Plus Two

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.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 10 Financial Markets.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 10 Financial Markets

Plus Two Business Studies Financial Markets 1 Mark Important Questions

Question 1.
State the market for medium and long term funds. (FEBRUARY – 2009)
a) Money market
b) Capital market
c) Commodity market
d) Exchange market
Answer:
Capital Market

Question 2.
Complete the series: (MAY-2009)
Bombay Stock Exchange -1875
Cochin Stock Exchange -1978
National Stock Exchange – ?
Answer:
National stock exchange – 1992

Question 3.
Complete the following series: (MAY-2009)
Bombay Stock Exchange -1875
Cochin Stock Exchange -1978
National stock exchange – 1992
OTCEI – ?
Answer:
OTCEI – 1992

Question 4.
The settlement cycle in NSE is (MARCH-2015)
a) T + 3
b) T + 2
c) T +1
d) T + 4
Answer:
b) T + 2

Question 5.
The method of issuing securities through intermediaries like issue houses or stock brokers is. (MARCH-2016)
a) Offer for sale
b) Offer through prospectus
c) Private placement
d) Rights issue
Answer:
a) Offer for sale

Question 6.
National Stock Exchange of India (NSE) started its operation in (MARCH-2017)
(a) 1992
(b) 1994
(c) 1993
(d) 2000
Answer:
(b) 1994

Question 7.
Pick out from the following a short term money instrument having a maternity period of one day to fifteen days used for meeting, cash reserve ratio requirement by commercial bank: (MAY-2017)
a) Treasury Bills
b) Call Money
c) Commercial Paper
d) Certificate of Deposits
Answer:
b) Call money

Plus Two Business Studies Financial Markets 2 Marks Important Questions

Question 1.
Write two protective functions performed by SEBI. (FEBRUARY – 2009)
Answer:
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insider trading price rigging etc. and imposing penalties for such practices.

Question 2.
Shaheena, one of your classmates in Plus Two Com-merce class, was absent in one day. On that day teacher takes class on the process of dematerialisation. Can you help Shaheena to understand the topic that the teacher taught that day? (MARCH-2010)
Answer:
Dematerialisation : It is a process by which physical share certificates are converted into an equivalent number of securities to be held in electronic form and credited in the investors’ account. For this, the investor has to open a Demat account with an organisation called a depository.

Question 3.
Smt. Faseela is a shareholder of ABC Co. Ltd. She gets allotment of 50 shares free of cost from the company. (MARCH-2012)
i) Find out the method of share allotment referred here.
ii) How it will affect ownership?
Answer:
i) Bonus shares/Stock dividend
ii) Issue of bonus shares does not affect the capital structure of the company.

Question 4.
Complete the following series. (MAY-2013)
a) Calcutta stock exchange -1909
b) Bombay stock exchange – ?
c) OTCEI – ?
Answer:
BSE – 1875
OTCEI – 1992

Plus Two Business Studies Financial Markets 4 Marks Important Questions

Question 1.
This is the agency which regulates the securities market and protects the interest of investors.(MAY-2009)
a) Identify the agency and explain its functions.
Answer:
SEBI
Functions of SEBI
1. Regulatory Functions
a) Registration of brokers and sub brokers and other players in the market.
b) Registration of Mutual Funds.
c) Regulation of stock brokers, portfolio exchanges, underwriters, etc.
d) Regulation of takeover bids by companies
e) Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
1) Levying fee or other charges for carrying out the purposes of the Act.
2) Development Functions
a) Training of intermediaries of the securities market.
b) Conducting research and publishing information useful to all market participants.
c) Undertaking measures to develop the capital markets by adapting a flexible approach.
3) Protective Functions
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insider trading price rigging etc. and imposing penalties for such practices.
c) Undertaking steps for investor protection.
d) Promotion of fair practices and code of conduct in securities market.

Question 2.
Your teacher told you to prepare a table showing various money market instruments and their maturity periods. How will you prepare such a table? (MAY-2012)
Answer:
Call money market – 1 -14 days
Commercial Bill Market – 90 days
Treasury Bill Market – 14- 364 days
Commercial Paper – 3-12 Months
Certificate of deposit – 3-12 Months

Question 3.
Differentiate between money market and capital market. (MARCH-2014)
Answer:

Question 4.
“These are markets for short term funds.”(MARCH-2016)
Identify the type of financial market and list out its various instruments.
Answer:
Money Market
Money Market Instruments
1) Treasury Bill : They are issued by the RBI on behalf of the Central Government to meet its short¬term requirement of funds. They are issued at a discount on the face value of the instruments and repayable at par. They are issued in the form of promissory notes. They are also known as Zero Coupon Bonds as no interest is paid on such bills. They are highly liquid. The maturity period of these bills may be between 14 to 364 days.
2) 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.
3) 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.
4) 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.
5) 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 5.
The SEBI has made it mandatory forthe settlement procedure to take place in demat form in certain selected securities. Forthe benefit of an investor in the Capital market, explain how does the demat system work. (MAY-2016)
Answer:
Working of the Demat System
1) A depository participant (DP), either a bank, broker, or financial services company, may be identified.
2) An account opening form and documentation (PAN card details, photograph, power of attorney) may be completed.
3) The physical certificate is to be given to the DP along with a dematerialisation request form.
4) If shares are applied in a public offer, details of DP and demat account are to be given to the depository registrar.
5) If shares are to be sold through a broker, the DP is to be instructed to debit the account with the number of shares.
6) The broker then gives instruction to his DP for delivery of the shares to the stock exchange.
7) The broker then receives payment and pays the person forthe shares sold.
8) Alt these transactions are to be completed within 2 days, i.e., delivery of shares and payment received from the buyer is on a T+2 basis, settlement period.

Question 6.
Briefly explain different methods of floating new is-sues in the primary market. (MARCH-2017)
Answer:
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
a) Offer through Prospectus : Prospectus is an invitation to the public for the subscription of shares and debentures of a company. The issues may be underwritten and also are required to be listed on at least one stock exchange.
b) Offer for Sale: Under this method new securities are not offered directly to the public. Initially the entire lots of securities are sold to an intermediary at a fixed price. The intermediary sells these securities to the public at a higher price.
c) Private Placement: Private placement is the allotment of securities by a company to institutional investors or some selected individuals. It is less expensive and saves time.
d) Rights Issue: According to the Companies Act, if a public company wants to issue additional shares, it must first be offered to the existing shareholders, in proportion to the amount paid up on their shares. This right is known as ‘Pre-emptive right’ and such an issue is called right issue.

Question 7.
Agni Ltd. is a medium scale enterprise engaged in the manufacture of match boxes in Kerala. Forfunding its modenisation requirement, it wanted to access capital market with the least cost that is possible. Identify the stock exchange format most suited to the company.
Give any six advantage of the above market. (MAY-2017)
Answer:
a) Overthe counter exchange of India (OTCEI)
b) Advantages of OTCEI
0 It provide online trading facilities to the investors
ii) It ensures a transparent system of trading
iii) It provides a trading platform to smaller and medium companies

Plus Two Business Studies Financial Markets 5 Marks Important Questions

Question 1.
Match the following. (MARCH-2009)

Answer:

Question 2.
‘SEBI’ is the watch dog of the securities market.’ Substantiate your answer. (FEBRUARY-2010)
Answer:
Functions of SEBI
1. Regulatory Functions
a) Registration of brokers and subbrokers and other players in the market.
b) Registration of Mutual Funds.
c) Regulation of stock brokers, portfolio exchanges, underwriters, etc.
d) Regulation of takeover bids by companies
e) Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
1) Levying fee or other charges for carrying out the purposes of the Act.
2) Development Functions
a) Training of intermediaries of the securities market.
b) Conducting research and publishing information useful to all market participants.
c) Undertaking measures to develop the capital markets by adapting a flexible approach.
3) Protective Functions
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insidertrading price rigging etc. and imposing penalties for such practices.
c) Undertaking steps for investor protection.
d) Promotion of fair practices and code of conduct in securities market.

Question 3.
It is a market for short-term financial assets having a maturity period of less than one year.(MARCH-2010)
a) Explain the concept referred above.
b) How it differs from capital market?
Answer:
a) Money Market

Question 4.
Stock exchanges are termed as the barometer of the economic progress in a country. (MAY-2010)
a) Do you agree with this statement?
b) Analyse the statement by connecting with the functions of stock exchange.
Answer:
a) Yes.
b) Functions of a Stock Exchange
1) Providing Liquidity and Marketability to Existing Securities: Stock Exchange provides
a ready and continuous market for the sale and purchase of securities.
2) Pricing of Securities : A stock exchange is a mechanism of constant valuation through which the prices of secuqjies are determined. It is based on the forces of demand and supply.
3) Safety of Transaction: Stock exchange has its own well-defined rules and regulations. This ensures safety and fair dealings to investors.
4) Contributes to Economic Growth : Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.
5) Providing Scope for Speculation : Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.
6) Economic barometer: A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression

Question 5.
Mercy, a computer operator of a private firm, wishes to buy some shares from stock exchange. (MARCH-2012)
1) Can she buy shares directly from the stock ex-change? State the reason.
2) Can she purchase shares of all companies from the stock exchange? State the reasons.
Answer:
1) No. Only members of stock exchange are allowed to enter the stock exchange.
2) No. Only listed and govt, securities are permitted to be traded in the stock exchange.

Question 6.
Manoj purchased 250 shares of Coal India Ltd. from the primary market. Later, he sold the shares of Coal India and earned a profit of Rs. 7,500/-. But all these transactions were done without physical transfer of share certificate. What is this system? What are the advantages of this system? (MAY-2012)
Answer:
Dematerialisation : It is a process by which physical share certificates are converted into an equivalent number of securities to be held in electronic form and credited in the investors’ account. For this, the investor has to open a Demat account with an organisation called a depository.
Benefits of Depository Services and Demat Account
1) Sale and Purchase of shares and stocks of any company make easy.
2) Saves time.
3) No paperwork.
4) Lower transaction costs.
5) Ease in trading.
6) Transparency in transactions.
7) No counterfeiting of security certificate.
8) Physical presence of investor is not required in stock exchange.

