DELHI PRIVATE SCHOOL — DUBAI HALF YEARLY EXAM (2023-2024) HY44 EC MN 2023-24 ECONOMICS - 030 CLASS -XI MAX. MARKS- 80 DURATION-3 Hr General Instructions:- «© Paper is in two sections. + All questions are compulsory, however there is internal choice in questions. + Please write as per the marks. PART-A_ STATISTICS FOR ECONOMICS Qi CASE STUDY 4 Read the following case study and answer questions 1 to 3 Sometimes formulation of plans and policies requires the knowledge of future trends. For example, an economic planner has to decide in 2019 how much the economy should produce in 2020. In other words, one must know what could be the expected level of consumption in 2020 in order to decide the production plan of the economy for 2020. In this situation one might make subjective judgment based on the guess about consumption in 2020. Alternatively, one might use statistical tools to predict consumption of past years or of recent years obtained by surveys. Thus, statistical methods help to formulate appropriate economic policies that solve economic problems. Fill in the blanks Statistical methods help to analyze ——------- and formulate to solve them. Q2 ‘Which of the following statements is incorrect? 1 (a) Resources have alternative uses (b) All numbers are Statistios (©) Macroeconomics studies large aggregates (c)Statistics studies only the aggregates of quantitative facts Q3 Statistics is applied in — (A)Economics Business management (B) Commerce and industry (C) Economic theories (D) All of these OR In singular sense, the term statistics has been defined as ---- Exit Polls is an interesting example of ine (A). Haphazard Sampling (8). Stratified Sampling (C). Quota Sampling (D). Random Sampling Q5 ‘Schedules are filled by the:(a)investigator (b) Enumerator (c Informant (d) None of these Government of India conducted a survey on citizen amendment act in West Bengal by sex a6 and location and presented its report in the form of a table. The type of classification used in tabulation is termed as : (a) Temporal (b) Qualitative (c) Spatial Quantitative Q7 | From the following data, how much percent of persons are earning more than Rs. 1499, Income in Rs, No. of persons 500-999 15 1000-1499 28 1500-1999 Sea Peer |[2000-2499 Sd a) 50% b) 45% 40% 4) 60% ‘Q8 | State whether the following statements are True or False with reason. i) There are many sources of data ii) There is a certain bias involved in the non-random selection of samples. ili) Secondary data is available only from external sources. ‘9 | Construct a pie diagram to represent the cost of construction of a house in Ajmer. tems Percentage of expenditure Labour 20 Bricks 15 Cement, 25 Steel 10 Timer 20 Supervision 10 Or Make a frequency curve using the given data: it HE Marks Obtained [10-20 [20-30 | 30-40, 40-50 50-60 No. of students | 5 12 15. 22 14 4 ‘ato The average marks in statistics of 10 students of a class were 68. A new student took admission with 72 marks whereas two existing students left the college. If the marks of the students were 40 and 39, find the correct average marks. ‘Q11 | There are 10 students in your school who excel in the game of cricket. All are equally brilliant, but you are to select only 3 out of 10 for representing your school in the inter-zonal cricket tournament. How would you do it? Give details with reason.The marks obtained by 25 students in a class are as follows: Q12 | 22, 28, 30, 32, 35, 37, 40, 41, 43, 44, 45, 45, 48, 49, 52, 53, 54, 56, 56, 58, 60, 62, 65, 68, 69 i. Arrange the above data in the form of a frequency distribution taking class interval 20-29, 30-39, 40-49, 50-59, 60-69 ii. Form the less than cumulative frequency distribution also. Q13 | Calculate arithmetic mean from the following data using step deviation meth. Size 20-29 30-39 40-49 50-59 Frequency 10 8 6 4 Q14 | Draw ‘Less than ogive’ and ‘More than ogive’ from the given data Profit (in 0-20 20-40 40-60 60-80 lakhs) No. of 10 20 40 5 15 companies Q15 | A) The arithmetic mean of 7 numbers is 30. If 7 is added to every observation, what would be | 6 the new mean? 8) The mean profit per shop is Rs 28. Calculate the no. of shops corresponding to class interval 30-40 of the following distribution: Profit per [0-10 10-20 20-30 30-40 740-50 30-60 shop(Rs.) No of 12 18 oy ? 7 6 shops Or A) The arithmetic mean of 4 numbers is 50. If 3 is multiplied to every observation, what would be the new mean? B) Find the missing frequency from the following data if average marks are 17: C1 0-5 S-10_[_ 10-15 [15-20 [20-25] 25-30 30-35 F 10 2 16. 