Short Run Fixed Price Analysis of Product Market

Q.

What Are the Assumptions of the Law of Diminishing Marginal Utility?

Q.

Given, the consumption function, C = 150 + 0.6Y, where C = consumption expenditure, Y = income and investment expenditure = Rs 2, 000. Calculate:

(i) Equilibrium level of national income

(ii) Consumption at equilibrium level of national income

(iii) Saving at equilibrium level of national income

Q.

What Is Meant by the Law of Diminishing Returns?

Q.

What Are the Limitations of the Law of Diminishing Returns?

Q.

In an economy S = - 50 + 0.5Y is the saving function (where S = saving and Y = national income) and investment expenditure is 7, 000. Calculate

(i) Equilibrium level of national income.

(ii) Consumption expenditure at equilibrium level of national income.

Q.

Calculate Investment expenditure:

National income = 700

Autonomous consumption = 70

MPC = 0.8

OR

Calculate equilibrium level of income from the following:

Consumption expenditure at zero level of income = 60

MPC = 0.9

Investment =100

Q.

Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is Rs 50 crores, and MPS is 0.2 and level of income (Y) is Rs 4, 000 crores. State whether the economy is in equilibrium or not (cite reasons).

Q.

The consumption function in an economy is C = 80 + 0.6Y and investment level in an economy is 800 crores. State whether the following are true or false:
(a) Equilibrium level of income is 2100 crores.
(b) 275 crores is the total change in income if investment rises by 150 crores.
(c) Value of multiplier is 2.5.

Q.

Combined Leverage Is Calculated As_____

1. Operating Leverage + Financial Leverage

2. Operating Leverage - Financial Leverage.

3. Operating Leverage X Financial Leverage.

4. Operating Leverage / Financial Leverage.

Q.

From the following data about an economy, calculate its equilibrium level of income:

(i) Autonomous Consumption = 400
(ii) Marginal Propensity to Consume = 0.5
(iii) Investment = 4000

Q.

In an economy, the ratio of MPC and MPS is 7:3. How much increase in income will increase the consumption by Rs 350 crores?

OR

In an economy, C = 300 + 0.5 Y and investment is 600. What will be the equilibrium level of income and consumption?

Q.

In an economy S = - 50 + 0.5Y is the saving function (where S = saving and Y = national income) and investment expenditure is 7, 000. Calculate

(i) Equilibrium level of national income.

(ii) Consumption expenditure at equilibrium level of national income.

1. (i) 12, 100

   (ii) 12, 100

2. (i) 12, 100

   (ii) 7, 100

3. (i) 14, 100

   (ii) 7, 100

4. (i) 7, 100

   (ii) 14, 100

Q.

Given that MPC = 0.8 and investment at all the levels of income is 40 crores., complete the following table:

$\begin{array}{ccccccc}\text{INCOME}& \text{CONSUMPTION}& \text{SAVINGS}& \text{INVESTMENT}& \text{AD}& \text{AS}& \\ 0& 60& & & & & \\ 100& & & & & & \\ 200& & & & & & \\ 300& & & & & & \\ 400& & & & & & \\ 500& & & & & & \\ 600& & & & & & \end{array}$

Also calculate:

(a) Break-even point

(b) Equilibrium level of income

(c) MPS

(d) APC at the income level of 200 crores

(e) APS at the income level of 100 crores

Q.

Which Law Is Applicable in the Short Run Production Function?

Q.

Find equilibrium S and equilibrium I when Y = 4, 400, MPC = 0.75, and $\overline{C}=100.$

1. S = 1, 000
   I = 1, 000

2. S = 1, 150
   I = 2, 000

3. S = 1, 200
   I = 1, 200

4. S = 1, 000
   I = 1, 200

Q.

Given, the consumption function, C = 150 + 0.6Y, where C = consumption expenditure, Y = income and investment expenditure = Rs 2, 000. Calculate:

(i) Equilibrium level of national income

(ii) Consumption at equilibrium level of national income

(iii) Saving at equilibrium level of national income

1. (i) Rs 3, 375

   (ii) Rs 4, 375

   (iii) Rs 2, 000

2. (i) Rs 5, 375

   (ii) Rs 3, 375

   (iii) Rs 2, 000

3. (i) Rs 5, 375

   (ii) Rs 3, 375

   (iii) Rs 2, 300

4. (i) Rs 8, 750

   (ii) Rs 3, 375

   (iii) Rs 2, 000

Q.

Given C = 400 + 0.9Y and I = 4, 000, find : (i) equilibrium Y, (ii) S and C at equilibrium Y.

Q.

Give that, S = - 25 + 0.5Y and I = 5, 000, find equilibrium Y and equilibrium C.

1. Y = 5, 050
   C = 10, 050

2. Y = 10, 050
   C = 10, 050

3. Y = 5, 050
   C = 5, 050

4. Y= 10, 050
   C = 5, 050

Q. Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.

Q. C = 50 + 0.5 Y is the consumption function where C is consumption expenditure and Y is National Income and investment expenditure is 2, 000 in an economy. Calculate: (i) Equilibrium level of (national) income; (ii) Consumption expenditure at equilibrium level of (National) income.

Q.

Following is the consumption function in an economy:
C = 75 + 0.6Y

If the investment level in an economy is Rs. 400 crores, what will be:

(a) Equilibrium level of income

(b) APC at equilibrium level

(c) Value of multiplier

OR

(a) What is fiscal policy?

(b) Explain various fiscal policy measures to reduce deficient demand.

Q. Give that S = - 25 + 0.5Y and I = 5, 000, equilibrium Y is and equilibrium C is .

1. 5, 050
2. 10, 050
3. 5, 000
4. 10, 000

Q. The consumption function is expressed as: C = 100 + 0.25 Y (where C = consumption expenditure and Y = National Income). Calculate saving if consumption expenditure at equilibrium level of national income is Rs. 500 crores. (Saving = Rs. 1, 100 cores)

Q. In the case of substitute goods, a fall in the price of Good X causes a fall in demand for Good Y.

1. true
2. false

Q. An economy is in equilibrium. Calculate Marginal Propensity to Save from the following :
National Income $=1,000$
Autonomous Consumption $=100$
Investment Expenditure $=200$

Q. Calculate equilibrium national income from the following:
(i) Consumption expenditure at zero income Rs.60
(ii) Marginal propensity to consume 0.9
(iii) Investment Rs. 100
(Equilibrium level of income =Rs. 1, 600)

Q. In an economy C= 200 + 0.75 Y is the consumption function where C is consumption expenditure and Y is national income. Investment expenditure is 4, 000. Calculate equilibrium level of income and consumption expenditure.

Q. Explain the rationale behind the consition of equilibrium of a producer.

Q. Calculate equilibrium level of income from the following:
(i) Consumption expenditure at zero income Rs. 40
(ii) Marginal Propensity to Consume 0.8
(iii) Investment Rs. 80
(Equilibrium level of income =Rs. 600)

Q. In an economy the autonomous investment is 60 and the marginal propensity to consume is 0.8. If the equilibrium level of Income is 400, then the autonomous consumption is 30. True or False? Justify your answer.
(False. The given value of autonomous consumption is Incorrect. The correct value is 20)