profit in long run as in the short run.

In figure, q is the equilibrium quantity of output that gives maximum profit to the monopoly firm. MR and MC are equal at output q,m MC curve intersects MR curve at point E where MC curve should cut MR curve from below. Under monopoly since price and AR are same, AR at equilibrium quantity is the equilibrium price. Then AR at q is OP. This is the equilibrium price.

Question 29.
Some Macro economic aggregates are given below:

a) Identify the three methods to measuring National Income.
b) Calculate GDP from the above data by using any two methods.
Answer:
a) i) Product method
ii) Income method
iii) Expenditure method

b) Product method = P + In + R + W
= 200 + 150 + 300 + 350
= 1,000
Income method = Rent + Wages and salaries + Interest + Gross profits
= 300 + 350 + 150 + 200
= 1,000
Expenditure method = C + I + G + (X – M)
= 400 + 300 + 200 + (250 – 150)
= 1,000

Question 30.
a) Write the five degrees of elasticity and diagrammatically explain it.
b)

Find elasticity at the points A, B, C.
Answer:
The price elasticity of demand (ed) measures the degree of responsiveness of change in the price on quantity demanded. There are five degrees of elasticity of demand, which are (ep = 0)
i) Perfectly inelastic demand curve (epf = 0)

The demand curve is perpendicular to the x-axis. Even if the price increases or decreases demand will be the same, then demand is perfectly inelastic.

ii) Perfectly elastic demand curve (ep = 0c)

If a very small change in price leads to infinite change in demand. This is known as perfectly elastic demand. The demand curve will be parallel to x-axis.

iii) Unit elastic demand curve (ep = 1)

If a proportionate change in price leads to equal and proportionate change in demand, then demand is unit elastic demand.

iv) Elastic demand curve:

If a proportionate change in price leads to more than proportionate change in demand, it is in the case of elastic demand curve. Here price elasticity of demand is greater than I.

v) Inelastic demand curve

If a proportionate change in price leads to less than proportionate change in demand it is the case of inelastic demand. Here the price elasticity of demand is less than one.

b)

Kerala State Board New Syllabus Plus Two Economics Previous Year Question Papers and Answers.

Kerala Plus Two Economics Previous Year Question Paper March 2019 with Answers

Time: 2½ Hours
Cool off time : 15 Minutes

General Instructions to candidates

• There is a ‘cool off time’ of 15 minutes in addition to the writing time of 2½ hrs.
• Your are not allowed to write your answers nor to discuss anything with others during the ‘cool off time’.
• Use the ‘cool off time’ to get familiar with the questions and to plan your answers.
• Read questions carefully before you answering.
• All questions are compulsory and only internal choice is allowed.
• When you select a question, all the sub-questions must be answered from the same question itself.
• Calculations, figures and graphs should be shown in the answer sheet itself.
• Malayalam version of the questions is also provided.
• Give equations wherever necessary.
• Electronic devices except non programmable calculators are not allowed in the Examination Hall.

Match the column B & C with A: (5 × 1 = 5)

Question 1.

Answer:

Qn. No. 2 to 6, write the correct answer. Each question carries 1 score. (5 × 1 = 5)

Question 2.
write the economic term of \(\frac{\text { Change in output }}{\text { Change in input }}\)
Answer:
Marginal output / Marginal product.

Question 3.
Petroleum refining and marketing in India is the closest example of ………..
a) Monopoly
b) Oligopoly
c) Perfect Competition
d) None of these
Answer:
b) Oligopoly

Question 4.
In an open economy, if C = 0.7, m = 0.2. Calculate the value of multiplier.
Answer:
Multiplier = \(\frac{1}{\mathrm{MPS}+\mathrm{MPM}}\)
= \(\frac{1}{0.3+0.2}\) = \(\frac{1}{5}\)
= 2

Question 5.
In a centrally planned economy all major economic decisions are taken by ………..
a) Market
b) Government
C) Private Producers
d) None of these
Answer:
b) Government

Question 6.
When the existing price is higher than the equilibrium price ………..
a) Market demand is higher than market supply.
b) Market supply is higher than market demand.
c) Market demand is equal to market supply.
d) None of these.
Answer:
b) Market supply is higher than market demand.

Answer all questions from 7 – 11. Each carries 2 scores. (5 × 2 = 10)

Question 7.
The supply curve of a firm depends on many factors. Point out any two.
Answer:
The supply curve of a firm depends on different factors.
Two factors are:

1. Technological progress.
2. Input prices.

Question 8.
Differentiate between Balance of Payment (BoP) and Balance of Trade (BoT).
Answer:
Balance of trade is the difference between the visible export and visible import of a country with the rest of the world. It includes the exchange of goods only balance of payment is the complete record of the financial transaction made between a country and the rest of the world. The BOP includes visible and invisible transactions. The BOP account has 4 parts

1. Current account
2. Capital account
3. Official reserve account
4. Errors and omissions

Question 9.
a) Write down two most important characteristics of monopolistic competition.
b) Differentiate the price and output prevailing in the monopolistic competitive market with that of per-fectly competitive market.
Answer:
a) Two important characteristic of monopolistic competition are

1. Large number of buyers and sellers.
2. Product differentiation.

b) In monopolistic competition, price is greater than that under perfect competition. Just as output is differentiated product.
At the same time price is uniform price and output is homogeneous in perfect competition market.

Question 10.
Beginning on 15 August 2018, severe floods affected Kerala due to unusually high rainfall. The state gov-ernment has hiked the excise duty on liquor and by which, it is expected to raise revenue to ₹ 750 crore. Suppose the MPC (Marginal Propensity to Consume) of the same product is, only 0.8, then calculate the tax multiplier and its effect on income.
Answer:
Tax multiplier = \(\frac{\Delta Y}{\Delta T}=\frac{-C}{1-C}\)
= \(\frac{-0.8}{1-0.8}=\frac{-0.8}{0.2}\)
= – 4

Question 11.

a) Complete the given diagram.
b) Mark the real flow and money flow.
Answer:
a)

b) Money flow:

• Expenditure on goods and services
• Factor payment

Real flow:

• Goods and services
• Factor services

Answer any 6 questions from 12 – 18. Each carries 3 scores. (6 × 3 = 18)

Question 12.
In the open market, the price of rice/kg is ₹ 35. Assume that the poor people cannot afford to purchase rice at this price. To protect the poor people, the government decided to offer rice at a minimum price of ₹ 2/kg through ration shop. Identify the economic term of this situation. Draw a diagram to illustrate this.
Answer:
Price selling:

In the diagram, ‘ep’ is the market determined equilibrium price. If this price is very high then the government will interfere in the market and will fix ‘p’ as the price ceiling. This government fixed price ‘p’ is less than the market determined equilibrium price ‘ep’. This leads to the following situations.

• Rationing
• Black marketing
• Dual marketing
• Huge burden of government as subsidy.

Question 13.
Paul A. Samuelson used the concept Production Possibility Curve to explain the economic problem of a society. Draw the Production Possibility Curve on the basis of the given schedule.

Answer:

Question 14.
Indian Rupee has been on a free fall since past few months. Rupee has lot more than 20% of its value this year when compared to last year. In this context, identify the important factors responsible for such a flexibility in the exchange rate.
Answer:
Factors responsible for flexibility in exchange rate are:

• Inflation rate
• High interest rate
• Government debt
• Recessionary situation
• Increasing oil prices
• Deficit in BOP

Question 15.
Prepare a short note on the concept of speculative demand for money with the help of a diagram.
Answer:
In order to make profits from the purchase and sale of bonds and securities individuals will hold cash. This is known as speculative demand for money. It can be drawn as follows:

There is a negative relationship between the market rate of interest and speculative demand for money. When the market rate of interest reaches r minimum the speculative demand curve will be parallel to ‘x’ axis. This situation is known as liquidity trap.