Question 7.
‘Money market is a wholesale market and capital market is a retail market.’ Do you agree with this statement? (MARCH-2013)
Give other 5 differences between them.
Answer:
a) Yes

Question 8.
“Only listed securities are permitted to be traded in the stock exchange” – Comment. Also explain functions of stock exchange. (MAY-2013)
Answer:
Only listed and Government securities are traded in the stock exchange,
Functions of a Stock Exchange
1) Providing Liquidity and Marketability to Existing Securities: Stock Exchange provides
a ready and continuous market for the sale and purchase of securities.
2) Pricing of Securities : A stock exchange is a mechanism of constant valuation through which the prices of secuqjies are determined. It is based on the forces of demand and supply.
3) Safety of Transaction: Stock exchange has its own well-defined rules and regulations. This ensures safety and fair dealings to investors.
4) Contributes to Economic Growth : Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.
5) Providing Scope for Speculation : Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.
6) Economic barometer: A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression.

Question 9.
Indian money market is a well developed one with the active participation of large number of financial institutions and the presence of innovative financial instruments. (MARCH-2015)
a) Name any three participants of Indian money market.
b) Name any three innovative financial instruments prevailing in Indian money market.
Answer:
a) RBI, Commercial bank, IFCI, IDBI, ICICI, LIC, UTI etc.
b) Call money Commercial bill Treasurybill Commercial paper Certificate of deposit

Plus Two Business Studies Financial Markets 8Marks Important Questions

Question 1.
“It is the regulatory & development agency of Indian Capital Market.” (MARCH-2011)
1) Identify the agency referred here,
Explain the functions performed by this agency,
Answer:
SEBI
Functions of SEBI
1. Regulatory Functions
a) Registration of brokers and subbrokers and other players in thd market.
b) Registration of Mutual Funds.
c) Regulation of stock brokers, portfolio exchanges, underwriters, etc.
d) Regulation of takeover bids by companies
e) Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
1) Levying fee or other charges for carrying out the purposes of the Act.
2) Development Functions
a) Training of intermediaries of the securities market.
b) Conducting research and publishing information useful to all market participants.
c) Undertaking measures to develop the capital markets by adapting a flexible approach.
3) Protective Functions
a) Prohibition of fraudulent and unfair, trade practices.
b) Controlling insidertrading price rigging etc. and imposing penalties for such practices.
c) Undertaking steps for investor protection.
d) Promotion of fair practices and code of conduct in securities market.

Question 2.
“BSE Sensex reached a new record of 20893 point as a result of Listing by Coal India Ltd.” This was headline in a newspaper. (MARCH-2011)
i) Which Financial Market is referred here?
ii) What are its functions?
iii) Which types of Secuitites are traded in this mar-ket?
Answer:
a) Stock Exchange
b) Functions of a Stock Exchange
1) Providing Liquidity and Marketability to Existing Securities: Stock Exchange provides a ready and continuous market for the sale and purchase of securities.
2) Pricing of Securities : A stock exchange is a mechanism of constant valuation through which the prices of secuqjies are determined. It is based on the forces of demand and supply.
3) Safety of Transaction: Stock exchange has its own well-defined rules and regulations. This ensures safety and fair dealings to investors.
4) Contributes to Economic Growth : Stock exchange provides a platform by which savings are channelised into the most productive investment proposals, which leads to capital formation and economic growth.
5) Providing Scope for Speculation : Stock exchange provides scope within the provisions of Law for speculation in a restricted and controlled manner.
6) Economic barometer: A stock exchange serves as a barometer of a country’s economic condition. Price trends in stock exchange indicate whether economy is going through boom or depression.
c) Securities traded in the secondary market are:
i) Corporate Securities
ii) Government Securities
iii) Listed Securities

Question 3.
Explain in detail the difference between capital market and money market of the country. (MAY-2013)
Answer:
Money Market: The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. It enables in raising short term fund for meeting day-to-day requirements. The major participants in the money market are the Reserve Bank of India, Commercial Banks, Non-Banking Finance Companies, State Governments, Large Corporate Houses and Mutual Funds.
Money Market Instruments
1) Treasury Bill : They are issued by the RBI on behalf of the Central Government to meet its short¬term requirement of funds. They are issued at a discount on the face value of the instruments and repayable at par. They are issued in the form of promissory notes. They are also known as Zero Coupon Bonds as no interest is paid on such bills. They are highly liquid. The maturity period of these bills may be between 14 to 364 days.
2) 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.
3) 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.
4) 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.
5) 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.
Capital Market: It is a market for long term funds where debt and equity are traded. It consists of development banks, commercial banks and stock exchanges. The capital markfet can be divided into:
1. Primary Market.
2. Secondary Market
Primary Market : The primary market is also known as the new issues market. It deals with new securities being issued for the first time. A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. Funds raised may be for setting up new projects, expansion, diversification, etc. of existing enterprises. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals.
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
a) Offer through Prospectus : Prospectus is an invitation to the public for the subscription of shares and debentures of a company. The issues may be underwritten and also are required to be listed on at least one stock exchange.
b) Offer for Sale: Under this method new securities are not offered directly to the public. Initially the entire lots of securities are sold to an intermediary at a fixed price. The intermediary sells these securities to the public at a higher price.
c) Private Placement: Private placement is the allotment of securities by a company to institutional investors or some selected individuals. It is less expensive and saves time.
d) Rights Issue: According to the Companies Act, if a public company wants to issue additional shares, it must first be offered to the existing shareholders, in proportion to the amount paid up on their shares. This right is known as ‘Pre-emptive right’ and such an issue is called right issue.
e) Electronic Initial Public Offer (e-IPOs): It is a method of issuing securities through on-line system of stock exchange. Such a company has to enter into an agreement with the stock exchange. This is called an e-initial public offer.

Question 4.
Asianet Communications Ltd. proposes to raise additional capital through issue of its shares for modernising their communication equipments. Being a specialist in securities you are asked to advice them the various methods of raising capital in the primary market. Advise the company in this issue (MAY-2013)
Answer:
Primary Market : The primary market is also known as the new issues market. It deals with new securities being issued for the first time. A company can raise capital through the primary market in the form of equity shares, preference shares, debentures, loans and deposits. Funds raised may be for setting up new projects, expansion, diversification, etc. of existing enterprises. The investors in this market are banks, financial institutions, insurance companies, mutual funds and individuals.
Methods of flotation: There are various methods of floating new issues in the primary market. They are:
a) Offer through Prospectus : Prospectus is an invitation to the public for the subscription of shares and debentures of a company. The issues may be underwritten and also are required to be listed on at least one stock exchange.
b) Offer for Sale: Under this method new securities are not offered directly to the public. Initially the entire lots of securities are sold to an intermediary at a fixed price. The intermediary sells these securities to the public at a higher price.
c) Private Placement: Private placement is the allotment of securities by a company to institutional investors or some selected individuals. It is less expensive and saves time.
d) Rights Issue: According to the Companies Act, if a public company wants to issue additional shares, it must first be offered to the existing shareholders, in proportion to the amount paid up on their shares. This right is known as ‘Pre emptive right’ and such an issue is called right issue.
e) Electronic Initial Public Offer (e-IPOs): It is a method of issuing securities through on-line system of stock exchange. Such a company has to enter into an agreement with the stock exchange. This is called an e-initial public offer.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 9 Financial Management.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 9 Financial Management

Plus Two Business Studies Financial Management 1 Mark Important Questions

Question 1.
Which among the following is the cheapest source of finance? (FEBRUARY – 2009)
a) Equity share capital
b) Debentures
c) Long term loans
d) Retained earnings
Answer:
d) Retained earnings

Question 2.
The main source of finance of K.K. Ltd. is Equity Capital of Rs. 8,00,000. The company also uses Fixed Inter est Bearing sources of debentures of Rs. 3,00,000 and long term loans Rs. 2,00,000 with an intention to enhance the return to equity shareholders.
a) Identify the concept of Financial Management used in this context. (MAY-2009)
Answer:
Trading on equity

Question 3.
Which among the following is not a factor affecting dividend decision? (MARCH-2010)
Nature of industry
b) Taxation policy
c) Competition
d) Legal restrictions
Answer:
Competition

Question 4.
The prime responsibility of a Finance Manager is to determine in advance the amount of capital and its sources. Give a suitable name to this process. (MAY-2011)
Answer:
Financial planning

Question 5.
Choose the correct pair from the following (MAY-2011)
a) Capital – Capitalisation structure
b) Fixed capital – Short term needs of the firm
c) Working capital – Net current assets
d) Investment decision-Distribution of profit Working
Answer:
capital – Net current assets

Question 6.
EPS stands for (MARCH-2013)
a) Equity per share
b) Earning per share
c) Equity pro share
d) Earning pro share
Answer:
Earnings per share

Question 7.
A major decision of the financial management is whether to distribute profits to shareholders or to retain the profits and reinvest into the business. Name the decision with regard to this. (MAY-2013)
Answer:
Dividend decision

Question 8.
‘Shortage of capital leads to over capitalisation.’ Do you agree with this statement? (MARCH-2014)
a) Letters
b) Memos
c) Complaints
d) Orders
Answer:
Complaints

Question 9.
Select the wrong pair from the following : (MARCH-2015)
a) Interest – Debentures
b) Buildings – Working Capital
c) Mix of debt and equity – Capital Structure
d) Dividend – Share Capital
Answer:
Buildings – Working capital

Question 10.
Financial leverage is favourable when, (MARCH-2016)
a) Return on investment is lower than cost of debt.
b) Debt is easily available.
c) The dividends are paid more.
d) Return on investment is higher than cost of debt.
Answer:
Return investment is higher than debt

Question 11.
List out the twin objectives of financial planning. (MAY-2016)
Answer:
a) To ensure availability of funds
b) To see that the firm does not raise resources unnecessarily

Question 12.
Zero working capital means Zero working capital (MARCH-2017)
a) Current Asset > Current Liability
b) Current Asset < Current Liability
c) Current Asset = Current Liability
d) Current Asset * Current Liability
Answer:
c) Current Asset = Current Liability

Question 13.
Ratios which help in determining the ability of the enterprise to service its long term debts are: (MAY-2017)
a) Liquidity
b) Profitability
c) Turnover
d) Solvency
Answer:
Solvency

Plus Two Business Studies Financial Management 2 Marks Important Questions

Question 1.
Mr.Joseph appointed as the Finance Manager of Venus Exporting Company Ltd. As the Finance Manager, point out two important decisions he has to take. (MAY-2010)
Answer:
Investment decisions, Finance decision and Dividend decision.

