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UP Board Solutions for Class 10 Commerce Chapter 20 Expenditure and Saving

Expenditure and Saving Objective Type Questions (1 Mark)

Question 1.
Income is utilized in:
(a) Expenditure
(b) Saving
(c) Either (a) or (b)
(d) Both (a) or (b)
Answer:
(d) Both (a) or (b)

Question 2.
The expenditure has been classified into:
(a) Individual Expenditure
(b) Social Expenditure
(c) Neither (a) or (b)
(d) Both (a) or (b)
Answer:
(d) Both (a) or (b)

Question 3.
Social Expenditure are of obligatory expenditure and ……….
(a) Individual Expenditure
(b) Consumption Expenditure
(c) Optional Expenditure
(d) None of these
Answer:
(c) Optional Expenditure

Question 4.
Saving is defined as the excess of income over ………
(a) Consumption Expenditure
(b) Production Expenditure
(c) Optional Expenditure
(d) Individual Expenditure
Answer:
(a) Consumption Expenditure

Question 5.
When a person incures some expenditure for the benefit of the society, such expenditure is known as ………..
(a) Individual Expenditure
(b) Social Expenditure
(c) Consumption Expenditure
(d) Optional Expenditure
Answer:
(b) Social Expenditure

Expenditure and Saving Definite Answer Type Questions (1 Mark)

Question 1.
Write the type of Income.
Answer:
(i) Monthly Income
(ii) Real Income.

Question 2.
Write the types of social expenditure.
Answer:
(i) Obligatory Expenditure and
(ii) Optional Expenditure.

Question 3.
What is its called when money received by a person in return of this work services or utilizing his property for any production purpose.
Answer:
Income.

Expenditure and Saving Very Short Answer Type Questions (2 Marks)

Question 1.
Define Expenditure.
Answer:
Expenditure is the way by which man meets (UPBoardSolutions.com) out his necessities. In other words, Expenditure is that portion of the income with which human being derive present day satisfaction.

Question 2.
How saving is disadvantageous to society as a whole?
Answer:
Disadvantages to society as a whole are as follows:
(a) Rise of class conflicts: Savings which far exceed the limits will ultimately result in class-conflicts. Huge savings on the part of the monopolists put them at an advantageous position and they, therefore, exploit the weaker sections of the society.

(b) Fear of over-production and Unemployment: Savings help in the formation of capital, and the use of capital give rise to further production. Increased production still further increases capital formation. This tendency, therefore, leads to overproduction.

Question 3.
How the saving is disadvantageous to an individual?
Answer:
Disadvantages to an individual ate as follows:
(a) Psychological effect: Postponement of present wants for future gains involve an element of sacrifice on the part of an individual. Consumption, whether it is useful or wasteful, has to be set aside in order (UPBoardSolutions.com) to make savings. A person needs to tighten on his belt to save an amount which he thinks may help to enjoy at a later stage. But how many persons are really able to enjoy this?

(b) Chance of Exploitation: To a mss wealth in order to keep it for future purpose can give rise to exploitation. In addition, if a person gives undue emphasis to savings, he may even resort to evil and undesirable methods in order to attain wealth.

(c) Create a group of Spendthrift and Lazy Persons: These persons who are lucky to get savings from their parents for the creation of which they have not put any effort, fail to understand the need to utilize the savings for productive purposes.

Question 4.
Point out the difference between expense and saving. (UP 2019)
Answer:

	Expenses	Savings
1. Meaning	Expenses in that portion of income with which human beings derived present-day satisfaction.	Saving is the part of income which is set aside in a productive manner in order to meet out some future requirements.
2. Effect	In the case of expenditure, the goods and services are applied directly to the satisfaction of wants.	In the case of saving the goods and services are applied to the production of other wealth.

Expenditure and Saving Short Answer Type Questions (4 Marks)

Question 1.
What are the points of difference between saving and expenditure?
Answer:
Difference between Savings and Expenditure: Savings and expenditure can be distinguished in the following way:
(a) Savings help a person to satisfy his future wants, while expenditure satisfies his present requirements.

(b) In the case of savings goods and services are applied indirectly to the satisfaction of wants, while in the case of expensive goods and services are applied directly to the satisfaction of wants.

(c) Capital is formed out of the savings of the people and, therefore, (UPBoardSolutions.com) saving constitutes the most important aspect of capital accumulation; whereas expenditure does not help in the creation of capital.

(d) Savings increase the income of a person whereas expenditure decreases the income of a person.

(e) A wise and farsighted person saves something from his current income which constitutes saving, while a person who looks wisdom of farsightedness utilises his whole income on expenditure.

Question 2.
Discuss the importance of savings from the point of view of the nation.
Answer:
Importance of Savings to the country can be studied under the following heads:
(a) To raise capital formation: Large scale production of modern times is possible only with the help of huge capital. Savings of the people help the country to accumulate capital. In other words, capital is the result of the (UPBoardSolutions.com) savings of the people.

(b) To raise the standard of living of the People: Standard of living of the people depends upon the rate of economic development achieved by a particular country. Rapid economic growth enables its citizens to enjoy the high standard of living.

(c) To Increase Employment Opportunities: Mechanization, large scale production, division of labour and all-round development of the country will create more and better employment opportunities to the people in a country. This is possible only if people are in the habit of saving and moreover are capable to save.

