SST Set - 6 (Q.1 to 27)
Q.1. What are the main assumptions of the Law of Demand? What explains the law of demand or why demand curve slope downward?
Ans : Law of demand holds good when “other things remain the same.” It means factors influencing demand other than price are assumed to be constant. These constitute the assumptions of the law. It applies to normal goods and not to Giffen goods. The main assumptions of the law are as follows:
(1) Tastes and preferences of the consumers remain constant.
(2) There is no change in the income of the consumer.
(3) Prices of the related goods do not change.
(4) Consumers do not expect any change in the price of the commodity in the near future.
Downward slope of demand curve indicates that more is purchased in response to fall in price.
Thus, there is inverse relationship between price of a commodity and its quantity demanded. This may be explained in terms of the following factors :
(1) Law of Diminishing Marginal Utility : According to this law, as a consumer, in a given time, increases the consumption of a thing, the utility from each successive unit goes on diminishing. A consumer gets maximum satisfaction when the price of a commodity is equal to its marginal utility. As more units are bought their marginal utility diminishes. Consequently, a consumer will buy more less and less price for each successive unit . It is, therefore, clear that with fall in price more units of a commodity will be demanded and with rise in price less units of commodity will be demanded.
Income Effect can be Positive or Negative. It is positive when increase in income causes increase in demand. It occurs in case of normal goods. Income effect is negative when increases in income causes decrease in demand. It occurs in case of inferior goods.
(2) Income Effect : Income effect is the effect on the change in the quantity demanded when the real income of butler changes as a result of the change in the price of commodity alone. Change in the price of commodity causes a change in the real income of the consumer. Real income is that income which is measured in terms of goods and services. With fall in price real income increases. The increased real income is used to buy more units of the commodity. Thus, demand extends with increase in real income. Conversely, rise in price leads to fall in real income and hence contraction of demand.
(3) Substitution Effect : Substitution effect refers to substitution of one commodity for the other when it become relatively cheaper. Thus, when the price of commodity-X falls, it becomes cheaper in relation to commodity-Y. Accordingly X is substituted for Y. Tea and coffee are substitutes, with fall in the price of tea, it is substituted for coffee. It is called substitution effect. As a result of this effect, a consumer in order to get maximum satisfaction, will buy more units of that commodity whose price has fallen in relation to the substitute commodity. In the above example, consumers will substitute tea for coffee and so demand for tea will increase under substitution effect. Conversely, if the price of tea rises, consumer will substitute coffee for tea and hence demand for coffee will extend.
(4) Size of Consumer Group : When the price of a thing falls, many consumers who were not buying it at its previous price begin to purchase it. Consequently, demand extends. Conversely, when the price rises, some of the consumers will withdraw from the market and thus demand will fall. In this way, change in price is followed by change in the size of consumer group which, in turn, will influence the total demand for the commodity.
(5) Different Uses : Many goods have alternative uses. Grams are used for human consumption as well as for the consumption of horses. When the price of gram is high, it will be used to meet more important demand, i.e., for human consumption alone. Thus its total demand will fall. On the other hand, with fall in its price, it will be demanded both for human as well as animal consumption. Consequently, fall in price of gram will lead to more demand for it.
Q.2. What is Private Cost and Social Cost? What is the difference between the two?
Ans : On the basis of the Sacrifice that the society has to make in order to produce goods and services two aspects of cost are considered:
(1) Private Cost : Private cost is the cost incurred by an individual firm for production a commodity. In the words of Miller, “Private costs are costs incurred by the firm or the individual producer as a result of their own decision.” For example, the expenses incurred by a textile mill on the purchase of raw material , wages, rent, electricity charges etc. to manufacture cloth are called private cost. `
(2) Social Cost : Social cost is the cost incurred by the whole society for producing a commodity. For instance, during the process of manufacturing cloth the smoke emitting from the chimneys of textile mills spoil the garments worn by the people and so they have to spend more on laundry. Pollution of air tells on the health of the people and they have to spend more on medical treatment. All these expenses are not incurred by a private firm but by the society as a whole. That is why these expenses are called social costs.
Following examples of social costs should make the distinction between private cost and social cost clear:
(1) The expenses incurred by a contractor in felling trees constitute private cost; but the sufferings that the society has to undergo in the form of soil erosion, floods, and deforestation constitute social cost.
(2) Wastes of chemical factory flowing into a river, not only pollute the river water but also cause death to the fish. In order to make this water potable, municipalities have to spend large amounts on water treatment. This expenditure constitutes social cost.
It may however be noted that when we refer to cost we mean private cost only.
Q.3. What Determines Demand for a Factor ?
Ans : Demand for a factor depends upon the following factors :
(i) Demand for the Final Product : Demand for a factor of production is derived demand. It is derived from the demand for the product that the factor is producing. Accordingly, demand for the final product (produced by the factor) becomes the principal determinant of demand for the factor.
