Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question

Why is speculative demand for money inversely related to the rate of interest?

Explain various degrees of price elasticity of supply. Use diagrams.

Explain the implications of the following in a perfectly competitive market:

1. Large number of buyers.
2. Freedom of entry and exit of firms.

Find net domestic product at factor cost and personal income:

		(Rs. crores)
(i)	Rent	200
(ii)	Net current transfers to abroad	10
(iii)	National debt interest	60
(iv)	Corporate tax	100
(v)	Compensation of employees	900
(vi)	Current transfers by government	150
(vii)	Interest	400
(viii)	Undistributed profits	50
(ix)	Dividend	250
(x)	Net factor income to abroad	(-) 10
(xi)	Income accruing to government	120

On the basis of the information given below, determine the level of output at which the producer will be in equilibrium. Use the marginal cost-marginal revenue approach. Give reasons for your answer.

Output (Units)	Average Revenue(₹)	Total Cost(₹)
1	7	7
2	7	15
3	7	22
4	7	28
5	7	33
6	7	40
7	7	48

Is a producer in equilibrium under the following situations:

1. When MR > MC
2. When MR = MC

Give reasons for your answer.

Giving reasons, explain how the following are treated in estimating national income:

1. Wheat grown by a farmer but used entirely for family’s consumption.
2. Earnings of the shareholders from the sale of shares.
3. Expenditure by government on providing free education.

Explain the conditions of producer’s equilibrium with the help of a numerical example. Use marginal cost and marginal revenue approach.

What are the conditions of consumer’s equilibrium under the indifference curve approach? What changes will take place if the conditions are not fulfilled to reach equilibrium?