SST Set - 9 (Q.1 to 15)
Q.1. List the factors determining Price Elasticity of Demand
Ans : Following factors determine the price elasticity of demand : (1) Nature of Commodity : Ordinarily, necessarieslike salt, kerosene oil, match boxes, text books, seasonal vegetables etc. have less than unitary elastic (inelastic) demand). Luxuries, like air-conditioner, costly furniture, fashionable garments etc. have greater than unitary elastic demand. The reason being that change in their price has a great effect on their demand. Comforts like milk, transistor, cooler, fans etc. have neither very elastic nor very inelastic demand.
Jointly demanded goods, like, car and petrol, pen and ink, camera and film, etc., have ordinarily inelastic demand. For example, rise in price of petrol will not reduce its demand if the demand for cars has not decreased. (2) Availability of Substitutes : Demand for these commodities which have substitutes, (for example, tea has its substitute in coffee, orange juice has its substitute in lime juice) are relatively more elastic. The reason being that when the price of commodity falls in relation to its substitute the consumers will go in for it and so its demand will increase. Commodities having no substitutes like cigarettes, liquor etc. have inelastic demand. (3) Different Uses of Commodity : Commodities that can be put to variety of uses have elastic demand.
For instance, electricity has multiple uses. It is used for lighting, room-heating, air-conditioning, cooking etc. If the tariffs of electricity increase its use will be restricted to important purpose like lighting. It will be withdrawn from less important uses. On the other hand, if a commodity such as paper has only a few uses its demand is likely to be inelastic. (4) Postponement of the Use : Demand will be elastic for those commodities whose consumption can be postponed. For instance, demand for constructing a house can be postponed. As a result, demand for bricks, cement, sand, gravel etc. will be elastic. Conversely, goods whose demand cannot be postponed, their demand will be inelastic. (5) Income of Consumer : People whose income are very high or very low, their demand will ordinarily be inelastic. Because rise or fall in price will have little effect on their demand. Conversely, middle income groups will have elastic demand.
(6) Habit of Consumer : Goods to which a person becomes accustomed will have inelastic demand like cigarette, coffee, tobacco etc. It is so, because a person cannot do without them. (7) Proportion of Income spent on a Commodity : Goods on which a consumer spends a very small proportion of his income, i.e., toothpaste, boot-polish, newspaper, needles etc. will have an inelastic demand.
On the other hand, goods on which the consumer spends a large proportion of his income, i.e., cloth, scooter etc. their demand will be elastic. (8) Price-level : Elasticity of demand also depends upon the level of price of the concerned commodity.
Elasticity of demand will be high at higher level of the price of the commodity and low at the lower level of the price. (9 ) Tim e Period : Demand in inelast ic in shortperiod but elastic in long period. It is so because in the long-run a consumer can change his habits. So rise in price in the long-run is followed by relatively more fall in demand.
Q.2. What are the causes of Increasing Returns to a Factor ?
Ans : Increasing returns to a factor occurs because of the following factors : (i) Fuller-utilisation of the Fixed Factor : In the initial stages, fixed factor (such as machine) remains under-utilised. Its fuller utilisation calls for greater application of the variable factor (labour). Hence, initially, additional units of the variable factor add more and more to total output, or, marginal product of the variable factor tends to increase. (ii) Increased Efficiency of the variable Factor : Additional application of the variable factor (labour) facilitates process based division of labour that raises the efficiency of the factor. Accordingly, marginal productivity of the factor tends to rise. (iii) Better Co-ordination between the Factor : So long as fixed factor remains under-utilised, additional application of the variable factor tends to improve the degree of co-ordination between the fixed and variable factors. As a result, total output increases at the increasing rate.
Q.3. What is Economic Rent ? Discuss different types of rent ?
Ans : There are two concepts relating to economic rent.(i) Classical View : According to classical economists, payment made for the use of land only is called economic rent. In economics the term ‘rent’ is used to connote economic rent only. Thus, according to Ricardo and other classical economists, economic rent is that rent which is paid for services of land alone. According to Anatol Murad, “Economic rent is the portion of a landlord’ a income which is attributable to his ownership of land.” (ii) Mo dern View : Acc ordin g to moder n eco nomists like, Robinson, Boulding etc., the concept of rent is applicable not merely to land but to all factors of production. A part of the income or the entire income of a factor of production can be called rent. It will be wrong to confine rent to the income earned by land only. The modern economists have made use of the concept of opportunity costs or transfer earnings while explaining economic rent. Different factors of production, like land, capital, labour etc. have alternative uses. Each factor will be put to that use in which it can earn maximum income. Economic rent of a factor of production is the excess over its transfer earning (opportunity cost) i.e.,. what a factor may be earning in its present employment (use) over what it should earn in its next best alternative use. The amount by which the actual earning of a factor is more than its transfer earning will be called rent.
