NIOS Economics 318 Solved Paper’ October 2017, NIOS Senior Secondary Solved Papers

NIOS Economics 318 Solved Paper’ October 2017

NIOS Senior Secondary Solved Papers

[Time: 3 Hours]

[Maximum Marks: 100]

1. What type of correlation is expected between heights and weights of students?

(a) Positive.       

(b) Negative.    

(c) Infinite.         

(d) None.

2. Positive economics deals with the economic phenomenon:

(a) What is.

(b) what ought to be.

(c) Individual behaviour.  

(d) Economy’s behaviour.

3. Ordinal utility analysis was developed by:

(a) Marshall.      

(b) Hicks.            

(c) Robbins.       

(d) Samuelson.

4. X and Y are complementary goods. When the price of X rises, demand for Y.

(a) Rises.             

(b) Falls.                              

(c) Remain unchanged.   

(d) Is uncertain.

5. As output increases, average variable cost:

(a) Increases.    

(b) Decreases.  

(c) Remain unchanged.

(d) Initially falls, then rises.

6. Different forms of market are distinguish on the basis of:

(a) No of firm.  

(b) Ease of entry and exit of firms.  

(c) Product differentiation. 

(d) All the above.

7. To arrive at ‘domestic product at market price’ from ‘domestic product at factor cost’. The following adjustment is made:

(a) Add subsidies to and subtract indirect taxes from domestic product at Factor cost.

(b) Add indirect taxes to and subtract subsidies from Domestic Product at Factor cost.

(c) Add both subsidies and indirect taxes from Domestic Product at Factor cost.

(d) Subtract both subsidies and indirect taxes from Domestic Factor cost.

8. Transportation of product is a part of:

(a) Primary sector.          

(b) Secondary sector.    

(c) Tertiary sector.          

(d) Government sector.

9. The sum of marginal propensity of consume and marginal propensity to save is:

(a) Zero.                              

(b) One.                              

(c) Less than one but greater than Zero.               

(d) Greater than one.

10. Borrowings by government is:

(a) Revenue receipts.   

(b) Capital receipts.        

(c) Neither Capital receipt nor revenue receipt.

(d) Capital receipt if borrowings are from abroad, all other borrowings are revenue receipts.

11. Distinguish between median and mode.                       3

Ans.:- The following are the differences between median and mode:-




1. Meaning

Median is the value of the variable which divides the series into two equal parts.

Mode is the most common value. It occurs most frequently in the series.

2. Calculation

It is easy calculate and simple to understand.

It is difficult to calculate. It cannot be determined in case of multi modal distributions.

3. Impact of Extreme values

It is not affected by extreme values (i.e. very large and very small values).

It is also not affected by extreme values, because it depends only on the largest frequency.

 12. Explain the Concept of microeconomics. Give one example.                  3

Ans.:- Microeconomics is the study of individuals, households and firms’ behaviour in decision making and allocation of resources. It generally applies to markets of goods and services and deals with individual and economic issues.

Example of microeconomics – the study of how individual or individual businesses allocate resources.

13. State any three assumptions on the basis of which production possibilities are demanded.         3

Ans.:- Three assumptions n the basis of which production possibilities are demanded are:-

1) Only two goods X (consumer goods) and Y (capital good) are produced in different proportions in the economy.

2) The same resources can be used to produce either or both of the two gods and can be shifted freely between them.

3) The supplies of factors are fixed.

14. Explain ‘interdependence between the firms’ feature of oligopoly.         3

Ans.:- Interdependence between the firms:- It is one of the most important feature of an Oligopoly market, wherein, the seller has to be cautious with respect to any action taken by the completing firms. Since there are few sellers in the market, if any firm makes the change in the price or promotional scheme, all other firms in the industry have to comply with it, to remain in the competition.

Thus very firm remains alert to the actions of others and plan their counterattack beforehand, to escape the turmoil. Hence, there is a complete interdependence among the sellers with respect to their price-output policies.


