Q.1. What are the features of Perfect Competition?
Ans. The following are the main features of perfect competition:
(1) Large Number of Firms or Sellers : The number of firms selling a particular commodity is so large that any increase or decrease in the supply of one particular firm hardly influences the total market supply. Accordingly any individual firm fail to make any influence on the price of the commodity. It is therefore said that a firm under perfect competition is price-taker. In other words he has to sell his production at the prevailing market price.
(2) Large Number of Buyers : Not only is the number of sellers very large, also the number of buyers is very large. Accordingly, like an individual firm, and individual buyer is also not able to influence price of the commodity. Any increase or decrease in individual demand will hardly make any difference to the total market demand. Accordingly, and individual buyer under perfect competition is also a price taker.
(3) Homogeneous Product : All sellers sell identical units of a given product. A important inference drawn from this feature is that buyers will have no reason to prefer the product of one seller to the product of another seller. Thus, the price of the product throughout that market will be the same.
Selling homogeneous product at the given price rules out the possibility of advertisement or other sale-promotion expenses. So that there are no selling costs in perfectly competitive market.
- Homogeneous product is sold, only one price prevails in the market as determined by the forces of market demand and market supply.
(4) Perfect Knowledge : Buyers and sellers are fully aware of the price prevailing in the market. Buyers know it fully well at what price sellers are selling a given product. As a consequence, only one price prevails in the market.
(5) Free Entry and Exit of Firms : A firm can leave any industry. There is no legal restriction on the entry or exit.
(6) Independent decision making and freedom from checks : There is no agreement between the sellers regarding production, quantity and price. Nor is there any restriction regarding the sale and purchase of any commodity.
(7) Perfect Mobility : Factors of production are perfectly mobile under perfect competition. Factors will move to that industry which pays the highest remuneration
(8) No Extra Transport Cost : For one price to prevail throughout the market, it is essential that there is no extra transport cost for the consumers while buying a commodity from different sellers.
Q.2. What are the causes of the Application of the Law of proportion ?
Ans : Many causes of the application of the law are as under :
(1) Indivisibility of Factors : The main cause of the first stage of increasing returns is that some factors of production are indivisible. It means, in order to produce goods upto a given limit, at least one unit of the fixed factor is a must. For example, a smallest stitching machine can stitch 10 dozens of exercise books per hour. Now, whether you stitch one exercise book, or one dozen of exercise book or 10 dozens of exercise books, you will require this machine, as there is no machine smaller that it. If you get this machine on hire of Rs. 2.00 per hour and stitch only one dozen of exercise books, the cost of stitching will be Rs. 2.00 per dozen. If you stitch 5 dozens, the cost will be 40 paise per dozes and if you stitch 10 dozens, the cost will be 20 paise per dozen. Thus, with increase in production average cost goes on diminishing and marginal return increases.
(2) Fixed Factors of the Production : The main cause of the operation of the second stage is that one of the factors of production is variable while others are fixed. When this variable factor is used with fixed factors, then their ratio compared to variable factor falls. Production is the result of the co-operation of all factors. When an additional unit of a variable factor begins to diminish. For instance, in a field measuring 10 hectare, 5 labourers are employed. Land is fully utilized with the help of these five labourers. In this case, land-labour ratio is 2 : 1. On the contrary, if the number of labourers is increases to 10 then the new land-labour ration 1 : 1. It is obvious that one labourer on 1 hectare of land will produce less than one labourer on 2 hectares of land. Thus, as the ratio land (fixed factor) to labour (variable factor) falls, the marginal production of the labourer diminishes.
(3) More than Optimum Use of the Fixed Factor : After making the optimum use of a fixed factor if it is combined with increasing units of variable factor, then diminish. It is so because after the optimum use, the ratio of fixed and variable factors becomes defective. Supposing, a machine is a fixed factor or production. It is put to optimum use when 4 labourers are employed on it. If, however, 5 labourers are put on it, then total product increases very little and the marginal product diminishes.