2 14 10 g Part B(Microeconomics) ‘Qi | Read the following statements- Assertion (A) and Reason (R). Choose one of the correct alternatives given below: Assertion (A): Choice is the process of selection from available limited alternatives. Reason (R): Resources are scarce and have alternative uses. Alternatives: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)| (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A) (©) Assertion (A) is true but Reason (R) is false. (d) Assertion (A) is false and Reason (R) is false. O17 True and False with reasons PPF is concave shaped as production of one good can be increased only by reducing quantity of another good ais Opportunity cost is the a) Number of units sacrificed b) Number of units gained c) Cost of next best alternative forgone d) None of these Q19 Slope of budget line is: a) PxiPy b) Py/Px c) MRS d) PxPy Q20 Read the following and answer questions 5 and 6 on the basis of the same: - | A consumer is an economic agent who uses goods and services for the direct satisfaction of his / her wants. Consumer consists of institution, individuals and groups of individuals or households. Consumer behavior refers to the way in which consumers spend their income. The consumer derives utility from his expenditure. The consumer chooses his expenditures and maximums his utility with the given income and given prices of goods and services. Consumption of goods and services leads to satisfaction of human wants. This satisfaction is called “Utilty’. Utlity may be defined as “satisfaction derived from the consumption of a commodity” or it may be defined as ‘want-satisfying power of a commodity’. Total Utility (TU) [tis the sum total of utility derived from the consumption of all the units of a commodity. Marginal Utility (MU) It refers to additional utility on account of the consumption of an additional unit of a commodity. Q. Marginal utility is: - (a) Total minus average utility (b) Addition to total utility (c) Total plus average utility (d) Total utility divided by the number of units Q21 Q22 ‘At the saturation point for commodity X, the MU is: - (a) Positive (b) Negative (c) Zero (d) Any of the above. Income effect in case of inferior quality goods will be: a) Positive b) Negative ©) Zero d) One Q23 A ise in price of a tea will lead to an/a movement in the demand curve of tea. 24 Choose the correct option:-‘Assertion (A): The demand for salt is inelastic Reason(R): Necessary goods have inelastic demand (@) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). () Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). (c) Assertion (A) is true but Reason (R) is false. (d) Assertion (A) is false but Reason (R) is true Q25 If price of a commodity rise by 20%, and Ed is 1, then its quantity demanded falls by a) 10% b) 20% c) No change d) 8% | Q26 Q27 | Following is the condition of consumer's equilibrium in case of a single commodity a) MU of good/price of good = MU of money b) Price of good/MU of good = MU of money c) MU of money/MU of good = price of good d) None of these ce i i ‘A consumer has total money income of 250 to be spent on two goods X and Y with prices of 25 and 10 per unit respectively. On the basis of the information given, answer the following questions: (a) Give the equation of the budget line for the consumer. (b) What is the value of slope of the budget line? (©) Calculate X and Y intercept. Q28 g What happens to the budget set if both the prices as well as the income double? Or A consumer consumes only two goods X and Y. At a consumption level of these two goods, he finds that the ratio of marginal utility of price in case of X is not equal to Y. Explain what will be the reaction of rational consumer. a2 8 ‘Categorize the following diagrams as expansion, contraction, increase or decrease in demand (assuming the given commodity) is a normal good. Explain with reason.| a aa* a aa Quantity Demanded Quantity Demanded ‘Quantity Demanded Gin units) {in units) {in units) @ o fa Q30 a) ‘An economy may operate inside the PPC even if there is full employment of resources. Defend or refute. b)ldentify and discuss the nature of the following newspaper reports in terms of positive or normative economic analysis: (i) “India jumped 23 points in the World Bank's ease of doing business index to 77th place, highest in 2 years." The Economic Times. (ii) "Government should further liberalize the business rules.” - The Economic Times. Q31 A dentist was charging 300 for a standard cleaning job and it used to generate total revenue equal to 30,000 per month. She has, since last month, increased the price of dental cleaning to 350. As a result, fewer customers are now coming for dental cleaning, but the total revenue is now 