How to avoid silly mistakes with tricky questions
Class 12 economics is considered very competitive and crucial, especially for the commerce stream students. A look at some questions which carry low weightage but can be tricky for students.education Updated: Feb 04, 2015 17:11 IST
Class 12 economics is considered very competitive and crucial, especially for the commerce stream students. A look at some questions which carry low weightage but can be tricky for students.
Q1 Why is indifference curve downward sloping?
A. Indifference curve is downward sloping because when consumption of one commodity increases, the consumer has to reduce the consumption of the other commodity to remain at the same level of satisfaction.
(Note: Most of the students write this answer: Indifference curve is downward sloping because MRS declines along the indifference curve which is incorrect. MRS is the slope of indifference curve thus declining MRS only implies convexity of indifference curve.)
Q2 Classify the following into intermediate expenditure and final expenditure.
a) Expenditure on purchase of stationery by a school.
b) Expenditure on furniture purchased by a school.
A. Final goods – Final goods are those goods which are either meant for consumption of for investment during the same year.
Intermediate goods – Intermediate goods are those goods which are either used up in the production process or are for resale during the same year. Expenditure on purchase of stationery is an intermediate expenditure as stationery will be used up in the production process.
Expenditure on furniture by a school is an investment done by a school, therefore, it is a final expenditure.
(Note: To determine whether a good is an intermediate good or final good when purchased by a firm, look carefully whether it is a durable or a non-durable good. If it is a non-durable good purchased by a firm it will be intermediate and if it is a durable good, it will be a final good.)
The questions have been compiled by subject experts of economics at Studymate