Q.1. Write notes on Degrees of Elasticity of Supply.
(1) Perfectly Elastic Supply : Perfectly elastic supply results in an infinite change in quantity due to a very small change in price. It is illustrated by the figure.
In this figure, SS is perfectly elastic supply curve. It is parallel to OX-axis. It implies that a slight fall in price will reduce the supply to zero. In this case, price elasticity of supply (Es) is infinite ∝, that is, (ES= ∝).
(2) Perfectly Inelastic Supply : Perfectly inelastic supply that there is no change in supply regardless of change in price.
As shown in the figure below, SS is perfectly inelastic supply curve and is parallel to OY-axis. It signifies that even if price increases to OP1, the supply remains unchanged i.e., OS. In this case, elasticity is zero (ES = 0). Supply of perishable goods in short period is inelastic.
(3) Unitary Elasticity : Supply is said to be unitary elastic when proportionate change in quantity supplied is equal to the proportionate change in price. For instance, if price increases by 50 percent supply also extends by 50 percent.
In Figure, SS curve represents unit elasticity of supply. Price and supply are changing in the same proportion,
Q : Quantity Supplied D : Change in quantity P : Price D : Change in Price
(4) More than Unitary Elasticity : In this case, proportionate change in quantity supplied is greater than proportionate change in price. For example, 50 percent increase in price is followed by 100 percent extension in supply,
In Figure, SS curve expresses more than unity elasticity of supply. When price increases from supply extends more than proportionately.
(5) Less than Unitary Elasticity : In this case, the proportionate change in quantity supplied is smaller than
he proportionate change in price. If 50 percent increase in price causes 25 percent extension in supply, it is case of less than unitary elasticity.
In Figure, supply curve SS represents less than unitary elasticity. When price increases then supply extends less than proportionately.
Q.2. Define Law of Variable Proportions. What are the assumption of the law ?
Ans : When the number of one factor is increasing while all other factors remain constat, then the proportion between the factors is altered. Supposing, there are two factors of production i.e. land and labour. Land is a fixed factor and labour is a variable factor. Supposing, you have a land measuring 2 hectares. You grow tomatoes on it with the help of labourer. Accordingly, the proportion between labour and land will 1 : 2. If the number of labourers is increased to 2 then the new proportion between labour and land will be 2 : 2, in other words, if there are 2 hectares of land per labourer previously, now there will be 1 hectare of land per labourer. On account of change in the proportion of factors there will also be a change in total output at different rates. In Economics, this tendency is called Law of Variable Proportion. The law states that as the proportion of factors is changed, the total production at first increases more than proportionately, then proportionately and finally less than proportionately.
- Leftwitch,“The law of variable proportions states that if the input of one resource is increased by increments per unit of time while the inputs of other resources are held constat, total output will increase, but beyond some point the resulting output increases will become smaller and smaller.”
Assumptions of the Law
Occurrence of the Variable Proportions can be fully appreciated only in the light of its assumptions. These are as follows.
(i) Production is not of ‘Fixed Proportions Type,. Instead, it is of Variable Proportions Type. Son that output can be increased by combining more of the variable factor with the fixed factor.
(ii) Units of the variable factor are homogeneous or equally efficient, and are increased one by one. So that diminishing returns start operating not because latter units of the variable factors are less efficient than the former ones, but because of sub-optimal combination of fixed and variable factors.
(iii)Some of the factors are fixed, so that output can be increased only by increasing the application of the variable factor.
(iv)State of technology does not change. This is a very crucial assumption of the law. In fact, occurrence of the law can be deferred in case the state of technology is improved. Inputs, or same output with the reduced set of inputs.
Q.3. How does the modern economists have explained the relation between Price and Rent ?
Ans : (i) From the point of view Economy : Land is a free gift of nature from the point of view of the entire economy. Its total supply is perfectly inelastic. From economy’s point of view no minimum supply price need be paid for its use. In other words, for the economy, transfer earning of land is zero. So, the entire income of land is surplus or rent. It does not enter into price and so does not influence price. Hence, according to the modern economists, from the point of view of the economy Ricardo is right in asserting that rent does not enter into price.
