Solution

SET-B

Class 11 - Economics
Section A
1.
(c) The simple average of the two middle values
Explanation: In case of even number of items , median = average of the two middle items. After arranging the data in
ascending order, We have to apply the formula
n+1
M edian = size of [ ]th item
2

for eg. if there are 6 items

then median = size of (6+1)/2 th item = 7/2th item = size of 3.5 th item.
then we have to take the simple average of the 3rd and 4th item as median is size of 3.5 th item
2.
(c) 0
Explanation: We know that the algebraic sum of deviations about mean is 0, so, the answer is 0.
3. (a) Range
Explanation: Range can only tell you basic details about the spread of a set of data. By giving the difference between the
lowest and highest scores of a set of data it gives a rough idea of how widely spread out the most extreme observations are but
gives no information as to where any of the other data points lie.
4.
(b) 56
Explanation: Formula for calculating mode=3median-2 mean
= 3(40)-2(32)
= 120-64
= 56
5.
(d) decrease by 20 percent
Explanation: decrease by 20 percent
6. (a) raise the price of electricity by 12.5%
Explanation: raise the price of electricity by 12.5%
7.
(c) 1.5
Explanation: If elasticity of demand is equal to 1.
then,
% change in price = % change in quantity
there is 50% fall in quantity from 40 to 20 kg.
hence there should be 50% increase in price
new price = 1.5

8.
(c) inelastic
Explanation: inelastic
9.
(c) Both decline with increase in sales.
Explanation: Both MR and AR falls with increase in sales. However fall in MR is double than that in AR. MR curve is
steeper than the AR curve.
10.
(c) firm's demand curve
Explanation: Firm's AR curve is same as firm's demand curve.

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11. (a) TR is Constant
Explanation: When MR is Zero, TR is at its maximum and constant. This can be seen from the following figure.

12.
(c) Many close substitutes exist in monopolistic competition
Explanation: In monopoly, there is a single seller and no close substitutes are available for the product. So the customer cannot
shift to any other product(as there are no substitutes) if the monopolist increases the price of the product. In such a case the
demand is less elastic or inelastic. Whereas in monopolistic competition, there are large number of sellers and substitutes are
available, so the customer will shift to substitute product if there is a increase in price. As such in this situation the demand is
more elastic.
13.
(c) The AR curve
Explanation: The AR curve and price are the same.
AR = (Quantity x Price) / Quantity
AR = Price.

14.
(d) Yes
Explanation: We know that Break even point is determined when
TR=TC
Dividing both sides by output(Q), we get
TR TC
=
Q Q

which is AR=AC
Therefore breakeven point is also achieved when AR = AC

15. (a) Profits

Explanation: Excess of receipts from the sale of goods over expenditure incurred on producing them is termed as Profits.
16.
(d) AR = MR = MC and MC must be rising
Explanation: A producer strikes his equilibrium when the following conditions are satisfied:
i. MR is equal to MC
ii. MC should be rising when MR is equal to MC
iii. AR should at least be equal to AVC
It is only when these conditions are satisfied that the difference between TR and TC is maximised, implying the maximization
of profit.

17.
(b) increase in own price of the commodity and decrease in own price of the commodity

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 Explanation: When due to change in its own price of the commodity, its quantity supplied changes, it is expressed by different
points on the supply curve. It is also called movement along a supply curve or change in quantity supplied.
18. (a) 2.0
percentage change in qty supplied
Explanation: Elasticity of supply = percentage change in price

19.
(b) unitary elastic
Explanation: At any point on a straight line, the supply curve going through the origin price elasticity will be one. The supply
for such a commodity is said to be unitary elastic.
20. (a) agricultural and perishable commodities
Explanation: The positive relationship between own price and quantity supplied of a commodity may not hold good in the
case of agricultural output, goods of social distinction and perishable goods.
Section B
21. The given series is a discrete series. So we have the first find the cumulative frequency of the series.
Calculation of Median
Marks (X) Number of Students (f) Cumulative Frequency (cf)

