All questions of Previous Year Papers for BPSC (Bihar) Exam

Explanation:

Oikonomia is a Greek term that means household management. It is a combination of two Greek words, oikos and nomos, which mean house and law, respectively. The term was used in ancient Greece to describe the management of the household, including both financial and non-financial aspects.

Importance of Oikonomia:

Oikonomia was an important concept in ancient Greece because it was central to the functioning of society. The management of the household was seen as critical to the well-being of the family and the community. The head of the household, typically a man, was responsible for managing the household and ensuring that it was run efficiently.

Scope of Oikonomia:

The scope of Oikonomia is broad and includes a wide range of activities related to household management. Some of the areas that fall under the purview of Oikonomia include:

- Financial management: This includes managing the household budget, tracking expenses, and ensuring that the family's financial resources are used wisely.

- Resource management: This includes managing the household's resources, such as food, water, and energy, to ensure that they are used efficiently.

- Property management: This includes managing the household's property, such as land, buildings, and other assets, to ensure that they are maintained and used effectively.

- Personnel management: This includes managing the household's staff, such as servants and other employees, to ensure that they are working efficiently and effectively.

Conclusion:

In conclusion, Oikonomia is an important concept in ancient Greek society that refers to household management. It encompasses a wide range of activities related to the efficient and effective management of the household's financial and non-financial resources. The concept of Oikonomia has had a lasting influence on modern management theory and practice, particularly in the areas of financial management and resource allocation.

Revenue Sources for State Governments in India

There are several sources of revenue for State Governments in India, including:

1. Sales Tax: Sales tax is the main source of revenue for State Governments in India. It is levied on the sale of goods within a state and is collected by the state government. The tax rates vary from state to state, but it is generally in the range of 4% to 15%.

2. Excise Duty: Excise duty is a tax that is levied on the production of goods within a state. It is collected by the state government and the rates vary from state to state. Excise duty is levied on goods like alcohol, tobacco, and petroleum products.

3. Income Tax: Income tax is a tax that is levied on the income of individuals and companies. It is collected by the Central Government, but a portion of it is allocated to the State Governments. The allocation is based on the population of the state.

4. Property Tax: Property tax is a tax that is levied on the ownership of property. It is collected by the state government and the rates vary from state to state. Property tax is levied on both residential and commercial properties.

Conclusion

In conclusion, sales tax is the main source of revenue for State Governments in India. It is followed by excise duty, income tax, and property tax. These taxes are essential for the State Governments to fund their various programs and initiatives.

Excess Capacity in Monopolistic Competition

In monopolistic competition, firms have excess capacity. Excess capacity refers to the situation where a firm produces less output than it could produce with its existing resources. This means that the firm is not utilizing its resources to their full potential.

Explanation:

1. Characteristics of Monopolistic Competition:
Monopolistic competition is a market structure characterized by a large number of firms producing differentiated products. Some key characteristics of monopolistic competition include:

- Many sellers: There are many firms operating in the market, each producing a slightly different product.
- Product differentiation: Firms in monopolistic competition differentiate their products through branding, packaging, quality, and other marketing strategies to attract customers.
- Easy entry and exit: Firms can enter or exit the market relatively easily, leading to low barriers to entry.

2. Excess Capacity:
Excess capacity occurs in monopolistic competition due to two main reasons:

- Product differentiation: Firms in monopolistic competition differentiate their products to attract customers. This differentiation leads to a limited market share for each firm, as customers have various options to choose from. As a result, each firm operates at less than full capacity to meet the demand for its differentiated product.
- Diminishing returns to scale: In the long run, firms in monopolistic competition experience diminishing returns to scale. This means that as the firm increases its production, the additional output gained becomes smaller. Therefore, it is not economically efficient for firms to operate at full capacity.

3. Implications of Excess Capacity:
Excess capacity in monopolistic competition has several implications:

- Higher average costs: Operating at less than full capacity leads to higher average costs per unit of output. This is because fixed costs are spread over a smaller quantity of output.
- Inefficiency: Excess capacity implies that firms are not utilizing their resources efficiently. They could potentially produce more output without incurring significant additional costs.
- Price flexibility: Firms in monopolistic competition have more flexibility in setting prices due to product differentiation. They can choose to lower prices to increase demand or maintain higher prices to increase profitability.

4. Examples:
Examples of industries characterized by monopolistic competition and excess capacity include the restaurant industry, clothing industry, and personal care product industry. In these industries, each firm offers a slightly different product or service, and they often operate with excess capacity.

