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Read the passage given below and answer the questions that follow.
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In India, Fixed deposits have long been a favourite investment choice of people, especially senior citizens, as it promise steady returns. It attracts those who are seeking a stable income. But it’s an illusion in the period of inflation. Inflation is the rate at which the general level of prices for goods and services rises, subsequently eroding the purchasing power of money. In simple terms, what money could buy today might not a few years down the line. Fixed deposits are financial instruments offered by banks where you deposit a lump sum amount for a fixed period at a predetermined rate of interest. Consider an investment of Rs 1 crore in a fixed deposit at a 6% annual interest rate and the annual rate of inflation is 5%. By the 10th year your pre inflation return is 1.79 crore, but post inflation it’s just 1.10 crore. The nominal value of investment in fixed deposits may appear to grow, inflation significantly diminishes their real value and purchasing power over time.
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- What is the theme of the extract? (2)
- Differentiate between Demand pull and Cost push inflation. (2)
- What are the demand deposits and time deposits? (2)
- Since 1998 RBI has been using new measures of money supply, M0, M1, M2 and M3. Which one of these measures incorporates fixed deposit as one of its components? Mention the other components of that measure. (2)
Concept: Concept of Demand
The aggregate utility obtained from the consumption of a specific unit of a commodity is called ______.
Concept: Cardinal Approach (Utility Analysis)
Utility maximising consumers would like to decrease the consumption when ______.
Concept: Total Utility and Marginal Utility
Draw a diagram to show the elasticity of demand when it is greater than one.
Concept: Concept of Elasticity of Demand
The price of a good decreases from ₹100 to 80 per unit. If the price elasticity of demand for the good is 2 and the original quantity demanded is 30 units, calculate the new quantity demanded.
Concept: Concept of Elasticity of Demand
Which one of the following will cause a rise in the equilibrium price of rice when the demand for rice remains the same?
Concept: Movements Along and Shifts in Supply Curve
The price of a mobile handset has risen in the market. But the dealers have not been able to increase the supply proportionately.
What will be the price elasticity of supply for the mobile handset? Draw the supply curve to indicate the type of elasticity.
Concept: Measurement of Elasticity of Supply
An increase in the number of firms in the market causes a rightward shift in the market supply curve, but the individual supply curve may shift leftward. Justify the statement.
Concept: Movements Along and Shifts in Supply Curve
Give two differences between intended supply and actual supply.
Concept: Determinants of Supply
Prices of air conditioners and refrigerators have shot up in the new year as consumer durables makers pass on the impact of rising raw material costs and higher freight charges to customers, while home appliances like washing machines may witness a 5–10 per cent price hike later this month or by March.
(Source: The Economic Times)
Explain the behaviour of supply of this consumer durable. Illustrate the same in a diagram.
Concept: Determinants of Supply
Explain the law of variable proportions with the help of a diagram.
Concept: Law of Variable Proportions
Which one of the following is NOT a ceteris paribus assumption of the Law of Supply?
Concept: Law of Variable Proportions
When the Marginal Product turns negative, Total Product will ______.
Concept: Law of Variable Proportions
Why is the AVC curve U-shaped?
Concept: Law of Variable Proportions
At the point of inflexion, ______ is maximum.
Concept: Law of Variable Proportions
With the help of a diagram, explain the relationship between Average Product and Total Product under the Law of Variable Proportions.
Concept: Law of Variable Proportions
Study the data given below and identify the laws followed in the production of A and B depicted in the Table I and Table II. Justify your answer with a reason for each.
| Table I | Table II | ||||
| Machines | Labour | Output of A (units) | Machines | Labour | Output of B (units) |
| 5 | 10 | 1000 | 5 | 10 | 400 |
| 5 | 11 | 1150 | 10 | 20 | 800 |
| 5 | 12 | 1310 | 15 | 30 | 1200 |
Concept: Law of Variable Proportions
Normal profits for a firm imply that the firm is breaking even. Explain.
Concept: Basics of Production Theory
What are Average product?
Concept: Law of Variable Proportions
What is marginal product?
Concept: Law of Variable Proportions