Rent = Actual Earning - Transfer Earning Suppose a peon in a bank is getting Rs. 3,000 p.m. as salary. This is his actual earning. His next best alternative employment is in a college where he can get Rs. 2,000. This is his transfer earning. But as he is actually earning Rs. 3,000 as a Government peon, it mens he is earning Rs. 1000 more than his transfer earnings. Thus, he is earning as economic rent (Rs. 3,000 - Rs. 2,000) equivalent to Rs. 1000. Modern economists have associated rent with all factors (land, labour, capital, entrepreneur) of production.
Gross and New Rent : Gross rent is that which is paid for the services of the land and for the use of fixed assets on land. Gross rent has the following components : (i) Net rent (it is a payment for the use of land only.) (ii) payment for the use of fixed assets on land such as wells, farm houses etc.
Contract Rent : It is the rent which is settled as per contract between the tenant and the landlord. Generally it is of the nature of gross rent. It refers to contractual payment, say for the use of land, residential buildings, factory sheds etc. for a specified period of time.
Scarcity Rent : According to Malthus, rent arises due to scarcity of land, that is, supply of land is less than its demand. “Scarcity rent is the price paid for the use of the homogeneous land when its supply is limited in relation to demand.” If the entire land is homogeneous (equally fertile) but its demand is more than its supply then the entire land will earn economic rent due to scarcity. Rent therefore arises when the supply
of land is perfectly inelastic, that is, when supply cannot be increased in response to increase in demand.
Thus, scarcity rent is that rent which arises due to scarcity of a factor. It is attributed to all the units of a factor, marginal or intra-marginal. Modern economists have extended the concept of scarcity rent to all factors of production which are scarce in supply.
Differential Rent : According to Ricardo, rent arises due to difference in the fertility of land. Every country has a variety of land. Some land is more fertile and some less fertile. When less fertile land is brought under cultivation the land-owners of more fertile land obtain relatively more production. This surplus, which arises due to difference in the fertility of land, is called differential rent. This kind of differential rent arises in extensive cultivation. It is that rent which arises due to the difference in the productivity (efficiency) of different units of a factor. Extending the concept of differential rent to all factors of production, modern economists define it as surplus that arises due to difference between transfer earning and actual earning.
Q.4. What is the difference between Ex-ante and Ex-post Saving and Investment ?
Ans : Ex-ante Saving and Investment refer to the planned Saving and Investment. Ex-ante saving is what the savers plan to save (or intend to save) at different levels of income and employment in the economy. Likewise ex-ante investment in the economy. Since savers and investors in an economy are a different set of persons and guided by a different set of factors, the level of ex-ante saving may or may not be equal to ex-ante investment at any level of employment.
Ex-post saving and investment refer to realised saving and investment in the economy.
Ex-post saving and ex-post investment have identical definition : Excess of income flow over consumption flow in economy during the period of one year.
Accordingly, ex-post saving is always equal to ex-post investment. In fact, ex-post saving and ex-post investment form an accountin identity and are, therefore, bound to be equal to each other at all levels of income and employment in an economy.
Note that equilibrium level of output is determined not where ex-post saving and ex-post investment are equal to each other, but where ex-ante saving and exante investment are equal to each other.
Q.5. What are the significance of public expenditure?
Ans : Public expenditure is of notable significance in the context of welfare state like India. Following observations highlight the significance of public expenditure:
(1) Increases Economic Growth: Public expenditure accelerates the process of economic growth. This is of unique importance particularly in the context of less developed countries like India. Public expenditure ensures the construction of roads, dams, bridges,canals which are pre-requistes for the growth of agriculture and industry. Also research and innovations are encouraged. Size of the market enlarges. Rate of investment / capital formation is encouraged.
