UNIT:1

BASICECONOMICS
2MARKS

1.Whatismeantbyeconomics?
Economicsisastudyofeconomicproblemsofthepeopleconcerningproduction,
consumption,exchangeanddistributionofwealth.
2.Whatismicroeconomics?
Microeconomicsisthestudyofaparticularhousehold,individualprice,afirmoranindustry.
3.Whatismacroeconomics?
Macroeconomicsanalysesthebehaviourofbroadeconomicaggregatelikenationalincome,general
income,andgeneralpricelevel.etc.
4.Whatsortofrelationshipexistsbetweenthedemandforgoodsandthepriceofcomplementarygoods?
Therelationshipbetweenthedemandforgoodsandthepriceofcomplementarygoodsisinverse.when
thepriceofcomplementarygoodsfallsitsdemandwouldincrease.itwouldincreasethedemandfor
goodsastheyaregoingtobeusedalongwiththecomplementarygoods.

5.Statethelawofdiminishingmarginalutility.
Itstatesthatwithsuccessiveincreaseintheunitsofconsumptionofacommodity,everyadditionalunit
ofthatcommoditygiveslessersatisfactiontotheconsumer.consumptionbeyondpointofsafety.
6.Whataretheassumptionsoflawofdemand?
a) Priceofrelatedgoodsremainsconstant.
b) Incomeoftheconsumerdoesnotchange
c) Tasteandpreferencesofthepeopleremainunchanged.
7. Whatarethefactorswhichaffectthepriceelasticityofdemandforacommodity?
a) Natureofthecommodity
b)Availabilityofsubstitutes
c) Shareinthetotalexpenditure
d)Differentusesofacommodity

8. Statetheassumptionofthelawofsupply.

Priceofrelatedgoodsremainsunchanged.b)Technologyof
productionshouldnotchanged

c) Costoffactorsofproductionshouldremainthesame
d) Goalsofthefirmshouldnotchange
9. Giveanythreefactorsaffectingelasticityofsupply
a) Natureofcommodity
b) Costofproduction
c) Timeelement

10. Definemarketdemand.
Marketdemandisthetotalquantitydemandedbyallthepurchaserstogether.
11.Statethelawofsupply
Thelawofsupplystatesthatthequantityofacommoditysuppliedvariesdirectlywiththeprice,other
determinantsofsupplyremainingconstant.
12.Whatisfixedcost?
Fixedcostsarethecostwhichdoesnotchangewithchangeinthelevelofoutput.

13.Definemarginalcost.
Marginalcostisthechangeinthetotalcostbyproducinganadditionalunitofoutput

14.State&explainthelawofdemand
Thelawofdemandstatesthatotherthingsbeingequaldemandwhenpricefallsand
contractswhenpricerises.

15.Whydoesthedemandcurveslopedownwardstotheright?
Anormaldemandcurveslopesdownwardsfromlefttorightanditmeansthatmoreunitsofagoodare
broughtwhenpricefallsandlessnumberofunitsarebroughtwhenrises.Thatis,whenpricefalls,demand
expands.Sothedemandcurveasarule,slopedownwardsfromlefttoright.

16.Definecrosselasticityofdemand.

CrosselasticityofdemandistheresponsivenessofdemandforacommoditysayXtoagiven
changeinthepriceofarelatedsayY.

17.Classify

wants.

a)Necessariesb)Comforts

c)Luxuries

18.Namethefactorsinfluencingdemand.
a) Changesinthepriceofothergoods.
b) Stateoftrade
c)Changesinthetasteandfashion
d)Advertisementexpenditure

19.Whatisdemandforecasting?
Demandforecastingistheestimateoflevelofdemandtobeexpectedforgoodsorservicesfor
someperiodoftimeinthefuture.

20.Whatismeantbysupplyineconomics?
Supplyistheamountofcommoditywhichwillbeofferedforsaleatagivenpriceperunitoftime.
UNIT:2

DEMANDANDSCHEDULE
2

MARKS

1. Whataretheelementsoffinancialmanagement?
a)Fixedandworkingcapitalmanagement.
b) Determiningsourcesoffunds
c) Financialanalysis
d) Capitalbudgeting

2.Explainworkingcapital
Workingcapitalisthatpartofthecapitalwhichisrequiredforthefinancingofworking
orcurrentneedsofthefirm.

