Class 11 Economics Important Questions PDF Download

Uncover Class 11 Economics Important Questions that are vital for acing your exams. This article pinpoints key topics and questions to help streamline your study efforts. Understanding the CBSE Class 11 Economics Syllabus for 2027 is essential for effective exam preparation.

• The syllabus is divided into two parts: Part A (Statistics for Economics) and Part B (Introductory Microeconomics).
• The theoretical portion of the exam is worth 80 marks, while the project work is worth 20 marks.

You can also download free Economics study notes below, along with Class 11 Economics Important Questions.

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Class 11 Economics Important Questions with Answers

Economics is one of the optional subjects chosen for the 11th Commerce Subjects by students in Class 11 Commerce. To prepare effectively for exams, students can refer to Economics Class 11 important questions with answers PDF download, which covers important concepts and exam-oriented questions.

• Practising important questions for Class 11 Economics can help you concentrate on the most valuable topics in the syllabus.
• To score well in this subject, focus on areas like statistics for economics, data collection, organisation and presentation, consumer equilibrium, and demand.
• Using economics class 11 important questions with answers pdf download can improve your efficiency and accuracy in your exam preparation.

Download Class 11 Economics Important Questions PDF

Chapter-wise NCERT Class 11 Economics Questions

Solving Class 11 Economics Sample Papers will help you know the paper's difficulty level and the type of questions asked in the exam. Let's look at the chapter-wise important questions for Class 11 Economics to help improve your speed and accuracy in the exam.

Important Questions from Introduction to Microeconomics

Check the list of some important questions for Class 11 Economics Chapter 1 provided here and enhance your preparation.

Q. Explain the Diamond-Water Paradox?

Ans. It is based on the principle of scarcity. Water is useful, yet it is cheap because it is abundant in the economy. Diamonds are very expensive because they are scarce, so people are ready to pay a high price.

Q. Only scarce goods attract price.” Comment.

Ans. The given statement is correct. Not all resources are scarce in the economy. For example, the air we breathe is abundant in relation to wants. Such goods are available free of cost. These goods are known as Non-Economic Goods. On the other hand, some goods are scarce in relation to wants. For example, petrol, electricity, etc. are scarce in relation to wants. These goods command a price and are known as Economic Goods. So, it is rightly said that only scarce goods attract price.

Q. What does the slope of PPF indicate?

Ans. PPF is a downward-sloping, concave-shaped curve.

•       (i)       Its downward slope indicates that in order to increase production of one good, another good needs to be sacrificed
•       (ii) Its concave shape indicates that More and more units of one good are sacrificed in order to produce one unit of another good.

Q.  “Scarcity and Choice go together”. Comment.

Ans. All of us want better food, clothing, housing, schooling, entertainment, etc. But resources are not enough to meet all our wants. Even the developed economies cannot satisfy all the needs of people. It means that scarcity of resources is a common feature of every economy, and it gives rise to the problem of choice, i. e., how to make the best possible use of available resources. If resources were available in plenty, there would not have been any problem of choice. Hence, economics is concerned with the problem of choice under the conditions of scarcity.

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Q. “An economy always produces on, but not inside, a PPC” Defend or refute the statement.

Ans. The given statement is refuted. An economy operates on the PPF only when resources are fully and efficiently utilised; if there is unemployment or inefficient use of resources, then the economy may operate inside the PPC.

Class 11 Economics Important Questions from Consumer’s Behaviour

Go through all the important questions for the Class 11 Economics State Board for the Consumer Behaviour chapter.

Q. Law of DMU operates only with continuous consumption.

Ans. The law of diminishing marginal utility will operate only when consumption is a continuous process. For example, if one burger is consumed in the morning and another in the afternoon, then the second burger may provide equal or higher satisfaction as compared to the first one.

Q. “Define a budget line. When can it shift to the right?

Ans. A budget line is a graphical representation of all possible combinations of two goods which can be purchased with a given income and prices, such that the cost of each of these combinations is equal to the consumer's income.

Budget Line shifts to the right when:

• (i) When there is an increase in income, assuming no change in the prices of the two goods;
• (ii) When there is a decrease in the prices of both goods, the consumer's income is assumed to be unchanged.

Q. What changes will take place in TU when: (i) MU curve remains positive; (ii) MU becomes ‘0’ ; (iii) MU is negative.

Ans. (i) TU will increase, but at a diminishing rate; (ii) TU will be maximum; (iii) TU starts falling.

