Measures of

Central Tendency
In this chapter, a description is provided that will help you in studying the
measures of central tendency which is a numerical method that explains the data
with the help of arithmetic mean, median and mode.

Mean and Determination

of Mean

Meaning of Central Tendency

Measures of central tendency is that technique of statistical analysis by which
we get such a value of data which represents the whole data. Such value is called
average or central value. Thus, a central tendency is a single figure that represents
the whole mass of data.

3 Mean and Determination of

Mean
3 Median and Quartiles
3 Mode and Determination of

Definitions of Central Tendency

An average is a figure that represents the whole group.
Clark
Statistics is the science of average.
Dr Bowley
An average is a single value within the range of the data that is used to represent
all the values in the series. Since, an average is somewhere within the range of
data, it is sometimes called a measure of central tendency. Croxton and Cowden

Mode

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81

Measures of Central Tendency

Objectives and Functions of Average

The main objectives and functions of average are as given below
(i) An average is a single simple expression, in which
the net result of a complex group or large numbers
are centred.
(ii) Average present the concise picture of the groups by
a single value, so it is very convenient to compare
the different homogeneous groups by their average.
(iii) Average helps in formulation of economic policy.
e.g., for the removal of poverty from India, our
government should take into account per capita
income, average productivity of labour, etc.
(iv) Average is the basis of statistical analysis. To know
the average marks secured by the students in their
different subjects, one can easily analyse the subjects
in which the students are weak.

Essential of a Good Average

A good average should have the following features
(i) A good average should be clear and stable in
definition.
(ii) An average value should be representative of the
entire population of data.
(iii) A good average must be so simple that it is easily
worked out.
(iv) A good average should be capable of mathematical
or algebraic treatment.

Types of Statistical Average

There are several statistical measures of central tendency
or average. The three most commonly used average are
arithmetic mean, median and mode.

Arithmetic Mean
This is a most commonly used measure of central
tendency. It is defined as sum of the values of all observations
divided by the number of observations and is usually
denoted by X .
The arithmetic mean is the amount secured by dividing
the sum of value of the items in a series by their
numbers.
H. Secrist

Let, X 1 , X 2 , X 3 ,K, X n are then values of different

items in the series and N = Total number of items.
X + X 2 + X 3 + X 4 +K+ X n
Then,
X= 1
n
SX
X =
n

Some Special Properties of the

Arithmetic Mean
(i) The sum of deviations of the observations from their
arithmetic mean is always zero.
Symbolically, S( x - x ) = zero
S( X - x ) = ( X1 x ) + ( X 2 x ) + ( X3 x )
+ K + (X n x ) = 0
(ii) The product of arithmetic mean and the number of
values on which the mean is based equal to the sum of
all given values.
Algebraically,

Sx

Qx =
n

nx = SX

(iii) Arithmetic mean is affected by extreme values. Any

large value on either end, can push it up or down.

Types of Arithmetic Mean

Arithmetic mean has two different types
(i) Simple Arithmetic Mean In simple arithmetic
mean, all items of a series are taken as of equal
importance.
(ii) Weighted Arithmetic Mean In weighted arithmetic
mean, different items are taken as of different
importance, accordingly weights are accorded to
different items depending on their relative
importance.
Arithmetic mean is based on all items of the series
and is capable of further algebraic treatment.

Calculation of Arithmetic Mean

Arithmetic mean can be calculated for the following two
series of data

1. Arithmetic Mean for Series of Ungrouped

Data (or Individual Series)
The arithmetic mean for series of ungrouped data can be
computed by the following three methods
(i) Direct Method Arithmetic mean by direct method
is the sum of all observations in a series divided by
the total number of observations.
Arithmetic mean X =
Here,

SX
n

SX = Sum of all observations

n = Number of observations or terms

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Solution
or

Arithmetic mean

X=

X 1 + X 2 + X 3 +...+ X n

Hence, required arithmetic mean = 60

You should remember that any value, in the data, can be
taken as assumed mean. However, in order to simplify the
calculation, centrally located value in the data can be
selected as assumed mean.

n
30 + 40 + 45 + 68 + 48 231
X=
=
X = 46.2
5
5

The average marks of students in the economics test is

46.2.

(ii) Assumed Mean Method (or Short-cut Method) If the

number of observations in the data is large then it is
difficult to compute arithmetic mean by direct method.
So, in order to save time in calculating mean we can
use assumed mean method.
This method involves the following steps
(a) Assume a particular figure from the data as arithmetic
mean.It is called assumed mean A. Now obtain
deviations of A from individual observations is
dx = X - A.
(b) Find the sum of all deviations as S dx.
(c) Substitute the values of A, S dx and N in the
following in formula, to obtain arithmetic mean ( X ) .

S dx
n
A = Assumed mean
dx = Deviation of A from individual
observations ( X - A)
n = Number of observations
X =A+

Where,

Then,

SX
n

(iii) Step Deviation Method This method is used where

the difference of items are equal. This method makes
the calculation more easy. In this method, deviations
are divided by a common factor c.
(a)
(b)

(c)
(d)

This method involves the following steps

Take an item as an assumed mean ( A).
Take deviation from assumed mean i.e., X - A = dx
and divide the deviation by common factor indicated
by c and we get
dx
d 'x =
c
Calculate the sum of step deviations i.e., (Sd x ).
Now use following formula to calculate arithmetic mean,
Sd x
c
X =A+
n

Solution Let, Assumed mean A = 61. Then we have

following table

Example 3. Calculate simple arithmetic mean from

the following data
Wages (in `)

10

15

20

25

30

Calculation of Arithmetic Mean

dx = ( X - A )
A=
-11
7
-5
3
-2
-1
0
1
4
14
Sdx = -10

Solution Let, Assumed mean A= 15.

Calculation of Arithmetic Mean

50
54
56
58
59
60
61
62
65
751

A = Assumed mean
d x = ( X - A)/c
c = Common factor
n = Number of observations

Where,

Example 2. Calculate the arithmetic mean of marks

of 10 students by assumed mean or short-cut
method. Marks obtained (X) 50, 54, 56, 58, 59, 60,
61, 62, 65, 75

1
2
3
4
5
6
7
8
9
10
N = 10

Economics Class 11th

N = 10, S dx = -10
S dx
( -10)
X =A+
= 61 +
= 61 - 1 = 60
10
n

Now,

Example 1. Calculate arithmetic mean from the data

showing marks of students in a class in an economics
test : 30,40,45,68,48

ne

dx = ( X - A )
`

X
-29

19

A = 15

-10

10

-5

15

20

+5

25

+10

30

+15

N =6

d x =

dx
(c = 5)
c

-2
-3
-1
0
+1
+2 +6

+3
dx = +3

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83

Measures of Central Tendency

N=6, d' x = 3
Sd x
3
\ X = A+
c X = 15 + 5
n
6
15
= 15 + 2 .5 = 17.5
X = 15 +

6
Hence, required arithmetic mean = 17.5
Hence,

(ii) Assumed Mean Method (or Short-cut Method) We

can use this method to calculate airthmetic mean in
order to simplify arithmetic calculations.
The following steps are used to calculate the arithmetic
mean
(a) Any value of the observation is taken as assumed
mean (A), preferably mid-value of a series.

2. Arithmetic Mean for Grouped Data

In grouped data there are two series discrete series and
continuous series.

