The theory of the firm under perfect competition — Economics STD 12 Humanities & Commerce — Question

Explain the equilibrium level of income with the help of saving and investment curves. If savings exceed planned investment, what changes will bring about the equality between them?

OR

Explain with the help of a diagram and using Saving = Investment approach the determination of equilibrium output and income level in an economy. What happens when the economy is not in equilibrium and saving exceeds investment?

Explain the implications of the following:

1. Freedom of entry and exit of firms under perfect competition.
2. Non-price competition under oligopoly.

What is ‘effective demand’? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?

Demand for electrical appliances like induction chulazas, heaters etc have increased due to increase in the price of LPG. However, in short run supply of these appliances remains constant. What will be the effect on the equilibrium price of these electrical appliances in the given scenario? In this case, which values are being highlighted by the demanders of electrical appliances?

Distinguish between inferior good and normal good. Explain the effect of change in income on the demand curve of each good. Use diagram.

OR

Distinguish between normal goods and inferior goods, with examples.

Are the following a part of a country's 'net domestic product at market price'? Explain:

1. Net indirect taxes.
2. Net exports.
3. Net factor income from abroad.
4. Consumption of fixed capital.

At a price of Rs 4, there is a demand for 25 units of an article. If the price of an item increases to Rs 5, the demand decreases to 20 units. Calculate the price elasticity of demand. Explain the range of price elasticity of demand and on the basis of this classify goods into essential and luxury goods.

Explain 'non-monetary exchanges' as a limitation of using gross domestic product as an index of welfare of a country.

Calculate (a) net national product at market price, and (b) gross national disposable income:

		₹  in crores
(i)	Compensation of employees	250
(ii)	Mixed income of self-employed	600
(iii)	Profit	80
(iv)	Rent	30
(v)	Interest	40
(vi)	Net factor income to abroad	(–) 10
(vii)	Net exports	15
(viii)	Consumption of fixed capital	20
(ix)	Net indirect taxes	10
(x)	Net current transfers to abroad	8

Why does the demand for foreign currency fall and supply rises when its price rises? Explain.