(ii) Productivity of the Factor : We have noted earlier that curve for a factor by a firm is identified with the marginal revenue productivity curve of the factor. Accordingly, productivity of the factor becomes another important determinant of its demand. Other things remaining constant, a forward shift in productivity should also imply a forward shift in demand for the factor.
(iii) Price of the Factor : Other things being constant, demand for the factor is inversely related to price of the factor. Higher the price, lower the demand, and vice versa.
(iv) Prices of Related Factors : Demand for a factor also depends upon prices of related factors, particularly when the factors are substitutes of each other. Higher price of the substitute factor will raise the demand for the factor under consideration, and vice-versa.
Q.4. What is the relation between Multiplier and Marginal Propensity to Consume ?
Ans : Relationship between multiplier and marginal propensity to consume is significant in view of the fact that the size of the multiplier depends upon the value of marginal propensity to consume. Higher the value of marginal propensity to consume, greater the multiplier and vice-versa. This is because consumption expenditure of one individual becomes income of the other. Accordingly when more is spent greater is the generation of income. And, when more is saved lesser is the generation of income. Thus, whereas the size of multipler is positively (directly) related to marginal propensity to consume, it is negatively (inversely) related to marginal propensity to save. This is established in terms of the following algebraic relationships:
Substituting the value of DI in equation (i),
Dividing both numerator and denominator by DY, we get
Q.5. What is Revenue Expenditure ?
Ans : Revenue expenditures of the Government are those expenditures which have the following two characteristics:
(i) These expenditures do not create assets for the Government. For example, expenditure by the Government on old-age pensions, salaries and scholarships are to be treated as revenue expenditure. Because these are jusrroutine expenditures, not creating assets of any sort.
(ii) These expenditures do not cause any reduction of liability of the Government. Expenditure on the repayment of loans, for example, causes reduction on Government liability. Accordingly, this is not to be treated as revenue expenditure.
In short, revenue expenditure refers to estimated expenditure of the government in a fiscal year which do not either create assets or causes a reduction is liabilities.
Q.6. What are the objective of first five year plan? What was its performance?
Ans : India's First Plan was formally finalised in December 1952, though it has already been in operation from April 1951. The Plan had a two fold objectives : (i) to correct the disequilibrium in the economy caused by three main problems—influx of refugees, severe food shortage and mounting inflation— which arose due to Second World War and the partition of the country; (ii) to initiate the process of all-round balanced development to ensure a rising national income and a steady improvement in the living standards. The plan accorded highest priority to agriculture and irrigation allocating about 25% of the total outlay, and transport and communications.
The plan was successful, especially in the agricul ural sector targets were more than fulfilled and the three objectives, viz, rehabilitation of refugees, food self sufficiency and control of prices were more or less realised. The plan was primarily a plan for rehabilitation and a plan for tentative initiation into development.
Q.7. What are the plan strategies of poverty alleviation so far?
Ans : The plan strategies of poverty alleviation can be divided into three phases. In the first phase, lasting from the beginning of the 1950s till the end of 1960s, the major emphasis was on growth mainly through improvement in infrastructures and structural reforms such as redistribution of land, improving the plight of poor tenants, other radical land reforms etc. It was though that the solution to the problem of inequality and poverty would come through 'filtration' rather than a planned direct attack.
In the second phase, beginning from the Fifth plan. PAP was started with measures that promised to address directly and exclusively the poor in the rural areas. A number of special programmes for the rural poor were undertaken in this phase, of which the important ones are: Small Farmer's and agricultural Labourers' Development Agency (MFAL), Drought Prone Areas Programme (DPAP), Crash Scheme for Rural Employment (CSRE), Food for Work Programmer (FWP), IRDP and NREP. During this phase the emphasis of PAP was on creating employment opportunities and distributing renewable assets among the poor. Similarly heavy emphasis was laced on transfer of income to the poor in indirect ways for e.g. through food subsidies and dual pricing of essential commodities.
In the third — the latest phase — starting from the beginning of the 1990s emphasis has shifted to measures aimed at accelerating economic growth and on creating an environment for ensuring a 'spread effect'. In keeping with Indian traditions, lip service is continued to be paid to structural change, as much as to target group oriented programmes, but the dominant thought is to create more wealth and to enable the poor to benefit from the secondary effects of growth, which it is presumed, will percolate down and reach the poor.
ntrally sponsored employment schemes with more dynamism and efficiency.
Q.8. Write a brief note on the organisation of Subordinate courts in the State.