Question 2.
Following is the details of dividend received by Mr.Amal from a company during the year 2009-10. (MAY-2012)
Decks Ltd. Additional shares What is the type of dividend payment followed by the company?
Answer:
Bonus share

Question 3.
Determination of capital structure of a firm is a crucial management decision. Point out any four factors influencing the determination of capital structure. (MAY-2013)
Answer:
1) Trading on Equity (Financial Leverage)
2) Stability of Earnings
3) Cost of Debt
4) Interest Coverage Ratio (ICR)

Question 4.
Financial planning strive to achieve mainly two objectives. State these objectives. (MAY-2017)
Answer:
The twin objectives of financial planning are
a) To ensure availability of fund at the right time and its possible Sources.
b) To see that firm does not raise fund unnecessarily.

Plus Two Business Studies Financial Management 3 Marks Important Questions

Question 1.
a) Financial Service (MAY-2010)
b) Financial Markets
c) Financial Management
d) Financial institutions
i) Spot the odd one
ii) Justify your answer.
Answer:
Financial management

Question 2.
Briefly explain the term “Financial Planning”. (MARCH-2016)
Answer:
Financial Planning: The process of estimating the fund requirement of a business and specifying the sources of funds is called financial planning.
It ensures that enough funds are available at right time. The twin objectives of financial planning are
a) To ensure availability of fund at the right time and its possible sources.
b) To see that firm does not raise fund unnecessarily.

Question 3.
Capital structure is the ratio between owned capital and borrowed capital. Several factors are to be considered in determining an appropriate capital structure. Prepare a chart showing the factors affecting capital structure. (MARCH-2017)
Answer:
Factors affecting capital structure
1) Trading on Equity
2) Stability of earnings
3) Cost of debt
4) Interest Cover Ratio
5) Desire for control
6) Capital market condition
7) Taxation policy
8) Legal Requirements

Plus Two Business Studies Financial Management 4 Marks Important Questions

Question 1.
“Finance function is concerned with taking three important decisions”.Comment. (MARCH-2011)
Answer:
Finance Functions: The finance function is concerned with three broad decisions which are :

Finance Decision : It relates to the amount of . finance to be raised from various long term sources.
The main sources of funds for a firm are shareholders’ funds (equity capital and the retained earnings) and borrowed funds (debentures or other forms of debt). A firm needs to have a judicious mix of both debt and equity in making financing decisions.
Investment Decision : The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital budgeting decision.
Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables.
Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

Plus Two Business Studies Financial Management 5 Marks Important Questions

Question 1.
“A Firm’s total investment in the form of Bills Receivable, Debtors, Stock of goods, Cash in hand and at bank were Rs. 5,00,000.” Receivable , Debtors, Stock of goods, Cash in hand and at Bank (MARCH-2011)
a) Identify the type of Capital referred here
b) Explain the factors influencing the investment in these assets.
Answer:
a) Working Capital
b) Factors affecting Working Capital
1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 2.
The prime responsibility of a finance manager is to determine in advance the amount of capital, its sources and patterns. (MAY-2013)
a) Give a suitable name to this process.
b) Mention the importance of this process.
Answer:
a) Financial Planning
b) Importance of Financial Planning
1) It ensures adequate funds from various sources.
2) It reduces the uncertainty about the availability of funds.
3) It integrates the financial policies and procedures.
4) It helps the management to eliminate waste of funds and reduce cost.
5) It helps to achieve a balance between the inflow and outflow of funds and ensure liquidity.
6) It serves as the basis of financial control
7) It helps to reduce cost of financing to the minimum.
8) It helps to ensure stability and profitability of business.
9) It makes the firm better prepared to face the future

Question 3.
Spencers India a wholesaler of grocery goods, want to start a new branch in Kerala. They are requiring capital for a period of 20 yrs. Briefly explain the factors that determine the size of their capital requirement, (MARCH-2016)
Answer:
Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 4.
“It is a decision regarding the distribution of profit to shareholders.” Identify the decision and explain the factors affecting such decision. (MARCH-2017)
Answer:
a) Dividend decision
b) Factors affecting Dividend Decision
1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) 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.
3) 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.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) 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.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Plus Two Business Studies Financial Management 8 Marks Important Questions

Question 1.
a) What is working capital? (FEBRUARY – 2009)
b) What are the factors determining working capital?
Answer:
a) Working Capital: Working capital is that portion of capital required for investing in current as-sets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is of two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities
b) Factors affecting Working Capital
1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 2.
“It refers to the mix or components of long term sources of funds”. (MARCH-2009)
a) Identify the concept referred above.
b) What are the factors to be considered while determining it?
Answer:
a) Capital structure
b) Factors Affecting Capital Structure
1) 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.
2) 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.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) 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.
5) 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.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 3.
What is working Capital? What are the factors influencing the working capital requirements. (MARCH-2009)
Answer:
Working Capital: Working capital is that portion of capital required for investing in current assets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is o f two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 4.
Mr. Ganesh, the newly appointed Finance Manager of Soorya Ltd, identified that the poor management of capital required for the day to day operation of the business is one of the problems faced by the Finance Department. He decided to take certain remedial measures to make it efficient. (MAY-2009)
a) State the factors to be considered while deter-mining the amount of capital.
Answer:
Working Capital: Working capital is that portion of capital required for investing in current assets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is o f two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 5.
What is capital structure and what are the essential features of an appropriate capital structure? (MAY-2010)
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

1) 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.
2) 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.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) 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.
5) 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.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 6.
No business Can run successfully without adequate working capital. By considering this fact, you are required to ‘
a) Narrate the significance of adequacy of working capital and
b) The important factors influencing working capital. (MARCH-2010)
Answer:
Working Capital: Working capital is that portion of capital required for investing in current assets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is o f two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets – Current Liabilities

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 7.
A major policy decision of the Financial Manager of a company is whether to distribute profits to shareholders or retain the profits and reinvest into business. (MAY-2010)
a) Name the policy decision of the Financial Manager with regard to this aspect.
b) Explain the various factors affecting the policy of the management in the maximization of the wealth of the owners.
Answer:
a) Dividend Decision

b) Factors affecting Dividend Decision

1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) 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.
3) 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.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) 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.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Question 8.
“Financial planning is one of the important functions of management.” – Explain the statement. Also state various steps and objectives of it. (MARCH-2012)
Answer:
Financial Planning: The process of estimating the fund requirement of a business and specifying the
sources of funds is called financial planning. It ensures that enough funds are available at right time.
The twin objectives of financial planning are
a) To ensure availability of fund at the right time and its possible sources.
b) To see that firm does not raise fund unnecessarily.

Importance of Financial Planning

1) It ensures adequate funds from various sources.
2) It reduces the uncertainty about the availability of funds.
3) It integrates the financial policies and procedures.
4) It helps the management to eliminate waste of funds and reduce cost.
5) It helps to achieve a balance between the inflow and outflow of funds and ensure liquidity.
6) It serves as the basis of financial control
7) It helps to reduce cost of financing to the minimum.
8) It helps to ensure stability and profitability of business.
9) It makes the firm better prepared to face the future

Question 9.
“It is that part of profit of a company which is distributed among the shareholders.” (MARCH-2012)
a) Identify it.
b) Explain internal and external factors affecting it.
Answer:
a) Dividend
b) Factors affecting Dividend Decision
1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) 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.
3) 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.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) 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.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Question 10.
Current assets = Working capital current assets – Current liabilities = Working capital. The above two equations are based on two different concepts of working capital. Describe these two concepts of working capital. Explain factors influencing working capital (MAY-2012)
Answer:
a) 1) Gross Working Capital = Total of Current
Assets
2) Net Working Capital = Current Assets – Current Liabilities
b) Factors affecting Working Capital
1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital.

Question 11.
‘It is a composition of owner, equity and debt in the capitalisation.’ (MARCH-2013)
i) Identify the above definition
ii) Explain the factor, determining its make up
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

1) 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.
2) 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.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) 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.
5) 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.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 12.
i) What is dividend? (MARCH-2013)
ii) What are the factor, affecting dividend decision?
Answer:
i) Dividend is that part of the profits of a company which is distributed among shareholders.
ii) Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.
iii) Factors affecting Dividend Decision
1) Stability Earnings : A company having stable earnings can declare higher dividends. Otherwise, pay lower dividend.
2) 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.
3) 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.
4) Cash Flow Positions : Availability of enough cash in the company is necessary for declaration of dividend.
5) Shareholders’ Preference : While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard.
6) 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.
7) Capital Market: Reputed companies have easy access to the capital market and, therefore, they can pay higher dividends than the smaller companies.
8) Legal Constraints: The companies Act has laid down certain restrictions regarding payment of dividend. No dividend can be paid out of capital.

Question 13.
It is the capital required for meeting the permanent or long term needs of the business. (MARCH-2014)
a) Identify it.
b) Explain factors determining it.
Answer:
i) Fixed capital
ii) Fixed Capital : Fixed capital refers to the capital needed for the the acquisition of fixed assets to be used for a longer period.
Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 14.
“Capital budgeting is an important decision making area for the finance manager.” Explain. (MARCH-2014)
Answer:
a) Capital Budgeting
b) Importance of Financial Planning
1) It ensures adequate funds from various sources.
2) It reduces the uncertainty about the availability of funds.
3) It integrates the financial policies and procedures.
4) It helps the management to eliminate waste of funds and reduce cost.
5) It helps to achieve a balance between the inflow and outflow of funds and ensure liquidity.
6) It serves as the basis of financial control
7) It helps to reduce cost of financing to the minimum.
8) It helps to ensure stability and profitability of business.
9) It makes the firm better prepared to face the future.

