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## TN State Board 11th Economics Model Question Paper 1 English Medium

General Instructions:

1. The question paper comprises of four parts.
2. You are to attempt all the parts. An internal choice of questions is provided wherever applicable.
3. All questions of Part I, II, III and IV are to be attempted separately.
4. Question numbers 1 to 20 in Part I are Multiple Choice Questions of one mark each.
These are to be answered by choosing the most suitable answer from the given four alternatives and writing the option code and the corresponding answer
5. Question numbers 21 to 30 in Part II are two-mark questions. These are to be answered in about one or two sentences.
6. Question numbers 31 to 40 in Part III are three-mark questions. These are to be answered in above three to five short sentences.
7. Question numbers 41 to 47 in Part IV are five-mark questions. These are to be answered in detail Draw diagrams wherever necessary.

Time: 3:00 Hours
Maximum Marks: 90

PART – I

Choose the correct answer: [20 × 1 = 20]

Question 1.
The construction of demand line or supply line is the result of using ………………………
(a) Matrices
(b) Calculus
(c) Algebra
(d) Analytical geometry
(d) Analytical geometry

Question 2.
“Economics is the study of mankind in the ordinary business of life”. It is the statement of ………………………….
(b) Lionel Robbins
(c) Alfred Marshall
(d) Samuelson
(c) Alfred Marshall

Question 3.
The Industry which was de – reserved in 1993?
(a) Railways
(b) Mining of copper and zinc
(c) Atomic energy
(d) Atomic minerals
(b) Mining of copper and zinc

Question 4.
A production function measures the relation between ……………………….
(a) Input prices and output prices
(b) Input prices and the quantity of output
(c) The quantity of inputs and the quantity of output
(d) The quantity of inputs and input prices
(c) The quantity of inputs and the quantity of output

Question 5.
Mathematical Economics is the integration of ………………………..
(a) Mathematics and Economics
(b) Economics and Statistics
(c) Economics and Equations
(d) Graphs and Economics
(a) Mathematics and Economics

Question 6.
Mixed economy means ……………………………..
(a) Private sectors and banks
(b) Co – existence of public and private sectors
(c) Public sectors and banks
(d) Public sectors only
(b) Co-existence of public and private sectors

Question 7.
Who is the Father of Economics?
(a) Max Muller
(c) Karl Marx
(d) Paul A Samuelson

Question 8.
Annual plans formed in the year ………………………….
(a) 1989 – 1991
(b) 1990 – 1992
(c) 2000 – 2001
(d) 1981 – 1983
(b) 1990 – 1992

Question 9.
In investment proposals filed by MSMEs, TN ranks ………………………..
(a) I
(b) II
(c) III
(d) IV
(b) II

Question 10.
Which of the following is the way of Privatisation?
(a) Disinvestment
(b) Denationalization
(c) Franchising
(d) All the above
(a) Disinvestment

Question 11.
Cost refer to ………………………..
(a) Price
(b) Value
(c) Fixed cost
(d) Cost of production
(d) Cost of production

Question 12.
Petrol and gold is the example of ………………………. market.
(a) Local
(b) Provincial
(c) National
(d) International
(d) International

Question 13.
Money cost is also known as …………………………. cost.
(a) Explicit
(b) Implicit
(c) Social
(d) Real
(a) Explicit

Question 14.
Which of the following involves maximum exploitation of consumers?
(a) Perfect competition
(b) Monopoly
(c) Monopolistic competition
(d) Oligopoly
(b) Monopoly

Question 15.
How do you term people employed in excess over and above the requirements?
(a) Unemployment
(b) Under employment (or) Disguised unemployment
(c) Full employment
(d) Self employment
(b) Under employment (or) Disguised unemployment

Question 16.
The main objective of nationalisation of banks was ……………………….
(a) Private Social welfare
(b) Social Welfare
(c) To earn
(d) Industries monopoly
(b) Social Welfare

Question 17.
Which of the following is not a characteristic of land?
(a) Its limited supply
(b) It is mobile
(c) Heterogeneous
(b) It is mobile

Question 18.
Quasi – rent arises in ………………………..
(c) Imported items
(d) None of these

Question 19.
The recommended nutritiofaal intake per person in rural areas.
(a) 2100 calories
(b) 2200 calories
(c) 2300 calories
(d) 2400 calories
(d) 2400 calories

Question 20.
The highest rate of tax under GST is ……………………….. (as on July 1,2017).
(a) 18%
(b) 24%
(c) 28%
(d) 32%
(c) 28%

PART – II

Answer any seven question in which Question No. 30 is compulsory. [7 × 2 = 14]

Question 21.
What is meant by distribution?
Distribution means division of income among the four factors of production in terms of rent to landlords, wage to labourer, interest to capital and profit to entrepreneurs. The theory of functional distribution deals with how the relative prices of these factors of production are determined. The theory of factor prices is popularly known as the theory of distribution.