(b) Obtain deviation of the variable X from the

assumed mean as dx = X - A.
(c) Multiply these deviation with its corresponding
frequency and find the sum Sfdx .

A. Discrete Series

In this series, frequencies corresponding to different

items of the series are also given.
The arithmetic mean in discrete series can be computed
by the following three methods
(i) Direct Method To calculate arithmetic mean in
discrete series by direct method. We use the following
steps
(a) Multiply the value of each observation (X) with
its respective frequency to obtain f X and find
sum Sf x
(b) Substitute the values in following formula to obtain
arithmetic mean ( X ).
SfX SfX
or
X =
N
Sf
Where,
Sf X = Sum of the product of observations and
corresponding frequencies.
Sf = Sum of frequencies (where, N is equal to Sf ).

(d) Substitute the values in the following formula to get

required arithmetic mean
X =A+

Sfdx
Sf

Where, A = Assumed mean

Sf = Sum of frequencies
Sfdx = Summation of the product of frequency
and deviation from assumed mean
Note Assume mean is selected from values of x.

Example 5. Calculate arithmetic mean by assumed

mean or short-cut method from the data given in
previous example.
Solutions

Let Assumed mean, A = 62

Calculation of Arithmetic Mean
(f)

dx = ( X - A )
(A = 62)

Example 4. Calculate mean farm size of cultivating

households in a village for the following data

64

+2

63

18

+1

64

63

62

61

60

59

62

12

18

12

61

-1

60

-2

59

-3

(in acre)

Solution

Calculation of Arithmetic Mean

fX

X
64
63
62
61
60
59

Sf = 60

(f)
8
18
12
9
7
6
Sf = 60

X=

512
1134
744
549
420
354
SfX = 3713

SfX 3713
=
= 61.88 acre
Sf
60

x
+16
+34
+18
0
-9
-14 - 41

-18
Sfdx = -7

Now,

X = A+

Sfdx
Sf

X = 62 +

( -7 )
60

X = 62 + ( - 0.12)

X = 61 .88 acre

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(iii) Step Deviation Method This method is used where
the difference of size of items is equal. This method
makes the calculation more easy. In this method,
deviations are divided by a common factor denoted
by c. The following steps are used to calculate the
arithmetic mean by step deviation method.
(a) Consider an assumed mean ( A). Preferably
mid-value of a series.
(b) Take deviations from assumed mean i.e.,
dx = ( X - A) and divide the deviation by
dx
common factor indicated by C then d ' x =
c
X -A
=
C
(c) Multiply each deviation by its corresponding find
frequency i.e., find fd x .
(d) Take the sum of product of deviations and
frequencies. i.e., find fd ' x
(e) Substitute the values in the following formula to get
required arithmetic mean,
Sfd x
c
Sf
Where, d x = Deviations from assumed mean by
step deviation
c = Common factor, A = Assumed mean
Sf = Sum of frequencies
X =A+

Example 6. Wage rate of 19 workers is given below

`

10

20

30

40

50

Calculate arithmetic mean using step deviation method.

Solution Let the assumed mean, A=30 and common
factor, c=10
Calculation of Arithmetic Mean
`
10
20
30
40
50

x=
( = 30)

(f)
4
5
3
2
5
Sf = 19

-20
-10
0
10
20

X -A
c
c = 10

d x =

-2
-1
0
1
2

fd 'x
-8
-5
0
2
10
Sfd= -1

ne

Economics Class 11th

Here,
A = 30, c = 10, Sf = 19, Sfd x = -1
On putting these values in the formula, we get
Sfd x
c
X = A+
Sf
X = 30 +

( -1)
10
19

= 30 - 0053
.
10 = 30 - 053
. = 29.47
Hence, required arithmetic mean = 29.47
B. Continuous Series

In case of continuous series, items are classified into

different class interval, etc. Hence, the class intervals
may be exclusive as 0-10,10-20 and so on and inclusive
as 0-9,10-19 and so on and of unequal size as
0-20,20-50 and so on. In all these cases, calculation of
arithmetic mean is done in same way.
There are three methods of calculating arithmetic mean in
continuous series which are given below
(i) Direct Method The process of calculating
arithmetic mean in case of continuous series is same
as that of a discrete series. The only difference is that
here the mid-points of various class interval are
taken.
This method involves the following steps
(a) Find the mid-value of each class interval by using
the following formula
Lower Limit + Upper Limit
Mid-Value, m =
2
(b) Multiply each mid value (m) by their
corresponding frequency ( f ).
(c) Obtain the sum of product of mid-value and
frequencies i.e., find (Sfm ).
(d) Substitute the values in the following formula to
get arithmetic mean
Sfm
X =
Sf
Where, Sfm = Sum of product of mid-value
and frequencies
Sf = Sum of frequencies

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Measures of Central Tendency

Example 7. From the following data calculate

arithmetic mean by direct method
10-20 20-3
0
2

30-4
0

40-5
0

10

15

50-6 60-70 70-80

0
20

16

Example 8. Calculate arithmetic mean by assumed

mean method from the data given in previous
example.
Solution

Let assumed mean, A = 45

Calculation of Arithemetic Mean

Calculation of Arithmetic Mean

Solution

= (m A )
(f)
1020

15

-30

1020

15

30

2030

25

-20

2030

25

175

3040

10

35

-10

3040

10

35

350

4050

15

45

4050

15

45

675

5060

20

55

10

5060

20

55

1100

6070

16

65

20

6070

16

65

1040

7080

75

30

7080

75

450

f = 76

Sfm = 3820

Sfm
Sf
3820
X=
= 5026
.

76
Hence, required arithmetic mean = 50.26
Now,

X=

(ii) Assumed Mean Method (or Short-cut Method) For

continuous series the calculation of arithmetic mean
by short-cut method is same as in case of discrete
series. The only difference is that mid-point of class
intervals and taken here.
In this method the following steps are required to
calculate arithmetic mean
(a) Find mid-value of each class interval and choose
assumed mean A from these mid-values.
(b) Calculate deviations of mid-values from assumed
mean. i.e., dm = m - A.
(c) Mutiply the deviations by corresponding
frequencies and find sum i.e., Sfdm.
(d) Substitute the values in the following formula to
obtain required value of arithmetic mean ( X ),
X =A+

Sfdm
Sf

Where, A = Assumed mean

Sfdm = Sum of product of frequency
and mid-value
Sf = Sum of frequencies or sum of
observations

Sf = 76

400
76

0
+200
+320 700

180
Sfdm = 400

Now, X = A +
X = 45 +

-60
-140 - 300

-100

Sfdm
Sf

X = 45 + 5.26 = 50. 26

(iii) Step Deviation Method If class interval are equal in

continuous series and number of items are large,
then with the help of step deviation method
measuring can be made easy and it is same as in case
of discrete series. The only difference is that
mid-point of class intervals are taken here. In this
method we use the following steps
(a) Find the mid-point X of various classes and say it
is m.
(b) Consider one of the mid-points as assumed mean
(A), preferably the mid-point of the middle class.
(c) Obtain deviation of the mid-points from the
assumed mean i.e; find dm = (m - A).
(d) Consider the width of class intervals as c and
m - A
calculate d m =
.
c
(e) Multiply each value of d m by its corresponding
frequency to obtain fd m and find the sum.
(f) Substitute the values in the following formula to get
the required arithmetic mean,
X =A+

Sfd m
c
Sf

Where, A = Assumed mean

Sfd m = Sum product of frequency and
mid-value after dividing dm by c.
c = Common factor or width of class-interval
Sf = Sum of frequencies or sum of observations