Conclusion:
In summary, firms in monopolistic competition have excess capacity due to product differentiation and diminishing returns to scale. This leads to higher average costs, inefficiency, and price flexibility for these firms. Understanding the concept of excess capacity is crucial in analyzing the behavior and dynamics of firms in monopolistic competition.

Produced and become due for payment when then are physically removed from factory for sale. Remember duty is first paid by manufacturer on removal of goods from factory and then collected from customers when sales takes place because the sales price will include the excise duty. Sales Taxes are always first collected from customers during sales(sales price includes the tax) and then paid by the manufacturer to the sales tax authorities.

Normative economics

Overview:
In economics, goods are categorized based on their characteristics and demand patterns. Seawater and fresh air are considered as free goods, also known as common goods or public goods. These goods have certain characteristics that differentiate them from other types of goods.

Explanation:

Free Goods:
Free goods are goods that are available in abundance and do not have a price attached to them. They are not scarce and can be consumed by anyone without reducing their availability to others. Seawater and fresh air are examples of free goods as they are naturally occurring resources that are available in abundance and can be used by anyone without any cost.

Characteristics of Free Goods:
- Abundance: Free goods are available in large quantities and are not limited in supply. Seawater and fresh air are constantly replenished by natural processes, ensuring their availability in abundance.
- Non-excludability: Free goods cannot be restricted or excluded from use by individuals. No one can prevent others from using seawater or fresh air.
- Non-rivalry: The consumption of free goods by one individual does not diminish the availability or quality of the goods for others. The use of seawater or fresh air by one person does not reduce its availability for others.

Other Goods:
In contrast to free goods, there are other types of goods with different characteristics:
- Giffen goods: Giffen goods are a rare phenomenon in economics where the demand for a product increases as its price rises. These goods are considered inferior goods.
- Inferior goods: Inferior goods are goods for which demand decreases as income increases. They are typically of lower quality or less desirable compared to other goods.
- Normal goods: Normal goods are goods for which demand increases as income increases. They are typically of higher quality or more desirable compared to inferior goods.

Conclusion:
Seawater and fresh air are classified as free goods in economics due to their abundance, non-excludability, and non-rivalry characteristics. They are available to everyone without any cost and can be consumed without reducing their availability for others. Understanding the categorization of goods helps economists analyze consumer behavior and market dynamics.

Poor

Private Investment and its types

Private investment refers to the investment made by private individuals, companies or institutions in the economy. It is one of the key drivers of economic growth and development. Private investment can be classified into different types based on various criteria. Some of the types of private investment are:

1. Autonomous Investment: It refers to the investment made by private individuals or companies without any influence from the government or other external factors. This type of investment is usually driven by the profit motive.

2. Induced Investment: Induced investment refers to the investment made by private individuals or companies in response to changes in the economy or government policies. This type of investment is usually driven by the expectation of future profits.

3. Foreign Direct Investment: Foreign direct investment refers to the investment made by foreign companies or institutions in the economy of a country. This type of investment is usually made to gain access to new markets, resources, or technology.

4. Foreign Institutional Investment: Foreign institutional investment refers to the investment made by foreign institutional investors such as mutual funds, pension funds or hedge funds in the stock markets or other financial markets of a country.

Conclusion

Private investment plays a crucial role in the economic development of a country. It provides the necessary funds for the growth of businesses, creation of jobs, and development of infrastructure. The different types of private investment have different implications for the economy and can be influenced by various factors such as government policies, market conditions, and investor preferences.

**Price Theory**

Price theory, also known as microeconomics, is the branch of economics that focuses on the behavior of individual consumers, firms, and industries. It analyzes how these economic agents make decisions regarding the allocation of scarce resources. Price theory examines how prices are determined and how they affect the allocation of resources, production, consumption, and welfare.

**Microeconomics vs. Macroeconomics**

Microeconomics and macroeconomics are two main branches of economics. While microeconomics focuses on the behavior of individual economic agents, macroeconomics studies the behavior of the economy as a whole. Macroeconomics examines aggregate variables such as national income, employment, inflation, and economic growth.

**Difference between Price Theory and Macro Economics**

While macroeconomics studies the overall behavior of the economy, price theory (microeconomics) focuses on the behavior of individual agents within the economy. Price theory analyzes how individual consumers and firms make decisions in the marketplace, how prices are determined, and how these decisions impact the overall allocation of resources.

**Development Economics**

Development economics is a branch of economics that focuses on the economic development of countries and regions. It examines the factors that contribute to economic growth, poverty reduction, and improved living standards. Development economics studies issues such as inequality, education, health, infrastructure, technology, and trade.

