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Balbharti Maharashtra State Board Class 12 Economics Solutions Chapter 7 National Income Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 Economics Solutions Chapter 7 National Income

1. Complete the following statements:

Question 1.
While estimating national income, we include only value of final goods and services in order to
a) make computation easier
b) avoid double counting
c) maximize national welfare of the people
d) evaluate the total economic performance of a nation
Answer:
b) avoid double counting

Question 2.
NDP is obtained by
a) deducting depreciation from GNP
b) deducting depreciation from GDP
c) including depreciation in GDP
d) including depreciation in GNP
Answer:
b) deducting depreciation from GDP

Question 3.
In India, national income is estimated using
a) output method
b) income method
c) expenditure method
d) combination of output and income method
Answer:
d) combination of output and income method

2. Complete the Correlation:

1) ……………… :C+I+G+(X-M)::GNP:C+I+G + (X-M) + (R-P).
2) Output method : ……………… :: Income method : Factor cost method
3) Theoretical difficulty : Transfer payments :: ……………… : Valuation of Inventories
Answer:

1. GDP
2. Product / Inventory method
3. Practical difficulty

3. Identify the incorrect pair:

a) National Income Committee — 1949
b) Financial year 1’ April to 31st March
c) Income method — National Income = Rent + Wages + Interest + Profit + Mixed income + Net Income from abroad
d) Expenditure method – National Income = Rent + Wages + Interest + Profit
Options:
1) a 2) b 3) c 4) d
Answer:
d) Expenditure method — National Income = Rent + Wages + Interest + Profit

4. Identify and Explain the following concepts:

Question 1.
Vrinda receives monthly pension of Rs.5,000/- from the State Government.
Answer:
Concept: Transfer payment.
Explanation : Pension is a part of money income earned by an employee during his service period with the entrepreneur.
Such income is paid by Government to an employee after his retiement so as to make employee survive during his retirement period.
Thus, transfer income is not included in National Income. It is just an government expenditure.

Question 2.
Viru kept aside 1oo kgs. out of 500 kgs. of wheat produced in his farm for his family.
Answer:
Concept: Production for self-consumption. Explanation : In above case, Viru’s total production is 500 kgs but he keep aside 100 kgs for his self consumption.
This 100 kg will not be shown by him as his income and hence it will not be included in national income accounting.
Such output kept for self consumption is called as theoretical difficulty in measurement of national income.

Question 3.
Sheetal purchased wheat flour for her bakery from the flour mill.
Answer:
Concept: Intermediate goods.
Explanation : In the above case, wheat flour is not the final product.
Wheat flour will be used by Sheetal to produce cake or pastry or biscuits which will be final product for her.
So, in above case wheat flour is considered j! (8) as intermediate goods. Intermediate goods are excluded while calculating NI by Final ( Ans. Goods approach method and included while calculating by Value Added approach method.

Question 4.
Shobha collected data regarding the money value of all final goods and services produced in the country for the financial year 2018-2019.
Answer:
Concept: National Income.
Explanation : National Income estimate ( measures the column of commodities and ) services turned out during a given period, counted without duplication.
NI is the macro concept. It is flow concept.

Question 5.
Rajendra has a total stock of 500 gel pens in his shop which includes 200 gel pens produced in the previous financial year.
Answer:
Concept: Flow Concept
Explanation : National Income accounting considers the production of goods and services in a current year. The production of previous year is ignored.
Thus, out of total inventory, of Mr Rajendra, only 300 pens will be taken into consideration while calculating NI for the current year.

5. Answer the following

Question 1.
Explain the two sector model of circular flow of national income.
OR
Explain the circular flow of National Income.
Answer:
The two sector economy consists of household J and business firm. The income is circulated between household and business firm. It is explained with the help of following diagram.

In every economy there is household sector on one hand and business firm on the other hand.

(A) Household is the basic consuming unit. It) centres around a family. Its main function j is to consume goods and services. Business firm is the basic producing unit. Its main function is to produce goods and services with the aim of maximising profits. When s the household supplies factor services (land, ^ labour, capital, enterprise to business firms, business firms supply goods and services to the household. This is known as Real Flow.

(B) In a money economy when the household supplies factor services, there is a flow of income from the business firm to the j household in form of rent, wages, interest and profit. This income comes from the firms to the household sector. The household ; sector uses this income to satisfy the wants. Therefore, there is a flow of consumption expenditure from the household to the business firms. The flow of factor payments from business sector to household sector and corresponding flow of consumption expenditure from household sector to business firms. This is known as Money Flow. Both the money flow and real flow should balance for the smooth functioning of the economy. If the money flow is greater j than real flow there would be inflation and if the money flow is less than the real flow there would be deflation.

(C) In the above diagram, the inner circle represents the Real flow and the outer circle represents the Money flow. There is circular and continuous flow of money income as production is a continuous activity due to never ending human wants. The circular J flow shows interdependence in the economy.

Question 2
Explain the importance of national income.
Answer:
National income data is very useful for various purposes. It is as follow :

• For the Economy : National income data are very important for macro economic analysis and performance of the economy.
• National Policies : National income gives the industrial policy, agricultural policy, export promotion policy etc.
• Economic Planning : The data of national income is very important tools for long term and short term economic planning e.g. planning for aggregate saving, investment, output, etc.
• Economic Research: The data of national income is very useful to the research students to study in detail how income is produced, how it is distributed, how much is spent, saved or taxed.
• Comparison of Standard of Living :
  Because of national income, it is possible to do comparison between the standard of living of the people of different countries and home country.
• Distribution of Income : The data of national income is very important to understand the disparities in the income of different sections of the society and to make the policies to reduce the disparities in income.
• Speed of Economic Growth : Because of national income, it is possible to know the trends or speed of the economic growth of our country in relation to previous years.

Question 3.
Explain the features of national income.
Answer:
(1) Flow Concept : National Income is the flow of goods and services produced in the economy during a year. The flow of goods takes place when there is production activity in the economy. It generates flow of income in the form of rent, wages, interest and profit.

(2) Avoid Double Counting: While estimating National Income we include only the value of final goods and services and not the value of intermediate goods or raw materials to avoid double counting.

(3) National Income is the net aggregate value : National Income includes net value of goods and services produced. It does not include depreciation cost. Depreciation is wear and tear of capital goods due to their continuous use in production.

(4) Transfer Income : Transfer Income in J the form of old age pension, lottery prize, scholarship, etc. are not to be included as they are received without contributing anything to the current national income.

(5) National Income is money valuation of goods: National Income is always expressed ( in money terms. Only those goods and services which are exchanged for money are included. Unpaid services like the service of housewife should not be included.

(6) National Income is calculated for one year : National Income is always expressed with reference to time period i.e. generally one financial year from 1st April to 31st March of every year.

(7) Net Income from Abroad: While estimating National Income net Income from abroad i.e. difference between exports and imports (X – M) as well as net income from foreign investment should be included (R – P).

(8) Macro Economic Concepts : National Income is a macro economic concepts as it is the aggregate income of the country. It includes the value of goods and services produced in the different sectors of the economy. National Income data present the (1) There are many theoretical difficulties picture of the performance of the economy in the measurement of National Income, during a given period of time.

(9) National Income is calculated at current and constant price: National Income when calculated at the prevailing market price it is called National Income at current price and when it is calculated at the base year price, it is called National Income at constant price

Question 4.
Explain the concept of Green GNP.
Answer:
The Green GNP is the measurement of the national income adjusted for degradation of environment.
E.g. The National Income for a current year is 8,000 units and the degradation of environment is 500 units, so Green GNP is ( 8000 – 500 = 7500 units.
The green GNP considers the environmental degradation or resource depletion.
It is defined as, “Green GNP is an indicator of sustainable use of natural environment and equitable distribution of benefits of development.”

The features of Green GNP are :

1. Sustainable economic development means economic development without creating pollution or environmental degradation.
2. The benefits of sustainable economic development should be equally distributed. In the long period of time it helps to promote economic welfare.
   Green GNP = (Net fall in stock of natural capital + Pollution load)

6. State with reasons, whether you agree or disagree with the following statements:

Question 1.
There are many theoretical difficulties in the measurement of national income.
Answer:
Yes, I agree with this statement.
National income is a very broad concept and it is difficult to precisely define what exactly should be included and not to be included.

• Transfer payment: If it included in national income then there will be overestimation of NI. E.g. pension, gifts, unemployment allowances, etc. are excluded.
• Unpaid services : The value of unpaid services are not included in national income as they are not paid for. E.g. services of housewife.
• Illegal income : The income from illegal activities are not included in NI. E.g. black marketing, smuggling.
• Production kept for self-consumption :
  It is not accounted for in the national income as such product does not enter the

Question 2.
Under output method, value added approach is used to avoid double counting.
Answer:
Yes, I agree with this statement.

• The value added approach is the difference between the value of final output and input at each stage of production.
• In this approach, the value added at each stage of production is considered.
• E.g.
  
• In the above example, value of groundnut with shell is ₹ 50, after removing shells value of groundnut is ₹ 80, after crushing groundnut value oil ₹ 120 and when oil is packed its value ₹ 150.
• So, the value added raw groundnut (₹ 50), groundnut (₹ 30), oil (₹ 40), packed oil (₹ 30), total value ₹ 150 is included in national income.

7. Answer in detall:

Question 1.
Explain the practical difficulties involved in the measurement of national income.
Answer:
National Income means money value of) goods and services produced in the country in a year.
AccordingtoNationallncome Committee:
“A national income estimate measures the volume of goods and services turned out during a period without duplication.” National income is a very broad concept and it is difficult to precisely define what exactly should be included and not to be included. So, there are many practical difficulties in the measurement of NI.

Practical Difficulties or Statistical Difficulties :

• Problem of double counting: In case of certain goods it is difficult to distinguish properly between final goods and intermediate goods. That’s why problem of double counting arises e.g. flour is final goods for housewife, but it is intermediate goods for the bakery.
• Existence of non-monetised sector : In India large non-monetised sector exists in rural area specially in agriculture. In agriculture many places goods and services are exchanged with goods that’s why it is difficult to count in national income.
• Inadequate and unreliable data : Because of illiteracy it is difficult to get adequate and reliable data from unorganised sector, small enterprises, agriculture, etc.
• Depreciation : Its difficult to measure exact value of depreciation. There are no uniform common accepted standard rates of depreciation applicable to the various capital assets.
• Capital gain or loss : Due to capital gain there is over estimation and due to capital loss there is under estimation of national income.
• Illiteracy and ignorance : Majority of small producer in developing counties are illiterate and ignorant and are not able to keep accounts of their productive activities.
• Lack of systematic, occupational classification: There is lack of systematic occupational classification, which makes the calculation of national income difficult. Especially in rural areas where many villagers work on farms for some time and also take some other job during off season.
• Untrained and incompetent staff: Due to untrained and incompetent staff, accurate and timely, information cannot be obtained.

Importance of National Income (NI) :
For the economy : National income data are particularly important for macro economic analysis and performance of the economy.

Question 2.
Explain the income method and expenditure method of measuring national income.
OR
Explain any two methods of measuring National Income.
Answer:
National Income is macro economic concept. National Income means money value of goods and services produced in the country in a year. There are three methods to measure national income.
(1) The Output Method,
(2) The Income Method,
(3) The Expenditure Method.

(A) The Income Method : This method is also known as factor cost method. According to this method national income is the sum of income received by all factors of production in a year. So national income is the income received by all the citizens of the country in a year. In income method national income studied from the distribution side. According to income method national income or GNP is
NI = R + W + I + P + MI + (X – M)

• Rent (R) : Rent and Royalty is usually treated as the payment for the land, building, machines that are rented.
• Wages (W) : It includes wages and salaries earned by labour as well as it includes commission, bonus, social security payments, fringe benefits, etc.
• Interest (I) : Interest is the payment for using the services of capital. It includes interest paid by banks, insurance companies etc.
• Profit (P) : It includes the profit of private and public sector companies.
• Mixed Income (MI) : It is the income which is earned by self-employed. They earn income through various sources like wages for effort put, rent on own property, interest on own capital, etc.
• Net Exports (X – M) : It is the difference between export and imports.

Precautions :

• Transfer payment : It should not be included in national income. E.g. pension, gifts, unemployment allowances, lottery prize, etc.
• Unpaid services : It should not be included in national income. E.g. services of housewife, teacher teaching her own child, etc.
• Second hand goods : The income from sale of second hand goods should not be included.
• Financial asset : The income from sale of shares and bonds should not be included in national income.
• Tax revenue : The revenue of government through taxes should not be included in national income.
• Undistributed profits of companies, income from government property and profits from public enterprise should be included.
• Imputed value of production kept for self consumption and rental value of owner occupied houses should be included in national income.

(B) Expenditure Method :
This method also known as outlay method. NI = C + I + G + (X – M) + (R – P)
National Income can also be calculated by adding up the expenditure incurred on purchase of final goods and services. We can get National Income by summing up all consumption expenditure, investment expenditure made by all individuals, firms as well as the government of a country during a year.

• Consumption Expenditure (C) : It includes all expenditure incurred on goods and services by households during the year. It includes expenditure mostly on durable and non-durable goods, which are consumed by the consumers. E.g. food, medical care, clothing, car, computer and services, etc.
• Investment Expenditure (I) : It refers to the investment made by private businessman on capital goods like machinery, plants, factories, warehouses, etc.
• Government Expenditure on goods and services (G) : Government expenditure refers to expenditure on consumption and investment –
  • Consumption expenditure : It refers to expenditure incurred on various administrative services like law and order, defence education, generation and distribution of electricity.
  • Investment expenditure : It refers to expenditure incurred by government on construction of roads, railways, dams, canals, etc.
• Net Exports (X – M): It refers to difference between exports and imports of the country. If the exports are more than imports then net exports will be positive, it is called Trade Surplus and if imports are greater than exports, the net exports will be negative, it is called as Trade Deficit.
• Net Receipts (R-P) : It is the difference between expenditure incurred by foreigners in the country (R) and expenditure incurred abroad by Nationals (P). Net Receipts can also be Positive or Negative.
  Net National Expenditure = NNE = C + I + G + (X – M) + (R – P) – Depreciation. NNPFC or NI = C + I + G + (X -M) + (R -P) “Depreciation “ Indirect Tax + Subsidies.

