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NIOS Class 10 Economics Chapter 13 Role of Government in Determination of Price and Quality
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Role of Government in Determination of Price and Quality
Chapter: 13
MODULE 4: DISTRIBUTION OF GOODS AND SERVICES
TEXTBOOK QUESTIONS (SOLVED)
INTEXT QUESTIONS 13.1
Q.1. Why does government fix the price of some commodities below the equilibrium price?
Ans. Government fixes the price of some commodities below the equilibrium price to protect the interest of consumers.
Q.2. Name the problems faced in fixing the price of a commodity below the equilibrium price.
Ans. (i) Problem of excess demand/ shortage of the commodity.
(ii) Problem of black-marketing.
Q.3. What is meant by rationing?
Ans. Rationing means fixing quota per head, per unit of time.
Q.4. What is meant by black-marketing?
Ans. Black-marketing is a situation in which the seller illegally charges a price which is much higher than the control price.
Q.5. What policy is adopted by the government to check black-marketing arising due to price control.
Ans. Dual Price Policy.
INTEXT QUESTIONS 13.2
Q.1. What is support price?
Ans. Support price is the price fixed by the government higher than the equilibrium price to protect the interests of producers specially farmers.
Q.2. Why does the government fix the price of a commodity higher than the equilibrium price?
Ans. To protect the interest of producer especially farmers.
Q.3. Suppose the farmers are unable to sell their total output at a price, which is fixed by the government higher than the equilibrium price. What policy is adopted by the government?
Ans. Government is ready to purchase any quantity of commodity at that price to make buffer stock of the commodity.
Q.4. Name the two commodities which have support price in India.
Ans. (i) Wheat.
(ii) Rice.
INTEXT QUESTIONS 13.3
Q.1. What is a token price?
Ans. Token price is the price which is fixed by the government and some private charitable institutions much lower the cost of production per unit of the commodity.
Q.2. What is meant by dual price?
Ans. Dual price is a policy in which a part of production of a good is sold at control price trough fair price shops and remaining part is sold at prevailing market price determined by the forces of demand and supply.
Q.3. What does the government not supply some commodities free? Why does it charge a token price for them?
Ans. Government does not supply some commodities free in order to avoid misuse of these commodities.
Q.4. Tick mark (✓) the correct answer.
(a) Token price is the price fixed by the government which is higher than the per unit cost of production.
(b) Token price is the price which is much below the per unit cost of production.
(c) Token price is the price which is charged from rich persons.
(d) Token price is equal to the per unit cost of production.
Ans. (b) Token price is the price which is much below the per unit cost of production.
INTEXT QUESTIONS 13.4
Q.1. Name the three elements of public distribution system.
Ans. (i) Subsidy.
(ii) Fixed Quantity/Rationing.
(iii) Fair Price Shops.
Q.2. How does increase in tax affect the price of a commodity?
Ans. Price of the commodity increases.
Q.3. How does increase in subsidy effect the price of a commodity?
Ans. Price of the commodity decreases.
Q.4. What is meant by rationing?
Ans. Rationing means fixing quota per head, per unit of time.
Q.5. On what basis are the fair price allotted to the quota of goods to be distributed by them?
Ans. On the basis of the ration cards registered with the shop.
Q.6. Write down the full forms of
(i) BPL.
Ans. Below Poverty Line.
(ii) FPS.
Ans. Fair Price Shops.
(iii) PDS.
Ans. Public Distribution System.
TERMINAL EXERCISE
Q.1. What is control price? How does it affect the consumers?
Ans. Control price is the price which is fixed by the government below the equilibrium price. It protects the interests of the consumers.
Q.2. What is support price? How does it affect the producers?
Ans. Support price is the price which is fixed by the government above the equilibrium price. It protects the interest of producers specially farmers.
Q.3. What is a token price? What is purpose behind fixing token price of the a commodity?
