Economic and Statistic

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Foundation Additional reading

GOLS 2011

ECONOMICS AND STATTSTICS

PAPER 2

PART A

Chapter - 1

Question.

No.

Particulars

1 Write Distinguish between the following

a Micro Economics and Macro Economics

Basics Micro Economics Macro Economics

Meaning Micro economics studies the

behaviour of individual units viz.,

industrial firms, industry etc.

Macro economics is that branch which

deals with national aggregates like

total production, supply, national

income, employment etc.

Objective To study the principles, problems,

policies relating to optimum use

of resources.

To study problems and principles in

relation to full employment of

resources.

Tools/Components Demand and supply Aggregate demand and aggregate

supply

Alternative Names This is also known as price theory

as it mainly deals withdetermination of price of

commodities and various factors

of production.

Also popularly known as Income

theory or Employment Theory as itsobjective is to study these.

Methods of study It is called partial equilibrium as

its laws and principles are

formulated on assumption of

other things being equal

It is general economic analysis as it

studies mutual interdependence of

different economic variables.

b Positive Economics and Normative Economics

Basics Micro Economics Macro Economics

Meaning It is a body of systematized

knowledge relating to WHAT IS?

This body of knowledge relates to

WHAT OUGHT TO BE?

Verification These statements can be

empirically verified.

These statements cannot be verified

with precise accuracy.

Basis This is based on true facts and

given figures.

Based on individuals opinion and not

backed by facts.

Nature This is not suggestive in nature. Being suggestive in nature can also begiven the nomenclature as Regulative

Science

Objective The objective is to make true

description of economic

activities.

The objective behind this is to

determine the ideals.


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2 Write Descriptive Answers of the following:

a State the facts on which Robbins definitions of economics are based.

Ans Scarcity definition given by Robbins states Economics is the science that studies

human behavior as a relationship between ends and scare means which have

alternative uses

Explanation:

(i) Economy always has shortage of resources.(ii) Ends or wants of economy are unlimited.(iii) It is possible to select between alternatives resources for satisfying given

wants.

(iv) It is also possible to use given resources for the satisfaction of severalalternative wants.

Criticism:

(i) This theory is devoid of crucial aspects of economics like growth anddevelopment.

(ii) It is total/absolute waste of efforts not to investigate the possibilities ofimproving the working of the economy and thus narrowed down his

scope.

(iii) He was totally silent about certain macro economics aspects such asdetermination of national income, employment etc.

b Economics is neither a study of only wealth nor only of man and his actions

Comment

Ans According to Marshall, Economics is neither study of only wealth, nor only of man. It is

a combination of both, but man is more important. Economics is a study of mankind

in ordinary business of life. But this definition of Marshall does not include things like

services of teachers, actors, etc.

c Economics can be defined as a study of an economic system. Elaborate

Ans The entire set of arrangements and institutions meant for meeting the objectives of

increasing the availability of resources and ensuring their economic value is known as

economy or economic system of the society.

The term study of an economy encompasses in its ambit the following:

(i) Different forms of an economy viz., capitalism, socialism, mixed economy.(ii) Vivid forms of economic decisions and their implementation by

(a) individual economic units(b)groups of economic units(c) public authorities

(iii) Inter-relationship between economic groups and individual units.(iv) Performance of both individual units and their groups and the economy

as a whole.

(v) Last not the least, inter-relationship between different economies witheach other.

3 State with reasons in brief, whether following statements are true or false:

a In economics, controlled experiments are possible.

Ans False In economics, controlled experiments are not possible. For controlled

experiments there are the requirement of scientific laboratories, which are not

present in economics, hence controlled experiments are not possible. Economics

cannot be called as a perfect science, it is relative science only.

4 Choose the most appropriate answer from the given option in respect of thefollowing:

a Central problems of economics arises because:

1. wants are unlimited2. means are limited3. wants are unlimited and means which have alternative uses are limited4. None of the above

Correct answer is (3)

b The term mixed economy denotes:


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1. Co-existence of both rural and urban sectors in the economy2. Co-existence of both public and private sectors in the economy3. Co-existence of both heavy and small industries in the economy4. Co-existence of both developed and underdeveloped regions in the

economy


c Human wants are always:

1. Always fixed2. Unlimited3. Limited4. Likely to decrease over time


d In a capitalist economy, basic economic problems are primarily solved by:

1. Government intervention2.

Market Mechanism3. Creating unlimited resources

4. A mixture of Government intervention and free marketCorrect answer is (2)

Chapter - 2

Question.

No.

Particulars


a Cardinal approach of utility and ordinal approach of utility

Ans The approaches of measurement of utility can be classified ascardinal and ordinal.

As per the cardinal approach, utility can be expressed in absolute standard units,

such as 100 units of utility from first glass of water, 80 units from the second one and so

on and thus allotting concrete numerical figures to utility.

In contrast, ordinal measurement of utility is the one which is not expressed in

absolute units. As per this approach, utility from two or more sources can only be

ranked or placed in relation to each other.

b Inferior Goods and status related goodsAns Inferior goodssuch goods are generally consumed by weaker sections of society. If

income increases, demand for such inferior goods reduces. These goods are also

called giffen goods. Example, tonned milk, coarse grains, jaggery (gur), bidi etc.

Status related goods such goods symbolizes ones status or prestige. If their price

falls i.e. they become inexpensive, their demand falls. The consumer consumes these

products for show off purposes. Example, diamond, expensive jwellery, car etc.

c Income effect and substitution effect

Ans Income effect it takes place due to change in the purchasing owner of the

consumer. According to the concept of income effect, when price of commodity

decreases the purchasing power of consumer increases and vice-versa. Thus in such

a case the income of the consumer does not increases or decreases but there seems

an effect on the purchasing power as a result of change in price.

Substitution effect takes place as a result of relative change in price of goods.

When goods become cheaper, the consumer substitutes the same with costier

goods.

d Increase in demand and expansion of demand

Ans Increase in demandrefers to increase in quantity demanded of a good as a result

of change in factors other than price of the good. It occurs due to change in factors

other than price like increase in income or increase in number of consumers or

expected increase in prices in near future etc.


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Expansion of demandrise in demand as a result of reduction in prices, when other

things remain equal. It occurs due to reduction in price.


a What do you understand by the concept of demand function?Ans The demand for a good is defined as that quantity of a commodity which a

consumer is able and willing to purchase at any given price during some specific

period of time.

Function of demand may be expressed as

D = F (P1;P2;Y;T)

D = Demand for x good

P1 = Price of x good

P2 = Price of related goods.

Y = Consumers Income

T = Taste of the consumers

b Briefly state the exception to the law of demand

Ans Some of the exceptions to the law of demand are as follows:

(i) Expected change in price of a gooda consumer will not demand moreeven when the prices are decreasing as in future he expect a further fall in

prices.

(ii) In case of complementary goods law of demand can be violated incase of complementary goods. A consumer buy more of one good as it

price falls but he has to buy more of other goods also though the price

may fall.

(iii) Consumers demand can be influenced by demonstration effect whichcan violate law of demand.

(iv) Sometimes consumer feels that high priced goods means high quality andpurchases more even if prices are high.

(v) If goods are of special prestige, then they do not follow law of demand.These types of goods are conspicuous goods and their demand falls if

they are inexpensive.

c Demand curve can be drawn from marginal utility curve.

Ans The first economist to derive the demand curve from marginal utility curve was

Marshall. He was to establish relationship between the two.

Marginal utility refers to additional amount of utility derived when one more unit is

consumed. As we consume more and more units of a commodity, the utility keeps on

declining and thus results in a negative slope. It lays the foundation of the negatively

sloped demand curve.

3 Practical Questions

A A consumer buys 50 units of commodity at Rs. 4 per unit. When its price falls by 25%, its

demand rises to 100 units. Find out price elasticity of demand.

