SAMPLE QUESTION PAPER - 1

Economics (030)
Class XI (2024-25)
Time Allowed: 3 hours Maximum Marks: 80
General Instructions:
1. This question paper contains two sections:
Section A – Micro Economics
Section B – Statistics
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each to be
answered in 60 to 80 words.
4. This paper contains 6 Short Answer Questions type questions of 4 marks each to be
answered in 80 to 100 words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each to be
answered in 100 to 150 words.
Section A
1. Assertion (A): Economists might not be interested in predicting the changes in one [1]
economic factor due to the changes in another factor.
Reason (R): Statistics helps to predict the future behavior of phenomena for the
future is predicted on the basis of available statistics of past and present.

a) Both A and R are true and R is b) Both A and R are true but R is
the correct explanation of A. not the correct explanation of
A.

c) A is true but R is false. d) A is false but R is true.

2. Paasche's index number is expressed in terms of: [1]

a) ∑ Pn q
n
b) ∑ Poq
o

∑ P o qn ∑ P n qo

c) ∑ Pn q
o
× 100 d) ∑ P nqn

∑ P o qo ∑ P o qn

3. When the mean of series is a decimal number, then which method should be used [1]
for computing Karl Pearson’s coefficient of correlation?
 a) Step Deviation Method b) Short-cut Method

c) Indirect method d) Direct Method

4. Construct price index number from the following data by applying(Fisher’s ideal [1]
Method
Price Quantity Price Quantity
Commodity
(2000) (2000) (2001) (2001)
A 2 8 4 5
B 5 12 6 10
C 4 15 5 12
D 2 18 4 20

a) 144.5 b) 147.3

c) 144.7 d) 147.5

5. In Laspeyre’s index number, the weight pertains to [1]

a) None of the given b) Both Base year and current

year quantities

c) Current year quantities d) Base year quantities

6. If the prices of all commodities in a place have decreased 35% over the base period [1]
prices, then the index number of prices of that place is now

a) 35 b) 85

c) 135 d) 65

7. Read the data – It is stated that there are 300 students in art faculty, 400 in [1]
commerce faculty and 300 in science faculty .This data represents which
characteristics of statistics

a) Affected by multiplicity of b) Aggregate of facts

causes

c) Numerically expressed d) Affected by extreme values

8. Histogram is prepared in case of: [1]

 a) Discrete series b) Continuos series

c) Individual series d) Open end series

9. _________ reflects on the price change experienced by families of people. [1]

a) weighted average price b) none

c) consumer price index d) whole sale price index

10. Calculate the correlation coefficient of the marks obtained by 12 students in [1]
mathematics and statistics and interpret it
Marks (in Maths) 50 54 56 59 60 62 61 65 67 71 71 74
Marks (in statistics) 22 25 34 28 26 30 32 30 28 34 36 40

a) 0.76 b) 0.78

c) 0.77 d) +0.75

11. Using the simple aggregative method, calculate the index number for the given [3]
data.
A B C D
P1 15 22 20 27
P0 10 20 18 25

12. What is first quartile? Show it graphically. [3]

OR
Average daily wages of 50 workers of a factory was Rs.200. Each worker is given a
raise of Rs.20. What is the new average daily wages? Which property of arithmetic
mean does the above example point to?

13. Convert the following inclusive class interval into exclusive class interval. [4]
Inclusive Class Interval Frequency (f)
0-99 2
100-199 4
200-299 5
300-399 6
 400-499 3
500-599 5
Total 25

14. Draw the ‘less-than’ and ‘more-than’ ogive from the data given below [4]
Weekly Wages (in Rs.) Number of Workers
0-20 10
20-40 20
40-60 40
60-80 20
80-100 10

OR
Direction of export is shown in the following table. Prepare a pie diagram to show the
percentage distribution of export.
Country Export (in %)
USA 25
Japan 15
UK 30
China 20
Others 10

15. Mr. X is conducting a survey in his locality to understand proportion of rich and [4]
poor persons in his locality. Due to lack of time, he did not cover a part of his
locality and took certain assumptions for the data. Do you think he did the right
thing?