Precautions :
The following precautions should be taken while estimating National Income.

• To avoid double-counting take the expenditure incurred only on final goods and services.
• Government expenditure on transfer payments to be excluded like unemployment allowances, old age pension, etc.
• Expenditure on second-hand goods like furniture, house, land, and financial assets { like shares, bonds, etc. should be excluded.
• Exclude expenditure incurred on the purchase of financial assets such as shares, bonds, etc.
• Deduct indirect tax and add subsidies. Out of these methods, output method and income method are extensively used. The expenditure method is rarely used because of its practical difficulties.
• In India, the Central Statistical Organisation (CSO) adopts a combination of output method and income method to estimate N.I. of India.

Balbharti Maharashtra State Board Class 12 Economics Solutions Chapter 9 Money Market and Capital Market in India Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 Economics Solutions Chapter 9 Money Market and Capital Market in India

1. Complete the following statements:

Question 1.
Development financial institutions were established to …………………
a) provide short term funds.
b) develop industry, agriculture and other key sectors.
c) regulate the money market.
d) regulate the capital market.
Answer:
b) develop industry, agriculture and other key sectors.

Question 2.
Money market faces shortage of funds due to
a) inadequate savings.
b) growing demand for cash.
c) presence of unorganized sector.
d) financial mismanagement.
Answer:
a) inadequate savings.

Question 3.
Individual investors have lost confidence in the
capital market due to
a) lack of financial instruments.
b) high transaction costs.
c) low returns.
d) financial scams.
Answer:
d) financial scams.

Question 4.
Commercial banks act as intermediaries in the financial system to
a) make profits
b) accelerate the country’s economic growth.
c) mobilise the savings and allocating them to various sectors of the economy.
d) control the credit.
Answer:
c) mobilise the savings and allocating them to various sectors of the economy.

2. Complete the correlation:

1) Money market : Short term funds :: …………….. : Long term funds
2) …………….. : Central Bank:: SBI : Commercial Bank
3) Co-operative banks : Organized sector :: Indigenous bankers : ……………..
4) Primary market : …………….. :: Secondary market : Old issues
Answers:

1. Capital market
2. RBI
3. Unorganised sector
4. New issue

3. Find the odd word:

Question 1.
Types of Bank Accounts:
Answer:
Saving A/c, D-mat A/c, Recurring A/c, Current A/c.

Question 2.
Unregulated Financial Intermediates:
Answer:
Mutual fund, Nidhi, Chit fund, Loan Companies.

Question 3.
Financial Assets:
Answer:
Bonds, Land, Government Securities,
Derivatives.

Question 4.
Quantitative Tools:
Answer:
Bank Rate, Open Market Operation, Foreign Exchange Rate, Variable Reserve Ratio.

4. Assertion and Reasoning:

Question 1.
Assertion (A) : Money market economizes use of cash
Reasoning (R) : Money market deals with financial instruments that are close substitutes of money
Options: 1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer:
3) Both (A) and (R) are True and (R) is the correct explanation of (A)

Question 2.
Assertion (A) : Regional stock exchanges have witnessed a sharp decline in the volume of trade.
Reasoning (R) : Investors prefer to trade in securities listed in premier stock exchanges like BSE, NSE etc.
Options:
1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer:
3) Both (A) and (R) are True and (R) is the correct explanation of (A)

Question 3.
Assertion (A) : The unorganized sector of the money market lacks transparency.
Reasoning (R) : Activities of the unorganized sector are largely confined to rural areas.
Options:
1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer:
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)

Question 4.
Assertion (A) : Foreign exchange management and control is undertaken by commercial banks.
Reasoning (R) : RBI has to maintain the official rate of exchange of rupee and ensure its stability.
Options:
1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer:
3) Both (A) and (R) are True and (R) is the correct explanation of (A)

5. Identify and explain the concepts from the given illustrations:

Question 1.
Raghu’s father regularly invests his money in stocks and bonds.
Answer:
Concept: Financial Market
Explanation : Financial Market refers to a market where financial assets such as bonds, stocks, derivatives, government securities foreign currency, etc. are sold and purchased.

Question 2.
Sara makes a monthly contribution to a fund jointly created by her friends. The collected fund is then given to a chosen member through lucky draw.
Answer:
Concept: Chit fund
Explanation : Under chit fund, members make regular contribution to the fund, bids or draws are made on the basis of a criteria mutually agreed upon by members.

Question 3.
Tina deposited a lurnpsurn amount of 50,000 in the bank for a period of one year.
Answer:
Concept: Fixed deposit
Explanation : Fixed deposit refers to a lumpsum amount deposited by a customer for a specified period of time. Compared to all other deposits, fixed deposits carry a high rate of interest.

Question 4.
ABC bank provides d-mat facility, safe deposit lockers, internet banking facilities to its customers.
Answer:
Concept: Ancillary function of Commercial Bank
Explanation : Ancillary services are those services of commercial banks which are provided beside the primary services of bank. Ancillary services are transfer of j funds collection of money, making periodical payments on behalf of the customer, merchant banking, foreign exchange, safe deposits lockers, D-mat facility, internet banking.

6. Distinguish between:

Question 1.
Money market and Capital market.
Answer:

Question 2.
Demand deposit and Time deposit.
Answer:

Question 3.
Organized sector and Unorganized sector of money market.
Answer:

7. Answer the following:

Question 1.
Explain the problems faced by the money market in India.
Answer:
Following are the problems of money market in India:
(a) Shortages of Funds : Generally, there is shortage of funds in Indian Money Market on account of various factors like inadequate banking facilities, low savings, lack of banking habits, existence of parallel economy,- etc. have also been responsible for the paucity of funds in the money market.

(b) Existence of Unorganised Money Market : This is one of the major defects of Indian Money Market. It does distinguish between short term and long term finance, and also between the purposes of finance. Since it is outside the control and supervision of RBI. It limits the RBI’s control over money market.

(c) Delays in technological up-gradation: Use of advanced technology is a pre requisite for the development and smooth functioning of financial markets. Delays in up-gradation of technology hampers the working of the money market.

(d) Absence of Well Organized Banking Sector : Branch expansion was very slow before bank nationalization in 1969. Even now the banks are largely concentrated in large towns and small cities. There is lack of movement of funds. Indian banking system is not yet a well organized sector.

(e) No Uniformity in the rates of interest:
There exists too many rates of interest in the Indian Money Market such as the borrowing rate of government, deposits and lending rates of co-operatives and commercial banks, lending rates of financial institutions, etc. This is due to lack of mobility of funds from one section of the money market to another.

(f) Seasonal fluctuations : The seasonal stringency of money and high rate of interest during the busy season (November to June) is striking feature of Indian Money market. There are wide fluctuation in the interest rates from one season to another. Money Market add money into the money market during the busy season and withdraw funds during the slack seasons.

Question 2.
Explain the functions of commercial bank.
Answer:
(A) Meaning A bank is a dealer in credit. Any institution that accepts deposits from public who have more cash than it needs immediately and gives loans to those who are need is called as a bank. Commercial bank performs all these functions for earning profit. Commercial banks play an important role in mobilizing savings and allocating ) them to various sectors of the economy. It includes both scheduled commercial banks l and non scheduled commercial banks.

(B) Definition of Commercial Bank :
Banking Regulation Act 1949 “”Banking means the accepting for the purpose of lending or investment of deposits of money from public repayable on demand or otherwise and withdrawable by cheque, demand draft, order or otherwise.
The above definition clearly indicates the essential function of a bank is mainly dealing in money and credit.

(C) Functions of a Commercial Bank :
Commercial Bank performs a variety of functions to satisfy the needs of the various S sectors of the economy.

The functions of Commercial Banks are as follows:

(I) Accepting Deposits:
The most significant and traditional function of commercial bank is accepting ? deposits from public. A commercial bank acts as the custodian of public deposits. This l function is very important because it helps in the mobilisation of funds from households to businessman for production purposes, Commercial banks act as intermediary by accepting deposits and paying interest on them and giving loans and charging interest) from borrowers at a high rate. The difference j between the two is the profit of the bank. Commercial bank accepts the following types of deposits :

(A) Demand Deposits
(B) Time Deposits

(A) Demand Deposits : The deposits which ; are withdrawable on demand, are known as demand deposits. They are of two types (1) Current Account Deposits (2) Saving) Account Deposits

(1) Current Account Deposits : Current j account deposits are usually held by businessmen, industrial enterprises, public bodies for business transactions. Money deposited in current account can be withdrawn in part or full at any time and any number of times by the depositors without any prior notice. Overdraft facilities and agency service are provided by the bank to the current account holders. Very low or no interest is paid on these accounts as the banks cannot utilise these short term deposits. Banks may charge certain amount of service charges on account holders.

(2) Saving Account Deposits : Saving account deposits are opened by salaried class or people with fixed income for holding their short term savings. Money deposited in these accounts retain high degree of liquidity. At the same time it earns nominal interest. It is a kind of demand deposits which is generally kept by people for sake of safety.

(B) Time Deposits : These are deposits, which are repayable after a certain period of time. They are of two types – (1) Recurring Deposits (2) Fixed Deposits

(1) Recurring Deposits : These are deposits under which people deposit a fixed amount at regular interval for specified period of time. These deposits encourage savings and carry high rate of interest.
(2) Fixed Deposits : Fixed deposits are time deposits or term deposits, which attract fund for a specific period. It is a time bound deposit as the amount deposited cannot be withdrawn before the maturity of the period. However, loans can be taken from the bank against the security of this deposit, within that period. These deposits earn a higher rate of interest.

(II) Advancing / Granting Loans :
The second major function of a commercial bank is to make loans and advances out of the money, which comes to it from the public by way of deposits. Direct loans and advances are given to all types of persons particularly to businessmen and investors against personal security, gold, silver and other assets. The profit earning capacity of commercial banks depends on this function of lending. Generally banks grant loans and advances to the borrowers in the following forms :
(1) Loans (2) Cash Credit (3) Overdraft facility (4) Discounting of bills.

(III) Ancillary Functions :
Commercial Banks also provide variety of ancillary services like – transfer of funds, j collection of money, making periodical ( payments on behalf of the customer, merchant banking, foreign exchange, safe deposit lockers, D-mat facility, internet banking, mobile banking, ATM facility, purchase and sale of securities, etc.

(IV) Credit Creation :
It is an important function of commercial banks. Commercial banks are the creators  of credit.
Commercial Bank collects deposits from public which is called as primary deposits. After deducting required reserves, bank lends money to the borrower which is called j as secondary deposits or derivative deposits. This procedure is followed by entire banking [ system in a country leading to creation of credit.
Thus, every loan creates deposits and every deposits creates loans.

Question 3.
Explain the role of capital market in India.
Answer:
Role of Capital Market:

1. Mobilizes long term savings : Capital market helps to mobilize long term savings from various section of the population through the sale of securities.
2. Provides equity capital : Capital market provides equity capital or share capital to entrepreneurs which will be used by entrepreneurs to purchase business assets and also to fund the business operations.
3. Operational efficiency : Capital market helps to achieve operational efficiency by lowering the transaction costs, simplifying transaction procedures, lowering settlement timings in purchase and sale of stocks.
4. Quick valuation : Capital market helps to determine a fair and quick value of both equity (shares) and debt (bonds, debentures) instruments.
5. Integration : Capital market brings integration among real and financial sectors, equity and debt instruments, government and private sector, domestic and external funds, etc.

Question 4.
Explain the problems of capital market in India.
Answer:
Following are the problems of capital market in India :

• Scams : It is observed that different types of financial scams in the stock exchange have affected the confidence of individual investors in the securities market. Scams involve manipulation of larger amount of money, which results in public distrust and loss of confidence among the individual investors.
• Inadequate debt instruments : There is less trading in debt securities due to narrow investor base, high cost of issue, lack of accessibility to small and medium enterprises.
• Lack of informational efficiency : Indian stock markets lacks informational efficiency as compared to advanced countries.
• Decline in volume of trade : There is sharp decline in the volume of trade in regional stock exchanges. This is due to investors preferring trading in securities listed in premier stock exchanges like BSE and NSE.

8. Answer in detail:

Question 1.
Explain the role of money market in India.
Answer:
(A) Meaning:
Money market is a market for lending and borrowing short term funds.
It is a market for near money.
It deals in short term instruments like trade bills, government securities, promissory notes, etc.

Money market centres are located at Mumbai, Delhi and Kolkata. Money market consists of organised as well as unorganised j sector.

Role of Money Market in India :

(a) Portfolio Management : Money market deals with different types of financial instruments which are designed to suit the risk and return preferences of the investors. This enables the investors to hold a portfolio of different financial assets which in turn, j helps in minimizing risk and maximizing returns.

(b) Implementation of monetary policy :
Various monetary policies are implemented by the Central Bank, with an aim to manage the quantity of money, to meet the requirements of different sectors of the economy and to increase the pace of economic growth. Money market ensures successful implementation of these monetary policies. It also guides the central bank in developing an appropriate interest policy.

(c) Growth of Commerce, Industry and Trade : Money market facilitates discounting bills of exchange to local and international traders who are in urgent need of short-term funds. It also provides working capital for agriculture and small scale industries.

(d) Financial requirements of the Government : Money market helps the Government to fulfil its short term financial requirements on the basis of Treasury Bills.

Economizes the use of cash : Money market deals with various financial instruments that are close substitutes of money and not actual money. Thus, it economizes the use of cash.

Equilibrating mechanism : Money
market helps to establish equilibrium between the demand for and supply of short term funds by allocating rationally the available resources and thus mobilizing the savings of public into fruitful investment channels.

Liquidity Management : Money Market, through the monetary authorities facilitates better management of liquidity and money in the economy. This, in turn, leads to economic stability and development of the country.

Short-term requirements of borrowers :
Money market provides short-term financial needs of the borrowers at reasonable prices.

Question 2.
Explain the functions of RBI.
Answer:
(A) Introduction: Central Bank is the apex or the supreme monetary banking authority and occupies an important position in the monetary and banking structure of the country.
The guiding principle of a Central Bank is to act only in public interest and for the welfare of the country without regards to profit as primary consideration.
In India, The Reserve Bank of India is the Central Bank. It was established as shareholder’s bank on 1st April, 1935. It was nationalized on 1st January, 1949.