Ans. In every district there is a District and Sessions Judge. Under the District and the Sessions Court there are several civil, criminal and revenue courts:
(i) Civil Courts
In a District the District Court is the highest court of appeal. The District Judge exercises both administrative and judicial powers. He supervises the working of civil courts in the district and distributes work among them. He also enjoys both original and appellate jurisdiction. Appeals against the judgement of the District courts can be taken to the High Court of the State. The District Courts have also jurisdiction over other matters like marriage, divorce and guardianship of minors and lunatics. Under the District Court are the Courts of Senior Sub-Judges and the Small Causes Courts. The Small Causes Courts can decide cases involving sums below Rs. 500. The Courts of Sub-Judges can try cases of sums not exceeding Rs. 5000. The Courts of Senior Sub-Judges can deal with cases involving any amount. The District Court hears appeals from all these courts.
(ii) Criminal Courts
The court of the Sessions is the highest Criminal Court in a District. This Court tries very serious criminal cases involving murder and other serious offences duly committed to it by a First Class magistrate. The Sessions Court can award any punishment. But a death sentence passed by a Sessions Court is subject to the confirmation of the High Court of the State.
Under the Sessions Court are the Courts of First Class Magistrates, Second Class Magistrates and Third Class Magistrates.
A Third Class Magistrate can try only minor criminal cases involving punishment by imprisonment upto one month and fine upto Rs. 50.
The Second Class Magistrate can award punishment for imprisonment for a maximum period of six months and fines upto Rs. 200.
The First Class Magistrate is above the Second and Third Class Magistrates and hears appeals from them. He can award a sentence of imprisonment upto two years and fines upto Rs. 1000.
(iii) Revenue Courts
The revenue courts differ from State to State. The Court of a Tehsildar is the lowest court,. The District Magistrate hears appeals against his decisions. Similarly, the Commissioner hears the appeals against the decision of the District magistrate or the Deputy Commissioner. At the apex is the Court of the Board of Revenue. This Court hears appeals against the decisions of all the lower subordinate revenue courts.
Q.9. Name the important sources of Union Revenue.
Ans. Following are the important sources of revenue of the Union :
i. Corporation tax.
ii. Currency, coinage and legal tender, foreign exchange.
iii. Duties of customs including export duties.
iv. Duties of excise on tobacco and certain goods manufactured or produced in India.
v. Estate duty in respect of property other than agricultural land..
vi. Fees in respect of any of the matters in the Union List, but not including any fees taken in any court.
vii. Foreign loans.
viii. Lotteries organised by the Government of India or the Government of a State.
ix. Post Office Savings Bank.
x. Post and Telegraphs, Telephones, Wireless Broadcasting and other like forms of communications.
xi. Property of the Union.
xii. Public debt of the Union.
xiv. Rates of stamp duty in respect of Bills of Exchange, Cheques, Promissory Notes, etc.
xv. Reserve Bank of India.
xvi. Taxes on income other than agricultural income.
xvii. Taxes on the capital value of the assets exclusive of agricultural land of individuals and companies.
xviii. Taxes other than stamp duties on transactions in stock exchanges and future markets.
xix. Taxes on the sale or purchase of newspapers and on advertisements published therein.
xx. Terminal taxes on goods or passengers, carried by railways, sea or rail.
Q.10. Name the important sources of the State Revenue.
Ans. Following are the sources of revenue meant exclusively for States.
i. Capitation tax
ii. Duties in respect of succession to agricultural land.
iii. Duties of exchange on certain goods produced or manufactured in the States, such as alcoholic liquids, opium, etc.
iv. Estate duty in respect of agricultural land.
v. Fees in respect of any of the matters in the State List, but not including fees taken in any court.
vi. Rates of stamp duty in respect of documents other than those specified in the Union List.
viii. Taxes on agricultural income.
ix. Taxes on land and buildings.
x. Taxes on mineral rights, subject to limitations imposed by Parliament relating to mineral development.
xi. Taxes on the consumption or sale of electricity.
xii. Taxes on the entry of goods into a local area for consumption, use of sale therein.
xiii. Taxes on advertisement other than those published in newspapers.
xv. Taxes on goods and passengers carried by road or on inland waterways.
xvi. taxes on vehicles.
xvii. Taxes on animals and boats.
xviii. Taxes on professions, traders, callings and employments.
xix. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
Q. 11. Who appoints the Finance Commission? What are the functions of the Finance Commission?
Ans. There is a Chairman and four other members of the Finance Commission, who are appointed by the President of India under Article 280 of the Constitution.
The Finance Commission is appointed after every five years or earlier; if the President considers necessary.
The qualifications for the appointment as members are to be determined by the Parliament.
Following are the functions of the Finance Commission as mentioned under Article 280 of the Constitution :
(i) To make recommendations to the President regarding the distribution between the Union and the State of the net proceeds of taxes which are to be, or may be, devided between them.
(ii) It also makes recommendations regarding the principles which should govern the grants-in-aid of the revenues of the State out of the Consolidated Fund of India.