(2) Increases Economic Welfare: Public expenditure increases economic welfare. This happens particularly when public expenditure is directed towards poverty eradication, as well as health and education of the poorer sections of the society. Such expenditures reduce economic inequalities and thereby promote social justice. (3) Corrects Depression and Checks Unemployment: Public expenditure corrects depression and checks unemployment. According to Keynes, depression can be corrected by increasing public expenditure so that aggregate demand is increased. During depressions, the government is expected to step up its expenditure on public works programmes including construction of roads, dams and bridges. (4) Reduction of Inequality: Public expenditure plays an important role in reducing regional and individual inequalities. Public expenditure helps develop backward regions. Economic progress of the poorer section is promoted through transfer payments, such as subsidised food, unemployment allowance, scholarship, cash subsidies to small and cottage industries.’
Q.6. What was the 'Plan Holiday'? How does the annual plan perform?
Ans : The Indo-Pak War, two years of drought, devaluation of rupee and the inflationary recession forced the government to suspend long term planning, 'Plan Holiday', for the three year period (1966-69). During these years three Annual Plans were undertaken to make way for the forthcoming Fourth Plan. The prevailing crisis in agriculture and serious food shortage necessitated the emphasis on agriculture during the Annual Plans.
During these plans a whole new agricultural strategy involving wide spread distribution of high yielding varieties seeds, the extensive use of fertiliser, the exploitation of irrigation potential and soil conservation was put into action to tide over the crisis in agricultural production. During the Annual Plans the economy basically absorbed the shocks given during the Third Plan making way for a planned growth.
Q.7. What are the three components of unemployment development by National Sample Survey Organisation?
Ans : The three concepts of unemployment developed by National Sample Survey Organisation (NSSO) are: (i) Usual Status : It refers to usual activity status — employed or unemployed or outside the labour force of those covered by the survey. The activity status is determined with reference to a longer period. The usual status unemployment rate is person rate. (ii) Current Weekly Status : It refers to activity sta-
tus of a person with reference to a period of preceding seven days. If in this period a person seeking employment fails to get work for even an hour on any day, he/ she is deemed to be unemployed. Current weekly status unemployment rate is also a person rate. (iii) Curren t Daily Status : It refe rs to a ctiv ity s tatus of a person for each day of the preceding seven days. The current daily status unemployment is a time rate.
However, the current daily status unemployment provides the most appropriate measure of unemployment.
Q.8. Define a 'national Government'. Is there any provision in the Constitution for a National Government?
Ans. When no political party or a combination of political parties is able to form a Government, the President may try to form a 'national' government, in which all major political parties in the Lok Sabha maybe represented. Such a government would necessarily be a caretaker government entrusted with the responsibility of carrying on day-to-day administration till the election to the Lok Sabha.
There is no provision in the Constitution for a National Government.
Q.9. Can a Bill be introduced first in the Rajya Sabha?
Ans. Yes. However, no Money Bill can be introduced first in the Rajya Sabha. (It has no power to amend or reject a Money Bill).
Q.10. "A member of the Union Council of Ministers survives at the pleasure of the Prime Minister".
Ans. A member of the Union Council of Ministers survives at the pleasure of the Prime Minister, though constitutionally speaking, the ministers hold office during the pleasure of the President. The President may be said to exercise de jure powers while the Prime Minister, in practice, exercises the de facto powers.
Q.11. Why is the President deemed as the first citizen of India and not the Prime Minister?
Ans. The President of India occupies the same position as the King under the English Constitution.
He is the Head of the State. He represents the nation and is the symbol of the nation. By virtue of these, the President is deemed as the first citizen of the land.
Q.12. Write short notes on : (i) Law Commission (ii) Legal Aid Scheme (iii) Lok Adalat (iv) Territorial Army (v) NCC
Ans : ( i) Law Commi ssion : Th e ne ed for periodical revision of the form and content of law has been recognised on account of the changing social and economic conditions as well as changed concepts on certain ethical issues.
(ii) Legal Aid Scheme : The legal aid scheme is a recent development in India.
The principle of equal opportunities for justice and free legal aid for the poor is embodied in Article 39A of the Constitution as one of the Directive Principles.
Legal Aid and Advice Boards have been set up in various states and Union Territories after 1980.
Legal Aid Committees have been set up for District Courts, High Courts and Supreme Courts.
Steps are being taken to implement other recommendation of the Committee for creating legal awareness among the people and in particular among the students, encouraging settlement of disputes through negotiations and encouraging public interest litigation.
(iii) Lok Adalat : The idea of Lok Adalat has been initiated by the ex-Chief Justice of India, Mr. P.N.