Question 22.
State the reasons for implementing LPG?
Liberalization:

1. Liberalization refers to removal of relaxation of governmental restrictions in all stages of industry.
2. De-licensing, decontrol, deregulation, subsidies (incentives) and greater role for financial institutions are the various facets of liberalization.

Privatization:

1. Privatization means transfer of ownership and management of enterprises from public sector to private sector.
2. Denationalization, disinvestment and opening exclusive public sector enterprises to private sector are the gateways to privatization.

Globalization:
Globalization refers to the integration of the domestic (Indian) economy with the rest of the world. Import liberalization through reduction of tariff and non – tariffbarriers, opening the doors to Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) are some of the measures towards globalization.

Question 23.
Why was structural reform implemented in Indian Economy?

1. Indian Economy responded to the crisis by introducing a set of policies known as Structural Reforms.
2. These policies were aimed at correcting the weaknesses and rigidities in the various sectors of the economy such as industry, trade, fiscal and agriculture.

Question 24.
What is selling costs?

1. Selling Cost is the discussion of “ Product differentiation”.
2. We can infer that the producer under monopolistic competition has to incur expenses to popularize his brand.
3. This involved in selling the product is called selling cost.
4. According to Prof. Chamberlin, selling cost is “ The cost incurred in order to alter the position or shape of the demand curve for a product”.

Question 25.
What are major ports in Tamil Nadu?

1. Tamil Nadu has three major ports; one each at Chennai, Ennore, and Thoothkudi as well as one intermediate port in Nagpattinam, and 23 minor ports.
2. All the minor portsare managed by the Tamil Nadu Maritime Board, Chennai Port.
3. Ennore port was recently converted from an intermediate port to a major port and handles all the coal and ore traffic in Tamil Nadu.

Question 26.
Mention any four food crops which are favourable to Tamil Nadu?

1. Rice: Tamil Nadu is the India’s second biggest producer of rice.
2. Banana and Coconut: Tamil Nadu ranks first in production of Banana and coconut.
3. Cashewnut: Tamil Nadu ranks second in production of cashewnut.
4. Pepper: Tamil Nadu ranks third in production of pepper.
5. Sugarcane: Tamil Nadu ranks fourth in production of Sugarcane.

Question 27.
What is Selling cost?

1. Selling Cost is the discussion of “ Product differentiation”.
2. We can infer that the producer under monopolistic competition has to incur expenses to popularize his brand.
3. This involved in selling the product is called selling cost.
4. According to Prof. Chamberlin, selling cost is “The cost incurred in order to alter the position or shape of the demand curve for a product”.

Question 28.
What do you mean by Rural Development?

1. Rural Development is defined as an overall improvement in the economies and social well being of villagers and the institutional and physical environments in which they live.
2. According to the World Bank “Rural Development is a strategy designed to improve the economic and social life of a specific group of people – rural poor.
3. Rural Development is a process of improving the rural areas, rural people and rural living.

Question 29.
Define Rural economy?

1. Rural areas are geographical areas located outside towns and cities.
2. Rural Economy refers to villages and rural community refers to people living in villages.

Question 30.
Give the definition for ‘Real Cost’ ?
Real Cost refers to the payment made to compensate the efforts and sacrifices of all factor owners for their services in production. Real Cost includes the efforts and sacrifices of landlords in the use of land, capitalists to save and invest, and workers in foregoing, leisure. Real cost are considered pains and sacrifices of labour as real cost of production.

PART – III

Answer any seven question in which Question No. 40 is compulsory. [7 × 3 = 21]

Question 31.
Enumerate the remedial measures to Rural poverty?
Remedial measures:

1. Since rural unemployment and rural poverty are interrelated, creation of employment opportunities would support elimination of poverty.
2. Poverty alleviation schemes and programmes have been implemented, modified, consolidated, expanded and improved over time.
3. However, unemployment, begging, rag-picking and slumming continues.
4. Unless employment is given to all the people poverty cannot be eliminated.

Question 32.
Write a short note on Marginal Revenue?
1. Marginal Revenue [MR] is the addition to the total revenue by the sale of an additional unit of a commodity.