33,250. From this, what can we conclude about the elasticity of demand for her dental service? Or a) Price elasticity of demand for flowers and toys are respectively (-) 0.9 and (-) 0.5. Demand for which one is more elastic and Why? b) Differentiate between law of demand and price elasticity of demand 32 ‘A consumer consumes only two goods. Why is the consumer said to be in equilibrium when he buys only the combinations of two goods which lies at that point of indifference curve where the budget line is tangent to the indifference curve? Explain. Use diagram. Or a) Explain the concept of Marginal Rate of Substitution (MRS) by giving an example. What happens to MRS when consumer moves downwards along the indifference curve? Give reasons for your answer. b) A consumer consumes only two goods X and Y both priced at 3 per unit. If the consumer chooses a combination of these two goods with Marginal Rate of Substitution equal to 3, isthe consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Explain. Q33 The demand for commodity ‘A’ rises by 20% due to fall in price by Rs. 2 from the original price of Rs. 8 i) Calculate elasticity of demand by ‘Percentage method’. il) Whether demand of ‘A’ is elastic or inelastic? Give reason for your answer, il) What will be the shape of demand curve of A? iv) If new demand of commodity 'A’ is 84 units, then calculate its original demand. v) Determine the price elasticity by ‘Total Expenditure Method.’ vi) Whether price elasticity of demand calculated in (i) and (v) give the same answer?DELHI PRIVATE SCHOOL — DUBAI ECONOMICS - 030 oe ANSWER KEY CLASS -XI MAX. MARKS- 80 DURATION-3 Hr General Instructions:- + Paper is in two sections. «All questions are compulsory, however there is internal choice in questions. «Please write as per the marks. PART-A STATISTICS FOR ECONOMICS Qi CASE STUDY Read the following case study and answer questions 4 to 3 Sometimes formulation of plans and policies requires the knowledge of future trends. For ‘example, an economic planner has to decide in 2019 how much the economy should produce in 2020. In other words, one must know what could be the expected level of consumption in 2020 in order to decide the production plan of the economy for 2020. In this situation one might make subjective judgment based on the guess about consumption in 2020. Alternatively, one might use statistical tools to predict consumption of past years or of recent years obtained by surveys. Thus, statistical methods help to formulate appropriate economic policies that solve economic problems. Fill in the blanks Statistical methods help to analyze —-—-—- and formulate — Ans. (i) Economic problems | (ii) Policies --- to solve them Q2z Which of the following statements is incorrect? (a) Resources have alternative uses (b) All numbers are Statistics (c) Macroeconomics studies large aggregates (d)Statistics studies only the aggregates of quantitative facts Ans. B All numbers are Statistics Q3 Statistics is applied in ———— (A)Economics Business management (B) Commerce and industry (C) Economic theories (D) Allof these Ans. D OR HALF YEARLY EXAM (2023-2024) [Hv11 Ec MNAK 2023-24 |In singular sense, the term statistics has been defined as — Ans. Stages of Statistics Q4_ | Exit Polls is an interesting example of (A). Haphazard Sampling (8). Stratified Sampling (C). Quota Sampling (0). Random Sampling Ans. D z Q5_| Schedules are filled by the:-— 7 (a)Investigator (b) Enumerator (c )Informant (d) None of these Ans. B Government of India conducted a survey on citizen amendment act in West Bengal by sex [4 and location and presented its report in the form of a table. The type of classification used in tabulation is termed as (a) Temporal (b) Qualitative (c) Spatial (d) Quantitative Ans. (C) Spatial Q7_ | From the following data, how much percent of persons are earning more than Rs. 1499. 1 | [Income in Rs. ___[ No. of parsons [500-999 15 1000-1499 28 1500-1999 36 2000-2499 7 a) 50% b) 45% c) 40% d) 60% Ans.50% He Q8 | State whether the following statements are True or False with reason. 3 i) There are many sources of data There is a certain bias involved in the non-random selection of samples. ili) Secondary data is available only from extemal sources. Ans. l) False. There are only two sources of data. ii) True. iii) True. 9° | Construct a pie diagram to represent the cost of construction of a house in Ajmer. 