Question 16.
Suppose the price of tomato per kg. is ₹ 10, Ms. Mittu purchase 2 kg of tomato. If the price rises to ₹ 15, she buys 1 kg. Based on this information.
a) Draw the Demand Curve.
b) Find out the Elasticity of Demand.
Answer:
a)

b) Elasticity of demand:

Question 17.
Great depression was a severe worldwide economic depression that took place mostly during the 1930s, beginning in the United States. Prepare a brief note on it.
Answer:
The great depression of 1929 and the subsequent years created huge economic crisis in countries of Europe and North America. It affected other countries of the world as well. This depression proved that the classical idea of full employment and the automatic working of the economy was wrong. Due to depression production fell down.

Demand for goods in the market was low. Many factories were lying idel. Unemployment rose severely. The classical theory failed to explain the problem of long lasting unemployment in the economy. Keynes book was an attempt to explain this phenominon and remedial measures for it.

Question 18.
Define the concept of GDP deflator. Calculate the GDP deflator from the following data and analyse it.

• In 2015, the GDP at current price is ₹ 8,500.
• In 2015, the GDP at constant price is ₹ 7,000.

Answer:

It shows that the general price level has increased compared to the base year.

Answer any 6 questions from 19 – 23. Each carries 4 scores. (4 × 4 = 16)

Question 19.
Complete the following table:

Answer:

Question 20.
a) Distinguish between MPC and MPS.
b) Calculate the value of multiplier and income generated when there is an additional investment of ₹ 100 crore in an economy.

Answer:
a) MPS + MPC = 1
∴ MPC = 1 – MPC
b)

If the values of MPC in an economy is unity the value of MPS will be zero. Thus, there is close relationship between MPC and MPS.

Question 21.
a) Define the monetary policy.
b) Reserve Bank of India controls the money supply in the country though its instruments. Analyse them.
Answer:
a) The policy adopted by RBI to regulate the fluctuations in the economy is known as monetary policy.

b) RBI contrails the money supply in the country through its monetary instruments which are given below.

1. Open market operations: It is the process of increasing or decreasing the volume of high powered money in the economy by purchasing or selling government bonds and securities.
2. Bank rate: It is the rate at which the central bank discounts first class bills of exchange of commercial banks or it is the interest rate charged by RBI on loans given to commercial banks.

3) Varying the reserve deposit ratios: Reserve deposit ratios are of two types:

1. CRR (Cash Reserve Ration): Commercial banks have to keep a certain percentage of their demand deposits and time deposits as reserves with RBI. This percentage is known as cash reserve ratio.
2. SLR (Statutory Liquidity Ratio): Commercial banks have to invest a certain percentage of their demand and time deposits on assets like gold or government securities. This percentage is known as SLR.

RBI in India acts as strong force in controlling credit by monetary policy. The acts of RBI towards control of money supply is also noteworthy.

Question 22.
QD = 500 – P
QS = 300 + P
a) Calculate the equilibrium price and quantity.
b) Draw a diagram based on equilibrium price and quantity.
Answer:
a) QD = 500 – P
QS = 300 + P
500 – P = 300 + P
500 – 300 = +P + P
200 = 2P
\(\frac{200}{2}\) = P
P = 100
Equilibrium price is 100
QD = 500 – P
= 500-100 = 400
Equilibrium quantity = 400

b)

Question 23.
Short run production function is different from long run production functions.
a) Identify any two important differences between the two.
b) Draw the Average Product and Marginal Product Curves. AP, MP
Answer:
a) 1) Under the short run the firm cannot vary all the inputs for a change in output in long run, but in long run firm can vary all inputs for a change in output.
2) Some inputs are fixed under short run while under long run there is no fixed input.

b)

Answer any 2 questions from 24 – 26. Each carries 5 scores. (2 × 5 = 10)

Question 24.
Statement I: Indian Railway (IR) is India’s National railway system operated by the Ministry of Railways.
Statement II: ONGC, ESSAR, Reliance Ltd., etc. are the oil extraction companies in the country.
a) Identify the closest market form associated with the above statements.
b) Point out the features of each market form.
c) List out two differences between these two mar¬ket forms.
Answer:
a) Statement I – associated with monopoly market.
Statement II – associated with oligopoly market

b) Features of monopoly market:

• Only a single seller.
• No close substitues are available.
• Barriers to entry.
• Firm itself is the industry.
• Firm is price maker.

Features of oligopoly market:

• Products may be homogeneous or differentiated.
• There exists selling cost.
• Freedom of entry and exit of firms.
• Interdependence of firms.

c) Difference between these market:
Monopoly:

1. Higher price
2. Single seller

Oligopoly:

1. Price less than monopoly market
2. Few sellers

Question 25.
a) Mention the methods of National Income accounting and explain briefly the expenditure method.
b) Caculate the GNP MP from the following data:

Answer:
a) There are mainly three methods for measuring national income. They are product method, income method and expenditure method.
i) Product method: It is the sum of the gross value added by the entire production units in the economy.
GDP = \(\sum_{i=i}^{N} N V A_{i}+\sum_{i=i}^{N} D_{i}\)

ii) Income method: The income method approaches national income from the income side. National income is the sum total of the rewards earned by the factors of production in an economy in the form of rent, wage, interest and profit.
GDP = W + P + In + R

iii) Expenditure method: Expenditure method is an alternative way to calculate the GDP and it looks at the demand side of the production. The expenditure method estimates national income by measuring final expenditure on gross domestic product.
GDP = C + I + G + X – M

b) GNP_MP = 18000
= 5000 + 1000 + 2000 + 10000
= 18000

Question 26.

The above figure shows an equilibrium in the product market.
Suppose an Autonomous Investment (Al) increases by ₹ 100 crores, and MPC is equal to 0.8, what happens to the AD and equilibrium income? Explain this with the help of a diagram.
Answer:
Question is incomplete

Answer any 2 questions from 27 – 29. Each carries 8 scores. (2 × 8 = 16)

Question 27.
Ms. Sudha wants to consume apple and oranges. Her income is ₹ 400. The price of apple (Good 1) is ₹ 80/kg. and the price of orange is ₹ 50/kg. On the basis of this data.
a) Draw the budget line.
b) Write the equation of budget line.
c) How much kg of apple that Ms. Sudha can consume if she spend the whole income on that good alone?
d) What is the slope of the budget line?
e) Draw the new budget line in the same graph if her income falls to ₹ 200 remaining same the price of two goods.
f) What happens to the budget line if the price of apple rises to ₹ 100 but income and price of orange are remaining constant? Draw a new budget line.
Answer:
a)

b) P₁X₁ + P₂X₂ = M
80 X₁ + 50 X₂ = 400
c) \(\frac{400}{80}\)
d) Slope = \(\frac{-P_{1}}{P_{2}}=\frac{-80}{50}\)
e) Question is wrong.
f) Question is wrong.

Question 28.
In a perfectly competitive market, the firm wishes to maximize its profit.
a) Identify the conditions with the help of a diagram.
b) Explain the profit maximization of a firm in the short run.
c) In the long run, a perfectly competitive firm earns the normal profit. Do you agree with this? Graphically substantiate.
Answer:
a) The main air of a firm under perfect competition is the maximization of profit. The output level at which the firm maximises its profits is called equilibrium of the firm. The following conditions are necessary for the profit maximization. If firm

Condition – 1
Market price (P) should be equal to MC. ‘P’ should not be greater than MC or ‘P’ should not be less than MC.

If the market price (P) is less than MC then for producing each unit of output the firm incurs loss. When the firm produces output at q0 the gross profit is maximum. If q0 is equilibrium output then at q0 level of output market price (P) should be equal to MC.

Condition – 2
At the profit maximising level of output MC should not be decreasing or MC curve should cut MR curve from below.

Condition – 3
In the short run the price (P) should be more than or equal to minimum point of AVC.

Here the equilibrium output is q₁ and equilibrium price is p. If the price line is aboue the minimum point of AVC the loss will decrease. Thus in the short run the price of the firm should be more than or equal to minimum point of AVC.

b) Profit of a firm can be denoted as π. It is the difference between total revenue and total cost. Profit maximisation of firm in the short run takes place through following situations in the market which are given below.
1) P = MC
2) MC curve should cut the MR curve from below.
3) P > AVC.
In the short riff the firm should get at least minimum point of AVC as price, inorder to remain in the production process. So the minimum point of AVC is known as shut down point in the short run. In the short run the minimum point of SAC curve is the break even point.

c) Yes. I agree with this statement.
Each firm in the market will take the price determined in the market by the forces of demand and supply. If a firm changes a higher price than the market determined price then it will loose its entire customers. Since the firm gets only the normal profit he cannot sell below the market determined price.