2. MR can be found out by dividing change in total revenue by the change in quantity sold out.

3. MR = ∆TR/∆Q where MR denotes Marginal Revenue, ∆TR denotes change in Total Revenue and ∆Q denotes change in total quantity.

4. The other method of estimating MR is:

MR = TRn – TRn-1 (or) TRn+1 – TRn
Where, MR denotes Marginal Revenue,
TRn denotes total revenue of nth item,
TRn-1, denotes Total Revenue of n – 1th item and
TRn+1 denotes Total Revenue of n + 1th item.
If TR = PQ , MR = dTR/dQ = P, which is equal to AR.

Question 33.
Define opportunity cost and provide an example?

1. Opportunity cost refers to the cost of next best alternative use. In other words, it is the value of the next best alternative foregone.
2. For example, a farmer can cultivate both paddy and sugarcane in a farm land.
3. If he cultivates paddy, the opportunity cost of paddy output is the amount of sugarcane output given up.
4. Opportunity Cost is also called as “Alternative Cost” or Transfer cost.

Question 34.
Explain the theory of “consumer’s surplus”?
Alfred Marshall defines consumer’s surplus as “the excess of price which a person would be willing to pay a thing rather than go without the thing, over that which he actually does pay is the economic measure of this surplus satisfaction. This may be called consumers surplus”.

Question 35.
List out the objectives of MUDRA Bank?

1. Regulate the lender and the borrower of microfinance and bring stability to the microfinance system.
2. Extend finance and credit support to Micro Finance Institutions [MFI] and agencies that lend money to small businesses, retailers, self-help groups and individuals.
3. Register all MFIs and introduce a system of performance rating and accreditation for the first time.
4. Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro businesses.
5. Introduce appropriate technologies to assist in the process of efficient lending, borrowing and monitoring of distributed capital.

Question 36.
Explain about the period of Merchant capital?
Period of Merchant Capital:

1. The period of merchant capital was from 1757 to 1813.
2. The only aim of the East India Company was to earn profit by establishing monopoly trade in the goods with India and the East India’s.
3. During this period, India had been considered as the best hunting ground for capital by the East Indian company to develop industrial capitalism is Britain.
4. When Bengal and South India came under political shake of the East India company in 1750s and 1760s, the objective of monopoly trade was fulfilled.
5. The company administration succeeded in generating huge surpluses which were repatriated . to England, and the Indian leaders linked this problem of land revenue with that of the drain.
6. Above all, the officers of the company were unscrupulous and corrupt.

Question 37.
Distinguish between rent and quasi – rent?

 Rent Quasi – Rent 1. Rent accrues to land. 1. Quasi – rent accrues to man – made appliance. 2. The supply of land is fixed forever. 2. The supply of man made appliances is fixed for a short period only. 3. It enters into price. 3. It does not enter into price.

Question 38.
Explain the causes for Rural backwardness?

1. The evils of brain-drain and rural-urban migration can be reduced if rural areas are developed.
2. In order to better utilise the unused and under – utilised resources there is a need to develop the rural economy.
3. Rural Development should minimise the gap between rural and urban areas in terms of the provision of infrastructural facilities. It was called as PURA by former President Abdul Kalam.
4. In order to improve the nation’s status in the global arena in terms of the economic indicators like,
• Human Development Index [HDI]
• Woman Empowerment Index [WEI]
• Gender Disparity Index [GDI]
• Physical Quality of Life Index [PQLI] and
• Gross National Happiness Index [GNHI] should be given due attention.

Question 39.
Discuss the long run cost curves with suitable diagram?

1. In the long run all factors of production become variable. The existing size of the firm can be increased in the case of long run. There are neither fixed inputs nor fixed costs in the long run.

2. LAG is given in diagram.

3. Long run average cost (LAC) is equal to long run total costs divided by the level of output.

LAC = LTC/Q

4. where, LAC denotes Long-Run Average Cost, LTC denotes Long-run Total Cost and Q denotes the quantity of output. The LAC curve is derived from short-run average cost curves. It is the locus of points denoting the least cost curve of producing the corresponding output. The LAC curve is called as ‘Plant Curve’ or ‘Boat shape Curve’ or ‘Planning Curve’ or ‘Envelop Curve’.

Question 40.
State the importance of Rural Development?
1. A major share of population lives in rural areas, and their development and contributions are very much supportive for the nation building activities. India cannot be developed by retaining rural as backward.

2. The rural economy Supports the urban sectors by way of supplying drinking water, milk, food and raw materials. Hence, the backwardness of the rural sector would be a major impediment to the overall progress of the economy.