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15. Explain the meaning of excess supply and its effect on price.                 3

Ans.:- In economics, an excess supply or economic surplus is a situation in which the quantity of a good or service supplied is more than the quantity demanded, and the price is above the equilibrium level determined by supply and demand. That is, the quantity of the product that producers wish to sell exceeds the quantity that potential buyers are willing to buy at prevailing price.

 16. Explain meaning of mixed income of self-employed.                      3

Ans.:- The remuneration of the self-employed is treated as mixed income. It is defined as the income that is received, over a given reference period, by individuals, for themselves or in respect of their family members, as a result of their current or former involvement in self-employment jobs.

For purposes of measurement of income related to self-employment, the self-employed are primarily the sole owners, or joint owners, of the unincorporated household enterprises in which they work, according to the definition provided in the system of National Accounts.

17. Calculate Marginal propensity to consume from the following

(i) Increase in national income = Rs. 1000 crore.

(ii) Increase in investment = Rs. 100 crore.                                     3

18. Define average propensity to consume and average propensity to save. State the relation between the two.                   3

Ans.:- The average propensity to consume (APC) expresses the percentage of income consumed at any given level of income. In other words, it’s the amount of income on goods and services.

The average propensity to save (APS) is an economic term that refer to the proportion of income that is saved rather than spent on goods and services. Also known as the savings ratio, it is usually expressed as a percentage of total household disposable income.

Relation between APC and APS

The sum of the Average Propensity to Consume (APC) and Average Propensity to Save (APS) is always equal to unity, i.e., APC + APS = 1. It is so because the money income can either be spent on consumption or it can be saved.

19. What is autonomous investment? Represent the same on a diagram.              3

Ans.:- The Autonomous Investment is the capital investment which is independent of the economy shifts. This means, any change in the cost of raw material or any change in the salary and wages of labour etc. has no effect on the autonomous investment.

The autonomous investment is made for the welfare of the society and not for generating profits out of such investments. These investments are independent of the level of income or profit, and hence, any change in the income or profit level will have no effect on the autonomous investment. This can be shown in the figure below:

The graphs show that autonomous investment remains independent of the level of income and profit and hence is parallel to the X axis. It does not mean that induced investment does not change at all; it can be increased or decreased at the individual’s disposal. In such a case, the investment curve 1-1 either shifts upwards or downwards.

 20. Calculate revenue deficit from the following:                           3

(i) Tax revenue

(ii) Non-tax revenue

(iii) Recovery of loan

(iv) Revenue expenditure





 21. Explain the difference between ‘absence of correlation’ and ‘perfect correlation’.             3

Ans.:- If both the variables are moving in the same direction, correlation is said to be positive or direct. For example, increase in the values of one variable causes an increase in values of the other variable or decrease in one variable makes a decrease in the other variable. When the income rises, consumption also rises and when income falls consumption also falls. Thus, income and consumption have positive correlation. On the other hand, if both the variables vary in opposite direction, i.e., with an increase in the values of one variable, there is a decrease in the values of the other, correlation is said to be negative or absence of correlation. For example, when price of a commodity falls, its demand increases, when price rises, its demand decreases. Thus, price and demand have negative correlation.

22. When price of a good falls by 20 percent, its supply falls by 40 percent. Calculate price elasticity of supply.                4

23. State the relation between marginal physical product and average physical product.            4

Ans.:- Both the average physical product (APP) and the marginal physical product (MPP) are ultimately based on the total product. All three curves are shown in the graphs below.

The MPP curve is the measure of the change in output per unit of input. Mathematically, it is obtained b plotting the derivative of each point on the total product curve (slope of the tangent line to the curve at each point). This is why the MPP hits the horizontal axis at the peak of the total production curve (because the tangent line at the peak has a slope of 0).

So the relationship between the two is that the MPP measures the rate of change of output while the APP measures the actual output levels. So the MPP acts as a driver for the APP since the rate of change will directly affect the average output. This is why the MPP curve drops off so much more quickly than the APP. In order for the average output to drop, the rate of (negative) change in the output must change even more so to have that effect.