16. Calculate the correlation coefficient between the height of fathers in inches (X) and [6]
their sons (Y).
X 65 66 57 67 68 69 70 72
Y 67 56 65 68 72 72 69 71

17. Calculate Q1 and Q3 from the following table. [6]

 Wages (in Rs.) Number of Workers
0-5 4
5-10 6
10-15 3
15-20 8
20-25 12
25-30 7

OR
Compute mode from the following data.
Score Frequency
0-10 10
10-20 20
20-30 18
30-40 32
40-50 21

Section B
18. A straight line supply curve passing through the origin forming an angle of 60° [1]
indicates:

a) Es = 0 b) Es > 1

c) Es = 1 d) Es < 1

19. Normative economics states [1]

a) What ought to be b) What was

c) What is d) Central problems of an

economy

20. What should firm do when marginal revenue is greater than marginal cost? [1]

a) Firms should expand output b) All of above

 c) Effect should be made to make d) Prices should be covered down
them equal

21. Can TR be a horizontal Straight line? [1]

a) May not be always b) May be

c) Yes d) No

22. A firm is operating with a Total Variable Cost of ₹ 500 when 5 units of the given [1]
output are produced and the Total Fixed Costs are ₹ 200 What will be the Average
Total Cost of producing 5 units of output?

a) ₹ 100 b) ₹ 300

c) ₹ 120 d) ₹ 140

23. Assertion (A): In a situation of increase in income less of the inferior good is [1]
purchased.
Reason (R): The consumer prefers to shift on to superior substitutes because now
he can afford them.

a) Both A and R are true and R is b) Both A and R are true but R is
the correct explanation of A. not the correct explanation of
A.

c) A is true but R is false. d) A is false but R is true.

24. If the demand curve of a firm is a horizontal straight line: [1]

a) all firms will sell equal amount b) firms can differentiate their
of a commodity product

c) a firm can sell only a specified d) a firm can sell any amount at
amount at the existing price the existing price

25. The demand curve is elastic when marginal revenue has a positive value, and [1]
inelastic when the marginal revenue has a negative value.

a) False b) Can’t say

c) True d) May be
26. With the increase in output, the difference between total cost and total variable cost: [1]

a) None of these b) Decreases

c) Increases d) Remains Constant

27. A Seller Cannot influence the market price under: [1]

a) Monopolistic Competition b) All of these

c) Monopoly d) Perfect Competition

28. State three reasons which give rise to an economic problem. [3]

OR
Giving reason, comment on the shape of the Production Possibilities Curve based on
the following schedule.
Good X (units) 0 1 2 3 4
Good Y (units) 20 18 14 8 0

29. Explain the implication of 'freedom of entry and exit of the firms' under perfect [3]
competition.

30. Explain the effects of change in income on demand for a good. [4]

31. Given the following schedule, state at which level of output, will the firm be at [4]
equilibrium and why.
Quantity (in units) Price (in ₹) Total Cost (in ₹)
0 10 5
1 10 25
2 10 35
3 10 40
4 10 50
5 10 70
6 10 100

OR
Explain the conditions of producer's equilibrium.
32. Given the price of a good, how will a consumer decide as to how much quantity to [4]
buy of that good? Explain.

33. Mr. Sohan Singh has a small scale unit producing chairs and other furniture. Read [6]
the following information and answer the given questions :
1. Wages of daily workers = Rs. 5,000
2. Monthly rent of the building = Rs. 5,000
3. Cost of raw material = Rs. 10,000
4. Insurance cost = Rs. 2,000
In the month of July he sold 20 chairs at Rs. 1,000 each.
i. What is his fixed cost?
ii. What is his variable cost?
iii. Is he producing at breakeven point?
iv. Should he closed down his unit or not?

34. Answer the following questions [6]

(i) A consumer buys 18 units of a good at a price of Rs 9 per unit. The price [3]
elasticity of demand for the good is (-)1. How many units the consumer will
buy at a price of Rs 10 per unit. Calculate.

(ii) Price elasticity of demand of goods is (-) 4. When price of the goods falls, its [3]
demand rises by 24 percentage. Calculate percentage change in price.
 Solution
SAMPLE QUESTION PAPER - 1
Economics (030)
Class XI (2024-25)
Section A
1.
(d) A is false but R is true.
Explanation:
Economists might be interested in predicting the changes in one economic factor due to
the changes in another factor. Statistics helps to predict the future behavior of phenomena
for the future is predicted on the basis of available statistics of past and present.
∑ Pn q
2. (a) n

∑ P o qn

Explanation:
A weighted aggregative price index using current period quantities as weights is known as
∑ Pn q
Paasche’s price index. It is calculated as follow: P 01 =
n