Ans Income (Rs.) Demand (Units)

40 850 10

Income elasticity = % change in demand / % change in income

= (Change in demand/ Original Demand) / (Change in income/

Original income)

= [(10-8)/8] / [(50/40)/40]

= (2/8) / (10/40) = 2/8 x 4/10 = 1Hence, income elasticity of demand for commodity is 1.

Substituting these values, we get

50/50 x 4/-1 = (-)4

b When the price of Commodity X is Rs. 20/- per unit, its quantity demanded is 50 units;

and when the price goes up to rs. 40 per unit its quantity demanded falls to 25 units.

Find the price elasticity coefficient and give its interpretation.

Ans Price (Rs.) Quantity Demand (Units)

20 5040 25

Ed = (Change in demand/ Original Demand) / (Change in income/ Original income)


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= [(25-50)/50] / [(40-20)/20]

= (25/50) / (20/20) = -25/50 x 20/20 = (-) 0.5


a The cross elasticity of demand is positive in case of substitute goods.

Ans True Cross elasticity of demand will be positive in case of substitute goods. Crosselasticity refers to change in demand of one commodity as a result of change in

price of another commodity. In case, two commodities are substitute of each other,

for example, tea and coffee, rise in price of tea will result in fall in demand for tea

and consequently increase in demand for coffee, cross elasticity become positive.

The value of cross elasticity will be higher for close/perfect substitute and less for

weaker substitutes.

b The concept of consumer surplus has been developed by Lionel Robbins.

Ans Falsethe concept of consumer surplus has not been developed by Lionel Robbins.

In case the price and marginal utility are not equal, there exist disequilibrium giving

rise to consumer surplus; this concept of consumer surplus was propounded by Alfred

Marshall. Robbins was one who gave the famous scarcity definition.

c Demand for a commodity by a consumer is not the same thing as his desire to buy it

Ans TrueIt is true that the demand of a commodity is not the same thing as his desire to

buy it. Consumer may have desire to buy anything, but he can actually demand it

depends upon the resources he has thus, we cannot equate desire to buy with

demand.

5 Choose the most appropriate answer from the given option in respect of the

following:

a Normally the slope of a demand curve is

1.

Negative2. Positive3. Zero4. Constant


b When marginal utility diminishes, total quality

1. Diminishes2. Increases3. Diminishes at increasing rate4. Increases at diminishing rate


c In case of inferior goods, income effect is

1. Negative2. Zero3. Positive4. Indeterminate


d Expansion in demand is the result of

1. Decrease in the price of the goods2. Increase in the number of consumers3. Decrease in the prices of other related goods4. Increase in income of consumers


e If the product is inferior, then income effect is:

1. Positive2. Negative3. Zero4. Either positive or negative


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6 Rewrite the following sentences after filling-in the blank spaces with appropriate

word(s)/figure(s)

a Cross elasticity of demand is the change in the demand for one good in response to

change in theprice of another good

b Consumer equilibrium is a situation where a consumer secures maximum satisfaction

out of his expenditure

c A consumer compares utility from the goods purchased with the price to be paid for

it.

d Price Elasticity of demand measure the responsiveness of the quantity demanded of

a good to changes in its own price, other things remaining the same.

Chapter - 3

Question.

No.

Particulars

1 Write short notes on the following:

A Iso-cost lines

Ans An iso-cost lines represent a set of combinations of input L&k which the firm can

acquire for a given total cost or budget. The market allows the firm to choose any

combination of input along the isoquant lines.

b Ridge Lines

Ans Ridge lines is defined as the economic region within which business is to operate.

c Production function

Ans Production may be defined as an art of transforming inputs into output. The

relationship between input and output of a good is technically termed as production

function.


a Returns to a factor and returns to scale

Returns to factor Return to scale

1 By returns to factor we meanchange in physical output of good

when only the quantity of one input

is increased while that of other input

kept constant.

It means change in physical outputof good on account of increase in

all inputs required to produce that

good simultaneously and in the

same production

2 It relates to short period It is concerned with long period

3 In this case, the proportion between

fixed and variable factors goes on

changing as more units of the latter

are applied

Factor proportion does not change

at all

4 Scale of production does not

change

Scale of production change

5 Only variable factors arechangeable

Fixed as well as variable factors arechangeable

b External economies and internal economies

External Economies Internal economies

1 Economies of Information: cheap

information is available is the industry

as a whole tries to procure

information rather that individual firm

doing it

Managerial economies: better

qualified and specialized managers

and workers leased to reduction of

operation cost thereby leading to

economies

2 Research and development:

research and development if done

Technical economies: when the

scale of production increases it is in


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by the industry on behalf of the

industry turns out to be much

economical than that undertaken

by individual firm.

a position to upgrade its plant and

machinery. This enhancement can

lead to per unit reduction of cost.

3 Economies of specialization: when

growth and expansion of industry

takes place, related industries alsoget established nearly. Adding up to

the economies

Financial economies: the credit

worthiness enjoyed by the large firm

is substantially more than those ofsmall. They are able to procure

finance at cheap rates from outside.

4 Economies of concentration: speed

of banking and credit facilities

insurance, advertisement etc. also

accelerate the development

Risk economies: Large firms by

means of diversification can reduce

the risk faced by it.

c Fixed cost and variable cost

Fixed cost Variable cost

1 These are the costs which do not

vary with the level of output

These are the cost which vary with

the level of output

2 Fixed cost are the cost incurred onfixed factors of production like land,

machine building etc

These costs are incurred on theemployment of variable factors such

as material labour etc.

3 It is also known as indirect cost It is also known as direct cost

4 Total fixed cost curve is parallel to x

axis

Total variable cost curve rises from

the point of origin and moves

upward to the right.


a Narrate few aspects relating to supply of labour in a country.

Ans Supply of labour in a country refers to

(i) the total number of workers available for labour,(II) the intensity with which they can work,

(iii) the duration for which they work ,and

(iv) their efficiency ( or productivity ).

Factually, labour power of a worker is a mixture of the working capacity (a) provided

to him by nature, and (b) acquired by the worker himself. Only those human activities

can be termed as labour which are in the nature of economic activities. That is to

say, these activities should aim at production (even when it is for self-consumption).

Labour is a nactive factor of production. Labour cannot be separated from the

laboureer. Productivity of a labour can be improved. Labour has a weak bargaining

power. They accept the wages offered by employers.

b All capital is wealth, but all wealth is not capital. Comment.

Ans Capital is man-made productive resources. Capital is that part of the wealth of an

individual or community which is used for further production. Capital is known as

produced means of production. It may also be defined as man made instrument of

production. Machine tool. Transport equipment, are some of examples of capital.

All capital is wealth but all wealth is not capital. Capital is that part of the wealth

which is used for further production. Thus, that part of wealth which can be used for

further production will be capital.

c What do you mean by returns to scale? How do these affect the total cost curve of

a firm?

Ans Returns to scale means change in physical output of a good on account of increase

in all inputs required to produce that good simultaneously & in the same proportion.

The law of return of scale has three stage: Increasing returns of scale: increase in return of scale occurs when a given

percentage increase in all factor inputs in the same ratio causes

proportionately greater increase in output.

Constant returns of scale: constant returns of scale in which percentageincrease in all factor inputs in the same ratio causes equal percentage

increase in output.

Diminishing returns to scale: Diminishing returns to scale occur when givenpercentage increase in all factor inputs causes proportionately lesser increase

in output.

Effect of returns to scale on total cost:

In case of increasing returns to scale, the total cost decrease.