(ii) From the point of view of Industry : An industry may have several alternative uses of the land. So the industry will have no pay a minimum price for the use of land and it will be equal to its transfer earning or opportunity cost. From the industry’s point of view only opportunity cost of the factor is considered. In this way, from the industry’s point of view, the transfer earning will form part of the cost of production and so enter into price. Rent being the surplus over and above transfer earnings, will not enter into cost of production nor will it enter into price.
(iii) From the point of view of Individual Producer or Firm : Whatever price an individual producer pays for the services of land, that forms part of the average cost of production, Hence it influences the price. A producer must cover his average cost of production by the prevailing price. So, from an individual producer’s point of view, rent is included in firm’s average cost of production and accordingly enters in price.
Q.4. How do you interprete excess demand ?
Ans : Excess Demand refers to the situation when aggregate demand (AD) is the excess of aggregate supply (AS) corresponding to the full employment in the economy.
It may interpreted in two different ways :
(a) The level of aggregate demand in the economy happens to exceed its full employment level. Since resources have already been fully utilised (corresponding to the full employment level) and therfore, aggregate supply cannot be raised, demand only implies greater pressure on the available goods and services in the economy. Accordingly prices tend to rise.
(b) The level of aggregate demand (or planned expenditure) surpasses the level of aggregate supply even when there is full capacity production in the economy. Accordingly the market value of the existing goods and srvices tends to rise equivalent to the value of expenditure in the economy. And, equilibrium between agregate demand and aggregate supply is struck somewhere beyond the point of full employment. Over full employment equilibrium only indicates gareater market prices of aggregate supply and aggregate demand, quantum of goods produced and sold remaining the same as at full employment of the resources.
In short, excess demand only indicates greater 'purchasing power', not the greater 'purchase,' because purchase cannot increase beyond what is produced at the full employment level. Accordingly only the market value of aggregate demand (AD) and aggregate supply (AS) tends to rise.
Q.5. What is the importance of a budget ?
Ans : Following points should highlight the importance of Government Budget for a country’s economy:
(1) Knowledge of Government Revenue and Expenditure: Budget gives a detailed understanding of the size and sources of Government revenue. It also shows similar details of the Government expenditure.
(2) Direct and Indirect Role of the Government in Development: Detailed study of the Government expenditure shows direct and indirect participation of the Government in development and welfare programmes of the country. Direct participation is known through Government expenditure on public sector undertakings. Indirect participation is known through Government expenditure on the provision of infrastructure including irrigation projects, roads, dams, bridges, power etc.
(3) Direction of Developmental Programmes of the Government: Budget reflects direction of the country’s development programmes. It shows the extent of privatisation, liberalisation and globalisation of our development efforts.
(4) Fiscal Policy: Budget is a summary statement of the fiscal policy of the Government. It is the policy of fixing its revenue and expenditures in a manner such that economic fluctuations are minimised. To illustrate, the Government would generally decide to increase its expenditures to increase aggregate demand during deflation. On the other hand, Government expenditure is expected to be decreased during inflation. Decrease in expenditure implies decrease in aggregate demand which should check the rise in prices.
(5) Public Borrowing: Budget shows to extent of borrowings the Government has to make for its development programmes. Borrowings may stimulate the process of growth. But certainly these add to the burden (c)f repayment on future generations.
Briefly budget of the Government present a summary statement of the manner in which the Government of a country plans to direct and control the level of economic activity in the economy. It is an annual exercise of the Government but affects day-to-day economic life of the citizens of a nation.
Q.6. What was rolling plan? What was the strategy and performance of the sixth plan?
Ans : There were two Sixth Plans. One by Janata Party for 1978-83 period was in operation only for two years and abandoned in 1979-80. The other by the Congress (I) government, which came to power in 1980, for the period 1980-85. The Janata Party Plan, also called rolling Plan openly praised the achievements of planning in India but blamed Nehru model of growth for unemployment problem, for economic power concentration in the hands of few powerful business families, for the increasing inequalities of income and wealth and for rising poverty. The main objectives of Janata Plan were to achieve higher production and to create greater employment opportunities simultaneously. The focus, therefore, was enlargement of employment potential in agriculture and allied sectors, encouragement to household and small industries producing consumer goods for mass consumption and to raise income of lowest income groups through a minimum needs programme. Though both the Sixth Plans basically aimed at removal of poverty and unemployment the Congress (I) Plan rejected the Janata approach and brought back Nehru model of growth by aiming at direct attack on the problem of poverty by creating conditions of expanding economy.