∑ P o qn

3.
(b) Short-cut Method
Explanation:
To avoid difficult calculations due to mean being in fraction, deviations are taken from
assumed means while calculating coefficient of correlation. The formula is also modified
for standard deviations because deviations are taken from assumed means.
4.
(b) 147.3
Explanation:
Price Quantity Price Quantity
Commodity P1q0 P0q0 P0q1 P1q1
(P0) (q0) (P1) (q1)
A 2 8 4 5 32 16 10 20
B 5 12 6 10 72 60 50 60
C 4 15 5 12 75 60 48 60
D 2 18 4 20 72 36 40 80
251 172 148 220
√2 51 220
= × × 100 = 147.3
172 148

5.
(d) Base year quantities
 Explanation:
A weighted aggregative price index using base period quantities as weights is known as
Laspeyre’s price index.
This method uses the base period quantities as weights.
6.
(d) 65
Explanation:
The price of Base year = 100
Decrease in Prices by 35% i.e 100 × 35

100
= 35

Index number of the prices of that place now = 100 - 35 = 65

7.
(b) Aggregate of facts
Explanation:
300 students, 200 students represent a sum, it's, therefore, an aggregate of facts.
8.
(b) Continuos series
Explanation:
Histograms are a special form of bar chart where the data represent continuous rather than
discrete categories. This means that in a histogram there are no gaps between the columns
representing the different categories. A histogram is used for data on ages because age is a
continuous rather than a discrete category.
9.
(c) consumer price index
Explanation:
Consumer index number (CPI) or cost of living index numbers are helpful in studying the
change in consumer expenditure .Here, family is basically a consumer unit.
10.
(b) 0.78
Explanation:
X Y dX dY dX
2
dY
2
dXdY

50 22 -12 -8 144 64 96
54 25 -8 -5 64 25 40
56 34 -6 4 36 16 -24
59 28 -3 -2 9 4 6
60 26 -2 -4 4 16 8
 62 (A) 30 (A) 0 0 0 0 0
61 32 -1 2 1 4 -2
65 30 3 0 9 0 0
67 28 5 -2 25 4 -10
71 34 9 4 81 16 36
71 36 9 6 81 36 54
74 40 12 10 144 100 120
∑ 6 5 598 285 324
N ∑ XY −∑ X ∑ Y
r= 2 2 2 2
√ N ∑ X −(∑ X) √ N ∑ Y −(∑ Y )

12(324)−(6)(5)
= 2 2
= 0.78
√ 12(598)−(6) √ 12(285)−(5)

11. Construction of Index Number

Here, we aggregate the current and the base year prices respectively and take the ratio of
the two.
Commodity p0 (Base Year) p1 (Current Year)
A 10 15
B 20 22
C 18 20
D 25 27
Σp 0 = 73 Σp 1 = 84

Σp 1 84
P01 = × 100 ⇒ P01 = × 100 = 115.07
Σp 0 73

12. First quartile is a positional average which distributes data in such a way that 25% items of
the series lie below first quartile and 75% items lie-above it.
 OR
Increase in wages of each worker =Rs.20
Total increase in wages = 50 x 20 = Rs.1000
Total wages before increase in wages= 50 x 200 = Rs.10,000
Total wages after increase in wages=10,000+1000=Rs.11,000
New average wage= ΣX

n
=
11,000

50
= Rs. 220

Thus, the mean wage has increased by Rs.20.

The property of arithmetic mean which is reflected here is that if each observation of a
series is increased or decreased by a constant, say k, then the arithmetic mean of the new
series also gets increased or decreased by k. In this case, each item is increased by 20, so
the mean also increases by 20.
13. To convert the inclusive series into exclusive series
Correction factor = 100-99 /2=0.5
This is added to the upper limit and subtracted from the lower limit of the class.
The exclusive class interval table of a given form is shown below
Inclusive Class Interval Frequency (f)
0-99.5 2
99.5-199.5 4
199.5-299.5 5
299.5-399.5 6
399.5-499.5 3
499.5-599.5 5
Total 25
 In this case, as the lower limit of first class is zero, hence 0.5 will not be subtracted from
it.
14. For less-than and more-than ogives, we will have to prepare less-than and more-than
frequency distributions.
In less than method, the frequencies of all the preceding class intervals are added to the
frequency of a class.
In more than method, the frequencies of all the succeeding class intervals are added to the
frequency of a class.
The computation for both less than and more than ogive is given in the following table.
Less-than Distribution More-than Distribution
Weekly Wages (in Number of Weekly Wages (in Number of
Rs.) Workers Rs.) Workers
Less than 20 10 More than 0 100
Less than 40 30 More than 20 90
Less than 60 70 More than 40 70
Less than 80 90 More than 60 30
Less than 100 100 More than 80 10
The less-than’ and ‘more-than ogives of the given data are shown below

