# NIOS Solved Papers: Economics (318) - April' 2016

NIOS SOLVED PAPERS
APRIL’ (2016)
ECONOMICS
(318)

1. The coefficient of correlation ranges between
(a) 0 and 1                                                           (b) -1 and +1
(c) minus infinity and plus infinity             (d) 1 and 100
2. Total expenditure on a commodity rises, when its price. Demanded for the commodity will be:
(a) unit elastic                                                    (b) More than unit elastic
(c) Less than unit elastic                                                (d) Perfectly elastic
3. Total fixed cost is Rs. 100 and Total variable cost of producing 10 units of a commodity is Rs. 200. Average Total cost of producing 10 units will be:
(a) 10     (b) 20    (c) 30     (d) 200
4. Marginal cost equals Average Total cost when Average Total cost is :
(a) Minimum                      (b) Maximum
(c) Falling                             (d) Rising
5. By deducting intermediate consumption expenditure and net indirect taxes from value of output , we set:
(a) Net Value added at factor cost
(b) Net value added at market price
(c) Gross value added at factor cost
(d) Gross value added at market price
6. The expenditure in goods and services purchased for resale by production unit is:
(a) Intermediate cost     (b) value of final product
(c) value of output          (d) Factor cost

7. Domestic income will be more than national income when net factor income from abroad is:
(a) Positive         (b) Zero
(c) Negative       (d) More than domestic income
8. At equilibrium level of national income:
(a) Aggregate demand Value of total output
(b) Aggregate demand Value of total output
(c) Investment Savings
(d) Aggregate demand = value of total output
9.  Which one of the following is a measure to correct excess demand in the economy?
(a) Increase in rate of taxes
(b) Buying of government securities by central bank from commercial banks.
(c) Decrease in variable reserve ratio
(d) Increase in Bank rate.
10. In an economy, level of income in Rs. 10,000 crores and at this level of income,, consumption expenditure is Rs. 7,000 crores. Value of APS is:
(a) 0.7   (b) 0.3   (c) 1.4    (d) None of the above

11. Find the Spearman’s coefficient of correlation form the following data:
X:- 50,55,60,65,70,62,58,66,51,57
Y:- 13,15,16,18,20,14,17,19,21,22                                                                                                                               3
Solution:-
 X Y R1 R2 50 55 60 65 70 62 58 66 51 57 13 15 16 18 20 14 17 19 21 22 10 8 5 3 1 4 6 2 9 7 10 8 7 5 3 9 6 4 2 1 0 0 4 4 4 25 0 4 49 36     12. State any three differences between Micro-economics and Macro-economics.                         3
Ans.:- The following are the differences between Micro-economics and Macro-economics
 Basis Microeconomics Macroeconomics 1.       Meaning The branch of economics that studies the behaviour of an individual consumer, firm, family is known as Microeconomics. The branch of economics that studies the behaviour of the whole economy, (both national and international is known as Macroeconomics. 2.       Assumption It assumes that all macro-economic variables are constant. It assumes that all micro-economic variables are constant. 3.       Business Application Applied to operational or internal issues Environment and external issues.

13. How is the price elasticity of demand of a commodity affected by availability of its close substitution? Explain.                                                                                                                                                      3
Ans.:- Price elasticity of demand of a commodity affected by availability of its close substitution – Demand for a commodity with large number of substitutes will be more elastic. The reason is that even a small rise in its prices will induce the buyers to go for its substitutes. For example, a rise in the price of Pepsi encourages buyers to buy Coke and vice-versa.
Thus, availability of close substitutes makes the demand sensitive to change in the prices. On the other hand, commodities with few or no substitutes like wheat and salt have less price elasticity of demand.

14. How is the supply of a commodity affected by the change in price of other related goods? Explain.                                                                                                                                                                                                3
Ans.:- As resources have alternative uses, the quantity supplied of a commodity depends not only on its price, but also on the prices of other commodities. Increase in the prices of other goods makes them more profitable in comparison to the given commodity. As a result, the firm shifts its limited resources from production of the given commodity to production of other goods. For example, increase in the price of other good (say, wheat) will induce the farmer to use land for cultivation  of wheat in place of the given commodity (say rice).

15. Market price of a commodity is higher than the equilibrium price. Explain the chain of effects till the market reaches equilibrium.                                                                                                                    3
Ans.:- If the price of above the equilibrium price, there will be excess supply for the product since the quantity supplied exceed quantity demanded, meaning producers are willing to sell more than consumers are willing to buy. This mismatch between demand and supply will cause the price to decrease. Firms will decrease the price they change for their limited demand and consumers will pay the lower price to get one of the many available. This happens till the market reaches equilibrium.