Q. State the conditions of consumer’s equilibrium in the Indifference Curve Analysis and explain the rationale behind these conditions.

Ans. Let the only two goods the consumer consumes be X and Y. The two conditions of equilibrium are:

(1) MRS_XY =  

(2) MRS falls as more of X is consumed in place of Y

The rationale behind these conditions:

(1) Suppose MRS_XY >  it means that to obtain one more unit of X, the consumer is willing to sacrifice more units of Y as compared to what is required in the market. This induces the consumer to buy more X. As a result, MRS falls and continues to fall until it equals the price ratio, and equilibrium is established.

Suppose MRSXY < it means that to obtain one more unit of X, the consumer is willing to sacrifice fewer units of Y as compared to what is required in the market. This leads the consumer to buy less of X. As a result, MRS increases and continues to rise until it equals the price ratio, and equilibrium is established.

(2) Unless MRS falls as the consumer consumes more of X, the consumer will not reach equilibrium again.

Q. A consumer consumes only two goods X and Y whose prices are Rs.4 and Rs.5 per unit, respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4, is the consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Rs. Use utility analysis.

Ans. Given P_X = 10, P_Y = 15, MU_X = 50, MU_Y = 45. A consumer will be in equilibrium when Substituting values, we find that: Or

Since per rupee MU_X is higher than per rupee MU_Y, the consumer is not in equilibrium.

The consumer will buy more of x and less of y. As a result, MUX will fall, and MUY will rise. The reaction will continue till MUx and MUy are equal, and the consumer is in equilibrium.

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Class 11 Economics Important Questions from Theory of Demand

Here, we have provided economics class 11 questions chapter-wise for the theory of demand.

Q. “Law of Demand is a Qualitative statement”. Comment.

Ans. Law of demand is only an indicative, and not a quantitative statement. It indicates only the direction in which the demand will change with a change in price. It says nothing about the magnitude of such a change. For example, if the price of Pepsi rises from Rs.10 to Rs.12 per bottle, then, as per the law of demand, we can say that the demand for Pepsi will fall. But the law does not give the actual amount by which the demand for Pepsi will decline.

Q. Distinguish between an inferior good and a normal good. Is a good which is inferior for one consumer also inferior for all the consumers? Explain.

Ans. When, with the rise in income of the consumer, demand for a good increases, that good is a normal good for that consumer. If, with a rise in income, demand for the good decreases, then that good is inferior for that consumer. A good is not necessarily inferior for all the consumers. A good which is inferior for a higher income consumer may be a normal good for the lower income consumer. It is not the consumer but the income level of the consumer which determines whether a good is normal or inferior.

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Q. Derive the law of demand from the single commodity equilibrium condition “Marginal utility = Price”.

Ans. According to the single-commodity equilibrium condition, the consumer purchases that quantity of a good at which marginal utility (MU) is equal to the price. Given, MU = price. Now suppose the price falls. It will make MU greater than the price and will encourage the consumer to buy more. It shows that when price falls, demand rises.

Q. Distinguish between demand by an individual consumer and market demand of a good. Also state the factors leading to a fall in demand by an individual consumer.

Ans. Demand by an individual refers to the quantity of a good the consumer is willing to buy at a price during a period of time. While market demand refers to the quantity of a good that the consumers of that good are willing to buy at a price during a period of time.

The factors leading to a fall in demand by individual consumers are:

(I) Rise in the own price of the normal good.

(ii) Fall in the price of a substitute good.

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Q. Suppose there are two consumers in the market for a good, and their demand functions are as follows:

• d₁ (p) = 20 – p for any price less than or equal to 15, and d₁(p) = 0 at any price greater than 15.
• D₂ (p) = 30 – 2p for any price less than or equal to 15, and d₁(p) = 0 at any price greater than 15.

Find out the market demand function.

Ans. From the given demand functions, it can be seen that both consumers do not want to demand the good at any price above Rs. 15. Both of them demand only at a price less than or equal to Rs. 15. Hence, the market demand will be: 

d_market(p) = d₁(p) + d₂(p)

d_market(p) = 20 – p + 30 – 2p

d_market(p) = 20 – p + 30 – 2p

d_market(p) = 50 – 3p for any price less than or equal to 15 and d_market(p) = 0 at any price greater than 15.