(4) Imperfect Substitutes : According to Robinson, it is the imperfect substitution of factors that is mainly responsible for the operation of the stage of diminishing returns. One factor cannot be used in place of the other factor. Had perfect substitution among the factors been possible, then after the optimum use of fixed factor, as the units of variable factor are increased the amount of fixed factor could be increased by making use of its substitutes. Such a substitution would have made it possible to increase the production in the same proportion as before. But in real life factors are imperfect substitutes. Accordingly, after the optimum use of a fixed factor, it cannot be substituted by any other factor. Consequently, when fixed and variable factors are not combined in an appropriate ratio, the marginal return of the variable factor begins to diminish.
Q.3. What are the determining of real wages ?
Ans : (1) Money Wages : If other things remain the same, especially the prices, increase in nominal wages will lead to increase in real wages, because then the wage-earner will be able to get more goods and services. Real wages of a college Professor who gets Rs. 8,000 per month will be more than the real wages of a school Teacher who get Rs. 6,000 per moth.
(2) Price Level : Price level refers to the purchasing power of money. When price level moves up the purchasing poser of money goes down. For example. 10 percent increase in general price level in India in 2000 led to relative fall in the real wages of the labourer. because their money wages having remained the same. They could get less amount of goods and services.
(3) Supplementary Income : Real wages of a labourer would be more if besides nominal wages he also receives supplementary income form his employer in the form of free meals, uniform, medical facilities, etc.
(4) Nature of Employment : Real wages also depend upon the fact whether the employment is regular or casual. Regularity of job implies higher real wages while uncertainty of job implies lower real wages.
(5) Hose of Work : If a worker by working less number of hours gets the same money wages as the other worker who works for long hours, then the real wages of the former will be more than the latter. The former can supplement his income by doing some work in his spare hours.
(6) Working Conditions : If two labourers get the same nominal wages, but the one works under clean and healthy conditions whereas the other has to work under dirty and unhealthy conditions, then the real wages of the former will be more than the latter. The latter will have to spend part of his income on medicines whereas the former will have to incur no such expenditure.
(7) Professional Expenses : If a worker has to spend a part of his money wages on professional expenses, his real wages will be low. If a Lecturer and a D.P.E. working in a college get the same salary, then the real wages of the former will be low. It is so because a lecturer has to spend amount on the purchase of books of his subject as his trade expenses, whereas, a D.P.E. will have to spend nothing on this score.
(8) Period and Cost of Training : Engineers, Doctors and Advocates etc. have to receive training before entering into their profession. It involves time and money expenses. Hence to work out the real wages of the professionals these expenses must be deducted from their money income.
(9) Employment of Dependents : Dependents of those working in Railways, Bank, Army etc. get preference at the time of recruitment to those services. Hence the future of such dependents is quite secure. This economic security enhances the real income of the employees of these services.
(10) Prospects of Future Promotion : If the future prospects of a job are quite bright and promising then even if the money wages are low to begin with , the real wages will be considered high.
(11) Social Status : A head clerk and a police sub-inspector may receive the same money wages, but a police sub-inspector commands more respect in the society than a head clerk. Hence, the real wages of the sub-inspector are considered to be high.
(12) Extra Earnings : Real wages will be more if there are opportunities of extra earnings in spare time. College teachers may write books to make extra earnings.
Q.4. List the effects of Excess Demand Or Inflationary Gap on Output, Employment and Prices.
Effects of excess demand or inflationary gap on output, employment and prices may be summarised as follow :
(1) Effect on Employment : Excess demand does not affect the level of employment in the economy. The system is already in a state of full employment when aggregate demand tends to increase beyond what is required to maintain the full employment equilibrium.
(2) Effect on Prouction : Excess demand does not help increase production either. It is simply in excess of what is needed for 'full capacity' production in the system. In a state of full employment, output can increase only when the state of technology improves which is assumed by Keynes to remain constant in short period.
(3) Effect on Prices : Excess demand only generates pressure of demand on the existing flow of goods and services, in the economy. Accordingly, rise in price tends to be proportionate to the rise in demand. Which is why excess demand is described as 'inflationary gap' or inflationary gap is measured in terms of excess demand.
Q.5. How the transfer of resources are made between the centre and the state ?
Ans : Financial resources are transferred from the Centre to the States through the following three sources –
(i) Finance Commission;
(ii) Planning Commission;
(iii) Discretionary grants.
Since planning the contribution of the Centre to the State resources has been rising continuously. The share of these transfers in aggregate expenditure of the State governments has varied between 35 percent and 45 percent.