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86
Example 9. Calculate mean marks of the following
students using step deviation method
0-10 10-20 20-30 30-40 40-50 50-60 60-70
5

12

15

25

Let assumed mean, A = 35 and width of class

intervals, c = 10

Solution

(f)

dm
c

A = 35

c = 10

0-10

-30

-3

10-20

12

15

-20

-2

20-30

15

25

-10

-1

30-40

25

35

40-50

45

10

50-60

55

20

60-70

65

30

Sf = 70

Calculation of Missing Values When

Arithmetic Mean is Given
If mean of the series is given but one value is missing, then
missing value may be calculated with the help of given mean
of the series. It can be understand with the help of following
example

fd m
-15
-24 - 54

-15
0
+8
+6 + 20

+6

Solutions Let 5 th value is X 5

Given, X 1 = 10, X 2 = 25, X 3 = 30, X 4 = 35, X 5 = ?, X = 60,
n =5
X + X2 + X3 + X4 + X5
Now, X = 1
n
10 + 25 + 30 + 35 + X 5
60 =

5
100 + X 5
=
5

60 5 = 100 + X 5

Sfd m = -34

Now,

X = A+

Sfd m
c
Sf

X = 35 +

( -34 )
10
70

X = 35 + ( -4.86)

Economics Class 11th

Example 10. Suppose mean of a series of 5 items is

60. Four values are 10,25,30, and 35 respectively. Find
the missing 5th value of the series.

Calculation of Arithmetic Mean

dm = (M - A ) dm =

ne

X = 35 - 4.86 = 30.14
Hence, required arithmetic mean = 30.14

300 = 100 + X 5

X 5 = 300 - 100 = 200

Thus, value of the 5 th item = 200

Example 11. Find out the missing value of the variate

for the following distribution whose mean is 31.87.

Solution

Calculation of Simple Arithmetic Mean in

Different Conditions
There are certain specific conditions one which some
adjustments are required before calculating arithmetic mean.
These are given below

20

27

33

54

16

48

90

30

(f)

Let the missing value of the variate be Y.

Charliers Accuracy Check

Some errors may be made while calculating the value of
mean. When the arithmetic mean of a frequency
distribution is calculated by short-cut or step deviation
method, the accuracy of the calculations can be checked
by using the following formulae given by Charlier.
Sf ( d + 1) = Sfd + Sf (for short-cut method)
Sf ( d+1) = Sfd+ Sf (for step deviation method
If the two sides of these equations do not tally, then the
calculations are incorrect.

12

Calculation of Missing Value

12
20
27
33
Y
54

8
16
48
90
30
8
Sf = 200

96
320
1296
2970
30 Y
432
SfX = 5114 + 30Y

On substituting the values in following formula, we get

SfX
5114 + 30Y
X=
31 .87 =
f
200
31 .87 200 = 5114 + 30Y 6374 = 5114 + 30Y
1260
= 42

1260 = 30Y Y =
30
Hence, the missing value of the variate is 42.

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Measures of Central Tendency

Calculation of Corrected Arithmetic Mean

Sometimes, in the calculation of arithmetic mean, some
items or values are wrongly written. Accordingly, the mean
value goes wrong. But such mean value can be corrected with
the help of following formula
SX (Wrong) + (Correct value) - (Incorrect value)
X =
n
Example 12. Mean marks obtained by 100 students
are estimated to be 40. Later on it is found that one
value was read as 83 instead of 53. Find out the
corrected mean.
Given, X = 40, n = 100
SX
SX
Now,
X=
40 =
n
100

SX (wrong) = 40 100 = 4000,

Also given, correct value = 53, incorrect value = 83
\Corrected
SX (Wrong) + (Correct value) - (Incorrect value)
X =
n
4000 + 53 - 83 3970
=
=
= 39 .70
100
100
Thus, corrected mean = 39 .70

Sfd m
4
c = 25 + 10 = 25 + 1.33 = 26.33
f
30
Hence, required arithmetic mean = 26.33

Now, X = A +

Example 14. Calculate arithmetic mean with the help

of following data using step deviation method
0

10

20

30

40

50

30

27

20

10

(Morethan)

Solution First of all convert the more than cumulative

frequency series into ordinary one and then calculate
the value of arithmetic mean.

Solution

Calculation of Arithmetic Mean When

Cumulative Frequency is Given
If cumulative frequency is given, then the series will be
converted into simple frequency series and after that
calculate the arithmetic mean. The kinds of cumulative
frequencies series would be less than or more than.
Example 13. Calculate arithmetic mean with the
help of following data using step deviation method
10
3

20
10

30
20

40
25

50
28

60
30

Solution First of all convert the less than cumulative

frequency series into ordinary one and then calculate
the value of arithmetic mean.
Calculation of Arithmetic Mean
(f)

dm
dm = m A d m =
c
( A = 25)
(c = 10)

(m)

fd m

0-10
10-20
20-30

3
103 = 7
2010 = 10

5
15
25

-20
-10
0

-2
-1
0

- 6
-7 - 13

30-40
40-50
50-60

2520 = 5
2825 = 3
3028 = 2

35
45
55

10
20
30

1
2
3

5
6 17

f = 30

Sfd m = +4

dm =

(f)

f.d m

c = 10

-6

0-10

30 - 27 = 3

20

10-20

27 - 20 = 7

15

-10

-1

- 13
-7

25 = A

0
5
6 17

20-30 20 - 10 = 10
30-40

10 - 5 = 5

35

10

40-50

5 -2 = 3

45

20

50-60

55

30

f = 30

Now,

Sfd m = 4

Sfd m
C
Sf
4
= 25 + 10
30
= 25 + 133
.
= 26.33

X = A+

Calculation of Arithmetic Mean of a

Mid-Value Series
Sometimes values are given, then series is to be converted
into exclusive series i .e ., class interval are to be formed on the
basis of exclusive method or we can find the arithmetic mean by
using these mid-point directly (method of finding class interval
when mid-value are given is discussed in chapter 2).
Example 15. Following table gives marks in statistics
of the students of Class XI. Find out mean marks using
direct method.
5

10

15

20

25

30

10

Solution In this series, mid-value are given. The

calculation of arithmetic mean involves the same
procedure as in the case of exclusive series.

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EXAM
Multiple Choice Questions
1.

The most commonly used measure of central tendency is

(a) AM
(c) mode
Answer (a) AM (Arithmetic Mean)

2.

[1 Mark]

(b) median
(d) All of these

The average of five quantities is 6 and the average of three is 8. What is the average of the
remaining two?

(a) 4
(b) 5
(c) 3
(d) 2
Answer (c) Q Average of 5 quantities = 6
Sum of 5 quantities = 6 5 = 30
\
Q Average of 3 quantities = 8
Sum of 3 quantities = 8 3 = 24
\
Sum of 2 quantities = 30 - 24 = 6
\
Hence, average of two quantities = 6 / 2 = 3

3.

The total of the deviation of a set of observation from their mean is always

(a) 0
Answer (a) 0

4.

Answer

(b)

Assumed mean can be expressed by

(b) A
(d) X - A

The mean of first 8 odd numbers is

(a) 7
(c) 8.5

Answer

7.

(d) -2

(b) 11
(c) 12
(d) 13
1 + 3 + 5 + 6 + X + 10
25 + X
AM =
6=
36 = 25 + X \ X = 36 - 25 = 11
6
6

(a) Z
(c) X -1
Answer (b) A

6.