Question 29.

a) Write down the equation for calculating Revenue deficit, Fiscal deficit and Primary deficit.
b) Calculate Revenue deficit, Fiscal deficit and Primary deficit from the given data.
c) Suggest any two measures to reduce the Fiscal deficit in the country.
Answer:
Revenue deficit = Revenue expenditure – Revenue receipts
Fiscal deficit = Total expenditure – Total revenue excluding borrowing
OR
Fiscal deficit = Total expenditure – Revenue receipt + Capital receipts excluding borroiwng
Primary deficit = Fiscal deficit – Interest payments

b) Revenue deficit = 65000 – 50000 = 15000
Fiscal deficit = 90000 – 50000 – 15000
= 90000 – 65000 = 25000
Primary deficit = 25000 – 10000
= 15000

c) 1) Reduction in subsidies by the government will also help to reduce the deficit.
2) Borrowing from domestic sources

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 13 Entrepreneurial Development.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 13 Entrepreneurial Development

Plus Two Business Studies Business Entrepreneurial Development 3 Marks Important Questions

Question 1.
List out the important characteristics of entrepreneurship. [March – 2016]
Answer:
Characteristics of Entrepreneurship

• It is a systematic and purposeful activity.
• The object of entrepreneurship is a lawful business.
• Entrepreneurship is a creative and innovative response to the environment and an ability to recognize, initiate and exploit an economic opportunity.

Question 2.
“An entrepreneur is not only the composer of the musical score and the conductor of the orchestra but also a one-man band.” In light of the above statement, explain the role of entrepreneurs in relation to an enterprise. [May – 2016]
Answer:
Role of Entrepreneurs in Relation to their Enterprise

• Perceiving market opportunities
• Gaining command over scarce resources.
• Marketing of the products and responding to competition.

Question 3.
State the important characteristics of entrepreneurship. [March – 2017]
Answer:
Characteristics of Entrepreneurship

• It is a systematic and purposeful activity.
• The object of entrepreneurship is a lawful business.
• Entrepreneurship is a creative and innovative response to the environment and an ability to recognize, initiate and exploit an economic opportunity.

Question 4.
Naveen wants to establish a business enterprise of his own. Appraise him about the various steps he needs to go through in the process of setting the business. [May – 2017]
Answer:
Process of Setting up a Business Resource mobilization

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 12 Consumer Protection.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 12 Consumer Protection

Plus Two Business Studies Consumer Protection 1 Mark Important Questions

Question 1.
Which is acclaimed to be the ‘Magna Carta’ of Indian Consumers? (February – 2009)
Answer:
Consumer Protection Act 1986.

Question 2.
Smt. Sindhy purchased a silksaree costing Rs. 5000. After first wash, it has lost the colour and caused huge loss to her. She lodged a complaint to the redressal forum. It was held’that she will be given a sum of Rs. 5000 as compensation. Identify the redressal forum she might have lodged the complaint. (May -2010)
Answer:
District Forum

Question 3.
Which of the following pair is ‘not correct? (March – 2011)
a) External Environment- Beyond the Control of the Management.
b) Consumer Protection Act-Technological Environment.
Answer:
b) Consumer Protection Act – Technological Environment

Question 4.
In which year Consumer Protection Act was enacted? (March – 2011)
Answer:
1986

Question 5.
Consumer Protection Act -1968 (May – 2012)
MRTPAct, 1969
Companies Act, 1956
One of the years of the above-mentioned enactments is wrong.
Answer:
Consumer Protection Act -1986

Question 6.
Which of the following is not a consumer right? (March – 2013)
a) Right to safety
b) Right to education
c) Right to choose
d) Right to get goods at lower cost
Answer:
d) Right to get goods at lower cost

Question 7.
Mr.Pradeep purchased a ready-made shirt costing Rs. 1000/- After the first wash, it has lost its colour and caused high loss to him. He lodged a complaint to the redressal forum. It was held that he will be given a sum of Rs. 1000/- as compensation. (May – 2013)
Answer:
District Forum

Plus Two Business Studies Consumer Protection 2 Marks Important Questions

Question 1.
Even though the consumer is regarded as the king of the market, every after his rights are not protected. Comment on this statement with your justification. (February – 2010)
Answer:

• Right to Safety
• Right to be Informed
• Right to Choose
• Right to be Heard
• Right to seek Redressal
• Right to Consumer Education

Plus Two Business Studies Consumer Protection 3 Marks Important Questions

Question 1.
Explain any three consumer rights. (March – 2011)
Answer:

• Right to be Heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with goods or services.
• Right to seek Redressal: The consumer has a right to get relief in case the product or service falls short of his expectations.
• Right to Consumer Education: The consumer must be educated about the rights and remedies available under different laws.

Question 2.
Two months back, Shyjal purchased a DVD player from Aroma Traders, Kottayam. But at present, it is not working properly. Even though it has 1 year’s replacement warranty, Aroma Traders refused to replace the DVD to Shyjal. Explain the redressal agencies available to Shyjal against Aroma Traders. (May – 2012)
Answer:
District Forum, State Commission and National Commission.

Question 3.
Kochumol purchased a Samsung Cell phone with one year warranty. Before the expiry period the phone get damaged. When she approached the shopkeeper he refused to replace or repair in it. (March – 2013)
a) Is the act of shopkeeper is fair?
b) Where should she lodge her complaint?
Answer:
a) No
b) District Forum

Question 4.
In India there are different consumer protection agencies, Name any six of them. (March – 2015)
Answer:
Consumer Protection Agencies are :-

• Consumer Coordination Council,Delhi
• Common Cause, Delhi
• Voluntary Organisation in Interest of Consumer Education (VOICE), Delhi
• Consumer Education and Research Centre (CERC), Ahmedabad
• Consumer Protection Council (CPC), Ahmedabad
• Consumer Guidance Society of India (CGSI), Mumbai
• Mumbai GrahakPanchayat, Mumbai
• Karnataka Consumer Service Society, Bangalore
• Consumers’Association, Kolkata
• Consumer Unity and Trust Society (CUTS), Jaipur

Plus Two Business Studies Consumer Protection 4 Marks Important Questions

Question 1.
Name any 4 Acts to protect the rights and interests of consumers. (May – 2009)
Answer:

• The Consumer Protection Act-1986
• The Indian contract act-1812
• The Sale of Goods Act -1930
• The essential commodities Act -1955

Question 2.
Explain any four functions of consumer association. (March – 2010)
Answer:

• Educating the general public about consumer rights by organising training programmes, seminars and workshops.
• Publishing periodicals and other publications.
• Collecting various Samples of different goods and testing their quality.
• Encouraging consumers to protest against exploitative and unfair trade practices of sellers.
• Providing legal assistance to consumers by way of providing aid, legal advice, etc.

Question 3.
Consumer problems in India are highly complex in nature. The exploitation of consumers will be stopped only if they start exercising their rights and perform their responsibilities. Point out the responsibilities of customers in this respect. (May -2010)
Answer:

• Be aware of various goods and services available in the market.
• Buy only standardised goods as they provide quality assurance.
• Learn about the risks associated with products and services, follow the manufacturer’s instructions and use the products safely.
• Read labels carefully so. as to have information about prices, net weight, manufacturing and expiry dates, etc.
• Choose only from legal goods and services.

Question 4.
In India there are different means for consumer protection. Explain any four of such agencies. (May – 2011)
Answer:
The following are the important ways and means for consumer protection in India:

1. Lok Adalats : The Lok Adalat is a legal grievance redressal system. These type of courts are introduced for speedy, effective and economic redressal of cases.
2. Public Interest Litigation (PIL): It is means to provide legal representation to previously unrepresented groups and interests.
3. Environment-Friendly Products : The scheme is consumer oriented so that the people prefer the items which are not harmful to the environment in their manufacture, use and disposal.
4. Redressal Forums : Under the Consumer Protection Act 1986, several redressal forums have been created to deal with consumer grievances, i.e. District forums, State Commission and National Commission.