The growing transference of resources from the Centre to the States is evidence of –
(i) Increasing integration between the Central and State finance;
(ii) Helpless dependence of States on the Centre;
(iii) Growing power and interference of the Centre in the affairs of the State.
Among the taxes, the States' share of Union excise duties has been showing the largest rise. This is due to the increase in the number of items in the list of divisible excise duties. The States' share of taxes and duties as a whole has been expanding due to the increasing yields of various taxes also. The large increase in grants from the Centre indicates the growing revenue requirements of States. Loans have registered only a modest increase.
Q.6. How the role of the plannning commission was re-defined during the eighth plan?
Q.7. What are the consequences of inflation?
Ans : Mild inflation is good for economy. It creates favourable climate for investment which eventually results in larger income and full employment. However, high rate of inflation has serious repercussions on the economy as a whole. Besides what is worse still it affects the various classes in different ways. Persons' income like the interest and rent receivers are the worst sufferers. As the interest receivers are mostly rich with plenty of loanable funds and have other avenues of income as well, in real practice they may not suffer so much. Inflation has an extremely adverse effect on savings of the middle, lower middle and the poor classes. Long term savings are also discouraged. Creditors still suffer in another manner. As the purchasing power of the money is constantly declining their loan amount when repaid can be much less in terms of goods and services. Debtors are thus gainers too. When they liquidate their loans in terms of its purchasing power, they are returning a far smaller proportion. Wage earners are the worst sufferers. Initially the wages do not rise and when they do rise they still lag behind prices. Business community is generally a gainer for while the prices of its costs of production either remains the same or rises at a slower pace, certain elements of costs do not rise at all like the rent and interest. Such an arbitrary redistribution of wealth from the working and the poorer classes to the richer classes has been sharply criticised.
Although inflation is a worldwide phenomena, prices in India have risen more sharply than that in most of the other countries. This has adversely affected our balance of payments in two ways : (i) the demand for Indian products in international market has declined and so increasing of our exports has become difficult. Also as the profitability in the home markets have increased, producers are least interested in stepping up exports; and (ii) as the foreign goods appear cheaper, Indian importers have tried to increase imports.
Q.8. What are the Jurisdiction of Parliament in the matter of Jammu and Kashmir?
Q.9. 'There are some autonomy given to J & K in certain matters. Discuss.
Q.10. What are the procedure for the amendments of theConstitution of Jammu and Kashmir ?
Q.11. What is the origin of Art 370 of the Constitution? Discuss the pros and cons of the demand to abrogate the Article?
Q.12. Can the President declare a Constitutional Emergency in the State of Jammu and Kashmir? Discuss the other serious limitations imposed upon the executive power of the Union in this regard.
Q.13. Write a note on the following :
(1) Question Hour (2) Starred Question (3) Unstarred Question (4) Short Notice Question (5) Zero Hour (6) Cut Motion (7) Calling Attention Motion.
Ans : (1) Question Hour. The day’s business normally begins with the Question Hour during which questions asked by the members are answered by the Ministers.
(2) Starred Question is one for which an oral answer is required to be given by the Minister on the floor of the House. Supplementary questions may be asked based on the Minister’s reply. The Speaker decides if a question should be answered orally or otherwise. One member can ask only one starred question on a day.
(3) Unstarred Question is one for which the Minister lays on the table a written answer. A 10-day notice has to be given to ask such questions and no supplementary questions can be asked with regard to such questions.
(4) Short Notice Question can be asked by members on matters of public importance of an urgent nature. It is for the Speaker to decide whether the matter is of urgent nature or not. The member has also to state reasons for asking the question while serving notice.
(5) Zero Hour. This period follows the Question Hour and it generally begins at noon. Usually the time is used by members to raise various issues for discussion.
(6) Cut Motions. A motion that seeks reduction in the amount of a demand presented by the government is known as a cut motion. Such motions are admitted at the Speaker’s discretion. It is a device through which members can draw the attention of the government to a specific grievance or problem.
(7) Calling Attention Motion. A member may, with prior permission of the Speaker, call the attention of a Minister to any matter of urgent public importance and the Minister may make a brief statement regarding the matter or ask for time to make a statement.
Q.14. Discuss the parliamentary forms of government.