40 2 2

41 3 5

42 7 12

43 8 20

44 10 30

45 12 42

46 14 56

47 16 72

n = Σf = 72

Here, n=Sum of frequency=72

n+1 72+1
P osition of M edian = ( ) th item = ( ) th items
2 2

=36.5th item
The 36.5th item falls in the cumulative frequency 42. We can see that the marks corresponding to this cumulative frequency are
45. Therefore, the required median is 45.
22. The slope of the production possibility curve is marginal opportunity cost or marginal rate of transformation which refers to the
additional sacrifice that a firm makes when they shift resources and technology from the production unit of one commodity to the
other commodity in an economy. It is the ratio between loss of output and gain of output when some resources are shifted from
use 1 to use- 2.
23. i. As per the consumer's equilibrium of budget line PAX + PBY = M.
Total Expenditure of the consumer to purchase 4 bundles of X and 5 bundles of Y is 4 × 4 + 5 × 2 = ₹26, which is greater
than his money income (₹ 24). So, he cannot afford to buy it.
PX
ii. MRS = PY

Substituting, Px = 4, Py = 2
MRSxy = = 2 4

MRSxy = 2, According to given Question Px/Py=2, therefore value of marginal rate of substitution is equal to 2 in the state of
Consumer's equilibrium.
24. Given:
Q = 5L+ 2K
L = 0 units
K = 10 units
putting these values in equation
Q = 5(0) + 2(10)

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 = 20 units of output
The maximum output = 20 units.
25. There exist a positive relationship between the two as good X and good Y are substitutes of each other.
With fall in price of Y, demand for X will also fall because the consumers will substitute good X with good Y. So, at the
same price, the demand for good X will fall as shown in the diagram below:

26. Total revenue in economics refers to the total receipts from sales of a given quantity of goods or services.
i. When TR increases at a decreasing rate, MR should decrease but should not become zero or negative.
ii. When TR increases at a constant rate, MR should be constant.
Section C
27. The main objectives of computing an average are given below:
i. Average is a single simple expression, in which the net result of a complex group or vast data is represented. Average
summarises a large number of numerical data into a single figure, which makes it easier to understand and remember.
ii. Average presents the concise picture of a group by a single value, so it is very convenient to compare the different
homogeneous groups by their average. Such comparisons can be made either at a point of time or over a period of time.
iii. Average helps in the formulation of economic policy, e.g., for the removal of poverty from India, our government should take
into account the per capita income, the average productivity of labour etc which are examples of averages. In other words,
average provides such values which becomes a guideline for decision makers.
iv. Average is the basis of statistical analysis. The knowledge of average marks secured by the students in different subjects can
help to analyse the subjects in which the students are weak.
v. Average helps to obtain an idea about the whole population on the basis of a sample drawn from the population. The average
of the sample is deemed to be the average of the population.
vi. Average helps in computation of various other statistical measures such as dispersion, correlation, skewness, kurtosis etc.
vii. Average becomes essential when it is desired to establish relationships between different groups in quantitative terms.
28. Closed economy: The economy that does not interact with the rest of the world is called a closed economy.
Interaction with other economies of the world widens choice in three broad ways:
i. Consumers and firms have the opportunity to choose between domestic and foreign goods. This is the product market linkage
which occurs through international trade.
ii. Investors have the opportunity to choose between domestic and foreign assets. This constitutes the financial market linkage.
iii. Firms can choose where to locate production and workers to choose where to work.
29. Indifference map refers to the graphical representation of a set of indifference curves that represent consumer preferences over
all the bundles of the two goods. That is, the consumer has no preference for one combination or bundle of goods over a different
combination on the same curve.
Higher indifference curve gives a higher level of satisfaction than the lower indifference curve This is because a higher
indifference curve corresponds to a higher income level. At higher income levels, a consumer will be able to purchase more of
two goods or at least more of one good and no less of the other good. So, as per monotonic preferences, higher quantities of the
goods will give a higher level of satisfaction to the consumer. However, each indifference curve shows the same level of
satisfaction individually. Therefore, an indifference curve to the right shows higher utility levels.

