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ECO401 current midterm Past papers from from 17th Dec to 29th Dec. 

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Share Your Current Mid Term Papers (Questions/Pattern) 17 December 2016 to 29 December 2016 & Past Papers as well here to help each other. Thanks 

+ USA  thanks for sharing 

Today was my eco401 paper 
and paper was easy and also it was hard 
what is long run and short run? 3 marks 
what is differentiate curves and curves complement of good we have to draw a graph ? 5 marks
one was 5 marks we have to calculate demand and quantity it was like numerical? 
and 3 other was graph one was 2 marks and one was 5 marks and also one was 5 marks.
what is optimal consumption formula?
and 50% mcq was from handouts..

Eco 401 todays paper,
Law of supply,
Demand curve,
The mrket for butter- pg 16,
Elastic nd inelastic demand,
Marginal utility,
Law of diminishing marginal utility,
Law of diminishing marginal returns,

Budget line..
Just 1 mcqs from past pprs.

Current paper of eco401 dated: 17/12/2016
1.If there is Decrease in resource price then what will be the direction on curve supply?
2.When government sets the price of a good and that price is above the equilibrium price, the result will be?
3.Price Elasticity of Demand is equal to (formula)?
4.Demand is elastic when the elasticity of demand is?
5.If both supply and demand increase simultaneously, the equilibrium?
6.To find the profit maximizing level of output, a firm finds the output level at?
7.A normative economic statement?
8.While moving from left to right, the typical production possibilities curve has?
9.When an industry's raw material costs increase, other things remaining the same
It cause decrease in?
Note: total mcqs were 21. these are in my remembrance.
Q: Features of Islamic economic system? (5)
Q: law of demand? (3)
Q: solve the quadric equation in term of product demand:
Pd= 10p+2p were p=2(3)
Q: Price consumption curve? What will be the effect on budget if price goes up? (5

Find the attached file of  Subjective questions which came in ECO 401 Fall 2016 Midterm.






Q: Features of Islamic economic system? (5)

(1) Zakat or compulsory alms giving (2) The Islamic law of inheritance which splits the property of an individual into a number of shares given to his relations (3) The forbiddance of interest which checks accumulation of wealth and this strikes at the root of capitalism

Q: law of demand? (3)

The law of demand states that holding all other factors constant, if the price of a certain commodity rises, its quantity demanded will go down, and vice-versa. Other factors are income, population, tastes, prices of all other goods etc

Q: solve the quadric equation in term of product demand:

Pd= 10p+2p were p=2(3)

Q: Price consumption curve? What will be the effect on budget if price goes up? (5)  

 The slope of budget line changes due to a change in the relative price ratio (leads to substitution effect). The substitution effect of a price rise is always negative, while the income effect of a price rise on the consumption of a normal good is negative. The income effect for an inferior good is positive. The income effect of a Giffen good is so positive that it offsets the negative substitution effect, therefore.

What is long run and short run? 3 marks 

Short run:  

Short run is a period of time in which at least one of the factors of production is fixed or Unchangeable Long run:  

Long run is a period of time in which all the factors of production used in the production are flexible. The actual length of the short run and long-run can vary considerably from industry to industry

What is differentiate curves and curves complement of good we have to draw a graph ? 5 marks

one was 5 marks we have to calculate demand and quantity it was like numerical? 
and 3 other was graph one was 2 marks and one was 5 marks and also one was 5 marks.

What is optimal consumption formula?

Law of supply,

The law of supply states that the quantity supplied will go up as the price goes up and vice versa. As output increases, cost will also increase. Higher prices means more profit so firms will produce more of that product whose price has increased. New producers will also emerge in the market. And total supply will also increase
Demand curve,

Demand curve: A demand curve is a graph that obtains when price (one of the determinants of demand) is plotted against quantity demanded.       