Class 11 Economics Important Questions from Elasticity of Demand

Candidates can go through the Class 11 economics questions with answers for the elasticity of demand chapter.

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Q. Price elasticity of demand for Milk and Wheat are respectively (-) 0.9 and (-) 0.5. Demand for which one is more elastic and why?

Ans. Demand for Milk is more elastic, as with a 1% fall in the price of milk, its demand rises by 0.9%. However, for wheat, a 1% fall in price raises demand by just 0.5%.

Q. Differentiate between law of demand and price elasticity of demand.

Ans. (i) Law of demand states the inverse relation between the price of a commodity and its quantity demanded, assuming no change in other factors. On the other hand, price elasticity of demand indicates the rate of change in the quantity demanded of the commodity due to a change in its price.

(ii) Law of Demand reflects the direction of change in demand, whereas price elasticity of demand measures the magnitude of change in demand.

Q. What is the price elasticity of demand for the following demand curves: (i) Straight line demand curve parallel to X-axis; (ii) Straight line demand curve parallel to Y-axis.

Ans. The price elasticity of demand in the following cases will be: (i) Perfectly Elastic Demand; (ii) Perfectly Inelastic Demand.

Q. State with reasons whether the following items will have elastic or inelastic demand: (i) Matchbox;

(ii) Cold Drink; (iii) Medicines; (iv) Salt; (v) Electricity; (vi) Cigarettes; (vii) Butter for a poor person.

Ans.

(i) Matchbox has inelastic demand as the consumer has to spend a very small proportion of his income.

(ii) Coke has elastic demand as it has a number of substitutes.

(iii) Medicines have inelastic demand as their consumption cannot be postponed.

(iv) NCERT textbooks have inelastic demand as they are necessity items.

(v) Electricity has elastic demand as it can be put to several uses.

(vi) Cigarettes have inelastic demand as their consumers are habituated.

(vii) Butter for a poor person has elastic demand as it is a luxury item for the poor person.

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Q.The price elasticity of demand for good × is known to be twice that of good Y. The price of X falls by 5% while that of good Y rises by 5%. What is the percentage change in the quantities demanded of X and  Y?

Solution:

Percentage fall in price of X = 5%; Percentage rise in price of Y = 5%

Also, the price elasticity (Ed) of X is twice that of good Y. Suppose Ed of Y is 1; then Ed of X will be 2.

Therefore, a 5% fall in the price of good × will lead to a 10% rise in the demand for X, and a 5% rise in the price of good Y will lead to a 5% fall in the demand for Y.

Ans. Quantity of X will rise by 10%; Quantity of Y will fall by 5%

Class 11 Economics Important Questions from Theory of Production

Check the Class 11 Economics Chapter 5 important questions below.

Q. Why does the MP curve cut the AP curve at its maximum point?

Ans. It happens because when AP rises, MP is greater than AP. When AP falls, MP is less than AP. So, it is only when AP is constant and at its maximum point that MP is equal to AP. Therefore, the MP curve cuts the AP curve at its maximum point.

Q. Can AP rise when MP starts declining?

Ans. Yes, AP can rise when MP starts declining. It can happen as long as the fall in MP is greater than the fall in AP. However, when MP becomes equal to AP, then further decline in MP will also reduce the AP.

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Q. What are the different phases in the Law of Variable Proportions in terms of Total Product? Give reasons behind each phase. Use a diagram.

Ans. The Phases are:

• Phase I: TP rises at an increasing rate, i.e., up to A.
• Phase II: TP rises at a decreasing rate, i.e. between A and B.
• Phase III: TP falls, i.e. after B.

Reasons:

• Phase 1: Initially, variable input is too small as compared to the fixed input. As production starts, the fixed input is used efficiently, increasing the productivity of the variable input because of division of labour. As a result, TP rises at an increasing rate.
• Phase II: After a level of output, pressure on fixed input leads to a fall in the productivity of the variable input. As a result, TP continues to rise but at a decreasing rate.
• Phase III: The variable input becomes too large relative to the fixed input, causing TP to decline.

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Q4. Let the production function of a firm be: Q = 2L²K². Find out the maximum possible output that the firm can produce with 5 units of L and 2 units of K. What is the maximum possible output that the firm can produce with zero units of L and 10 units of K?