OR
For constructing a pie diagram, it is necessary to convert the percentage into
corresponding degrees in the circle. Since one circle contains 360 degrees, therefore we
calculate the degree of angles by multiplying the percentage value by 3.6 i.e. 360

100
which is
equal to 3.6. The conversion to degree of angles is shown in the following table.
Country Percentage of Export Degree of Angles
USA 25 25

100
× 360
∘
= 90
∘
 Japan 15 15

100
× 360
∘
= 54
∘

UK 30 30

100
× 360
∘
= 108
∘

China 20 20

100
× 360
∘
= 72
∘

Others 10 10

100
× 360
∘
= 36
∘

100 360
∘

A pie diagram to show percentage distribution export is given below :

15. Mr. X did not follow the value of accuracy as his data cannot be complete without
coverage of the whole of locality. He should not take assumptions as that will render his
data collection exercise inaccurate.
16. Calculation of Coefficient of Correlation
x(X - X ), X =
¯¯¯¯ ¯¯¯¯

2 y(Y - Y ), Y =
¯
¯¯¯ ¯
¯¯¯

2
X x Y y xy
66.75 67.5
65 -1.75 3.0625 67 -0.5 0.25 0.875
66 -0.75 0.5625 56 -11.5 132.25 8.625
57 -9.75 95.0625 65 -2.5 6.25 24.375
67 0.25 0.0625 68 0.5 0.25 0.125
68 1.25 1.5625 72 4.5 20.25 5.625
69 2.25 5.0625 72 4.5 20.25 10.125
70 3.25 10.5625 69 1.5 2.25 4.875
72 5.25 27.5625 71 3.5 12.25 18.375
Σ X= Σx
2= Σ Y= Σy
2= Σ xy =
534 143.5 540 194 73
Here, n = 8, ΣX = 534, Σx2 = 143.5​​, ΣY = 540, Σy2 = 194, Σ xy = 73
Now, X ¯¯¯¯
=
ΣX

n
=
534

8
= 66.75, and Y ¯
¯¯¯
=
ΣY

n
=
540

8
= 67.5
Σxy 73 73 73
r = = = = = 0.438
√ Σx 2 ×Σy 2 √143.5×194 √27839 166.85

It indicates that there is low degree of positive correlation between height of fathers and
sons.
17. Wages Number of Workers Cumulative Frequency (cf)
0-5 4 4
5-10 6 10
10-15 3 13
15-20 8 21
20-25 12 33
25-30 7 40
n = Σf = 40

Calculation of Q1 and Q3
Q1 Q3
First Quartile number (q1)= Third Quartile number (q3)= Size
Size of ( n

4
) t h item of ( 3n

4
) th item

= (
40
) th item=10th item
4
= (
3×40
) th item =30th items
10th item will correspond to 4

30th item will correspond to the

the class 5-10.
class 20-25.
So, l1=5, cf=4, f=6 and c=5
So, l1=20, cf=21, f=12 and c=5
Now, 3n
−cf
Now, Q
n
4
−cf = l1 + × c = 20
4 3
Q1 = l 1 + × c = 5 f
f
30−21
10−4 + × 5
+ × 5 12
6
45
6×5 30
= 20 + = 20 + 3.75 ⇒ Q3
12
5 + = 5 + = 5 + 5
6 6
= 23.75
⇒ Q1 = 10

OR
Steps to be followed to calculate the Mode are:
1. Create a table with two columns
2. In column 1 write your class intervals
3. In column 2 write the corresponding frequencies
4. Locate the maximum frequency denoted by fm
5. Determine the class corresponding to fm this will be your Modal class
6. Calculate the Mode using given formula:M
f 1 −f 0
o = l1 + × c
2 f 1 −f 0 −f 2

Calculation of mode
Score Frequency
0-10 10
 Score Frequency
10-20 20
20-30 18
30-40 32
40-50 21
By observation method, it is clear that the modal value lies in the group of 30-40 because
it has the highest frequency.
∴ l1=30, f0=18, f1=32, f2=21 and c=10
Now, Mode = l
f 1 −f 0
1 + × c
2 f 1 −f 0 −f 2