(c) -1

The AM of 1, 3, 5, 6, X and 10 is 6, then the value of X is

(a) 10

5.

(b) 1

(b) Mean =

(b) 8
(d) None of these
1 + 3 + 5 + 7 + 9 + 11 + 13 + 15
= 64 / 8 = 8
8

The class mid-point is equal to

(a) the average of upper class limit and lower class limit
(b) the product of upper class limit and lower class limit
(c) the ratio of the upper class limit and the lower class limit
(d) None of the above
Answer (a) The average of upper class limit and lower class limit

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91

Measures of Central Tendency

8.

Which of the following formula is used for calculating combined arithmetic mean?
(a) X 1,2 =

X 1n1 + X 2 n2
n1 + n2

(b) X 1,2 =

(c) X 1,2 =

X 1X 2
n1 n2

(d) None of these

Answer

(a) X 1,2 =

X 1n1 + X 2n 2
n1 + n 2

Very Short Answer Type Questions

9.

X1 + X 2
n1 + n2

[1 Mark]

Name two types of arithmetic mean.

Answer

10.

SX
n

Arithmetic Mean =

SfX
N

Give the formula of calculating arithmetic mean in frequency distribution

(if assumed mean is taken).

Answer

13.

Arithmetic Mean =

Give the formula of calculating arithmetic mean in grouped data (without assumed mean).

Answer

12.

(ii) Weighted Arithmetic Mean

Give the formula of calculating arithmetic mean in ungrouped data.

Answer

11.

(i) Simple Arithmetic Mean

Arithmetic Mean = A +

Sfdx
c
Sf

Give the formula of weighted arithmetic mean.

SXW
SW
where, S XW = Total of the values multiplied by weights
SW = Sum of weights

Answer

14.

Complete the following formula

Answer

15.

Weighted Arithmetic Mean,

X = A+

XW =

X =A+

Sfd x
c
Sf

If mean of a distribution is `700 and total is `6300, then find the number of observations.

Answer

Mean =

Total of Values
6300
6300
700 =
n=
=9
Number of Observations
700
n

Short Answer Type Questions

16.

Sfd x
?
?

[3/4 Marks]

Prove that the algebraic sum of deviation of a given set of observations from their mean is zero.

Answer

S( X - X ) = SX - SX = SX - NX
= NX - NX = 0

[Q Sa = Na]
Hence, proved.

as X = SX SX = NX

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17.

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Economics Class 11th

Find unknown frequency in the table given below.

X

(f)

10

15

20

10

25

30

6
S f = 50

Answer To find unknown frequency subtract the sum of known frequencies from sum of total
frequencies
S f = 50
Sum of Known Frequency = 5 + 7 + 10 + 8 + 6 = 36
Unknown Frequency = Total Frequency - Sum of Known Frequencies
= 50 - 36 = 14

18.

The arithmetic mean gets distorted by extreme values in the series and that the value of
arithmetic mean may not figure in the series at all. Write the limitations of mean with the help of
above statement.

Answer

Refer to the text on page 89.

19.

Average daily wage of 50 workers of a factory was ` 200. Each worker is given a raise of ` 20.
What is the new average daily wage?

Answer Increase in wages of each worker = ` 20

Total increase in wages = 50 20 = ` 1000
Total wages before increase in wages = 50 200 = 10000
Total wages after increase in wages = 10000 + 1000 = ` 11000
SX 11000
New average wage =
=
= ` 220
n
50
Thus, mean wage will increase by ` 20.

20.

Show the sum of deviation of the value of variables from their arithmetic mean is equal to zero.

Answer

In order to show this, we take an example

X

dx = ( X - X )
X =6

-4

-2

+2

10

+4

SX = 30, N = 5

Sdx = 0

SX 30
=
=6
5
n
This shows that the sum of deviations of the values of the variables from their arithmetic mean is
equal to zero.
X =

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Measures of Central Tendency

29.

A book seller has 150 books of Economics and Accountancy. The average price of these books is
`40 per book. Average price of books on Economics is `43 and that of Accountancy is `35. Find the
number of books on Economics with the seller.

Answer

Let n1 = Economics, n 2 = Accountancy

n1 + n 2 = 150
n 2 = 150 - n1

Now,

X 1, 2 = 40, X 1 = 43, X 2 = 35
X 1, 2 =

X 1n1 + X 2 n 2
n1 + n 2

43n1 + 35(150 - n1 )
150
43n1 + 5250 35n1
40 =
150
8n1 + 5250
40 =
150
6000 = 8n1 + 5250
8n1 = 750

40 =

750
= 93.75 = 94 (approx)
8
Thus, books on Economics with the seller are 94.
n1 =

Long Answer Type Questions

30.

[6 Marks]

Find out the arithmetic mean using the step deviation method.
(f)
More than 0

28

More than 10

24

More than 20

14

More than 30

/ In the above problem, cumulative frequencies are given. Firstly, it will be changed into exclusive class interval
and thereafter we will calculate arithmetic mean using the formula of step deviation method.

Calculation of Arithmetic Mean by

Step Deviation Method

Answer

dm
= m- A
c

(f)

(m)

fd m

0-10

28 - 24 = 4

-10

-1

-4

10-20

15

24 - 14 = 10

20-30

25

14 - 4 = 10

10

10

30-40

35

20

Sf = 28

dm
c
c = 10

d m =

X = A+
X = 20

Sfd m
14
c = 15 + 10 = 15 + 5
Sf
28

Sfd m = 14

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Median and Quartiles

Median
Median is that positional value of the variable which divides the
distribution into two equal parts, one part comprises all values greater
than the median value and the other comprises all the values less than
the median value.
Median is the middle element when the data set is arranged in
order of the magnitude.

Definitions of Median
If the number of group are ranked in order according to the
measurement under consideration, then the measurement of
the number most nearly one half is the median.
AL Bowley
The median is that value of the variable which divides the group
into two equal parts, one part comprising all values greater and
the other part comprising all values lesser than the median
value.
Connor
The median is usually defined as the value which divides a
distribution so that an equal number of items is on either side of
it.
Croxton and Cowden

Computation of Median
The median can be calculated in the following series

Calculation of Median in Individual Series

(Ungrouped Data)
In individual series, there is no frequency (as it is ungrouped data)
only values of the variable are given.
To calculate median in an individual series, the following steps
are used
Step 1 Arrange all the values of different items of given series in
the ascending or descending order.
Step 2 Compute the number of items i.e., n.
Step 3 If number of items i.e., n is odd then use the following
formula to calculate median
n + 1
Median, M = Size of
th item
2
And if N is an even number, then use the following
formula to calculate median
n
n
Size of th item + Size of + 1 th item
2
2
M =
2
Note The position of the median can be calculated by the formula
n + 1
position of median =
th item Where, n = number of items
2

Example 1. Calculate median from the

following data
20, 25, 30, 15, 17, 35, 26, 18, 40, 45, 50.
Solution First of all, arrange the values in
ascending or descending order and put serial
numbers accordingly.
Calculation of Median
1

15

17

18

20

25

26

30

35

40

10

45

11

50

n = 11

There, number of items i.e., n = 11which is

odd.
n + 1
\Median, M = Size of
th item
2
11 + 1
= Size of
thitem
2
12
= Size of th item
2
= Size of 6th item
6th item is 26. So, median = 26

Calculation of Median in Discrete Series

In discrete series, frequencies are given against
the definite value of the variables.
To calculate median in discrete series use the
following steps
Step 1 First of all arrange the data in ascending
or descending order. and X denotes
value and f denotes frequency.
Step 2 Calculate the cumulative frequencies
(cf ).