Hint: Maximum possible output with 5 units of L and 2 units of K

Given: Q = 2L²K² and L = 5 units; K-2 units

Putting the values of L and K in the given production function, we get:

Q = 2(5)² (2)² = 200 units

Maximum possible output with 0 units of L and 10 units of K

Given: Q = 2L²K² and L = 0 unit; K = 10 units

Putting the values of L and K in the given production function, we get:

Q = 2(5)² (10)² = 0 unit.

Q. Find out the maximum possible output for a firm with zero units of L and 10 units of K when its production function is: Q = 5L + 2K.

Hint: Given: Q = 5L + 2K. and L = 0 units; K- 10 units

Putting the values of L and K in the given production function, we get:

Q = 5(0)+2(10)

Q or Maximum output = 20 units.

Economics Important Questions from Theory of Cost

Let us look at Class 11 Economics questions for the Theory of Cost chapter.

Q.“The gap between AC and AVC keeps on decreasing with rise in output, but they never meet each other”. Comment.

Ans. The given statement is correct. The gap between AC and AVC keeps decreasing because the difference between them is AFC, which falls as output increases. However, AFC can never be zero. Therefore, AC and AVC can never meet each other.

Q. Why does the minimum point of the AC curve fall towards the right of the AVC curve?

Ans. The minimum point of the AC curve falls to the right of the AVC curve because AC continues to fall due to decreasing AFC even after AVC starts rising.

Q.“MC can be calculated both from total cost and total variable cost and is not affected by total fixed cost”. Discuss

Ans. The given statement is correct. MC is not at all affected by total fixed cost (TFC). MC is the addition to TC or TVC when one more unit of output is produced. As TFC remains the same as output increases, MC is independent of fixed cost and depends only on changes in variable costs.

Q. Calculate TFC, if AC and AVC are Rs. 22 and Rs. 18 respectively, at output of 10 units.

Ans. AFC = AC - AVC = Rs.22- Rs. 78 = Rs.4

TFC - AFC × units produced = Rs. 4×10 units

TFC = Rs. 40

Q. Classify the following as fixed cost and variable cost:

(i) Salary to the manager of the company.

(ii) Wages to casual labour.

(iii) Payment of insurance premium for insurance of the factory.

(iv) Payment for raw material.

(v) Payment of rent for postpaid connection of Mobile Phone.

(vi) Interest on loan taken from ICICI.

(vii) Electricity charges beyond the minimum rent.

(viii) Payment of rent of the factory building to the landlord.

(ix) Commission to production manager on the basis of number of units produced.

(x) Payment of fuel used in machines.

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Ans. Fixed Cost: (i), (iii), (v), (vi), (viii); Variable Cost: (ii), (iv), (vii), (ix). (x).

Class 11 Economics Important Questions from Theory of Revenue

Check the Class 11 Economics questions for the chapter Theory of Revenue from the post below.

Q. Why is the AR curve under monopolistic competition more elastic than the AR curve under monopoly?

Ans. AR curve under both markets slopes downwards. However, the AR curve under monopolistic competition is more elastic as compared to the AR curve under monopoly because of the presence of close substitutes. AR curve is less elastic in monopoly because of no close substitutes.

Q. Under what market condition does Average Revenue always equal Marginal Revenue? Explain?

Ans. This occurs when a firm can sell more at the given price, so AR = MR throughout as the firm increases production. It is because the firm is a price taker. It means that price, which is the same as AR, remains unchanged throughout. By the average-marginal relationship, AR remains unchanged only when AR = MR throughout.

Q. What is the relation between market price and marginal revenue of a price-taking firm?

Ans. Market price is equal to marginal revenue (MR). This happens because a price-taking firm can sell more output at the same price. This means revenue from each additional unit (MR) equals price, or average revenue (AR), since Price = AR.

Q. Compute the total revenue, marginal revenue and average revenue schedules in the following table. The market price of each unit of the good is Rs. 10.

Quantity sold	TR	MR	AR
1	—	—	—
2	—	—	—
3	—	—	—
4	—	—	—
5	—	—	—
6	—	—	—

Answer:

(P)	(Q)	TR = P×Q	AR (Price) = TR ÷ Q	MRn = TRn-TRn-1
10	1	10	10	10
10	2	20	10	10
10	3	30	10	10
10	4	40	10	10
10	5	50	10	10
10	6	60	10	10

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Q. What would be the shape of the demand curve so that the TR curve is: (a) a positively sloped straight line passing through the origin; (b) a horizontal line?