(B) Definitions :
(1) According to M. H. de Kock –
“A Central Bank is one which constitutes the apex of the monetary and banking structure of the country. ”

“(2) According to Prof. W. A. Shaw –
“Central Bank is a bank which controls credit.”

(C) Functions of Central Bank :
(1) Issue of Currency Notes : The Central i Bank has been authorised to print and issue ; currency notes. The RBI enjoys the monopoly of note issue of all denominations except one rupee note. The one rupee note and coins are issued by the Ministry of Finance of the government of India but their distribution is undertaken by RBI.

(2) Banker to the Government: The Central Bank acts as (A) a banker, (B) advisor, and (C) agent to the government. It performs all these functions which commercial banks do for their customers.
As a banker to the government, central bank transacts the business of Central and State governments. It accepts money and makes payments on behalf of these governments.
As an advisor, central bank advises the government on various economic issues and policies.
As an agent, central bank acts as a representative of central bank and attends l the international meetings of IMF and World Bank.
In short, it is a friend, philosopher and guide to the government.

(3) Bankers’ Bank : It supervises, co-ordinates j and controls the operations and activities of the commercial banks. As their bank it undertakes the following functions:
(a) acts as custodian of cash reserve.
(b) acts a lender of the last resort.
(c) provides clearing house function.

(4) Controller of Credit or Money Supply : Central Bank regulates the volume of credit and money supply in the country. The main objective behind this is to maintain price and ; economic stability in the country.
There are various methods which Central Bank uses to control the supply of credit in : the economy. They are –

• Quantitative Measures control the quantity or volume of credit created by the commercial banks. They are bank rate, open market operation and cash reserve ratio.
• Qualitative Measures or Selective Measures deal with the purpose and direction of credit. They are – varying margin requirements, regulation of credit, moral suasion and direct action.

(5) Custodian of Foreign Exchange Reserve of the Country: The Central Bank is also a custodian of country’s gold and major foreign currencies like US dollar, Euro the British Pound, etc. obtained by government from international trade.
The central bank also maintains international liquidity.

(6) Developmental and Promotional Functions : In developing countries like India, a very important function of Central Bank is to promote economic development.

• To promote banking habits among the poor people.
• To provide agriculture finance through NABARD and to promote rural and agricultural development.
• To provide industrial finance through IDBI, SFC and IFCI and boost the growth of industrial sector.
• To provide export – import finance through EXIM bank.
• To encourage small savings through Unit Trust of India.

(7) Data Collection and Publicity : The Central Bank also collects and publishes information relating to agriculture, industrial and financial sectors of the economy, exports and imports, banking, trends in money and capital market, etc.
Its main publications include – Report on Currency and Finance, RBI Bulletin, RBI Journals and various research papers.

Intext Questions

Try this (Textbook Page 81)

Identify the type of finance into – Personal finance, Corporate finance or Public finance.
Answer:

Find out (Textbook Page 83)

Find out names of the Central Banks of the following countries.

(1) USA
(2) Canada
(3) Russia
(4) Germany
(5) China
(6) UK (United Kingdom)
(7) Sweden
(8) France
(9) Japan
(10) Australia
Answer:
(1) USA : Federal Reserve System ;
(2) Canada : Bank of Canada
(3) Russia : Central Bank of Russia
(4) Germany : Deutsche Bundes bank
(5) China : People’s Bank of China
(6) UK (United Kingdom) : Bank of England
(7) Sweden : Sveriges Riksbank
(8) France : Banque de France
(9) Japan : Bank of Japan
(10) Australia : Reserve Bank of Australia

Try this (Textbook Page 85)

Pair the logos given with their respective banks as given in the bracket below :
(State Bank of India, HSBC Bank, Union Bank of India, Axis Bank, Standard Chartered Bank, HDFC Bank)
Answer:

Try this (Textbook Page 85)

Collect information of Co-operative banks in your region at different levels.
Answer:
[Students should do this activity by themselves]

Find out (Textbook Page 90):

List the regional stock exchanges in India.
Answer:

• Regional Stock Exchanges in India :
• Bombay Stock Exchange (BSE)
• National Stock Exchange (NSE)
• Calcutta Stock Exchange (CSE) Metropolitan Stock Exchange (MSE)
• India International Exchange (India INX)
• NSE IFSC Ltd.

Balbharti Maharashtra State Board Class 12 History Solutions Chapter 2 European Colonialism Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 History Solutions Chapter 2 European Colonialism

1A. Choose the correct alternative and rewrite the statement.

Question 1.
‘Declaration of Independence was drafted by __________
(a) George Washington
(b) Thomas Jefferson
(c) Lord Amherst
(d) Lord Cornwallis
Answer:
(b) Thomas Jefferson

Question 2.
The second Anglo-Burmese war was fought during the times of __________
(a) Lord Amherst
(b) Lord Dufferin
(c) Lord Dalhousie
(d) Ashley Eden
Answer:
(c) Lord Dalhousie

1B. Find the incorrect pair from group ‘B’ and write the corrected one.

Question 1.

Answer:
Ivory Coast – French colony

2A. Write the names of historical places/persons/events.

Question 1.
The region from Florida to California on the southern coast of America was under the control of-
Answer:
Spain

Question 2.
The sea voyages for exploration were encouraged in the reign of-
Answer:
Queen Elizabeth I

2B. Choose the correct reason from those given below and complete the sentence.

Question 1.
The British wanted to gain control over Myanmar because __________
(a) they wanted to expand their empire
(b) it was very important to control the natural resources and the market in Myanmar
(c) they wanted to be at the forefront of the colonial competition amongst the European nations
(d) they wanted to teach a lesson to King Thibaw of Myanmar
Answer:
(b) it was very important to control the natural resources and the market in Myanmar

3. Complete the following concept map.

Question 1.

Answer:

4. Write short notes.

Question 1.
Nature of Colonialism.
Answer:

• Colonialism is the act of a developed nation occupying the land of a less developed, distant nation and establishing its rule on the occupied country. Europeans travelled all over the world with various intentions such as the urge for adventures, to earn a name, to discover unknown lands, to search for gold mines, etc.
• The Europeans established colonies wherever they went and in doing so there was a competition to gain economic, social, and political supremacy among the nations. Extreme nationalism, feeling of racial superiority, industrialization, aggressive approach, etc., are the factors that led to the growth of colonialism.
• Thus, Europeans went to America, Australia, and New Zealand. The Europeans also colonised Asia. However, the climate of Asia did not favour them. Favourable or unfavourable, Europeans disposed of the indigenous people in their own lands.
• The Europeans saw these colonies as potential marketplaces to sell their surplus goods which were accumulated as a result of mass production. The Europeans also needed additional sources that would provide ample raw material.
• In the latter half of the 19th century, England built a flourishing trade as a result of the industrial revolution.

Question 2.
American War of Independence.
Answer:
The colonies got into several battles with the British army even after gaining independence. The colonies finally at Saratoga got a decisive victory over the British army. This victory proved to be a turning point for the colonies as the French agreed to support them in their conflict against the British. Eventually, Spain also joined the conflicts in their struggle for independence.

On 7th October 1780, George Washington defeated the British army. On 19th October, British General Lord Cornwallis surrendered and America became independent. The American revolt for independence is also known as the ‘American Revolution’. America proved to the world that the subjects have a right to fight their rulers who deny them their natural rights.

5. Explain the following statements with reasons.

Question 1.
The industrial revolution gave momentum to colonialism.
Answer:
Colonialism was a result of the industrial revolution. Production increased enormously because of the new machines. However, the rate of local consumption was much less compared to the surplus rate of production. Hence, the immediate need of the Europeans was to find new markets for selling their products. It was also necessary that these markets be dependable and easy to dominate.

Question 2.
European nations established colonies in America.
Answer:
The stronger European nations dominated the weaker countries by establishing colonies there and pushed them to subjection. The lands of the original inhabitants in America were seized by the Europeans and were also massacred. The original inhabitants were forced into slavery. The Europeans discovered gold mines and the Spanish colonizers brought African slaves to work in sugarcane and tobacco fields. Farming and mining earned them enormous wealth. Essential raw materials were exported to Spain and the finished goods used to be imported for sale in the local markets for the colonies. The trade of gold and silver also earned huge profits for the king. Witnessing Spain’s prosperity England, Holland and France also began to establish colonies in America.

Class 12 History Chapter 2 European Colonialism Intext Questions and Answers

Try to do this. (Textbook Page No. 11)

Locate the following regions under British domination on the map: Gibraltar, Malta in the Mediterranean Sea; British Guyana, British Honduras, British West Indies, Bermuda and Falkland islands in the Western Hemisphere; Aden, Sri Lanka, Myanmar, Hongkong, India; also, the countries in Africa.
Answer:

Project (Textbook Page No. 18)

Question 1.
Collect information about the biodiversity and sources of minerals in the African continent.
Answer:
1. Meaning of Biodiversity:
Biodiversity consists of two words ‘Biological’ and ‘Diversity’. It refers to all the variety of life that can be found on earth (plants, animals, fungi, and microorganisms) as well as to the communities that they form and the habitats in which they live.

2. Biodiversity in Africa:

• Rich in biodiversity.
• Africa supports the earth’s largest assemblages of large mammals which roam freely in many countries.
• Africa is home to a rich and diverse animal, plant, and marine biodiversity that provide critical ecosystem services.

3. Minerals in Africa:
Africa is rich in mineral reserves and ranks first or second in quantity of world reserves of bauxite, cobalt, industrial diamond, phosphorite, platinum, etc.

Balbharti Maharashtra State Board Class 12 Economics Solutions Chapter 8 Public Finance in India Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 Economics Solutions Chapter 8 Public Finance in India

1. Choose the correct option

Question 1.
Optional functions of Government:
a) Protection from external attack
b) Provision of education and health services
c) Provision of social security measures
d) Collection of tax
Options:
1) b and c
2) a, b and c
3) b, c and d
4) All of the above
Answer:
1) b and c

Question 2.
Obligatory functions of the Government:
a) Provision of employment
b) Maintaining internal law and order
c) Welfare measures
d) Exporting goods and services
Options:
1) c and d
2) a and b
3) only b
4) a, c and d
Answer:
3) only b

Question 3.
Public finance is one of those subjects which are on the borderline between economics and politics’ ……………. is the view of
a) Adam Smith
b) Alfred Marshall
e) Prof. Hugh Dalton
d) Prof. Findlay Shirras
Options:
1) only a
2) only b
3) only c
4) only d
Answer:
3) only c

Question 4.
Non-tax sources of revenue:
a) Direct and Indirect Tax
b) Direct Tax and Fees
c) Fees
d) Special Levy
Options:
1) b and c
2) a and c
3) a, b, c andd
4) c and d
Answer:
4) c and d

Question 5.
Trends shown by Public expenditure of any Government shows following trend.
a) Constant
b) Increasing
c) Decreasing
d) Fluctuating
Options:
1) only a
2) only b
3) only c
4) only d
Answer:
2) only b

Question 6.
Identify the right group of pairs from the given options.
I) Direct tax – a) Non-tax revenue
ii) Indirect tax – b) Inflation
iii) Fees and Fines – c) GST
iv) Surplus budget – d) Personal income tax
Options:
a) i-d ii-c iii-b iv-a
b) i-c li-d ill-a iv-b
c) i-d li-c ill-a iv-b
d) i-a li-b iii-c iv-d
Answer:
c) i-d li-c ill-a iv-b

2. Distingwish between following concepts:

Question 1.
Public finance and Private finance.
Answer:

Question 2.
Internal debt and External debt.
Answer:

Question 3.
Developmental expenditure and Non developmental expenditure.
Answer:

Question 4.
Special assessment and Special levy.
Answer:

Question 5.
Direct Tax and Indirect tax.
Answer:

3. State with reasons whether you agree or disagree with the following statement:

Question 1.
Obligatory function is the only function of the Govenment.
Answer:
No, I do not agree with this statement.
It is essential to perform obligatory functions for the government like protection from external attack, maintaining law and order, defence and civil administration, etc.
But modern government also perform some optional functions also. They are necessary for social and economic development of the country such as provision of education and health services, provision of social security like pensions and other welfare measures.
So, government has to perform obligatory as well as optional functions.

Question 2.
Fines and penalties are a major source of revenue for the Government.
Answer:
No, I do not agree with this statement.
Public revenue is the aggregate income, with the government, comes through various sources.
These sources are classified as tax-revenue and non-tax revenue.
Tax revenue is a compulsory contribution from people to government without getting any special benefits to tax-payers.
So, tax revenue is the major source of revenue for the government.
However, fines and penalties are sources of non-tax revenue.
The government imposes fines and penalties { only on those who violate the laws of a country. So, the income from this source is ) very small.

Question 3.
The goods and services tax (GST) has replaced almost all indirect taxes in India.
Answer:
Yes, I agree with this statement.
The Goods and Service Tax (GST) came into effect in India on 1st July, 2017.
GST is an indirect tax used in India, on the supply of goods and services.
GST simplified the tax system in a country.
GST is different from an excise or sales tax imposed on the manufacture or sale of ; a product. GST is a tax levied on supply of goods and services.
GST replaced almost all indirect taxes like central excise duty, service tax, entry tax, entertainment tax, etc.
Because, GST is a comprehensive tax base with nationwide coverage of goods and ; services.

Question 4.
Democratic Governments do not lead to increase in public expenditure.
Answer:
No, I do not agree with this statement. i Public expenditure is that expenditure which is incurred by the public authority (i.e., central, state and local government). Public expenditure is required for protection of the citizens, for satisfying their collective needs and for promoting economic and social welfare of the people.
In a democratic state, government has to ( perform the obligatory functions like, defence and civil administration, maintaining internal law and order, etc.
Government also performs optional functions like provision of education and health services, provision of social security, etc.
To perform all these functions more efficiently, democratic government leads to increase in public expenditure.

Question 5.
Public finance is more elastic than private finance.
Answer:
Yes, I agree with this statement.
Public finance refers to the income and expenditure of public authorities, whereas, private finance is the income and expenditure of individuals and private sector organisations.

The main objective of public finance is to offer maximum social advantage, while the main motive of private finance is to fulfil private interest.

Public finance is more elastic compare to private finance because credit provision is much more in the market to increase public finance but, credit availability is limited to increase private finance.
It is also possible to the government to adjust revenue and expenditure with one another in case of public finance.