Question 15.
a) “No business can run successfully without adequate working capital.” By highlighting this fact:  Narrate the significance of adequacy of working capital.(MARCH-2015)
ii) Identify the important factors influencing working capital of a firm
Answer:
i) Working Capital : Working capital is that portion of capital required for investing in current as¬sets for meeting day to day working of an organization. Current assets can be converted into cash within a period of one year. They provide liquidity to the business.
Working capital is of two types:
1) Gross working capital = Total of current asset
2) Net working capital = Current assets-Current Liabilities
ii) Factors affecting Working Capital

Factors affecting Working Capital

1) Nature of Business : A trading organisation usually needs a smaller amount of working capital as compared to a manufacturing organisation.
2) Scale of Operations: A large scale organisation requires large amount of working capital as compared to the organisations which operate on a lower scale.
3) Business Cycle : In the boom period larger amount of working capital is needed to meet the demand. In case of depression, demand for goods declines so less working capital is required.
4) Seasonal Factors: During peak season demand of a product will be high and thus high working capital will be required as compared to lean season.
5) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
6) Credit Policy : A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.
7) Operating Efficiency : If cash, debtors and inventory are efficiently managed, working capital requirement can be reduced.
8) Availability of Raw Materials : If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital

Question 16.
“Management of fixed capital involves allocation of firms capital to different long term assets or projects.” By highlighting this statement, you are required to :(MARCH-2015)
i) Identify and explain the various factors influencing the fixed capital requirements of a company, and
ii) State the principles to be followed in managing the fixed assets of a company.
Answer:
i) Fixed Capital: Fixed capital refers to the capital needed for the the acquisition of fixed assets to be used fora longer period.
ii) Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 17.
Mr. Ankit is a newly appointed Finance Manager of Neo Ltd., a manufacturing and trading enterprise. His first assignment with the new employer is about allocation of its capital among projects/assests with long-term implications. Explain the various factors he needs to consider in this regard. (MAY-2016)
Answer:
Factors affecting Fixed Capital
1) Nature of Business : A trading concern needs lower investment in fixed assets compared with a manufacturing organization.
2) Scale of Operations: An organisation operating on large scale require more fixed capital as compared to an organisation operating on small scale.
3) Choice of Technique : A capital-intensive organisation requires more amount of fixed capital than labour intensive organisations.
4) Technology Upgradation : Organisations using assets which become obsolete faster require more fixed capital as compared to other organisations.
5) Growth Prospects : Higher growth of an organisation generally requires higher investment in fixed assets.
6) Diversification : The firms dealing in number of products (Diversification) requires more investment in fixed capital.
7) Use of Fixed Assets: Companies acquiring fixed assets on hire purchase or lease system require lesser amount as against cash purchases.

Question 18.
“Overall financial health of a business enterprise is determined by the quality of its financial management.” Justify the above statement with suitable examples. (MAY-2016)
Answer:
Financial Management: Financial Management is concerned with optimal procurement as well as usage of finance. For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. Financial Management aims at reducing the cost of funds procured and ensuring availability of enough funds whenever required.
Objectives of Financial Management : The primary aim of financial management is to maximise shareholder’s wealth. It means maximisation of the market value of equity shares. It is the responsibility of the company to pay reasonable dividend and also to maximize the value of its shares.
Finance Functions,: The finance function is concerned with three broad decisions which are :

Finance Decision : It relates to the amount of . finance to be raised from various long term sources.
The main sources of funds for a firm are shareholders’ funds (equity capital and the retained earnings) and borrowed funds (debentures or other forms of debt). A firm needs to have a judicious mix of both debt and equity in making financing decisions.
Investment Decision : The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital budgeting decision.
Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables.
Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

Question 19.
Mr.Amitabh has been appointed as the Finance Manager of a newly floated manufacturing and trading concern. Help him in preparing a note addressed to Board of directors citing the relevance of capital structure decision for the concern and any six prominent factors that determine the choice of capital structure. (MAY-2017)
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
1) 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.
2) 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.
3) Cost of Debt: A firm’s ability to borrow at lower rate, increases its capacity to employ higher debt.
4) 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.
5) 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.
6) Flexibility: Capital structure should be capable of being adjusted according to the needs of changing conditions.
7) Capital Market Conditions : In depression, debentures are considered good. In a booming situation, issue of shares will be more preferable.
8) Period of Finance: If funds are required for short period, borrowing from bank should be preferred. If funds are required for longer period company can issue shares and debentures.
9) Taxation Policy : interest on loan and debentures is deductible item under the Income Tax Act whereas dividend is not deductible. In order to take advantage of this provision, companies may issue debentures.
10) Legal Requirements : The structure of capital of a company is also influenced by the statutory requirements. For example, Banking Regulation Act, Indian Companies Act, SEBI, etc.

Question 20.
The Managing Director of Ellexi Ltd., is not same about the primary objective of financial management and the broad decision making horizons of it. Assist him forgetting a better idea in this regard. (MAY-2017)
Answer:
Financial Management: Financial Management is concerned with optimal procurement as well as usage of finance. For optimal procurement, different available sources of finance are identified and compared in terms of their costs and associated risks. Financial Management aims at reducing the cost of funds procured and ensuring availability of enough funds whenever required.
Objectives of Financial Management : The primary aim of financial management is to maximise shareholder’s wealth. It means maximisation of the market value of equity shares. It is the responsibility of the company to pay reasonable dividend and also to maximize the value of its shares.
Finance Functions,: The finance function is concerned with three broad decisions which are :

Finance Decision : It relates to the amount of . finance to be raised from various long term sources.
The main sources of funds for a firm are shareholders’ funds (equity capital and the retained earnings) and borrowed funds (debentures or other forms of debt). A firm needs to have a judicious mix of both debt and equity in making financing decisions.
Investment Decision : The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital budgeting decision.
Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables.
Dividend Decision : Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 8 Controlling.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 8 Controlling

Plus Two Business Studies Controlling 1 Mark Important Questions

Question 1.
Controlling function of management ensures events to conform to _______ (MAY-2009)
a) Performance
b) Standards
c) Future activites
d) Deviations
Answer:
b) Standards

Question 2.
In the controlling process only those deviations from standard which seem exceptionally are brought to the attention of top management. Identify the relevant principle behind this. (MAY-2010)
Answer:
Management by exception

Question 3.
Find the odd one. (MARCH-2011)
a) Bill of Exchange
b) Treasury Bill
c) Debenture
d) Commercial Paper
Answer:
c) Debenture

Question 4.
________ is the criterion against which actual performance is measured. (MARCH-2012)
Answer:
Standard

Question 5.
Identify the one which is not a feature of controlling function. (MAY-2013)
a) Authority
b) Supervision
c) Forward locking
d) Continuous process
Answer:
Authority

Question 6.
The first step in control process is ______ (MARCH-2014)
a) Corrective action
b) Fixing standard
c) Analysing deviation
d) Measuring actual performance
Answer:
Fixing standard

Question 7.
Identify the management function which denotes th process of ensuring that actual activities conform to planned activities. (MARCH-2015)
Answer:
Controlling

Question 8.
“Control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans’’ is a definition given by (MARCH-2016)
a) Koontz & O Donnel
b) Henry Fayol
c) F.W. Taylor
d) Oliversheldon
Answer:
a). Koontz & O Donnel

Question 9.
Pick out a modern technique of managerial control from the following: (MAY-2016)
a) Statistical reports
b) MIS
c) Breakeven analysis
d) Budgetary control
Answer:
b) MIS (Management Information System)

Question 10.
“Without control system in place, the best of plans can go awry.” Substantiate. (SAY-2016)
Answer:
i) It helps to accomplish organisational goals.
ii) Controlling helps to judge accuracy of standards.
iii) Controlling creates an atmosphere of order and discipline in the organisation.

Plus Two Business Studies Controlling 2 Marks Important Questions

Question 1.
The various steps involved in the control process are given below. Arrange them in their sequence. (SAY-2011)
a) Comparison of performance with the standards.
b) Taking corrective action
c) Measurement of performance
d) Establishment of standards
Answer:
Establishment of standards, Measurement of performance, Comparison of performance with standards, Taking corrective action.

Question 2.
Devu, the Manager of a business unit opined that ‘control without’, planning is meaningless.’ (MARCH-2014)
a) Do you agree with Devu?
b) State reason.
Answer:
a) Yes
b) 1) Planning and control are interdependent and
inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.

Plus Two Business Studies Controlling 3 Marks Important Questions

Question 1.
“If you try to control everything you may end up by controlling nothing.” (FEBRUARY – 2009)
a) Do you agree with the statement?
b) Why?
Answer:
a) Yes. The principle is Management by exception
b) According to this principle, only those deviations which are exceptionally high and which cannot be easily solved by lower level management alone, should be reported to top management.

Question 2.
Mr. Thomas is working as the Marketing Manager in a pharmaceutical company. The target performance fixed by the top management for the Marketing Man-ager is Rs. 40 lakhs sales in a month. During the month of January, 2009 he can make sales of Rs. 32 lakhs only.
a) Which management function is to be applied here? (MAY-2009)
b) Name the steps to be followed while performing this function.
Answer:
Controlling
1) Setting performance standards
2) Measurement of actual performance
3) Comparison of actual performance with standards
4) Analysing deviations
5) Taking corrective action

Question 3.
Just as planning, controlling should also be primarily a forward looking function.” To what extent, this statement is true?(FEBRUARY-2010)
Answer:
Controlling is a forward looking function – However, Like planning, control is also forward looking. Con¬trolling provides valuable information forfuture planning. Corrective action in controlling helps to improve the future performance. Thus controlling is a forward looking.

Question 4.
“Planning without control is a ship without a captain.” (MAY-2011)
a) Do you agree with this statement?
b) Establish the relationship between planning and control.
Answer:
a) yes.
b) 1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.

Question 5.
An essential part of the control process is corrective actions as and when needed – State your opinion (MARCH-2012)
Answer:
Meaning : Controlling is the process of ensuring that actual performance conform to planned performance. It also ensures that an organisation’s resources are being used effectively for the achievement of predetermined goals. So controlling is a goal oriented function.The controlling functions measure actual performance against standards, find out the deviations, analyse the causes of such deviations and take corrective actions.