Answer:

• (a) The demand curve or AR curve will be a horizontal straight line parallel to the X-axis because a positively sloped straight-line TR curve passing through the origin indicates that price (or AR) remains constant at all levels of output.
• (b) The demand curve or AR curve will slope downwards from left to right because a horizontal TR indicates that TR remains the same at different levels of output. It is possible only when price (or AR) falls with a rise in output.

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Class 11 Economics Important Questions from Producer’s Equilibrium

 Review the Class 11 Economics questions on the producer's equilibrium provided in this post.

Q. Why should the MC curve cut the MR curve from below to achieve producer’s equilibrium?

Ans. One of the two conditions for a firm's stable equilibrium is that its MC curve should cut the MR curve from below, not from above. If the MC curve cuts the MR curve from above, the equilibrium established will not be stable, as it will be possible to increase profits by producing more. The idea is that beyond the equilibrium point, MC should be greater than MR so further production becomes uneconomical.

Q. A table showing TC and TR of a firm is given. Calculate MC and MR and find out the equilibrium level of output.

Output	1	2	3	4	5	6	7	8	9	10
TC	45	80	95	105	135	175	225	285	360	440
TR	40	80	120	160	200	240	280	320	360	400

Ans.

Output (Q)	TC	TR	MC(V	MR (Rs.)
(in units)	(Rs.)	(Rs.)	MRn = TRn-TRn-1	MRn = TRn-TRn-1
1	45	40	45	40
2	80	80	35	40
3	95	120	15	40
4	105	160	10	40
5	135	200	30	40
6	175	240	40	40
7	225	280	50	40
8	285	320	60	40
9	360	360	75	40
10	440	400	80	40

The producer achieves equilibrium at 6 units of output. This is because this level of output satisfies both conditions of the producer’s equilibrium:

(i) MC is equal to MR; and

(ii) MC becomes greater than MR after this level of output.

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Q. The equality of marginal cost and marginal revenue is a condition necessary for equilibrium, but it is not by itself sufficient to assure the attainment of producer’s equilibrium. Comment.

Ans. The given statement is correct. Equality of marginal revenue (MR) and marginal cost (MC) is only one condition for a firm's equilibrium. Another condition must also be fulfilled for the firm’s equilibrium, and that is: ‘MC must be greater than MR after the MC = MR output level’.

Q. Why is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium? Is it sufficient to ensure equilibrium? Explain.

Ans. The producer’s equilibrium conditions are: (i) MC = MR; and (ii) MC > MR after equilibrium.

Suppose MC > MR: In this situation, it will be profitable for the firm to produce more or less depending upon relative changes in MC and MR till MC = MR.

Suppose MC < MR: It will be profitable for the producer to produce more till MC = MR.

MC= MR is not a sufficient condition to ensure equilibrium. Given MC = MR, suppose MC and MR behave such that if one more unit is produced, MC falls below MR.

Then, in this case, it will be profitable for the firm to produce more. Therefore, in this case, though MC = MR, the producer is not in equilibrium. However, if after MC = MR output, MC becomes greater than MR, it will be most advantageous for the firm to produce only up to MC = MR.

Q. Explain why a producer will not be in equilibrium if the conditions of equilibrium are not met.

Ans. The equilibrium conditions are: (i) MC = MR; and (ii) MC > MR after equilibrium.

Suppose the MC = MR condition is not met. Let MC > MR. In this case, it will be profitable for the firm to produce more or less depending upon the relative changes in MC and MR till MC = MR. Similarly, if MC < MR, it will also be profitable to produce more till MC = MR.

Now suppose ‘MC > MR after the equilibrium condition is not met’ and MC < MR after equilibrium. In this case, the firm is not in equilibrium because it can increase profits by producing more.

Class 11 Economics Important Questions from Supply

Here, we have provided Class 11 Economics questions for the supply chapter. These questions will help candidates enhance their preparation for the exam.

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Q. What is the price elasticity of supply when: (a) the supply curve passes through the origin; (b) the supply curve is a vertical straight line; (c) the supply curve is a horizontal straight line.

