CUET 2026 Economics May 23 Shift 1 Question Paper- Download Answer Key and Solution PDF

Concept:
In a perfectly competitive market: Price = Average Revenue = Marginal Revenue 
A firm is a price taker and sells its product at the market price.
Step 1: Examine Statement 1.
Average Revenue: \[ AR = \frac{TR}{Q} \]
Under perfect competition: \[ AR = Price \]
Therefore: Statement 1 is correct.
Step 2: Examine Statement 2.
The price line shows the relationship between: Market Price and Output 
In perfect competition, it is a horizontal line because price remains constant.
Therefore: Statement 2 is correct. 
Step 3: Examine Statement 3.
Marginal Revenue under perfect competition is: MR = Price
Therefore: Statement 3 is correct.
Step 4: Examine Statement 4.
Total Revenue: \[ TR = P \times Q \]
As output increases, total revenue also increases.
Hence, the total revenue curve is: \[ an\ upward\ sloping\ straight\ line \]
and not a horizontal straight line.
Therefore: \[ Statement\ 4\ is\ incorrect. \]
Thus, the incorrect option is: \[ \boxed{Statement 4} \] Quick Tip: Remember: In perfect competition: \[ P = AR = MR \] Price line: \[ Horizontal \] Total Revenue curve: \[ Upward\ sloping\ straight\ line \]

Concept:
Equilibrium price and quantity in a market are determined by the interaction of demand and supply.
A shift in demand or supply curves changes equilibrium conditions.
Step 1: Match (A): Leftward shift in both demand and supply curves.
A leftward shift means:
Demand decreases
Supply decreases
This generally reduces equilibrium quantity.
Thus: \[ (A) \rightarrow (III) \]
Step 2: Match (B): Rightward shift in both demand and supply curves.
A rightward shift means:
Demand increases
Supply increases
This increases equilibrium quantity.
Thus: \[ (B) \rightarrow (II) \]
Step 3: Match (C): Equal percentage increase in demand and supply curves.
When both demand and supply increase proportionately: Equilibrium price remains unchanged
Thus: \[ (C) \rightarrow (I) \]
Step 4: Match (D): Supply shifts right and demand shifts left.
An increase in supply and decrease in demand may offset each other, causing equilibrium quantity to remain unchanged.
Thus: \[ (D) \rightarrow (IV) \]
Hence, the correct matching is: \[ (A)-(III),\quad (B)-(II),\quad (C)-(I),\quad (D)-(IV) \]
Therefore, \[ \boxed{(A)-(III),\; (B)-(II),\; (C)-(I),\; (D)-(IV)} \] Quick Tip: Remember: Demand \& Supply both decrease \(\rightarrow\) Quantity decreases Demand \& Supply both increase \(\rightarrow\) Quantity increases Equal proportional shifts may keep price unchanged

Concept:
Gross National Product (GNP) at Market Price is calculated by first determining domestic production and then adding net factor income from abroad.
The sequence follows the value added method.
Step 1: Calculate value of output.
First, we estimate: Value\ of\ Output 
This includes the total value of goods and services produced.
Thus: \[ (B) comes first \]
Step 2: Determine total sales in the country.
Next, total sales or gross value generated in the economy is determined.
Thus: \[ (C) comes after (B) \]
Step 3: Deduct intermediate consumption.
To avoid double counting: Intermediate Consumption
is deducted to obtain value added.
Thus: \[ (D) comes next \]
Step 4: Add Net Factor Income from Abroad.
Finally: Net Factor Income from Abroad (NFIA) 
is added to convert domestic product into national product.
Thus: \[ (A) comes last \]
Hence, the correct order is: \[ B \rightarrow C \rightarrow D \rightarrow A \]
Therefore, \[ \boxed{BCDA} \] Quick Tip: Remember: Value Added: Output - Intermediate Consumption . GNP at Market Price: GDP + Net Factor Income from Abroad . NFIA converts: \[ Domestic Product \rightarrow National Product \]