Ans. Token price is the price which is fixed by the government/private charitable institutions. The purpose behind the fixing token price of a commodity far below the per unit cost of production is to prevent the wasteful use of the services.
Q.4. Explain the system of dual price policy. How does it help the poor?
Ans. System of Dual Policy: It is the system under which a part of production of the good is sold at control price through fair price shops and the remaining part is sold at prevailing market price, which is determined by the forces of demand and supply. For example, government sells wheat, rice, and sugar to BPL (Below Poverty Line) cardholders at controlled price through Fair Price Shops and the producers are also allowed to sell their remaining production at equilibrium price in open market.
It helps the poor in getting the essential goods like wheat, rice, sugar at cheaper prices.
Q.5. How do taxes and subsidies affect market price of a commodity?
Ans. Effect of Tax on Market Price of a Commodity: Government imposes various types of taxes on production and sales of commodities and also on the import of raw materials etc. in the form of excise duty sales tax and import duty etc. These taxes are paid to the government by producers, sellers and importers of these commodities. The producers, sellers and importers recover them from the buyers of these commodities. So the tax increase the market price of the commodities. If the government increases the rate of these taxes, the market price of the commodities will also increase.
Effect of Subsidies on the Market Price of a Commodity: The government gives subsidy to the producers to sell some goods at lower price in order to make the commodity available to the common men at a lower price. In this way subsidy decrease the market price of the commodities. The increase in subsidy leads to decrease in market price of the commodity. At present government gives subsidy on kerosene oil, cooking gas etc.
Q.6. What is meant by public distribution system? Explain its essential elements in brief.
Ans. Public Distribution System: Public Distribution System is a system under which essential commodities like wheat, rice, sugar are made available to the common man at cheaper rate through Fair Price Shops called ration shops. These commodities are sold through an identification paper called ration card.
Essential Elements of Public Distribution System: Following are three essential elements of Public Distribution System:
(i) Subsidy: Government gives subsidy on the commodities sold through public distribution system. Hence prices of the commodities sold under this system are relatively lower.
(ii) Fixed Quantity (Rationing): Government fixes the quantity (Quota) per head, per unit of time on the basis of minimum requirement of a person. Every household is issued a ration card mentioning the number of persons in the family. Every household can buy fixed quantity of the commodity according to the number of persons in the family from the fair price shops.
(iii) Fair Price Shops (FPS): Government sells the commodities through Fair Price Shops popularly known as ration shops. These are opened in all parts of the country. The government supplies these commodities to the owner of these shops according to the number of ration cards registered with each shop. The owner of these shops are paid a commission on their total sales.
SOME IMPORTANT QUESTIONS FOR EXAMINATIONS
VERY SHORT ANSWER TYPE QUESTIONS
Q.1. Under which situation the govern- ment intervenes and fixes the fix price?
Ans. The government intervenes and fixes the prices when the market prices are too high or too low.
Q.2. When is the market price very high?
Ans. The market price is very high when there is shortage of some commodity in the market.
Q.3. Out of control price and support price which is generally lower than the equilibrium price?
Ans. Control Price.
Q.4. Name those goods which have control price in india.
Ans. Wheat, rice, sugar, kerosene oil etc. have control price in india.
Q.5. What does rationing mean?
Ans. Rationing means fixing of the quota per head, per unit of time.
Q.6. How can the problem of black-marketing be solved?
Ans. The problem of black-marketing can be solved through dual policy.
Q.7. What is other name of minimum price?
Ans. The other name of minimum price is support price.
Q.8. Name the price fixed by the government to safeguard the interest of producers.
Ans. Support Price.
Q.9. Which situation may arise due to support price?
Ans. The situation of excess supply.
Q.10. Who are affected by low prices of foodgrains in India?
Ans. In India, farmers are affected by low prices of foodgrains.
Q.11. Why is token price charged?
Ans. Token price is charged to prevent the wasteful use of services.
Q.12. What does the government do when there is excess supply of the commodity at support price?