(d) To achieve military power: Savings help a country to achieve military power. The strength of the armed forces to safeguard its boundaries and to wage successful battles bring glory to this nation. Savings, therefore, are of grant importance to increase the might of the forces in a particular country.

Expenditure and Saving Long Answer Type Questions (8 Marks)

Question 1.
What do you understand by expenditure and saving? Discuss the objectives and social importance of saving. (UP 2009, 18, 15)
Or
Describe the importance of saving in society. (UP 2018)
Answer:
Expenditure: Expenditure is that portion of the income with which human beings derive present day satisfaction. In other words, expenditure is the way by which man meets out his necessities.
Savings: Saving is that part of income which is not spent by an individual for satisfying his present-day necessities but is kept aside for meeting out uncertainties and crisis in future.
Objectives of Savings: Following are some reasons behind savings:

1. To Create Capital: Savings are made for the purpose of creating capital to earn more income in future.

2. To Meet Out the Calamities: Sometimes a man has to face a critical situation in which he has to spend more than his income. In that case, his savings cover the gap between income and expenditure.

3. Provision for Old Age: In old age, the earning capacity of a person (UPBoardSolutions.com) decreases and he needs more money. So savings are made to provide for old age.

Importance of Savings: Following are some importance of saving:

1. To Raise capital-formation: Large scale production of modern times is possible only with the help of huge capital. Savings of the people help the country to accumulate capital. In other words, capital is the result of the savings of the people.

2. To Raise the Standard of Living of the People: Standard Pf living of the people depends upon the rate of economic development achieved by a particular country. Repaid economic growth enables its citizens to enjoy the high standard of living. A country whose people do not have the capacity to save will have only a low per capita income. Higher the per capita income, higher the standard of living of the people.

3. To Increase Employment Opportunities: Mechanization, large scale production, division of labour and all-round development of the country will create more and better employment opportunities to the people in a country. This is possible only if people are in the habit of savings.

Question 2.
What is the relationship between expenditure and savings?
Answer:
Relationship between Expenditure and Savings: Expenditure and Income result in the increase of production. They increase the economic developments and helps in the upliftment of the nation’s status because both satisfy the various requirements of a human being. The only difference is that savings help a person to satisfy his future wants, while expenditure satisfies his present requirements.

Economists are having two different views in this connection according to one group of economists, “Expenditure is one of the best means for society’s welfare.” On the other hand, other economists suggest that “Savings is the only cause of society’s welfare.”

Those who are of the opinion that savings are more important than the expenditure argue the same because of the following reasons:

1. Savings lead to the capital formation which helps in the production (UPBoardSolutions.com) of further wealth. Accumulation of capital increase production in leaps and bounds boosts trade and commerce and earns huge profits for government and industrialists, which induce them to start more productive units.

2. The workers will enjoy more and better employment opportunities. Hence, a nation whose people give more importance to savings than expenditure enable them to achieve economic development.

3. The national income and per capita income of the people will also simultaneously increase owing to increased savings.
The other group of economists which favour expenditure says that the amount spent by the people will proportionately increase the demand for commodities in the market. With increased demand, industrialists will be induced for increasing production. They will set up new units for earning more profits resulting in better employment opportunities with more wages. The material prosperity of the country will have its far-reaching effect in all walks of human activities. People can increase their income and reuse their standard of living.

From the above study, it can be concluded that for the economic development of a country both savings and expenditure are equally important and the country cannot achieve material prosperity without their co-ordinated functioning. Hence, savings and expenditure are like the two tracks on which a nation progresses.

Question 3.
Give the main points of difference between Saving and Expenditure.
Answer:
Savings and expenditure can be distinguished in the following way:
1. Savings help a person to satisfy his future wants, while expenditure satisfies his present requirements.

2. In the case of savings, goods and services are applied indirectly to the satisfaction of wants, while in the case of expenditure, goods and services are applied directly to the satisfaction of wants.

3. Capital is formed out of the savings of the people and, therefore, savings constitute the most important aspect of capital accumulation; whereas expenditure does not help in the creation of capital.

4. Savings increase the income of a person whereas expenditure decreases the income of a person.

5. A wise and farsighted person saves sometimes from his current (UPBoardSolutions.com) income which constitutes savings, while a person who lacks wisdom and farsightedness utilizes his whole income on consumption.

UP Board Solutions for Class 10 Commerce

UP Board Solutions for Class 10 Commerce Chapter 8 Time and Labour Saving Appliances in Business Office

Time and Labour Saving Appliances in Business Office Objective Type Questions (1 Mark)

Question 1.
Which machines are used for addition, subtraction, multiplication and division?
(a) Typing
(b) Punching
(c) Fax
(d) Calculating
Answer:
(d) Calculating

Question 2.
Which machines provide a printed record of the items added?
(a) Fax
(b) Adding
(c) Punching
(d) Typing
Answer:
(b) Adding

Question 3.
………… machine prints addresses on envelops, wrappers, news- paper etc.
(a) Fax
(b) Adding
(c) Calculating
(d) Addressing
Answer:
(d) Addressing

Question 4.
………. developed punched card system.
(a) Dr. Harman Hallerith and Mr. James Pones
(b) Dr. Robert Desouza and Mr. James Pones
(c) Dr. Harman Hollerith and Dr. Robert Desouza
(d) Mr. S. G. William and Mr. James Pones
Answer:
(a) Dr. Harman Hallerith and Mr. James Pones

Question 5.
A computer has ………… component units are section.
(a) 6
(b) 5
(c) 4
(d) 3
Answer:
(b) 5

Time and Labour Saving Appliances in Business Office Definite Answer Type Questions (1 Mark)

Question 1.
Write the name of machines which make many copies of certain letters or other documents?
Answer:
Duplicating Machines or (UPBoardSolutions.com) Duplicators.