The courts have been set up in all the states.
These are presided over by retired judges, lawyers or even eminent social workers.
Working and achievement The parties settle their civil disputes, compensation claims and compoundable criminal cases through conciliation.
Once an agreement is reached between the parties, it is registered in a court of law and thus, th e dec ision of the Lok A dalat ac qu ire s leg al sanction.
The Lok Akalats have disposed of many longpending cases.
The disposal is not only speedier but also cheaper.
Majority of the cases relate to cases of motor vehicle accidents in which the insurance companies find it worthwhile to arrive at out-of-court settlements.
So cial litig ation c ase s relating to d ivo rc e, separation and family feuds have also been settled.
(iv) Territorial Army : The Territorial Army is a citizens’ volunteer force, which functions on a parttime basis.
Established in 1949, it is designed to give the citizens an opportunity to receive military training in their leisure hours.
They serve the country in times of emergency by relieving the Army of static duties and assist the civil authorities in dealing with natural calamities, maintenance of essental services in critical situation and providing units for the regular Army, if and when required.
All able-bodied persons in the age group of 18-42, who possess the requisite qualifications, are eligible to join as officers or as other ranks.
(v) Ncc : National Cadet Corps (NCC), established in 1948, is the premier youth organisation in the country today.
It aims at developing qualities like leadership, comradeship, spirit of sportsmanship and the ideals of service among the youth. Students of universities, colleges and higher secondary schools can join NCC on a voluntary basis.
It has a strength of approximately 11.2 lakh cadets (both boys and girls) drawn from 130 universities.
The NCC cadets have no liability for active military service.
The Directorate-General of NCC, located in Delhi, under the control of the Ministry of Defence, heads the organisation.
The Director-General, NCC holds the rank of a Lieutenant General.
Q.13. How did the Zonal councils are formed?
What are its functions?
Ans : Zonal councils were set up under the State Reorganisation Act, 1956, to ensure greater cooperation amongst states in the field of planning and other matters of national importance. The Act divided the country into five zones andprovided a zonal council in each zone. (i) The Northern Zone consists of Punjab, Rajasthan, Jammu & Kashmir, Himachal Pradesh and the National Capital Territory of Delhi. (ii) The Central Zone consists of Uttar Pradesh and Madhya Pradesh. (iii) The Eastern Zone consists of Bihar, West Bengal, Orissa, Assam, Nagaland, Meghalaya, Manipur, Tripura, Mizoram and Arunachal Pradesh. (iv) The Western Zone consists of Maharashtra, Goa and Gujarat. (v) The Southern Zone consists of Andhra Pradesh, Tamil Nadu, Karnataka and Kerala.
Each Zonal Council consists of: (a) a Union Minister nominated by the President; (b) the Chief Minister of each state in the zone; (c) two ministers from each state in the zone, nominated by the governors of the respective states; and (d) one member from each Union territories included in the zone, nominated by the President. In addition, each Zonal Council can associatecertain members nominated by the Planning Commission, the secretaries of states, and development commissioners of states in the zones. Generally the Zonal Councils hold separatemeetings, but two or more Zonal Councils can hold joint meetings. These joint meetings are presided over by the Union Home Minister.
Functions Zonal councils discuss matters of common concern to the member states relating to economic and social planning, border disputes, inter-state transport etc. and render necessary advice to the governments of the concerned states as
Q.14. Write short notes on the following : (i) Eighty- First Amendment (ii) Eighty-Second Amendment (iii) Eighty-Fifth Amendment (iv) EightySixth Amendment
Ans : (i) Eighty- First Amendment : The Constitution (Eighty-first Amendment) Act, 2000, amended Article 16 (1) of the Constitution and added a new clause(4-B) after clause (4-A) to Article 16(1) of the Constitution. With this the 50 percent ceiling on reservation for SC/ST and OBCs in backlog vacancies, which could not be filled due to the non-availability of eligible candidates. The amendment intended to nullity the effect of the Supreme court’s Indra Sawhney v. Union of India.
(ii) Eighty-Second Amendment : The Constitution (Eighty-Second Amendment) Act, 2000, a new provision in Article in 355 was added which provides that “nothing in this Article 355 shall prevent in the making of any provision in favour of the members of the SC/ST for relaxation in qualifying marks in any examination or lowering the standards of evaluation for reservations matters of promotion of any class or classes of services or posts in connection with the affairs of the Union of a state.”