Ans. The government purchases any quantity of the commodity to make buffer stock of the commodity.
Q.13. Out of token price and control price which price is far below the per unit cost of production of the commodity?
Ans. Token Price.
Q.14. Out of taxes and subsidies, which increase the market price?
Ans. Taxes increase the market price.
Q.15. Name any two commodities on which the government gives subsidies.
Ans. (i) Kerosene Oil.
(ii) Cooking Gas.
Q.16. There are three elements of public distribution system. Two of them are fair price shops and subsidy. Name the third one.
Ans. Third one is fixed quantity (Rationing).
Q.17. How is market price affected by an increase in taxes?
Ans. Increase in taxes on a commodity increases the market price of the commodity.
SHORT TYPE QUESTIONS ANSWER
Q.1. What does the system of support prices assure the farmers?
Ans. The system of support prices assures the farmers that they will be able to sell their atleast at this price (support price).
Q.2. Give an example of dual price.
Ans. Government sells wheat, sugar etc. to BPL cardholders at control price through Fair Price Shops and the producers are also allowed to sell their remaining production at equilibrium price in open market.
Q.3. Give an example of token price.
Ans. The tuition fees charged in government school is an example of token price.
LONG TYPE QUESTIONS ANSWER
Q.1. Differentiate between Control Price and Support Price.
Ans. Differentiate between Control Price and Support Price.
| Control Price | Support Price |
| (i) It is below the equilibrium price. | (i) It is above the equilibrium price. |
| (ii) It is fixed by the government to protect the interest of consumers. | (ii) It is fixed by the government to protect the interest of producers/sellers. |
Q.2. What is an administered price? Give its main forms and describe any one form.
Ans. Administered Price: It is the price fixed by the government to protect the interest consumers and suppliers. It may be below or above the equilibrium price.
Forms of administrative Prices:
(i) Control Price.
(ii) Support Price.
(iii) Token Price.
(iv) Dual Price.
Token Price: It is very much below even its per unit cost of production. The tuition fee charged in government schools is the example of token price. It is charged in order to prevent the wastage of essential services.
OBJECTIVE TYPE QUESTIONS
Q.1. Tick mark (✓) the correct answers:
(i) (a) Support price protects the interest of customers.
(b) This price is generally lower than the equilibrium price.
(c) The problem of support arises when the producers do not cover even the cost of production of equilibrium price.
(d) Cars and buses have support price in India.
Ans. (c) The problem of support arises when the producers do not cover even the cost of production of equilibrium price.
(ii) (a) Token price is the price which is fixed by the government only.
(b) The tuition fees charged in the public schools is an example of token price.
(c) Token price is greater than equilibrium price.
(d) Token price is charged in order to prevent the wastage of the services.
Ans. (d) Token price is charged in order to prevent the wastage of the services.
Q.2. Fill in the blanks:
(a) Public Distribution System has ________ elements.
Ans. Three.
(b) Increase in tax ________ the price of a commodity.
Ans. Increases.
(c) Administrated price may be below or above the ________ price.
Ans. Equilibrium.
(d) Support Price is the price which is fixed by the government ________ the equilibrium price to protect the interest of consumers.
Ans. Below.
(e) Token price is the price which is fixed by the government/private charitable institutions ________ the per unit cost of production of the commodity.
Ans. Far below.
(f) Subsidy given on a commodity ________ the market price of the commodity.
Ans. Decreases.
(g) Commodities are sold through public distribution system on the basis rate of ________.
Ans. Ration Card.
(h) Full form of BPL is ________.
Ans. Below Poverty Line.
(i) Full form of PDS is ________.
Ans. Public Distribution System.
(j) FPS stands for ________.
Ans. Fair Price Shops.
(k) Subsidy is one of the essential elements of ________ in India.
Ans. Public Distribution System in India
(l) Taxes are paid to the ________ by produces sellers and importers of goods.
Ans. Government.