Question 5.
Consumers are often exploited by profiteering business. What are the measures available to safeguard them? (March – 2012)
Answer:
Means of Consumer Protection :

• Consumer Protection Act 1986
• Lok Adalat
• Public Interest Litigation (PIL)
• Environment-friendly products
• Redressal Forums and Consumer Protection Council
• National Youth Award of consumer protection
• Publicity measures

Question 6.
While conducting interviews of marketing executives in J.L.agencies, one candidate replies that ‘consumers have no right’. Do you agree with the candidate? Justify your answer. (March – 2014)
Answer:
a) No

b)

1. Right to Safety : The consumer has a right to’ be protected against goods and services which are hazardous to life and health.
2. Right to be Informed : The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc.
3. Right to Choose : The consumer has the freedom to choose from a variety of products at competitive prices.
4. Right to be Heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with goods or services.

Question 7.
‘Due to the ignorance of consumers about their rights they are exploited in the market.’ Briefly describe various consumer rights as per Consumer Protection ACt,. 1986 in the light of above statement. (March -2016)
Answer:
Consumer Rights

1. Right to Safety: The consumer has a right to be protected against goods and services which are hazardous to life and health.
2. Right to be Informed : The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc.
3. Right to Choose: The consumer has the freedom to choose from a variety of products at competitive prices.
4. Right to be Heard : The consumer has a right to file a complaint^nd to be heard in case of dissatisfaction with goods or services.

Question 8.
Define a consumer as defined by the Consumer Protection Act, 1986. Briefly explain how the consumer grievances are redressed in India. (May -2016)
Answer:
Consumer: Under the Consqmer Protection Act, a consumer is defined as:

• Any person who buys any goods for a consideration.
• Any person who hires or avails of any service, for a consideration.
• Redressal Agencies under the consumer protection Act 1986 are:
  1. District forum
  2. State commission
  3. National commission

Question 9.
Consumers also have some responsibility while purchasing and consuming goods and services. Do you agree with this? State any four consumer responsibility in this regard. (March -2017)
Answer:

1. Yes. I agree with this statement.
2. Consumers’ Responsibilities
   • Be aware about various goods and services available in the market.
   • Buy only standardised goods as they provide quality assurance.
   • Learn about the risks associated with products and services, follow the manufacturer’s instructions and use the products safely.

Question 10.
List out the Safeguards and rights provided to customers by the Consumers’Protection Act, 1986. (May -2017)
Answer:
Consumer Rights

1. Right to Safety: The consumer has a right to be protected against goods and services which are hazardous to life and health.
2. Right to be Informed : The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc.
3. Right to Choose : The consumer has the freedom to choose from a vanety of products at competitive prices.
4. Right to be Heard : The consumer has a right to file a complaint and to be heard in case of dissatisfaction with goods õr services.

Plus Two Business Studies Consumer Protection 5 Marks Important Questions

Question 1.
No shopping with closed eyes. Elucidate the statement with regard to consumer rights and responsibilities. (February – 2009)
Answer:

1. Be aware about various goods and services avail’ able in the market.
2. Buy only standardised goods as they provide quality assurance.
3. Learn about the risks associated with products and services, follow manufacturer’s instructions and use the products safely.
4. Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.
5. Choose only from legal goods and services.
6. Ask for a cash memo on purchase of goods or services.

Question 2.
Mrs. Mahija purchased a calculator from a nearby shop. They give one-year replacement guarantee. After two weeks the calculator fails to perform. Mahija, approaches the trader for replacement. But the trader refused to replace it. (March -2009)
a) State whether Mahija is considered as a consumer under the Consumer Protection Act. Justify your answer.
b) State different rights of Consumers under this Act.
Answer:
a) Yes
b) Consumer: Under the Consumer Protection Act, a consumer is defined as:
a) Any person who buys any goods for a consideration.
b) Any person who hires or avails of any service, for a consideration.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 11 Marketing Management.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 11 Marketing Management

Plus Two Business Studies Marketing Management 1 Mark Important Questions

Question 1.
Marketing mix is the combination of four Ps which constitute the core of the company’s marketing system. What are they? (MARCH-2009)
Answer:
Product, Price, Place and Promotion.

Question 2.
In a classroom debate, Amitha argues that selling is coming under marketing and Smitha argues that marketing comes under selling. Whose argument is logical? (MARCH-2010)
Answer:
Amitha’s argument is logical. Selling comes under marketing.

Question 3.
The management of New Kerala Soaps Ltd. manufactuers of toilet soaps, in facing the problems of poor sales. As a marketing expert, suggest them a suitable sales promotional measure to increase their sales. (MAY-2010)
Answer:
Rebates, samples, free gifts etc.

Question 4.
Product planning and development begins with identification of consumer needs – Do you agree with this? (MARCH-2012)
Answer:
Yes. Agree

Question 5.
Mr. Vineeth is a producer of Pickles and sells them directly to the households. The above mentioned situation is an example of channel level. (MAY-2012)
a) Three
b) Two
c) One
d) Zero
Answer:
Zero level channel

Question 6.
Time utility is created by (MARCH-2013)
a) Packaging
b) Warehousing
c) Physical distribution
d) Promotion
Answer:
Warehousing

Question 7.
List out any two sales promotional activities. (MARCH-2014)
Answer:
Bonus, Sample, Coupons, Rebate, Free gift etc.

Question 8.
Short term incentives designed to encourage the buyers to make immediate purchase of a product or service is known by the name. (MAY-2016)
a) Personal selling
b) Sales promotion
c) Branding
d) Labelling
Answer:
Sales promotion

Question 9.
Jewellery is an example of (MARCH-2017)
a) Convenience Product
b) Durable Product
c) Shopping Product
d) Non-durable Product
Answer:
Durable Product

Question 10.
Advertising falls under which on the following elements of.marketing mix? (MAY-2017)
a) Promotion
Place
c) Price
Product
Answer:
a) Promotion

Plus Two Business Studies Marketing Management 2 Marks Important Questions

Question 1.
Identify four P’s in marketing mix. (MARCH-2009)
Answer:
Product, Price, Place and Promotion.

Question 2.
Find the odd one and state reason. (MAY-2009)
a) Rebate
b) Discounts
c) Dividend
d) Free gifts
Answer:
Dividend. All others are various sales promotion methods.

Question 3.
What do you mean by‘Marketing Research’? (MARCH-2013)
Answer:
Marketing Research: Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.

Question 4.
Complete the series: (MARCH-2015)
a) Treasury Bills -14 to 364 days
b) Call Money (?)
c) Commercial Paper (?)
Answer:
b) Call Money -1 to 14 Days
c) Commercial Paper – 90 to 180 Days

Question 5.
Colgate Palmolive Ltd. markets Colgate toothpaste in different colours with varying features. (MARCH-2015)
a) Point out the element of the product mix referred here.
b) Explain it.
Answer:
a) Depth of the mix
b) Variation in the product line for a product.

Plus Two Business Studies Marketing Management 3 Marks Important Questions

Question 1.
The management on New Cosmetics Ltd. manufacturers of cosmetics is facing the problem of poor sale. As a marketing expert suggest them a sales promotional measure to increase their sales (MARCH-2016)
Answer:
Samples, Coupons, free gifts etc.

Question 2.
Briefly explain the various levels of packaging of products available. (MAY-2015)
Answer:
Levels of Packaging
1) Primary Package: It refers to the product’s immediate container, e.g. toothpaste tube, match box, etc.
2) Secondary Packaging : It refers to additional layers of protection that are kept till the product is ready for use.
3) Transportation Packaging : It refers to further * packaging components necessary for storage, identification or transportation.

Question 3.
“Packaging performs a number of functions in the marketing of goods.” Give the important functions of packaging. (MAY-2016)
Answer:
Functions of Packaging
1. Packaging helps in identification of the products.
2. Packaging protects the product from spoilage, breakage, leakage, etc.
3. It facilitates easy transfer of goods to customers.