The Sixth Plan adopted a two pronged strategy : (i) moving simultaneously to strengthen the infrastructure for both agriculture and industry. So as to create conditions for an accelerated growth in investment, output and exports; and (ii) providing, through special programmes designed for the purpose, increased opportunities for employment especially in rural areas and the unorganised sector and meeting the minimum basic needs of the people for removal of poverty. The plan had ten objectives including significant increase in the national income; modernisation of technology; progressive reduction in poverty and unemployment; speedy development of the energy sector; reduction in inequalities of income and wealth; balanced regional development; population control through family planning; protection and improvement of environment; and encouragement process.
The Sixth Plan was fairly successful. It was successful in achieving the target growth rate of 5.2 percent mainly because of good agricultural performance and a rapid rate of growth in the service sector. The industrial sector performed poorly as against the targeted growth rate. The production of foodgrains increased from 110 million tonnes in 1979-80 to about 152 million tonnes (as targeted) in 1984-85. Industrial growth rate was about 6% per annum. The rate of inflation also came down to 5% in 1985 as against 16.7% in 1980-81. The balance of payments situation which was under a severe strain due to hike in oil prices in 1980 was in favourable position in 1985. The plan did appreciably well in the removal of poverty and unemployment. It largely fulfilled the quantitative targets of the minimum needs programme though quality-wise the performance was poor. Finally on the objective of self-reliance the plan witnessed substantial reduction in import dependence for three strategic commodities: foodgrains, petroleum products and fertilisers. The plan also saw increase in self reliance in various fields of science and technology. In short the Sixth Plan helped the country to move towards the objective of growth, self-reliance and social justice.
Q.7. What is Inflation? Define the different types of inflation?
Ans : A persistent rise in general level of prices is known as inflation. It is usually measured as rate per cent per unit time, say, a year or a month. Inflation occurs when currency of a country exceeds the production. Existence and availability of surplus currency raises the general price level and lowers the purchasing power of the currency. So inflation results in the depreciation in the value of money.
The two alarming features of inflation are: (i) acceleration in the rate of inflation over time, and (ii) high rate of unemployment in the face of high rate of inflation—also termed as stagflation and slumpfation—which has posed serious challenge. Inflation, based on degrees of severity, is classified into various types.
The initial stage of inflation is generally slow and this is actually an ideal time to check it. Such an inflation with a slow rate of price rise (a low single digit inflation rate) is called crawling or creeping inflation. Such an inflation may not be considered undesirable particularly when it is after depression.
In the course of time, the process gathers strength and it enters the intermediate stage. In its earlier part it may be called trotting or walking inflation. Apart from the speed of the price increase, there is an increase in the effective demand, rate of investments and money income.
Trotting inflation may soon assume the shape of running inflation. The output of the economy fails to respond to the quick rise of money income and aggregate demand. Along with the greater rise due to the expectation of higher rise still, there is a tendency of hoarding and stock piling by the business community. It curtails the available output in the market, so the price level is pushed further. Running inflation now becomes galloping inflation (inflation rises at double or triple digit rates). The authorities are forced to meet their deficits by resorting to deficit financing.
The last stage is the run away inflation known as hyper inflation (prices rise at a thousand million or trillion percent annually). It is the last stage of inflation. At this stage, the speed of the general rise in the price level becomes extremely high. Planning goes out of context in such a peculiar situation. It leads to the collapse of the monetary and financial structure.
Inflation in India is generally caused by three factors: (i) those which induce an increase in demand—called demand pull inflation; (ii) those which produce a decrease in supply—called cost push inflation; and (iii) structural rigidities.
Q.8. Parliament can't curb judical review power. Discuss.