3. Improvements in education, health and sanitation in villages can help avoid many urban problems namely, begging, rag-picking and road side slumming.

4. Development of agriculture and allied activities are necessary for providing gainful employment in rural areas and improving overall food production.

PART – IV

Answer all the questions. [7 × 5 = 35]

Question 41 (a).
Bring out Jawaharlal Nehru’s contribution to the idea of economic development?

1. Jawaharlal Nehru, one of the chief builders of Modem India, was the first Prime Minister of Independent India.
2. He was a great patriot, thinker and statesman.

(I) Democracy and Secularism:

1. Jawaharlal Nehru was a firm believer in democracy.
2. He believed in free speech civil liberty, adult franchise and the Rule of Law and Parliamentary democracy.
3. Secularism, is another signal contribution of Nehru to India.

(II) Planning:

1. Jawaharlal Nehru was responsible for the introduction of planning in our country.
2. Jawaharlal Nehru, the Plan was essentially an integrated approach for development.
3. Nehru Spoke on the theme of planning.
4. He said “the essence of planning is to find the best way to utilize all resources of manpower, of money and so on”.
5. “Planning for Nehru was essentially linked up with Industrialization and eventual self¬reliance for the country’s economic growth on an self – accelerating growth.
6. Nehru carried through this basis strategy of planned development.
7. Nehru’s contribution to the advancement of science, research, technology and industrial development cannot be forgotten.
8. It was dining is period, many IITs and Research Institutions were established.
9. Nehru always in insited on “ scientific temper”.

[OR]

(b) Describe the Salient features of EXIM policy [2015 – 2020]
The new EXIM policy has been formulated focusing on increasing in exports Scenario, boosting production and supporting the concepts like Make in India and Digital India.

Salient Features:

1. Reduce export obligations by 25% and give boost to domestic manufacturing supporting the “Make in India” concept.
2. As a step to Digital India concept, online procedure to upload digitally signed document by CA /CS / Cost Accountant are developed and further mobile app for filing tax, stamp duty has been developed.
3. Repeated submission of physical copies of documents available on Exporter Importer Profile is not required.
4. Export obligation period for export items related to defence, military store, aerospace and nuclear energy to be 24 months.
5. EXIM policy 2015 – 2020 is expected to double the share of India in World Trade from present level of 3% by the year 2020. This appears to be too ambitions.

Question 42 (a).
Explain basic problems of the economy with the help of production possibility curve?
1. The problem of choice between relatively scarce commodities due to limited productive resources with the society can be illustrated with the help of a geometric device, is known as production possibility curve.

Production possibility curve shows the menu of choice along which a society can choose to substitute one good for another, assuming a given , state of technology and given total resources.

2. The explanation and analysis of production possibility curve is based upon certain assumptions, some of them are following:

1. The time period does not change. It remains the same throughout the curve.
2. Techniques of production are fixed.
3. There is full employment in the economy.
4. Only two goods can be produced from the given resources.
5. Resources of production are fully mobile.
6. The factors of production are given in quantity and quality.
7. The low of diminishing returns operates in production.
8. Every production possibility curve is based upon these assumptions. If some of these assumptions changes or negelected, then it affects the nature of production possibility curve.
9. To draw this curve we take the help of production possibilities schedule, as shown below.

Production possibilities schedule:
1. The schedule suggests that if all resources are thrown into the production of food, a maximum of 500 tons of food can be produced, given the existing technology. If on the other hand, all resources are instead used for producing cars, 25 cars can be produced. In between these two extreme possibilities exist. If we are willing to give up some food, we can have some cars.

2. We can obtain a production possibility curve by drawing production possibilities schedule graphically. The quantity of food is shown on x – axis and the number of cars is shown on y – axis, the different six production possibilities are. being shown as point P1 P2 P3 P4 P5 & P6.

Problems of the economy:

1. The problem of choice:
The problem of choice arise because of the given limited resources and unlimited wants, may relate to the allocation of resources between the goods for the higher income group and the lower income group and the goods for the defense and the civilians. Since PPC is the locus of the combination of the goods the problem of choice will not arises when we choose any point on PPC.

2. Solution of central problems:
The central problems of an economy can be explained with the help of PPC. The solution of problem of what to produce involves the decision regarding the choice of location on the production possibility carves. A production combination represented by any point inside the PPC indicates that the economy is using inefficient methods of production and inefficient combination of resources.