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In case of constant returns to scale, the total cost remains same. In case of diminishing returns to scale, the total cost increase.

d U shaped short run average and marginal cost curve suggest only economies of

scale. Comment

Ans It would be incorrect to state U shaped short run average and marginal cost curves

suggest only economies of scale. The cost curves are U shape in account of theoperation of Return to variable factors. The average cost curve falls downward the

starting as a result of increasing returns to factor and then the cost curve rises upward

due to diminishing returns to variable factor and not due to the operation of

economies of scale.

Thus, the U shaped short run average cost curve and marginal cost curve is due to

better utilization of resources, optimum combination of inputs etc.


a Fill-up the blanks in the following table :

Agricultural Output with Fixed Land and

Variable Units of LabourLabour Total Average Marginal

(Units) Output Output Output

(Tonnes) (Tonnes) (Tonnes)

1 8 8 ....

2 20 .... 12

3 36 12 ....

4 .... 12 12

5 55 .... 7

6 60 .... 5

7 .... .... 0

Ans Labour Total Average Marginal

(Units) Output Output Output

(Tonnes) (Tonnes) (Tonnes)

1 8 8 8

2 20 10 12

3 36 12 16

4 48 12 12

5 55 11 7

6 60 10 5

7 60 8.571 0


a In modern economy, most of the production takes place for self consumption

Ans False. Modern economy is characterized by production which takes place oncommercial scale as against self consumption while subsistence economy,

production takes place for self consumption.


following:

a A cost curve which is not U shaped:

(a)Marginal cost curve(b)average cost curve(c) average variable cost curve(d)average fixed cost curve

Ans average fixed cost curve

b Production function is

(a)Physical relationship between inputs and outputs(b)Relationship among all factors of production(c) Relationship between workers and management(d)None of the above

Ans Physical relationship between inputs and outputs

c Which of the following activity is considered production in economics

(a) Output of crops

(b) Singing a song before friends


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(c) Painting a picture for pleasure

(d) Run for fun

Ans Output of crops

d In the short run, total cost is equal to

(a) Variable cost

(b) Fixed cost(c) Fixed cost + variable cost

(d) Marginal cost + average cost

Ans Fixed cost + variable cost

e Total product is maximum, when

(a) Marginal product is maximum

(b) Average product is maximum

(c) Marginal product is equal to zero

(d) Marginal product is equal to average product

Ans Marginal product is equal to zero

f If all factors of production are increased by 100% and the output increases by 90%, itis a case of

(a) Increasing returns to scale

(b) Decreasing returns to scale

(c) Constant returns to scale

(d) None of the above.

Ans Decreasing returns to scale

g The average revenue curve of a firm is also known as its

(a) Profit curve

(b) Demand curve

(c) Income curve

(d) None of the aboveAns Demand curve


word(s)/figure(s)

a Land, labour, capital and Enterprenuership are the major factors of production.

b Marginal cost is the addition to total cost on account of the production of an

additional unit

c Better transport and banking facilities in the industrial area will come under external

economies economies

d The relationship between inputs and outputs of a good may be expressed in the form

of production function

e Addition to total cost on account of the production of an additional unit is called

marginal cost

f Internal economies accrue to a firm when it expands its operation.

g Marginal cost is additional total cost when an additional unit of production is

produced

h All factors of productions are variable in long run

Chapter - 4

Question.

No.

Particulars



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a Buyers Market and sellers market

Buyers market Sellers market

1 Buyers market may be defined as a

market which buyers have dominant

role to play and have an upperhand

in such a market

Seller market is one which is

characterized by greater influence

of the seller

2 It is characterized by more choiceand freedom to the buyers. In other

words consumer is the king of the

market

It is characterized by shortages andscarcity of goods since seller plays a

dominant role.

3 Prices in such market are

competitive

Such market witness an increase in

the prices

4 Producers seek to sell more goods

that buyers are ready to buy

Shortage of goods exists

5 Indian market after globalization Indian market before globalization

b Monopoly and monopolistic competition

Monopoly Monopolistic competition

1 There is only single seller There are many sellers2 Homogeneous products Product differentiation is a feature of

monopolistic competition

3 There are no close substitutes of

commodity

Mane close substitutes are available

4 No significant selling entry of new

firms

There is freedom of entry and exit

5 It has considerable influence over

market price

It has a less influence over market

price

c Perfect competition and monopolistic competition

Perfect Competition Monopolistic Competition

1 It has a large number of firms It has less firms as compared toperfect competition

2 Homogeneous product is a feature

of perfect competition

Differentiated product is a feature of


3 A firm can not have independent

price

A firm can have independent price

policy

4 Perfect competition does not have

selling costs

Monopolistic competition incurs a

selling costs

5 All firms produces same product There are close substitutes in case of


d Pure monopoly and discriminating monopoly

Pure monopoly Discriminating monopolyPure monopoly highlights the fact

that there is a single seller in the

market who has an absolute control

over the market as there exist no

substitute of the commodity and

there are restriction on the entry of

new firms

Discriminating monopoly refers to the

practice of charging different prices

from different set of consumers for

the very same product.


a Product differentiation and selling expenses form the foundation of monopolisticcompetition. Comment

Ans Monopolistic competition is a situation in which market, basically, is a competitive

market with some element of monopoly. It implies that buyers differentiated among

the products of differential firms. It may be on account of different brand name,

packing, colour, shape. These differentiated products are close substitute of each

other. This feature differentiated monopolistic competition from perfect competition.

Firms under monopolistic competition compete with each other by incurring selling

costs or expenditure on sales promotion selling cost is the expenditure incurred by the

firm to promote the sale of its product like in the form of advertisement, door to door

campaign etc.

b What is meant by monopoly? Explain the equilibrium of a monopolist firm in the long


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run.

Ans The word monopoly has been derived from two words namely mono and poly.

Where mono means single while poly means seller. The term monopoly means a

single seller. In economics, this term refers to a firm the product of which has no close

substitute in the market. Such a market is characterized by price discrimination,

absence of close substitute and sole firm placing restrictions on entry of new firms.

c Firm andindustry are identical under monopoly. Comment

Ans The term firm coined to denote the individual unit selling the good while industry

refers to group of firms. Monopoly is that form wherein there exist a large number of

buyers but only a single seller, selling that good of which no close substitute exist. As

there exist only a single seller, the difference between the firm and industry dissolves

there are restrictions on the entry of new firm, enabling the monopolist to act as the

sole decisive factor. Thus, under a monopoly both firm and industry are identical.

d What is price discrimination? State the conditions necessary for price discrimination.

Ans The term price discrimination refers to the act of selling the homogeneous products at

different price to different buyer. This situation may arise in monopoly. A monopolistic

can charge different price from different buyer by adapting policy of pricediscrimination leading to a situation called discriminating monopoly. Professor Pigou

mentions three types of price discrimination.

The monopolist may charge a separate price for each unit sold by him. This isknown as the price discrimination of first degree.

The monopolist may sell his output in batches or lots, charging a separateprice for each batch or lot. This is known as price discrimination of second

degree.

The monopolist may split up the market for his product on the basis of thebuyers, He may divide buyers into two or more categories and charge from

each category a different price. This is known as price discrimination of third

degree.


A Monopolistic competition is characterized by the homogeneity of product.

Ans Monopolistic competition is not characterized by the homogeneity of product. Under

monopolistic competition, the products of different firms are not homogeneous.

Products are differentiated from each other. But under perfect competition, the

products are homogeneous.

b An individual firm under perfect competition has full control over price

Ans No. an individual firm under perfect competition does not have full control over the

price.

c Monopoly of issue of currency note is the function of commercial banks

Ans False. Monopoly of issue of currency note is not the function of Reserve bank of India.

Issue of currency note is made by Central Bank. Issue of currency note is not the

function of commercial bank.


following:

a For price discrimination to be successful, the elasticity of demand for the product in

the two markets should be

(a) Same

(b) Different

(c) Constant(d) Zero.