Ans : In a landmark judgment, a seven-judge Constitution bench of the Supreme Court ruled that Parliament could not divest constitutional courts of the power of judicial review even by way of a constitutional amendment.
The court held in a unanimous judgement that the power of judicial review over legislative action vested in the high courts under Article 226 and in the apex court under Article 32 of the Constitution was an integral and essential feature of the Constitution, and formed part of its basic structure.
The judges, quoting the apex court's majority ruling in the Kesavananda Bharati case said that, “though, by virtue of Article 368 of the Constitution, Parliament is empowered to amend the Constitution, that power cannot be exercised so as to damage the basic feature of the Constitution or to destory its basic structure.”
The ruling was given by the court while declaring unconstitutional Clause 2 (D) of Article 323A and Clause 3 (D) of Article 323B of the Constitution, to the extent that they excluded the jurisdiction of the high courts and the Supreme Court under Articles 226/227 and 32 of the Constitution.
The court made it clear that the jurisdiction conferred upon the high courts under Article 226 and 227 and upon the Supreme Court under Article 32 of the Constitution was part of the inviolable basic structure of the Constitution.
Justice Ahmadi, who delivered the judgment on behalf of the court, clarified that tribunals created under Article 323A (Central Administrative Tribunal) and Article 323B (Dealing with disputes relating to tax cases, foreign exchange matters, industrial and labour cases, ceiling on urban property, election to State legislatures and Parliament etc.) of the Constitution were competent to test the constitutional validity of statutory provisions and rules.
Q.9. What are the limitations of judicial Control.
Ans :Judicial control suffers from the following limitations:
1. Courts of law cannot intervene on their own accord. They start intervening only when approached by an individual or group of individuals, with the plea that his or their rights have been infringed, or are likely to be infringed, due to some act of the government servants.
2. The judicial control is a control after the event. One can have judicial recourse only after the damage has been done.
3. Judiciary may be statutorily prevented from reviewing on the validity of rules and regulations falling within certain spheres. Many administrative activities have been kept beyond the jurisdiction of the judiciary in India. This is not so in the case of United States of America. In that country, the Congress cannot statutorily exclude any administrative act or decision because its own acts remain subject to judicial review.
4. Judiciary may itself adopt a sort of self-denying ordinance, refusing, of its own accord, to interfere in certain areas.
5. Recourse to judicial redress has become prohibitively expensive and vexatious, which would terrify an average citizen.
Q.10. List the different forms of judicial control.
Ans :The more important forms which judicial control or remedies may take, are the following:
1. Judicial review of administrative acts and decisions.
2. Statutory appeal against administrative acts and decisions to the courts.
3. Suit against the government, central or local, by a private party, in torts or contract.
4. Criminal suits by private parties against a public officer and civil suits against a public officer for damages, or on contracts made by him, and
5. Extraordinary remedies of
(a) Habeas Corpus
(e) Prohibition and
(f) Quo Warranto
Q.11. Is there great variation exists in the case of judicial review in different countries? What are its limitations? What is the position in India?
Ans : Great variations in the pattern of judicial review exist between country and country as well as in respect of different types of administrative acts and decisions within the same country.
In Britain, judicial review does not extend to all administrative acts and is limited in three ways:
1. Many classes of administrative acts and decisions are excluded by statutes of Parliament from the scrutiny of the courts.
2. Many others are excluded by rules evolved by the courts themselves by judicial self-limitation.
3. Certain other matters are excluded by procedural difficulties.
Though judicial review does not cover the whole field of administrative action, under the well-established principles of common law and equity, actions of an administrative authority are liable to be challenged in the courts on the ground of want of jurisdiction, excess of power or its abuse.
In the U.S.A., the Congress cannot statutorily exclude any administrative act from judicial review. To do so would be unconstitutional. Therefore in principle, judicial review extends to the whole field of administrative action. In practice, the courts in the U.S.A. also have, by self-denial, limited their power to review in several ways. As these limitations have not been defined, the courts have reserved their direction to consider each case as it comes up.
Broadly speaking, the limitations affect in the following ways:
1. Review will lie only if the party applying for it has legal standing. The party must be adversely affected by the decision complained against.