Question 6.
The following table shows the details of defective per 1000 units of tooth brush during 4 months (MAY-2012)

The supervisor reported only the defective of Jan.2011 to top management. Explain the underlying principle behind this practice.
Answer:
Management by Exception

Question 7.
Mr. Salam, the new manager of Rubco Ltd., believes that controlling function should concentrate on Key Result Areas, do you agree with Mr. Salam? Sub-stantiate. (MARCH-2016)
Answer:
Yes., I agree with Salam
Controlling function should concentrate on key result areas. This is known as control by exception or management by exception. (MBE)

Question 8.
A system of control pre-supposes the existence of certain standard of performance which eventually are provided by planning. In the light of the above, establish that planning and controlling are inter-related. (MAY-2017)
Answer:
Relationship between Planning and Controlling
1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.
5) Planning and controlling are both backward looking as well as forward looking functions.
6) Planning based on facts makes controlling easier and effective

Plus Two Business Studies Controlling 4 Marks Important Questions

Question 1.
Planning without control is a ship without a captain. Do you agree with this statement? Establish the relationship between planning and control. (MAY-2010)
Answer:
a) Yes. Planning and control, both are complementary.
b) Relationship between Planning and Controlling
1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.
5) Planning and controlling are both backward looking as well as forward looking functions.
6) Planning based on facts makes controlling easier and effective

Question 2.
Prepare a seminar paper in ‘Steps in Control Process (MARCH-2013)
Answer:
Controlling Process : Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective action
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 measure-ment 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.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations.
5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within the acceptable limits.

Question 3.
“Planning and Corrtffilling are inseparable Siamese twins of management.” Why? (MARCH-2015)
Answer:
Relationship between Planning and Controlling
1) Planning and control are interdependent and inseparable functions of management.
2) Planning is a prerequisite for controlling.
3) Planning initiates the process of management and controlling complete the process.
4) Planning is prescriptive where as controlling is evaluative.
5) Planning and controlling are both backward looking as well as forward looking functions.
6) Planning based on facts makes controlling easier and effective.

Question 4.
Identify the idea behind the diagram and explain its importance. (MARCH-2017)

Answer:
a) Controlling
b) Importance of Controlling
1) Accomplishing organizational goals : The controlling function measures progress towards the organizational goals and brings to light the deviations, if any, and indicates corrective action.
2) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective.
3) Making efficient use of resources : By exercising control, a manager seeks to reduce wastage of resources.

Plus Two Business Studies Controlling 5 Marks Important Questions

Question 1.
Analyze the following activities. (MARCH-2009)
1) Measurement of performance.
2) Taking corrective action.
3) Comparing actual performance with standards.
4) Establishments of standards.
a) Identify the management function.
b) Arrange it in correct order as it takes place in an organisation.
c) Explain the relationship of this function with planning
Answer:
a) Controlling
b) 1) Establishments of standards
2) Measurement of performance
3) Comparing actual performance with standards
4) Taking corrective action

Question 2.
Just as traffic signals are essential to make our roads accident free, management controls are necessary forthe smooth functioning of the organisation. (MARCH-2010)
a) State your opinion about this statement.
b) Briefly explain the steps in control process.
Answer:
a) Yes. Control is necessary for the smooth func¬tioning of the organization.

Question 3.
“This management function is similar to thermostat in refrigerator, which compares actual temperature with the standard and acts when there is deviations.” (MARCH-2011)
a) Which management function is referred here?
b) Write the process involved in it.
Answer:
a) Controlling
b) Controlling Process : Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective action
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 measure-ment 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.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations.
5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within the acceptable limits.

Question 4.
The sales report of Usha Fans Ltd. for the last six months is given below. The target fixed for each month was 2000 fans. In the last 3 months the sales manager of the company was on leave for personal reasons Just as traffic signals are essential to make our roads accident free, management controls are necessary forthe smooth functioning of the organisation. (MAY-2013)

a) Identify the management function in the absence of which the production declined.
b) State the steps to be taken by the management to achieve the target.
Answer:
a) Controlling
b) Controlling Process : Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective action
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 measure-ment 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.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations.
5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within acceptable limits.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 7 Directing.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 7 Directing

Plus Two Business Studies Directing 1 Mark Important Questions

Question 1.
Mr. Abhinav has been working as Marketing Manager of an electrical components manufacturing unitforthe last five years. Mr. Suresh is working as an assistant in the same section. Suresh made a complaint about his junior to the Marketing Manager. Mention the direction in which communication flows. (MARCH-2009)
Answer:
Upward communication

Question 2.
Suggest a suitable term to describe the network of informal communication which lead to ________ (February-2010)
Answer:
Grapevine communication

Question 3.
Mr.Praveen, the production manager of ABC Ltd, always encourages his subordinates to work hard. Which management term is used to refer Praveen’s activity? (MARCH -2010)
Answer:
Motivation

Question 4.
Identify the term used to refer to the ability of a person to look at things from other’s point of view. (MARCH-2010)
a) empathy
b) responsibility
c) sympathy
d) authority
Answer:
Empathy

Question 5.
Observe the following and pick out and odd one. Justify your answer. (MAY-2010)
a) Supervision
b) Control
c) Motivation
d) Leadership
Answer:
Control

Question 6.
Maslow defines this need as “The desire to become everything one is capable of becoming.” (MARCH-2012)
a) Social need
b) Self actualization need
c) Safety need
d) Esteem need
Answer:
Self actualization need

Question 7.
“I am always with the subordinates, giving them direct and immediate guidance and controlling them in the performance of their tasks”. Who am I? (MAY-2012)
Answer:
Supervision

Question 8.
“Desire to become everything one is capable to becoming” Which is the need that Maslow mean here? (MAY-2012)
Answer:
Self Actualisation Needs

Question 9.
Ability of a leader to look things from others point of view is (MARCH-2013)
a) Empathy
b) Sympathy
c) Responsibility
d) Authority
Answer:
a) Empathy

Question 10.
Identify the communication network in the following diagram. (MARCH-2013)

a) wheel pattern
b) Chain pattern
c) Circle pattern
d) Ladder pattern
Answer:
Chain pattern

Question 11.
Which among the following is not an example of downward communication? (MAY-2013)
a) Letters
b) Memos
c) Complaints
d) Orders
Answer:
Complaints

Question 12.
Who among the following suggested need hierarchy theory? . (MARCH-2014)
a) Henry Fayol
b) F.W. Taylor
c) Abraham Maslow
d) Peter Drucker
Answer:
Abraham Maslow

Question 13.
Which one of the following is not an element of directing? (MAY-2016)
a) Planning
b) Supervision
c) Leadership
d) Communication
Answer:
a) Planning

Question 14.
Which one of the following is not a semantic barrier of communication? (MAY-2016)
a) Technical Jargons
b) Gesture decoding
c) Badly expressed messages
d) Status
Answer:
d) Status

Question 15.
Autonomy status requirement of an individual is a factor, under which category of needs identified by Abraham Maslow: (MAY-2017)
a) Affiliation
b) Self Actualisation
c) Esteem needs
d) Safety
Answer:
c) Esteem needs

Question 16.
A democratic leader is otherwise known as: (MAY-2017)
a) Participative leader
b) Free-rein leader
c) Autocratic leader
d) Laissezfaire leader
Answer:
a) Participative leader

Plus Two Business Studies Directing 2 Marks Important Questions

Question 1.
Shajahan, one of your classmates, asks you why informal communication is also known as ‘grapevine’? What explanation will you give to shajahan? (MARCH-2009)
Answer:
The network or pathway of Informal communication is known as grapevine communication. Because the origin and direction of flow of the informal mes-sages cannot be easily traced.

Question 2.
“The sales executive of marketing department communicates with the manager of Production Department about the quality of products.
a) What type of communication takes place here? (MAY-2012)
b) If the sales executive communicates with his boss, ie. marketing manager, what type of communication will be that?
Answer:
a) Diagonal communication
b) Upward communication.

Question 3.
The newly established Technical University in Kerala wants to appoint 100 data entry operators. (MARCH-2015)
a) Suggest a suitable testto be conducted to select the candidates.
b) Justify your answer.
Answer:
a) Performance test.
b) These tests are conducted to assess the actual performance and ability to do the particular job.

Question 4.
Observe the following methods of communication (MARCH-2015)
i) Upward communication
ii) Informal communication
iii) Horizontal communication
iv) Diagonal commyfiication
a) Spot the odd orfe
b) Justify your answer.
Answer:
a) Informal communication
b) Others are methods or types of formal communication.

Question 5.
Prepare a pyramidal diagram showing Maslow’s Need Hierarchy Theory. (MARCH-2016)
Answer:
Maslow’s Need Hierarchy Theory

Question 6.
Diagrammatically present communication process involved in a telephonic conversation between X and Y. (MARCH-2017)
Answer:

Plus Two Business Studies Directing 3 Marks Important Questions

Question 1.
Put a right word in the circle in the picture given be-low. Explain the meaning of that term. (MARCH-2009)

Answer:
Directing: Directing refers to the process of instruct-ing, guiding, counselling, motivating and leading people in the organisation to achieve its objectives.

Question 2.
Identify the communication pattern. Also explain its feature. (MARCH-2011)

Answer:
In wheel network, all subordinates under one superior communicate through him only. The subordinates are not allowed to communicate among themselves.

Question 3.
Differentiate between formal and informal communication. (MAY-2016)
Answer:

Question 4.
Organisation keen on developing effective communication should adopt suitable measures to overcome the barriers. Suggest any six measures to overcome the barriers of communication. (MAY-2017)
Answer:
Measures to overcome barriers to communication
1) The entire problem to be communicated should be studied in depth, analysed and stated in such a mannerthat it is clearly conveyed to subordinates.
2) Communication must be according to the education and understanding levels of subordinates.
3) Before communicating.the message, it is better to consult with others.
4) The contents of the message, tone, language used, etc. are important aspects of effective communication.
5) While conveying message to others, it is better to know the interests and needs of the receiver.
6) Ensure proper feedback.
7) Manager should be a good listener.