(iii) Eighty-Fifth Amendment : The Constitution (Eighty-Fifth Amendment) Act, 2001 amended clause (4-A) of Article 16 and substituted for the words “in matter of promotion to any class” the words “in matters of promotion the consequential seniority, to any class.”
(iv) Eighty-Sixth Ame ndment : The Constitution (Eighty-Sixty Amendment) Act, 2002 inserted Article 21-A and made the right to education of children of the age of 6 to 14 years a fundamental right.
Q.15. Discuss the 93rd Constitutional Amendment Act. Although a significant step, do yoy feel that the Act could and rest the large social question?
Ans : Parliam ent passed the Constitution (93 rd Amendment Bill) on Nov. 27, 2002. It makes elementary education a Fundamental Right. With this, an endeavour that has been in the making since July 1997 finally got cleared by Parliament and now it is in the law book. With governments changing in quick succession in the latter half of the last decade the 83rd Amendment Bill which sought to make Elementary Education a Fundamental Right was almost forgotten till the Human Resource Development (HRD) Ministry resurrected it in 2001 and decided to introduce it afresh as the 93rd Constitution Amendment Bill.
Once the Bill becomes an Act, all the children in the 6 to 14 age group will have the Fundamental Right to free and compulsory education. Also, as per the Bill, “the State Shall endeavour to provide early childhood care and education for all children until they complete the age of 6 years.” Further, the Bill makes it the fundamental duty of parents and guardians to provide opportunities for education to their children/wards in 6 to 14 age group.
A significant step The grant of Presidential assent for the 93rd Constitutional Amendment that makes free and compulsory primary education a Fundamental Right for all children marks a significant step in the country’s aim to achieve ‘Education for All’. The Bill may have taken five years to become law for many reasons. It may suf-
fer many a lacuna. But the fact is the amendment holds out a constitutional guarantee for providing free education up to high school to all its 190 million young and growing minds between 6 and 14, more significantly, the new law will seek to bring into the educational mainstream 35 million boys and girls who are yet to be covered by formal schooling systems.
The Amendment to Article 21 of the Constitution says that the “Government shall provide free and compulsory education to all children from the age of six to 14 in such a manner as the State may by law determine..” No longer is the promise of achieving universal primary education an unenforceable Constitutional Directive. Now there is scope for judicial intervention to provide educational infrastructure to all Indian children up to the high school level. It also seeks to compel parents to send their children to school by including it as a Fundamental Duty (Article 51 A); and amends Article 45 of the Constitution to make the state “endeavour to provide early childhood care and execution for all children until they complete six years of age.” The Minister for Human Resource Development, Murli Manohar Joshi, has rightly called the passing of the Bill in the Lok Sabha the “dawn of the second Revolution in the Chapter of citizen’s Rights” and announced that laws will also be made to operationalise the Fundamental Right.
Laudable the new law might be. But the Constitutional amendment alone may not be able to address the larger social question and the Preambular promises of providing social, economic and political justice for all, for instance, the law does not define the word “free”. Today, even the poorest of parents spend money to buy books uniforms and pay examination fees for their children. The role of private educators in making primary education free and compulsory also remains undefined. The Opposition parties have already raised in Parliament the fact that of funds were allotted in this year’s subject to operatioalise the law. But then the Government can always point to the fund it has alloted under the ‘Education for All movement’ as its financial commitment. While the amendment makes it a fundamental Duty for every parent to send his or her wards to school, there are genuine apprehensions that those who fialf to do it may face prosecution Ears about the random use of the provision against the poor and the depressed are not unfounded. Early childhood care and education is only a Directive Principle and not a Fundamental Right—meaning the educational growth of children from 0-6 years is to be guaranteed.
Thus the Amendment alone is not enough. Every State, especially those with poor literacy laws to extend the Constitutional guarantee and provide free, compulsory, quality, equitable school and early childhood care and education up to the higher secondary level. Gender injustice and adult illiteracy are problems that need legal instrumentalities for lasting solutions. The States have no choice but to take monumental efforts for universalizing enrolment and retainingeach student in school, without dropping out, till the age of 14. Otherwise, India’s economic growth will face a frightful threat from a large seething mass of young people who remain illiterate, specifically due to lack of state effort. This spectre should goad administrators and lawmakers into taking the Education for all campaign to its highest possible pitch. Only then can the one billion population of India match the demands of a knowledge-powered 21st century.