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 Bihar Board 12th Business Economics Important Questions Short Answer Type Part 1

Bihar Board 12th Business Economics Important Questions Short Answer Type Part 1

Question 1.
What do you mean by consumer’s equilibrium? State its assumption.
Answer:
A consumer is said to be in equilibrium, when he is spending his given income on various goods in such a way that maximises his satisfaction.

Condition of consumer’s equilibrium in case of a single commodity: Consumer’s equilibrium in case of a single commodity is attained when the marginal utility of the commodity measured in terms of money is equal to its price. Symbolically, MUx = Px.

Question 2.
Write the meaning of perfectly elastic demand and perfectly inelastic demand.
Answer:
Perfectly Elastic Demand (e = ∞): When even small increases in price produces infinite changes in demand, then it is called perfectly elastic demand. In this, curve is parallel to X-axis.

Perfectly Inelastic Demand (e = 0): When change in price produces no change in demand, then such a demand is called perfectly inelastic demand. Such a demand curve is perpendicular to X-axis.

Question 3.
State the relation between Marginal Production and Average Production.
Answer:
Average production: Amount of per unit production is called average production. To get average production, we devide total output by amount of variable factor.
AP = TPL

Marginal Production: Change in total production level due to use of one more or one less unit of variable factor, is called Marginal Production.
MPn = [TPn – TPn-1] or ΔTPΔL

Question 4.
Clarify the concept of opporunity cost.
Answer:
Austrian economists modified the concept of ‘Real cost’ and presented the concept of opportunity cost. Resources are limited to unlimited needs and hence, the production of one goods means the sacrifice of the other.

The concept of opportunity cost can be explained with an example. A person can obtain three services: Degree College Lecturer (Salary Rs. 40,000), Bank Officer (Salary Rs. 28,000) and Sales Officer (Salary Rs. 20,000). The person will opt the job of a Degree College Lecturer and sacrifice two another available jobs. The next best alternative sacrificed by the person is the job of bank officer with salary of Rs. 28,000. Hence, the opportunity cost of selected job (Salary Rs. 40,000) is Rs. 28,000 (i.e., the salary of next best alternative).

Question 5.
What to you mean by Total Revenue, Average Revenue and Marginal Revenue?
Answer:
Total Revenue (TR): Total revenue is the price of output sold multiplied by the quantity of output TR = P × Q.

Average Revenue (AR): Average revenue is defined as the total revenue per unit of output AR = TRQ

Marginal Revenue (MR): Marginal revenue is the addition made to the total revenue by selling one more units of the item.
MR = ΔTRΔQ = TRn – TRn-1

Question 6.
Define micro economics.
Answer:
Micro economics is the study of aggregates or average of the entire economy like national income, aggregate consumption aggregate investment etc.

Question 7.
What is Net National Product (NNPMP)?
Answer:
NNPMP is the money value of all final goods and service producted in a country by its resident from which depreciation is substracted thus.
NNPMP = GNPMP – Depreciation.

Question 8.
What do you mean by full employment?
Answer:
Full employment refers to a situation where there is no involuntary unemployment i.e., those who are living to work at the current wage rate get work. In other words, full employment refers to a situation where all services and employed to their full limit.

Question 9.
Define Total cost
Answer:
The total cost of a firm is the sum of total fixed cost and total variable cost i.e., Tc = TRc + Tve.

Question 10.
What is average product?
Answer:
Average product is per unit product of a variable factor.
Average product =  Total Product  Quality of Variable Inputs 

Question 11.
What is involuntary unemployment?
Answer:
Involuntary Unemployment refers to a situation in which people are ready to work at the curent wage rate but do not find work. They are rendered unemployed against their wish.

Question 12.
What is Marginal revenue?
Answer:
Marginal revenue refers the addition to total revenue when are more unit of a commodity is sold.
MRn = TRn – TRn-1.

Question 13.
Define National Income?
Answer:
It is the money value of not flow of final goods and services produced in a country inclusive of net factor from investment.

Question 14.
What do you mean by consumer Equilibrium?
Answer:
Consumers equilibrium is defined as a situation when a consumer allocates his income on one or two goods in such a way that he gets maximum, satisfaction?

Question 15.
What do you mean by Indrect Tax?
Answer:
When the liability to pay a tax and the burden of that tax can be an different person it is called on indirect tax.

Question 16.
Define Total Revenue?
Answer:
Total revenue is the total sale receipts from the sale of all the goods.
RT = AR • Q

Question 17.
What is cost?
Answer:
Cost refers to the total expenses incurred in the production of a commodity costs are studied separately in the short run as well as in the long run.