24. Calculate the personal income from the following:

(i) Saving of private corporate sector

(ii) Net domestic product at factor cost accruing to the private sector   

(iii) Corporation tax

(iv) National debt interest

(v) Net current transfers from abroad

(vi) Net factor income from abroad

(vii) Current transfer form government               








 25. With the help of example how the ‘lack of common unit of measurement’ was a demerit of the barter system.                     4

Ans.:- “Lack of common unit of measurement”- In barter, there is no common measure (unit) of value. Even if buyer and seller of each other commodity happen to meet, the problem arises in what proportion the two goods are to be exchanged. Each article must have as many different values as there are other articles for which it is to be exchanged.

When thousands of articles are produced and exchanged, there will be unlimited number of exchange ratios. Absence of a common denominator in order to express exchange ratios creates many difficulties. Money obviates these difficulties and cats as a convenient unit of value and account. For example you need sugar in exchange of wheat it is so difficult to measure that what quantity of sugar you get in what quantity of wheat and so on.

26. Explain ‘open market operations’ as an instrument of credit control.              4

Ans.:- Open market operations:- Prof. Halm remarks, “In view of the short-comings rediscount policy the development of open market operations – the purchase and sale of government securities and other credit instruments in the open market – as an additional and to some extent alternative instrument of central bank policy is a logical step.” In other words, whenever the central bank wants to regulate the amount of money in circulation, it resorts to open market operations, the sale and purchase of securities by the central bank.

If the central bank wishes to reduce the volume of credit, it sells securities to the public, for which it receives payment either in cash from the public (in which case the quantity of money with the public to that extent is reduced) or it may receive payments by cheques drawn on the commercial banks, in which case the cash held by these banks with the central bank is reduced, and to that extent, commercial banks are compelled to reduce the volume credit.

27. Calculate Quartile Deviation of marks obtained by seven students:                 4

30, 100, 70, 40, 60, 50, 80                                                                                                                                      


Sl. no
















28. Calculate Price index of the year 2013. Taking year 2012 as base year use “Simple Average of price Relatives.” Method. Comment upon the result.                          6


Price in the year 2012 (Rs.)

Price in the year 2013 (Rs.)













 29. Explain how the following affect the price elasticity of demand of a good?

(i) Share of expenditure on goods in total expenditure.

(ii) Level of income.                       6

30. A consumer consumes only two goods X and Y. State the conditions of consumer’s equilibrium using utility analysis. Explain what happens when consumer is not in equilibrium.                     6

31. Explain the distinction between private costs and social cost. Give examples.                           6

Ans.:- The following are the difference between Private costs and social costs:-

The difference between these two is that private costs are only one part of overall social costs. Social costs take into account not only private costs, but also the externalities that come as a result of a given economic decision.

Private costs are the costs with which we are all familiar. These are the costs that we actually have to pay when we decide to do something. Let us take the example of owning and driving a car. Clearly, there are many private costs involved here. If I own and drive a car, I have to buy the car. Then I have to pay for the gas I use. I have to maintain the car. I have to buy insurance. I have to spend time in the car being unable to do much else other than driving. These are all private costs because I actually have to pay them and they are specific to me.

Social costs also include the externalities of driving my car. When I drive my car, it contributes to some extent to polluting the atmosphere. I do not directly pay for this, but it affects society. When I drive my car, I contribute to traffic congestion. Again, I do not pay for this, but i have at least a marginal effect on many other people who are also stuck in congestion, wasting their time.

Social costs are a category that includes both the more tangible private costs and the external costs of any given economic activity.

32. Calculate Net National Product at Factor cost from the following:


(Rs. In crore)

(i) Private final consumption expenditure

(ii) Profit

(iii) Net factor income from abroad

(iv) Government final consumption expenditure

(v) Consumption of fixed capital

(vi) Gross domestic capital formation

(vii) Subsidies

(viii) Exports

(ix) Indirect  tax

(x) Imports



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