Ans Different

b In perfect competition, the price is determined by:

(a)Firm(b) Industry(c) Government(d)None of the above

Ans Industry

c Price discrimination is possible under the following market:


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(a)Perfect competition(b)Pure competition(c) Monopolistic competition(d)Monopoly

Ans Monopoly

d A firm in the perfect competition faces a(a) Perfectly inelastic demand curve

(b) Perfectly elastic demand curve

(c) Perfectly inelastic supply curve

(d) Perfectly elastic supply curve

Ans Perfectly elastic demand curve

e A firm maximises profits where

(a) Marginal revenue = marginal cost

(b) Marginal revenue = average cost

(c) Marginal revenue = average revenue

(d) Marginal revenue = total cost

Ans Marginal revenue = marginal cost

f The demand curve of a firm under perfect competition is

(a) Vertical

(b) Horizontal

(c) Negatively sloped

(d) Positively sloped

Ans Negatively sloped

g Product differentiation is the basic feature of

(a) Monopoly

(b) Monopolistic competition

(c) Perfect competition(d) All of the above.

Ans Monopolistic competitions


word(s)/figure(s)

a Product differentiation and selling costs are the most important features of

Monopolistic competition

b All economic activities are guided by market forces in long run

Chapter - 5

Question.

No.

Particulars


A Dualistic nature of Indian economy

Ans Dualistic structure means that some segments of economic activity are unevenly

developed and other are well developed. Those which are experiencing a high

growth rate are able to provide a high standard of living for the persons engaged in

them. Persons engaged in the background component are very poor. Moreover, thedeveloped and backward component of the segment of activities is not segregated

b geographical boundaries. They co exit side by side.

a) on the one hand, some economic activities are highly capital intensive andare characterized by (i) speed (ii) high labour productivity.

b) In contrast some economic activities a re based on old techniques. They arehighly labour intensive but are characterized by low labour productivity. For

example, urban dualism is in the form of posh offices with urban slums

populated by very poor. Rural dualism in the form of advance component like

developed mining, fisheries. In contrast backward segment are represented

by small and fragmented forms.

B Components of tertiary sector in India


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Ans Components of territory sector are:

1. Transport, communication & trade: Its a mixture of incongruent components.Its share has increased from 11.9% in 1950-51 to 26.11 % in 2005-2006.

2. Banking & Insurance, Real estate & ownership: Its share on GDP is 13.76 % in2005-06.

3. Public Administration & defense & other services: This sector has recorded amoderate long term growth.

The share of services in our GDP is likely to increase further in the foreseeable future.

c Feature of mixed economy

Ans Some of the important feature of mixed economy are:

1. Co-existence of both private ad public enterprise: Private sector: Industries in this sector are based on self interest & profit

motive. However they are regulated by government.

Public Sector: These are set up by the state for the welfare of theeconomy.

Combined sector: this denotes the sector set up by the governmentand private sector in consonance.

2.

Planned economy: In this economy; government has a clear and definiteeconomic plan.

3. Balanced regional development: In a mixed economy balanced regionaldeveloped is expected.

4. Dual system of pricing: The economy depicts a dual system of pricing.2 Write Distinguish between the following

a National Income at current prices and National Income at constant prices

National Income at current prices National Income at constant prices

1 It is the sum total of market value of

all goods and services produced by

an economy during the year

estimated at current price of that

year.

It is the sum total of market value of

all final goods and services

produced by an economy during

the year but estimated at the price

of same base year.

2 It can increase even when there is

no flow of goods and services in the

economy.

It will increase only when there is an

increase in the flow of goods and

services

3 It does not reflect real growth of an

economy

It reflects the real growth of

economy


a Explain in briefly Industrial Sickness

Ans Industrial sickness of certain industries has been caused by two basic factors:

1. Seek personal benefits by entrepreneurs2. Faulty planning and policies pursued by authorities in form of over regulation

and restrictions.

A financially sick company leads to drainage of valuable resources of the economy

and hence calls for restructuring the revival of the sick unit. A proper scheme of

revival for the enterprise needs to be chalked out by adequate provisions for fund.

However, if the same cannot be revived, it should be better to close down the unit.

b Will an increase in national income result in a corresponding increase in economic

welfare of the society? Give reasons in support of your answer.

Ans An increase in national income need not result in an increase in national welfare. It

depends on number of factors:

1. If the national income is increased by degrading environment it reduceseconomic welfare.

2. We should expect an increase in economic welfare, when a reduction ininequalities takes place.

3. If national income is increased due to overworking of labour, it may not addto economic welfare.

4. Increase in government expenditure on its own maintenance or producingcertain public services inefficiently results in increase in national income but

not in national welfare

c What is meant by disguised unemployment?

Ans Disguised unemployment means that form of unemployment wherein the person


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seems to be employed but in actual he is unemployed. For example in case of

agriculture large number of workers worked on an agriculture land seems to be

employed but the same work could be performed even by lesser number of persons

and hence the extra workers will be deemed to be unemployed

d Discuss the problem of income inequalities

Ans In India, income inequalities exist. Number of poor below poverty line has increased inabsolute terms. The very structure of Indian economic system feeds inequalities

problem of inequalities of income and wealth arises in context of two things:

In a market guided economy, such inequalities lead to inequalities ofeconomic opportunities

Distribution of income and wealth is closely linked to distributive justice.e How National Income is estimated in India?

Ans There are three methods to compute national income:

1. Production method: In this method, we classify the contribution of thedifferent industrial sectors of the economy to GDP mp & then arrive at Net

National product at factor cost.

2. Income Method: This method is called income distribution method as in thismethod we measure the factor income distributed to the owners of factor ofproduction by the various sectors of the economy.

3. Expenditure method: the steps involved are: Classify production unit into industrial sector, classify them into primary,

secondary and tertiary sectors.

Estimate final expenditure on goods and services produced by them Take the um of these final expenditure to obtain the measure of gross

domestic product at market price

Estimate consumption of fixed capital and net indirect taxes anddeduct these from GDPmp to get NDPfc

Add net factor income from abroad to get Net national product atfactor cost.

f Write a note on the role of service sector in Indian economy

Ans Role of service sector is as follows:

Increased share in GDP: The share of service sector has increased manifold. Share in export: services accounted for 36 percent of total export in India

(2004-05). Services exports from India include transportation, construction,

financial services, software agency etc.

Contribution to other sectors: It provides support to industry & agriculturesector by providing services such as those related to financial, transport

distribution etc.

Provides employment: the contribution of service sector to employment hasalso increased.


A Calculate GNPFC, NNPFC and NDPFC with the help of following information:

Rs.

(i) GNP at market price 35,000 crore

(ii) Net indirect taxes 4,000 crore

(iii) Consumption of fixed capital 1,800 crore

(iv) Net factor income from abroad 200 crore

Ans: GNPFC = GNPMP (-) NiT

= 350004000 = 31000 CRORE

NNPFC = GNPFCDEPRECIATION

= 310001800 = 29200 CRORE

(Depreciation is the same as Consumption of fixed capital)

NDPFC = NNPFCNfiA

= 29200200 = 29000 CRORE


A A larger share of Indias GDP is generated in the public sector

Ans: Incorrect, Larger share of Indias gross domestic capital formation is in the hands of


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private sector. In 1950-51, share of private sector was 7.7 % as against 5.8% of public

sector.