Question 2.
What kind of machine is used to affix stamps on outward letters and envelops?
Answer:
Franking Machine.

Question 3.
Name of the machine which can be sent letter, table, chart, graph etc. in printed form is a place to another in no time.
Answer:
Fax Machine.

Question 4.
What kind of machine is very useful in these undertakings or departments which have a very large client etc.
Answer:
Addressing and mailing machines.

Question 5.
Name of the machine which records the time of arrival and departure of an employee.
Answer:
Time Records.

Question 6.
What for time Recording Machine is used in an office? (UP 2013)
Answer:
Time Recording machines record the time of (UPBoardSolutions.com) arrival and departure of an employee.

Question 7.
What for photostat machine is used in an office? (UP 2012)
Answer:
Offices may require a number of copies of certain letters or other documents. By Photo state machine obtaining a number of copies of the master impression.

Time and Labour Saving Appliances in Business Office Very Short Answer Type Questions (2 Marks)

Question 1.
What are the various kinds of Typewriters available in the market?
Answer:
Various types of typewriters are available in the market. Standard typewriter, Portable Typewriter, Noiseless and Electronic Typewriter are main.

Question 2.
Name the component units of a computer.
Answer:
A computer has five component units or sections:

• Input Unit
• Memory or Storage Unit
• Arithmetic Unit
• Control Unit
• Output Unit.

Question 3.
What are the two main types of “adding machines”?
Answer:
Adding machines can be of two main types:

• Listing Machine
• Non-listing Machine.

Question 4.
What is the use of calculating machine?
Answer:
Calculating machine is used for addition, (UPBoardSolutions.com) subtraction, multiplication and division.

Question 5.
Write the name of anyone time and labour saving machine. (UP 2015, 18)
Answer:
Typewriter.

Time and Labour Saving Appliances in Business Office Short Answer Type Questions (4 Marks)

Question 1.
Write a short note on “Book-keeping Machine”.
Answer:
The most important and perhaps the most advanced mechanical device used in big business offices is the book-keeping machine. It can post ledgers, make statements, prepare payroll and add and subtract. The sheets are inserted in the machine and amount keys are pressed. The whole thing is printed and balances are automatically extracted. Such machines are largely used in big business houses of America and England, and no are most helpful for insurance and banking companies. The important makers of this machine are the Burroughs, the Remington and the Elliot Fisher.

Question 2.
How does the “Stencil Duplicator” operate.
Answer:
A stencil is a special kind of coated tissue paper on which matter can be written with a special kind of nib called ‘Stylers’ or on a ‘typewriter’ by remaining the ribbon. The stencil gets punched by pressure from (UPBoardSolutions.com) stylers on typewriter key. The cut stencil is then put on the machines. The stencil is then put on the machines. The stencil gets ink through the cuts on it and imprints the matter on the duplicating paper placed therein. The duplicating machine called ‘Mimeograph’ can be hand-operated or electrically operated.

Question 3.
Explain in brief any four main appliances used in an office.
Answer:

1. Adding Machines: These machines are quite widely used in offices because addition is the most common operation performed by the office clerks.
2. Calculating Machine: These machines are used for addition, subtraction, multiplication and division calculating machines contribute greatly to business efficiency by eliminating chances of errors and by relieving the office clerks of routine and tiring mental work.
3. Time Recorders: Time recorders are the machines which record the time of arrival and departure of an employee.
4. Duplicating machines or Duplicators: Offices may require a number of copies of certain letters or other documents. Duplicating is a process of obtaining a number of copies of the master impression.

Question 4.
State any four main uses of a computer. (UP 2019)
Answer:

1. The Businessmen are using computer to the internet with their customers anywhere in the world.
2. An organisation can use computers for marketing their products.
3. People can manage the office work at home through computer.
4. Computer can also be used in the education field.

Time and Labour Saving Appliances in Business Office Long Answer Type Question (8 Marks)

Question 1.
Describe four labour and time-saving device in business offices. (UP 2015, 17)
Answer:
The following are the main time and labour saving appliances:
(a) Typewriter: This is the most common medical and for writing. It infused not only for need and clean writing but also for the fact that a number of copies can be made with the use of carbon or stencil. Typewriters are available (UPBoardSolutions.com) in different sizes and have different technological sophistication. Various types of typewriters are available. Standard typewriter, portable typewriter, Noiseless and Electronic Typewriter are main.

(b) Book-keeping Machine: The most important and perhaps the most advanced mechanical service used in big business offices in the book-keeping machine. It can fast ledgers, make statements, prepare payrolls and add and subtract. The stutes are inverted in the machine and amount keys are pressed. The whole thing is printed and balances are automatically extracted. Such machines are largely used in big business houses of America and England and are most helpful for insurance and banking companies. The important makers of this machine are the Burnougts, the Remington and the Elliot-Fister.

(c) Time Recorder: Time recorders are the machines which record the time of arrival and departure of an employee. The Cled fill Book Time Recorder in a good mape. Time recording machines are mostly used in big factories where thousands of workers on duties and the task of recording the time of their arrival and departure accordingly is not ordinarily possible.