Question 4.
There exists confusion while using theterms ‘marketing’ and ‘selling’. Help in differentiating the terms. (MAY-2017)
Answer:

Plus Two Business Studies Marketing Management 4 Marks Important Questions

Question 1.
The manager of impact enterprises dealing in cosmetics in facing the problems of poor sales. Suggest and explain any foursales promotional measures that can be undertaken to improve the sales. (FEBRUARY – 2010)
Answer:
Techniques of Sales Promotion
1) Rebate : Offering products at special prices, to clear off excess inventory.
2) Discount: Offering products at less than maximum retail price.
3) Refund: The seller offers to refund a part of the price paid by the customer on production of some proof of purchase.
4) Free gifts : Offering another product as gift along with the purchase of a product.
5) Quantity Gift: Offering extra quantity of the product.
6) Contests : Prize contests are organized for the consumers and winners are given attractive prizes.
7) Money refund: There are certain manufacturers who promise to refund the price of the product, if it does not satisfy the consumer.
8) Samples: Offer of free samples of a product to customers at the time of introduction of a new product.

Question 2.
Marketing mix consist of 4 P’s. Explain these 4 P’s. (FEBRUARY -2010)
Answer:
Marketing Mix: It refers to the combination of four basic marketing tools (Product, Price, Place and Promotion) that a firm uses to pursue its marketing objectives in a target market.

Question 3.
‘Marketing Mix represents a blending of decisions in four inter-related elements.” – Explain. (MAY-2010)
Answer:
Merits of Sales Promotion
1) Sales promotion activities attract attention of the people.
2) Sales promotion tools can be very effective at the time of introduction of a new product in the market.
3) Sales promotion helps to increase sales.
4) It creates new customers and retains existing customers.
5) Consumers can purchase quality products at low cost.

Question 4.
Your friend, who is studying in science class asked you about marketing and what are its functions. What reply to you give? (MARCH-2014)
Answer:
Marketing : Marketing may be defined as all activities that are facilitating the movement of goods and services from producer to the ultimate consumer.
Functions of Marketing
1) Marketing Research : Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning : Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications.
Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling : Packaging refers to designing and developing the package for the products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services : An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing : Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion : Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution : It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing : In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.

Question 5.
The aim of ‘marketing’ and ‘selling’ is to maximize profit. Yet they differ in their approach. Differentiate between these two by pointing out four differences (MARCH-2015)
Answer:

Question 6.
“Marketing mix is a combination of 4Ps.” Briefly ex-plain 4Ps of marketing mix. (MARCH-2016)
Answer:
Product, price, Place and Promotion.
Elements / 4 Ps of Marketing Mix Marketing Mix: It refers to the combination of four basic marketing tools (Product, Price, Place and Promotion) that a firm uses to pursue its marketing objectives in a target market.

Elements / 4 P’s of Marketing Mix
1) Product: Product means goods or services or ‘anything of value’, which is offered to the market for sale. The important product decisions include deciding about the features, quality, packaging, labelling and branding of the products.
2) Price : Price is the amount of money paid by the customers to pay to obtain the product. In most of the products, price affects the demand of the products. Desired profits, cost of production, competition, demands, etc. must be considered before fixing the price of a product.
3) Place : Place or Physical Distribution includes activities that make firm’s products available to the target customers. Important decision areas in this respect include selection of dealers, storage, warehousing and transportation of goods from the place of production to the place of consumption.
4) Promotion : Promotion includes activities that communicate availability, features, merits, etc. of the products to the target customers and persuade them to buy it. It includes advertising, personal selling, sales promotion and publicity to promote the sale of products.

Plus Two Business Studies Marketing Management 5 Marks Important Questions

Question 1.
Explain the elements of marketing mix. (FEBRUARY – 2009)
Answer:
Marketing Mix: It refers to the combination of four basic marketing tools (Product, Price, Place and Promotion) that a firm uses to pursue its marketing objectives in a target market.

Elements / 4 P’s of Marketing Mix
1) Product: Product means goods or services or ‘anything of value’, which is offered to the market for sale. The important product decisions include deciding about the features, quality, packaging, labelling and branding of the products.
2) Price : Price is the amount of money paid by the customers to pay to obtain the product. In most of the products, price affects the demand of the products. Desired profits, cost of production, competition, demands, etc. must be considered before fixing the price of a product.
3) Place : Place or Physical Distribution includes activities that make firm’s products available to the target customers. Important decision areas in this respect include selection of dealers, storage, warehousing and transportation of goods from the place of production to the place of consumption.
4) Promotion : Promotion includes activities that communicate availability, features, merits, etc. of the products to the target customers and persuade them to buy it. It includes advertising, personal selling, sales promotion and publicity to promote the sale of products.

Question 2.
Mr. Shahul is a newly appointed salesman in marketing department. He has no clear idea about the factors to be considered while fixing the price of a product. If he is asking you being a commerce stu-dent, which answer will you give? (MARCH -2009)
Answer:
Factors Affecting Price Determination
1) Product Cost: One of the most important factors affecting price of a product or service is its cost of production and distribution. Fixed Costs, Variable Costs and Semi- Variable Costs are to be considered for determining the price.
2) Demand : The price of a product is affected by the elasticity of demand of the product. If the demand of a product is inelastic, the firm is in a better position to fix higher prices.
3) Competition : Competitors’ prices and their anticipated reactions must be considered before fixing the price of a product. In case of high competition, it is desirable to keep price low.
4) Government and Legal Regulations: In order to protect the interest of public against unfair practices, prices of some essential products are regulated by the government under the Essential Commodities Act., e.g. Medicines.
5) Pricing Objectives : Another important factor affecting the fixation of price of a product is pricing objectives, e.g. maximisation of profit, market share, etc.

Question 3.
There are several factors influencing pricing. Classify these factors as internal and external. (FEBRUARY -2010)
Answer:
Factors Affecting Price Determination
1) Product Cost: One of the most important factors affecting price of a product or service is its cost of production and distribution. Fixed Costs, Variable Costs and Semi- Variable Costs are to be considered for determining the price.
2) Demand : The price of a product is affected by the elasticity of demand of the product. If the demand of a product is inelastic, the firm is in a better position to fix higher prices.
3) Competition : Competitors’ prices and their anticipated reactions must be considered before fixing the price of a product. In case of high competition, it is desirable to keep price low.
4) Government and Legal Regulations: In order to protect the interest of public against unfair practices, prices of some essential products are regulated by the government under the Essential Commodities Act., e.g. Medicines.
5) Pricing Objectives : Another important factor affecting the fixation of price of a product is pricing objectives, e.g. maximisation of profit, market share, etc.

Question 4.
Explain different sales promotion techniques. (MARCH-2011)
Answer:
1) Quantity Gift: Offering extra quantity of the product.
2) Contests : Prize contests are organized for the consumers and winners are given attractive prizes.
3) Money refund : There are certain manufacturers who promise to refund the price of the product, if it does not satisfy the consumer.
4) Samples : Offer of free samples of a product to customers at the time of introduction of a new product.

Question 5.
How ‘Advertising’ differs from ‘Personal Selling? (MARCH-2011)
Answer:

Question 6.
Marketing is a continuous process of identifying consumer needs and fulfilling such needs through product development, promotion and pricing. Comment. Is it different from selling? If yes, state the differences. (MARCH-2012)
Answer:
a) Marketing and selling are different.

Question 7.
What are the factors that Mr.Nassar should consider while fixing the price of a new washing soap introduced by him? (MAY-2012)
Answer:
Pricing : Price may be defined as the amount of money paid by a buyer in consideration of the purchase of a product or a service.
Factors Affecting Price Determination
1) Product Cost: One of the most important factors affecting price of a product or service is its cost of production and distribution. Fixed Costs, Variable Costs and Semi- Variable Costs are to be considered for determining the price.
2) Demand : The price of a product is affected by the elasticity of demand of the product. If the demand of a product is inelastic, the firm is in a better position to fix higher prices.
3) Competition : Competitors’ prices and their anticipated reactions must be considered before fixing the price of a product. In case of high competition, it is desirable to keep price low.
4) Government and Legal Regulations: In order to protect the interest of public against unfair practices, prices of some essential products are regulated by the government under the Essential Commodities Act., e.g. Medicines.
5) Pricing Objectives : Another important factor affecting the fixation of price of a product is pricing objectives, e.g. maximisation of profit, market share, etc.