32−18
= 30 + × 10
2×32−18−21

14
= 30 + × 10
25

=30+5.6=35.6
Hence, the modal value is 35.6 score.
Section B
18.
(c) Es = 1
Explanation:
A straight line upward-sloping supply curve shooting from the origin always shows Es= 1.
Percentage change in quantity supplied is equal to the percentage change in price.
19. (a) What ought to be
Explanation:
Normative economics is a part of economics that expresses value or normative judgements
about economic fairness or what the outcome of the economy or goals of public policy
ought to be.
20. (a) Firms should expand output
Explanation:
When MR is greater than MC , it means that the firm can earn more profit if they produce
more because cost of production is less than the revenue. So they should produce more
and move from abnormal profits towards equilibrium point where they can maximise their
profit..
21.
(d) No
Explanation:
TR cannot be a horizontal straight line as TR = qty * price. TR can be calculated by
adding up revenue realised from sale of every additional unit . With sale of every
 additional unit TR increases. So it cannot be constant and thus cannot be a horizontal line.
22.
(d) ₹ 140
Explanation:
₹ 140
Total cost = Total fixed cost + Total variable cost
Total cost = 200 + 500 = 700
T otal cost
Average cost = Quantity
= 700

5
= 140
23.
(b) Both A and R are true but R is not the correct explanation of A.
Explanation:
In a situation of increase in income less of the inferior good is purchased. The consumer
prefers to shift on to superior substitutes because now he can afford them.
24.
(d) a firm can sell any amount at the existing price
Explanation:
Firm's demand curve is a horizontal straight line under perfect competition. Demand curve
of the firm is perfectly elastic. It means that the firm can sell any amount of the
commodity at the prevailing price. The horizontal straight line shows that the firm is to
accept the price as determined by the forces of market supply and market demand; it can
sell whatever amount it wishes to sell at this price.
25.
(c) True
Explanation:
True
26.
(d) Remains Constant
Explanation:
With increase in output, the difference between total cost and total variable cost will
remain constant,
27.
(d) Perfect Competition
Explanation:
because, in a perfectly competitive market, the buyers will treat the products of all the
firms in the market as homogeneous. There is zero degrees of product differentiation and
the firm cannot take any control of the price.
28. There are three reasons which give rise to an economic problem.:
i. Wants of people are unlimited - It is due to unending circle of wants. After the
satisfaction of one wants, another want arises.
ii. Resources are limited - Problem of allocation of resources arises because resources are
not enough to satisfy wants of every individual.
iii. Resources have alternative uses - Scarce resources have alternative uses. When an
individual chooses to use a given resources for something, he/she is unable to use that
resources for anything else.
OR
Good-X (Units) Good-Y (Units) Marginal Opportunity Cost
0 20 -
1 18 2

1
= 2

2 14 4

1
= 4

3 8 6

1
= 6

4 0 8

1
= 8

The schedule shows that the marginal opportunity cost of producing more of Good-X in
place of Good-Y is rising. Accordingly, the production possibility curve is to be concave
to the origin.
29. The firms enter the industry when they find that the existing firm earning super normal
profits. Their entry raises supply of the product of the industry brings down the market
price and thus reduce profits. Their entry continue till profits are reduced to normal (or
zero).On the other hand the firms start leaving industry when they are facing losses. This
reduces output of the industry raises market price and reduces losses. The exit continues
till the losses are wiped out. Hence in the long run, firms earn only normal profit.
30. The quantity of a good that the consumer demands can increase or decrease with the rise
or fall in his income depending on the nature of the good, as is discussed below:
Normal goods These are the goods for which the demand is directly related to consumer's
income.
Other things remaining constant, quantity demanded of these goods increases in response
to increasing consumer's income and decrease in income reduces the demand. For
example, full cream milk, pulses, grams etc.
The figure given below illustrates the income effect in the case of normal goods. When
income increases, the demand curve D shifts to D1 and when income decreases, the
demand curve D shifts to D2.
Inferior goods These are the goods for which the demand is inversely related to
 consumer's income. Other things remaining constant, quantity demanded these goods
decreases in response to increase in income and a decrease in income leads to rise in
demand. For example, coarse cereals, skimmed milk etc.
No commodity is inferior. If any commodity is purchased by a consumer just because of
his low income level,then this commodity is termed as an inferior commodity for that
person.
It is not the consumer but the income level of the consumer which determines whether a
good is normal or inferior. So inferiority is a relative concept.

When income increases, the demand curve D shifts to D2 and when income decreases, the
demand curve D shifts to D1.
In the case of normal goods, income effect is positive while in case of inferior goods,
income effect is negative.