**Public Economics**

Public economics is a branch of economics that analyzes the role of government in the economy. It examines how the government collects revenue through taxes and how it allocates resources through public expenditure. Public economics also studies the impact of government policies on economic efficiency, equity, and welfare.

**Conclusion**

In conclusion, price theory is another term for microeconomics, which focuses on the behavior of individual consumers, firms, and industries. It analyzes how these economic agents make decisions regarding the allocation of scarce resources. Price theory examines how prices are determined and how they affect the allocation of resources, production, consumption, and welfare.

Surplus labour (German: Mehrarbeit) is a concept used by Karl Marx in his critique of political economy. It meanslabour performed in excess of the labour necessary to produce the means of livelihood of the worker ("necessary labour").

Monopolistic Competition refers to a market situation in which there are large numbers of firms which sell closely related but differentiated products. Markets of products like soap, toothpaste AC, etc. are examples of monopolistic competition.

Sunk cost

To understand why the correct answer is option 'D' - Economic goods, let's delve into the concept of scarcity and the different types of goods.


Scarcity refers to the limited availability of resources relative to the unlimited wants and needs of individuals and society. This fundamental economic problem arises due to the fact that resources are finite, while human wants are infinite.


In economics, goods are categorized into different types based on their characteristics and nature. The two main categories of goods are:

1. Free Goods:
- Free goods are those that are available in abundance and have no opportunity cost.
- They are not scarce and do not have a market value.
- Examples include air, sunlight, and water from natural sources.

2. Economic Goods:
- Economic goods are goods that are scarce and have an opportunity cost.
- They are limited in supply relative to the demand for them.
- Economic goods have a market value and are subject to exchange.
- Economic goods can further be classified into two subcategories: consumer goods and capital goods.


Economic goods can be further divided into two types:

1. Consumer Goods:
- Consumer goods are goods that are directly consumed by individuals to satisfy their wants and needs.
- They include items such as food, clothing, and electronics.
- Consumer goods are typically the end products that individuals purchase for personal use.

2. Capital Goods:
- Capital goods, also known as producer goods or investment goods, are goods that are used to produce other goods and services.
- They are not directly consumed but are used in the production process.
- Examples include machinery, equipment, and buildings.
- Capital goods are essential for increasing the productivity and efficiency of an economy.


Based on the given options, the correct answer is option 'D' - Economic goods. This is because economic goods are the goods that are scarce and limited in supply. They have a market value and are subject to exchange. Both luxury goods and expensive goods may fall under the category of economic goods, but they do not encompass all economic goods. Capital goods, on the other hand, are a specific type of economic goods that are used for production purposes. Therefore, the most appropriate and inclusive term for goods that are scarce and limited in supply is economic goods.

Negative

When two commodities are complements, it means that they are consumed together or used in conjunction with each other. For example, bread and butter are complements, as people often consume them together. Similarly, cars and gasoline are complements, as cars require gasoline to operate.

The cross-price elasticity measures the responsiveness of the quantity demanded of one commodity to a change in the price of another commodity. When two commodities are complements, an increase in the price of one commodity will generally lead to a decrease in the quantity demanded of the other commodity, and vice versa.

This relationship between price and quantity demanded is reflected in the cross-price elasticity. If the cross-price elasticity is negative, it indicates that an increase in the price of one commodity leads to a decrease in the quantity demanded of the other commodity, and vice versa. This negative relationship is consistent with the complementary nature of the two commodities.

For example, if the price of cars increases, people may reduce their demand for cars, which will in turn decrease the demand for gasoline. Similarly, if the price of gasoline increases, people may reduce their demand for gasoline, which will decrease the demand for cars.

Therefore, the correct answer is option C: Negative. The cross-price elasticity between two complementary commodities is negative, reflecting the inverse relationship between their prices and quantities demanded.

Horizontal Equity in Taxation:
Horizontal equity in taxation refers to the principle that individuals in similar financial situations should be treated similarly in terms of their tax liability. This principle ensures fairness and equality in the tax system.

Explanation:

Proportional to the income of tax payers:
- Horizontal equity is achieved when the tax liability is proportional to the income of taxpayers. This means that individuals with similar levels of income should pay a similar amount of tax.
- For example, if two individuals have the same income, they should have the same tax liability under a system that adheres to horizontal equity.

Similar for tax payers in similar circumstances:
- Horizontal equity also requires that taxpayers in similar circumstances should face a similar tax burden.
- This ensures that individuals with comparable financial situations are treated equally in terms of taxation.

