DU SOL Question Paper 2018 B.Com (Hons.) Micro - Economic Theory and Applications - I

fThis question paper contains 12 printed pages.]

588 Your Roll No. ..............

B.Com. (Hons.)/I

Paper Code : A-104

Paper III-MICRO-ECONOMIC THEORY AND
APPLICATIONS.l

(Admissions of 2004 and onwards)

Time: 3 Hours Maximum Marks : 55

(Write your Roll No. on the top immediately
on receipt of this question paper.)

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Note :- Answers may be written either in English or in Hindi;
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paper.

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Note :- The maximum marks printed on the question paper are
applicable for the candidates registered with the regular
colleges. These marks will, however, be scaled up
proportionately in respect of the students of SOL, at the
time of posting of ayvards for compilation of result.

P.T.O.

588 2

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Attempt all questions.
Marks are indicated against each queston.
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l. (a) Calculate cross- elasticity of demand between sugar and
tea from the following data and comment on the
relationship between the two- (5)

Bcforc After

Commodity Pricc Price Quantity
Quantity

$ugar l0 20 20 l5

20 40 20 35
Tca

OR

With the help of calculus, derive the following
relationship between Average Revenue, Marginal

s88 3

Revenue and Elasticity of Demand:

E:AR/(AR - MR)

If AR is a rectangular hyperbola, draw the corresponding
MR curve. (5)

(b) Prove that on a straight line demand curve Price elasticity
of demand decreases from infinity at the price axis to
zero at the quantity axis. (5)

OR

For the market demand schedule in the given table, find
the price Elasticity of demand for a movement from point
A to point C, from point C to point A and mid-way
between A and C: (s)

Point A B c D

k 7 6 5 4

ax 500 750 1250 2000

(c) The slope of a demand curve is one of the ingredients
of the elasticity of demand (but not the only one).
Explain. (s)
P.T.O.

588

OR

Whatdoesthepriceelasticityofsupplymeasurein
general? Show that Elasticity of supply
of a straight
Price axis is greater
line supply curve passing through the
(s)
than one.

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P.T.O.

588 6

2. (a) Draw indifference curves between Pepsi and Slice for
two individuals, Teena and Meena with Teena having a
stronger preference for Pepsi and Meena having a
stronger preference for Slice. (7)

OR

Rajat's budget line relating to good X and good Y has
intercepts of 72 units of good X and 60 units of good Y.
If the price of good X is Rs.5, what is Rajat's income?
Calculate the price of good Y and the slope of the budget
Line. Write the equation of the budget line. (7)

(b) Why does a consumer attain equilibrium at the point
where the slope of the budget line is equal to the slope
of the indifference curve? Explain with the help of a
diagram. (8)

OR

"The law of demand does not hold true in case of
Giffengoods'. Explain this statement with the help of
income and substitution effects usine indifference curves.
(8)

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3. (a) "lsoquants can be convex' linear or L-shaped'' tl
each of these shapes tell you about
the nature of the
Explain with
production function and about the MRTS?
(8)
the help of diagrams'

OR

P.T.O.

588 8

that exhibits
Can a firm have a production function
returns to scale and
increasing returns to scale' constant
Increases? Explain
decreasing returns to scale as output
(8)
with a diagram.

relevance of these
(b) What are Ridge Lines? What is the
(7)
lines in the theory of production?

OR

input
How doe s a producer choo se an optimal
to a given cost
combination to maximize Output subject
Q)
constraint'/

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4. (a) Explain the shapes of the short run
Variable Cost
the relationship Average Cost' Average
(8) 8)
and Marginal Cost'

OR
€
Curve' What is its
Explain the concept of Learning
learning on the downward
shape? What is the impact Of
(8)
sloPing LAC curve?

Run Marginal Cost
(b) Explain the derivation of the Long q
(7)
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Distinguish between Accounting Cost
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P.T.O. ).

588 10

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5. (a) Explain and derive diagrammatically the long run supply
curve of a constant cost industry under perfect
competition. (7)

OR

In the short run under perfect competition, firms and
industry will be in equilibrium even if they are earning
supernormal profits or incurring Losses. However in the
long run firms and industry will be in equilibrium only
when they earn normal profit because of free entry and
exit of other firms. Explain. (7)

588 11

(b) What is meant by deadweight loss? Why does a price
ceiling usually result in such a loss? (8)

OR

Distinguish between walrasian and Marshallian stability
ofequilibrium'Showthatanequilibriumcanbestable
in the Marshallian sense but not In a Walrasian one'
(8)

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P.T.O.

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