These machines are like a big clock. Each worker is given a card bearing a number. As soon as he comes to the factory, he has to insert the card into the machine and a slight pressure prints the time of his arrival. The same thing has to be done at the time of departure. An official goes through these cards and can easily detect those who can take or go early. It is of great help in ensuring punctuality on the part of the workers.

(d) Funded Card System: Funded card system is a system of accounting in which the accounting data contained in primary discounts in transcribed into a number of holes in a card known or punched card. In other words, (UPBoardSolutions.com) the sake which was recorded in the ledger and other books in words and figures may be recorded in code by making holes on the cards. Or Harman Hollerith and Mrs James Pones were the first to develop this method for processing census data.

UP Board Solutions for Class 10 Commerce

UP Board Solutions for Class 10 Commerce Chapter 19 Law of Diminishing Marginal Utility

Law of Diminishing Marginal Utility Objective Type Questions (1 Mark)

Question 1.
The law of diminishing marginal utility regulates our daily:
(a) Income
(b) Production
(c) Expenditure
(d) Saving
Answer:
(c) Expenditure

Question 2.
When the total utility is maximum marginal utility is:
(a) Zero
(b) Less than one
(c) More than one
(d) None of these
Answer:
(a) Zero

Question 3.
The more we have of a thing, the ………… we want to have of it.
(a) Less
(b) More
(c) Either (a) or (b)
(d) None of these
Answer:
(a) Less

Question 4.
The law of diminishing marginal utility ………. in the case of rare collections.
(a) Apply
(b) Does not apply
(c) either (a) or (b)
(d) None of these
Answer:
(b) Does not apply

Question 5.
If the period of consumptions is not the ……….. law of diminishing marginal utility does not operate.
(a) Stop
(b) Never end
(c) Continuous
(d) None of these
Answer:
(c) Continuous

Law of Diminishing Marginal Utility Definite Answer Type Questions (1 Mark)

Question 1.
What are human wants?
Answer:
Unlimited.

Question 2.
Write the direction of Marginal Utility Curve.
Answer:
The curve slopes downwards (UPBoardSolutions.com) to the right.

Law of Diminishing Marginal Utility Very Short Answer Type Questions (2 Marks)

Question 1.
State any two assumptions of law of diminishing marginal utility.
Answer:
Two assumptions of law of diminishing marginal utility are as follows:
(a) Change in other person’s stock: The law of diminishing marginal utility does not hold if there occurs a change in other people’s stock. According to the law, marginal utility diminishes when there is an increase in our (UPBoardSolutions.com) stock. But it is pointed out that in some cases the utility changes not because of a change in our stock, but because of a change iri other people’s stock.

(b) Suitable Time: In order to make the law applicable, the commodity should be consumed within a certain time otherwise, the law will not operate.

Question 2.
Write a brief note on the importance of the law of diminishing marginal utility.
Answer:
The importance of the law can be explained as under:
(a) Indicates relation between the standard of living and efficiency: (UPBoardSolutions.com) The law of diminishing marginal utility helps us to understand the reason for a fall in the efficiency owing to a rise in the standard of living of the people.

(b) Theory of Taxation and Public Expenditure: Prof. Marshall utilised the law of diminishing marginal utility to build up his theory of taxation and public expenditure.

(c) Importance in the Field of Exchange: The law of diminishing marginal utility has its own importance in the field of exchange also. When the supply of any commodity increases its marginal utility decreases and the prices also come down. The commodities which are supplied largely have no value-in-exchange. Thus, the law has considerable importance in the field of exchange.

(d) Basis of Consumer’s Surplus: The utility derived by a consumer from each (UPBoardSolutions.com) successive unit of a commodity goes on diminishing, though the price of the article remains unchanged. He stops his purchase and that point where the utility derived equals utility lost. Thus, the law of diminishing margined utility is the basis of the concept of consumer’s surplus.

UP Board Solutions for Class 10 Commerce

UP Board Solutions for Class 10 Commerce Chapter 18 Utility, Marginal Utility, Total Utility

Utility, Marginal Utility, Total Utility Objective Type Questions (1 Mark)

Question 1.
Marginal Utility may be:
(a) Positive
(b) Negative
(c) Zero
(d) All of these
Answer:
(d) All of these

Question 2.
When the consumption of marginal unit gives neither satisfaction nor dissatisfaction, the marginal utility is:
(a) Positive
(b) Negative
(c) Zero
(d) All of these
Answer:
(c) Zero

Question 3.
Marginal utility ………….. with successive units of consumption.
(a) Increases
(b) Decreases
(c) Either (a) or (b)
(d) None of these
Answer:
(b) Decreases

Question 4.
Marginal utility is the ………… associated with the consumption of successive units.
(a) Sum of Marginal Utility
(b) Sumof Total Utility
(c) Neither (a) or (b)
(d) None of these
Answer:
(a) Sum of Marginal Utility

Question 5.
When marginal utility diministes with successive units of consumption, the total utility at first increases at a ………. rate.
(a) Increasing
(b) Diminishing
(c) Decreasing
(d) None of these
Answer:
(b) Diminishing

Utility, Marginal Utility, Total Utility Definite Answer Type Questions (1 Mark)

Question 1.
Who says that “the additional benefit which a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has.”
Answer:
Prof. Marshall.

Question 2.
What marginal is said when the consumption of the last unit gives some satisfaction?
Answer:
Positive.