Ans : The Constitution of India establishes a parliamentary form of government both at the Centre and the States. In this respect, the Constitution-makers have followed the British model in toto.
Unique Blend of Rigidity and Flexibility. A rigid Constitution is one which requires a special method of amendment of any of its provisions, while in a flexible Constitution, the provisions can be amended by ordinary legislative processes. A written Constitution is generally rigid. The Indian Constitution, though written, is sufficiently flexible, however, a few provisions of the Constitution require the consent of half of the state legislatures. The rest of the provisions can be amended by a special majority of parliament as under Article 368.
Q.15. What is fundamental rights and directive principles of state policy?
Ans : Inspired by the principles of Natural Law and the need to enable the fullest development of the human personality, as well as to protect human dignity and worth, our Constitution-makers were prompted to import a complete code of human rights in the Constitution, which have been elaborately detailed in Part III of the Constitution (Articles 12-32). The State cannot make a law which takes away or abridges any of the rights of the citizens guaranteed in Part III of the Constitution. If it passes such a law, it may be declared unconstitutional by the courts. Moreover, the Supreme Court can issue writs in the nature of Habeas Corpus, Mandamus, Prohibition, Certiorari and Quo Warranto whenever these rights are violated.
q However, the Fundamental Rights are not absolute rights. They are subject to certain ‘reasonable restrictions’. Thus, the guarantee of individual rights in the Constitution has been very carefully balanced with the need for the protection of social and national interests.
Directive Principles of State Policy. The Directive Principles of State Policy, contained in Part IV (Articles 36-51), spell the aims and objectives to be taken up by the state in the governance of the country. Unlike the fundamental rights, the directive principles are not justifiable, that is, if the state fails to implement any provisions of Part IV no action can be brought against the state in a law court. However, the idea of a Welfare State, as envisaged by Part IV of the Constitution, can be realised only if the state endeavours to implement them with a genuine sense of moral duty.
Q.16. How the Indian constitution is a federation with unitary features?
Ans : The most remarkable feature of the Indian Constitution is that being a Federal Constitution it acquires a unitary character under certain conditions. During the proclamation of emergency the normal distribution of powers between the Centre and the States undergoes a vital change. The Union Parliament is empowered to legislate on any subjects mentioned in the State List. The Central government is empowered to give directions as to the manner in which it should exercise its executive powers. The financial arrangements between the Centre and the States can also be altered by the Central government. Thus, during a proclamation of emergency, the Constitution acquires a unitary character.
Q.17. What is universal adult suffrage?
And : The old system of communal electorates has been abolished and the uniform adult suffrage system has been adopted. Under the Indian Constitution every man and woman above 18 years of age (the 61st Amendment Act, 1989 lowered the minimum voting age from 21 to 18 years) has been given the right to vote. The adoption of universal adult suffrage (Article 326) without any qualification either of sex, property, taxation, or the like, is a bold experiment in India, having regard to the vast extent of the country and its population with an overwhelming illiteracy.
Q.18. What is independent judiciary and secular state?
Ans : Mere enumeration of a number of fundamental rights in a Constitution without any provision for the proper safeguards cannot serve any useful purpose. The very existence of a right depends upon the remedy for its enforcement. It is said that unless there is remedy, there is no right.
Secular State. The Constitution established India into a secular state. The state is to adopt an attitude of equality to all religious communities—the relationship between the state and the individual being that on the basis of citizenship and not on religious identities. Articles 25 to 28 of the Constitution give concrete shape to this concept of secularism. It guarantees to every person the freedom of conscience and the right to profess, practice and propagate religion.
Q.19. What is fundamental duties?
Ans : In line with the recommendations of the Swarn Singh Committee, the Constitution 42nd Amendment Act, 1976, has introduced a Code of ten “Fundamental Duties” for citizens. Of course, there is no provision in the Constitution for direct enforcement of any of these Duties nor for any sanction to prevent their violation. But, while determining the constitutionality of any law if a court finds that it seeks to give effect to any of these Duties, it may consider such a law to be `reasonable’ in relation to Articles 14 or 19, and thus save such a law from unconstitutionality. It would also serve as a warning to reckless citizens against anti-social activities such as burning of the Constitution, destroying public property, and the like.