4. Read the given passage and answer the questions:

‘The conventional notion of social security is that the government would make periodic payments to look after people in their old age, ill-health. disability and poverty. This idea should itself change from writing a cheque for the beneficiary to institutional arrangements to care for beneficiaries. including by enabling them to look after themselves. to a large extent.

The write-a-cheque model of social security is a legacy from the rich world at the optimal phase of its demographic transition, when the working population was numerals enough and earning enough to generate the taxes to pay for the care of those not working. This model is ill-suited for less, well- off India with growing life expectancy. increasing urbanization and resultant migration. Social security
under urbanization will be different from social security in a static society.

Question 1.
State the conventional notion of social security.
Answer:
The conventional notion of social security is that the government would make periodic payments to look after people in their old age, ill-health, disability and poverty.

Question 2.
What kind of conceptual change is suggested in the given paragraph.
Answer:
The given paragraph suggests that, the idea should change from writing a cheque for the beneficiary to institutional arrangement to care for beneficiaries.
It will enable them to look after themselves to a large extent.

Question 3.
What is a legacy of social security from the rich world?
Answer:
The write-a-cheque model of social security i is a legacy from the rich world.

Question 4.
Which features of India make the traditional model of social security ill-suited for the
economy?
Answer:
Growing life expectancy, increasing urbanization and resultant migration are the features of India that make the traditional model of social security ill suited for the economy.

5. Answer the following:

Question 1.
State the types and importance of Government budget.
Answer:
(B) Importance of Budget:
Budget is important in number of ways.

(1) Tax rates presented in the budget indicates disposable income of the tax payer. It also determines the development of business and individuals.
(2) Government expenditure is also a part of budget. This public expenditure on defence, administration, infrastructure, education, health care, etc. affects the lives of the citizens and overall economy.
(3) Government uses budget as a medium for implementing economy policies in the country.
(4) Budgetary actions of the government affect production size and distribution of income, utilization of human and material resources of the country.
Thus, implementing suitable budgetary policy is very important for overall development of the economy.

Question 2.
Explain the principles of taxation.
Answer:
Principles of taxation are also called canons of taxation. There are four principles (canons) of taxation, propounded by Adam Smith
(1) Canon of Equity or Equality
(2) Canon of Certainty
(3) Canon of Convenience
(4) Canon of Economy

They are explained as follows :

1. Canon of Equity or Equality : According to Adam Smith, every person should pay taxes to the government in proportion to his ability to pay.
Canon of equity or equality means rich people should pay more tax as compared to poor.

2. Canon of Certainty : Adam Smith suggested that the tax payer should know in advance that, how much tax he has to pay, at what time and in what form he has to pay tax to the government.

3. Canon of Convenience : According to this principle, every tax should be levied in such a manner and at such a time that, it becomes convenient to the tax payer to make payment.

4. Canon of Economy : This principle suggests that the cost of tax collection should be the minimum. If tax is collected economically, then such a tax is considered to be a good tax.
Every citizen of a country has to pay tax, imposed upon him as it is compulsory contribution to the government.
Tax is a major source of revenue to the government.
Therefore, public authority (Government) must consider all the principles (canons) of taxation in the preparation and implementation of tax system.

Question 3.
Explain non-tax sources of revenue of the Government.
Answer:
Non-tax revenue refers to the revenue received by the government from various ? sources other than taxes.
The sources of non-tax revenue are as follows:

Fees : It refers to charges paid, in return for certain specific services rendered by the government. E.g. fees paid for registration of house, car, education fees, etc.

Prices of Public Goods and Services : Various types of goods and services are produced, supplied and sold by modern government to the citizens. It; is added to public revenue when people s purchase them and pay their prices.

Special Assessment : It is special kind of tax, which is levied by local government on the residents of a particular area. In exchange of it, government provides some special facilities to them.

Fines and Penalties : It is imposed by government on those who violate the laws of the country.
E.g. a traffic police charges fine and collects money if someone violates traffic rule. The objective behind collection of fines and penalties is not to earn money but to discourage the people from violating the laws framed by the government It is small source of income.

Gifts, Grants and Donations : The government receives gifts from its citizens and others. It is included in public revenue. The government may also get grants from foreign government and institutions for general and specific purposes.
Foreign aid is also an important form of public revenue for developing country like India. However, this source of revenue is uncertain in nature.

Special Levies : It refers to the charges levied by government on those commodities, whose consumption is harmful to human health.
Special levies are paid for using commodities like wine, opium and other intoxicants. Special levy is imposed, not to earn income, but to discourage the people from using harmful products.

Borrowings: Government borrows to raise fund because government expenditure generally exceeds government revenue, in a welfare state.

When government borrows from foreign government or international organisations, it is known as external debt. It is more popular source of public revenue for investment in development of projects. Thus, public revenue in form of non-tax sources play very important role in socio¬economic development of a country. Explain the classification of public expenditure.

6. Answer in detail :

Question 1.
Explain various reasons for the growth of public
expenditure.
Answer:
Public expense is the expense incurred by the government (central, state and) local government). It is necessary for the protection of the citizens, for satisfying collective needs of the society and for ? promoting economy.and social welfare of a S country.

Public expense is necessary to perform various functions of the government Public ; expense consists of revenue and capital expenses as well as developmental and non-developmental expenses.

1. High Growth of Population : In a developing country like India, population is rising rapidly. Therefore, government has to incur greater expense to fulfil the needs of growing population.

(2) Growing Urbanisation : Due to expansion of urban sector, government expense increases. Government has to make the provision of water supply, roads, energy, schools and colleges, public transport, hospitals, welfare centres, sanitation, drainage system, etc.
It leads to growth in public expense.

(3) Public Health Care : Public health is a top most priority of modern welfare state. Government undertakes public vaccination programme, maintenance of dispensaries, maternity care and child welfare centres, etc
.
(4) Democracy : There is a democracy in India. A democratic form of government is very expensive due to regular elections and other public works.
It leads to growth in public expense.

(5) An increase in Defence Expense : Government has to incur defence expense to protect the country from external attacks as well as to maintain law and order in a country. Hence, an increase in defence expense leads to growth of public expense.

(6) Disaster Management : Many natural calamities like earthquakes, flood, cyclones, Covid-19 and man-made problems like social unrest, economic instability, etc. occur frequently. In such cases, government has to spend for disaster management which increases public expense.

(7) Infrastructure Development : It is necessary to make provision of economic infrastructure like energy, transport, communication and social infrastructure like education, health, etc. for rapid economic development of a country.
Thus, development of infrastructure facilities results into growth of public expense.

(8) Inflation : Due to inflation, prices of goods and services tend to rise. When government buys goods and services from the market for development of a country, government has to pay higher cost which raises public expense.

(9) Industrial Development : An increase in production depends upon industrial development. It leads to an increase in level of employment and overall economy growth. So, government implements various schemes and programmes for industrial development.
It results into growth of public expense.

(10) Increase in Government Activities : The modern government performs various obligatory and optional functions for social and economic development of a country. It requires huge fund to spend on education, public health, public recreation, social welfare schemes, etc.

Many other functions like maintenance of roads, lighting, public streets, construction of public houses, protecting life and property, public vaccination, garbage collection and ; disposal, prevention and control of epidemics etc. lead to growth of public expenses.

Government also spends on provision of pure water supply, removal of slums, checking ) food adulteration, etc.
All these factors are responsible for the j growth of public expense.

Intext Questions

Find out (Textbook Page 70) :

More examples of obligatory and optional functions of the government.
Answer:

Find out (Textbook Page 73) :

Reasons for growth in public expenditure other than given in the text-book.
Answer:

1. Rise in per capita income.
2. Rural development.
3. Provision of transport and communication.
4. Reducing inequalities.
5. Expenditure on social services (like food, housing, education etc.)
6. Effects of war.
7. Pressure of social progress.

Find out (Textbook Page 73) :

Important Social Welfare Schemes in India.
Answer:

Balbharti Maharashtra State Board Class 12 Economics Solutions Chapter 6 Index Numbers Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 Economics Solutions Chapter 6 Index Numbers

1. Choose the correct option:

Question 1.
Statements that are incorrect in relation to index numbers.
a) Index number is a geographical tool.
b) Index numbers measure changes in the air pressure.
c) Index numbers measure relative changes in an economic variable.
d) Index numbers are specialized averages.
Options :
1) c and d
2) a and b
3) b and c
4) a and d
Answer:
2) a and b

Question 2.
Statements that highlight the significance of index numbers.
a) Index numbers are useful for making future predictions.
b) Index numbers help in the measurement of inflation.
c) Index numbers help to frame suitable policies.
d) Index numbers can be misused.
Options :
1) b, c and d
2) a, c and d
3) a, b and d
4) a, b and c
Answer:
4) a, b and c

Question 3.
Statements that apply to weighted index
numbers.
a) Every commodity is given equal importance.
b) It assigns suitable ‘weights’ to various commodities.
c) In most of the cases, quantities are used as weights.
d) Laaspeyre’s and Paasche’s method is used in the calculation of weighted index numbers.
Options :
1) b, c and d
2) a, c and d
3) a, b and d
4)a, b, c and d
Answer:
1) b, c and d

Question 4.
Statements related to limitations of index numbers.
a) Index numbers are not completely reliable.
b) There may be a bias in the data collected.
c) Every formula has sorne kind of defect.
d) Index numbers ignore changes in the qualities of products.
Options :
1) a, c and d
2) a, b, c and d
3) a, b and d
4) b, c and d
Answer:
2) a, b, c and d

Question 5.
Choose the correct pair:

Options :
1) 1-d, 2-c, 3-a, 4-b
2) 1-d, 2-a, 3-b, 4-c
3) 1-b, 2-c, 3-d, 4-a
4) 1-c, 2-d, 3-a, 4-b
Answer:
2) 1-d, 2-a, 3-b, 4-c

2. Complete the Correlation:

1) Price Index: Inflation :: ………………. : Agricultural production
2) ……………….: Base year prices :: P₁ : Current year prices
3) Laaspeyre’s index : ………………. :: Paasches index : Current year quantities
4) ……………….: Single variable :: Composite index: Group of variables
Answers:

1. Quantity Index
2. P₀
3. Base year quantity
4. Univariate Index

3. Solve the following:

Question 1.
Calculate Price Index number from the given data:

Answer:

Steps:
Add the price of base year (p₀)
Add the price of current year (p₁)
P₀₁ = \(\frac{\Sigma p_{1}}{\Sigma p_{0}}\) x 100
= \(\frac{60}{50}\) x 100
= 120
Hence P₀₁ = 120

Question 2.
Calculate Quantity Index number from the given data:

Answer:

Steps : Add quantities of base year (q0).
Add quantities of current year (q ).
Q₀₁ = \(\frac{\Sigma q_{1}}{\Sigma q_{0}}\) x 100
= \(\frac{480}{820}\) x 100
= 58.53
Hence, Q₀₁ = 58.53
As quantity in the current year has fallen Q₀₁ is less than loo.

Question 3.
Calculate Value Index number from the given data:

Answer:
Steps:
(1) Formula used for Value Index Number
= V₀₁ = Zpq x 100
(2) We find product of prices and their respective quantities of the different commodities for the base year to derive p0q0, then take the sum total of the products to derive Zp0q0.
(3) Similarly, find the product of prices and their respective quantities for the current year to derive p1q1, then take the sum total of the products to derive p₁q₁.

Value Index Number = \(\frac{\Sigma p_{1} q_{1}}{\Sigma p_{0} q_{0}}\) x 100
= \(\frac{6,540}{1,890}\) x 100
= 346.03
Value Index Number = 346.03

Question 4.
Calculate Laaspeyre’s and Paasche’s index from the given dala:

Answer:
I’m 7
Price Index P₀₁ = \(\frac{\Sigma p_{1}}{\Sigma p_{0}}\) x 100
= \(\frac{42}{40}\) x 100
= 105
Hence, P₀₁ = 105

4. Distinguish between:

Question 1.
Simple Index Numbers and Weighted Index Numbers.
Answer:

Question 2.
Price Index and Quantity Index.
Answer:

Question 3.
Laaspeyre’s Index and Paasche’s Index.
Answer:

5. State with reasons whether you agree or disagree with the following statements:

Question 1.
Index numbers measure changes in the price level only.
Answer:
No, I do not agree with this statement.

• Index numbers are statistical devices which are used to measure changes in some quantities which cannot be measured directly.
• It shows the changes in the variables like price, quantity of output, exports, standard of living, cost of living, stock markets, etc.
• Index numbers are like economic barometers, measuring changes in variables over time with respect to a chosen base year.
• Hence, it is not right to say Index Numbers measures changes in price only.

Question 2.
Index numbers are free from limitations.
Answer:
No, I do not agree with this statement.
Although index numbers are very useful in business and industry, they suffer from following limitation:

• Bias in the data: If the data is not collected properly, we may not get proper index numbers.
• Based on samples : If the samples are not collected properly, there may be error in index number calculations.
• Misuse of index number : We compare the index numbers with the base year, but if a businessman chooses a base year in which profits are high and show that his profits are falling now.
• Changes in the economy : In long run habits, tastes, etc of people may change, so it is difficult to include all such changes in index number.
  Hence, it is not right to say that index numbers are free from limitations.

Question 3.
Index numbers can be constructed without the base year.
Answer:
No, I do not agree with this statement.
Index numbers can be constructed without the base year because :

• Index Numbers are the tools for measuring J the changes in the magnitude of a variable or a group of variables over time with respect to a chosen year.
• Prices of some goods may increase and of other may decrease during the two periods. Index numbers solves this problem by taking the average change.
• For example, to know cost of living of people in general in India, Government chooses a base year 2010 which is taken as 100. Then  cost of living is calculated in 2019 which may be 140.
• This difference of 40(140-100) shows that cost of living in India has increased by 40% ( since 2010.
  Hence, Index Numbers cannot be constructed – without the base year.

6. Answer the following:

Question 1.
Explain the features of index numbers.
Answer:
Features of Index Numbers :

• Index numbers are a specialised form of averages.
• They are expressed in percentage form without using a percentage sign.
• The year for which index number is being prepared is the current year.
• The year from which index number is being prepared is called the base year which is ? always taken as 100.
• They are used in measuring the changes ( in magnitudes which cannot be measured directly.
• The formula used for Price Index Number = \(\frac { Total price of the current year }{ Total price of the base year }\) x 100
• They are considered as barometer of economic activity.
• Index number which is calculated from a single variable is called “univariate index” and which is constructed from a group of variables is called a “composite index”.