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Mode and Determination of Mode

Mode
The word mode has been derived from the French word
La Mode which signifies the most fashionable values of a
distribution because it is repeated the highest number of times
in the series. It is the most frequently observed data value.
Mode is the value of that item in a variable which is
repeated at the greatest number of times or occurs most
frequently.

Definitions of Mode
The mode may be regarded as the most typical of a
series of value.
Croxton and Cowden
The value of the variable which occurs most frequently
in a distribution is called the mode.
Kenny
Mode is the value occurring most frequently in a series
of items.
Zizek

Mode is a position of greatest density or point of highest

concentration of value.
If in a data unique value of mode is obtained then the data
is unimodal. Also, the mode is not necessarily unique, unlike
or arithmetic mean and median. Data with two modes called
bi-modal and with more than two modes called multi-modal.
It also possible that there is no mode if no value appears more
frequent than any other value in the distribution.
In a series 4, 4, 5, 5, 6, 6 there is no mode.

Example 1. From the heights of 15 students,

calculate the value of Mode.
Height (in inches)
66

1. Calculation of Mode in Individual Series

In series of individual observation, mode can be calculated in
two ways.

(i) By Arraying Data

In this method, we array the data in ascending or
descending order first. The value of that item which
occurs most frequently in the distribution is called mode.

67

69

67

50
48

66
60

70

66

72

71

65

Solution By arranging the series in an ascending order,

we get
48, 50, 52, 60, 60, 65, 66, 66, 66, 67, 67, 69, 70, 71, 72
By observation, height 66 inche occurs most frequently
i.e., three times therefore the mode ( Mo) is 66 inche.

(ii) By Conversion of Data in Discrete Series

In this method, data is converted into discrete series and
the most frequently repeated value is termed as mode.
Example 2. Calculate the value of mode from the
following data
Wages 30
40
Solution

40

35

40

45

40

36

25

32

40 46 47 25 35
Calculation of Mode

30

Calculation of Mode
Values of mode can be calculated in the following way for
three series

60

52

40

35

45

36

25

32

46

47

Here, mode is 40 because it has maximum frequency.

u

If the frequencies of two or more size of items are maximum,

then it is difficult to say which item is mode. In such situations,
the following formula will be applied for getting the value of
mode.
Mode = 3Median - 2Mean
Or
Mo = 3M - 2 X

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Measures of Central Tendency

2. Calculation of Mode in Discrete Series

In a discrete series, mode can be calculated in the following two ways

(b) Analysis Table

After preparing the grouping table, prepare an

analysis table. while preparing this table put column
numbers on the left hand side and the various
probable values of mode on the right hand side.
The highest total of frequencies marked in each
column is now entered in the analysis table against
the concerned values of x or item. We use tick mark
( ) in the relevant box to show these entries. At the
end, we find total number of tick marks for each
value of x. The value of x having maximum tick marks
in called mode of given series

(i) By Inspection Method

In this method, the value whose frequency is maximum will said
to be the mode.
Example 3. Find the mode from the following data
100

200

300

400

500

20

30

15

10

Calculation of Mode

Solution

100

200

300

400

500

20

30

15

10

(f)

By inspection, mode is 200 because the maximum frequency is

30.

II

III

Modal marks = 200

(ii) By Grouping Method

In certain cases, the items concentrate around more than one
value, so it becomes difficult to observe the modal variable. In
such cases, we adopt grouping method, wherein grouping table
and analysis table are prepared.
(a) Grouping Table

Prepare a table consisting of 6 columns, in addition to a column for

various values of variable.
In Column I The frequencies as given in the question are noted
against the respective items and highest frequency is marked.
In Column II The frequencies are grouped in twos, beginning
with the 1st item. Find out their total and mark the highest total.
In Column III The frequencies are grouped in twos beginning
with 2nd item (i. e., first frequency is left out). Find out their total
and mark the highest total.
In Column IV The frequencies are grouped into threes beginning
with 1st item. Find out their total and mark the highest total.
In Column V The frequencies are grouped into threes beginning
with 2nd item (i. e., first frequency is left out). Find out their total
and mark the highest total.
In Column VI The frequencies are grouped into threes beginning
with 3rd item (i. e., first and second frequencies are left out). Find
out their total and mark the highest total. Highest value in all the
columns are shown in bold letters or are underlined.
Format of Grouping Table
I

II

III

IV

IV
V
VI
Total

Example 4. Find out mode of the following

series
8

10

11

12

13

14

15

Solution The two items 12 and 14 have the

highest frequency of 9. So, grouping of
frequencies is essential. The method of
grouping will be used for determination of
mode.
Grouping Table
(f)
(X )
8

10

11

12

13

14

15

VI

11

15

17

15

14

16

17

19

24

21

26

24

23

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Measures of Central Tendency

Important Formulae
1. Calculation of Arithmetic Mean
(i) Individual Series
(a) Direct method, X =

(ii) Corrected Mean

SX (Wrong) + (Correct value) - (Incorrect value)
X =
N

SX
N

(b) Assumed mean or short-cut method, X = A +

(c) Step deviation method, X = A +

(ii) Discrete Series

(a) Direct method, X =

Sd x
N

Sdx
N

Sfx
N / Sf

(b) Assumed mean or short-cut method,

S fdx
X =A+
N / Sf
(c) Step deviation method, X = A +

(iii) Continuous Series

(a) Direct method, X =

Sfd x
c
N / Sf

Sf / N

(b) Assumed mean or short-cut method,

Sfdm
X =A+
N / Sf
Sfd m
N / Sf

2. Calculation of Weighted Arithmetic Mean

SXW
Xw =
SW
(i) Combined Arithmetic Mean
X 1, 2,3 =

4. Calculation of Partition Value

Quartiles

(i) Individual and Discrete Series

N + 1
Q 1 = Size of
th item,
4

Sfm

(c) Step deviation method, X = A +

3. Calculation of Median
(i) Individual Series and Discrete Series
N + 1
M = Size of
th item
2
(ii) Continuous Series
N
M = Size of th item
2
N
- cf
and
c
L1 + 2
f

N 1 X 1 + N 2 X 2 + N 3 X 3 ++ N n X n
N 1 + N 2 + N 3 ++ N n

N + 1
Q 3 = Size of 3
th item
4
(ii) Continuous Series
N
Q 1 = Size of th item
4
N
- cf
= L1 + 4
c
f

5. Calculation of Mode in Continuous Series

Mo = l1 +

f1 - f 0
f2
c
c or l1 +
2 f1 - f 0 - f 2
f0 + f2

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136

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Economics Class 11th

Misconception of Concepts
P Concept Consider the following formulae
fx
In Discrete Series X =
N
Calculate arithmetic mean by short-cut method

=
=

+
+

010

20

1020

24

2030

40

3040

36

4050

20

Misconception

In Discrete Series

e.g.,

3 4

fx

=
\
=

X = 25.86

P Concept Calculate median from the following values

20, 32, 35, 33, 15, 21, 17, 32, 11, 10, 19

N=5

6 12 20 30
fx = 70
fx 70
=
= 14
X=
5
N

This is wrong way to assuming N in discrete series.

d =
m- A
( A = 5)

Misconception This is wrong way to taken assumed mean

because it does nt make calculation easy.
N + 1
M = Size of
th item
2
11 + 1
= Size of
th item
2
12
= Size of th item = 6 th item
2

Marks (x)

Mid
Value m

010

20

1020

15

24

10

240

2030

25

40

20

800

3040

35

36

30

1080

This is wrong way to calculate median because given data is

not arranged in ascending or descending order.

