DCM1102 ECONOMIC THEORY JULY-AUG 2025

Description

SESSION	JULY-AUG 2025
PROGRAM	BACHELOR OF COMMERCE (B COM)
SEMESTER	I
COURSE CODE & NAME	DCM1102  ECONOMIC THEORY

 

 

Set – 1

 

Q1. Explain the following: 10

A Applications of Law of Demand 5          

B Short-run Costs 5 

Ans 1.

1. Applications of the Law of Demand

The Law of Demand states that, other things remaining constant, the quantity demanded of a good increases when its price falls, and decreases when its price rises. This fundamental concept has several practical applications in business, economics, and daily life. One important application is in business pricing decisions. Firms carefully study how consumers respond to price changes before fixing the price of goods. For products where demand is highly elastic, even a small price rise may reduce total revenue. Therefore, the law guides

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Q2. Discuss the factors affecting the Law of Supply. 10  

Ans 2.

Factors Affecting the Law of Supply

Nature of the Law of Supply

The Law of Supply states that, other factors remaining constant, the quantity supplied of a good increases when its price increases, and decreases when its price falls. Producers are motivated by profit, so higher prices encourage them to produce and supply more. However, the law operates under specific conditions, and several factors can influence the ability or willingness of suppliers to respond to price changes.

Cost of Production

One of the most important factors affecting supply is the cost of production. When

 

 

Q3. Explain the Law of Variable Proportion in detail. 10           

Ans 3.

Law of Variable Proportion

Law

The Law of Variable Proportion, also known as the Law of Diminishing Returns, explains the relationship between input and output when one factor varies while the others remain fixed. It applies in the short run, where land, machinery, or factory size cannot be changed, but labour or raw materials can be varied. The law helps firms understand how output responds to

 

 

Set – 2

 

Q4. Discuss briefly the different types of market.  10       

Ans 4.

Different Types of Market

A market refers to a place, system, or arrangement where buyers and sellers interact for the exchange of goods and services. Markets may or may not be physical spaces; they can also exist in digital or virtual form. The structure of a market depends on the number of buyers and sellers, the nature of the product, price control, and the freedom of entry or exit. Different types of markets operate in an economy, each with unique characteristics influencing price,

 

 

Q5. Explain the criticisms of Marginal Productivity Theory of Wages. 10        

Ans 5.

Criticisms of the Marginal Productivity Theory of Wages

The Marginal Productivity Theory of Wages states that workers are paid wages equal to the value of their marginal productivity. According to this theory, a firm continues hiring labour until the value of the marginal product equals the wage rate. Although influential in explaining wage determination, the theory has been widely criticized for its unrealistic

 

 

Q6. Explain The Fisher’s Time Preference Theory of Interest. 10         

Ans 6.

Fisher’s Time Preference Theory of Interest

Fisher’s Time Preference Theory, developed by economist Irving Fisher, explains interest as a reward for postponing current consumption. According to this theory, individuals prefer present consumption over future consumption. To induce people to save or invest rather than consume immediately, they must be compensated with interest. Thus, interest arises due to the preference for present goods over future goods.

Time Preference and Human Behaviour

The foundation of the theory lies in the idea that people value present goods more because