31. Quantity in units Price=AR TR TC MR MC

0 10 0 5 - -
1 10 10 25 10 < 20
2 10 20 35 10 = 10
3 10 30 40 10 > 5
4 10 40 50 10 = 10
5 10 50 70 10 < 20
6 10 60 100 10 < 30
The firm will be in equilibrium at 4 units of output as at this level of output both the
conditions of firm’s equilibrium are satisfied, i.e.
i. MR is equal to MC (₹ 10)
ii. MC is increasing at the point of equilibrium
OR
The two conditions of producer's equilibrium are:
i. MC = MR
ii. MC becomes greater than MR, if more is produced after the point of equilibrium.
Explanation:
 i. If MC is less than MR, it is profitable to produce more units till MC becomes equal to
MR.
ii. When MC becomes greater than MR after the MR = MC condition, production of each
new unit is sold at a loss, which leads to decline in profits.
32. Given the price of a good, a consumer decided how much quantity of that good to buy, on
the basis of the following conditions
MUM = Price, i.e. M UX

M UM

A consumer is in a state of equilibrium when he maximizes his satisfaction by spending

his given income on different goods and services. Any deviation or change in the
allocation of income under the given circumstance will lead to a fall in total satisfaction.
For one-commodity case: Rupee worth of satisfaction actually received by the consumer is
equal to the marginal utility of money as specified by the consumer himself.
Condition 1 : MU(of good X) = MU(of money) OR , PRICE(of good X) = MU(of money)
Reason: Price paid by the consumers should be exactly equal to the money value of MU
that he derives. In case P(of X) is lesser than the MU(of money), he should be prompted to
buy more of good X. Higher consumption will lead to a fall in MU. The consumption of
good X would stop only when P(of good X) will be equal to MU(in terms of money).
Likewise, if P(of X) is greater than MU(in terms of money), the consumer will be
prompted to buy less of good X, leading to a fall in MU.
Condition 2: Marginal utility of money remains constant.
Condition 3: Law of marginal utility holds good.
For two-commodity case: Rupee worth of marginal utility of money should be the same
across good X and good Y, and equal to the marginal utility of money.
Reason: In case rupee worth of satisfaction (MU of good X/ price of good X) is greater for
good X than good Y, the consumer will be prompted to buy more of good X and less of
good Y. This would lead to a fall in the marginal utility of good X and a rise in the
marginal utility of good Y. This process would continue till MU(of good X)/ Price of good
X = MU(OF GOOD Y)/ Price of good Y = MU(of money). In case rupee worth of
satisfaction (MU of good Y/ price of good Y) is greater for good Y than good X, the
consumer will be prompted to buy more of good Y and less of good X. This would lead to
a fall in the marginal utility of good Y and a rise in the marginal utility of good X.
33. i. Fixed Cost (FC) = Monthly rent of the building + Insurance cost=Rs. 5000 + 2000 =
Rs. 7000
ii. Variable Cost (FC) = Wages of daily workers + Cost of Raw material= Rs. 5000 +
10,000 = Rs. 15,000
iii. No, he is not producing at break-even point. Breakeven point refers to the point where;
TR = TC
TC = FC + VC= Rs. 7,000 + 15,000 = Rs. 22,000
TR = P rice × Quantity
= Rs. 1000 × 20 = Rs. 20,000
As, TC > TR so, he is operating below the break-even point.
iv. To know whether he should close down or not we should know the shutdown point.
Shut down point refers to a situation when a firm is able to cover its (VC) variable costs
only. As he is recovering his VC so, he should not close down his business.
TR 20,000
AR = =
Q 20

= Rs. 1, 000

V C 15,000
AV C = =
Q 20

= Rs. 750

34. Answer the following questions

(i) Given,
Elasticity of Demand (Ed) = (-) 1
Old Price (P) = Rs 9; New Price = 10
Change in Price (P) = X1 Old Quantity (QΔ ) = 18 units, New Quantity = x
Change in Quantity (Δ Q) = X -18.
Now, we know, Ed = P

Q
×
ΔQ

ΔP

9 x−18
−1 = ×
18 1

−1 =
x−18

2
, or − 2 = x − 18

or x = 18 - 2 = 16 units
∴ Consumer will buy 16 units at the price of Rs 10 per unit.
(ii) Given, Ed = (-) 4, % Change in Demand = 24 %
To find % change in price.
 Percentage Change in Demand
Ed =
Percentage Change in Price

or (-)4 = 24

Percentage Change in Price

∴ Percentage Change in Price = - 24

4
= -6
∴ Percentage Change in Price = (-)6
means price decreases by 6 percent.