Utility, Marginal Utility, Total Utility Very Short Answer Type Questions (2 Marks)

Question 1.
Define Utility.
Answer:
In common language, the word ‘utility’ means usefulness but in economics, it is used for the propriety in a commodity to satisfy human wants. According to Baugh, “Utility is (UPBoardSolutions.com) the capacity to satisfy human wants.”

Question 2.
Write two characteristics of utility.
Answer:
The characteristics of the utility are as follows:

• Utility is created by Wants: Utility in any commodity is created by an effective desire to possess it. If a thing is not wanted, it has no utility.
• Utility is an abstract quality: Utility is (UPBoardSolutions.com) a commodity can only be experienced. It is a psychological characteristic. It cannot be seen or touched physically.

Question 3.
What are the two kinds of utility? (UP 2016)
Answer:
Utility is of two kinds:

• Marginal Utility
• Total Utility.

Utility, Marginal Utility, Total Utility Short Answer Type Questions (4 Marks)

Question 1.
What is the total utility?
Answer:
Total Utility: The total utility from the consumption of an article is the sum of utilities of all units consumed at a particular time to satisfy a particular want. Prof. A. L. Meyers defines it as, “the sum of (UPBoardSolutions.com) the marginal utility associated with the consumption of the successive units.” Prof. Marshall says that “the total utility or the total pleasure or another benefit it yields him increases but does not increase at the same route as his stock increases.”

Question 2.
How marginal utility and total utility-related?
Answer:
The relation between the total utility and marginal utility is deep. The total utility increases so long as the marginal utility is positive. The total utility is maximum when the marginal utility is zero. After this point, the total (UPBoardSolutions.com) utility begins to decrease and marginal utility is negative.

Question 3.
Distinguish between marginal utility and total utility. (UP 2019)
Answer:

	Total Utility	Marginal Utility
1. Meaning	Total utility means total benefits obtained by a person from the consumption of goods and services.	Marginal utility means the amount of utility a person gains from the consumption of each successive unit of a commodity.
2. Result	Suffers from diminishing returns.	Declines for each additional unit consumed.

Utility, Marginal Utility, Total Utility Long Answer Type Questions (8 Marks)

Question 1.
What do you mean by the total utility and marginal utility? Explain with the help of example and diagram. (UP 2008, 09)
Or
What do you understand by the term Total Utility and Marginal Utility? What are the kinds of Marginal Utility?
Answer:
Total Utility: Total Utility is the sum of the utility derived from the (UPBoardSolutions.com) consumption of all the units of a commodity at the disposal of the consumer at a particular time.

Marginal Utility: Marginal utility is the utility of the last unit of the commodity that is consumed at any particular time. In order to satisfy our wants, we have to consume a number of units of a commodity. For instance, a person consumes 2 bananas yielding 6 and 4 units of utility at a time, the marginal utility is the utility of second banana which is equal to 4. Now, further suppose that he takes one more banana yielding him utility, say 2 units, then in such a case third banana is the marginal unit and its marginal utility will be equal to 2.

The marginal utility may be of three kinds i.e., (i) positive, (ii) negative, and (iii) zero.

• Marginal utility is positive when the consumption of the last unit gives some satisfaction.
• Marginal utility is negative when the consumption of marginal unit gives some dissatisfaction or does not yield any utility.
• Marginal utility is zero when consumption neither provides (UPBoardSolutions.com) satisfaction nor causes any dissatisfaction.

Relationship between marginal and total utility

Units of Chapatis consumed in succession	Marginal Utility	Remarks	Units of Total Utility
1	40	Positive Marginal Utility	40
2	30		70
3	20		90
4	10
5	0	Zero Marginal Utility	100
6	-10	Negative Marginal Utility	100
7	-20		70

Marginal utility of a commodity to a person is based on two things. These two things are as follows :

• Consumption should be regular and unbroken.
• The utility in question should be the utility of the final unit (or marginal unit) consumed.

For example, if an individual takes only 3 units of chapatis and his hunger is satisfied then the marginal unit is the third one and the marginal utility is the utility derived from its consumption, i.e., 20 units as shown in the table.

The relation between the total utility and marginal utility is deep. The total utility increases so long as the marginal utility is positive. The total utility is maximum when the marginal utility is zero. After this point, the (UPBoardSolutions.com) total utility begins to decrease and marginal utility is negative. This relationship between total and marginal utility is well explained through the following figure:
It can be exhibited with the help of the diagram given in figure.

Question 2.
List the importance of Law of Diminishing Marginal Utility. (UP 2009)
Answer:
The law of diminishing marginal utility is considered as one of the basic laws of Economics.
The importance of the law can be explained as under:
1. Basis of the Law of Demand: The law of diminishing marginal utility provides the function for various laws of consumption. The law of demand which is a very important law of consumption is based on the law of diminishing marginal utility.

2. Basis of Equi-marginal Utility: The law of equity-marginal utility or the law of substitution is derived from the law of diminishing marginal utility. A consumer does not spend his total income on the purchase of one (UPBoardSolutions.com) commodity alone, instead, he spends it on different commodities in such a manner as to ensure that the marginal utility obtained from every commodity purchased is in the same relationship to price.

3. Basis of Consumer’s Surplus: The utility derived by a consumer from each successive unit of a commodity goes on diminishing, though the price of the article remains unchanged. He stops his purchase at that point where the utility derived equals utility lost. Thus, the law of diminishing marginal utility is the basis of the concept of consumer’s surplus.