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30. Production function of a firm is a functional relationship between inputs used and output produced by the firm.
Differences between short-run and long-run production function are
Basis Short-run production function Long-run production function

This production function relates to long-run.

Time Period This is production function relates to short-run.(Short period)
(Long period)

Factors of
Some factors of production are fixed and some are variable All factor of production is variable.
production

It is expressed as Qx = f(L, K), where L (Labour) is the variable It is expressed as Qx = f(L, K), where both L
Equation
factor, and K (Capital) is the fixed factor. and K are variable factors.
31. The quantity of a good that the consumer demands can increase or decrease with the rise or fall in his income depending on the
nature of the good, as is discussed below:
Normal goods These are the goods for which the demand is directly related to consumer's income.
Other things remaining constant, quantity demanded of these goods increases in response to increasing consumer's income and
decrease in income reduces the demand. For example, full cream milk, pulses, grams etc.
The figure given below illustrates the income effect in the case of normal goods. When income increases, the demand curve D
shifts to D1 and when income decreases, the demand curve D shifts to D2.
Inferior goods These are the goods for which the demand is inversely related to consumer's income. Other things remaining
constant, quantity demanded these goods decreases in response to increase in income and a decrease in income leads to rise in
demand. For example, coarse cereals, skimmed milk etc.
No commodity is inferior. If any commodity is purchased by a consumer just because of his low income level,then this
commodity is termed as an inferior commodity for that person.
It is not the consumer but the income level of the consumer which determines whether a good is normal or inferior. So inferiority
is a relative concept.

When income increases, the demand curve D shifts to D2 and when income decreases, the demand curve D shifts to D1.
In the case of normal goods, income effect is positive while in case of inferior goods, income effect is negative.
32. The term extension and contraction in supply is used for changes in quantity supplied due to the changes in the price of a
commodity. When the rise or fall in the price of a commodity brings about an increase or decrease in quantity supplied of the
commodity, while other determinant factors of supply remain constant, this is called Extension in Supply.

In the given figure, the initial price of a commodity is P, the initial quantity supplied is Q. Now, if the price rises from P to P1, the
quantity supplied increases from Q to Q1. Thus the supply increases from A to B. This is an extension of supply.
Likewise, it is shown in the other figure, that when the price reduces from (initial price) P to (new) P1​, the quantity supplied
reduces from Q1 to Q. This has been shown by a downward movement from B to A. This is called contraction of supply.

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 Section D
33. 1. All the given inclusive series will be converted into an exclusive series:
To convert the inclusive series into exclusive series ;
Correction factor = (50-49)/2=0.5
This is added to the upper limit and subtracted from the lower limit of the class.
2. Now, after conversion of series, mode will be determined.

Marks Number of Students (f)

39.5-49.5 12

49.5-59.5 30

59.5-69.5 24

69.5-79.5 20

79.5-89.5 12

89.5-99.5 2
The modal class is not clear by inspection.
Although, class interval 49.5-59.5 has the highest frequency 30, yet the greatest concentration of items is around class
interval 59.5-69.5 (with a frequency of 24.)
Therefore, we will find mode by the method of grouping.
Grouping Table
Marks (X) Frequency (f)

I II III IV V VI

39.5-49.5 12
42
49.5-59.5 30 66
54
59.5-69.5 24 74
44
69.5-79.5 20 56
32
79.5-89.5 12 34
14
89.5-99.5 2

Analysis Table
Frequency (f)

39.5-49.5 49.5-59.5 59.5-69.5 69.5-79.5 79.5-89.5 89.5-99.5

I √

II √ √

III √ √

IV √ √ √

V √ √ √

VI √ √ √

Total 1 4 5 3 1
From the analysis table, the modal class is 59.5-69.5. The frequency of this group is 24. So,
f1 − f0
Mode(Mo ) = l1 + × c
2f1 − f0 − f2

But in this case, when f1 (24) is less than f0 (30), (f1-f0) will be negative and because of this modal value will lie outside the
group.