3 items, Percentage of expenditure Labour 20 Bricks 1s Cement 25 Steel 10 Timer 20 ‘Supervision 10Or Make a frequency curve using the given data: Marks Obtained [10-20 [20-30 | 30-40 [40-60 [50-60 | 60-70 4 No. ofstudents [5 12 15 22 44 Q10 The average marks in statistics of 10 students of a class were 68. A new student took admission with 72 marks whereas two existing students left the college. If the marks of the students were 40 and 39, find the correct average marks. (Gomrected 2X — 680~ 40-90 + 72=673 cane Average Maes) = E273 074.78 maka Ane, Corract Average Marks = 74.78 marks Q11 | There are 10 students in your school who excel in the game of cricket. All are equally brilliant, but you are to select only 3 out of 10 for representing your school in the inter-zonal cricket tournament. How would you do it? Give details with reason. Ans. Random Sampling — Definition Because all items have equal chance The marks obtained by 25 students in a class are as follows: Q12 | 22, 28, 30, 32, 35, 37, 40, 41, 43, 44, 45, 45, 48, 49, 52, 53, 54, 56, 56, 58, 60, 62, 65, 68, 69 i. Arrange the above data in the form of a frequency distribution taking class interval. 20-29, 30-39, 40-49, 50-59, 60-69 ii Form the less than cumulative frequency distribution also. Marks | No. of Stu_ I Mm Tn nT Oy ex] o»/ 00] ro] 19.5-29.5, 29.5-39.5, 39.5-49.5 a] o/eola|ns|zMarks No. Less than 29.5 | 2 Less than 39.5 |6 Less than 49.5 | 14 Less than 59.5 | 20 Less than69.5 | 25 Q13 Calculate arithmetic mean from the following data using step deviation method. Size 20-29 30-39 40-49 50-59 60-69 Frequency | 10 8 6 4 2 Ans. Mid-Value Frequency d'madmn/c Class Interval (f) c=10 Here = X=5+2 x10 34.5 4 10 = Therefore, arithmetic mean of the given data is 37.83 =aia Qt | Draw ‘Less than ogive’ and ‘More than ogive’ from the given data: Profit (in 0-20 20-40 40-60 60-80 80-100 lakhs) No. of 10 20 a 15 15 companies Ans. F Profit (less _| No. of Profit (More | CF than) companies | Than) CF 20 10 0 100 40 30 20 90 60 70 40 70 80 85 60 30 100 100 80 15, 3 conversion 3 plotting =n A) The arithmetic mean of 7 numbers is 30. If 7 is added to every observation, what would be the new mean? B) The mean profit per shop is Rs 28. Calculate the no. of shops corresponding to class interval 30-40 of the following distribution: Profit per 0-10 10-30 120-30 [30-40] 40-50] 50-60 shop(Rs.) Noof 12 is U7 ? 7 6 shops Or A) The arithmetic mean of 4 numbers is 50. If 3 is multiplied to every observation, what would be the new mean? B) Find the missing frequency from the following data if average marks are 17: Cl 0-5 5-10 10-15, 15-20 20-25 25-30. 30-35, F 10 12 16 2 14 10 8 Ans. A)Mean 30+7=37 B) or A) Mean 50*3 =150Serine missing requoncy ofthe cints 15-20 bot Catoutation of Minsing Freavency RR ot aineete Raia catae 40 ¥2 16 18 (5 Mark MV 1. Mark - FM 1,990 « 171 1.105 617.5 1.190 1,165~ 17.51 471 t=50 A: 2 Marks ~ Calculation 5 Mark ~ Missing Frequency Part B(Microeconomics) Q16 | Read the following statements- Assertion (A) and Reason (R). Choose one of the correct alternatives given belo Assertion (A): Choice is the process of selection from available limited alternatives. Reason (R): Resources are scarce and have alternative uses. Alternatives: (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A) {b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A) (c) Assertion (A) is true but Reason (R) is false. (d) Assertion (A) is false and Reason (R) is false. Qi7 | True and False with reasons PPF is concave shaped as production of one good can be increased only by reducing quantity of another good. Ans. False. It is because resources are not equally efficient in the production of both the good: Q18 | Opportunity cost is the a) Number of units sacrificed b) Number of units gained c) Cost of next best alternative forgone d) None of these Ans. ¢) Cost of next best alternative forgone é Z a Q19 | Slope of budget line is: a) PxiPyQ20 | b) Py/Px ) MRS d) PxPy | Ans. a) PxiPy Read the following and answer questions 5 and 6 on the basis of the same: - ‘A consumer is an economic agent who uses goods and services for the direct satisfaction of his / her wants. Consumer consists of institution, individuals and groups of individuals or households. Consumer behavior refers to the way in which consumers spend their income. The consumer derives utility from his expenditure. The consumer chooses his expenditures and maximums his utility with the given income and given prices of goods and services. Consumption of goods and services leads to satisfaction of human wants. This satisfaction is called “Utility”, Utility may be defined as “satisfaction derived from the consumption of a commodity” or it may be defined as ‘want-satisfying power of a commodity". Total Utility (TU) Itis the sum total of utility derived from the consumption of all the units of a commodity. Marginal Utility (MU) It