Question 8.
“Inspite of the existence of large number of super-markets, shopping malls and e-commerce facility, personal selling still plays a crucial role in moving goods and services to required consumers.” Explain the importance of personal selling in the light of this statement in Indian context. (MARCH-2016)
Answer:
Personal Selling : Personal selling involves face to face contact between the seller and prospective customer with an intension of selling some products. It is a personal form of communication.
Features of Personal Selling
1) It is a direct presentation of the product to the consumers.
2) Develop personal relationships with the prospective customers.
3) The sales presentation can be adjusted according to the specific needs of the individual customers.
4) It is possible to take a direct feedback from the customer.
Role of Personal Selling
1) Importance to Businessmen
1) It helps in influencing the prospects about the merits of a product and thereby increasing its sale.
2) Personal selling helps to develop lasting relationship between the sales persons and the customers.
3) Personal selling plays very important role in the introduction stage of a new product.
4) Personal selling increases the competitive strength of a business organisation.
2) Importance to Customers
1) Personal selling helps the customers in identifying their needs and wants.
2) Customers get latest market information.
3) Customers get expert advice and guidance in purchasing various goods and services.
4) Personal selling induces customers to purchase new products.
3) Importance to Society
1) Personal selling offers greater employment opportunities.
2) Personal selling provides attractive career with greater opportunities.
3) Personal selling increases product standardisation and uniformity in consumption pattern.

Plus Two Business Studies Marketing Management 8 Marks Important Questions

Question 1.
Product, price, place and promotion are the four elements which constitute the core of the marketing programmes of a business.”
Elaborate the concept mentioned in the above statement and explain its significance. (MAY-2009)
Answer:
Marketing Mix: It refers to the combination of four basic marketing tools (Product, Price, Place and Promotion) that a firm uses to pursue its marketing objectives in a target market.

Elements / 4 P’s of Marketing Mix
1) Product: Product means goods or services or ‘anything of value’, which is offered to the market for sale. The important product decisions include deciding about the features, quality, packaging, labelling and branding of the products.
2) Price : Price is the amount of money paid by the customers to pay to obtain the product. In most of the products, price affects the demand of the products. Desired profits, cost of production, competition, demands, etc. must be considered before fixing the price of a product.
3) Place : Place or Physical Distribution includes activities that make firm’s products available to the target customers. Important decision areas in this respect include selection of dealers, storage, warehousing and transportation of goods from the place of production to the place of consumption.
4) Promotion : Promotion includes activities that communicate availability, features, merits, etc. of the products to the target customers and persuade them to buy it. It includes advertising, personal selling, sales promotion and publicity to promote the sale of products.

Question 2.
When a new product has been introduced in the market, the board of directors decided that advertisement is the only method for promotion of the product. (FEBRUARY – 2010)
a) If you are a marketing manager, do you agree with the decision of board of directors. Justify your comment.
b) If any other methods prevail, list out them and state its relevance.
Answer:
No. Advertisement is only one of the promotion methods. Other promotion methods are :
Personal Selling : Personal selling involves face to face contact between the seller and prospective customer with an intension of selling some products. It is a personal form of communication.
Sales Promotion : It refers to those marketing activities other than personal selling, advertising and publicity that stimulate short term sales. Sales promotion activities include offering cash discounts, sales contests, free gift offers, and free sample distribution, etc.
Techniques of Sales Promotion
1) Rebate : Offering products at special prices, to clear off excess inventory.
2) Discount: Offering products at less than maximum retail price.
3) Refund: The seller offers to refund a part of the price paid by the customer on production of some proof of purchase.
4) Free gifts : Offering another product as gift along with the purchase of a product.
5) Quantity Gift: Offering extra quantity of the product.
6) Contests : Prize contests are organized for the consumers and winners are given attractive prizes.
7) Money refund: There are certain manufacturers who promise to refund the price of the product, if it does not satisfy the consumer.
8) Samples: Offer of free samples of a product to customers at the time of introduction of a new product.

Question 3.
Jeevan Ltd. started the manufacturing of washing ma-chine. They wish to inform this to the public. What activity they have to undertake to do this? State the factors that they should consider while selecting media for this activity. (MARCH-2010)
Answer:
Advertising : Advertising may be defined as “any paid form of non-personal presentation and promotion of ideas, goods or service of an identified sponsor”.
Merits of Advertising
1. Advantages to Manufacturers and Traders
1) Advertising helps in introducing new products.
2) It stimulates the consumers to purchase the new products.
3) Advertisement helps to increase the sales of new and existing products.
4) It helps to increase the goodwill of the firm.
5) It helps to face the competition in the market.
6) It increases profit of the firm through large sales.
2. Advantages to Consumers
1) It helps the consumers to know about the various products and their prices.
2) Consumers can purchase the better products easily.
3) It helps in maintaining high standard of living.
4) It educates the consumers about the various uses of products.
3. Advantages to the Society
1) Advertisement helps to create more employment opportunities.
2) It provides an important source of income to the press, radio, T.V., etc.
3) It is a source of encouragement to artists.
4) It plays an important role in economic development of the country.
5) It reduces number of middlemen and consumers get quality products at lower cost.

Question 4.
“The basic goal of marketing management is to achieve the objectives of business.” In the light of the above statement, you have to explain. (MARCH-2010)
i) What is Marketing?
ii) What is Marketing Management?
iii) What are the objectives of marketing management?
Answer:
Marketing : Marketing may be defined as all activities that are facilitating the movement of goods and services from producer to the ultimate consumer
Marketing Management : It refers to planning, organising, directing and controlling of the activities.
Role / Objectives of Marketing
1) Role in a Firm : Modern marketing emphasises that customer satisfaction is the key to the survival and growth of an organization. A satisfied customer is the most valuable asset of any firm. So product must be designed according to the needs and wants of the consumers, ensure fair distribution and determine an appropriate pricing strategy.
2) Role in the Economy : Marketing plays a significant role in the economic development of a nation. Marketing helps to increase the standard of living of the people by providing quality goods at reasonable prices. Marketing accelerates the economic activity leading to higher incomes, more consumption and increased savings and investment.

Question 5.
Buying and assembling is an important function of marketing. What are other facilitating functions? (MARCH-2012)
Answer:
Market: It refers to a place where the buyers and sellers meet each other for sale and purchase of the commodity.
Marketing : Marketing may be defined as all activities that are facilitating the movement of goods and services from producer to the ultimate consumer.
Functions of Marketing
1) Marketing Research : Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning : Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications.
Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling : Packaging refers to designing and developing the package for the products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services : An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing : Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion : Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution : It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing : In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.

Question 6.
What is advertising? Explain its benefits to manufacturers, customers and society. (MARCH-2012)
Answer:
Advertising : Advertising may be defined as “any paid form of non-personal presentation and promotion of ideas, goods or service of an identified sponsor”.
Merits of Advertising
1. Advantages to Manufacturers and Traders
1) Advertising helps in introducing new products.
2) It stimulates the consumers to purchase the new products.
3) Advertisement helps to increase the sales of new and existing products.
4) It helps to increase the goodwill of the firm.
5) It helps to face the competition in the market.
6) It increases profit of the firm through large sales.
2. Advantages to Consumers
1) It helps the consumers to know about the various products and their prices.
2) Consumers can purchase the better products easily.
3) It helps in maintaining high standard of living.
4) It educates the consumers about the various uses of products.
3. Advantages to the Society
1) Advertisement helps to create more employment opportunities.
2) It provides an important source of income to the press, radio, T.V., etc.
3) It is a source of encouragement to artists.
4) It plays an important role in economic development of the country.
5) It reduces number of middlemen and consumers get quality products at lower cost.