4. Indicates Relation between Standard of Living and Efficiency: The law of diminishing marginal utility helps us to understand the reason for a fall in the efficiency owing to a rise in the standard of living of the people.

5. Importance in the Field of Production: The law of substitution is based on the law of diminishing marginal utility. Accordingly, the factors of production can be substituted. The process of substitution is influenced by the prevailing prices of the factor of production. The dearer factors will be substituted by cheaper factors. The law of diminishing marginal utility will prove helpful to understand the law of substitution.

6. Theory of Taxation and Public Expenditure: Prof. Marshall utilized the law of diminishing marginal utility to build up his theory of taxation and public expenditure.

7. Public Finance: Modern governments follow the system of taxation so as to transfer the purchasing power from the richer sections of the society to the poorer section. This will help to achieve greater economic equity among the various sections of the society. Taxation and public expenditure is undertaken by the government are based on the law of diminishing marginal utility.

8. Importance in the Field of Exchange: When the supply of any commodity (UPBoardSolutions.com) increases, its marginal utility decreases and the prices also come down. The commodities which are supplied largely have no value-in-exchange. Thus, the law has considerable importance in the field of exchange.

Question 3.
What are the assumptions of Law of Diminishing Marginal Utility? (UP 2009)
Answer:
The law of diminishing marginal utility is based on certain assumptions and any change in the assumptions would obstruct the operation of the Law. ‘Other things remaining the same’ signifies certain assumptions and conditions without which the law cannot operate. The law of diminishing marginal utility is based on the following important conditions or assumptions:

1. The Units of the Commodity must be Homogeneous: The first condition to be satisfied for the operation of the law is that units of the commodity must be similar in quality and quantity. Suppose, you give two oranges to (UPBoardSolutions.com) a hungry man to appease his hunger. The first orange which you gave him is a slightly damaged one while the second orange is a better one. Naturally, when the first orange was not tasty, he will derive more satisfaction from the second orange.

Suppose, you give a third orange also, that would be the best of the three oranges; he may even derive more utility from its consumption than the other two oranges. If the units of the commodity are not similar in quality, the law of diminishing marginal utility will not operate. Similarly, the quantity of each unit must remain the same. If the first orange is very small in size while the second orange is double the size of the first orange, the law of diminishing marginal utility does not operate. Thus, if the units of the commodity are not alike in quality and size, the law may not operate.

2. The Process of Consumption should be Continuous: The second condition is that the period of consumption should be continuous and there should not arise any time-gap between consumption of the two units of the commodity. For example, (UPBoardSolutions.com) a person eats one chapati at 8 O’clock in the morning, the second chapati at 9 O’clock in the morning and the third chapati at 10 a.m. The law of diminishing marginal utility does not apply here because the period over which consumption is spread is not continuous and sufficient time interval given will obstruct the operation of the law. If the second chapati is taken immediately after the first chapati, the utility of the later will diminish.

3. The Price of the Commodity and its Substitutes should Remain the Same:
The price of the commodity should remain unchanged during the process of consumption. For instance, if the price of an article has reduced considerably consumers may want it with increased intensity and the desire to get more and more of that article will increase its utility. Therefore, the law of diminishing marginal utility will not operate as far as the commodity in question becomes cheap and one wants it with increased intensity.

The price of the substitutes should also remain the same for the operation of the law. If the cost of an article comes down, the demand for it will increase and it is natural to increase its utility also. If the price of the substitute of an article goes up, people start consuming the article in question and the utility of the article goes up, comparatively to that of the substitute. Thus, the (UPBoardSolutions.com) unchangeableness of the price of the article in question and the substitute thereof is very important for the operation of the law of diminishing marginal utility.

4. Taste, Habit, Fashion and Income of the Consumer should remain Unchanged: The law of diminishing marginal utility operates only if the taste, habit and income of the consumer do not change, in those cases where the period of consumption is long. For example, the particular design of a shirt which is not in fashion may yield only less utility to a person, but if the same shirt comes in fashion, its utility is liable to increase.

5. Mental Approach: The mental outlook of the consumer should remain the same. Normally, a person who eats 5 chapatis should feel satisfied, and if he is forced to eat more, he will yield zero utility and later on negative utility. Suppose, he takes some intoxicants after eating 5 chapatis, he craves for more chapatis and subsequently its utility will increase rather than diminishing. Under such a situation the law does not work.

Question 4.
Explain the Law of Diminishing Marginal Utility in detail. (UP 2008)
Or
Explain the Law of Diminishing Marginal Utility with the help of a diagram. (UP 2011, 13)
Answer:
Law of Diminishing Marginal Utility: Law of Diminishing Marginal Utility states that as a person purchases more and more units of a commodity, its marginal utility diminishes. The more we have of a commodity, the less urgently we want its subsequent units and the utility of its succeeding units goes on diminishing. According to Prof. Marshall, “The additional benefit which a person derives from a given increase of the stock of a thing diminishes with every increase in the stock, which he already has.” This concept can be cleared from the following example:

A person who is hungry starts eating bread to satisfy his hunger. Suppose that he consumes 5 pieces of bread. The utility of the first bread will be great. The utility of second bread will not give him the same amount of utility as the first bread has already satisfied a part of his hunger. The second bread yields less satisfaction in comparison to the first bread. The third bread (UPBoardSolutions.com) will yield even less utility than the second bread. The satisfaction of the fourth bread will be less than that of the third and of the fifth will be less than that of the fourth. This way, the utility of each bread will go on diminishing with every successive bread. Ultimately he would reach a stage where his hunger is fully satisfied and the utility of next bread would come down to zero. If he is forced to take more, he will derive ‘negative utility’ or ‘disutility’.