The market for butter- pg 16,

What will happen to the equilibrium price and quantity of butter in each of the following cases?

a. A rise in the price of the margarine.    D Æ ,  S Å

 b. A rise in the demand for milk. S Æ; D Å ( if milk is a substitute )

 c. A rise in the price of bread. D Å 

 d. A rise in the demand of bread. D Æ 

e. An expected rise in the price of butter in near future. S Å D Æ 

f. A Tax on butter production. S Å

 g. An invention of a new, but expensive, process of removing all cholesterol from butter , plus the passing of law which states that all producers must use this process. D Æ S Å  
Elastic and inelastic demand,

Slope and elasticity of demand have an inverse relationship. When slope is high elasticity of demand is low and vice versa.
Marginal utility,

Marginal utility is the additional utility derived from the consumption of one or more unit of the good.
Law of diminishing marginal utility,

The law of diminishing marginal utility states that as you consume more and more of a particular good, the satisfaction or utility that you derive from each additional unit falls.

A firm is any organized form of production, in which someone or a collection of individuals are involved in the production of goods and services. A firm can be sole proprietorship (one person ownership), partnership (a limited number of owners) or a limited company (a large number of changing shareholders).
Law of diminishing marginal returns,

The law of diminishing marginal returns states that as you increase the quantity of a variable factor together with a fixed factor, the returns (in terms of output) become less and less


An isoquant represents different combinations of factors of production that a firm can employ to produce the same level of output.
Budget line..

Amount of money needed or available 


Budget line in terms of Y = a + bX

kX + lY = M lY =  – kX + M

Y =  – k X /1 +  M   /1                                                                                                                                                    

Where,  M = total amount of money   k & l = Prices of two  goods  M   = intercept   l               - K   = Px = slope     l       Py 

f. Draw budget line equation and show its slope and interception? - 5 Marks


The Law Of Diminishing Marginal Utility


c)Define Engel curve and draw graph

The income consumption curve (ICC) can be used to derive the Engel Curve, which shows the relationship between income and quantity demanded.   Engel curve shows the positive relationship between income & quantity demanded of normal good. As income increases, quantity demanded for normal goods also increases.  
d)solve the Profit Equation

Profit = TR – TC

Qd = 50-10p+p^2 

If P= 2

Find quantity demand and elasticity        ( 5 MARKS)

Qd = 60 – 15P + P2 

dQ/dP = -15 + 2P 

IF P=3 then 

dQ/dP = -15 + 2(3) = -15 + 6 = -9 And  Qd = 60- 15(3) + (3)2 = 24 

The formula of elasticity = (dQ / dP) (P/Q) = -9 (3/24) = -1.125

how isoquants measure scale and scope ,,,isi tarha k tha ek question ( 5 Marks)

Isoquant can be used to illustrate the concepts of returns to scale and returns to factor. a. Constant returns to scale: equally spaced isoquants; 

b. Increasing returns to scale: isoquants become closer and closer to each other;

 c. Decreasing returns to scale:  isoquants become further and further apart from each other.

d. Diminishing returns to factors can be illustrated by keeping one of the inputs constant (say capital). Here if there are constant returns to scale, ever-increasing increments of labor will be required to produce equal increments to output.  

 define average variable cost and fixed variable cost   (  3 marks)

Average variable cost (AVC)

AVC is an economics term to describe the total cost a firm can vary (labor, etc.) divided by the total units of output. 


Average fixed cost (AFC) 

AFC is total; fixed cost divided by the total units of output. 



Explain the indifference curve with the help of graph. 3 marks

An indifference curve is a line which charts out all the different points on which the consumer is indifferent with respect to the utility he derives (in other words it is a combination of all equi-utility points). It is drawn in goods space, i.e. a good Y on the vertical axis and a good X on the horizontal axis. Indifference curves are bowed in towards the origin. In other words its slope decreases (in absolute terms) as we move down along the curve from left to right. 