Question 2.
Explain the significance of index numbers in economics
Answer:
Index numbers are significant tools of economic analysis in the following ways:

(1) Help in formulating Policies : Index numbers help the government and business organisations in framing their suitable economic policies for agriculture and industrial sector, wage and dearness allowance policies, etc.

(2) Help in the study of Trends and Tendencies : Index numbers study the relative changes in the level of phenomenon of different periods of time, so they can be used to predict future events. The economists can study the general trends of changes in price levels, agricultural and industrial production, export, imports, etc.

(3) Economic Barometer : Just as barometer is used to measure atmospheric pressure, index numbers measure the level of economic and business behaviour. They are very important for an economist, businessman, planners, policy makers, etc.

(4) Helps in Measurement of Inflation :
It helps the government to take measures against inflation by giving additional D.A. to the employees on the basis of Dearness Index.

(5) Help to adjust National Income : By comparing current year’s national product prices with the base year’s prices, the Domestic Product (GDP) produced. Hence, this shows changes in real national income.

(6) To present Financial Data in Real Income : Index numbers are used to adjust price change, wage change, etc. Thus deflating helps to present the financial data at constant prices.
(Note: Deflating means to make adjustments in the original data)

(7) Helps in determining Depreciation
Cost: The price index helps in determining the depreciation cost of durable goods. At the time of inflation, it is useful to know the original cost of the commodities.

7. Answer in detail:

Question 1.
Explain the steps involved in the construction of index numbers.
Answer:
Steps involved in the construction of j index numbers are as follows :
1. Purpose of an Index Number : Before constructing an index number, one must know the purpose for which the index number is constructed. E.g. for the whole c sale price or retail price or for agricultural – output, etc.

2. Selection of a Base Year : It is important to select a base year against which comparisons are made. So base year or reference year should be
(i) a recent year and not a distant past.
(ii) it should be normal and free from natural calamities, war, etc.

3. Selection of Commodities: When the cost c of living index number of the middle class jj families is to be constructed, the items that are used by middle class families in everyday life should be included and items like big cars, AC’s, etc. should not be included.

4. Selection of Prices : Prices differ from city to city and even from shop to shop in the same city. Hence, we should take a few standard shops from where middle class families buy goods and take the average of the prices of goods sold by them. Otherwise index number
constructed may be misleading.

5. Selection of suitable Average : An ; index number is a special kind of average, Generally arithmetic mean is commonly ? used for construction of index number as it is simple to calculate.

6. Selection of Formula : Number of formulae can be used for construction, of index numbers. Economists have to decide which formula to use for the construction of a particular index number.

7. Assigning proper Weights : Weights refer to the relative importance of different items in the construction of an index number. ( Weights may either be quantity weights (q) or value weights (p). All weights may not be equally important. Therefore, by s assigning specific weights better result can be obtained.

Index Questions

Find out (Textbook Page 58) :

(a) List of crops included in the Index of Agricultural Production in India.
Answer:
Food grains : Rice, Wheat, Jowar, Bajra, Maize, Ragi, Barley and Small Millets. Gram, Tur and other pulses.
Fibres: Cotton, Jute, Mesta and Sannhemp.
Non-food grains : Oilseeds Groundnut, Sesame, Rapeseed and Mustard, Linseed, Castorseed, Safflower, Nigerseed, Soyabean, Sunflower, Coconut and Cottonseed.
Plantation crops: Tea, Coffee and Rubber.
Condiments and Spices : Pepper, Ginger, Garlic, Chillies, Turmeric, Arecanut, Coriander and Cardamom.
Fruits and Vegetables : Potato, Onion, Banana, Cashewnut, Tapioca and Sweet Potato.
Other Crops : Sugarcane, Tobacco and Guarseed.

(b) List of products included in the Index j of Industrial Production in India.
Answer:
Index of Industrial Production in ; India includes – Consumer Durable goods, Consumer non-durable goods, manufacturing goods, mining, electricity, infrastructure or construction goods, etc.

Find out (Textbook Page 59) :

Newspaper headlines related to the following types of index numbers :
(a) Price Index
(b) Agricultural Productivity Index
(c) Index of Industrial Production
(d) Equity Share Price Index
Answer:
[Students should do this activity by themselves.]

Balbharti Maharashtra State Board Class 12 Economics Solutions Chapter 5 Forms of Market Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 Economics Solutions Chapter 5 Forms of Market

1. Choose the correct option:

Question 1.
In economic sense, market includes following activities
a) The place where goods are sold and purchased.
b) An arrangement through which buyers and sellers come in close contact with each other directly or indirectly.
c) A shop where goods are sold.
d) All of the above.
Options :
1) a and b
2) b and c
3) a, b and c
4) only b
Answer:
4) only b

Question 2.
Classification of markets on the basis of place
a) Local market, National market, International market
b) Very short period market, Local market, National market.
c) Short period market, National market, International market.
d) Local market, National market, Short period market.
Options :
1) a, b and c
2) b. c and d
3) only a
4) a and d
Answers:
3) only a

Question 3.
Homogeneous product is a feature of this market.
a) Monopoly
b) Monopolistic competition
c) Perfect competition
d) Oligopoly
Options:
1) c and d
2) a, b and c
3) a, c and d
4) only c
Answer:
4) only c

Question 4.
Under Perfect competition, sellers are
a) Price makers
b) Price takers
c) Price discriminators
d) None of these
Oplions:
1) a, b and c
2) only b
3) only c
4) a and c
Answers:
2) only b

2. Give economic terms:

1) The market where there are few sellers.
2) The point where demand and supply curve intersect.
3) The cost incurred by the firm to promote sales.
4) Number of firms producing identical product.
5) Charging different prices to different consumers for the same product or services.
Answers:

1. Oligopoly
2. Equilibrium point
3. Selling cost
4. Homogeneous
5. Discriminating monopoly

3. Complete the Correlation:

1) Perfect competition : Free entry and exit :: ……………. : Barriers to entry.
2) Price taker …………….:: Price maker:: Monopoly.
3) Single price : Perfect competition :: Discriminated prices : …………….
Answers:

1. Monopoly
2. Perfect competition
3. Monopoly

4. Find the odd word out:

1) Selling cost : Free gifts, Advertisement hoardings. Window displays. Patents.
2) Market sructure on the basis of competition : Monopoly. Oligopoly. Very Short Period market. Perfect competition.
3) Features of monopoly : Price maker, Entry barriers, Many sellers. Lack of substitutes.
4) Legal monopoly : Patent. OPEC. Copyright. Trade mark.
Answers:

1. Free gift
2. Very short period
3. Many sellers
4. OPEC

5. Answer the following:

Question 1.
Explain the features of Oligopoly.
Answer:
The term Oligopoly is derived from the Greek words ‘Oligo’ which means few and ‘Poly’ which means sellers. Hence, following are its features –

1. Many buyers and few sellers : There are many buyers and a few sellers or firms (may be five or six) who dominate the market and have major control over the price of a product.

2. Interdependence : Since the number of firms are less, any change in price, output, product etc. by one firm will affect the rival firms and will force them to change their price, output, etc. E.g. In case of Coke and Pepsi in soft drink market.

3. Selling cost or advertising : Each firm in order to sell more of its product takes aggressive steps to advertise or through free samples. This helps them to capture larger sales.

4. Barrier to entry : The firm can easily exit from the industry whenever it wants, but to enter a new industry it has certain entry barriers like government license, patent right, etc.

5. Uncertainty : There is a great uncertainty in this market if the rival firms join hands and may try to fight each other.

6. Lack of Uniformity : The firms may produce either homogeneous or differentiated products. Eg. In automobile industry, Maruti, Indica are examples of differentiated product but cooking gas of Bharat Petroleum and Hindustan Petroleum are examples of homogeneous product or pure oligopoly.

Question 2.
Explain the types of Monopoly.
Answer:
There are different types of monopoly as analysed below:

(1) Natural Monopoly : A natural monopoly arises when a particular type of natural resource is located in a particular region like petrol or crude oil in Gulf countries. Also natural advantages such as good location, business reputation, age – old establishment s etc., confer natural monopoly. Similarly, many professional skills, natural talents give monopoly power. E.g. A singer or actor has monopoly of his skill, talent.

(2) Legal Monopoly : Legal monopolies are those monopolies which are recognised by law. Legal protection granted by the Government in the form of trade mark, copy rights, license etc., give monopoly power to j the firms. Here the potential competitors are j not allowed to copy the product registered under the given brand names, patents or trade marks according to the law.

(3) Joint Monopoly or Voluntary Monopoly : This monopoly arises through mutual agreement and business combinations like the formation of cartels, syndicate, trust etc. For e.g. Oil producing nations have come together and formed a Cartel OPEC Organisation of Petroleum Exporting Countries.

(4) Simple Monopoly : A simple monopoly firm charges a uniform price for its product to all the buyers.

(5) Discriminating Monopoly : A discriminating monopoly firm charges different prices for the same product to ) different buyers. E.g. a doctor, a teacher, a lawyer, etc., charges different fees from the people. The practice of charging different j prices from different buyers is called “Price discrimination.”

(6) Private Monopoly : When an individual or a private firm enjoys the monopoly of manufacturing and supplying a particular product, it is called private monopoly. The main aim of private monopolist is profit maximisation.

(7) Public Monopoly : When a field of production is solely owned, controlled and operated by the government, it is regarded as public monopoly. Eg. Public utility service like Railways, Electricity, Water Supply etc. Since these monopolies are service motivated and welfare oriented they are also called welfare monopolies.

6. Observe the table and answer the questions:

Question 1.
Fill in the blanks in the above schedule.
Answer:

Question 2.
Derive the equilibrium price from the above schedule with the help of a suitable diagram.

Answer:
In the diagram, equilibrium price is ₹ 30/- because at this point dd curve insects SS curve at point ‘P’. At this point DD is 300 doz of bananas and sellers are ready to sell 300 doz at price ₹ 3.

7. Answer in detail:

Question 1.
Explain the meaning of Monopolistic competition with its features.
Answer:

(1) Fairly large number of Sellers : There are large number of sellers selling closely related, but not identical products. There is tough competition among sellers. An individual seller supply is just a small part) of the total supply, so he has limited degree l of control over market supply and price. Each firm (seller) can formulate its own price and output policy independently.

(2) Fairly large number of Buyers: There are large numbers of buyers in a monopolistic competition market. Each buyer enjoys his preference over a particular brand and chooses to buy a specific brand of product. Hence, the buying is by choice and not by chance.

(3) Product Differentiation : The most distinguishing feature of monopolistic competition is that the product produced by different firms are not identical, they are slightly different from each other but they are close substitutes. The product differentiation can be done in different ways like may be in the form of brand names say Raymonds. It can be differentiated in terms of colour, size, design, etc., say soap, mobiles etc., or through sales technique. For e.g. cars, two wheelers, air conditioners, etc.

(4) Free Entry of Firms: A firm is free to enter the market as there are no entry barriers. Similarly there are no restrictions if the firm wants to quit the market. Freedom of entry leads to occurrence of only normal profit in the long run.

(5) Selling Cost : One of the special features of monopolistic competition is the selling cost. Selling costs are those costs, which are incurred by firms to create more and more demand for its products through advertisement, salesmanship, free samples, exhibitions, etc.

(6) Downward Sloping Elastic Demand Curve : The demand curve faced by each firm is downward sloping and comparatively more elastic. It implies that an individual firm can sell more only by reducing the price.

(7) Concept of Group : Under monopolistic competition, Prof. E. H. Chamberlin introduced the concept of group in place of Marshallian concept of industry. Industry means a number of firms producing identical products. A group means a number of firms producing differentiated product, which are close substitutes.

Question 2.
Explain the meaning of Perfect competition with its features.
Answer:

(1) Perfect Mobility of Factors of Production : Factors of production that is land, labour, capital are perfectly free to move from one firm to another or from one industry to another from one region to another or from one occupation to another. This ensures freedom of entry and exit for individuals and firms.

(2) Single / Uniform Price : There exists a single price for homogeneous product in the entire market at a given point of time. The price is determined by forces of demand and supply.

(3) Large Numbers of ellers : There are many sellers in this market. The number of sellers (firms) are so large that a single seller cannot influence the market price nor the total output in the market (Industry). The contribution of one seller is insignificant and microscopic. The price in the market is determined by the forces of market demand and market supply. Hence, a firm or seller is a ‘price taker’ and not a ‘price maker.’


(4) Homogeneous Product : The products produced by all the firms in the industry are identical and are perfect substitute to each other. The products are identical in shape, size, colour, etc. and hence uniform price rules the market for the product.

(5) Large Number of Buyers : There are large number of buyers in the market. One individual buyer’s demand is only a small fraction of total market demand so he is not in a position to influence the price. He is a price taker.

(6) No Government Intervention : It is assumed that the government does not interfere with the working of market economy. There are no tariffs, subsidies, licensing policy or other government interventions. This non – intervention of government is necessary to permit free entry of firms and automatic adjustment of demand and supply. In short, laissez faire policy prevails under perfect

(7) Perfect Knowledge : There is perfect knowledge on the part of buyers and sellers regarding the market conditions especially regarding market price. As a result no buyer will pay a higher price than the market price and no seller will charge a lower price than the market price. So a single price would prevail for a commodity in the entire market.

(8) Free Entry and Free Exit : There is freedom for new firms or sellers to enter the industry or market. There are no legal, j economic or any other type of restrictions or; barriers for new firms to enter the industry or an existing firms to quit the industry, Entry of new firm usually takes place j when existing firms enjoy abnormal profit. Similarly, existing firms quit the industry when they face losses.

(9) No Transport Cost: It is assumed that all firms are close to the market and hence there  is no transport cost. If the transport cost are added to the price of product then the homogeneous commodity will have different prices depending upon the distance from the place of supply to the market.

Question 1.
Do you know? (Textbook Page 50)
What is monopsony?
Answer:
Monopsony is opposite of monopoly market but it is rarely found in reality.
In monopsony, there are large number of sellers but buyer is only one. So buyer has complete control over the price in the market. He can bargain with the sellers and fix the price at his terms.