Question 18.
Define Government budget?
Answer:
Government budget is an annual statement showing item stimates of receipt and expenditures during a fiscal year.

Question 19.
What do you mean by fiscal deficit?
Answer:
Fiscal deficit is defined as the excess of total expenditure over the total receipts net of borrowings.

Question 20.
Why does the indifference curve slopes downward?
Answer:
An indifference curve slopes downward because increase in units of owe goods required decreases in the no. of unit of mother goods to maintain the same level of satisfaction.

Question 21.
Give meaning of an economy.
Answer:
The branch of knowledge concerned with the production, consumption and transfer for wealth.

Question 22.
State any three central problems of an economy.
Answer:

1. What to produce and in what quantity?
2. How to produce?
3. For whom to produce?

Question 23.
Why is there a need for economising resources?
Answer:
There is need for economising resources because resources in an economy are limited in supply and they have alternative uses.

Question 24.
Define total utility.
Answer:
Total utility refers to the total satisfaction obtained from consumption of all possible units of commodity.

Question 25.
Why are indifference curves always convex to the origin?
Answer:
Indifference curves are always convex to the origin because of the diminishing marginal rate of substitution.

Question 26.
Why does indifference curve slopes downward?
Answer:
An indifference curve slopes downward because increase in units of one good requires decrease in the no. of units of another goods to maintain the same level of satisfaction.

Question 27.
What is meant by consumer equilibrium?
Answer:
Consumer’s equilibrium refers to the situation when a consumer is having maximum satisfaction with limited income and has no tendency to change his way of existing expenditure.

Question 28.
What is budget line?
Answer:
Budget line is the locus of different combination the two goods which the consumer can afford by spending the whole of his income.

Question 29.
Define an indifference curve.
Answer:
It shows all those combinations of two commodities which gives equal satisfaction to the consumer.

Question 30.
Define price elasticity of demand.
Answer:
The price elasticity of demand means the effect of a percentage change in price on the quantity demanded.

Question 31.
What is meant by inferior goods in economics?
Answer:
Inferior Goods: Inferior goods are those goods whose demand falls with the rise in the income of the consumer e.g., Jawar or Bajra.

Question 32.
What is Demand Schedule?
Answer:
Demand Schedule: A demand schedule is a tabular statement showing different quantities of a commodity demanded at different prices during a given period of time.

Question 33.
What is market demand?
Answer:
Demand for a good by all the individuals on a particular price, in a particular market at a particular point of time.

Question 34.
Define marginal cost.
Answer:
Marginal cost is the addition to total cost due to the addition of unit of output.
MC = TCn – TCn-1

Question 35.
Define fixed cost.
Answer:
The costs which do not change with the change in the level of output during a short period are known as fixed costs.

Question 36.
Find out the maximum possible output for a firm with zero unit of L and 10 units of K when its production function is Q = 5L 2K
Answer:
Production Function
Q = 5L 2K = 5 × 0 × 2 × 10 = Zero

Question 37.
What is meant by producer’s equilibrium?
Answer:
It refers to the stage of that output level at which the difference between TR and TC is positively maximised.

Question 38.
Define Market Supply.
Answer:
It is the total quantity supplied of a commodity by all the producers at a given price over a given period.

Question 39.
Define price elasticity of supply.
Answer:
Price elasticity of supply is a measurement of responsiveness of supply to the change in price.

Question 40.
What is the marginal product of an input?
Answer:
Marginal product refers to addition to total product when one more unit of variable factor is employed.

Question 41.
What is Total product of an input?
Answer:
Total product refers to total quantity of goods produced by a firm during a given period of time with given number of inputs.

Question 42.
What is the law of variable proportion?
Answer:
Law of variable proportions states that as we increase quantity of only one input, keeping other inputs fixed, total product initially increases at an increasing rate then at a decreasing rate and finally at a negative rate.

Question 43.
What is the law of diminishing marginal product?
Answer:
Law of diminishing marginal product states that when more and more units of a variable factor are employed along with a fixed factor, the marginal product of the factor must fall.

Question 44.
Define monopolistic competition.
Answer:
Monopolistic competition is a form of market situation in which a large number of firms produce and sell differentiated products having close substitutes.

Question 45.
Define excess demand in an economy.
Answer:
Excess demand is a situation in an economy when the demand for a commodity is more than its supply or output.

Question 46.
Define normal profit.
Answer:
Normal profit is the minimum income which the entrepreneur must get in order to stay in business or industry.

Question 47.
Define oligopoly.
Answer:
It is a form of the market in which there are few sellers of the commodity.