refers to additional utility on account of the consumption of an additional unit of a commodity. Q. Marginal utility is: - (a) Total minus average utility (b) Addition to total utlty (©) Total plus average utility (d) Total utility divided by the number of units Ans. (b) Addition to total utility Q21 At the saturation point for commodity X, the MU is: - (a) Positive (b) Negative (c) Zero (d) Any of the above. Ans. (¢) Zero Q22 Income effect in case of inferior quality goods will be: a) Positive b) Negative c) Zero d) One Ans. b) Negative 23 Arise in price of a tea will lead to an/a movement in the demand curve of tea. Ans. Upward Q24 Choose the correct option:- Assertion (A): The demand for saltis inelastic Reason(R): Necessary goods have inelastic demand (@) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A). (b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A). (c) Assertion (A) is true but Reason (R) is false. (d) Assertion (A) is false but Reason (R) is true Ans. (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).25 If price of a commodity rise by 20%, and Ed is 1, then its quantity demanded falls by a) 10% b) 20% ©) No change d) 8% Ans. B) 20% Q2 8 Following is the condition of consumer's equilibrium in case of a single commodity a) MU of goodiprice of good = MU of money b) Price of good/MU of good = MU of money c) MU of money/MU of good = price of good d) None of these Ans. a) MU of good!price of good = MU of money e What happens to the budget set if both the prices as well as the income double? Ans. There will be no change in the budget set. In the example given in question 4, the budget line is represented by the equation: 4x+5y=20. If prices as well as the income double, then new budget, line will be: 8x+10y=40 Therefore there will be no change Or 27 | A consumer has total money income of 250 to be spent on two goods X and Y with prices of 25 and 10 per unit respectively. On the basis of the information given, answer the following questions: (@) Give the equation of the budget line for the consumer. (b) What is the value of slope of the budget line? (©) Calculate X and Y intercept. 3 Ans. (a) PQ,+PQ=M 250, +100,-250 (b) Slope of Budget Line=(-) P/P,=(-) 25/10-(-)25 {c) Intercept on X-axis-M/P-250/25=10 Intercept on Y-axis MIP, 250/40 25 a28 | ¢ 3Q29 ‘A consumer consumes only two goods X and Y. At a consumption level of these two goods, he finds that the ratio of marginal utility of price in case of X is not equal to Y. Explain what will be the reaction of rational consumer. Ans. It means that at some consumption level, Mux/Px >MUy/Py. In this case, the consumer is getting more marginal utility per rupee in case of good X as compared to Y. Therefore, he will buy more of X and less of Y. This will lead to fall in MU, and rise in MU, The consumer will continue to buy more of X till Mux/Px =MUy/Py. And vice versa. _ Categorize the following diagrams as expansion, contraction, increase or decrease in demand (assuming the given commodity) is a normal good. Explain with reason. Price (in) Quantity Demanded ‘Quantity Demanded Quantity Demanded (in units) (in units) (nunits) (a (ey fe Ans.a) Expansion- it shows downward movement B) Increase with reason C) Decrease in Demand Q30 31 a) ‘An economy may operate inside the PPC even if there is full employment of resources. Defend or refute. b)Identify and discuss the nature of the following newspaper reports in terms of positive or normative economic analysis. ("India jumped 23 points in the World Bank's ease of doing business index to 7th place, highest in 2 years."- The Economic Times. (ii) "Government should further liberalize the business rules." - The Economic Times. Ans. A) The given statement is defended. When the resources are not utilised efficiently, then an economy may operate inside the PPC even if there is full employment of resources. B) i) Positive ii) Normative A dentist was charging 300 for a standard cleaning job and it used to generate total revenue equal to 30,000 per month. She has, since last month, increased the price of dental cleaning to 350. As a result, fewer customers are now coming for dental cleaning, but the totalTevenue is now 33,250. From this, what can we conclude about the elasticity of demand for her dental service? Or a) Price elasticity of demand for flowers and toys are respectively (-) 0.9 and (-) 0.5. Demand for which one is more elastic and Why? b) Differentiate between law of demand and price elasticity of demand. Number of Customers Frotal Revenue Fes) ‘Total Expenditure Mathod With increase in fees, the total revenue of dentist has ao increased. Hence, the elasticity