Question of 14
Q.(a) Explain the problem of 'How to Produce'.
(b) Draw PPC showing efficient use of resources.
(c) What is meant by demand ?
(d) Define marginal Product.
(e) What is meant by consumption of Fixed Capital ?
(f) What is Deficient Demand ?
(g) What is a Central Bank ?
(h) What is 'Net Indirect Tax' ?
(i) Define Surplus Budget.
(j) What is Foreign Exchange Market ?
Jammu Kashmir JkboseJKBOSE Class 12 Annual Regular Examination (Commerce) 2019Subjective· 20mImportance★★★★★
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Start your 14-day free trial to unlock the full solution →Ten short conceptual answers spanning the basic problems of an economy, demand, production, national income, money, taxation, the budget, and foreign exchange.
- The problem of 'How to Produce': This is one of the three central problems of an economy. It refers to the choice of technique of production — whether to use a labour-intensive technique (more labour, less capital) or a capital-intensive technique (more capital, less labour) — to produce a given quantity of a good at the lowest possible cost, using the most efficient combination of available resources.
- PPC showing efficient use of resources: The Production Possibility Curve (PPC) is a bowed-out (concave to the origin) curve showing the maximum combinations of two goods that an economy can produce using all its resources fully and efficiently, given the existing technology. Any point lying ON the PPC itself (not inside it) represents efficient use of resources, because all available resources are fully utilised; a point inside the PPC represents underutilisation or inefficient use of resources, and a point outside the PPC is currently unattainable.
- Demand: Demand for a commodity is the quantity of that commodity which a consumer is willing to buy and is able to pay for, at a given price, during a given period of time. Mere desire for a good, without the ability and willingness to pay, is not demand.
- Marginal Product: Marginal Product (MP) is the addition made to the Total Product (TP) by employing one additional unit of the variable factor (e.g., labour), while keeping all other factors constant. MP = ΔTP/ΔL (change in Total Product ÷ change in units of the variable factor).
- Consumption of Fixed Capital: Also called depreciation, it refers to the loss in value of fixed capital assets (machinery, buildings, equipment) due to normal wear and tear, obsolescence, and the passage of time during the process of production over an accounting year.
- Deficient Demand: Deficient demand is a situation in which the Aggregate Demand (AD) in an economy is less than the Aggregate Supply (AS) corresponding to the full-employment level of output. It creates a deflationary gap and tends to lower the general price level, output, and employment.
- Central Bank: A Central Bank is the apex monetary and banking institution of a country, responsible for issuing currency, regulating and supervising the banking system, controlling money supply and credit, and acting as banker to the government and to commercial banks. The Reserve Bank of India (RBI) is India's central bank.
- Net Indirect Tax: Net Indirect Tax (NIT) is the difference between Indirect Taxes (taxes on goods and services, like GST, raising market price above factor cost) and Subsidies (government grants that lower the market price below factor cost). NIT = Indirect Taxes − Subsidies. It is used to convert national income at market price into national income at factor cost. …
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