This example makes it clear that as a person gets more and more units of a commodity, the marginal utility derived from the successive units diminishes.

Tabular Representation: The following table illustrates the Law of Diminishing Marginal Utility as applied to the consumption of slices of bread:

Units (Slices of bread)	Marginal Utility (Units of satisfaction)	Total Utility
1	25	25
2	23	48
3	19	67
4	15	82
5	10	92
6	0	92
7	-12	80
8	-20	60

Marginal utility of bread till the 5th unit is positive if the consumer proceeds further to consume the 6th unit, marginal unit drops down to zero. After the zero points, utility becomes negative i.e., the 7th and 8th units give negative utility.
Diagrammatic Representation: The Law of Diminishing Marginal Utility can (UPBoardSolutions.com) be represented diagrammatically. The above illustration can be better understood with the help of the following diagram:

Along the OX-axis units of the commodity is represented and along the OY-axis marginal utility is measured. ‘MU’ is the marginal utility curve. This curve slopes downwards to the right because with every additional increase in the quantity of the commodity consumed, there is a decline in the marginal utility. At the 6th unit, the marginal utility drops down to zero. ‘P’ is (UPBoardSolutions.com) the point of satiety, and then it becomes negative. The dotted area below the OX-axis represents negative utility.

UP Board Solutions for Class 10 Commerce

UP Board Solutions for Class 10 Commerce Chapter 17 Indigenous Bankers

Indigenous Bankers Objective Type Questions (1 Mark)

Question 1.
The indigenous bankers are more financially:
(a) Week
(b) Sound
(c) Strong
(d) None of these
Answer:
(b) Sound

Question 2.
Sahukars and Mahajans do not accept deposits from:
(a) People
(b) Bank
(c) Government
(d) None of these
Answer:
(a) People

Question 3.
Indigenous bankers play a vital role in the ………….
(a) Agriculture
(b) Industry
(c) Urban areas
(d) Private Sector
Answer:
(a) Agriculture

Question 4.
The indigenous banker’s charge: (UP 2016)
(a) Lower rate of interest
(b) A reasonable rate of interest
(c) Higher rate of interest
(d) None of these
Answer:
(c) Higher rate of interest

Question 5.
The indigenous bankers are the oldest institution providing:
(a) Insurance Facilities
(b) Loans Facilities
(c) Locker’s Facilities
(d) Banking Facilities
Answer:
(d) Banking Facilities

Indigenous Bankers Definite Answer Type Questions (1 Mark)

Question 1.
What is called indigenous hankers in Chennai (Madras)?
Answer:
Chetti.

Question 2.
Which bank does not accept small deposits?
Answer:
Modern Banks.

Question 3.
Which committee defines an indigenous banker or banks as an individual or private firm receiving deposits and dealing in hundis of lending money.
Answer:
The Indian Central Banking (UPBoardSolutions.com) Enquiry Committee.

Indigenous Bankers Very Short Answer Type Questions (2 Marks)

Question 1.
Who is called a money-lender?
Answer:
Money-lender is also called Sahukars or Mahajans. Sahukars or Mahajans only provide loans to the borrowers. They do not accept any deposits from the people. These people utilise their own capital in granting loans (UPBoardSolutions.com) to people. Generally, Sahukars and Mahajans do other business along with this money lending business.

Question 2.
What is the meaning of indigenous bankers?
Answer:
Indigenous bankers are persons or institutions which provides the loan, discount hundis and accept deposits from the people. Their area of function is mostly in towns or big villages. The indigenous bankers also provide functional assistance to Sahukars and Mahajans.

Question 3.
Give any main functions of indigenous bankers.
Answer:

1. The modern banks have not been able to extend their network in rural areas and the financial requirements of that area are met by indigenous bankers.
2. Indigenous bankers issue and discount hundis. They also give (UPBoardSolutions.com) a loan on the basis of hundis.

Question 4.
Write any four demerits of indigenous bankers. (UP 2019)
Answer:

1. A high rate of interest
2. Inadequacy of funds
3. Fraudulent Practice
4. Not efficient.

Indigenous Bankers Short Answer Type Questions (4 Marks)

Question 1.
Why indigenous bankers are important in India?
Answer:
The modern banks have their network mostly in the cities and the desired development of these banks in the rural areas has not been fulfilled. India, being a country of villages, its major population lives in villages. (UPBoardSolutions.com) The main business of villagers is agriculture. The financial needs of the agriculturists are met by the indigenous bankers and moneylenders because we do not have modern banks in. every village. It is estimated that 90% of the agricultural needs are met by indigenous bankers.

The Indian farmer, being poor, needs money after very short intervals. Sometimes they need money for seeds and fertilisers to pay revenue (Lagan) and also for their personal needs etc. Only indigenous bankers can give a loan at short intervals and without much paperwork. When the farmers sell their crops their financial position is good but after sometimes they have to depend on moneylenders or indigenous bankers for their financial needs. Thus, we can say that indigenous bankers play a vital role in the agriculture of (UPBoardSolutions.com) our country.

Question 2.
Distinguish between indigenous bankers and money-lenders.
Answer:
Difference between indigenous bankers and money-lenders.