3.Whatismeantbyfixedcapital?
Fixedcapitalisassociatedwiththeamountofcapitalacquiredbyanenterpriseforacquiringfixedassets
suchasland,building,plant,machineryandequipment,whichareintendedforlongtermcontinueduse
inbusiness.

4.Classifyworkingcapital
a)Permanentworkingcapitalb)Variableworkingcapital

5. Listtheinternalsourcesoffinance.
a) Retainedprofit
b) Depreciationprovisions
c) Deferredtaxation
d) Personalfunds

6. Listtheexternalsourcesoffinance.a)Venture
capitalfunds
b) Loansfromfinancialinstitutions
c) Loansfrombanks
d) Tradecredit

7. What are the responsibilities of good financial management? a)Profit

planning
b) Worthmaximizationc)
Procurementoffinance
d) Capitalfinancing

8. Enumerateexecutivefunctionoffinancialmanagement.
a) Assessmentoffinancialneedsintermsoffixedandworkingcapital
b) Choosingthesourcesoffunds

9. Whatistheroleoffinancialmanagerinanorganization?

Thespecificroleofafinancialmanagerincludesanticipationoffinancialneeds,acquiringfinancial
resourcesandallocatingfundsinbusiness.

10.Whatisdebenture?
Adebentureisaninstrumentissuedbyacompanywhichdenotesanobligationresultingfrom
theborrowingofmoneythroughtheinstrument.

11. Name the state level financing institution for advancing loans to industries.
Tamilnaduindustrialdevelopmentcorporation

12. Whatareretainedearnings?
Retained earnings are profits not distributed by way of divided payments but retained within the
organization as revenue reserves. These retained earnings are utilized by the company to finance its
expansionplansormeetitsrequirementsofworkingcapital.

13.ExplainwhatismeantbyobsoleCCETnceofmachine.
ObsoleCCETnceisthelossinvalueofanassetduetonewinventions,modifications,andchangein
legislation,styles,technologyorothercauses.Itisdifferentfromwear&tearduetonormalusage.

14.Whatisinvestment?
Thepurchaseofcapitalgoods,suchasplantandmachineryinafactoryinorderproducegoods
forfutureconsumption.

15.Definecostofcapital.
Costofcapitalisconcernedwiththeamountthatshouldbeexpendedinordertoacquirecapital
forinvestmentproject.

16.Whatisfinancialaccounting?
Theartofrecording,classifyingandsummarizinginasignificantmannerandintermsofmoney
transactionsandeventswhichareimpartatleastofafinancialcharacterandinterpretingthe
resultingthereof.

17.Statethenatureoffinancialaccounting.
a) Thetransactionismostlyfinancialinnature
b) Itdealswiththeoverallperformanceofthebusiness.
c) Itismorerigidinitsapproach

9. Writethetypesofbusinessaccounts.a)Personalaccountb)Realaccount
c)Nominalaccount

10. What are the systems of book keeping? a)Double entry system b) Single entry
system

11. What are the functions of financial management? a)determining financial needs b) Determining
sourcesoffundsc)Financialanalysis
d)Profitplanningandcontrol

UNIT:3

ORGANISATION
2
MARKS

1. Whatarethecomponentsofcost?a)Primecostb)
Factorycost
c)Officecost
d) Totalcost
2. Statethefactorsinfluencingpricingdecisions.
a) Costofmanufacturing
b) Objectivesandpolicesofmanagement
c) Demandoftheproduct
d) Distributionstrengthofthefirm

3.Explainshortrunperiodineconomics.
Shortrunperiodisdefinedasaperiodduringwhichatleastoneelementoffactorinputisinfixed
supply,thefixedfactorinputisplantandequipment.

4.Whatismeantbyincrementalcost?
Incrementalcostistheadditionalcostduetoachangeinthelevelornatureofbusinessactivity.

5.ListoutthevariouspricingpoliciesinIndia.a)Skim
pricing
b)Penetrationpricingc)Market
pricingd)Mixedpricing

6.Whatismeantbyopportunitycost?
Opportunitycostofafactorreferstoitsvalueinitsnextbestalternativeuse.Opportunitycostisalso
knownastransferearningsontheforegonealternatives.
7.Whatarethepricingmethods?
a)Costpluspricingmethod

b) Breakevenanalysismethod
c) Targetrateofreturnmethod
d)leadershippricingmethod

e) Goingratepricingmethod
f) Marginalcostpricingmethod8.
Whatispriceindex?
Theratioofonepricetothepriceofthesameitematadifferenttime.
9.Listthreesemivariablescosts.
a)electricitycharges
b)Telephonechargesc)
Depreciation

d)maintenanceexpenses.