Find out (Textbook Page 50)

What are the types of monopoly of the following products or services and give reason.
(1) Tea in Assam, (2) Atomic energy, (3) Logo of a commercial bank
Answer:

Find out (Textbook Page 51)

Find the close substitutes for the following products:
Answer:

Balbharti Maharashtra State Board Class 12 Economics Solutions Chapter 3B Elasticity of Demand Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 Economics Solutions Chapter 4 Supply Analysis

1. Complete the following statements:

Question 1.
When supply curve is upward sloping, it’s slope is ……………….
a) positive
b) negative
c) first positive then negative
d) zero
Answer:
a) positive

Question 2.
An upward movement along the same supply curve shows ………………..
a) contraction of supply
b) decrease in supply
c) expansion of supply
d) increase in supply
Answer:
c) expansion of supply

Question 3.
A rightward shift in supply curve shows ………………..
a) contraction of supply
b) decrease in supply
c) expansion of supply
d) increase in supply
Answer:
d) increase in supply

Question 4.
Other factors remaining constant, when less quantity is supplied only due to a fall in price, it shows ………………..
a) contraction of supply
b) decrease in supply
c) expansion of supply
d) increase in supply
Answer:
a) contraction of supply

Question 5.
Net addition made to the total revenue by selling an extra unit of a commodity is ………………..
a) total Revenue
b) marginal Revenue
c) average Revenue
d) marginal Cost
Answer:
b) marginal Revenue

2. Complete the Correlation:

1) Expansion of supply: Price rises:: Contraction of supply: ………………….
2) Total revenue : …………………. :: Average revenue :TR/TQ
3) Total cost : TFC + TVC :: Average cost : ………………….
4) Demand curve : …………………. :: Supply curve : Upward
5) …………………. : Change in supply :: Other factors constant: Variation of supply
Answers:
(1) Price falls
(2) PxQ
(3) TC ÷ TQ
(4) Downward
(5) Other factor changes

3. Give economic terms:

1) Cost incurred on fIxed factor.
2) Cost incurred per unit of output.
3) Net addition made to total cost of production.
4) Revenue per unit of output sold.
Answers:
(1) Fixed Cost
(2) Average Cost
(3) Marginal Cost
(4) Average Revenue

4. Distinguish between:

Question 1.
Stock and Supply.
Answer:

Question 2.
Expansion of Supply and Increase in Supply.
Answer:
Expansion / Extension of Supply

1. When the supply of a commodity rises only due to the rise in the price of the commodity, then it is said to be extension in supply.
2. Extension of supply is a case of variation in supply.
3. Rise in price is the only factor due to which supply expands / extends.
4. When there is extension in supply, there is an upward movement on the same supply curve.
   

Increase in Supply :

1. The supply is said to increase if at the same price more is supplied.
2. Increase in supply is a case of changes in supply.
3. Supply increases due to
   (1) fall in cost of production
   (2) improvement in transport facility
   (3) introduction of modern technology
   (4) government subsidies
   (5) more imports etc.
4. When there is an increase in supply, the supply curve shifts to the right of original supply curve.

Question 3.
Contraction of Supply and Decrease in Supply.
Answer:
Contraction of Supply

1. Contraction of supply occurs when quantity supplied of a commodity falls due to a fall in price alone.
2. It is a case of variation in supply.
3. Supply contracts due to fall in price alone.
4. When there is a downward n curve.

Decrease in Supply

1. Decrease in supply occurs when less quantity is supplied at the same price.
2. It is a case of changes in supply.
3. Supply decreases due to –
   (1) increase in cost of production
   (2) transport strike
   (3) outdated technique
   (4) heavy taxes imposed by government.
   (5) more exports etc.
4. When there is curve shifts to curve.
   

Question 4.
Average Revenue and Average Cost.
Answer:

5. Observe the following table and answer the questions.

A) Supply schedule of chocolates

Question 1.
Complete the above supply schedule.
Answer:

Question 2.
Draw a diagram for the above supply schedule.
Answer:

Question 3.
State the relationship between price and quantity supplied.
Answer:
This diagram shows the direct relationship / between price and quantity supplied of) chocolates. When its price is ? 10, 200 units ( are supplied and as price rises to 15, 20, 25 ? …. and so on, quantity supplied also rises to )
When the schedule is plotted on the graph we 250, 300, 350 and so on. This is the law of supply of an individual firm.

B) Observe the market supply schedule of potatoes and answer the following questions.

Question 1.
Complete the quantity of potato supplied by the firms to the market in the above table.
Answer:

Question 2.
Draw the market supply curve from the schedule and explain it.
Answer:

When the schedule is plotted on the graph we get a market supply curve ‘SS’ which is upward sloping. This curve shows that as price rises from ₹ 1 to ₹ 2, supply rises from 1oo to 112 kg, but when price rises from ₹ 2 to ₹ 3, supply rises to a greater extent from 112 kg to 155 kg in the market. When price rises to ₹ 4 Supply falls from 155 kg to 154 kg. This may be because of perishable or seasonal good that supply could not Jj be increased and supply falls. This show backward bending supply curve, showing partly an exception to the supply curve.

6. Answer the following questions:

Question 1.
Explain the concept of total cost and total revenue.
Answer:
Total Cost (TC): It is the total expenditure incurred by a fir m on the factors of production required for the production of goods and services. Total cost is the sum of Total Fixed Cost (TFC) and Total Variable Cost (TVC). Total Fixed Cost is the cost incurred on fixed factors of production like land, factory, building, capital, etc. These factors cannot be changed in the short period. They remain constant. Total Variable Cost is the cost incurred on variable factors such as raw – materials, labour, etc. These factors can be varied or changed according to the change in output level. So the variable cost varies. Total Cost = Total Fixed Cost + Total Variable Cost
i.e., TC = TFC + TVC
TC increases as the level of output increases.

Total Revenue :
(Income) refers to total receipts of the firm from its sales of commodity. It is obtained by multiplying the price per unit of the  commodity with the total number of units!; of commodity sold to the consumers. Thus, Total Revenue = Price per unit Total  Number of units of commodity sold.
Example : If the firm sells lo units of a commodity at ₹ 100 per unit then total revenuewifibe TR = 100 x 10. TR= ₹ 1000

Question 2.
Explain determinants of supply.
Answer:

1. Cost of Production : Changes in the price of factors of production like rent, wages, interest affects the cost of production. When cost of production increases, supply decreases.
2. Price of Other Goods : The supply of a given commodity depends on the price of other commodity. E.g. if the price of wheat rises and that of rice remains the constant, then the producer will think of producing J more of wheat. This will affect the supply of rice.
3. price of the Commodity : Price is an important factor influencing the supply. More is supplied at a higher price and less at a lower price. So price and supply are 5 directly related.
4. Climatic Conditions : The supply of j commodity is also influenced by the forces
5. Government Policy : Government policies like taxation, subsidies, industrial policies etc., may encourage or discourage production and supply. A tax on the commodity will raise the cost of production and reduce the supply while a subsidy on the other hand will provide an incentive to increase production and supply.
6. Exports and Imports : When the
   government resort to imports, supply expands, at the same time heavy exports would reduce the supply in the domestic market.
7. Nature of Market : In a competitive market, the supply would be more but in a monopoly market the seller may create artificial scarcity to raise the price.
8. Future Expectation : If future trends indicate a rise in price, the supply decreases at present. On the other hand if the sellers expect the future price to fall, supply would increase in the current period.
9. Technique of Production : Improvement in the technique of production will lead to increase in supply. Application of advanced technology enables the producer to produce goods on large scale at a lower cost and lesser price.
10. Infrastructure Facility : If means of transport and communication are well developed, the extent of market would be wide. i.e. supply will increase.
11. Natural and Man-made Calamities : Natural calamities like earthquake, cyclone, flood etc., will affect the supply in the market. Even man-made calamities like a bomb-blast, affects supply. Even a strike call can affect supply in the market.

7. Answer in detail :

Question 1.
State and explain law of supply with exceptions.
Answer:
Law of Supply :
(A) Introduction : The law of supply was introduced by Dr. Alfred Marshall in his book “Principles of Economics” published in 1890. The law establishes a functional relationship between the price of a commodity and quantity supplied of that commodity. It explains the general tendency of the sellers in offering more goods for sale at a higher price than at a lower price.

(B) Statement of the Law : According to Prof. Alfred Marshall “Other things remaining constant, the higher the price of the commodity, greater is the quantity supplied and lower the price of the commodity, smaller is the quantity supplied.”In other words, quantity supplied of a commodity varies directly with price i.e., with a fall in price supply contract and with a rise in price supply expands.
S = f (P) [S = Supply, P = Price, f = Function of]
The law can be better understood with the help of a market supply schedule and market supply curve.

(C) Market Supply Schedule : Market supply schedule is a tabular representation of various quantities of a commodity offered for sale by all the sellers in the market at different prices during a given period of time. The schedule is a hypothetical one except one price rest are imaginary prices.

The above schedule clearly shows that sellers in general want to sell more at high prices and less at low price. E.g., at a low price of Rs.10 per unit the seller supplies only 100 units per day and at high price of Rs. 50 the supply rises to 500 units of ‘X’ per day.

(D) Market Supply Curve : It is graphical representation of the above market supply schedule. Price is measured on ‘Y’ axis and quantity supplied on ‘X’ axis and above schedule is plotted. We derive a supply curve SS.

Market Supply Schedule

There are some exceptions to the law of s supply. Following are such cases when supply may fall with the rises in price or rise with the fall in price.

(1) Labour supply : Supply of labour in the ) terms of hours of work is an important exception pointed out by economists. Generally when wages rise, workers work more, but after a certain point if wages continue to rise, supply of labour falls i.e. workers wish to earn more by work in for less hours and supply curve of labour would bend backwards as shown below :

In this figure as wage rate rises up to 0W, ;i supply of labor also rises up to ON, but when wage rate rises to 0W., labour supply falls from ON to 0Nr Hence an exception.

(2) Saving : In case of savings generally it is observed that as the rate of interest rises, savings also rises but some people want to have a fixed regular income by way of interest. They may save less at a higher rate of interest and save more at a lower rate of interest. For example : suppose a person is interested in earning a fixed income of ₹ 800 p.a. then he saves ₹ 10,000/- at 8% rate of interest but when rate of interest increases to 10%, he will save only ₹ 8,000/-.

(3) Future Expectations: If the seller expects a fall in price in future, then he will supply more today even at a low price. But if he expects the prices to rise further in future he will withhold the supply today to supply more in future at a high price.

(4) Need for Cash : When the sellers are in urgent need of liquid cash, then even at a lower price they will offer more goods for sale.

(5) Rare Goods : In case of rare collections such as rare painting, old coins, antique, the law is not applicable as the supply remains fixed. The supply curve is a vertical straight line parallel to Y axis.

(6) Agricultural Goods: Supply of agricultural product is influenced by natural factors like climatic conditions, rainfall etc., which cannot be controlled by man. So in bad weather condition, even at a higher price the supply of agricultural commodities will not increase.

Intext Questions

Question 1.
“Concept of supply is a micro concept but concept of aggregate supply is a macro concept”. Explain. (Textbook Page No. 43)
Answer:
Micro economics studies about economic behavior of units like households, firm market and particular commodities. Whereas macro economics deals with the broad economic concepts like total demand, total supply, national income, etc.
Supply refers to supply of an individual seller and aggregate supply refers to total supply of a commodity.
Hence, supply is a microscopic concept and aggregate supply is macro concept.

Question 2.
What do you mean by aggregate supply? (Textbook Page No. 43)
Answer:
Aggregate supply refers to the minimum amount of sales proceeds which the entrepreneurs expect to receive from the sale of output at a given level of employment.

Find out (Textbook Page No. 43)

If a firm produces 600 units of a commodity in a day and incurs a total cost of ₹ 30,000. Calculate the Average Cost.
Answer:
Average cost refers to the cost of production per unit cost of a commodity. It is calculated by dividing total cost by total quantity of a commodity. Hence,
AC = \(\frac{\mathrm{TC}}{\mathrm{TQ}}=\frac{30,000}{600}\) = ₹ 50 per unit

Find out (Textbook Page No. 43)

If a firm sells 400 units of a commodity at ₹ 10 unit. Calculate the TR and AR.
Answer:
TR = Price X Quantity
= 10 x 400
= 4,000
AR = \(\frac{\mathrm{TR}}{\mathrm{TQ}}\)
= \(\frac{4,000}{400}\)
= ₹ 10

Balbharti Yuvakbharati English 12th Digest Chapter 1.3 The Cop and the Anthem Notes, Textbook Exercise Important Questions and Answers.

Maharashtra State Board Class 12 English Yuvakbharati Solutions Chapter 1.3 The Cop and the Anthem

12th English Digest Chapter 1.3 The Cop and the Anthem Textbook Questions and Answers

Question 1.
Suppose you have gone to a place where the winter season is very severe. Discuss with your partner the ways in which you would protect yourself in the cold climate. (The answer is given and underlined.)

Answer:

Question 2.
When you see a cop approaching, you feel either ‘relieved’ or ‘scared’. Discuss with your partner and write down the situations when you feel ‘relieved’ or ‘scared’.
Answer:
Relieved:
(a) You are walking alone in a dark street.
(b) There is a fight taking place near you.
(c) A group of rough-looking people are coming towards you on a lonely road.
Scared:
(a) You are riding a bike without a valid driving licence.
(b) You have broken a traffic signal.
(c) You have been involved in a fight.

Question 3.
Discuss some of the motivating things that can change a person’s life :
Answer:
(a) Listening to an inspiring speech
(b) Reading motivating books and biographies of great people
(c) Reading epics and religious books
(d) Observing successful/happy people or watching biopics of their lives.

(A1)

Question (i)
Discuss with your partner and find out the different ways in which Soapy tried ; to get arrested. The first one is given.
Answer:
(a) Tried to enter a luxurious cafe.
(b) Threw a stone and broke a shop window.
(c) Ate heartily at a restaurant and then said he had no money.
(d) Shouted and howled and raved and danced on the sidewalk.
(e) Stole an umbrella.

Question (ii)
Describe the atmosphere when Soapy reached near the Church.
Answer:
(a) A soft light glowed through the violet-stained window.
(b) Sweet music drifted out of the quaint, old church.
(c) There was a full, radiant moon, and few vehicles and pedestrians.
(d) Sparrows twittered sleepily in the eaves.