B Fixed wage earner suffers both in inflation and deflation

Ans: Correct, Fixed wage earners belong to that section which suffers in both inflationary

and deflationary situations. In case of inflation, by the businessmen while in deflation

the price reduces and due to downfall in production they are throws out of job also.


following:

a Since adoption of economic liberalization, the share of agriculture to Indias GDP is

(a)Constant(b)Declining(c) Increasing(d)None of the above

Ans: Declining

b Which if the following is not included in income method of measurement of nationalincome:

(a)Fixed capital formation(b)Wages and salaries(c) Interest(d)dividends

Ans: Fixed capital Information


word(s)/figure(s)

A The Agriculture sector has the highest share in Indias national income

B National income estimates in India are prepared by Central Statistical Organisation

(CSO)

C The base year for the current new series of national income estimate is 1999-2000

D The acquisition of fixed assets and accumulation of stocks is known as Gross Capital

Formation

8 Choose the most appropriate answer from the given options in respect of the

following:

a Point out the odd one out of the following:(a)Delhi Transport corporation(b) Indian Railways(c) Hindustan aeronautics Ltd.(d)Reliance Industries Limited

Ans: Reliance Industries Limited

Chapter - 6

Question.

No.

Particulars


a Comment on Liberalization is the encouragement of direct foreign investment and

technology.

Ans Liberalization means loosing of various controls which were earlier prevailing in the

market. But. Liberalization policy since 1991 has brought a sea change in the foreign

direct investments. Liberalization has surely increased the foreign direct investment

and thereby increasing the growth of the country as a whole. Thus, the policy of

liberalization has surely encouraged the direct foreign investments.

b How does rapid growth of population create hurdles economic development?

Ans The drawbacks of population explosion are as follows:


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1. Low per capita income: Rapid growth of population has adversely affectedper capita income in India.

2. Burden of rising population: Rising population increases the demand for basicrequirements like food, houses, school etc.

3. Low rate of capital formation: high birth rate and increasing expectancy oflife have resulted in large proportion of dependents in the countrys total

population.4. Problem of unemployment: increase in population increase the labour force

which creates unemployment.

5. Low standard of living: due to population explosion, standard of living in Indiais quite low, even necessities of life are not met adequately.

6. pressure on land: rising population increases the pressure of population onland.

7. poverty: Indian poverty is deeply rooted in population growth. Populationgrowth has created all sorts of hurdles in economic development

programmes.

c What is fiscal policy? Discuss its various objectives.

Ans Fiscal policy means policy relating to public revenue and public expenditure Fiscalreforms aims at reducing expenditure, increasing revenues, and earning positive

economic returns on the investments.

Objectives of fiscal policy are:

Economic Growth: It refers to the increase in real income. Fiscal policy helps inachieving this objective by mobalizing resources for development.

Equitable channels of wealth and income: It is one of the major objectives offiscal policy. It helps to ensure the equality of wealth and income among the

rich.

Balanced regional development: It includes giving tax concessions ondeveloping this objective.

Providing employment; this policy aims at achieving full employment ormaximum employment.


a Balance of payments and balance of trade convey the same information

Ans Incorrect, balance of payments is a statement of all economic transactions between

the residents of country and rest of the world during a year whereas balance of trade

means difference between exports and imports of goods by a country in a year.


following:

a From the national point of view, which of the following indicates a micro approach

(a) Educated unemployment in India(b) Per capita income in India

(c) Inflation in India

(d) Study of sales of TISCO.

Ans Study of sales of TISCO

b Invisible items are included in

(a) National income accounts

(b) Balance of payments accounts

(c) International accounts

(d) World Bank accounts.

Ans Balance of payments accounts

c The duration of the 11th Five Year Plan is

(a) 2007-2012

(b) 2008-2013

(c) 2009-2014

(d) 2006-2011.

Ans 2007-2012

Chapter - 7

Question. Particulars


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No.


a Limitation of open market operations

It refers to the buying and selling of securities by the central bank to the public. It

reduces the deposits of the people with commercial banks which effects lendingpower of commercial banks and there is change in aggregate demand.

But these quantities measure (including open market operation) are not the only

means of controlling credit. Some other qualitative measures are also there. Thus, we

can conclude that open market operations are not the surest and the only way of

reducing credit.


a Credit card and Debit card

Credit Card Debit Card

1 Credit card is a means by which the

credit card holder is entitled toutilize the credit facility and can

withdraw the amount even more

than the deposit in his bank

account and thus. Credit card offer

him credit facility

Debit card is also means by which

the holder can utilize the amountlying in his bank account without

actually carrying the amount.

However it is distinguished from

credit card on the fact that in case

the customer can withdraw only

upto the amount lying in the

account and not above.

b Demand Deposits of banks and time deposits of banks

Demand Deposit Time deposit

1 Demand deposits refers to those

deposits which can be withdrawnthrough cheque.

Time deposits refers to those

deposits in the bank which can onlybe withdrawn after the expiry of a

certain fixed time period

2 Bank money is also called deposit

money

Time deposits are not part of money

as they cannot be used at any

time.

c Primary deposits and derived deposits

Primary Deposit Derived Deposit

1 The basic function that the bank is

engaged in consists of borrowing

and lending function. In the former,

the bank receives cash from thecustomer and these deposits of the

customer with the bank are termed

as primary deposit.

The bank deploys these deposits of

the customers to grant loan i.e. lend

to those who are in need of funds.

This results in the creation of loandeposit also known as derived

deposits.


a What is Bank Rate? How it is used by the central bank of a country to control credit

creation by banks?

Ans Bank rate is the rate of interest at which the central bank of the country lends money

to the commercial bank of that country. It lends to commercial bank even when

need arises. The rate of interest charged by the commercial banks from the general

public is called lending rate. If the central bank change its bank rate, lending rate

changes which results in fall in investment and in turn control credit.

b Discuss the main functions of a central bank of a country.

Ans Functions of central bank of a country:

1. Bank of issue: it means a bank which has legal right to issue currency notes.2. Governments banker, agent and advisor: It conducts the banking account

of the government departments. It accepts their deposit. It gives loan to

government.

3. Bankers Bank and supervisor: Commercial banks are obliged to keep a partof their deposit as reserve with central bank. Central bank provides them

credit and provides them guidance and direction and regulates their

activities.


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4. Custodian of nation of international currency: it is required to maintain acertain minimum reserve of international currency. It is to maintain the

confidence in domestic currency and to meet emergency requirement of

foreign exchange.

5. Lender of last resort: The direct lending to commercial bank is referred to aslender of the last resort. Instead of rediscounting central bank gives loan

against bill of exchange, govt. securities etc.6. Controller of the credit: Lower the cash reserve ratio more the lending power

of commercial bank and lower the interest charged higher the lending.

Central bank has the right to change cash reserve ratio and influence lending

rate of commercial bank by changing its own rediscounting rate.

c Briefly explain the fishers Quantity theory of money.

Ans According to quantity theory of money the level of prices in general is determined by

the quantity of money circulating in the economy and a change in it leads to

change In price level in the same proportion and in the same direction. For example,

the quantity theory says that if quantity of money is increased by 20% prices would

also go up by 20%.

Limitations:1. It makes wrong assumptions that proportion K1 C1 and h remains constantfrom one point of time to other.

2. It wrongly assumes that no variable in the equation, except +M can changeson its own.

3. There is no explanation of factors determining the value of K1 & h.4. The concept of R is vauge.

d Money does nothing. Comment

Ans In the present scenario it will not be justified to say that money does nothing. Money

plays a very crucial role and performs many functions.

Money as a medium of exchange: Money as a medium of exchange meansmoney as a means of payment of exchange of goods and services. Medium

of exchange function of money solves the problem of double coincidence of

wants which occurs in barter system.

Money as a store of value: Money as a store of value means money is anasset and can be stored for use in future. Holding of money means holding of

general purchasing power which can be used to purchase any goods or

services at any time.

Money as a unit of account: it means a standard unit for quoting prices. Itmakes possible of keeping of business accounts. It would be impossible to

keep business accounts unless all business transactions are expressed in

money.