10.Explaintherelationshipbetweencostandoutput.
Thecostofproductioninanindustrydependsontherateofoutputwhichisimportantineconomic
analysisofcost.therelationshipbetweencostandoutputdeterminesthecostfunction.Oncethecost
functionisdeterminedestimatesoffuturecostofproductionatvariousoutputlevelscanusuallybe
obtained.

11.Listthemaindifferencebetweenshorttermcost&longtermcost.
Theshorttermcostarecostwhicharerecurringbutthelongtermcostsareusedoveraperiodof
time.

12.Definesafetymargin.
Safetymarginisthedifferencebetweentheactualsalesquantityandthebreakevensalesquantity
expressedinmonetarytermsorasapercentage.

13.Whatareproducergoods?
Producergoodsareeconomicgoodsmadeforthepurposeofproducingconsumergoodsandother
capitalgoods.
14. Statefourpricingmethodsemployedbybusinessmen.
15. a)Fullcostpricing
b) Targetrateofreturnpricing
c) Goingratepricing
d) Sealedbidpricing
16.Mentionthemethodsofmeasuringnationalincome.a)production
method
b)Incomemethod
c)Expendituremethod

17.Explainequilibriumprice.
Itisapriceatwhichthesupplyof,&demandfor,acommodityareequal.

17.Defineprice.
Priceisdefinedastheexchangevalueofaproductoraservicequantifiedinmonetaryterms.

18.Definecost.
Costistheamountofexpenditurenotionaloractual,attributestoathing.costreferstosacrificeor
receivesomebenefits.
19.Writeashortnoteonskimmingpricepolicy.
Skimmingpricingpolicyuseshighpricestoobtainahighprofitandquickrecoveryofthe
developmentcostsintheearlystagesofaproductslifebeforecompetitionintensifies.
20.Whatispricediscrimination?
Pricediscriminationisthechargingofdifferentpricesofdifferentgroupsofindividualforthesame
goodsorservicesforreasonsnotassociatedwithdifferencesincosts.Thismayoccurwhenthereisa
geographicseparationofmarkets,thestructureofdemandineachmarketbeingdifferent.
UNIT4
BREAKEVENANALYSIS
2 MARKS
1. Whataretheuncertaintiesafirmfaces?
1) Dynamicnatureofconsumerneeds
2) Diversenatureofcompetition
3) Uncontrollablenatureofmostelementsofcost
4) Continuoustechnologicaldevelopments
2. Howiscostvolumeprofitrelationshipdetermined?
ThemostimportantmethodofdeterminingcostvolumeprofitrelationshipisBreakeven
Analysis.
3.WhatisBreakevenAnalysis?
ThemethodofdeterminingthecostvolumeprofitrelationshipisknownasBreakeven
Analysis.
4.WhoarebenefittedthroughBreakevenAnalysis?
BreakevenAnalysisisusefulforbusinessexecutives,butalsoforanentrepreneurwhoison
thethresholdofsettinguphisownunit.
5.WhatistheusefulnessBreakevenAnalysis?
BreakevenAnalysisisvaluableforprojectappraisalexecutives,businessstudents,
accountantsetc.
6.HowistheknowledgeofBreakevenAnalysisishelpfultobusinessconsultant?
TheknowledgeofBreakevenAnalysisishelpfultobusinessconsultantisusefulinorderto
providerightrecommendationstotheirclients.
7.WhatdoesbreakevenAnalysisinvolves?
BreakevenAnalysisthestudyofrevenueandcostsofafirminrelationtoitsvolumeof
salesandspecificallythedeterminationofthatvolumeatwhichthefirmscostsandrevenuewillbe
equal.

8.Whatisbreakevenpoint?
Breakevenpointisdefinedasthatlevelofsalesatwhichtotalrevenueisequaltototal
costsandthenetincomeisequaltozero.
9.Writetherelationshipbetweenbreakevenpointandvariablecost?
Writetheformulaforbreakevenpointandcontributionperunit?

10.HowisBEPdetermined?
BEPsaredeterminedas
IntermsofphysicalunitsIn
termsofmoney
12.Whatisbreakevenchart?
Breakevenchartisdefinedasagraphicalpresentationoffixedcosts,variablecosts
andsalesrevenueforvariousvolumesofoperations.Itillustratestheprofitsorlossesincurredat
differentvolumesofoperations,thebreakevenpointandmarginofsafety.
13. GivetheformulaforSelectedoperatingpoint.

