\n2. This type of inflation is not much of a problem and is good for healthy functioning of economy.<\/td>\n | This type of inflation is a warning signal indicating the need for controlling it.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n (c)<\/strong> Money acts as a standard of deferred payment. It means payment to be made in future can be expressed in terms of money. Credit is given in terms of money. If a person needs 10 kilograms of rice but does not have the required amount of money with him at the time, he borrows this amount. The person needed rice, but he borrowed money. He did not borrow rice. He will return money to the lender, after the agreed period. That\u2019s why money is called standard of deferred payments.<\/p>\n(d)<\/strong> The importance of public expenditure in the industrial development is in following manner\u2014<\/p>\n\n- By building economic overheads, e.g., roads, railways, irrigation, power, etc. and undertaking of social overheads, such as hospitals, schools, etc. productive capacity of an economy is increased.<\/li>\n
- Public expenditure is helpful in promoting and developing the basic and key industries, such as capital goods industries.<\/li>\n<\/ol>\n
(e) SLR\u2014<\/strong>Statutory Liquidity Ratio (SLR) refers to that portion of the total deposits of a commercial bank which it has to keep with itself in the form of cash reserves, gold and government securities. \nCRR\u2014<\/strong>Cash Reserve Ratio refers to that percentage of total deposits of commercial bank which it has to keep with the RBI in the form of cash reserves.<\/p>\nSECTION-II \u00a0(40 Marks)<\/strong><\/span> \n(Answer any four<\/strong> questions from this section)<\/em><\/p>\nQuestion 5:<\/strong> \n(a)<\/strong> What is meant by increase in demand? Discuss any four factors affecting price elasticity of demand. [5]<\/strong> \n(b)<\/strong> Define land. Explain the importance of land as a factor of production. [5]<\/strong><\/p>\nAnswer:<\/strong> \n(a) Increase in Demand\u2014<\/strong>Increase in demand refers to a situation when the consumers buy larger amount of a commodity at the same existing price. Increase in demand may take place due to rise in income, a change in taste, rise in the price of substitutes, a fall in prices of complementary goods, increase in population, redistribution of income, etc. \nFactors Affecting Price Elasticity of Demand<\/strong><\/p>\n\n- Availability of substitutesp\u2014<\/strong>A commodity with more and close substitutes tends to have an elastic demand and one with a few weak substitutes has an inelastic demand.
\nFor example: If price of Pepsi falls, a large number of consumers will switch over the Pepsi from Coke. On the other hand when the price of milk increases, the quantity demanded will not decrease much and vice versa.<\/li>\n- Proportion of Income Spent\u2014<\/strong>Smaller is the proportion of Income spent on a commodity, the smaller will be the elasticity of demand and vice-versa.
\nFor example: The demand for soap, salt, matches, etc. is highly inelastic since the consumer spends a very small proportion of his income on them.<\/li>\n- Habits of the consumer\u2014<\/strong>Price elasticity of demand depends also upon whether or not the consumers are habitual of using a commodity. If consumers are habitual of consuming some commodities, they will continue to consume these even at higher prices. The demand for such commodities will be usually inelastic.<\/li>\n
- Time Factor\u2014<\/strong>Price Elasticity is generally low for the short period as compared to long period. This is for 2 reasons\u2014
\nFirstly\u2014<\/strong>It takes time for consumers to adjust their tastes, preferences and habits. \nSecondly,<\/strong> new substitutes may be developed in the long run.<\/li>\n<\/ol>\n(b)<\/strong> \u201cLand is a specific factor or that it is the specific element in a factor or again that it is the specific aspect of a thing.” \u2014Prof. J. K. Mehta<\/strong> \nThe term \u2018land\u2019 generally refers to the surface of the earth. But in economics it includes all that, which is available free of cost from \u2018nature\u2019 as a gift to human being. Land stands for all nature, living and non living which is used by man in production. \nImportance of Land as a factor of Production\u2014<\/strong>In every kind of production, we have to use land. Therefore land is a basic factor of production.<\/p>\n\n- In industries, it helps to provide raw material.<\/li>\n
- It provide space\/surface for setting up the sites for industrial infrastructure.<\/li>\n
- In Agriculture, land is considered as the main factor of production as crops are produced on land.<\/li>\n
- All sources of power i.e. hydro electricity, thermal power, diesel, coal, oil, etc. emanate from land.<\/li>\n<\/ol>\n