Question 7.
Mr. Hari has started a new branch of hair fixing shop at Calicut. How can convey this information to the present and prospective customers? Explain the benefits and evils of this advertising. (MAY-2012)
Answer:
Advertising : Advertising may be defined as “any paid form of non-personal presentation and promotion of ideas, goods or service of an identified sponsor”.
Merits of Advertising
1. Advantages to Manufacturers and Traders
1) Advertising helps in introducing new products.
2) It stimulates the consumers to purchase the new products.
3) Advertisement helps to increase the sales of new and existing products.
4) It helps to increase the goodwill of the firm.
5) It helps to face the competition in the market.
6) It increases profit of the firm through large sales.
2. Advantages to Consumers
1) It helps the consumers to know about the various products and their prices.
2) Consumers can purchase the better products easily.
3) It helps in maintaining high standard of living.
4) It educates the consumers about the various uses of products.
3. Advantages to the Society
1) Advertisement helps to create more employment opportunities.
2) It provides an important source of income to the press, radio, T.V., etc.
3) It is a source of encouragement to artists.
4) It plays an important role in economic development of the country.
5) It reduces number of middlemen and consumers get quality products at lower cost.

Question 8.
What is marketing? Explain the important functions involved in marketing? (MAY-2012)
Answer:
Marketing : Marketing may be defined as all activities that are facilitating the movement of goods and services from producer to the ultimate consumer.
Functions of Marketing
1) Marketing Research : Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning : Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications.
Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling : Packaging refers to designing and developing the package for the products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services : An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing : Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion : Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution : It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing : In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.

Question 9.
After completing his MBA in marketing Mr. Johnson joined a new multinational company as Marketing Manager. He called a meeting of his subordinate marketing executives soon after his appointment. He wishes to deliver a talk in functions of marketing. What points he should include in his talk? (MARCH -2013)
Answer:
Marketing : Marketing may be defined as all activities that are facilitating the movement of goods and services from producer to the ultimate consumer.
Functions of Marketing
1) Marketing Research : Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning : Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications.
Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling : Packaging refers to designing and developing the package for the products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services : An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing : Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion : Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution : It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing : In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.

Question 10.
The amount spent on advertising is a national waste.’ (MARCH-2013)
i) Do-you agree with this statement?
ii) Give merits and demerits of advertisement.
Answer:
i) No
ii) Merits of Advertising
1. Advantages to Manufacturers and Traders
1) Advertising helps in introducing new products.
2) It stimulates the consumers to purchase the new products.
3) Advertisement helps to increase the sales of new and existing products.
4) It helps to increase the goodwill of the firm.
5) It helps to face the competition in the market.
6) It increases profit of the firm through large sales.
2. Advantages to Consumers
1) It helps the consumers to know about the various products and their prices.
2) Consumers can purchase the better products easily.
3) It helps in maintaining high standard of living.
4) It educates the consumers about the various uses of products.
3. Advantages to the Society
1) Advertisement helps to create more employment opportunities.
2) It provides an important source of income to the press, radio, T.V., etc.
3) It is a source of encouragement to artists.
4) It plays an important role in economic development of the country.
5) It reduces number of middlemen and consumers get quality products at lower cost.
Disadvantages / Objections to Advertising
1) Advertisement encourages consumers to buy unwanted goods.
2) Most of the advertisements are misleading.
3) Advertisement may lead to monopoly of a brand.
4) Advertisement is a costly affair. So, ultimately it increases the price of the product.
5) Advertisement persuades people to purchase even the inferior products.
6) It undermines social and ethical values.

Question 11.
‘ What is Marketing? Write an essay on objectives of marketing management. (MARCH-2014)
Answer:
Role / Objectives of Marketing
1) Role in a Firm : Modern marketing emphasises that customer satisfaction is the key to the survival and growth of an organization. A satisfied customer is the most valuable asset of any firm. So product must be designed according to the needs and wants of the consumers, ensure fair distribution and determine an appropriate pricing strategy.
2) Role in the Economy : Marketing plays a significant role in the economic development of a nation. Marketing helps to increase the standard of living of the people by providing quality goods at reasonable prices. Marketing accelerates the economic activity leading to higher incomes, more consumption and increased savings and investment.

Question 12.
What are the different components of marketing mix? (MARCH-2014)
Answer:
Marketing Mix: It refers to the combination of four basic marketing tools (Product, Price, Place and Promotion) that a firm uses to pursue its marketing objectives in a target market.

Elements / 4 P’s of Marketing Mix
1) Product: Product means goods or services or ‘anything of value’, which is offered to the market for sale. The important product decisions include deciding about the features, quality, packaging, labelling and branding of the products.
2) Price : Price is the amount of money paid by the customers to pay to obtain the product. In most of the products, price affects the demand of the products. Desired profits, cost of production, competition, demands, etc. must be considered before fixing the price of a product.
3) Place : Place or Physical Distribution includes activities that make firm’s products available to the target customers. Important decision areas in this respect include selection of dealers, storage, warehousing and transportation of goods from the place of production to the place of consumption.
4) Promotion : Promotion includes activities that communicate availability, features, merits, etc. of the products to the target customers and persuade them to buy it. It includes advertising, personal selling, sales promotion and publicity to promote the sale of products.

Question 13.
Mr. Mohan Das, the proprietor of Das Automobiles Ltd. wants to open a branch of its business at Nagercoil. He is not aware of any sales promotion measures. As a marketing expert, you are requested to narrate him the various objectives of sales promotion and the different sales promotion techniques suitable for his business. (MARCH-2015)
Answer:
Sales Promotion : It refers to those marketing activities other than personal selling, advertising and publicity that stimulate short term sales. Sales promotion activities include offering cash discounts, sales contests, free gift offers, and free sample distribution, etc.
Techniques of Sales Promotion
1) Rebate : Offering products at special prices, to clear off excess inventory.
2) Discount: Offering products at less than maximum retail price.
3) Refund: The seller offers to refund a part of the price paid by the customer on production of some proof of purchase.
4) Free gifts : Offering another product as gift along with the purchase of a product.
5) Quantity Gift: Offering extra quantity of the product.
6) Contests : Prize contests are organized for the consumers and winners are given attractive prizes.
7) Money refund: There are certain manufacturers who promise to refund the price of the product, if it does not satisfy the consumer.
8) Samples: Offer of free samples of a product to customers at the time of introduction of a new product.

Question 14.
“It is often criticized that “advertisement is a wasteful activity and an unnecessary cost”. You are asked to establish the statement by highlighting the various arguments against advertisement. (MARCH-2015)
Answer:
i) Advertising: Advertising may be defined as “any paid form of non-personal presentation and pro-motion of ideas, goods or service of an identified sponsor”.
ii) Disadvantages / Objections to Advertising
1) Advertisement encourages consumers to buy unwanted goods.
2) Most of the advertisements are misleading.
3) Advertisement may lead to monopoly of a brand.
4) Advertisement is a costly affair. So, ultimately it increases the price of the product.
5) Advertisement persuades people to purchase even the inferior products.
6) It undermines social and ethical values.

Question 15.
What do you mean by the term marketing? Explain its different functions. (MARCH-2016)
Answer:
Functions of Marketing
1) Marketing Research : Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning : Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications.
Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling : Packaging refers to designing and developing the package for the products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services : An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing : Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion : Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution : It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing : In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.

Question 16.
“Marketing is concerned with exchange of goods and service from producers to consumers by enhancing the satisfaction level of consumers.” Describe the various functions to be addressed by marketing in order to fulfill the above objective. (MAY-2016)
Answer:
Functions of Marketing
1) Marketing Research : Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning : Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications.
Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling : Packaging refers to designing and developing the package for the products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services : An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing : Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion : Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution : It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing : In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.

Question 17.
No product or service can be launched without a proper and accurate price tag in place. Discuss about the importance of fixation of prices and the various factors affecting price determination. (MAY-2016)
Answer:
Pricing : Price may be defined as the amount of money paid by a buyer in consideration of the purchase of a product or a service. The success or failure of a product depends on the pricing strategy of a firm.
Factors Affecting Price Determination
Factors Affecting Price Determination
1) Product Cost: One of the most important factors affecting price of a product or service is its cost of production and distribution. Fixed Costs, Variable Costs and Semi- Variable Costs are to be considered for determining the price.
2) Demand : The price of a product is affected by the elasticity of demand of the product. If the demand of a product is inelastic, the firm is in a better position to fix higher prices.
3) Competition : Competitors’ prices and their anticipated reactions must be considered before fixing the price of a product. In case of high competition, it is desirable to keep price low.
4) Government and Legal Regulations: In order to protect the interest of public against unfair practices, prices of some essential products are regulated by the government under the Essential Commodities Act., e.g. Medicines.
5) Pricing Objectives : Another important factor affecting the fixation of price of a product is pricing objectives, e.g. maximisation of profit, market share, etc.