[OR]

(b) Elucidate the law of diminishing marginal utility with diagram?
Introduction:
H.H.Gossen, an Austrian Economist was the first to formulate this law in Economics in 1854. Therefore Jevons called this law as “ Gossen’s First Law of Consumption”. But credit goes to Marshall, because he perfected this law on the basis of Cardinal Analysis. This law is based on the characteristics of human wants, i.e. wants are satiable.

Definition:
Marshall states the law as “ the additional benefit which a person derives from a given increase of his stock of a thing, diminishes with every increase in the stock that he already has”.

Assumptions:

1. Utility can be measured by cardinal numbers such as 1, 2, 3 and so on.
2. The marginal utility of money of the consumer remains constant.
3. The consumer should be a rational consumer and his aim is to attain maximum satisfaction with minimum expenditure.
4. The units of the commodity consumed must be reasonable in size.
5. The commodity consumed should be homogeneous or uniform in charcter like weight, quality, taste, colour etc.
6. The consumption of goods must take place continuously at a given period of time.
7. There should be no change in the taste, habits preferences, fashions, income and character of the consumer during the process of consumption.

Explanation:
The Law of Diminishing Marginal utility states that if a consumer continues to consume more and more units of the same commodity, its marginal utility diminishes. This means that the more we have of a thing, the less is the satisfaction or utility that we derive from the additional unit of it.

The Law of Diminishing Marginal utility:

1. In this table, we find that the total utility goes on increasing but at a diminishing rate.
2. The law can be explained with a simple illustration.
3. Consumer wants to consume 7 apples one after another.
4. The utility from the first apple is 20.
5. But the utility from the second apple will be less than that of the first [say 15].
6. The third less than that of the second [say 10] and so on.
7. Finally, the utility from the fifth apple becomes zero and the utilities from sixth and seventh apples are negative for disutility or disliking.
8. This tendency is called the “ The Law of Diminishing Marginal Utility”.
9. In this table we find on the other hand, marginal utility goes on diminishing.
10. When marginal utility becomes zero, the total utility is maximum and when marginal utility becomes negative, the total utility diminishes.

X – axis represents number of apples consumed
Y – axis represents total utility and marginal utility
TU – represents total utility
MU- represents marginal utility

Criticisms:

1. Utility cannot be measured numerically, because utility is subjective.
2. This law is based on the unrealistic assumptions.
3. This law is not applicable to indivisible commodities.

Question 43 (a).
Explain the objectives of nationalization of commercial bank?
The Government of India nationalized the commercial banks to achieve the following objectives:

1. The main objective of nationalization was to attain Social Welfare. Sectors such as agriculture, small and village industries were in need of funds for their expansion and further economic development.
2. Nationalisation of banks helped to curb private monopolies in order to ensure a smooth supply of credit to socially desirable sections.
3. In India, nearly 70% of population lived in rural areas. Therefore it was needed to encourage the banking habit among the rural population.
4. Nationalisation of banks was required to reduce the regional imbalances where the banking facilities were not available.
5. Before Independence, the numbers of banks were certainly inadequate. After nationalization, new bank branches were opened in both rural and urban areas.
6. Banks created credit facilities mainly to the agriculture sector and its allied activities after nationalization.
After New Economic Policy 1991, the Indian banking Industry has been facing the new horizons of competitions, efficiency and productivity.

[OR]

(b) Explain the Agrarian crisis after reforms?
(I) High input costs:

1. The biggest input for farmers is seeds.
3. The institutions produced own seeds and were responsible for their quality and price.
4. India’s seed market was opened up to global agri-businesses.
5. The deregulation of many state government institutions were closed down in 2003.
6. Seed prices shot up and fake seeds made an appearance in a big way.

(II) Cutback in agricultural subsidies:

1. Farmers were encouraged to shift from growing a mixture of traditional crops to export oriented “cash crops” like chilli, cotton and tobacco.
2. Liberalisation policies reduced the subsides on pesticide and fertilizer and elasticity.
3. As a result prices have increased by 300%.

(III) Reduction of import duties:

1. With a view to open India’s markets, the liberalization reforms also withdrew tariffs and duties on imports.
2. By 2001, India completely removed restrictions on imports of almost 1500 items including food.

(IV) Paucity of credit facilities:

1. The lending pattern of commercial banks, including nationalised bank, drastically changed. As a result, loan was not easily adequate.
2. This has forced the farmers to. rely on moneylenders who charge exorbitant rate of interest.