(iii) It will also give its recommendations on any other matter referred to the Commission by the President in the interest of sound finance.
(iv) The Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may, by law, confer on them.
Under Article 281, the President shall cause every recommendation made by the Finance Commission under the provision of the Constitution together with an explanatory memorandum as to the action taken thereon to be laid before each House of Parliament.
Q.12. Who appoints the Advocate General of State and what are his functions?
Ans. Every State has an Advocate General. He is appointed by the Governor of that State. A person who is appointed as an Advocate General should be qualified in every way to be a Judge of the High Court. He holds his office during the pleasure of the Governor.
It is the duty of the Advocate General to give advice to the Government of the State on such other duties of a legal character which are referred or assigned to him by the Governor from time to time. Besides this, the Advocated General performs such other functions and discharges such other duties which the Constitution confers on him or laws require of him. He has the right to address both the Houses of the State Legislature on legal points but he cannot vote in the proceedings of the State Legislature.
Q.13. Who can appoint the Inter-State Councils? What are their functions?
Ans. Article 263 of the Indian Constitution lays down that if at any time it appears to the President that the public interest would be served by the establishment of an Inter-State Council, he can establish the same.
These Inter-State Council can be charged with the following functions:
(a) inquiring into and advising upon disputes which may have arisen between States;
(b) investing and discussion subject in which some or all of the States, or the Union and one or more of the States, have a common interest; or
(c) making recommendations upon any subject and, in particular, recommendations for the better coordination of the policy and action with respect to that subject.
The President who has been given the authority to establish such a Council can define the nature of the duties to be performed by a particular Council. He can also lay down its organisation and the procedure to be followed.
Q.14. On whom does sovereignty vest in the present Indian Constitution?
Ans. As the Preamble indicates, the sovereignty under the Constitution vests in the Republic of India, and not in any of its component parts.
Q.15. What is a cut motion? When is it moved?
Ans. Cut motions are resorted to when demands for grants are placed before the House. Generally, token cuts are moved to enable the house to discuss failures/inadequacies.
Q.16. What is Zero Hour? What is the advantage inherent in it, from the point of view of legislators?
Ans. It is device used to interrupt the day's proceedings in the legislatures to raise any matter of urgent importance. The advantage : No prior notice is required.
Q.17. What do you understand by the term 'Begar mentioned in Art, 23 (1).
Ans. The term 'begar' means "labour or service exacted by government or a person in power without giving remuneration for the same".
Q.18. What constitutes contempt of Court?
Ans. Anything which tends to bring the administration of justice into disrespect or interfere with the administration of justice constitute contempt of Court.
Q.19. Cite the relevant Article of the Constitution which has a bearing on capital punishment or protection of life and personal liberty.
Ans. Art, 21 which states: "No person shall be deprived of his life or personal liberty except according to procedure established by law".
Q.20. Can a person of unsound mind exercise his franchise in the general elections? What are the disqualifications, if any, forbidding a citizen from exercising his franchise?
Ans. No, he cannot exercise his franchise. The grounds for disqualifications are :
(b) unsoundness of mind
(d) corrupt or illegal practice
(e) age less than 18 years.
Q.21. Does the Indian Constitution provide for a Deputy Prime Minister?
Ans. No, there is no constitutional sanction for the post of Deputy Prime Minister. "For all practical purposes, the (present) incumbent is a Cabinet Minister".
[Explanatory Note : According to a Supreme Court ruling, "the post of Deputy Prime Minister is only descriptive."]
Q.22. What is meant by "statutory status"?
Ans. Any institution which owes its birth to a statute and is a legal entity created by the Act or the Rules framed under an Act of Parliament or a State legislature, acquires a statutory status.
Q.23. Discuss the origin, powers and limitations of the Federal Court of India.
Ans. Established under the Government of India Act, 1935, the Federal Court had original and appellate jurisdiction. Appeals against its decisions would lie with the Privy Council, London.
Q.24. Which was the highest court of appeal for Indian litigants prior to 1950 i.e., before the advent of the Supreme Court of India?
Ans. The Privy Council, London.
Q.25. Write a short note on the "Right to Property".
Ans. Right to Property (Art. 31), having ceased to be a Fundamental Right, with the passing of the 44th Amendment Act (1978), is only a legal right now.
Q.26. Why and when are bye-elections held?
Ans. A bye-election is held to fill up a vacancy in a representative body.The vacancy occurs due to death or resignation of the member during his normal term. The member so elected holds office till the completion of the term of the representative body or till a general election takes place in all constituencies.
Q.27. Write a short notes on :
(a) scheduled tribes and
(b) scheduled areas
Ans. Scheduled tribes are notified by Presidential orders for special protection under the Constitution.
(b) Scheduled areas within States attract special administrative provisions on account of backwardness of the people.