Proportional to the expenditure of tax payers:
- Horizontal equity is not based on the expenditure of taxpayers but on their ability to pay, which is typically reflected in their income.
- Therefore, taxing based on expenditure does not necessarily align with the principle of horizontal equity.

The same for every tax payer:
- If the tax liability is the same for every taxpayer regardless of their income or financial situation, it does not reflect horizontal equity.
- Horizontal equity requires that tax liabilities are based on the taxpayer's ability to pay, which is usually tied to their income level.
In conclusion, horizontal equity in taxation is achieved when the tax liability is proportional to the income of taxpayers and is similar for taxpayers in similar circumstances. This principle ensures fairness and equality in the tax system by treating individuals with similar financial situations equally.

The concept of Quasi rent was introduced in Economics by Dr. Alfred Marshall. This concept is used for the surplus earned by man-made factors other than land. Certain man-made factors become scarce in the short run. The surpluses earned by using these factors go to constitute Quasi rent.

Excess Reserves Held by Commercial Banks

Excess reserves refer to the reserves held by commercial banks over and above the statutory minimum mandated by the central bank. In India, the Reserve Bank of India (RBI) is the central bank, and it sets the statutory minimum reserve requirement for commercial banks.

Explanation

Commercial banks are required to maintain a certain percentage of their deposits as reserves with the central bank. This reserve requirement is set by the central bank and varies from country to country. In India, the RBI sets the Cash Reserve Ratio (CRR), which is the percentage of deposits that commercial banks must maintain as reserves with the RBI.

Excess reserves refer to the reserves that commercial banks hold over and above the CRR. These reserves are not required by the central bank, but are held by the banks voluntarily. Banks may hold excess reserves for several reasons, such as to meet unexpected withdrawal demands from customers, to earn interest on excess funds, or to have a cushion against unexpected losses.

The RBI pays interest on the excess reserves held by commercial banks, which is known as the Reverse Repo Rate. This rate is usually lower than the repo rate, which is the rate at which the RBI lends money to commercial banks. The difference between the repo rate and the reverse repo rate is known as the Marginal Standing Facility (MSF) rate.

Conclusion

In conclusion, excess reserves are the reserves held by commercial banks over and above the statutory minimum reserve requirement set by the central bank. Commercial banks hold excess reserves voluntarily, and may do so for several reasons. The RBI pays interest on excess reserves held by commercial banks, which is known as the Reverse Repo Rate.

Explanation:

Minimum payment to a factor of production is called wages. Wages are the payment made to labor in return for their services. Labor is the most important factor of production, as all other factors of production require the use of labor to be productive. Wages are paid to labor in return for their contribution to the production process.

Factors of Production:
Factors of production refer to the resources that are used in the production of goods and services. The factors of production are land, labor, capital, and entrepreneurship. These factors are combined to produce goods and services.

Wages:
Wages are the payment made to labor in return for their services. Wages are the minimum payment made to labor for their contribution to the production process. The amount of wages paid depends on the demand and supply of labor in the market.

Quasi Rent:
Quasi rent is the return earned by a factor of production that is in fixed supply. Quasi rent is similar to economic rent, which is the return earned by a factor of production that is in scarce supply. Quasi rent is the minimum payment made to a factor of production that is in fixed supply.

Rent:
Rent is the payment made to a factor of production that is in scarce supply. Rent is the return earned by land or any other factor of production that is in scarce supply. Rent is paid to the owner of the factor of production.

Transfer Payment:
Transfer payment is the payment made by the government to individuals or businesses without any corresponding contribution to the production process. Transfer payment is made to support individuals or businesses that are in need of financial assistance.

Conclusion:
Wages are the minimum payment made to labor for their contribution to the production process. Quasi rent is the return earned by a factor of production that is in fixed supply. Rent is the payment made to a factor of production that is in scarce supply. Transfer payment is the payment made by the government to individuals or businesses without any corresponding contribution to the production process.

Sakes tax

(Correct Option:- C, 2005-06)

Fringe Benefit Tax (FBT) is the taxation of perquisites provided by the employer to his employees, in addition to the cash salary or wages paid, is fringe benefit tax. It was introduced in Budget 2005-06 by the Finance Minister P. Chidambaram.

Explanation:

The budget figures of the Government of India consist of two parts - total expenditure and total receipts. These two figures are used to calculate the fiscal deficit.

Fiscal Deficit:
Fiscal deficit is the difference between the total expenditure of the government and its total receipts excluding borrowing. This means that the fiscal deficit is the amount of money the government needs to borrow in order to meet its total expenditure.