Question 44 (a).
Explain strong features of Indian economy?
Strengths of Indian Economy:

1. India has a mixed economy:

1. Indian economy is a typical example of mixed economy.
2. This means both private and public sectors co-exist and function smoothly.
3. The fundamental and heavy industrial units are being operated under the public sector.
4. The liberalization of the economy, the private sector has gained importance.
5. This makes it a perfect model for public – private partnership.

2. Agriculture plays the key role:

1. Agriculture being the maximum pursued occupation in India.
2. It plays an important role in its economy as well.
3. Around 60% of the people in India depend upon agriculture for their livelihood.
4. In fact, about 17% of our GDP today is contributed by the agriculture sector.
5. Green revolution, ever green revolution and inventions is bio technology have made agriculture self sufficient and also surplus production.
6. The export of agriculture products such as fruits, vegetables, spices, vegetable oils, tobacco, animal skin, etc. also add to forex earning through international trading.

3. An emerging market:

1. Indian has emerged as vibrant economy sustaining stable GDP growth rate even in the midst of global downtrend.
2. This has attracted significant foreign capital through FDI and FII.
3. India has a high potential for prospective growth.
4. This also makes it an emerging market for the world.

4. Emerging Economy:

1. Emerging as a top economic giant among the world economy.
2. India bags the seventh position in terms of nominal Gross Domestic Product [GDP] and third in terms of Purchasing Power Parity [PPP].
3. As a result of rapid economic growth,. Indian economy has a place among the G20 countries.

5. Fat Growing Economy:

1. Indias economy is well known for high and sustained growth.
2. The world’s fastest growing economy in the year 2016-17 with the growth rate of 7.1% in GDP.

6. Fast Growing Service Sector:

1. The service sector, contributes a lion’s share of the GDP in India.
2. There has been a high rise growth in the technical sectors like information technology.

7. Large Domestic Consumption:

1. With the faster growth rate in the economy the standard of living has improved a lot.
2. The standard of living has considerably improved and life style has changed.

8. Rapid Growth of Urban Areas:

1. Urbanization is a key ingredient of the growth of any economy.
2. Improved connectivity is transport and communication, education and health have speeded up the pace of urbanization.

9. Stable Macro Economy:

1. The Indian economy has been projected and considered as one of the most stable economies of the world.
2. The current year’s Economic survey represents the Indian economy to be a “heaven of macroeconomic stability, resilience and optimism”.

10. Demographic dividend:

1. This means that India is a pride owner of the maximum percentage of youth.
2. The young population is not only motivated but skilled and trained enough to maximize the growth.
3. Thus human capital plays a key role in maximizing the growth prospects is the country.
4. This has invited foreign investments to the country and outsourcing opportunities too.

[OR]

(b) Explain the role of SSIs in economic development?
1. Provide Employment:

1. SSI’s use labour intensive techniques. Hence, they provide employment opportunities to a large number of people. Thus, they reduce the unemployment problem to a great extent.
2. SSI’s provide employment to artisans, technically qualified persons and professionals, people engaged in traditional arts, people in villages and unorganized sectors.
3. The employment-capital ratio is high for the SSI’s.

2. Bring Balanced Regional Development:

1. SSI’s promote decentralized development of industries as most of the SSI’s are set up in backward and rural areas.
2. They remove regional disparities by industrializing rural and backward areas and bring balanced regional development.
3. They help to reduce the problems of congestion, slums, sanitation and pollution in cities. They are mostly found in outside city limits.
4. They help in improving the standard of living of people residing in suburban and rural areas in India.
5. The entrepreneurial talent is tapped in different regions and the income is also distributed instead of being concentrated in the hands of a few individuals or business families.

3. Help in Mobilization of Local Resources:

1. SSI’s help to mobilize and utilize local resources like small savings, entrepreneurial talent etc., of the entrepreneurs, which might otherwise remain idle and unutilized.
2. They pave way for promoting traditional family skills and handicrafts. There is a great demand for handicraft goods in developed countries.
3. They help to improve the growth of local entrepreneurs and self-employed professionals in small towns and villages in India

4. Pave for Optimisation of Capital:

1. SSI’s require less capital per unit of output. They provide quick return on investment due to shorter gestation period. The payback period is quite short in SSI’s.
2. SSI’s function as a stabilizing force by providing high output – capital ratio as well as high employment – capital ratio.
3. They encourage the people living in rural areas and small towns to mobilize savings and channelize them into industrial activities.

5. Promote Exports:

1. SSIs do not require sophisticated machinery. Hence, import the machines from abroad is not necessary. On the other hand, there is a great demand for goods produced by SSIs. Thus they reduce the pressure on the country’s balance of payments. However, with recent past large scale industries are able to borrow large funds with low interest rate and spend large sums on advertisements. Hence SSSs are gradually vanishing.