Indigenous Bankers	Money-lenders
1. They do accept deposits from the people.	1. They do not accept deposits from the people.
2. They do business from the deposits accepted.	2. They do their business with their own capital.
3. They discount hundis.	3. They do not discount hundis.
4. The banking business is their primary business.	4. The banking business is not their primary business. They do this business along with other business.
5. The rate of interest charged by them is comparatively lower than money-lenders.	5. The rate of interest charged by them is higher than indigenous bankers.
6. They give huge loans only on security.	6. They give huge loans even without any security.
7. They generally give loan for agriculture, business and for small industries.	7. They generally give loan for personal needs and rarely give loans for production needs.

Question 3.
Distinguish between indigenous banks and commercial banks.
Answer:
Difference between indigenous banks and commercial banks.

Indigenous Banks	Commercial Banks
1. The deposits with these bankers are very nominal. They generally do business with their own capital.	1. Major portion of their capital is formed by means of deposits. The success of these banks depends upon their deposits.
2. They do not provide the facility to withdraw money by cheque.	2. They provide the facility for making payment by cheque.
3. They do some other business along with banking business.	3. They only perform banking business.
4. They even give a loan without any security.	4. These banks do not give loan without proper security.
5. The rate of interest charged by them is high and keeps on changing.	5. The rate of interest is fixed and is comparatively lower than indigenous bankers.

Indigenous Bankers Long Answer Type Questions (4 Marks)

Question 1.
Discuss the functions of indigenous bankers and also discuss its demerits. (UP 2013)
Or
Who are indigenous bankers? Briefly describe the demerits of indigenous bankers in India. (UP 2011)
Or
What are indigenous bankers? Mention its two defects. (UP 2012)
Answer:
Functions of Indigenous Bankers: Following are the main functions of indigenous bankers:

1. Lending of Money: Lending of money is the foremost function of indigenous bankers. Money is lent without any security other than that of borrower’s own reliability. But in certain cases, security accepted by them is in the form of land, crops or ornaments.
2. Acceptance of Deposits: Indigenous bankers accept both types of (UPBoardSolutions.com) deposits-short-term and long-term deposits, which are repayable either on-demand or after some fixed period.
3. Dealing in Hundis: Indigenous bankers issue hundis to the traders and others for accommodation and remittance purpose. The function of discounting Hundis is also performed by them.
4. Other Functions: Some of the other functions performed by Indigenous bankers are as follows:
   • They also perform the function of sending money from one place to another.
   • They also assist in the trade of import and export.
   • They also perform the trade of grains, gold, silver, clothes etc. They also invest money in speculation.

Demerits of Indigenous Bankers: Main drawbacks of these bankers are as below:

1. The rate of interest charged by indigenous bankers is very high. Because of charging of high rate of interest, the poor farmers are always exploited and their financial position does not improve.
2. Indigenous bankers accept only nominal deposits from the public. For the purpose of granting the loan, they utilise their own capital. This policy of indigenous bankers retards the saving habit of those living in that area.
3. In certain cases, it has come to light that the indigenous bankers indulge in fraudulent practices. They take the thumb impression of the uneducated farmers on a plain paper and then fill in more amount than actually given to them.
4. No banking principles are followed by them, nor any book of account is maintained.
5. There may be the cases that the farmers are unable to repay the loan and the interest (UPBoardSolutions.com) of indigenous bankers. In such a case, the bankers purchase the crops of the farmers at a very nominal rate.
6. Indigenous bankers also satisfy the personal monetary needs of the villagers which develop the habit of extravagance and uneconomical expenditure.
7. There is no control exercised by Reserve Bank of India upon indigenous bankers which develops inefficient management.

Question 2.
State the drawbacks of Indigenous Bankers.
Answer:
Drawbacks of Indigenous Bankers: The following are drawbacks of indigenous bankers.
1. High Rate of Interest: The indigenous bankers charge a higher rate of interest. Thus, the poor farmers are exploited by them.

2. Inadequacy of Funds: The indigenous bankers accept only nominal deposits from the public. They utilize only their own capital for providing loans. Thus, the people of that area do not develop the habit of saving. The demand of the farmer is more and the capital available with the indigenous bankers is less, which leads to high rate interest. Another problem is that the needs of all the farmers are not fulfilled.

3. Fraudulent Practice: indigenous bankers adopt fraudulent practices. They take the thumb impression of the uneducated farmers on a plain paper and then they fill more amount in it than actually given to them.

4. Lack of Sound Banking Principles: They do not adopt banking (UPBoardSolutions.com) principles and their books of accounts are not proper.

5. Nominal Payment for Crop: If the farmer is unable to repay the loan and the interest of indigenous bankers, then bankers purchase the crops of the farmers at a very nominal rate and sometimes they also take the land of the farmers at a very cheap rate.

6. Advances for Consumption Needs: The indigenous bankers also give loan for personal needs which develop the habit of extravagance and uneconomical expenditures made by people. As the loan is easily available, the villagers spend a lot on marriages and other social customs etc.

7. No Control of Reserve Bank of India: The Reserve Bank of India has (UPBoardSolutions.com) no control over indigenous bankers because there is no such law by which Reserve Bank of India can exercise its control over them.

8. Legal Proceedings Against Farmers: When the loan is not repaid by the farmers, the indigenous bankers take legal action against them. The borrower has to spend a lot of money to defend himself against legal proceedings.

UP Board Solutions for Class 10 Commerce