Calculation of Fiscal Deficit:
Fiscal deficit can be calculated using the following formula:

Fiscal Deficit = Total Expenditure - Total Receipts (excluding borrowing)

Importance of Fiscal Deficit:
Fiscal deficit is an important measure of the financial health of a government. A high fiscal deficit indicates that the government is spending more money than it is earning, which can lead to inflation and other economic problems. On the other hand, a low fiscal deficit indicates that the government is able to manage its finances effectively.

Conclusion:
In conclusion, the difference between total expenditure and total receipts in the budget figures of the Government of India is called fiscal deficit. This figure is an important measure of the government's financial health and is used to monitor its spending and borrowing.

WIth a Veblen good, the demand curve is shifting to the right – rather than demand upwardly sloping like Giffen good. Giffen Good. ... A Giffen good occurs when a rise in price causes higher demand because the income effect outweighs the substitution effect.

Rate of interest is determined by commercial banks.

Commercial banks play a crucial role in determining the rate of interest in an economy. They act as intermediaries between savers and borrowers and are responsible for allocating funds from savers to borrowers. The rate of interest charged by commercial banks on loans and earned on deposits is influenced by various factors, including:

1. Money Supply:
The rate of interest is affected by the supply of money in the economy. When there is an excess supply of money, banks may lower the interest rates to encourage borrowing and stimulate economic activity. Conversely, when there is a shortage of money, banks may increase the interest rates to discourage borrowing and control inflation.

2. Demand for Credit:
The demand for credit from borrowers also affects the rate of interest. If there is high demand for loans, banks may increase the interest rates to maximize their profitability. On the other hand, if there is low demand for loans, banks may lower the interest rates to attract borrowers.

3. Cost of Funds:
Commercial banks acquire funds from various sources, including deposits, interbank borrowing, and capital markets. The cost of these funds influences the rate of interest charged by banks. If the cost of funds is high, banks may increase the interest rates to maintain their profitability. Conversely, if the cost of funds is low, banks may lower the interest rates to remain competitive.

4. Reserve Bank Policy:
The central bank, such as the Reserve Bank of India, sets the benchmark interest rate known as the repo rate. Commercial banks borrow funds from the central bank at this rate. The repo rate serves as a guide for commercial banks in determining their lending and deposit rates. Changes in the repo rate by the central bank can directly influence the rate of interest charged by commercial banks.

5. Risk Factors:
Commercial banks assess the creditworthiness and risk profile of borrowers before granting loans. Higher-risk borrowers may be charged a higher rate of interest to compensate for the increased risk. Similarly, lower-risk borrowers may be offered a lower rate of interest.

In conclusion, commercial banks play a significant role in determining the rate of interest based on factors such as money supply, demand for credit, cost of funds, central bank policies, and risk factors. These factors collectively influence the interest rates charged by commercial banks, which in turn impact borrowing and investment decisions in the economy.

The irrigation expenditure has been the largest expenditure (both plan and non-plan expenditure) item in the budgets over the years. ... To sum up, irrigation infrastructure, major, medium and minor irrigation systems should be strengthened to enhance the agricultural production.

Price discrimination is a pricing strategy that charges customers different prices for the same product or service. Price discrimination allows a company to earn higher profits than standard pricing because it allows firms to capture every last dollar of revenue available from each of its customers.

Deflation is answer

Measurement of National Income

National Income is the total value of all goods and services produced in a country in a given period of time. There are various methods to calculate National Income. Let's discuss them in detail below.

Value Added Method
The value-added method calculates national income by adding up the value of all goods and services produced in a country minus the value of all intermediate goods and services used in their production. In other words, it is the value of the final product or service minus the value of the inputs used in its production.

Income Method
The income method calculates national income by adding up all the incomes earned by individuals, businesses, and the government in a country during a given period of time. This includes wages, salaries, profits, rent, and interest.

Expenditure Method
The expenditure method calculates national income by adding up all the expenditures made on goods and services in a country during a given period of time. This includes consumer spending, investment spending, government spending, and net exports.

Investment Method
The investment method calculates national income by adding up all the investments made in a country during a given period of time. This includes investments in physical capital, human capital, and natural resources.

Not a method of measurement of National Income
The investment method is not a method of measurement of national income. While investments are an important contributor to the overall economic growth of a country, they are not a direct measure of national income. Therefore, the investment method cannot be used to calculate national income.

Conclusion
In conclusion, the methods of measurement of national income are value-added, income, and expenditure methods. The investment method, while important, is not used to calculate national income.

The Philips curve shows an inverse relationship between inflation and unemployment rate. It resembles the graph of 1/x function.