NLUJAA

National Law University and Judicial Academy, Assam

B.A., LL.B. (Hons.): I Year, I Semester
(Academic Year: 2022-23)
Mid Semester Examination Test (September, 2022)
Subject Code: 102 Economics (Major-I)

Time: 2:00 Hrs.

Total Marks: 40
INSTRUCTIONS:
1. Read the questions carefully and answer.
2. Unnecessary queries on the Question Paper shall not be entertained.
3. Do not write anything on the question paper. It will be treated as malpractice.

Question No. 1 is compulsory. Answer any two questions from Question No. 2 to 4.
1. Select the most appropriate option. (2x5=10 marks)
A. The opportunity cost of any action is:
(i) All the possible alternatives forgone
(ii) The next best alternative forgone
(iii) The time required but not the monetary cost
(iv) The monetary cost but not the time required
B. The following are causes of shift of demand curve, except for:
(i) Change in income
(ii) Change in price
(iii) Change in fashion
(iv) Change in prices of substitutes
C. A point inside a production possibility curve (PPC)
(i) Could indicate that some resources are unemployed
(ii) Is unattainable
(iii) Is better than points on the PPC
(iv) Implies that too much capital and not enough labour are being used
D. The horizontal demand curve parallel to x-axis implies that the elasticity of demand
is:
(i) Zero
(ii) Infinite
(iii) Equal to one
(iv) Greater than zero but less than infinity
E. If the demand for a good is less elastic (Ep<1), an increase in its price will cause the
total expenditure of the consumers of the good to:
(i) Increase
(ii) Decrease
(iii) Remain the same
(iv) Become zero

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2. (a) Explain the term ‘change in demand’ and represent the same graphically. Also state
three factors responsible for change in demand. (6 marks)

(b) A teacher is getting Rs. 6000 per month as salary. If he leaves the job and starts
tuition work, he is expected to earn Rs. 5000 per month. What would be his
opportunity cost and why? (2 marks)

(c) Suppose that, originally, a product was sold for Rs. 10 and the quantity demanded
was 1000 units. The product price changes to Rs. 14 and as a result the quantity
demanded changes to 500 units. Calculate the price elasticity of demand and
comment on the type of elasticity. (3 marks)

(d) Explain how Income effect is a reason behind Law of Demand. (4 marks)

3. (a) Price elasticity of demand of a good is (-) 1. The consumer buys 50 units of that
good when price is Rs. 2 per unit. How many units will the consumer buy if the
price rises to Rs. 4 per unit? Answer this question with the help of the Total
Expenditure Method of determining price elasticity of demand. (4
marks)

(b) When is the demand of a commodity said to be (i) elastic, (ii) inelastic, and (iii)
unitary elastic? Substantiate your answer with suitable diagrams and explanation
of the same. (9 marks)

(c) How does availability of close substitutes of a good affect the price elasticity of
demand of that good? Explain. (2 marks)

4. (a) The following is a production possibility table for War Goods and Civilian Goods:
Combination A B C D E
Automobiles
1 2 3 4 5
(in thousands)
Rifles
10 9 7 4 0
(in lakhs)

(i) Show these production possibilities through a PPC. What do the points
on the curve indicate?
(ii) Label point G inside the curve. What does this point indicate?
(iii) Label point H outside the curve. What does this point indicate?
(iv) What must an economy do to attain the level of production indicated by
point H?
(v) What is the shape of the PPC and why? (9 marks)

(b) Explain briefly the central problems of an economy. (6 marks)

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