Fundamentally speaking, \u2018land\u2019 is the original source of all material wealth and it is of immense rise to mankind. Inspite of being a passive factor, it is an important factor of production. An overall economic prosperity of a country is directly related to the richness of its natural resources.<\/p>\n Question 6:<\/strong> \n(a)<\/strong> Define supply. State the law of supply and explain it with the help of a diagram. [5]<\/strong> \n(b)<\/strong> Define a consumer. Explain the importance of educating consumers of their rights. [5]<\/strong><\/p>\nAnswer:<\/strong> \n(a) Supply:<\/strong> \u201cSupply may defined as a schedule that shows the various amounts of a product for which a particular seller is willing and is able to produce and make it available for sale in the market at each specific price in a set of possible prices during some given period.\u201d \u2014Mc Connel<\/strong> \nIn simple words, supply means that quantity of a particular commodity which a seller is ready to sell at a given price. \nLaw of Supply:<\/strong> \u201cThe law of supply states that, other things being equal, the higher the price, the greater the quantity supplied or the lower the price, the smaller the quantity supplied.\u201d \u2014Dooley<\/strong> \nIt can be illustrated with the help of the following schedule and diagram:<\/p>\n\n\n\nPrice of Goods x (Rs. per kg)<\/strong><\/td>\nQty. supplied of Good x (kg. per month)<\/strong><\/td>\n<\/tr>\n\n10<\/td>\n | 5,000<\/td>\n<\/tr>\n | \n15<\/td>\n | 10,000<\/td>\n<\/tr>\n | \n20<\/td>\n | 16,000<\/td>\n<\/tr>\n | \n25<\/td>\n | 25,000<\/td>\n<\/tr>\n | \n30<\/td>\n | 35,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n <\/p>\n In the above diagram price is Rs. 10 per kg., at this price supply is 5,000 kg. We observe that as the price increases the quantity supplied goes on increasing, making the supply curve upward sloping.<\/p>\n (b) Consumer\u2014<\/strong>A person who has indicated his or her willingness to obtain goods and\/or services from a supplier with the intention of paying for them is termed as consumer. \nImportance of Educating Consumers of their rights\u2014<\/strong><\/p>\n\n- For the physical protection of consumer\u2014<\/strong>To educate consumers of their rights is necessary so as to provide safeguard against the products that are unsafe or harmful to the health and welfare of a consumer.<\/li>\n
- For protection against unfair trade practices\u2014<\/strong>Consumer should know about his rights and in case of any exploitation, due to supply of substandard defective goods etc. he should know the means to redress against frauds.<\/li>\n
- Protection against Environmental Hazards\u2014<\/strong>Use of chemical fertilizers and certain refinery complexes pollute air, water and food and they cause a threat to human life. Thus, protection is needed for it.<\/li>\n
- Protection from Deceptive Advertising\u2014<\/strong>Some producers give incorrect information about their products and the consumer is misled by these fake advertisements which costs hard on their pockets. They should aware of deceptive advertising.<\/li>\n<\/ol>\n
Question 7:<\/strong> \n(a)<\/strong> Name the institution that enjoys the monopoly of note issue in India. Briefly explain two qualitative methods of credit control adopted by this institution. [5]<\/strong> \n(b)<\/strong> Define labour. Explain four important characteristic of labour. [5]<\/strong><\/p>\nAnswer:<\/strong> \n(a)<\/strong> The institution that enjoys the monopoly of note issue in India is RBI (Reserve Bank of India). It is the central bank of India. \nQualitative Methods of Credit Control\u2014<\/strong><\/p>\n\n- Credit Rationing\u2014<\/strong>The RBI may also specify a ceiling limit on the maximum level of credit which can be given on the stocks of selected commodities to limit the quantum of credit given to a specific industry or sector of economy. For example\u2014The RBI may prescribe the limit for food credit for each year. This will ensure that excess credit will not flow to this sector of economy.<\/li>\n
- Moral Suasion\u2014<\/strong>Suasion means to persuade, so it is a method of request and advice to the commercial banks by the central bank. Central bank requests the commercial banks not tdgrant credit for speculative and non essential activities.
\nSince, the \u2018central bank\u2019 is the symbol of financial authority and sovereignty, the commercial banks honour such requests. This method proves very effective under normal conditions of market and economy.<\/li>\n<\/ol>\n(b)<\/strong> \u201cAny exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work is called labour.\u201d \nCharacteristics of Labour\u2014<\/strong><\/p>\n\n- The Labourer sells his services (Labour) only\u2014<\/strong>A labourer (worker) sells his services only and not himself. A labourer may or may not agree to do a work. The \u2018labour\u2019 factor comes into consideration when he agrees to offer his services on certain terms and conditions.<\/li>\n
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