Ans. The price elasticity of supply in the following cases will be:

(i) Unitary elastic Supply

(ii) Perfectly Inelastic Supply

(iii) Perfectly Elastic Supply

Q. There are three different supply curves passing through the origin. Curve A makes an angle of 60°. Curve B makes an angle of 45° and curve C makes an angle of 30°. What will be the price elasticity of curves A, B and C?

Ans. All three curves: A, B and C will have unitary elastic supply as they all are passing through the origin.

Q. Give one point of difference between individual supply and market supply.

Ans. Individual supply may not strictly follow the law of supply, i. e., it is not necessary that supply for an individual always varies directly with price. However, market supply always follows the law of supply, i.e. market supply always varies directly with price.

Q. ‘Supply curve is the rising portion of marginal cost curve over and above the minimum of Average Variable cost curve’. Do you agree? Support your answer with valid reasons.

Ans. Yes, we do agree with the given statement. No rational producer would like to supply his output to the market if he is unable to recover his per-unit variable cost, as it would lead to losses between the range of the minimum of marginal cost and the minimum of average variable cost.

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Q. A firm earns a revenue of Rs. 50 when the market price of a good is Rs. 10. The market price increases to Rs. 15, and the firm now earns a revenue of Rs. 150. What is the price elasticity of the firm’s supply curve?

Solution:

Price (Rs.)	Total Receipts (Rs.)	Quantity in units (Total Receipts ÷ Price)
10	50	5
15	150	10

Price Elasticity of Supply (E_s) =  ×  =  ×  = 2

Class 11 Economics Important Questions from Main Market Forms

Go through the Class 11 Economics Questions here and prepare well for the upcoming exam.

Q. How does a firm under monopolistic competition exercise partial control over price?

Ans. A monopolistically competitive firm enjoys partial control over price. This happens because, by incurring high selling costs, the firm can create a differentiated image of its product in consumers' minds. Products are differentiated by brand, size, colour, shape, etc. Buyers are attracted to buy a particular product even at a relatively higher price.

Q. “Monopolistic Competition is competition with differentiated products.” Elucidate.

Ans. An important characteristic of monopolistic competition is product differentiation. The competing firms produce products which are close but not perfect substitutes of each other. Products are differentiated by brand, size, colour, shape, etc. Because of this product differentiation, firms incur high selling costs to compete with other firms. So, it is rightly said that ‘Monopolistic Competition is competition with differentiated products’.

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Q. Why is the number of firms small in an oligopoly market? Explain.

Ans. The main reason for a small number of firms in an oligopoly is the ‘Barriers to Entry’, which prevent new firms from entering the industry. Patents, requirement of large capital, control over crucial raw materials, etc, are some of the other reasons, which prevent new firms from entering into industry. As a result, there are few firms in an oligopoly market.

Q. What happens to profits in the long run if firms are free to enter the industry?

Ans. When existing firms earn profits, free entry induces new firms to enter the industry. This raises market supply, which in turn lowers the market price. Profits fall and continue to fall until each firm earns zero economic profit, or normal profit.

Q. Explain the ‘Implications’ of the following:

(i) ‘Large Number of Buyers’ under Perfect Competition

(ii) ‘Freedom of Entry and Exit’ to firms under Perfect Competition

(iii) ‘Interdependence between Firms’ under Oligopoly

(iv) ‘Non-price Competition’ under Oligopoly

(v) ‘Large number of Sellers’ under Perfect Competition

(vi) ‘Homogeneous Products’ under Perfect Competition

(vii) ‘Barriers to Entry of New Firms’ under Oligopoly

(viii) ‘Few Big Sellers’ under Oligopoly

(ix) ‘Product Differentiation’ under Monopolistic Competition

(x) ‘Perfect Knowledge’ under Perfect Competition

Ans.

(i) The implication is that no individual buyer is in a position to influence the market price on its own by changing his individual demand.

(ii) The implication is that when existing firms are making profits, new firms enter, raise the output of the industry, and bring down the market price enough for the firm to earn only normal profit in the long run. The opposite happens if the existing firms are facing losses.

(iii) The implication is that an individual firm takes into consideration the likely reaction of its rival firms before making a move to change price or output. This is possible because rival firms are assumed to react.

(iv) Non-price competition means competition between firms by means other than changing price, like free gifts, home service, customer care, etc. The implication is that firms in oligopoly prefer non-price competition to avoid a price war because the firm that starts the price war may be the ultimate loser.

