The- coefficient of price elasticity of demand is given as unity (1). At a price of < 10, a consumer buys 120 units of the commodity. How

many units of the commodity will she buy if the price increases by 20 %?

(a) Explain the feature of ‘‘product differentiation’’ in the monopolistic competition form of the market, with a suitable example.

(b) Under the oligopoly form of market, why does the feature of ‘‘price rigidity’’ exist?

Describe the adjustment mechanism, if in an economy, the planned savings are lesser than the planned investments.

Explain the following functions of the Central Bank :

(i) Lender of last resort

(ii) Banker to the Government

The saving function of an economy is given as :

S = (–) 10 + 0 �20 Y.

If the ex-ante investments are Rs. 240 crores, calculate the following :

(i) The equilibrium level of income in the economy.

(ii) Additional investments will be needed to double the

present level of equilibrium income.