Money as a standard of deferred payment: money as a standard of deferredpayment means standard of payment contracted to be made at some future

date. This functions facilitates two advantages: 1) Facilitate borrowing andlending activities and 2) leads to creation of financial institution


a An increase in Cash Reserve Ration for banks can increase their capacity of credit

creation

Ans Incorrect, The capacity to create credit depends on the amount of cash with

commercial banks. If CRR is raised, it means that banks are required to maintain

higher cash reserves with the RBI, the smaller will be the amount of cash with them

and hence their capacity to create credit would diminish.

b Banks are not merely purveyors of money, but in a important sense, manufacture ofmoney.

Ans Correct, Banks are not merely purveyors of money, but also manufacturer of money

as with little cash in hand, commercial banks can multiply loans and advances and

hence deposit. When the banks accept cash from the customers it opens a deposit

account called primary deposit. When banks grant loan, then it instead of giving

cash to borrowers, open an account in his name called secondary deposit. The

creation of secondary deposit is called creation of credit. It is because of this unique

multiple credit creating power that the commercial banks are called as manufacture

of money.

c The evolution of money is discontinuous process.

Ans False, The evolution of money has proved to be an unending and continuous process


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which can be seen from the fact that apart from the commodity money and metallic

money, we have experienced paper money and a variety of other financial

instruments.


following:

a When general price level increases, the value of money will:

(a) Increase(b)Decrease(c) Remain constant(d)None of the above

Ans Decrease

b Find the odd one out of the following:

(a)State Bank of India(b)Reserve Bank of India(c) Central bank of India(d)Union Bank of IndiaAns Reserve Bank of India

c Which of the following leads to credit expansion

(a) Increase in CRR

(b) Increase in SLR

(c) Increase in bank rate

(d) Increase in purchase of government securities by central bank

Ans Increase in purchase of government securities by central bank

d Value of money changes

(a) In direct proportion to money supply

(b) In inverse proportion to money supply(c) In proportion to savings and investments

(d) According to changes in bank rate

Ans In inverse proportion to money supply

e The Reserve Bank of India was nationalised in the year

(a) 1935

(b) 1949

(c) 1969

(d) 1980

Ans 1949

f According to Fisher, total supply of money is

(a) MV + M1V1

(b) MV1 + M1V

(c) MV + M1V1

T


Ans MV + M1V1

g Which one of the following is not a function of RBI

(a) To issue currency notes

(b) To regulate supply of credit

(c) To act as banker to the government

(d) To regulate foreign trade

Ans To act as banker to the government


word(s)/figure(s)

a Quantitative Credit control measures control the direction of credit.

Chapter - 8

Question.

No.

Particulars


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a Briefly explain the meaning of globalization and its impact on the Indian economy

Ans Globalisation means integrating domestic economy with the world economy. It

involves increasing interaction among national economic system, more integrated

financial markets, economies of trade, free flow of technology and knowledge

through out the world. Through globalization the economies of the world are ironically moving away

from one another more then coming together

It proves difficult to the public to go through the pains and uncertainties ofstructural changes.

Globalizing is helping more the developed economies than the developingeconomies. The investment made by foreign countries in developing countries

is low as compared to their investment abroad.

Globalisation increases the pressure on economics for structural andconceptual readjustments to a breaking point.

b External sector reforms introduced in India since 1991 have been successful

Ans During pre 1991 scenario, the Chandrasekhar Government witnessed acute financialcrunch when it had gold reserves left in its treasury just enough to the extent of two

weeks import due to strict government regime, dominance of public sector

enterprises and licensing policies prevalent at that time. All these factors made it

necessary for the government to call for drastic reform and consequently the

government took the initiative by introducing the policy of liberalization, privatization

and globalization, also could the New Economic Policy, NEP 1991. Thus we can

conclude that the origin of the crisis was directly attributable to the imprudent macro

management of the economy during the 1980s, which led to the large and persistent

macro economic imbalances. These imbalances have to be met out through

borrowings. At the same time there was no political stability in our country. The

confidence of international community eroded, and Indias credit worthiness in the

international capital market went down suddenly.

c What is WTO? What are its functions?

Ans WTO is World Trade Organization. It consists of GATT, GATS and TRIPS. It is a dispute

settlement system. It is characterized by rule based system. It ensures free trade. The

functions of WTO includes:

1. Making, implementing and administrating the trade agreement.2. Reviewing the working of its member countries.3. Enhancing international cooperation among the member countries.4. Developing the underdeveloped countries by providing technical assistance5. ensuring norms for trade negotiations6. resolving trade disputes between the member countries

2 Choose the most appropriate answer from the given option in respect of thefollowing:

a Which of the following is not the objective of the WTO:

(a)To help free trade flow(b)To help trading members to settle dispute(c) To try to sort out the trade problems of members(d)To determine the exchange rates of different currencies

Ans To determine the exchange rates of different currencies

b Gloabalisation means:

(a)Creation of global trading blocks(b)Dismantling barriers to international trade(c) Introduction of one currency in the world(d)None of the above

Ans Dismantling barriers to international trade

Chapter9

Descriptive Statistics

Question.

No.

Particulars


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a Law of statistical regularity

Ans: This law states that if on random basis, a large sample is drawn from the population,

the same shall represent the characteristic of the population. The theory is backed by

the fundamentals of probability theory. The law of statistical regularity formulated in a

mathematical theory of probability lays down that a moderately large number ofitems chosen at random from a very large group are almost sure on the average to

have the characteristics of the large group.


a State the limitation of statistics

Ans: Statistics inspite of its immense use has certain limitations. Some of the important

limitations are listed as under:

1. Deals in Quantitative Data: Statistics deals with quantitative data only and notthe qualitative and descriptive facts such as honesty, efficiency, intelligence,

blindness, etc

2. Study of Groups and not Individuals: Statistics deals with groups and not withindividuals3. In-exact Science: Statistical laws are not exact. Their results are true only on

averages. They are valid only under certain set of assumptions

4. Misuse: Statistics deal with figures which can be easily distorted, manipulatedby people for their selfish motives.

b Statistics is a method of decision making in the face of uncertainty

Ans: Statistical data and powerful statistical techniques of probability, expectations,

sampling techniques, test of significance, estimation theory, forecasting techniques

and so on play crucial role. Chao "Statistics is a method of decision-making in the

face of uncertainty on the basis of numerical data and calculated risks". Statistics

provides information to the business units which help in deciding location and size of

business, demand forecasting, production planning, quality control, marketing

decisions and personnel administration. In Industry, statistics is extensively used in

'Quality Control'.

c Statistics are aggregate of facts Comment

Ans: Statistics must relate to aggregate of facts. A single figure even though numerically

expressed cannot be called statistics because such figures are unrelated and cannot

be compared. Hence, we cannot draw any conclusions out of it. By statistics we

mean aggregate of facts affected to marked extent by multiplicity of causes,

numerically expressed, enumerated or estimated according to a reasonable

standard of accuracy, collected in a systematic manner for a pre-determined

purpose and placed in relation to each other. It is not the datum but the data which

is the subject matter of statistics.

d Statistics should be placed in relation to each other. Discuss

Ans: This characteristic of statistics require that the collected statistics should be

comparable with reference to time, place or any other condition. In order that

statistics are comparable, it is essential that they are homogeneous and pertain to

same investigation. The numerical data may be compared period-wise or region-

wise. For example, per capita income of India may be compared at a point of time

to that of Pakistan, China, Brazil, Mexico, provided the data are homogeneous. They

are related to same phenomena.


a Perfect accuracy is unattainable in statistical enquiries

Ans: True. Perfect accuracy is unattainable in statistical enquiries because in statistics

there remains errors in measurement and collection of data

b Statistics studies qualitative phenomenon

Ans: Incorrect. Statistics does not study the qualitative phenomenon statistics deals with

quantitative data only and not the qualitative phenomenon

c Statistical results are true only on an average

Ans: True. Statistical laws are not exact. Their results are true only on averages. They are

valid only under certain set of assumptions.