4050

45

20

40

800

f = 140
\

fdm

M = 21

fdm = 2920

fdm
f
2920
X = 5+
140
X = A+

X = 5 + 20.86

X = 25.86

3
Liberalisation, Privatisation
and Globalisation
During the tenure of Narasimha Rao Government (1991), India met with an
economic crisis relating to its external debt. The government was unable to make
repayments on its borrowings from abroad; foreign exchange reserves were not
sufficient to repay the debts. The prices of essential goods were rising and the
imports were growing at a very high rate.
As a result, the government initiated a new set of policy measures to reform the
conditions of an economy and several economic reform programme were also
introduced in this respect to promote privatisation, liberalisation and
globalisation.

Economic Crisis of 1991

and Indian Economy Reforms

Crisis in India is figured out because of the inefficient management of

Indian Economy in 1980s.
The revenues generated by the government were not adequate to meet the
growing expenses. So, the government resorted to borrowing to pay for its debts
and was caught is a debt-trap.

Deficit It refers to the excess of government expenditure over its revenue.

3 Economic Crisis of 1991 and

Indian Economy Reforms

3 Liberalisation, Privatisation and

Globalisation

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Liberalisation, Privatisation and Globalisation

Causes of Economic Crisis

Different causes of economic crisis are given as under
(i) The continued spending on development
programmes of the government did not generate
additional revenue.
(ii) The government was not able to generate
sufficient funds from internal sources such as
taxation.
(iii) Expenditure on areas like social sector and
defence do not provide immediate returns, so
there was a need to utilise the rest of its revenue
in a highly effective manner, which the
government failed to do.
(iv) The income from public sector undertakings
was also not very high to meet the growing
expenditures.
(v) Foreign exchange borrowed from other
countries and international financial institutions
was spent on meeting consumption needs and
to make repayments on other loans..
(vi) No effort was made to reduce such increased
spending and sufficient attention was not given
to boost exports to pay for the growing needs.
Due to above stated reasons, in the late 1980s,
government expenditure began to exceed its revenue by
such large margins that meeting the expenditure through
borrowings became unsustainable.

Need for Economic Reforms

The economic policy followed by the government
upto 1990 failed in many aspects and landed the country
in an unprecedented economic crisis. The situation was
so alarming that Indias reserves of foreign exchange
were basely enough to pay for two weeks of imports.
New loans were not available and NRIs were
withdrawing large amounts. There was an erosion of
confidence of international investors in the Indian
economy.

287

The following points highlight the need for economic reforms in the
country
(i) Increasing fiscal deficit
(ii) Adverse Balance of Payments
(iii) Gulf crisis
(iv) Rise in prices
(v) Poor performance of Public Sector Units (PSUs).
(vi) High rate of deficit financing.
(vii) Collapse of soviet block.

Emergence of New Economic Policy (NEP)

Finally, India approached International Bank for
Reconstitution and Development, popularly known as World
Bank and International Monetary Fund (IMF) and received $ 7
million as loan to manage the crisis. International agencies
expected India to liberalise and open up economy by removing
restrictions on private sector and remove trade restrictions
between India and other countries.
India agreed to conditions of World Bank and IMF and had
announced New Economic Policy (NEP) which consist of wide
range of economic reforms.
The measures adopted in the New Economic Policy can be broadly
classified into two groups i .e .,
(i) Stablisation Measures They are short-term measures
which were intended to correct some weakness that have
developed in the Balance of Payments and to bring
Inflation under control.
(ii) Structural Reforms They are longterm measures,
aimed at improving the efficiency of the economy and
increasing its international competiveness by removing
the rigidities in various segments of the Indian economy.
The various structural reforms are categorised as
Liberalisation
Privatisation
Globalisation

Balance of Payment It is a system of recording countrys economic transactions with the rest of the world over a period of one year.
Inflation It is a situation in which general price level of goods and services increases in an economy over a period of time.

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EXAM
Multiple Choice
1.

When was new economic policy announced?

(a) In July 1991

Answer (a) In July 1991

2.

Questions [1 Mark]
(b) In June 1991

(b) Deficit

Very Short Answer

(c) Loss

(d) Profit

Type Questions [1 Mark]

Mention any two needs for economic reforms.

Answer (i) Increase in fiscal deficit

4.

(d) In June 1992

______ means the excess of anticipated expenditures over estimated revenue.

(a) Surplus
Answer (b) Deficit

3.

(c) In July 1996

(ii) Unfavourable balance of payment

Why is New Economic Policy called the policy of economic reforms?

Answer New Economic Policy is called the policy of economic reforms since, it seeks to remove the
inefficiencies in the economic system.

5.

Why does government need to generate funds?

Answer The government needs to generate funds to implement various policies and to meet its
general administration expenses.

6.

Inspite of low funds in the 1980s government had to overshoot its revenues? Why?

Answer Even though the revenues were low in 1980s, the government had to overshoot its revenues
to meet problems like unemployment, poverty, and population explosion.

7.

Why did Indian Government become unsustainable in 1991?

Answer Government expenditure began to exceed its revenue by very large margins. This was the
main cause to make the government unsustainable.

8.

Why did the government need to borrow from international organisations?

Answer A severe financial crisis due to unsustainable fiscal deficit, fall in foreign exchange reserves
and inability to pay interest to international lenders forced Indian Government to borrow from
international organisations.

Short Answer
9.

Type Question [3/4 Marks]

Why were reforms introduced in India?

Answer Since independence, India followed the mixed economy framework by combining the
advantages of the market economic system with those of the planned economic system. But over the
years, this policy resulted in the establishment of a variety of rules and laws which were aimed at
controlling and regulating the economy and these rules ended up hampering the process of growth
and development.
The economy was facing problems of declining foreign exchange, growing imports without matching
rise in exports and high inflation. India changed its economic policies in 1991 due to the financial
crisis and pressure from international organisations like the World Bank and IMF.

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Liberalisation, Privatisation and Globalisation

By introducing concept of liberalisation, privatisation and

globalisation, government have revived the condition of
Indian Economy.

Liberalisation
Libralisation was introduced with an aim to put an end to
those restrictions which became major hindrances in growth
and development of various sectors. It is generally defined as
the lossening of government regulations in a country to allow
for private sector companies to operate business transactions
with fewer ristrictions. In relation to developing countries, this
term refers to opening of economic border for multinationals
and foreign investment.

Objectives of Liberalisation
The main objectives of liberalisation policy are
(i) To increase competition among domestic industries.
(ii) To increase foreign capital formation and technology.
(iii) To decrease the debt burden of the country.
(iv) To encourage export and import of goods and
services.
(v) To expand the size of the market.