2. SSI’s earn valuable foreign exchange through exports from India.

6. Complement Large Scale Industries:

1. SSI’s play a complementary role to large scale sector and support the large scale industries.
2. SSI’s provide parts, components, accessories to large scale industries and meet the requirements of large scale industries through setting up units near the large scale units.
3. SSI’s serve as ancillaries to large scale units.

7. Meet Consumer Demands:

1. SSI’s produce wide range of products required by consumers in India.
2. Hence, they serves as an anti-inflationary force by providing goods of daily use.

8. Develop Entrepreneurship:

1. SSI’s help to develop a class of entrepreneurs in the society. They help the job seekers to become job givers.
2. They promote self-employment and spirit of self-reliance in the society.
3. SSI’s help to increase the per capita income of India in various ways.
4. They facilitate development of backward areas and weaker sections of the society.
5. SSI’s are adept in distributing national income in more efficient and equitable manner among the various participants of the society.

Question 45 (a).
Elucidate the Laws of Returns to scale. Illustrate?
Laws of Returns To Scale:
In the long – run, there is no fixed factor; all factors are variable. The laws of returns to scale explain the relationship between output and the scale of inputs in the long – run when all the inputs are increased in the same proportion.

Assumptions:
Laws of Returns to Scale are based on the following assumptions.

1. All the factors of production, [such as land, labour and capital] are variable but organization is fixed.
2. There is no change in technology.
3. There is perfect competition in the market.
4. Outputs or returns are measured in physical quantities.

Three Phases of Returns to Scale:

1. Increasing Returns to Scale: In this case if all inputs are increased by one percent, output increase by more than one percent.
2. Constant Returns to Scale: In this case if all inputs are increased by one percent, output increases exactly by one percent.
3. Diminishing Returns to Scale: In this case if all inputs are increased by one percent, output increases by less than one percent.

The three laws of returns to scale can be explained with the help of the diagram below.

Diagramatic Illustration:

In the figure, the movement from point a to point b represents increasing returns to scale. Because, between these two points output has doubled, but output has tripled. The law of constant returns to scale is implied by the movement from the point b to point c.

Because, between these two points inputs have doubled and output also has doubled. Decreasing returns to scale are denoted by the movement from the point c to point d since doubling the factors from 4 units to 8 units product less than the increase in inputs, that is by 33.33%.

[OR]

(b) Explain the internal and external economies of scale?
Internal Economics of Scale:

1. Internal Economies of scale refers to the advantages enjoyed by the production unit which causes a reduction in the cost of production of the commodity.
2. For example, a firm enjoying the advantage of an application of most modem machinery, generation of internal capital, an improvement in managerial skill etc. are sure to reduce the cost of production. They are of various types:

(a) Technical Economies:

1. When the size of the firm is large, large amount of capital can be used.
2. There is a possibility to introduce up – to – date technologies; this improves productivity of the firm.
3. Research and development strategies can be applied easily.

(b) Financial Economies:
Big firms can float shares in the market for capital expansion, while small firms cannot easily float shares in the market.

(c) Managerial Economies:
Large scale production facilitates specialization and delegation.

(d) Labour Economies:

1. Large scale production implies greater and minute division of labour.
2. This leads to specialization which enhances the quality.
3. This increases the productivity of the firm.

(e) Marketing Economies:

1. In the context of large scale production, the producers can both buy raw – materials in bulk at cheaper cost and can take the products to distant markets.
2. They enjoy a huge bargaining power.

(f) Economies of survival:

1. Product diversification is possible when there is large scale production.
2. This reduces the risk in production.
3. Even if the market for one product collapses, market for other commodities offsets it.

External Economies of Scale:

1. External Economies of Scale refer to changes in any factor outside the firm causing an improvement in the production process.
2. This can take place in the case of industry also.
3. These are the advantages enjoyed by all the firms in industry due to the structural growth.
4. Important external economies of scale are listed below :
• Increased transport facilities
• Banking facilities
• Development of townships
• Development of information and communication.

Question 46 (a).
Explain the Rail Transport System in Tamil Nadu?

