3 Marks Question

Question 13 Marks

Explain ‘large number of buyers and sellers’ feature of perfectly competitive market.

Answer

A perfectly competitive market is dominated by a very large number of buyers and sellers of a commodity. This means that there is no such buyer who can influence the market price on its own by changing his individual demand. Further the number of sellers is so large that no individual firm owns the control over the market price of the commodity. Thus, firms have no role to play other than supplying the required output at the existing market price and therefore a firm is a price taker and not a price maker. Thus we can conclude that each buyer/seller in perfect competition has to accept the price as prevailing in the market.

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Question 23 Marks

Classify the following statements into positive economics or normative economics, with suitable reasons:
a. Government should try to control the rising fiscal deficit.
b. Real Gross Domestic Product (GDP) is calculated on the basis of base year price.

Answer

a. Normative statement- it deals with a situation as it ‘What ought to be’.
b. Positive statement- it deals with a real life situation, justifiable by facts.

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Question 33 Marks

Draw PPC for an economy, if production possibilities are as under. Also find marginal opportunity cost.

Shirt (Millions)	0	1	2	3	4	5
Computer (Thousands)	15	14	12	9	5	0

Answer

Shirt (Million)	Computer (Thousands)	Marginal Opportunity Cost
0	15	-
1	14	$\frac{1}{1}=1$
2	12	$\frac{2}{1}=2$
3	9	$\frac{3}{1}=1$
4	5	$\frac{4}{1}=1$
5	0	$\frac{5}{1}=1$

PPC is shown below:

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Economics 3 Marks Question

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