Economic Reforms Under Liberalisation

Reforms under liberalisation were introduced in many
areas. Let us discuss these now

1. Industrial Sector Reforms

The following steps were taken to deregulate the industrial
sector
(i) Abolition of Industrial Licensing Government
abolished the licensing requirement of all industries,
except for the five industries, which are
Liquor
Cigarettes
Defence equipment
Industrial explosives
Dangerous chemicals, drugs and pharmaceuticals.
(ii) Contraction of Public Sector The number of
industries reserved for the public sector was reduced
from 17 to 8. Presently, only three industries are
reserved for public sector. They are
Railways
Atomic energy
Defence

(iii) De-reservation of Production Areas

The production areas which were earlier reserved
for SSI were de-reserved.
(iv) Expansion of Production Capacity The producers
were allowed to expand their production capacity
according to market demand. The need for
licensing was abolished.
(v) Freedom to Import Capital Goods The business
and production units were given freedom to
import capital goods to upgrade their technology.

2. Financial Sector Reforms

Financial sector includes financial institutions such as
commercial banks, investment banks, stock exchange
operations and foreign exchange market.
The following reforms were initiated in this sector
(i) Reducing Various Ratio Statutory Liquidity Ratio
(SLR) was lowered from 38.5% to 25%.
Cash Reserve Ratio (CRR) was lowered from 15%
to 4.1%.
(ii) Competition from New Private Sector Banks The
banking sector was opened for the private sector.
This led to an increase in competition and
expansion of services for consumers.
(iii) Change in the Role of RBI RBIs role underwent
a change from a regulator to a facilitator.
(iv) De-regulation of Interest Rates Except for savings
accounts, banks were able to decide their own
interest rates
3. Tax Reforms/Fiscal Reforms
Tax reforms are concerned with the reforms in
governments taxation and public expenditure policies,
which are collectively known as its fiscal policy.
Moderate and Simplified Tax Structure Prior to 1991,
the tax rates in the country were quite high, which led to
tax evasion. The fiscal reforms simplified the tax
structure and lowered the rates of taxation. This reduced
tax-evasion and increased governments revenues.
4. Foreign Exchange Reforms/External Sector
Reforms
External sector reforms include reforms relating to
foreign exchange and foreign trade. The following
reforms were initiated in this sector

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290
(i) Devaluation of Rupee Devaluation implies a fall in
the value of rupee against some foreign currency. In
1991, the rupee was devalued to increase our
countrys exports and to discourage imports.
(ii) Other Measures
Import quotas were abolished.
Policy of import licensing was almost scrapped.
Import duty was reduced.
Export duty was completely withdrawn.

World Trade Organisation (WTO)

The WTO was founded in 1995 as the successor
organisation to the General Agreement on Trade and Tariff
(GATT). GATT was established in 1948 with 23 countries
as the global trade organisation to administer all
multinational trade agreements by providing equal
opportunities to all countries in the international market
for trading purpose. However this had certain problems
hence.
WTO was expected to establish a rule based trading
regime in which nations cannot place arbitrary restrictions
on trade. Its purpose was mainly to expand production
and trade in order to have optimum utilisation of world
resources.
The WTO agreements cover trade in goods as well as
services to facilitate international trade through removal
of tariff as well as non-tariff barriers and provide better
market access to all countries. Being an important
member of WTO. India has been in front to frame rule and
regulations and safeguards interest of developing world.
India has kept commitments towards liberalisation of
trade in WTO by removing quantitative restrictions on
imports and reducing tariff rates.

Functions of WTO
(i) It facilitates the implementation, administration and
operation of the objectives of multilateral trade
agreements.
(ii) It administers the trade review mechanism.
(iii) It administers the understanding rules and procedures
governing the settlement disputes.
(iv) It is a watchdog of international trade. It examines the
trade regimes of individual members.
(v) Trade disputes that cannot be solved through bilateral
talks are forwarded to the WTO dispute settlement
court.
(vi) It is a management consultant for world trade. Its
economist keep a close watch on the activities of the
global economy and provide studies on the main issues of
the day.

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Economics Class 11th

Privatisation
It refers to giving greater role to private sector thereby
reducing the role of public sector. In other words, it means
shedding of the ownership or management of a government
owned enterprise.
It may also mean de-reservation of industries previously
reserved for public sector.
Government companies (public companies) are converted
into private companies in two ways
(i) By withdrawal of the government from ownership
and management of the public sector companies.
(ii) By the method of disinvestment.

Forms of Privatisation
Different forms of privatisation are
(i) Denationalisation When 100% government
ownership of productive assets is transferred to the
private sector, it is called denationalisation. It is
also known as strategic sale.
(ii) Partial Privatisation When less than 100% or
more than 50% ownership is transferred, it is a case
of partial privatisation with private sector owning
majority of shares. In this situation, the private
sector can claim to possess substantial autonomy in
its functioning. It is also known as partial sale.
(iii) Deficit Privatisation/Token Privatisation When
the government disinvests its shares to the extent of
5 to 10% to meet the deficit in the budget, this is
termed as deficit privatisation or token
privatisation.

Objectives of Privatisation
The most common and important objectives of privatisation
are
(i) Improving the financial condition of the
government.
(ii) Raising funds through disinvestment.
(iii) Reducing the workload of public sector.
(iv) Increasing the efficiency of the government
undertakings.
(v) Providing better goods and services to consumers.
(vi) Bringing healthy competition within an economy.
(vii) Making way for Foreign Direct Investment (FDI).

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Failures of Economic Reforms

I. Neglect of Agriculture
There has been deterioration in
agricultural
growth
rate.
This
deterioration is the root cause of the
problem of rural distress that reached
crisis in some parts of the country.
Economic reforms have not been able to benefit
the agricultural sector because
(i) Public investment in agriculture sector
especially in infrastructure which includes
irrigation, power, roads, market linkages
and research and extension has been
reduced in the reform period.
(ii) The removal of fertiliser subsidy has led to
increase in the cost of production which
has severely affected the small and
marginal farmers.
(iii) Various policy changes like reduction in
import duties on agricultural products,
removal of minimum support price and
lifting of quantitative restrictions have
increased the threat of international
competition to the Indian farmers.
(iv) Export-oriented policy strategies in
agriculture has been a shift from
production for the domestic market
towards production for the export market
focusing on cash crops in lieu of
production of food grains.

1.

Sircilla Tragedy
Privatisation of power supply in Andhra Pradesh resulted in
substantial increase in power-rates, causing many powerlooms to
shut down in a small town, Sircilla.
50 workers committed suicide because of loss in means of
livelihood.

II. Other Failures

In addition to the above mentioned failures, the other drawbacks of
LPG policy were:

It led to urban concentration of growth process.

It encouraged economic colonialism.
It resulted in the spread of consumerism.
It led to cultural erosion.

Questions [1 Mark]

The pre-condition of privatisation to be successful requires

(a) liberalisation and de-regulation of the economy
(b) capital markets should be sufficiently developed
(c) Both (a) and (b)

(d) None of the above

Answer (c) Both (a) and (b)

Economics Class 11th

II. Uneven Growth in Industrial Sector

Industrial sector registered uneven growth during this period.
This is because of decreasing demand of industrial products due to
various reasons
(i) Cheaper imports have decreased the demand for domestic
industrial goods.
(ii) Globalisation created conditions for the free movement of
goods and services from foreign countries that adversely
affected the local industries and employment opportunities in
developing countries.
(iii) There was inadequate investment in infrastructural facilities
such as power supply.
(iv) A developing country like India still does not have the access
to developed countries markets because of high non-tariff
barriers.

EXAM
Multiple Choice

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Liberalisation, Privatisation and Globalisation

2.