Question 18.
After completing her Post Graduate Diploma in Marketing, Smt. Jayasree was appointed as the Marketing Manager of Alpha Ltd. She is of the opinion that marketing effort of her organization should be formulated after analysing the concept behind it. Explain different marketing management concepts she should consider before formulating her marketing strategies. (MARCH-2017)
Answer:
Functions of Marketing
1) Marketing Research : Marketing Research is a process of collecting and analysing market information to identify the needs and wants of the customers.
2) Marketing Planning : Another function of marketing is to develop appropriate marketing plans so that the marketing objectives of the organisation can be achieved.
3) Product Designing and Development: The products are designed and developed according to the needs and wants of the consumers. It requires decision making on various aspects such as the product to be manufactured, its packing, selling price, quality of the product, etc.
4) Standardisation and Grading: Standardisation refers to producing goods of predetermined specifications.
Grading is the process of classification of products info different groups, on the basis of quality, size, etc.
5) Packaging and Labelling : Packaging refers to designing and developing the package for the products. Packaging gives protection to goods. Also it attracts the consumers to buy the product. Labelling refers to designing and developing the label to be put on the package.
6) Branding: A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller and to differentiate them from those of the competitors.
7) Customer Support Services : An important function of the marketing management is to develop customer support services such as after sales services, handling customer complaints, etc. which provides maximum satisfaction to the customers.
8) Pricing : Price of a product refers to the amount of money which customers have to pay to obtain a product. Price is an important factor affecting the success or failure of a product in the market. Price is fixed after taking into account the cost of production, desired profit, competitor’s price, govt, policy, etc.
9) Promotion : Promotion of products and services involves informing the customers about the firm’s product, its features, etc. and persuading them to purchase these products. It includes Advertising, Personal Selling, Publicity and Sales Promotion.
10) Physical Distribution : It includes decision regarding channels of distribution and physical movement of the product from the production centre to the consumption centre.
11) Transportation: Transportation involves physical movement of goods from one place to another. It removes the hindrance of place and creates time utility.
12) Storage or Warehousing : In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. It stabilizes the prices of products and keep the product without damage until they are sold.
Pricing : Price may be defined as the amount of money paid by a buyer in consideration of the purchase of a product or a service.
Factors Affecting Price Determination
1) Product Cost: One of the most important factors affecting price of a product or service is its cost of production and distribution. Fixed Costs, Variable Costs and Semi- Variable Costs are to be considered for determining the price.
2) Demand : The price of a product is affected by the elasticity of demand of the product. If the demand of a product is inelastic, the firm is in a better position to fix higher prices.
3) Competition : Competitors’ prices and their anticipated reactions must be considered before fixing the price of a product. In case of high competition, it is desirable to keep price low.
4) Government and Legal Regulations: In order to protect the interest of public against unfair practices, prices of some essential products are regulated by the government under the Essential Commodities Act., e.g. Medicines.
5) Pricing Objectives : Another important factor affecting the fixation of price of a product is pricing objectives, e.g. maximisation of profit, market share, etc.

Question 19.
“It is a process of giving name or sign or symbol to a product.” Identify the definition and explain its ad-vantages to the marketers and consumers. (MAY-2016)
Answer:
a) Branding
b) Branding: The process of giving a name or a sign ora symbol, etc. to a product is called branding. Advantages of branding Refer Section Branding : The process of giving a name or a sign or a symbol, etc. to a product is called branding. Terms related with branding
1) Brand : A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller or group of sellers and to differentiate them from those of the competitors.
2) Brand Name: That part of a brand, which can be vocalized i.e. can be spoken is called a brand name, e.g. Asian Paints, Maggie, Lifebuoy, Dunlop, etc.
3) Brand Mark: A brand mark is that part of a brand which can be recognized but cannot be vocalized,
i. e. non-utterable. It appears in the form of a symbol, design or distinct colour scheme. For example:‘Girl’of Amul.
4) Trade Mark : A brand or part of a brand that is given legal protection against its use by other firms is called trade mark. The firm which got its brand registered with the government, gets the exclusive right for its use.-
Advantages of branding
1) Advantages to the Firm
1) Branding helps a firm in distinguishing its product from that of its competitors.
2) It helps in advertising and display Programmes.
3) Branding enables a firm to charge competitive price for its products than that charged by its competitors.
4) It helps in Introduction of new product in the market.
2) Advantages to Customers
1) Branding helps the customers in identifying the products.
2) Branding ensures a particular level of quality of the product.
3) Some brands become status symbols because of their quality It creates a feeling of proud and satisfaction in the consumers.

Question 20.
Mr. Alphi. the Head of Marketing Division in a Private Ltd. company is confronted with the issue of pushing the demand of its major product. As part of the promotion of the product, he has made up his mind to go for intense advertising campaign. Before committing to the decision. He wants to weigh the merits and demerits of advertising. Assist him in enlisting the merits and demerits of advertising. (MAY-2017)
Answer:
a) Advertising: Advertising may be defined as “any paid form of non-personal presentation and pro-motion of ideas, goods or service of an identified sponsor”.
b) Merits of Advertising
Merits of Advertising
1. Advantages to Manufacturers and Traders
1) Advertising helps in introducing new products.
2) It stimulates the consumers to purchase the new products.
3) Advertisement helps to increase the sales of new and existing products.
4) It helps to increase the goodwill of the firm.
5) It helps to face the competition in the market.
6) It increases profit of the firm through large sales.
2. Advantages to Consumers
1) It helps the consumers to know about the various products and their prices.
2) Consumers can purchase the better products easily.
3) It helps in maintaining high standard of living.
4) It educates the consumers about the various uses of products.
3. Advantages to the Society
1) Advertisement helps to create more employment opportunities.
2) It provides an important source of income to the press, radio, T.V., etc.
3) It is a source of encouragement to artists.
4) It plays an important role in economic development of the country.
5) It reduces number of middlemen and consumers get quality products at lower cost.
Disadvantages / Objections to Advertising
1) Advertisement encourages consumers to buy unwanted goods.
2) Most of the advertisements are misleading.
3) Advertisement may lead to monopoly of a brand.
4) Advertisement is a costly affair. So, ultimately it increases the price of the product.
5) Advertisement persuades people to purchase even the inferior products.
6) It undermines social and ethical values.

Question 21.
One of the most important decisions that a marketer has to take with regard to a product is its branding. Explain the various terms associated with branding process.(MAY-2017)
Also narrate the characteristics, a good brand name is required to possess.
Answer:
Branding : The process of giving a name or a sign or a symbol, etc. to a product is called branding. Terms related with branding Refer Section
Branding : The process of giving a name or a sign or a symbol, etc. to a product is called branding. Terms related with branding
1) Brand : A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products of one seller or group of sellers and to differentiate them from those of the competitors.
2) Brand Name: That part of a brand, which can be vocalized i.e. can be spoken is called a brand name, e.g. Asian Paints, Maggie, Lifebuoy, Dunlop, etc.
3) Brand Mark: A brand mark is that part of a brand which can be recognized but cannot be vocalized,
i. e. non-utterable. It appears in the form of a symbol, design or distinct colour scheme. For example:‘Girl’of Amul.
4) Trade Mark : A brand or part of a brand that is given legal protection against its use by other firms is called trade mark. The firm which got its brand registered with the government, gets the exclusive right for its use.
Qualities of a Good Brand Name
1) The brand name should be short, easy to pronounce, spell, recognise and remember.
2) A brand should suggest the product’s benefits and qualities.
3) A brand name should be distinctive.
4) Brand name should be adaptable to packing or labelling requirements, to different advertising media and to different languages.
5) The brand name should be sufficiently versatile to accommodate new products.
6) It should be capable of being registered and protected legally.