MICROECONOMICS CH : 2 CENTRAL PROBLEMS OF AN ECONOMY — Economics STD 11 Commerce — Question

Read the following table carefully and give your comments.

INDEX OF INDUSTRIAL PRODUCTION BASE 1993–94
Industry	Weight in %	1996–97	2003–2004
General index	100	130.8	189.0
Mining and quarrying	10.73	118.2	146.9
Manufacturing	79.58	133.6	196.6
Electricity	10.69	122.0	172.6

The price quotation of different commodities for 2014 and 2015 are given below. Calculate the index number for 2015 with 2014 as base year by using:

1. Simple Average of Price Relative.
2. Weighted Average of Price Relative.

Commodity	Unit	Weight	Price ( ₹)
			2014	2015
A	Kg	5	2.00	4.50
B	Qunintal	7	2.50	3.20
C	Dozen	6	3.00	3.50
D	Kg	2	1.00	1.80

State the determinants of the market demand curve.

Just as individuals face scarcity of resources, the resources of an economy as a whole are always limited in comparison to what the people in the economy collectively want to have. The scarce resources have alternative usages and every society has to decide on how much of each of the resources to use in the production of different goods and services. In other words, every society has to determine how to allocate its scarce resources to different goods and services.
An allocation of the scarce resource of the economy gives rise to a particular combination of different goods and services. Given the total amount of resources, it is possible to allocate the resources in many different ways and, thereby achieving different mixes of all possible goods and services. The collection of all possible combinations of the goods and services that can be produced from a given amount of resources and a given stock of technological knowledge is called the production possibility set of the economy.

1. Draw a PPC and explain the problem of scarcity.

Government imposes GST on production of a good. Explain its effect on supply of that good.

The following table shows the estimated sectoral real growth rates (percentage change over the previous year) in GDP at factor cost.

Year	Agriculture and allied sectors	Industry	Services
1994-95	5.0	9.2	7.0
1995-96	-0.9	11.8	10.3
1996-97	9.6	6.0	7.1
1997-98	-1.9	5.9	9.0
1998-99	7.2	4.0	8.3
1999-2000	0.8	6.9	8.2

Represent the data as multiple time series graphs.

What is an Index Number? Explain the difficulties or problems involved while constructing an Index Number.

Given the following data:

Year	1995-96	1996-97	1997-98	1998-99	1999-2000	2000-01	2001-02	2002-03
WPI (1993-94)	121.6	127.2	132.8	140.7	145.7	155.7	161.3	166.8

Calculate the inflation rate and interpret the result.