Plus Two Business Studies Directing 4 Marks Important Questions

Question 1.
Mr.Ramesh is the newly appointed Branch Manager of a bank in the town. There are 40 employees in the branch. He is very active and enthusiastic in the duties. State any four qualities should he acquire to become a good leader.(MAY-2011)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 2.
The workers of the catering department of Akshaya Food Industries, Thrissur whole heartedly accepted Mr.Vivek, the production Manager, as their leader. Explain the qualitieswhich make Mr.Vivek, a good leader. (MAY-2012)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 3.
“It is the process of stimulating subordinates to act for accomplishing desired goals.” (MARCH-2014)
a) Identified it.
b) State its importance in business organisation.
Answer:
a) Motivation
b) Importance of Motivation
1) Motivation helps to improve performance levels of employees as well as the organisation.
2) Motivation helps to change negative attitudes of employee to positive attitudes.
3) Motivation helps to reduce employee turnover.
4) Motivation helps to reduce absenteeism in the organisation.
5) Motivation helps managers to introduce changes smoothly

Question 4.
Suppose you are appointed as Marketing Manager in S.K.Industries.State different types of communications possible here. Explain each with its requirements. (MARCH-2014)
Answer:
Formal Communication : Communication through the official chain of command is called formal communication. It flows through the scalar chain of authority. Formal communication may be of two types:
1) Vertical Communication
2) Horizontal Communication
Vertical Communication: Vertical communication flows vertically i.e., upwards or downwards through formal communication channels.
a) Downward Communication : Downward communication refers to flow of communication from a superior to subordinate. E.g. Notices, circulars, memos, reports, etc.
b) Upward Communication : It refers to flow of communication from a subordinate to superior. E.g. application for leave, submission of progress report, suggestions, complaints, etc.
Horizontal or Lateral communication : The flow of communication between persons holding position at the same level of the organisation is known as horizontal communication.

Question 5.
“Effectiveness of leadership depends upon the qualities of a leader.” Explain any four qualities of a leader. (MARCH-2015)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Plus Two Business Studies Directing 5 Marks Important Questions

Question 1.
‘A good communication system is necessary for effective coordination of activities. But there are cer¬tain factors which disrupt the flow of information and communication process. Discuss. (MAY-2009)
a) Briefly explain the factors which disrupt the proper flow of information and communication process.
Answer:
 Barriers to Communication
1) Semantic barriers : Semantic barriers are concerned with problems and obstructions in the process of encoding and decoding of message into words or impressions. Semantic barriers are:-
a) Badly expressed message : The badly expressed messages may be an account of inadequate vocabulary, usage of wrong words, omission of needed words, etc.
b) Symbols with different meanings : People may interpret the same message differently depending upon their attitude, education, social and cultural backgrounds.
c) Faulty Translations : If the translator is not proficient with both the languages, mistakes may arise causing different meanings to the communication.
d) Technical jargon : Technical words may not be understood by the workers.
2) Psychological Barriers : Emotional or psychological factors act as barriers to communicators. Psychological barriers are:
a) Premature evaluation : People evaluate the meaning of message before the sender completes his message.
b) Lack of attention : The preoccupied mind of receiver and the resultant non-listening of message acts as a major psychological barrier.
c) Loss by transmission and poor retention : When communication passes through various levels, there is a chance of distortion of the message.
d) Distrust: Distrust between communicator and communicatee act as a barrier.
3) Organisational Barriers
Organisation’s policies, Number of levels of management, rigid rules, etc,, are the examples . of organisational barriers.
a) Organisational policy: If the organisational policy is complex, it restricts the free flow of communication.
b) Rules and regulations : Rigid Rules and regulations may be a hurdle to communication
c) Status : Status differences of people in communication chain also adversely affect the effectiveness of communication.
d) Complex organisational structure: If there are number of managerial levels, communication gets delayed and distorted.
4) Personal barriers
It includes fear of challenge to authority, lack of confidence, lack of incentives, etc.
a) Fear of challenge to authority: If a superior perceives that a particular communication may affect his authority, then he withhold such communication.
b) Lack of confidence: If superiors do not have confidence on the competency of subordinates*tPiey may not seek their advice.
c) Lack of incentives: If there is no motivation or incentive for communication, subordinates may not take initiative to communicate.

Question 2.
Biju is a newly appointed manager of Niranjan Ltd, where 40 workers are working. He is active and enthusiastic in his duties. What qualities should be possess to become a good leader. (February-2010)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 3.
The Manager of Unitech Software Solutions, Mr. Vipin found that majority of his employees are wasting their time unless somebody oversees their activities. (MARCH-2010)
a) How can the Manager solve this problem?
b) Explain the management term related to this and also explain its importance.
Answer:
a) The manager can solve the problem by appointing the supervisors.
b) 1) A good supervisor acts as a guide, friend and philosopher to the workers.
2) Supervisor acts as a link between workers and management. It helps to avoid misunderstandings and conflicts among the management and workers.
3) Supervisor provides good On the Job training to the workers and employees.
4) A supervisor with good leadership qualities can build up high morale among workers.

Question 4.
The success of an enterprise highly depends on effective leadership. (MAY-2010)
a) Do you agree with this statement?
b) State any three qualities of a good leader.
Answer:
a) Yes.
b) Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 5.
“All organizational facility will become unproductive in the absence of Motivated People.” Explain. (MARCH-2011)
Answer:
Importance of Motivation
1) Motivation helps to improve performance levels of employees as well as the organisation.
2) Motivation helps to change negative attitudes of employee to positive attitudes.
3) Motivation helps to reduce employee turnover.
4) Motivation helps to reduce absenteeism in the organisation.
5) Motivation helps managers to introduce changes smoothly.

Question 6.
Identify the name of the famous psychologist who developed the need hierarchy theory. Explain the theory with the help of a diagram. (MARCH-2012)
Answer:
a) Abraham Maslow
b) Maslow’s Need Hierarchy Theory of Motivation
Abraham Maslow’s Need Hierarchy Theory is considered fundamental to understanding of motivation. His theory was based on human needs. Various human needs are:
1) Physiological Needs : These are the basic needs which include food, clothes, hunger, thirst,shelter, sleep and sex. If physiological needs are not satisfied, the higher level needs will not be emerged.
2) Safety/Security Needs : These needs provide security and protection from physical and emotional harm. These needs include job security, stability of income, pension plans, etc.
3) Social Needs : These needs refer to affection, sense of belongingness, acceptance and friendship. Informal organisation helps to satisfy the social needs of an individual.
4) Esteem Needs : These include factors such as self-respect, autonomy status, recognition and attention.
5) Self Actualisation Needs: It is the highest level of need in the hierarchy. Self actualisation is the need to maximise one’s potential, whatever it may be. These needs include growth, self-fulfilment and achievement of goals

Question 7.
Amal is the newly elected leader of Seven Hills School. Suggest the qualities he should have to become a good leader.(MARCH-2013)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 8.
Mr. Ram Mohan is a newly appointed MBA in the marketing Department of a firm. There are 50 7 employees under him and he is very active and enthusiastic in his duties. State the qualities should he acquire to become a good leader. (MAY-2013)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 9.
Explain briefly the various qualities to be possessed by a good leader. (MAY-2016)
Answer:
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.

Question 10.
Explain the term directing in the context of management.Briefly explain the salient principles of directing. (MAY-2017)
Answer:
a) Meaning : Directing refers to the process of in¬structing, guiding, counselling, motivating and leading people in the organisation to achieve its objectives.
b) Principles of Directing
1) Maximum Individual Contribution: This principle emphasises that directing techniques must help every individual in the organization to contribute to his maximum potential for achievement of organisational objectives.
2) Harmony of Objectives : The objectives of individual and organization must be in harmony with each other.
3) Unity of Command : This principle insists that a person in the organisation should receive instructions from one superior only.
4) Appropriateness of Direction Technique : According to this principle, appropriate motivational and leadership techniques should be used while directing the people.
5) Managerial Communication : Effective managerial communication across all the levels in the organisation makes direction effective.
6) Use of informal organization : Managers must make use of informal structure in the formal organisation forgetting correct and real feedback.
7) Leadership : While directing the subordinates, managers should exercise good leadership.
8) Follow through : Managers must continuously review whether the instructions are being understood and followed by the employees or not.

Plus Two Business Studies Directing 8 Marks Important Questions

Question 1.
“Incentives contribute to the performance of the employees.”(MAY-2013)
a) Do you agree with this statement?
b) Justify your view points.
c) Mention the various monetary incentives
Answer:
a) Yes
b) Financial and Non-Financial Incentives: Incentive means all measures which are used to motivate people to improve performance. These incentives maybe-
Financial Incentives: Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. Financial incentives are:
a) Pay and allowances : It includes basic pay, dearness allowances and other allowances.
b) Commission: Underthis system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
c) Bonus : Bonus is an incentive offered over and above the wages/salary to the employees.
d) Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organisation.
e) Co-partnership/ Stock option : Under these incentive schemes, employees are offered company shares at a price which is lower than market price.
f) Retirement Benefits : Several retirement benefits such as provident fund,, pension, and gratuity provide financial security to employees after their retirement.
g) Perquisites: It includes car allowance housing, medical aid, and education to the children, etc., over and above the salary.

Question 2.
a) “It is a process of instructing, guiding, motivating and leading people in the organisation to achieve its objectives.”
Identify the definition and briefly explain the elements of it.(MARCH-2016)
1) Supervision 2) Motivation
3) Leadership 4) Communication
Answer:

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.
Motivation: Motivation is the process of stimulating people to action to accomplish desired goals. Motivation depends upon satisfying needs of people. Leadership : Leadership can be defined as the process of influencing the behaviour of employees at work towards the accomplishment of organisational objectives.
Communication: Communication may be defined as an exchange of facts, ideas, opinions or emotions between two or more persons to create mutual understanding.