of demand for her dental service is less than ane, e Method ie0 “New 35 Change in Quant (AO =5- ft cranae Pie TP ae Pree Set otDenandtey 22x 2 22 (303 100 a) Demand for flowers is more elastic as with 1% fall in price of flowers, its demand rises by 0.9%. However, in case of toys, 1% fall in price raises the demand by just 0.5%. b) Law of demand states the inverse relation between price of a commodity and its quantity demanded, assuming no change in other factors. On the other hand, price elasticity of demand indicates the rate of change in quantity demanded of the commodity due to change in its price. (i) Law of Demand reflects the direction of change in demand, whereas, price elasticity of demand measures the magnitude of change in demand. Q32 ‘A consumer consumes only two goods. Why is the consumer said to be in equilibrium when he buys only the combinations of two goods which lies at that point of indifference curve where the budget line is tangent to the indifference curve? Explain. Use diagram. Ans. Ans. 1. If MRSxy > Px , the consumer will increase the consumption of X and reduce the consumption of Y. MRSxy fall and will become equal to Px Py 2. If MRSxy < Px , the consumer will reduce the consumption of X and increase the consumption of Y. MRSxy will increase and will become equal to Px Py 3. MRS must be diminishing as consumption of good X increases, symbolizes fall in marginal utility due to which the consumer will not further increase its consumption. If it does not fall, he keep on increasing the consumption of good X and not reach equilibrium. (3 Marks for explanation, 1 Mark for schedule and 2 marks for diagramOr a) Explain the concept of Marginal Rate of Substitution (MRS) by giving an example. What happens to MRS when consumer moves downwards along the indifference curve? Give reasons for your answer, ‘Ans. MRS is the ratio of the units of one good sacrificed and the units of the other good obtained. Example: Let the two goods be X and Y. Given a certain consumption of X and Y, suppose consumer wants one more unit of X. With increase in one more unit of X, marginal utility of X will reduce. As a result, consumer will be willing to sacrifice less units of Y. As he goes on obtaining more and more of X, marginal utility of X goes on falling and thus, consumer is willing to sacrifice less and less of Y. b) A consumer consumes only two goods X and Y both priced at 3 per unit. If the consumer chooses a combination of these two goods with Marginal Rate of Substitution equal to 3, is the consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Explain. Ans. La Given P= 3,P,=3 and MRS = 5. A consumer Is sad to be In equilibrium when MRS = LeMRS > 2s Py Therefore, consumer is not in equilibrium, mans > -Ex- means that consumer is willing to pay more for one more unit of x es compared to what market demands, ~The consumer will buy more units of x. — Asa result, MRS will fall due to the Law of Diminishing Marginal Utility, ‘This will continue till MRS =-E— and consumer is in equilibrium, Py 033 The demand for commodity ‘A’ rises by 20% due to fall in price by Rs. 2 from the original price of Rs. 8. i) Calculate etasticity of demand by ‘Percentage method’ il) Whether demand of ‘A’ is elastic or inelastic? Give reason for your answer. i) What will be the shape of demand curve of A?WW) Ifnew demand of commodity ‘A’ is 64 unils, then calculate its original demand v) Determine the price elasticity by ‘Total Expenditure Method.’ vi) Whether price elastiy of demand calculate in () and (¥) give the sare answer? oon (0 Oval Pree) ‘atin ne 80 New ice) percentage Changein rice = 2 x 100 = ° 8 _ Percentage ChangeinQuantty Demanded 20% Fe = percentage Change in Pics Tas ‘must noted that Ey is abays a negative number due fo inverse relationship between price tindquantty demanded So. negative signs alwaysiniled.SaInthelvencse,Eycanbe tan 35108 0r08. i Demand os neasticas eestlyof demand (8 tess tha 1 iy The demand curve of 8 wil be 3 Oownearé loping Steper Curve wl be dowsvaré oping ue to Inverse eletionship between price and quantty cemandid. tl bea sleeper curve 25 ean sina (6) Letihe Orginal demand be \Vieknow: Original Demand +Riseln Demand» NewDemand © 4 20NoF c= 4 units oy x4 Ro acunits ‘0 or 120e= 5400 uns or Orginal Demand » 70 uoks Pie Total Bendiazn © . a & spree eee et ee ee ae Demand Tess clastic, < Tas otal expenditure ao fas wih = (0 Na price slaty Int) and do ot gine the some absohte value. rc lschy of demand ‘Srsermene 9808 a by ercentce Method However, pice elt by Tota Expat mnethod provider only 2 ough messwe of astity,<1}and cannot ghethe erect magnitude ota,