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 In such cases, calculation of mode is done using the following formula,
f2
Mo = l1 + × c
f0 + f2

20
⇒ Mo = 59.5 + × 10
30+20

⇒ Mo = 59.5 + (0.4 × 10)

⇒ Mo = 59.5 + 4

⇒ Mo = 63.5

Therefore, the mode of the given distribution is 63.5

34. A consumer is said to be in equilibrium when he feels that "he cannot change his condition either by earning more or by spending
more by changing the quantities of thing he buys".
If this condition is not fulfilled the consumer will either purchase more or less. If he purchases more, MU(Marginal Utility) will
go on falling and a situation will develop where the price paid will exceed MU(Marginal Utility). In order to avoid negative
utility, i.e., dissatisfaction, he will reduce consumption and MU(Marginal Utility)will go on increasing till P(Price) =
MU(Marginal Utility).
According to the Law of Equi-Marginal Utility, the consumer spends his limited income on different goods in such a way that
marginal utility derived by all commodities are equal,
(Marginal Utility of Good X) MUx = MUy (Marginal Utility of Good Y)= MUz (Marginal Utility of Good Z..........
Explanation: Let us now discuss the Law of Equi- Marginal Utility with the help of a numerical example: Suppose, the total
money income of the consumer = Rs.5.
Price of good X and Y = Rs. 1 per unit.
So, a consumer can buy maximum 5 units of ‘X’ or 5 units of Y. The given table shows the marginal utility which the consumer
derives from various units of ‘X’ and ‘Y'.
Table - Consumer's Equilibrium - 2 Commodities
Unit MUx 'X' (in utils) MUy 'Y' (in utils) Money Spent TU

1 20 16 Good X 20
2 14 12 Good Y 16
3 12 8 Good X 14
4 7 5 Good X 12
5 5 3 Good Y 12

Total - 74
From the table, it is obvious that the consumer will spend the first rupee on commodity 'X', which will provide him the utility of
20 utils. The second rupee will be spent on commodity 'Y’ to get a utility of 16 utils. To reach the equilibrium, a consumer should
purchase that combination of both the goods, when:
i. MU(Marginal Utility) of the last rupee spent on each commodity is the same; and
ii. MU(Marginal Utility) falls as consumption increases. It happens when a consumer buys 3 units of 'X' and 2 units of 'Y'
because:
a. MU(Marginal Utility) from last rupee (i.e., 5th rupee) spent on commodity Y gives the same satisfaction of 12 utils as
given by last rupee (i.e., 4th rupee) spent on commodity X; and
b. MU(Marginal Utility) of each commodity falls as consumption increases.
The total satisfaction of 74 utils will be obtained when the consumer buys 3 units of 'X’ and 2 units of 'Y'. It reflects the state of
the consumer’s equilibrium. If the consumer spends his income in any other order, total satisfaction will be less than74 utils.
Basis of
Expansion in Supply Increase in Supply
35. difference

It refers to rise in the supply of

It refers to a rise in the supply of a commodity caused due to any
1.Meaning commodities due to change its own price
factor other than the own price of the commodity.
other factors remain unchanged.

Price (₹) Supply (Quantity ) Price (₹) Supply (Quantity)

2.Tabular
5 50 5 50
Presentation
6 70 5 70

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3.Effect on the There is an upward movement along the There is a rightward shift to the other supply curve.
supply curve same supply curve.

The expansion of supply occurs due to An increase in supply occurs due to other factors like a decrease in
4.Reason an increase in the price of the given the price of inputs, a decrease in taxes, technological upgradation,
commodity. increases in the price of substitutes.

5.Representation
by graph

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