Question 3.
b) What do you mean by incentive? Briefly explain different types of incentives. (MARCH-2016)
Answer:
Financial and Non-Financial Incentives : Incen¬tive means all measures which are used to motivate people to improve performance. These incentives may be –
Financial Incentives : Financial incentives refer to people for better performance. Financial incentives . are:
a) Pay and allowances : It includes basic pay, dearness allowances and other allowances.
b) Commission: Urttferthis system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
Non-Financial Incentives: Incentives which are not measurable in terms of money are called Non-Financial Incentives. These incentives are essential forsatisfying psychological, social and emotional needs. Some of the important non-financial incentives are:
a) Status: status means ranking of positions in the organisation. Psychological, social and esteem needs of an individual are satisfied by status given to their job.
b) Organisational Climate : It includes individuals autonomy, reward orientation, consideration to employees, etc. These characteristics influence the behaviour of individuals in the organization

Question 4.
Pecuniary and non-pecuniary incentives are used to motivate employees to improve their performance. Explain the pecuniary and non-peruniary incentives used by organizations now-a-days. (MARCH-2017)
Answer:
Financial Incentives: Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. Financial incentives are:
a) Pay and allowances : It includes basic pay, dearness allowances and other allowances.
b) Commission: Underthis system, a sales person is guaranteed a minimum wage as well as commission on sales. A commission plan motivates him to work better.
c) Bonus : Bonus is an incentive offered over and above the wages/salary to the employees.
d) Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organisation.
e) Co-partnership/ Stock option : Under these incentive schemes, employees are offered company shares at a price which is lower than market price.
f) Retirement Benefits : Several retirement benefits such as provident fund,, pension, and gratuity provide financial security to employees after their retirement.
g) Perquisites: It includes car allowance housing, medical aid, and education to the children, etc., over and above the salary.
Non-Financial Incentives: Incentives which are not measurable in Terms of money are called Non- Financial Incentives. These incentives are essential for satisfying physiological, social and emotional needs. Some of the important non-financial incentives are:
a) Status: status means ranking of positions in the organisation. Physiological, social and esteem needs of an individual are satisfied by status given to their job.
b) Organisational Climate : It includes individual autonomy, reward orientation, consideration to employees, etc. These characteristics influence the behaviour of individuals in the organization.
c) Career Advancement Opportunity: Managers should provide opportunity to employees to improve their skills and be promoted to the higher level jobs.
d) Job Enrichment: It is a method of motivating employee by making the task to be performed by him more interesting and challenging.
e) Employee Recognition Programmes : It includes Congratulating the employee for good performance, Displaying on the notice board about the achievement of employee, installing award or certificate for best performance and Distributing mementos or complimentaries etc.
f) Employee Participation : It means involving employees in decision making of the issues related to them.

Question 5.
What is leadership? What qualities should a leader possess to become a successful one? Briefly ex¬plain its different styles. (MARCH-2017)
Answer:
Leadership : Leadership can be defined as the process of influencing the behaviour of employees at work towards the accomplishment of organisational objectives.
Qualities of Good Leader
1) Physical Features : Physical features like height, weight, health, appearance determine the physical personality of a leader.
2) Knowledge: A good leader should have required knowledge and competence.
3) Honesty: A leader should possess high level of honesty.
4) Initiative : A leader should have courage and initiative.
5) Communication Skills : A leader should have the capacity to clearly explain the ideas.
6) Motivation Skills : The leader should have the ability to motivate the subordinates by satisfying their needs.
7) Self Confidence: A leader should have high level of self confidence.
Leadership Style
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.

Kerala State Board New Syllabus Plus Two Business Studies Chapter Wise Previous Questions and Answers Chapter 6 Staffing.

Kerala Plus Two Business Studies Chapter Wise Previous Questions Chapter 6 Staffing

Plus Two Business Studies Staffing 1 Mark Important Questions

Question 1.
Mr. Sajan is working as Human Resource Manager of an automobile manufacturing unit. One of the following combinations represents his functions. Identify it. (MARCH-2009)
a) Recruitment, branding, dividend decision
b) Selection, training, recruitment
c) Selection, recruitment, marketing
d) Training, pricing, promotion
Answer:
Selection, training, recruitment

Question 2.
Which one of the following functions is not related with staffing function? (MAY-2009)
a) Recruitment of employees
b) Selection of employees
c) Compensation of employees
d) Motivation of employees
Answer:
Motivation of employees

Question 3.
Observe the following sources of recruitments: (MAY-2011)
i) Advertisement
ii) Promotion
iii) Employment Exchange
iv) College Campus
a) Spot the odd one
b) Give justfication to your answer.
Answer:
Promotion. All others are external sources of recruitment.

Question 4.
_________ is the non-paid form of non-personal communication. (MARCH-2012)
Answer:
Publicity

Question 5.
Mr.Roshan and Electrical diploma holder, has been appointed as an apprenticeship trainee in the KSEB. Roshan does not know anything about apprenticeship. Being a friend of him, explain the meaning of apprenticeship to his Illiterate parents. (MAY -2013)
Answer:
Under this method, a trainee is put under supervision of an experienced experts.

Question 6.
Sony, the newly appointed staff of Alpha Food Products Ltd. is given training in accounts, purchase, production and quality control sections in each week. Identify the training method. (MARCH-2014)
Answer:
Job Rotation

Question 7.
Shifting the employee from one department to another or from one job to another as part of training is known as ______ (MAY-2016)
a) Internship
b) Coaching
c)Job rotation
d) Apprenticeship
Answer:
c) Job rotation

Question 8.
Which one of the following sources of recruitment is not an external source? (MAY-2017)
a) Employment Exchange
b) Promotion
c) Casual Callers
d) Campus Recruitment
Answer:
b) Promotion

Plus Two Business Studies Staffing 2 Marks Important Questions

Question 1.
State any two benefits of training the employees in an organisation. (FEBRUARY – 2009)
Answer:
a) It enhances employee productivity both in terms of quantity and quality, leading to higher profits
b) Training helps in securing promotion and career growth.

Question 2.
Mr. Alex wishes to start a medium type business unit. He decided to employ 25 candidates for different posts. Which source of recruitment he can adopt? Justify your answer. (MARCH-2009)
a) Internal source only
b) External source only
c) Both internal and external
d) Neither internal or external
Answer:
External source only. Internal source of recruitment is not possible because it is a new firm.

Question 3.
Mr. Mohan Kumar, the HRM Manager of Global Bank Ltd. wants to appoint 50 computer operators for their different branches in Kerala from internal sources. Name any two internal sources forthe recruitment. (MAY-2010)
Answer:
Transfer, Promotion.

Question 4.
“In transfer, there is no change in the status and compensation of the employees.” (MARCH-2012)
State your opinion and justify your answer
Answer:
Yes.
Transfer: It involves shifting of an employee from one job to another without change in responsibility or compensation.

Question 5.
Prepare a flow-chart showing different steps in selection process. (MARCH-2016)
Answer:
Steps in Selection
1) Preliminary Screening
2) Selection tests
3) Interview
4) Reference & Background Check
5) Final Selection
6) Medical Examination
7) Job offer
8) Signing of Employment Contract

Plus Two Business Studies Staffing 3 Marks Important Questions

Question 1.
T.K.Trading Company selected 5 B.Com Graduates forthe post of accountant in their organisation. The chief accounts officer of the company decided to provide training to these employees, while they are actually engaged in their work.
Identify and explain the different types of training programmes which can be used in this case. (MAY-2009)
Answer:
On the job training
b) 1) Apprenticeship Programme
2) Coaching
3) Internship Training
4) Job Rotation

Question 2.
Training is beneficial not only to the employers but also to the employees. Comment. (MARCH -2010)
Answer:
1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 3.
Classify the following as internal and external sources of recruitment: (MARCH-2010)
a) Advertisement
b) Transfer
c) Campus recruitment
d) Promotion
e) Employment Exchange
f) Job Contractors
Answer:
Internal sources of recruitment: Transfer, Promotion. External sources of recruitment – Advertisement, Campus recruitment, Employment exchange, Job contractors.

Question 4.
Differentiate between recruitment and selection. (MAY-2016)
Answer:

Question 5.
Match the following: (MARCH-2017)

Answer:

Question 6.
The extent to which sophistication and complexity is increasing, it demands for refined skill sets among existing employees. Explain the two different ways by which an organisation can achieve this. (MAY-2017)
Answer:
The two ways are: (1) Training (2) and Development
1) Training : Training is any process by which the aptitudes, skills and abilities of employees to perform specific jobs are increased.
2) Development: Development refers to the overall growth of the employee. It includes personality development, motivation for growth, career planning, n etc. Development equip the employees to take up future responsibilities of the organisation.

Plus Two Business Studies Staffing 4 Marks Important Questions

Question 1.
In a classroom debate Jith argues that recruitment and selection are same. Anoop argues that both are different. (MARCH-2009)
a) Whom do you support? Give justification.
b) If you are supporting Anoop, which one comes first?
Answer:
a) Recruitment: Recruitment may be defined as the process of searching for prospective employees and stimulating them to apply for jobs in the organisation.
Selection : Selection is the process of selecting the most suitable candidates from a large number of applicants.
b) Recruitment is The first process.

Question 2.
Smt. Nija is newly appointed as Assistant Personnel Manager in a manufacturing unit. You have to give her a detailed idea about various types of tests conducted for selecting candidates. (MARCH-2010)
Answer:
a) Intelligence Tests : This is one of the important psychological tests used to measure the level of intelligence quotient (IQ) of an individual.
b) Aptitude Test: It is a measure of individual’s potential for learning new skills.
c) Personality Tests : Personality tests provide clues to a person’s emotions, reactions, maturity and value system, etc.
d) Trade Test: These tests measure the existing skills of the individual.
e) Interest Tests : Interest tests are used to know’ the pattern of interests or involvement of a person.

Question 3.
Mr.Rasheed sent an application to the post of an Assistant Manager in Jacks FM Radio. Explain the process that Mr. Rasheed has to undergo before he is to be selected to that post. (MARCH-2011)
Answer:
1) Preliminary Screening
2) Selection Tests
3) Employment Interview
4) Reference and Background Checks
5) Final Selection
6) Medical Examination
7) Job Offer
8) Employment Contract

Question 4.
Identify the management function from the following statement. Also explain different sources of it. “It is the process of searching for prospective employees and stimulating them to apply for job in the organization.(MARCH-2012)
Answer:
External Sources: Selection of employees from outside the enterprise is known as external recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Jobseekers assemble outside the premises of the organisation on the’specrfied date and selection is done on the spot. It is suitable forfilling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement : Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees : Applicants introduced by present employees, ortheirfriends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated forthe purpose of providing information to the job seekers.