2. A complainant cannot ordinarily resort to a court until he has exhausted all administrative remedies, such as an appeal to higher administrative tribunal etc.
3. Negative orders are generally not reviewable e.g. the administrator's refusal to take action.
4. Courts usually do not review certain types of decision particularly suited to administrative direction.
5. Courts do not usually review administrative findings of fact supported by substantial evidence.
6. The courts are reluctant to review administrative decisions relating to a legal right which is a privilege, e.g., where some gratuity or benefit from the government has been refused.
7. They are also reluctant to review decisions relating to the necessary functions of government.
8. A large degree of administrative finality is allowed in old and tested fields where accepted principles and procedures are already well-established.
The scope of judicial review also varies from mere examination of the correctness and form of decision to the consideration of the matter de novo, according to circumstances and the subject-matter of the case. According to White the amount of judicial intervention tends to be least in cases in- volving public health and safety, and the greatest in cases concerned with public convenience or public amenities.
Under the Administrative Procedures Act, 1946, the reviewing court is empowered:
a: to compel administrative action unlawfully withheld or unreasonably delayed, and
b: to hold unlawful and set aside administrative action or decision found to be
(i) arbitrary, capricious, involving abuse of discretion or not in accordance with law,
(ii) contrary to constitutional right or privilege,
(iii) in excess of statutory jurisdiction,
(iv) without observance of procedure required by law,
(v) unsupported by substantial evidence, or
(vi) unwarranted by facts to the extent that facts are subject to trial de novo by the reviewing court.
In India the subject of judicial review has not yet been properly studied. Normally the courts do not interfere with purely administrative action, unless it is ultra vires in regard to its scope or form. They will review quasi-judicial decisions of administration on the ground of its being ultra vires or failure to follow the prescribed procedure. The availability of review in this country is restricted by certain provisions of Constitution as well as of statutes declaring finality of administrative decisions in particular matters. Under the present Constitution, enactments of our Parliament and State legislatures are subject to judicial review. Therefore all statutes which exclude judicial review are now unconstitutional. This question has yet to be authoritatively decided on.
Q.12. What is extra-ordinary remedies?
Ans : Extraordinary remedies consist of the five writs of Habeas Corpus, Mandamus, Prohibition, Certiorari and Quo Warranto. In the U.S.A., in addition to these, there is also Injunction. The origin of these writs can be traced to the English constitutional history. These form part of the common law and are known as common law remedies. In England, these are known as prerogative writs issued in the name of the king as fountainhead of justice. These writs except for Habeas Corpus, are granted by the courts in their discretion and not as a matter of right and that too, only where there is no other adequate remedy. Therefore, they are known as extraordinary remedies.
In the U.S.A. and India, there is no question of prerogative. In the U.S.A. these remedies are provided for partly by common law and partly by statute whereas in India, it is provided in the Indian Constitution.
According to Article 32 (2) of the Indian Constitution, the Supreme Court shall have power to issue directions or orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, whichever may be appropriate, for the enforcement of any of the rights conferred by Fundamental Right, Part III. Similarly, Article 226 empowers the High Courts to issue to any person or authority, including, in appropriate cases, any government within the territories in relation to which it exercises jurisdiction, directions, orders or writs, for the enforcement of any of the Fundamental Rights and for any other purpose.
Q.13. What are the different forms of debate and discussions in the parliament?
Ans : The inaugural address of the President, the Budget speech and introduction of a bill for amendment of an Act or enactment of a new law in Parliament provide occasion for full address debates. In such debates, Government policy and achievement in the department concerned come for full examination, any member may comment, criticize or praise any aspect of the department's work.
In the Indian Parliament, in addition to the general debate, there are two other occasions for discussing the government work in a department. The first is the Half-an-hour Discussion and the next, Short Discussion. The Half-an-hour Discussion follows the Question-Hour, when a member feels dissatisfied with the answer given to his question. During this discussion, the House may extract more information on a matter of public policy from the government, may seek further clarification of the policy, may ventilate the public grievance or may put more pressure upon the Government to modify its policy in accordance with the wishes of the opposition party.