1. Tamil Nadu has a well – developed rail network as part of Southern Railway, Headquartered at Chennai.
2. The present Southern Railway network extends over a large area of India’s Southern Peninsula, covering the States of Tamil Nadu, Kerala, Puducherry, minor portions of Karnataka and Andhra Pradesh.
3. Tamil Nadu has a total railway track length of 6,693 km and there are 690 railway stations in the State. The system connects it with most major cities in India.
4. Main rail junctions in the State include Chennai, Coimbatore, Erode, Madurai, Salem, Tiruchirapalli and Tirunelveli.
5. Chennai has a well – established Suburban Railway network, a Mass Rapid Transport System and is currently developing a Metro system, with its first underground stretch operational since May 2017.

[OR]

(b) Illustrate the uses of Mathematical Methods in Economics?
Uses of Mathematical Methods in Economics:

1. Mathematical Methods help to present the economic problems in a more precise form.
2. Mathematical Methods help to explain economic concepts.
3. Mathematical Methods help to use a largl number of variables in economic analyses.
4. Mathematical Methods help to quantity the impact or effect of any economic activity implemented by Government or anybody. There are of course many other uses.

Question 47 (a).
If TC = 2.5q3 – 13q2 + 50q + 12 derive the MC function and AC function?

$$\frac{dc}{dq}$$ = MC
AC = $$\frac{TC}{q}$$
$$\frac{dc}{dq}$$ = 2.5(3)q2 – [13 × 2]q + 50
MC = 7.5 q2 – 26q + 50
AC = $$\frac { 2.5q^{ 3 }-13q^{ 2 }+50q+12 }{ q }$$
∴ AC = 2.5q3 – 13q + 50 + $$\frac{12}{q}$$

[OR]

(b) What are the ideas of information and communication technology used in Economics?
Information and communication Technology [ICT] is the infrastructure that enables computing faster and accurate.
The following table gives an idea of range of technologies that fall under the category of ICT

The evaluation of ICT has five phases:
They are evaluation in:

1. Computer
2. PC – Personal Computer
3. Micro Processor
4. Internet

In Economics, the uses of mathematical and statistical tools need the support of ICT for:

1. Data Compiling
2. Editing
3. Manipulating
4. Presenting the results

Question 48 (a).
Discuss the important initiatives taken by the Government of India towards Industrial Policy?
Important initiatives by the Government towards Industrial Policy:
The policy has brought changes in the following aspects of industrial regulation.

1. Industrial de – licensing.
2. De – reservation of the Industrial Sector.
3. Public sector policy, (de – reservation and reform of PSES)
4. Abolition of MRTP Act.
5. Foreign Investment policy and foreign technology policy.

Industrial delicensing policy:

1. The most important part of the new Industrial policy of 1991 was the end of the Industrial licensing or the license raj or red tapism.
2. The Industrial licensing policies, private sector firms had to secure licenses to start an Industry.

De – reservation of the Industrial Sector:

1. The public sector was given reservation especially in the capital goods and key Industries.
2. Industrial deregulation, most of the Industrial Sectors were opened to the private sector as well.
3. The new Industrial policy, only three sectors atomic energy, mining and railways will continue as reserved for public sector.

Reforms related to the Public Sector enterprises:

1. Reforms in the public sector were aimed at enhancing efficiency and competitiveness of the sector.
2. The government identified strategic and priority areas for the public sector concentrate.

Abolition of MRTP Act:

1. The New Industrial Policy of 1991 has abolished the Monopoly and Restrictive Trade Practices Act 1969.
2. In 2010, the Competition Commission has emerged as the watch dog in monitoring competitive practices in the economy.

Eoreign Investment Policy:

1. Foreign investment including FDI and FPI were allowed.
2. In 1991, the government announced a specified list of high technology and high investment priority Industries.
3. Foreign direct investment upto 51 percent foreign equity.
4. Foreign Investment Promotion Board has been set up to negotiate with International firms and approve direct Foreign Investment.

[OR]

(b) Analyse the causes for Rural Indebtedness?
The Causes for Rural Indebtedness:

(I) Poverty of Farmers:

1. The vicious circle of poverty forces the farmers to borrow for consumption and cultivation.
2. Thus poverty, debt and high rates of interest hold the farmer in the grip of money lenders.

(II) Failure of Monsoon:

1. Frequent failure of monsoon is a curse to the farmers and they have to suffer due to the failure of nature.
2. Farmers find it difficult to identify good years to repay their debts.

(III) Litigation:

1. Due to land disputes litigation in the court compels them to borrow heavily.
2. Being uneducated and ignorant they are caught in the litigation process and dry away . their savings and resources.

(IV) Money Lenders and High Rate of Interest:
The rate of interest charged by the local money lenders is very high and the compounding of interest leads to perpetuate indebtedness of the farmer.