Question 5.
Briefly explain the various methods of on- the -job training.(MARCH-2012)
Answer:
is given training when he is on the job. It means learn-ing while doing. The important On the Job Methods are:
On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Question 6.
Zodiac Ltd, is contemplating to recruit employees and workers for its proposed overseas project. Write a brief not indicating the various tests used for selection employees.(MAY-2010)
Answer:
Selection Tests : Various tests are conducted to know the level of ability, knowledge, interest, apti¬tude, etc. of a particular candidate. The various types of tests are:
a) Intelligence Tests : This is one of the important psychological tests used to measure the level of intelligence quotient (IQ) of an individual.
b) Aptitude Test : It is a measure of individual’s potential for learning new skills.
c) Personality Tests : Personality tests provide clues to a person’s emotions, reactions, maturity and value system, etc.
d) Trade Test : These tests measure the existing skills of the individual.
e) Interest Tests : Interest tests are used to know the pattern of interests or involvement of a person.

Plus Two Business Studies Staffing 5 Marks Important Questions

Question 1.
Distinguish between recruitment and selection process (FEBRUARY – 2009)
Answer:
Differences between training and development

Question 2.
Human Resource Department of Sachin Power Limited proposed to conduct two programmes for the employees in the organisation. First one to the office staff to provide knowledge and skill in Linux operating system. And second one to higher level managers for their overall growth.(MAY-2009)
a) Identify and differentiate between the two programmes of the Human Resource Department.
b) Differences between training and development.
Answer:
a) Training and Development
b) Differences between training and development

Question 3.
There are different methods of training. Identify and explain each such method. (FEBRUARY – 2010)
Answer:
Training methods: There are two methods of training
1) On the job training.
2) Off the job training .

On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Off the Job Method : It refers to those methods under which an individual is provided training away from the work place. It means learning before doing. The important Off the Job Methods are:
a) Class room Lectures/Conferences : The lecture approach is well adapted to convey specific information such as rules, procedures or methods. The use of audio-visuals can often make a formal classroom.
b) Films : They can provide information and demonstrate skills.
c) Case Study : Trainee studies the cases to determine problems, analyses causes, develop alternative solutions and select the best solution to implement.
d) Computer Modelling : It stimulate the work environment by programming a computer to imitate the realities of the job and allows learning to take place without the risk or high cost.
e) Vestibule Training : Under this method, separate training centres are setup to give training to the new employees. Actual work environment is created in that centre and employees used the same material, equipment, etc. which they use while doing the actual job.
f) Programmed Instruction : Here information is broken into meaningful units and these units are arranged in a proper way to form a logical and sequential learning package.

Question 4.
Training is the art of increasing the knowledge and skills of an employee for doing a particular job. (MAY-2010)
a) Do you agree with the statement? (MARCH-2010)
b) Write any four advantages of training.
Answer:
a) Yes.
b) Importance of Training

A. Benefits to the Organisation

1) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
2) Training reduces absenteeism and employee turnover.
3) It helps to obtaining effective response to the changing environment.
4) Training increases employee morale.
5) If the employees are given adequate training, the need for supervision is minimum.
6) Trained employees can use materials and machines economically. It helps to reduce cost of production.

B. Benefits to the Employee

1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 5.
Wipro – India Ltd. selected 30 fresh Software Engineers for the company. The personnel management decided to give training to the new employees at the work place itself. (MARCH-2011)
Which method of training is mentioned here? Explain its different ways. Also explain the importance of training.
Answer:
On the job training

On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Importance of Training

A. Benefits to the Organisation

1) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
2) Training reduces absenteeism and employee turnover.
3) It helps to obtaining effective response to the changing environment.
4) Training increases employee morale.
5) If the employees are given adequate training, the need for supervision is minimum.
6) Trained employees can use materials and machines economically. It helps to reduce cost of production.

B. Benefits to the Employee

1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 6.
In a classroom discussion, Manesh argues that materials and machines are most essential elements of a business unit. Arun argues that without the productive efforts of the workers the materials and machines would be of no use. (MARCH-2012)
1) Whose argument do you support?
2) State five reasons.
Answer:
a) Arun’s argument is right
b) Importance of Staffing
1) Helps in discovering and obtaining competent personnel for various jobs.
2) Makes for higher performance, by putting right person on the right job.
3) Ensures continuous survival and growth of the enterprise.
4) Helps to ensure optimum utilization of the human resources.
5) Improves job satisfaction and morale of employees.

Question 7.
Yasir is a newly appointed manager of Moon Ltd. He is of the view that training will increase productivity of his employees in the organisation. Do you agree with his views? Give the importance of training . (MARCH-2013)
Answer:
Yes
b) Importance of Training

A.Benefits to the Organisation

1) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
2) Training reduces absenteeism and employee turnover.
3) It helps to obtaining effective response to the changing environment.
4) Training increases employee morale.
5) If the employees are given adequate training, the need for supervision is minimum.
6) Trained employees can use materials and machines economically. It helps to reduce cost of production.

B. Benefits to the Employee

1) Training helps in securing promotion and career growth.
2) Increased performance by the individual helps him to earn more.
3) Training helps to reduce the chances of accident and wastages.
4) Training increases the satisfaction of employees.

Question 8.
Mr.Hari started an industrial unit in Tamil Nadu. His son Manu, your friend appointed as H.R.Manager. Manu appoint 25 staff in different posts. Advise Manu, about different types of training possible here. (MARCH-2014)
Answer:
On the Job Method : Under this method the employee is given training when he is on the job. It means learning while doing. The important On the Job Methods are:
a) Apprenticeship Programme : Under apprenticeship training, a trainee is put under the supervision of a master worker.
b) Coaching : In this method, the superior guides and instructs the trainee as a coach.
c) Internship Training : It is a joint programme of training in which vocational and professional institutes enter into an agreement with business enterprises for providing practical knowledge to its students.
d) Job Rotation : Here the trainee is transferred from one job to another job or from one department to another department so that he can learn the working of various sections.

Question 9.
As attracted by ‘Make in India Scheme’ of govt., RR Autos, a German based company started a car manu-facturing unit in Tamil Nadu.lt requires candidate for different positions in its main plant. What external sources are available to them to fill up different posts? (MARCH-2016)
Answer:
i)Direct recruitment
ii) Advertisement
iii) Casual callers
iv) Web publishing
v) Labour contractors
vi) Employment exchange
vii) Placement and management consultants
viii) Recommendations
External Sources: Selection of employees from outside the enterprise is known as external . recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Job seekers assemble outside the premises of the organisation on the’specified date and selection is done on the spot. It is suitable for filling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement : Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees : Applicants introduced by present employees, or their friends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated for the purpose of providing information to the job seekers.

Question 10.
“It’s a managerial function of filling and keeping filled the positions in the organisations structure.” Identify the management function and state different steps followed in it. (MARCH-2017)
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.
5) Training and Development : The process of training helps to improve the job knowledge and skill of the employees. It motivates the employees and improve their efficiency.
6) Performance Appraisal : Performance appraisal means evaluating an employee’s current and past performance as against certain predetermined standards.
7) Promotion and Career Planning : Promotion means movement of an employee from his present job to a higher level job.
8) Compensation : Compensation refers to all forms of pay or rewards going to employees. It may be in the form of direct financial payments like wages, salaries, commissions and indirect payments like employer paid insurance and vacation.

Plus Two Business Studies Staffing 8 Marks Important Questions

Question 1.
Mr.M.K.Nambiar, the newly appointed Personnel Manager of Hindustan Aeronautics Ltd. wants to identify the sources of man power to fill various job positions in the company. Can you help him to identify different sources he would use? (MARCH-2011)
Answer:
Sources of Recruitment
There are two sources of recruitment.
1) Internal sources .
2) External sources
Sources of Recruitment
There are two sources of recruitment.
1) Internal sources
2) External sources
Internal Sources: It refers to the recruitment for jobs from within the organisation. It includes:
1) Transfer: It involves shifting of an employee from one job to another without change in responsibility or compensation.
2) Promotion: It refers to shifting of a person from lower position to a higher position carrying higher status, responsibility and more salary.
External Sources: Selection of employees from outside the enterprise is known as external . recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Job seekers assemble outside the premises of the organisation on the specified date and selection is done on the spot. It is suitable for filling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement : Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees: Applicants introduced by present employees, or their friends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated for the purpose of providing information to the job seekers.

Question 2.
Mr. Padma Kumar, the personnel manager of National Manufacturing Co. is confronted with the problem of recruitment of 10 Clerks – cum – Accounts. (MAY-2013)
Explain the sources of recruitment. Also explain its merits & demerits.
Answer:
Internal Sources : It refers to the recruitment for jobs from within the organisation. It includes:
1) Transfer: It involves shifting of an employee from one job to another without change in responsibility or compensation.
2) Promotion : It refers to shifting of a person from lower position to a higher position carrying higher status, responsibility and more salary.
External Sources : Selection of employees from outside the enterprise is known as external . recruitment. The important external sources of recruitment are:
1) Direct Recruitment : Under the direct ‘ recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Job seekers assemble outside the premises of the organisation on the specified date and selection is done on the spot. It is suitable for filling casual vacancies.
2) Casual callers : Many reputed business organisations keep a database of unsolicited applicants in their office. These list can be used for recruitment.
3) Advertisement: Advertisement in newspapers or trade and professional journals is generally used when a wider choice is required.
4) Employment Exchange : Employment exchanges keep records of job seekers and will be supplied to business concern on the basis of their requisition.
5) Placement Agencies and Management Consultants : These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients.
6) Campus Recruitment : Business enterprises may conduct campus recruitment in educational institutions for selecting young and talented candidates.
7) Recommendations of Employees: Applicants introduced by present employees, or their friends and relatives may prove to be a good source of recruitment.
8) Labour Contractors : Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice.
9) Web Publishing : There are certain websites specifically designed and dedicated for the purpose of providing information to the job seekers.