(v) The implication is that no single firm is in a position to influence the market price on its own by changing its own output. Thus, price remains unchanged.

(vi) The implication is that no firm can charge a higher price because no buyer is willing to pay the same. Thus, market price remains the same for all the firms.

(vii) The implication is that such barriers allow only a limited number of firms into oligopoly industries. Such barriers may be in the form of huge capital requirements, patent rights, availability of crucial raw materials, etc.

(viii) Implication is that each big seller contributes a fairly large share of total output. This gives an individual seller the power to influence the market price by changing its own output.

(ix) The implication is that buyers differentiate products of firms as different. So, they are willing to pay different prices for the products of different firms. This product differentiation gives an individual firm the power to influence the market price on its own.

(x) The implication is that buyers are fully aware of prices in the market and sellers of the technique of production. Buyer knowledge further implies that no buyer is willing to pay a higher price for any firm's product. Seller knowledge implies that the cost of production is the same for all producers.

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Class 11 Economics Important Questions from Price Determination

Here is the list of Class 11 Economics questions for the price determination chapter.

Q. Explain the effect of an increase in the income of buyers of a ‘normal’ commodity on its equilibrium price.

Ans. An increase in buyers' income increases demand for normal goods at the given price. It will lead to excess demand. This leads to competition among buyers, which raises the price. A higher price increases supply and reduces demand. These changes continue till supply and demand become equal at a new equilibrium price. Because demand increases only, the equilibrium price rises.

Q. What will be the effect on equilibrium price and equilibrium quantity when the price of complementary goods increases?

Ans. When the price of complementary goods increases, keeping other factors constant, then demand for the given commodity decreases since it becomes relatively expensive to consume the two commodities (the given commodity and its complement) together. This will lead to excess supply. This leads to competition among sellers, which reduces the price. A fall in price decreases supply and increases demand. These changes continue till supply and demand become equal at a new equilibrium price. As demand decreases only, both the equilibrium price and equilibrium quantity will fall.

Q. If the market demand function is given as: Q_MD = 25 - 2P and market supply as: Q_MS = 3P, then what will be the equilibrium price and equilibrium quantity

Ans. At equilibrium, Q_MD = Q_MS It means, 25 -2P = 3P Or, 5P = 25

P, or Equilibrium Price = Rs. 5.

Putting the value of the equilibrium price in the equation of the market demand function:

Equilibrium Quantity= 25-2×5=15 units.

Q. Explain the effects of ‘Maximum Price Ceiling’ on the market of a good. Use a diagram.

Ans. Maximum Price Ceiling refers to the imposition of an upper limit on the price of a good by the government. For example, in the diagram, OP is the price ceiling, while the equilibrium price is OPv.

At this price, the producers are willing to supply only PA (Or OQ1), while consumers demand PB (Or OQ1). The effect of the ceiling is that a shortage, equal to AB (Q₁Q₂), is created, which may further lead to black marketing,

Q. What are the effects of ‘price-floor’ (Minimum Price Ceiling) on the market of a good? Use a diagram.

Ans. When the government imposes a lower limit on the price that may be charged for a particular good or service, it is called a minimum price floor, e.g. price OP1. At this price, the producers are willing to supply P₁B or (OQ₂), while consumers demand only P₁A (= OQ₁). Unable to sell all they want to sell, the producers may try to illegally sell below the minimum price.

Check: CBSE Class 11 Commerce Syllabus

Class 11 Economics is a vital subject that lays the groundwork for understanding complex economic concepts and principles. F

Focusing on important questions helps you streamline your preparation, build a solid grasp of key topics, and improve your exam performance.

By practising Class 11 Economics important questions and answers chapter-wise, you can build a strong foundation for future studies in economics and related fields.

Download CBSE 11th Commerce Books by Supergrads

Conclusion

Targeted Study: Focusing on important questions helps you concentrate on the most critical topics in Economics.

Concept Mastery: Regular practice ensures a deeper understanding of fundamental economic principles.

Better Exam Performance: By concentrating on key questions, you improve your chances of scoring well in exams.

Enhanced Analytical Skills: Working through these questions develops your ability to analyse and interpret economic data.

Foundation for Future Studies: Mastering these important questions prepares you for more advanced studies in Economics and related disciplines.