Differentiate between price elasticity of demand and price elasticity of supply with the help of their formulas. 3 marks 

Price Elasticity of Demand: Price elasticity of demand is the percentage change in quantity demanded with respect to the percentage change in price. Price elasticity of demand can be illustrated by the following formula: 

PЄd = Percentage change in Quantity Demanded/ Percentage change in Price 

Price Elasticity of Supply: Price elasticity of supply is the percentage change in quantity supplied with respect to the percentage change in price. Price elasticity of supply can be illustrated by the following formula: 

PЄs = Percentage change in Quantity Supplied /Percentage change in Price 


Demand curve is negatively sloped due to two effects, income effect and substitution effect.

It is also one of two reasons for the law of demand and the negative slope of the market demand curve. The income effect results because a change in price gives buyers more real income, or the purchasing power of the income, even though money or nominal income remains the same. This causes changes in the quantity demanded of the good.

Differentiate between income effect and substitution effect of a price change. 5 marks 

Price effect is the addition of income and substitution effect. 

Price effect = Income effect + Substitution effect

more simply we can say that if price of any good increases, people reduce its consumption and substitute any other good whose price is not increased. This is substitution effect. 

more simply we can say that when price of any good increases, consumer’s real income falls and its purchasing power also decreases. This is income effect. 


Although indifference curve approach is very useful in order to analyze the consumer behavior but still there exist some flaws of this approach. Discuss. 5 marks

LIMITATION OF INDIFFERENCE APPROACH The indifference curves approach has the following limitations: a. Indifference curve analysis is only possible for 2 or at best for 3 goods. b. It is almost impossible to practically derive indifference curves. c. The consumer may not always behave rationally. d. The consumer may not always realize the level of utility (ex-post) from consumption, that she originally expected (ex-ante). e. Indifference curve analysis can not help when one of the goods (X or Y) is a durable good.


Question 2.                  (3 Marks)

Differentiate between storage and surplus situations.


Shortage is a situation in which demand exceeds supply, i.e. producers are unable to meet market demand for the product.  Surplus:  

Situation of excess supply, in which market demand falls short of the quantity supplied 


Question 5.           (5 Marks)

Calculate the following levels if quantity demanded is Qd=500+0.2Y. Where the total Income is?

                     Income (Y)












1- Find Income Elasticity of Demand? change in Income = 50% and change in Demand is 30% and also tell us which is Elastic or Inelastic? (3)

YЄd = Percentage change in Quantity Demanded/ Percentage change in Income

2- Discuss about Entrepreneurship? (3)

Entrepreneurship refers to the management skills, or the personal initiative used to combine resources in productive ways. It involves taking risks. It is the managerial function that combines land, labor, and capital in a cost-effective way and uncovers new opportunities to earn profit; includes willingness to take the risks associated with a business venture.
3- Find Equilibrium Quantity and Equilibrium Price?  (5)
Qd = 100 - 10P
Qs = 40 + 20P

Qd = Qs


100 - 10P = 40 + 20P

20P + 10P = 100 - 40

30P = 60 P = 60/30

 P = 2 

Putting the value of price in any of demand and supply equation,  

Q = 100 – 10x2 (or 40 + 20x2)

Q = 100 – 20

Q = 80 

The equilibrium price is 2 and the equilibrium quantity is 80

5- Discuss Production Function with Formula? (5)


A mathematical relation between the production of a good or service and the inputs used. A production function is usually expressed in this general form: Q = f(L, K), where Q = quantity of production output, L = quantity of labor input, and K = quantity of capital input. A production function is simply the relationship between inputs & outputs.

Mathematically it can be written as: Q = f (K, L, N, E, T, P…)

Where, Q = Output = Total product produced

 K = Capital

 L = Labor

 N = Natural resources

 E = Entrepreneurship

 T = Technology

P = Power 

Discuss Scarcity


Shortage of resources because economic resources are unable to supply all the goods demanded.


Q5 one Numerical on Cross price elasticity.

Cross price elasticity of demand is the percentage change in quantity demanded of a specific good, with respect to the percentage change in the price of another related good. 

PbЄda = Percentage change in Demand for good a / Percentage change in Price of good b


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