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following:

a Statistics deals with

(a) Independent data

(b) Quantitative data(c) Qualitative data

(d) Both (b) and (c).

Ans: Quantitative data

b Statistics in plural sense refers to

(a) Statistical data

(b) Statistical methods

(c) Applied statistics

(d) Inductive statistics.

Ans: Statistical data

5 Rewrite the following sentences after filling-in the blank spaces with appropriateword(s)/figure(s)

a Descriptive statistics deals with numerical data

b Statistics is a branch of applied mathematics which specializes in data

c The law of inertia of large numbers is corollary of the law of statistical regularity

Chapter10

Collection and Presentation Of Statistical Data

Question.

No.

Particulars


a Primary Data and Secondary Data

Ans: Primary Data Secondary Data

1 It is original in nature. They are

collected from the source of origin.

They are second hand data. They

are not collected by user himself.

2 Objective or purpose is to be kept in

mind while collecting primary data

These data may or may not be

directly suit the objective.

3 It is costlier and tedious task. It proves out to be less expensiveand easy availability.

4 It can be used directly. Certain precautions are required to

use these data.

5 They are more reliable and

accurate.

They are not much reliable and

accurate.

b Classification of data and tabulation of data

Classification of data Tabulation of data

1 Classification comes before

tabulation

Tabulation is the second step after

classification

2 It is a process of arranging or

grouping data on the basis of

similarity or resemblances

It is the process of orderly

arrangement of data in form of rows

and in columns

3 Data are classified into groups and

subgroups

Data is further presented in the form

of grid rows and columns.

4 It is the means of analysis It is merely a mode of presentation.

c Histograph and histogram

Histograph Histogram

1 It is also known as frequency

polygon

It is rectangle in shape.

2 It can be drawn by joining the mid

point of rectangles of histogram or

without using histogram

It is prepared by plotting class

intervals on X axis and frequency of

Y axis and thereafter rectangle is


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created for each class-interval.

d Census investigation and sample investigation

Census Investigation Sample Investigation

1 It is the study of each and every

component of the universe

A few units out of the whole universe

is kept for study.

2 It is more time consuming and

tedious job

It is less time consuming and easier

method

3 The result under this methods are

more accurate

The result under this method are less

accurate

4 It is appropriate both for

homogeneous and heterogeneous

products

It is suitable only for homogeneous

products.

e Line diagram and simple bar diagram

Line diagram Simple bar diagram

1 In line diagram, different values are

represented by the length of the

lines

In simple bar diagram, bars with

height proportional to the value of

the item are considered2 Line diagram is used when the

number of items is very large

Bar diagrams are particularly

suitable for representing individual

time series or spatial services.

3 Line diagram is not very attractive It is attractive

f Exclusive class and inclusive class

Exclusive Class Inclusive Class

1 Exclusive class is the one whose class

intervals are so determined that

upper limit of one class is the lower

limit of the next class

Under this, both the class limits are

included in the class itself while

determining the class intervals.


a Precaution in the use of secondary data. Discuss with suitable example

Ans: Secondary data needs utmost precautions in their use because they are collected

for different purpose and by different agencies. They are not much reliable and

accurate. , it is essential for the users of secondary data to ensure the reliability,

adequacy and suitability of data to the given problem under investigation. Some of

the major precautions in this regard include the following:

Suitability of data: It is expected that the user of the secondary data shouldensure that the data are suitable for the purpose of enquiry.

Reliability of data: The reliability of secondary data is another precaution. Theusers should take note of the reliability of the source of information, themethods used for collection and analysis of data, the degree of accuracy

desired by the company etc.

Adequacy of data: Adequacy of data is to be judged in the light of therequirements of the survey and the geographical area covered by the

available data.

Hence, in order to arrive at conclusions free from limitations and inaccuracies, the

secondary data must be subjected to thorough scrutiny and editing before they are

accepted for use.

b Explain personal interview method for collecting primary data

Ans: Direct interview is one of the important method of collecting primary data. Under this

method, investigator personally visits the respondent, ask them questions pertaining

to the subject of the enquiry and collect the desired information. Accuracy of the

data so collected depend largely upon to a large extent on the training and attitude

of investigator. It makes available to investigators supplementary information which

helps them in the interpretation of results. The data collected under this method may

be influenced by subjective attitude of investigators. This type of method is suitable

only in those cases where scope of enquiry is confined to single locality, area or

region and there is no constraint on the utilisation of resources like money and time.


a Present the following data relating to percentage of marks obtained by 60 students in

the form of frequency table with ten class intervals of equal width, one class interval


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being 40-49:

41 17 33 63 54 92 60 58 70 06 67 82

33 44 57 49 34 73 54 63 36 52 32 75

60 33 09 79 28 30 42 93 43 80 03 32

57 67 24 64 63 11 35 82 10 23 00 41

60 32 72 53 92 88 62 55 60 33 40 57

Ans: Class Interval Tally Marks Frequency

0-9 IIII 4

10-19 III 3

20-29 III 3

30-39 IIII IIII I 11

40-49 IIII II 7

50-59 IIII IIII 9

60-69 IIII IIII I 11

70-79 IIII 5

80-89 IIII 4

90-99 III 3

Total 60

b Represent the following frequency distribution by a histogram:

Class Interval 0-10 10-15 15-30 30-40 40-60

Frequency 8 10 36 40 32

Ans:

Class Frequency Adjustment factor

= (width of the

class interval/width

of the minimum

class interval)

Adjusted

Frequency

0-10 8 2 410-15 10 1 10

15-30 36 3 12

30-40 40 2 20

40-60 32 4 8

0

5

10

15

20

Frequenc

y

Adjusted

Class Intervals


a A random sample is free from the bias of the investigator.

Ans: Correct. A random sample is free from the bias of the investigator because the

sample is taken as per the applicable laws and it is free from bias.

b Sample study is suitable for large universe

Ans: Correct. Sample study is suitable for large universe. On the other hand, census

investigation is suitable for small surveys where the coverage of every item is

necessary.

c There is inverse relationship between the size of the sample and accuracy of the

result

Ans: False. In sample investigation The size of the sample should be adequate enough to

represent the parametric characteristics of the population. So larger the size more

accurate the results will be.


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following:

a Data originally collected for an enquiry are termed as

(a) Primary data

(b) Secondary data

(c) Published data(d) None of the above.

Ans: Primary data

b When both upper and lower limits are considered, such classes are called

(a) Exclusive

(b) Inclusive

(c) Cumulative

(d) Related.

Ans: Inclusive

c Census investigation is not preferred over sample investigation because

(a) It is costlier(b) It is time consuming

(c) It has greater possibilities of error

(d) All the above

Ans: All the above

d A researcher would prefer primary data when

(a) Accuracy is very important

(b) Adequate funds are not available

(c) Time available to complete the study is very short

(d) Much accuracy is not required

Ans: Accuracy is very important

e The graphical representation of cumulative frequencies is termed as

(a) Histograph

(b) Ogive

(c) Frequency curve

(d) Histogram.

Ans: Ogive

f The arranging of related facts into classes is called

(a) Diagram

(b) Graph

(c) Classification

(d) Tabulation.

Ans: Classification

g Ogive curve is drawn with the help of

(a) Tallies

(b) Median

(c) Cumulative frequency distribution


Ans: Median


word(s)/figure(s)

a Difference between the largest and smallest items of the series is called ranges

b Systematic arrangement of data into rows and columns is called as tabulation

Chapter11

Measures of Central Tendency

Question.

No.