14. Define(P/V)Ratio.
Itistheratioofcontributiontosales,whichisexpressedintermsofpercentages.It
isalsocalledasContributionRatio.
15.WhataretheusesofBEA?
Itpredictstheeffectsofchangeinpriceonsales.
Itpredictstheeffectsofchangeonprofitabilityofchangesincosts
andefficiency.
16.WritedownthelimitationsofbreakevenAnalysis?
BEPAnalysisassumescostsandrevenuetobelinearinfunction.Thispracticeisnottrue.
BreakEvenChartisusefulonlyforsingleproductcompanies.
17. HowisBEPdeterminedIntermsofphysicalunits?
18. HowisBEPdeterminedIntermsofmoney?

19. HowisContributionRatioDetermined?
C

20. HowisContributionMarginperunitDetermined?Contribution
Margin=SalesVariablecosts

21.DefineMarginalRatio.
Itistheratioofcontributiontosales,whichisexpressedintermsofpercentages.Itis
alsocalledasContributionRatio.

Unit5
COSTANDBREAKEVENANALYSIS
2MARKS
3. Whataretheuncertaintiesafirmfaces?
1) Dynamicnatureofconsumerneeds
2) Diversenatureofcompetition
3) Uncontrollablenatureofmostelementsofcost
4) Continuoustechnologicaldevelopments
4. Howiscostvolumeprofitrelationshipdetermined?
ThemostimportantmethodofdeterminingcostvolumeprofitrelationshipisBreak
evenAnalysis.
3. WhatisBreakevenAnalysis?
ThemethodofdeterminingthecostvolumeprofitrelationshipisknownasBreakeven
Analysis.
4. WhoarebenefittedthroughBreakevenAnalysis?
BreakevenAnalysisisusefulforbusinessexecutives,butalsoforanentrepreneurwhois
onthethresholdofsettinguphisownunit.
5. WhatistheusefulnessBreakevenAnalysis?
BreakevenAnalysisisvaluableforprojectappraisalexecutives,business
students,accountantsetc.
6. HowistheknowledgeofBreakevenAnalysisishelpfultobusinessconsultant?
TheknowledgeofBreakevenAnalysisishelpfultobusinessconsultantisusefulinorder
toproviderightrecommendationstotheirclients.
7. WhatdoesbreakevenAnalysisinvolves?
BreakevenAnalysisthestudyofrevenueandcostsofafirminrelationtoitsvolumeof
salesandspecificallythedeterminationofthatvolumeatwhichthefirmscostsandrevenuewill
beequal.
8.Whatisbreakevenpoint?
Breakevenpointisdefinedasthatlevelofsalesatwhichtotalrevenueisequal
tototalcostsandthenetincomeisequaltozero.
9.Writetherelationshipbetweenbreakevenpointandvariablecost?

12. Writetheformulaforbreakevenpointandcontributionperunit?

13. HowisBEPdetermined?
BEPsaredeterminedas
IntermsofphysicalunitsInterms
ofmoney
13.Whatisbreakevenchart?
Breakevenchartisdefinedasagraphicalpresentationoffixedcosts,variablecostsandsales
revenueforvariousvolumesofoperations.Itillustratestheprofitsorlossesincurredatdifferentvolumes
ofoperations,thebreakevenpointandmarginofsafety.
15. GivetheformulaforSelectedoperatingpoint.

16. Define(P/V)Ratio.
Itistheratioofcontributiontosales,whichisexpressedintermsofpercentages.Itisalso
calledasContributionRatio.
20.WhataretheusesofBEA?
Itpredictstheeffectsofchangeinpriceonsales.
Itpredictstheeffectsofchangeonprofitabilityofchangesincostsand
efficiency.21.WritedownthelimitationsofbreakevenAnalysis?
BEPAnalysisassumescostsandrevenuetobelinearinfunction.Thispracticeisnot
true.BreakEvenChartisusefulonlyforsingleproductcompanies.
22. HowisBEPdeterminedIntermsofphysicalunits?
23. HowisBEPdeterminedIntermsofmoney?

24. HowisContributionRatioDetermined?
C
20.HowisContributionMarginperunitDetermined?
ContributionMargin=SalesVariablecosts
21.DefineMarginalRatio.

Itistheratioofcontributiontosales,whichisexpressedintermsofpercentages.Itisalso
calledasContributionRatio.