(A2)

Question (i)
Read the story and match the incidents given in Column A with the consequences given in Column B.

Answer:

1. Soapy tried to enter a cafe – Strong and ready hands of the head waiter turned him around.
2. Soapy broke a glass window – The cop ran after another man.
3. Two waiters pitched Soapy on the callous pavement – He stood up slowly beating the i dust from his clothes.
4. Soapy heard the anthem being played in the Church – Suddenly a wonderful change came in his heart.
5. Cop arrests Soapy for hanging around. – Dream of turning around in life was shattered.

Question (ii)
Give reasons and complete the following: (The answers are given directly and underlined.)
Answer:
(a) Soapy had confidence in himself because he was shaven, his coat was trim and he had a neat, black bow. The portion of him that showed above the table looked respectable and would raise no doubt in the waiter’s mind.
(b) The head waiter of the luxurious cafe did not allow Soapy to enter because he saw Soapy’s tattered trousers and old, worn out shoes, and knew that Soapy would not have money to pay for a meal.
(c) The cop did not arrest Soapy for breaking the glass window because Soapy was standing calmly and talking to him. The policeman felt that men who smash glass windows do not remain to chat with the police.
(d) The cop did not arrest Soapy for shouting and dancing because it was the time of celebrations for the local college boys. They were generally noisy but harmless, and he had been told by his superiors to let them be.

(iii) Pick out the lines from the text which show that:

Question (a)
Soapy wants to enter the cafe for two reasons.
Answer:
1. A roasted mallard duck, thought Soapy, would be about the thing with a bottle of wine and then some cheese, a cup of coffee and a cigar.
2. The meat would leave him filled and happy for the journey to his winter island.

Question (b)
Soapy was afraid that he won’t be able to enter the prison.
Answer:
It seemed that his route to the coveted island was not to be an easy one. Some other way of entering the limbo must be devised.

Question (c)
Soapy was not caught by the cop for throwing stones at the glass.
Answer:
1. The policeman refused to accept Soapy even as a clue.
2. The policeman saw a man half-way down the block running to catch a car. With drawn club he joined in the pursuit.

Question (d)
Soapy actually did not want the umbrella.
Answer:
He hurled the umbrella angrily into the excavation.

Question (e)
Listening to the anthem, Soapy remembered his good old days.
Answer:
He had known it well in the days when his life contained such things as mothers and roses and ambitions and friends and immaculate thoughts and collars.

Question (iv)
‘He would make a man of himself again’ – The word ‘man’ in the sentence means ……………….. .
Answer:
‘He would make a man of himself again’ – The word ‘man’ in the sentence means a responsible and worthy human being.

Question (v)
Soapy’s earlier life was much different from his present life. Complete the table to show this contrast. One is done for you.

Answer:

Question (vi)
After listening to the sweet and solemn organ notes, Soapy decides to:
Answer:
1. pull himself out of the mire, conquer the evil that had enslaved him and make a man of himself again
2. resurrect his old eager ambitions and pursue them without faltering
3. go into the roaring downtown district and find work

Question (vii)
Write an incident in which you did something wrong and repented for it later. Give reasons.
Answer:
A lady who stayed in my building used to shout at me for playing noisily under her window. One day, she shouted at me as usual from her window and went inside. I suddenly got angry and threw a stone at her window. The stone hit the glass which broke. I heard a loud shout of pain and ran away. I later came to know that she had been badly injured by the shattered glass. I repented for what I had done. Though I did not tell her that I was the culprit, I was very good to her after that.

(A3)

Question (i)
O’Henry has used different words to indicate prison where Soapy wants to reach. Make a list of those words from the extract.
Answer:
the island

Question (ii)
Find out the words used for the ‘degraded state of Soapy’.
Answer:

1. the pit into which he had tumbled
2. the degraded days
3. unworthy desires
4. dead hopes
5. wrecked faculties
6. base motives
7. mire
8. evil that had enslaved him.

Question (iii)
The specific meaning of word ‘anthem’ in the content of the story is:
Answer:
Anthem – a rousing or uplifting song.

(A4)

Question (i)
Convert the following sentences into the negative without changing their meanings:
(a) The policeman refused to accept Soapy even as a clue.
(b) Soapy drifted along, twice unsuccessful.
(c) Soapy stopped his unavailing racket.
(d) The island seemed very far away.
(e) The island seemed an unattainable Arcadia.
Answer:
(a) The policeman did not accept Soapy even as a clue.
(b) Soapy drifted along, twice not successful.
(c) Soapy stopped his racket which was not successful.
(d) The island seemed not at all near.
(e) The island seemed an Arcadia which was not attainable.

Question (ii)
Convert the following sentences into the affirmative without changing their meanings :
(a) Men who smash windows do not remain to chat with the police.
(b) On the opposite side of the street was a restaurant of no great pretensions.
(c) Why don’t you call a cop?
(d) Noisy; but no harm.
(e) They seemed to regard him as a King who could do no wrong.
Answer:
(a) Men who smash windows refrain from remaining to chat with the police.
(b) On the opposite side of the street was a very ordinary restaurant.
(c) Please call a cop.
(d) Noisy; but harmless.
(e) They seemed to regard him as a King who was always right.

(A5)

Question (i)
‘Forgiveness is often better than punishment’. Write two paragraphs – one for and another against this notion.
Answer:
1. To err is human, to forgive is divine.

We all make mistakes. Nobody is perfect. That is why we are human. However, mistakes should be forgiven if there is sufficient repentance. Forgiveness will make the guilty person feel ashamed of his conduct and he will not repeat it. It is easy to punish but very difficult to forgive someone. It needs a big heart and a lot of kindness. If we punish the guilty person we will only make him more defiant. If punishing someone could have solved the problem, criminals who have been jailed would never have repeated the crime. But this is not found to be so. Just as God forgives us our mistakes, we should forgive others their mistakes too.

2. Punishment is the only answer

Forgiveness may work in certain cases, but there are hardened criminals who will not respond to forgiveness. They will only be stopped by punishment. If a person has murdered another in cold blood, will he improve by forgiveness? Never. He has to be punished severely so that he does not repeat it and society feels safe.

People only fear punishment. It can be easily seen at traffic signals – if there is no policeman to punish you, most people will break the signal. Then there will be chaos. If there is no punishment and no prisons, people will do whatever they want – rob, kill, etc. – and go off freely. No, in a society where it is not possible to expect everyone to have high values, punishment for misdeeds is the only solution.

Question (ii)
You are the class representative and you have been asked by the Principal to conduct an interview of a cop. Frame 8-10 questions with the help of the following points, give introduction and conclusion.

• reasons for joining the department
• special trainings
• developing the skill to identify and locate criminals
• dealing with criminals
• achievements and awards

Answer:
Good morning, Mr. Pawar. Congratulations on your excellent work in finding the bank robbers. May I ask you a few questions about your life? Thank you.

1. When did you join the police department?
2. Which examinations did you have to clear for the post?
3. What were your reasons for joining the department?
4. Did you have to go through any special training sessions?
5. What type of criminals do you come across most in this area-thieves, killers, molesters,
   etc?
6. How do you identify or locate criminals?
7. Once you catch the culprit-say a thief-how do you deal with him?
8. Can you tell me something about your achievements and awards?
9. How can you motivate others to join the force?
10. Any message to college students?

Thank you, Sir, for sparing the time for this interview. It will be published in our school magazine. Good day.

(A6)

Question (i)
Make a list of jobs which would give you an opportunity to help the society or serve the country. Also mention the different ways in which they can be beneficial to the people and also the country,

Question (ii)
Go to your school/college library and read some other stories by O’Henry like, ‘The Gift of the Magi’, ‘The Last Leaf and ‘After Twenty years’. Write the stories in short in your notebook.

Yuvakbharati English 12th Digest Chapter 1.3 The Cop and the Anthem Additional Important Questions and Answers

Read the extract and complete the activities given below:

Global Understanding:

Question 1.
Name the following:
Answer:

1. This is where Soapy stopped at a luxurious cafe
2. This had been a gift to Soapy: a neat, black bow
3. This is what Soapy wanted to eat: a roasted mallard duck, some cheese a bottle of wine, a cup of coffee
4. This is what Soapy wanted to drink: Soapy’s tattered
5. This is what the head waiter noticed:trousers and old shoes
6. This is where Soapy was left by the head: on the sidewalk

Question 1.
Write if the following sentences are True or False. Correct the False sentences:
1. Soapy broke the glass of the shop window.
2. Nobody heard the breaking of the window.
3. The policeman chased Soapy.
4. Soapy did not run away from the place.
5. The restaurant Soapy entered was an ordinary one.
6. The policeman ate beefsteak, flapjacks, doughnuts and pie.
Answer:
True sentences:
1. Soapy broke the glass of the shop window.
4. Soapy did not run away from the place.
5. The restaurant Soapy entered was an ordinary one.

False sentences:
2. Nobody heard the breaking of the window.
3. The policeman chased Soapy.
6. The policeman ate beefsteak, flapjacks, doughnuts and pie.

Corrected sentences:
1. A policeman as well as some people heard the breaking of the window.
2. The policeman chased a man running to catch a car.
3. Soapy ate beefsteak, flapjacks, doughnuts and pie.

Question 2.
Complete the table:
(The answers is given directly and underlined.)
Answer:

Question 3.
Rearrange the following sentences according to their occurrence in the extract:

1. Soapy decided to go into the downtown district and find work.
2. A policeman caught Soapy’s arm.
3. Soapy saw a quaint old church.
4. Soapy’s ears caught sweet music.

Answer:

1. Soapy saw a quaint old church.
2. Soapy’s ears caught sweet music.
3. Soapy decided to go into the downtown district and find work.
4. A policeman caught Soapy’s arm.

Question 4.
Complete the following:
(The answers are given directly and underlined.)
Answer:

1. A soft light glowed through one violet-stained window.
2. Soapy came to a standstill on an unusually quiet corner.
3. Soapy stood without moving near the iron fence listening to the anthem that the organist played.
4. Soapy planned to resurrect his old eager ambitions.

Answer the following in a few words each:

Question 1.
Who was lighting a cigar?
Answer:
A well-dressed man

Question 2.
Who twirled his club?
Answer:
A policeman

Question 3.
Who grabbed the umbrella?
Answer:
Soapy

Question 4.
Whom did the policeman help?
Answer:
A tall blonde

Complex Factual:

Question 1.
Give reasons and complete the following:
(The answers are given directly and underlined.)
Answer:
Soapy was disgusted with the policeman because he refused to accept that Soapy had broken the window, and he rushed off to chase another man.

Question 2.
Complete the web:
(The answers are given directly and underlined.)
Answer:

Question 3.
Describe Soapy’s behaviour on the sidewalk.
Answer:
On the sidewalk Soapy began to yell drunken meaningless things at the top of his harsh voice. He danced, howled, spoke wildly and made a big disturbance.

Question 4.
Describe the wonderful change in Soapy’s soul.
Answer:
After listening to the anthem, Soapy remembers his earlier life, and is horrified to realize that he has indeed become a degraded person. He decides to pull himself out of the pit into which he has fallen and make a man of himself again. He determines to bring back to his life his old eager ambitions and pursue them. He makes up his mind to take up a job.

Question 5.
Describe the end of the story in your own words.
Answer:
Initially Soapy had felt that he would like to pass the winter months in prison, and he makes several efforts to get himself arrested. The notes of anthem transform him from within and he decides to give up his evil ways and become a man again. He resolves to work hard. At that very moment, ironically, a policeman arrests him for loitering and he is sent to prison for three months. Soapy faces the irony of fate as the moment he realizes that real freedom lies in a virtuous life, he is taken into confinement.

Question 6.
Complete the following:
Soapy was angry because ………..
Answer:
Soapy was angry because when he wanted to fall into the clutches of the policemen. In order to be arrested, they seemed to regard him as a king who could do nothing wrong.

Inference/Interpretation/Analysis:

Question 1.
Complete the following:
(The answers are given directly and underlined.)
Answer:
Soapy took a stone because he wanted to break the glass of the shop window. This would result in a policeman arresting him for this act, and he would be imprisoned for the winter, which was exactly what he wanted.

Discuss the hidden meaning in the expressions/sentences.

Question 1.
It catered to large appetites and modest purses.
Answer:
The restaurant prepared food for ordinary workers who had large appetites but very little money.

Question 2.
He told the waiter the fact that the minutest coin and himself were total strangers.
Answer:
He told the waiter that he did not have any money.

Question 3.
A voice like butter cakes and an eye like the cherry in the Manhattan cocktail.
Answer:
A very smooth voice and a hard, stony eye (a tough person).

Question 4.
Discuss the meaning in the context:
He caught at the immediate straw of ‘disorderly conduct’.
Answer:
Soapy wanted to be arrested by a policeman and imprisoned. However, his efforts towards this end had been unsuccessful, and he was worried that he would continue to be unsuccessful. When he suddenly came upon a policeman lounging in front of a theatre, an idea struck him. He felt that if he shouted and screamed and made a lot of noise, he would be arrested for behaving in a dangerous and disturbing way in public, and would be imprisoned, which was what he wanted.

Question 5.
Complete the following:
(The answer is given directly and underlined.)
Answer:
Soapy was angry because even after he had stolen a man’s umbrella, the man did not report him to the police, but instead apologized and said that perhaps he (the umbrella man) had made a mistake.

Question 6.
The umbrella man did not call a policeman. Give reasons for this.
Answer:
The umbrella man had himself probably stolen the umbrella from somewhere. When Soapy picked up the umbrella, the man first thought that he could get it back. But when Soapy spoke about calling a policeman, the man thought that the umbrella was actually Soapy’s, and Soapy would hand him over to the police. Hence, he apologized quickly and walked away without calling a policeman.

Personal Response:

Question 1.
Give your opinion about Soapy’s desire to enter prison.
Answer:
I find it very strange that a person can actually want to enter prison, whatever be the reason. At least, from what I know of prisons, they are terrible places, and one has a very difficult time there. However, Soapy has obviously been to prison before, and probably enjoys the free food and protection from the winter that he gets there.

Question 2.
Have you ever bought/eaten something and then found that you did not have enough money to pay for it? Describe your feeling at that time.
Answer:
Yes, it happened to me once. I went to a mall and bought a jacket for myself. I had been looking at a lot of jackets and I got confused with the prices. Finally, when the cashier was making the bill, I found that the jacket I had chosen was very expensive and I did not have enough money to pay for it. I was very embarrassed to tell the cashier this, but I had to. He gave me an angry look.