Which of the following organisation settles the disputes among the member countries?

(a) IMF
Answer (c) WTO

3.

(b) World Bank

(b) trade organisation

(c) social institutions

Answer (a) Nations

(d) cultural forums

As a part of globalisation process tariff rates were in India.

(a) raised
Answer (b) Lowered

5.

(d) None of these

Globalisation is the process of increasing economic integration among in the world.

(a) nations

4.

(c) WTO

(b) lowered

(c) not changed

(d) abolished

Predecessor of WTO is
(a) general agreement on trade and tariff

(b) general announcement on trade and tax

(c) general agreement on taxes and trials

(d) None of the above
Answer (a) General agreement on trade and tariff

6.

refers to the sale of equity as public sector units in the market.

(a) Liberalisation
(b) Globalisation
Answer (c) Disinvestment

7.

(b) franchising

(c) contracting

(d) All of these

Deregulation of the economy and to introduce the policy of laissez-faire is

(a) liberalisation
(b) globalisation
Answer (a) Liberalisation

9.

(d) Privatisation

Privatisation can be achieved by

(a) leasing
Answer (d) All of these

8.

(c) Disinvestment

(c) privatisation

(d) None of these

100% privatisation in India has taken place in

(a) CMC Limited

(b) Maruti Udyog Limited

(c) Centaur hotel

Answer (c) Centaur hotel

10.

International body which deals with Multilateral Trade Agreement between nation is

(a) UNO
Answer (b) WTO

11.

(d) VSNL

(b) WTO

(d) IBRD

(c) independent

(d) None of these

Globalisation and liberalisation are

(a) contradictory
(b) complementary
Answer (b) Complementary

12.

(c) OPEC

Which of the following statement is against globalisation?

(a) It will improve allocative efficiency of resources
(b) It will redistribute economic power
(c) It will impose tariff barriers among nations

(d) It will provide updated technology

Answer (b) It will redistribute economic power.

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13.

Opening up the economy to the economies of the world so that Indian economy can compute at
international level is called

(a) liberalisation
Answer (b) Globalisation

(b) globalisation

Very Short Answer

14.

(c) privatisation

(d) None of these

Type Questions [1 Mark]

Why has government decided to retain the navaratanas in the public sector?

Answer Government has decided to retain the navaratanas in the public sector since they are profit
making and help the government to raise financial resources for themselves.

15.

Do you think outsourcing is good for India? Why are developed countries opposing it?

Answer Outsourcing is good for India since it has generated the new employment opportunities in
the Indian economy, contributed in GDP and has increased the foreign reserve in the country.

16.

What was the purpose of liberalisation of trade and investment in 1991?

Answer To increase international competitiveness of industrial production and to motivate foreign

investment and technology to reduce the burden of debt. Moreover, it aimed to promote efficiency
of local industries.

17.

What was the limit of automatic approval for direct foreign investment?

Answer Automatic approval was granted for direct foreign investment up to 51 percent in a wide
range of industries.

18.

Name two services outsourced from India.

Answer Voice-based business process and banking services.

Short Answer
19.

Type Questions [3/4 Marks]

State the main objectives of liberalisation policy.

Answer The main objective of liberalisation policy are

(i) To increase competition among domestic industries.
(ii) To increase foreign capital formation and technology.
(iii) To decrease the debt burden of the country.
(iv) To encourage export and import of goods and services.

20.

Deepak argues that in the era of privatisation, there is no need for government intervention in
education and health sectors. However, his friend Raju argues that education and health care
services create social benefits and therefore there is a need for government intervention in
education and health sectors. Decide with reasons, who is right?

Answer Raju is right, the government intervention in these sectors is essential due to following reasons
(i) Expenditures on education and health, make substantial long-term impact and they cannot be
reversed.
(ii) Individual consumers of education and health services do not have complete information
about the quality of services and their costs.
(iii) The government has to ensure that private institutions in these sectors adhere to the standards
stipulated by the government and charge the correct price.
(iv) In developing economies, a substantial sector cannot afford to have these services by paying for
it. These should be provided to them by the government.

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Liberalisation, Privatisation and Globalisation

32.

In your opinion, what are the advantages of privatisation to the economy?

Answer Advantages of privatisation are

(i) Privatisation will introduce efficiency and profitability in Public Sector Undertakings (PSUs).
(ii) Privatisation promotes consumers sovereignty. High degree of consumer's sovereignty implies
wider choice and better quality of goods and services.
(iii) Privatisation will reduce budgetary deficits which result from expenditure on loss making
PSUs.
(iv) Privatisation promotes diversification of production. Unlike PSUs, private enterprises
invariably generate high profits.

Long Answer
33.

Type Questions [6 Marks]

Distinguish between the following

(i) Strategic and minority sale

(ii) Bilateral and multi-lateral trade
Answer (i) Difference between strategic and minority sale are
Basis

Strategic Sale

(iii) Tariff and non-tariff barriers

Minority Sale

Meaning

Strategic sale involves the sale of minimum

51% stake of a Public Sector Unit (PSU) to the
private sector.

Minority sale involves the sale of less than 49%

stake of a PSU to the private sector.

Control

The control and management of PSU is

transferred to the private sector.

The control and management of PSU remains

with the government as it holds the majority
stake.

Process

It is done through a process of competitive

bidding and subsequent sales to the partner.

Minority disinvestment are made via public

offers.

(ii) Difference between bilateral and multi-lateral trade are

Basis

Bilateral Sale

Multi-lateral Trade

Meaning

It is a trade agreement between two countries. It is a trade agreement among more than two
countries.

Negotiations

Separate negotiations required to be done

with different countries on one to one basis.

Negotiations done with many countries together

which saves time.

Economic
cooperation

Encourages economic cooperation between

two countries.

Encourages globalisation integrating many

countries of the world.

(iii) Difference between tariff and non-tariff barriers are

Basis

Tariff Barriers

Non-tariff Barriers

Meaning

It refers to the taxes imposed on the imports

by a country for providing protection to its
domestic industries.

It refers to the restrictions other than taxes,

imposed on imports by a country for providing
protection to its domestic industries.

Purpose

Tariff barriers are allowed by world trade

organisation to be imposed by its member
countries though at reasonable rates.

Non-tariff barriers like import quotas and

voluntary export restraints are now abolished
under WTO regime.

Nature

Tariff barriers are more explicit.

Non-tariff barriers are not explicit.

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Your
Very Short Answer Type Questions [1 Mark]
1. What do you mean by foreign direct investment?
2. What was the main aim of trade and investment policy reforms?
3. State the measures adopted by the government to promote globalisation?
4. It is said, New Economic Policy is liberal. Do your agree?
5. How are bilateral trade agreements different from multilateral trade agreements? State in
one line.

Short Answer Type Questions [3/4 Marks]

6. Do you think only loss making companies should be privatised? Why?
7. Globalisation is the outcome of liberalisaton and privatisation strategies. Explain.
8. What are the major factors responsible for the high growth of the service sector?
9. What were the basic problems that forced us to have a u-turn in our economic policies?
10. Why should navaratnas be not privatised? Give logical reason.

Long Answer Type Questions [6 Marks]

11. Agriculture sector appears to be adversely affected by the reform process. Why?
12. During the reforms, growth of agriculture and industry has gone down. Explain.
13. India has certain advantages which makes it a favourite outsourcing destination. What are
these advantages?
14. What are the Economic Reforms in Indian since 1991?