Particulars


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a Compare mean, median and mode

Basis Mean Mode Median

1 Meaning Summation of all

value of items

divided by numberof observations

It is the most

frequently or

repetitivelyoccurring value in

the series

It is the value

divides the series

into two equalparts when being

arranged into

ascending or

descending order

2 Nature Based on all values

of the series

Not based on all

values

Not based on all

values

3 Calculation It is simple to

understand and

easy to compute

Easy to compute Easy to compute

4 Further

treatment

Capable of further

algebraic

treatment

Not capable of

further treatment

Only to certain

extent algebraic

treatment ispossible

5 Extreme

value

Adversely affected

by extreme values

Not affected by

extreme values

Impact of extreme

values is not much


a Discuss the requisites of a good statistical average.

An average is a single value representing a group of values and hence it should

possess the following requisites:

1. Simple to calculate: A good statistical average is one which is simple tocompute and so that it can be used very extensively

2.

Should be rigidly defined: The answer should remain the same whatever maybe the mode of calculation

3. It should be based on all the items: The average should depend upon eachand every item of the series. If some of the items are not taken into account

the average cannot be said to be a representative one.

4. It should be capable of further algebraic treatment: That is it could be usedfor further statistical computations so that its utility gets enhanced.

5. It should not be affected by extreme observations: The average obtained in aparticular field from two independent sample studies should not materially

differ from each other.

6. It should possess sampling stability: An average should be least affected bysampling fluctuations


a The mean salary paid per week to 1000 employees of an establishment was found to

be Rs. 900. Later on, it was discovered that the salaries of two employees were

wrongly as Rs. 750 and 365 instead of Rs. 570 and 635. find the corrected mean.

Ans: No. of Employees = 1000

Mean salary = 900

Mean = Sum observation/Number of observation

900= Sum of observation/1000

Sum of observation = 9,00,000

To find correct mean salary, we have to first find out the correct sum of observations.

Correct sum of observation = incorrect sum of observationsum of incorrect

observation + sum of correct observation

Correct sum of observation = 900000[750+365] +[750+635]

Correct sum of observation = 9000001115 + 1205

Correct sum of observation = 900,090

Correct mean = Correct sum of observation/number of observation

Correct mean = 900,090/1000

Correct Mean = Rs. 900.09


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b i) Out of 100 numbers, 20 were 4s, 40 were 5s, 30were 6s and reminder 7s. Find the

arithmetic mean of the numbers:

ii) Find the median of 25,14,28,30,25,15,32

iii) Four groups of students consisting of 15,20,10 and 18 individuals, reported mean

heights of 1.62, 1.48, 1.53 and 1.40 meters respectively. Find the mean height of all the

student

Ans: Xi fi Fixi

4 20 80

5 40 200

6 30 180

7 10 70

Total 100 530

Mean = fixi/fi

Mean = 530/100

Mean = 5.30

ii) Median of 25, 14, 28, 30, 25, 15, 32 is N=1/2 = 7+1/2 = 4th observation in the series isthe median i.e. 30.

iii) Calculation of mean height

Height (in meters) number of students

iii)

Xi fi Fixi

1.62 15 24.3

1.48 20 29.6

1.53 10 15.3

1.40 18 25.2Total 63 94.4

Mean = fixi/fi

Mean = 94.4/63

Mean = 1.50

c Find the mean, median and mode for the following set of numbers:

3 5 2 6 5 9 2 8 6

Ans: Calculation of Mean:

Observations are 3,5,2,6,5,9,2,8,6

Mean = Sum of observations/number of observations

= 3+5+2+6+5+9+2+8+6/9

= 46/9

= 5.11

Calculation of median :

For median observation should be arranged in ascending order

Observations are 3,5,2,6,5,9,2,8,6

Observations in ascending order: 2,2,3,5,5,6,6,8,9

Median = (n+1/2)th observation

= (9+1/2)th observation

= (10/2)th observation = 5th observation = 5

Calculation of mode:

Mode = 3 median2 mean= 3(5)2(5.11)

= 1510.22

= 4.78

d A cyclist pedals from his house to college at a speed of 10 kmper hour and back from

the college to his house 15 km per hour. Compute his average speed.

Ans: Suppose x kms. Be the distance between house to school. Therefore, total distance

covered by the cyclist = 2x kms.

Speed = Distance / time

Distance = 2x

Time = x/10 + x/15


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= 2 x 30/5

= 12 kms per hour.

Average speed of cyclist is 12 Km per hour


a Mode divides the series into two equal parts

Ans: Incorrect. Mode does not divides the series into two equal parts. Thus the above

statement is incorrect.

b Geometric mean cannot be calculated if one or more observations are zero or

negative

Ans: Geometric mean can not be calculated if one or more observation are zero or

negative. It is one of the limitation of geometric mean.


following:

a The geometric mean of two numbers 8 and 18 shall be(a) 12

(b) 13

(c) 15

(d) 11

Ans: 12

b Which one of the following cannot be determined by graphic method

(a) Mean

(b) Median

(c) Quartiles

(d) Mode.

Ans: Mean

c The measure of central tendency which is most affected by extreme observations

is

(a) Mean

(b) Median

(c) Geometric mean

(d) Mode.

Ans: Mean

d Out of the following which is not a measure of dispersion

(a) Mean deviation

(b) Standard deviation(c) Harmonic mean

(d) Range.

Ans: Harmonic mean

e Which of the following averages would be more suitable for ascertaining average

size of shoes

(a) Arithmetic mean

(b) M o d e

(c) Geometric mean

(d) Median.

Ans: Mode

f Which average is affected most by extreme observations

(a) Mode

(b) Median

(c) Geometric mean

(d) Arithmetic mean

Ans: Mode

g A distribution in which the values of mean, mode and median coincide is

known as

(a) Asymmetrical distribution

(b) Skewed distribution

(c) Symmetrical distribution


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(d) Non-normal distribution.

Ans: Symmetrical distribution


word(s)/figure(s)

A Harmonic mean is the reciprocal of the arithmetic mean of the reciprocals of given

observations.

b In a perfectly symmetrical distribution mean, mode and median are equal to each

other.

c The difference between the largest and the smallest observation is called range

d When the value of dependent variable changes by the constant percentage, it is

called expontial trend

Chapter12

Dispersion

Question.

No.

Particulars


a Deciles and percentiles

Ans: Deciles Percentiles

1 Deciles are the distribution divides aseries of observation into 10 equal

parts

Percentile is the distribution divides aseries of observations into 100 equal

parts

2 There are in all 9 deciles There are in all 99 deciles

3 D5 = Median P50 = Median

b Mean deviation and standard deviation

Ans: Mean Deviation Standard Deviation

1 Mean deviation is the arithmetic

mean of the absolute values of

deviations

Standard deviation may be defined

as the positive square root of

arithmetic mean of the squares of all

the deviations

2 it is not very convenient to bealgebraically manipulated

It can be manipulated algebraically

3 It deals with the average of the

series of values

The standard deviation gives more

importance to extreme observations


a Dispersion is used in two senses. Discuss with giving examples

Ans: Measures expressing variations among observations in terms of differences i.e. range,

percentile, interquartile range. Measures expressing variations in the observation in

the terms of average of deviations for central value. i.e. standard deviation, quartile

deviation, mean deviation etc.

The above categories of measures of dispersion can be classified as:Absolute measures of dispersion and relative measures wherein the former are

expressed in the same statistical units kgs, rupees, meters etc.

It is the extent of scattered ness of items around a measure of central tendency.

Dispersion calculate is done on relative basis by dividing the absolute measure of

central tendency. The relative measure of dispersion is known as coefficient of

variation and is used for facilitating comparisons of dispersion of various distributions.

b What is standard deviation? Explain briefly its merit and demerits

Ans: Standard deviation may be defined as the positive square root of arithmetic mean of

the squares of all the deviations of the values from their arithmetic mean. In brief, it

refers to the square root of the mean of the squares of deviation from mean. Square

of the standard deviation is known as variance of the distribution.


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Economic and Statistic