The rules also provide for Short Discussion on a matter of urgent public importance for a short time not exceeding two and a half hours. The discussion can take place only if the speaker admits the notice given by a Member on grounds of urgency and public importance and the Government agrees to find time. If admitted, a discussion takes place on the subject of the notice. Members place their points of view before the House and the Government makes a reply. But there is no voting on the motion.
‘Calling Attention’Notice is another device of drawing the attention of the Government to a serious problem in its policy administration. Under this provision, a member may raise a matter of grave urgency immediately. If it is admitted by the Speaker, the Government has to give an answer immediately or it may ask for time to make a statement.
There are two kinds of motions or resolutions, those whose object is to censure a particular minister or Government as a whole and those which seek to recommend some course of action to be adopted. Censure motion, if passed, would result in the resignation of Government. The other kind of motion are recommendatory and may or may not be accepted by the Government. Motions for adjournment are intended to discuss a definite issue of urgent importance.
Through these devices, the administration may be stirred from inertness and callousness and may be made alive to the urgency of the seriousness of a problem.
Q.14. Discuss different kinds of grants.
Ans : The Budget contains the ordinary annual estimates which constitutes the bulk of the annual receipts and charges. To meet special circumstances, there are four other kinds of grants which the House of People may be asked to make. These are:
(1) Votes on Account: Since the passing of the Budget can continue into the financial year (beyond April 1) advance grants are taken as “Votes on Account” for estimated expenditure, from April 1 to a part of the financial year, pending the regular passage of the Budget.
(2) Votes on Credit or Special Grants: To cover expenditure whose details cannot be precisely stated in the Budget on account of the indefinite character of the service to be financed (e.g., for impending war).
(3) Supplementary Grants: To cover insufficiency/overruns in grants taken, or if expenditure on some new services become necessary. This has to be passed by the usual procedure for the appropriation bills.
(4) Authorisation of charges involved in ordinary legislation: To safeguard against the possibility that ordinary legislation may, in an express or implied way, impose certain charges on the public exchequer. No bill involving such charges can go beyond second reading, unless authorised by a financial resolution of the House of People, on being moved by the Minister.
Once the budget is voted, the respective grants are communicated to the administrative ministries concerned. They, in turn, inform their respective subordinate agencies, offices, etc.
Q.15. “There are good reasons why constitutional amendment should be treated as the option of the last resort”. Enumerate a few reasons to substantiate this theory.
Ans : The Constitution is intended not merely to provide for the exigencies of the moment, but to endure through a long lapse of years. We should get accustomed to a spacious view of the great instrument. The Constitution was meant to impart such a momentum to the living spirit of our national identity that the Union of States may remain indestructible beyond our times. In dealing with a Constitution, therefore, the wisest principle to act upon is that when it is not necessary to change, it is necessary not to change.
Q.16. Rule of Law is an important feature of Indian polity. Are there exceptions to the Rule of Law? If so, are they peculiar to Indian polity? Discuss briefly the position in Britain.
Ans : The Constitution contains a number of exceptions which may be deemed to be in violation of the ‘rule of law’. These exceptions are:
Q. 17. Discuss the advantages and disadvantages of farm mechanisation in India.
Ans. Benefits : (1) Reduction in the overall coast of operation with a positive cost/benefit ratio.
(2) Timely completion of agricultural operations.
(3) Possibilities of economic multiple-cropping.
(4) Making maintenance of farm animals unnecessary for agricultural operations.
(5) Increase demand and generate employment.
(6) Improve the productivity of land and of the agricultural workers.
(i) It would displace labour.
(ii) Aggravate inequalities in income and wealth in the rural sector.
(iii) Mechanisation is limited by the topography and size of land holding.
Q.18. State the important characteristics of the topographic complexities of the Himalayas.
Ans. The Himalayas is a complex fold mountain system. The earth movements have formed many complex relief features such as:
(i) The Himalayas consist of a series of parallel mountain ranges. These ranges have been formed in different mountain building periods.
(ii) There are sharp and striking contrasts in altitude in the relief features. The curvature of the ranges, the hairpin bends, over thrust faults, suggest a complex topography found in the Himalayas.