Question 3.
Have you ever stolen/wanted to steal anything? Narrate in brief.
Answer:
Yes, when I was about 12 years old, I stole my friend’s remote-controlled toy car, which his uncle had sent him from abroad. It was a beautiful car. However, when I was playing with it at home my mother saw me, and she made me return the car. I later felt very ashamed of myself, but fortunately my friend forgave me.

Language Study.

Question 1.
If only he could reach a table in the restaurant unsuspected, success would be his.
(Rewrite using ‘unless’.)
Answer:
Unless he could reach a table in the restaurant unsuspected, success would not be his.

Question 2.
One dollar for the cigar would be enough.
(Add a question tag.)
Answer:
One dollar for the cigar would be enough, wouldn’t it?

Question 3.
Some other way of entering the limbo must be devised.
(Use an infinitive in place of a gerund.)
Answer:
Some other way to enter the limbo must be devised.

Question 4.
He had set his silk umbrella by the door on entering. (Rewrite using the verb form of the underlined word.)
Answer:
He had set his silk umbrella by the door when he entered.

Question 5.
At length Soapy reached one of the avenues to the east. (Rewrite using another adverb phrase with the same meaning as the underlined phrase.)
Answer:
After a long time Soapy reached one of the avenues to the east.

Question 6.
On an unusually quiet corner, Soapy came to a standstill. (Rewrite using ‘that’.)
Answer:
Soapy came to a standstill on a corner that was unusually quiet.

Vocabulary:

Question 1.
Guess the meaning of the following in the context:
1. winter island
2. eye fell upon
Answer:
1. winter island – prison.
2. eye fell upon – saw or noticed.

Question 2.
O’Henry has used different words to indicate prison, where Soapy wants to reach. Make a list of those words from the extract.
Answer:

1. winter island
2. coveted island
3. limbo

Question 3.
Make sentences using the following words/expressions :
1. eye fell upon
2. strolled
Answer:
1. My eye fell upon the clock, and I sat up with shock.
2. Seema strolled along the beach, enjoying the breeze.

Question 4.
Guess the meaning of:

1. napery
2. betook
3. brass buttons

Answer:

1. napery – table linen.
2. betook – to cause oneself to go.
3. brass buttons – the police.

Question 5.
O’Henry has used different words to indicate prison where Soapy wants to reach. Make a list of those words from the extract:
Answer:
the island

Question 6.
Fill in the blanks with the correct nouns from the extract:

1. friendly
2. electric
3. large
4. callous

Answer:

1. friendly voice
2. electric lights
3. large appetites
4. callous pavement

Question 7.
O’Henry has used different words to indicate prison where Soapy wants to reach. Make a list of those words from the extract.
Answer:
the island, Arcadia

Question 8.
Pick out four verbs in the simple past tense from the extract.
Answer:
danced, howled, raved, disturbed

Question 9.
Match the words in Column A with the meanings in Column B :
Answer:

1. disconsolate – very unhappy
2. sauntered – walked in a relaxed manner
3. raved – spoke wildly
4. rendered – made

Non-Textual Grammar

Do as directed:

Question 1.
Shivani found a small box and dropped her bangles inside.
(Rewrite the sentence, beginning ‘Finding …)
Answer:
Finding a small box, Shivani dropped her bangles inside.

Question 2.
Sunlight from the window made her black hair appear brown. (Rewrite using ‘that’.)
Answer:
Sunlight that came from the window made her black hair appear brown.

Question 3.
On the day the school closed for the summer, no student was more delighted than Rithik.
(Change the degree.)
Answer:
1. On the day the school closed for the summer, Rithik was the most delighted student. – Superlative degree
2. On the day the school closed for the summer, Rithik was more delighted than any other student. – Comparative degree

Spot the error in the following sentences and rewrite them correctly:

Question 1.
There is room for much boxes in this cupboard.
Answer:
There is room for many boxes in this cupboard.

Question 2.
If I requires help for him in public places, I was not embarrassed to seek it from people around.
Answer:
If I required help for him in public places, I was not embarrassed to seek it from people around.

Balbharti Maharashtra State Board Class 12 Economics Solutions Chapter 4 Supply Analysis Textbook Exercise Questions and Answers.

Maharashtra State Board Class 12 Economics Solutions Chapter 3B Elasticity of Demand

1. Complete the following statements:

Question 1.
Price elasticity of demand on a linear demand curve at the X axis is ……………
a) zero
b) one
c) infinity
d) less than one
Answer:
a) zero

Question 2.
Price elasticity of demand on a linear demand curve at the Y-axis is equal to
a) zero
b) one
c) infinity
d) greater than one
Answer:
c) infinity

Question 3.
Demand curve is parallel to X axis, in case of …………..
a) perfectly elastic demand
b) perfectly inelastic demand
c) relatively elastic demand
d) relatively inelastic demand
Answer:
a) perfectly elastic demand

Question 4.
When percentage change in quantity demanded is more than the percentage change in price, the demand curve is ………………..
a) flatter
b) steeper
c) rectangular
d) horizontal
Answer:
a) flatter

Question 5.
Ed = 0 in case of ………………
a) luxuries
b) normal goods
c) necessities
d) comforts
Answer:
c) necessities

2. Give et onomic terms:

Question 1.
Degree of responsiveness of quantity demanded o change in income only.
Answer:
Income elasticity

Question 2.
Degree of responsiveness of a change in quantity demanded of one commodity due to change in the price of another commodity.
Answer:
Cross elasticity

Question 3.
Degree of responsiveness of a change of quantity demanded of a good to a change in its price.
Answer:
Elasticity of demand

Question 4.
Elasticity resulting from infinite change in quantity demanded.
Answer:
Perfectly elastic demand

Question 5.
Elasticity resulting from a proportionate change in quantity demanded due to a proportionate change in price.
Answer:
Price elasticity

3. Complete the correlation:

1) Perfectly elastic demand: Ed = ∞ :: ……………. : Ed = 0
2) Rectangular hyperbola : ………………. : Steeper demand curve : Relatively inelastic demand.
3) Straight line demand curve : Linear demand curve:: …………….. non linear demand curve.
4) Pen and ink : …………….. :: Tea or Coffee: Substitutes.
5) Ratio method : Ed = \(\frac{\% \Delta \mathbf{Q}}{\% \Delta \mathrm{P}}\) :: …………… : Ed = \(\frac{\text { Lower segment }}{\text { Upper segment }}\)
Answer:

1. Perfectly inelastic demand
2. Unitary elastic demand
3. Unitary elastic (convex to origin)
4. Complementary goods
5. Point or Geometric method

4. Assertion and Reasoning type questions:

Question 1.
Assertion (A) : Elasticity of demand explains that one variable is influenced by another variable.
Reasoning (R) : The concept of elasticity of demand indicates the effect of price and changes in other factors on demand.
Options: 1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer:
3) Both (A) and (R) are True and (R) is the correct explanation of (A)

Question 2.
Assertion (A) : A change in quantity demanded of one commodity due to a change in the price of other commodity is cross elasticity.
Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
Options:
1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer:
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)

Question 3.
Assertion (A) : Degree of price elasticity is less than one in case of relatively inelastic demand.
Reasoning (R): Change in demand is less then the change in price.
Options: 1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer:
3) Both (A) and (R) are True and (R) is the correct explanation of (A)

5. Distinguish between:

Question 1.
Relatively elastic demand and Relatively inelastic demand.
Answer:
Relatively Elastic Demand

1. When percentage change in quantity demanded is greater than the percentage change in price then demand is said to be Relatively Elastic demand.
2. The numerical co-efficient is greater than one (e > 1).
3. Demand curve slopes flatter.
4. 
5. Example : luxury goods like LCD, TV, Car etc.

Relatively inelastic demand.

1. When percentage change in quantity demanded is less than percentage change in price then demand is said to be Relatively Inelastic demand.
2. The numerical co-efficient is less than one (e < 1).
3. Demand curve slopes steeper.
4. 
5. Example : foodgrains.

Question 2.
Perfectly elastic demand and Perfectly inelastic demand.
Answer:
Perfectly elastic demand :

1. When a small change in price brings an infinite change in quantity demanded, then demand is said to be Perfectly Elastic demand.
2. The numerical value of Perfectly Elastic demand is infinite i.e. e = ∞
3. The demand curve is horizontal straight line parallel to X-axis.
4. Such a demand is a myth or theoretical.
5. 

Perfectly inelastic demand.

1. When a change in price does not bring any change in quantity demanded, then demand
   is said to be Perfectly Inelastic demand.
2. The numerical value of Perfectly Inelastic demand is zero i.e. e = 0.
3. The demand curve is a vertical straight line parallel to Y—axis.
4. Such demand is found in case of life saving drugs, salt, etc.
5. 

6. Answer the following questions:

Question 1.
Explain the factors influencing elasticity of demand.
Answer:
The concept of Price Elasticity was developed i by great neo-classical economist Dr. Alfred \ Marshall in the year 1890.
According to Dr. Alfred Marshall, “The elasticity or responsiveness of demand in a market is great or small, according to the amount demanded which increases much or little for a given fall in price, and diminishes much or little for a given rise in price. ”
Elasticity of demand in fact refers to the £ degree of responsiveness of the quantity demanded of a commodity to change in the variable on which demand depends.

Question 2.
Explain the total outlay method of measuring elasticity of demand?
Answer:
Total Outlay Method : This method was introduced by Dr. Alfred Marshall. The limitation of this method is that in this method unlike ratio method, the exact numerical value of the elasticity of demand cannot be determined. According, to this method, the elasticity of demand is measured on the basis of expenditure incurred by consumer when the price of a commodity changes.

Total outlay or total expenditure can be calculated by multiplying the price with the quantity demanded (Price x Quantity demand = Total Expenditure). Depending upon the kind of change in total outlay, whether it increases, or decreases, or remain constant with the change in price we will be able to decide the type of elasticity. This can be explained with the following example:-

1. If the total outlay remains the same with a rise or fall in price then the demand is said to be unitary (e = 1) elastic.
2. If the total outlay decreases with a rise in price and increases with a fall in price, the elasticity of demand is greater than one or Relatively Elastic e > 1.
3. If the total outlay increases with a rise in price and decreases with a fall in price, then elasticity is less than one or relatively inelastic, e < 1.

Question 3.
Explain importance of elasticity of demand.
Answer:

• Nature of Commodity : By nature, commodities are classified as necessaries, comforts and luxuries. Normally demand for j necessaries like food grains are relatively inelastic and for comforts and luxuries like diamond, perfumes, etc is relatively elastic.
• Availability of Substitutes : The larger the number of substitutes available for a commodity, the greater would be the elasticity. Demand for products like soap, soft drinks, detergents, tooth paste, etc. have many substitute so demand is elastic, ‘j However, salt, garlic, onions have no substitute so demand is inelastic.
• Durability of the Commodity : The demand for durable goods like T.V., car, fridge, etc is relatively inelastic in the short run and elastic in the long run. Whereas the demand for perishable goods is relatively inelastic.
• Uses of Commodity : Single use commodities have less elastic demand and multi-use goods like coal, electricity, sugar, etc. have relatively elastic demand.
• Range of Price : The demand for commodities which are highly priced and will have a inelastic demand like AC, car, etc. Even very low priced goods have inelastic demand.
• Consumer’s Income : Generally if income is very high, the demand for over allcommodities tends to be relatively inelastic. The demand pattern of the rich people is rarely affected even when there is significant price change.
• Influence of Habits and Customs : When a person is habituated to consume a certain commodity, the demand will be inelastic for that commodity. E.g. demand for cigarettes to a chain smoker is inelastic.
• Time Period : The demand for goods is less elastic in the short period and more elastic in the long period. This is because (1) in the long period consumer are better informed about their price (2) habits of consumer’s change in the long run (3) durable goods get worn out in the long period.
• Proportion of Income Spend : If consumer spends a very small proportion of his income on a commodity, the demand for it will be relatively inelastic & vice-versa. For e.g. demand for salt, newspaper, pins are inelastic.
• Urgency and Postponement : If the demand for a commodity is urgent then demand for it will be inelastic. E.g. demand for medicine for a patient. Whereas, if the demand for a commodity can be postponed it will have elastic demand.
• Complementary Goods : Complementary goods are those goods which are demanded jointly such as car and petrol, mobile and sim cards, etc. Demand for petrol will be inelastic as car cannot run without petrol.

7. Observe the following figure and answer the questions:

Question 1.
Identify and define the degrees of elasticity of demand from the following demand curves.

Answer:

Concept: Perfectly Inelastic demand (Ed = 0) Explanation : When change in price has no effect on the quantity demanded of that commodity, then it is called as perfectly inelastic demand. Demand curve ‘DD’ is a vertical straight line parallel to ‘Y’ – axis.

Concept: Perfectly Elastic demand (Ed = ∞) (infinity)
Explanation: When a change in price leads to infinite change in quantity demanded of a commodity then it is called as perfectly) (d) elastic demand.
Demand curve is horizontal straight line ( parallel to ‘X’ – axis.

Concept: Ed = 1 Unitary elastic demand Explanation : When proportionate or percentage change in quantity demanded is exactly equal to proportionate or percentage change in price, then it is called as Unitary Elastic demand. Demand curve is called as rectangular hyperbola.

Concept: Relatively Elastic Demand (Ed > 1)
Explanation : When proportionate or percentage change in quantity demanded is more than proportionate change it its price, then it is called as Relatively Elastic Demand. Demand curve is called as flatter curve.

Question 2.
In the following diagram AE is the linear demand curve of a commodity. On the basis of the given diagram state whether the following statements are True or False. Give reasons to your answer.

1) Demand at point ‘C’ is relatively elastic demand.
2) Demand at point ‘B’ is unitaiy elastic demand.
3) Demand at point ‘D’ is perfectly inelastic demand.
4) Demand at point ‘A’ is perfectly elastic demand.
Answer:

1. Demand at point ‘C’ is relatively elastic demand.
2. False, it is relatively inelastic demand.
3. False, it is relatively elastic demand.
4. False, it is unitary elastic demand.
5. True, it is perfectly elastic Ed = ∞