Subject: Economics

There will be one paper of 3 hours duration of 100 marks divided into 2 parts.

Part 1 (30 marks) will consist of compulsory short answer questions testing knowledge, application and skills relating to elementary/ fundamental aspects of the entire syllabus.

Part 2 (70 marks) will consist of eight questions out of which the candidate will be required to answer five questions. Each question in this Part shall carry 14 marks.

Note: The syllabus is intended to reflect a study of the theory of Economics with specific reference to the Indian Economy. Therefore, examples and specific references to the Indian Economy must be made wherever relevant.

1. Micro Economic Theory

(i) Demand: meaning, factors affecting demand; Demand function; Law of Demand; derivation of demand curve; movement and shift of the demand curve; exceptions to the Law of Demand.
Law of Diminishing Marginal Utility, Law of Equimarginal Utility, consumers equilibrium through utility approach.

The concept of demand (exante) and effective (expost) demand. A demand function to be specified incorporating the determinants of demand. Diagrams should be used in explaining the Law of Demand, its derivation using demand schedule. Derivation of market demand curve from individual demand curve.
Law of Diminishing Marginal Utility, Law of Equimarginal Utility and consumer’s equilibrium with the help of schedule and graph.

(ii) Elasticity of demand: meaning, types of elasticity of demand, measurement of elasticity of demand; factors affecting elasticity of demand; importance of the concept of elasticity of demand. Various methods of measurement of the elasticity of demand: point method, percentage method, expenditure method and geometric method. (Numericals required on percentage method only). The cross and income elasticity of demand must be explained. Use diagrams wherever necessary. Degrees of elasticity of demand to be explained.

(iii) Supply: meaning; difference between stock and supply; determinants of supply; time period and supply; Law of Supply; movement and shift of the supply curve; elasticity of supply Difference between stock (actual supply) and supply (intended supply) with reference to the time period, with the help of certain examples. A supply function should be specified and explained. Law of Supply, supply schedule and supply curve. Derivation of market supply curve from individual supply curve. Movement and shift of the supply curve, exceptions to the Law of Supply. Meaning and degrees of elasticity of supply (methods of measuring elasticity of supply are not to be included).

(iv) Market Mechanism: Equilibrium and disequilibrium; Equilibrium price and effect of changes in demand and supply on the equilibrium price. Simple applications of tools of demand and supply. A basic understanding of the concept of equilibrium. The effects of changes in demand and supply - both along the curves and shift of the curves to be explained. Basic understanding of Price control, rationing, Price ceiling with the help of demand and supply curves.

(v) Concept of product and production function: returns to a factor, total, average and marginal physical products; Law of Variable Proportions and its three stages; returns to scale. A production function to be specified and explained (concept only - specific production function not required). Law of Variable Proportions: statement, assumptions, schedule (for the purpose of understanding and not for testing), diagram and explanation to the three stages and criticism. A comparison should be made between Law of

Courtesy: cisce.org

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