CBSE economics

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Question
CBSEENEC12013395

Give equation of Budget Line.

Solution

The budget line can be expressed as an equation:
M = (PA x QA) + (PB x QB)
Where:
M = Money income;
QA = Quantity of good 1
QB = Quantity of good 2
PA = Price of good 1
PB = Price of good 2

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Question
CBSEENEC12013396

When income of the consumer falls, the impact on price-demand curve of an inferior
good is: (choose the correct alternative)

  • Shifts to the right.

  • Shifts of the left.

  • There is upward movement along the curve.

  • There is downward movement along the curve.

Solution

A.

Shifts to the right.

Reason: Demand for inferior goods share a negative relationship with consumer's income.
Hence, when the income of the consumer falls, the demand for inferior good
increases leading to the rightward shift of the demand curve.

Question
CBSEENEC12013397

If Marginal Rate of Substitution is constant throughout, the Indifference curve will
be

  • Parallel to the x-axis.

  • Downward sloping concave.

  • Downward sloping convex.

  • Downward sloping straight line.

Solution

D.

Downward sloping straight line.

Reason: If Marginal Rate of Substitution is constant throughout, the Indifference curve will
be downward sloping straight line.

Question
CBSEENEC12013398

Giving reason comment on the shape of Production Possibilities curve based on the
following schedule:

Good X (units) Good Y (units)
0 10
1 9
2 7
3 4
4 0

Solution

Production Possibility Curve (PPC) will be concave to the origin because of the increasing
opportunity cost. As we move down along the PPC, to produce each additional unit of Good
X, more and more units of Good Y needs to be sacrificed. That is, as we move down along
the PPC, the opportunity cost increases. And this causes the concave shape of PPC.

Question
CBSEENEC12013399

What will be the impact of recently launched 'Clean India Mission' (Swachh Bharat
Mission) on the Production Possibilities curve of the economy and why?
Or

What will likely be the impact of large scale outflow of foreign capital on Production
Possibilities curve of the economy and why?

Solution

 

Production possibility curve is a graphical representation of the maximal mix of outputs
that an economy can achieve using its existing resources to full extent and in the most
efficient way. The mission of 'Clean India Mission' (Swachh Bharat Mission) will lead to
better waste-management technique. Consequently it leads to healthy India and increased
individual productivity. Both these factors will lead to better and efficient utilisation of
existing resources of an economy. Accordingly, the economy will move higher and closer
to initial PPC. This movement is being depicted in the below graph with the help of the
arrow from point P.


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OR

The large scale outflow of foreign capital will lead to a decrease in the availability of
resources, thereby shifting the Production Possibility Curve (PPC) from right to left that is
from AB to CD as shown in the following diagram. Hence, we can say that leftward shift of
PPC results in fall in output and resources.
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