KSLU Solved Question Papers
Micro Economics
Previous Year Question Paper with Solution
B.Com. LL.B. (Five Years) · Sem 1
2023 Sep Examination
munotes.in
Mumbai
B.Com. LL.B. (Five Years) Sem 1 Micro Economics 2023 Sep Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2023 Sep examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2023 Sep examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2023 Sep examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all five Units. (2) One essay type question and short note from each Unit. (3) Figures to the right indicate marks. (4) Answer should be written either in English or Kannada completely.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)Define Microeconomics. What are its uses and limitations ?[10]
Answer
For full marks, cover: a definition of microeconomics, in your own words and in Boulding's as usually quoted, with the origin of the term (Frisch, 1933); what it studies; its uses for understanding the economy, for decisions and for policy, each with an example; its limitations, including the fallacy of composition with a worked case; and a conclusion that weighs the two.
Definition
Microeconomics is the part of economics that studies the behaviour of individual units of the economy. These are a consumer, a firm, an industry, or the market for one commodity or one factor. It asks how each of them makes choices, and how the price of each good and factor is fixed.
K.E. Boulding's definition, in the form usually quoted, describes it as the study of "particular firms, particular households, individual prices, wages, incomes, individual industries, particular commodities".
The term was introduced by the Norwegian economist Ragnar Frisch in 1933, from the Greek mikros, small. Because the price of each good is its central concern, microeconomics is also called price theory.
What it studies. It covers consumer behaviour and demand, production and cost, and the pricing of goods under different market forms. It also covers the pricing of factors (wages, rent, interest and profit) and economic welfare.
Uses of microeconomics
A. For understanding the economy
- How free markets decide what is produced. Rising prices draw resources to goods in short supply, falling prices push them away. Microeconomics explains this working of the price mechanism.
- Why some goods and services cost more. A diamond is dearer than water, and a surgeon earns more than a clerk. The theory of value and of factor prices explains why.
B. For decisions by households and firms
- Spending. It shows a household how to divide a limited budget for the greatest satisfaction.
- Running a business. It tells a firm what output gives the most profit, what price to charge, and whether to stay open when prices are low.
C. For public policy
- Taxes and subsidies. It predicts how a tax on one good changes its price and sales, and who pays it.
- Controls. It shows the effect of a support price, a price ceiling or a minimum wage in one market.
- Competition. It shows how monopoly harms buyers, which guides competition law.
D. For judging efficiency
Welfare economics, built on microeconomics, sets out the conditions for the best use of resources and shows where markets fail, as with monopoly and pollution.
Limitations of microeconomics
- It cannot explain the economy as a whole. National income, total employment, inflation and the trade cycle need macroeconomics.
- It usually assumes full employment. It studies how given resources are shared among uses, not why some of them lie idle.
- The fallacy of composition. What is true of one unit may be false for all units together.
- Its assumptions are often unrealistic. Perfect competition, perfect knowledge and fully rational buyers are rarely found.
- It studies one market at a time. In this partial equilibrium approach, other markets are held constant, though in reality markets affect one another.
- It is largely static. It compares positions of rest more than it traces changes over time.
A worked case of the fallacy of composition. A textile mill pays 100 workers Rs 500 a day. If it alone cuts wages by 10 per cent, its cost falls by Rs 5,000 a day. Its sales hardly change, since its workers are a tiny part of its buyers, so it gains. If every firm in the country cuts wages by 10 per cent, workers everywhere have less to spend. Sales fall in all markets, and firms may end up worse off. The reasoning that is right for one firm is wrong for the whole economy. That question belongs to macroeconomics.
Microeconomics and macroeconomics compared
| Point | Microeconomics | Macroeconomics |
|---|---|---|
| Unit of study | One consumer, firm, industry or market | The whole economy |
| Central question | How a particular price is fixed | How national income, employment and the price level are fixed |
| Typical tools | Demand, supply, cost, revenue | Aggregate demand, saving, investment, money supply |
| Usual assumption | Total income given | Prices of single goods given |
Weighing the two
The limitations do not make microeconomics less useful. They mark out its field. It is the right tool for questions about particular prices, firms and markets, and macroeconomics is the right tool for questions about totals. Each needs the other.
Conclusion. Microeconomics, a term introduced by Frisch in 1933, studies individual households, firms, industries and markets, and is also called price theory. It is used to understand how prices allocate resources and to guide household and business decisions. It also helps shape taxes, controls and competition policy, and judge efficiency. Its limits are that it cannot explain the economy as a whole, assumes full employment and unrealistic conditions, and falls into the fallacy of composition. In the worked case, a wage cut that helps one mill could hurt all firms if every firm made it.
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