Concept:
Exchange rate changes can be understood using the Purchasing Power Parity (PPP) concept.
If prices rise faster in one country compared to another, the currency of that country tends to lose purchasing power and depreciate.
Step 1: Calculate percentage increase in price in the US.
Initial price: \[(8) \]
New price: \[(12) \]
Increase: \[ 12-8 = 4 \]
Percentage increase: \[ \frac{4}{8}\times100 = 50% \]
Step 2: Calculate percentage increase in price in India.
Initial price: \[ Rs.400 \]
New price: \[ Rs.480 \]
Increase: \[ 480-400 = 80 \]
Percentage increase: \[ \frac{80}{400}\times100 = 20% \]
Step 3: Compare inflation rates.
Prices increased: 50% in the US  and 20% in India 
Thus, inflation is higher in the US.
Higher inflation reduces the purchasing power of the dollar.
Therefore: Dollar depreciates
Hence, the correct answer is: \[ \boxed{Depreciated} \] Quick Tip: Remember: Higher inflation \(\rightarrow\) Currency loses value Lower purchasing power \(\rightarrow\) Currency depreciates Appreciation means increase in currency value

Concept:
Exchange rate systems determine how the value of one currency is measured against another currency in international trade and finance.
Step 1: Examine Statement (A).
In a: Floating Exchange Rate System exchange rates are determined by: Demand and Supply forces 
Thus: \[ (A) is correct \]
Step 2: Examine Statement (B).
Under a: Fixed Exchange Rate System if the government officially reduces the value of domestic currency, it is called: Devaluation 
Thus: \[ (B) is correct \]
Step 3: Examine Statement (C).
If the exchange rate rises: More domestic currency is required to buy foreign currency 
This means domestic currency loses value, which is called: \[ Depreciation \]
Thus: \[ (C) is correct \]
Step 4: Examine Statement (D).
According to: Purchasing Power Parity (PPP)  exchange rates adjust based on: Differences in price levels between countries 
Thus: \[ (D) is correct \]
Hence, all statements are correct.
Therefore, \[ \boxed{(A),\ (B),\ (C)\ and\ (D)} \] Quick Tip: Remember: Floating exchange rate \(\rightarrow\) Market determined Fixed exchange rate \(\rightarrow\) Government intervention Devaluation \(\rightarrow\) Official reduction in currency value Depreciation \(\rightarrow\) Market-driven fall in currency value

Concept:
When more domestic currency is needed to buy the same amount of foreign currency, the domestic currency is said to depreciate.
Currency depreciation also increases the cost of imports.
Step 1: Compare the exchange rates.
Earlier: \[ 2 dollars = Rs.100 \]
Thus: \[ 1 dollar = Rs.50 \]
Now: \[ 2 dollars = Rs.150 \]
Thus: \[ 1 dollar = Rs.75 \]
Step 2: Identify the effect on domestic currency.
Previously: \[ Rs.50 \] was needed for one dollar.
Now: \[ Rs.75 \] is needed for one dollar.
Hence, the rupee has lost value.
Therefore: Domestic currency has depreciated
So: \[ (A) is correct \]
Step 3: Examine the import bill effect.
When the domestic currency depreciates: Imports become more expensive 
Thus: \[ (C) is correct \]
Step 4: Examine RBI intervention.
To control excessive depreciation, the: Reserve Bank of India may sell foreign exchange reserves in the market.
Thus: \[ (D) is correct \]
Step 5: Examine Statement (B).
Appreciation means: Domestic currency gains value 
But here rupee lost value.
Thus: \[ (B) is incorrect \]
Hence, the correct statements are: \[ (A),\ (C)\ and\ (D) \]
Therefore, \[ \boxed{(A),\ (C)\ and\ (D)\ only} \] Quick Tip: Remember: More rupees needed per dollar \(\rightarrow\) Rupee depreciates Depreciation \(\rightarrow\) Imports become costly RBI may sell foreign exchange reserves to stabilize currency

Concept:
The tax multiplier measures the change in national income resulting from a change in taxes.
The formula for the tax multiplier is:
\[
k_T = -\frac{MPC}{1-MPC}
\]
Step 1: Substitute the given value of MPC.
Given: \[ MPC = 0.6 \]
Using the formula: \[ k_T = -\frac{0.6}{1-0.6} \]
Step 2: Simplify the denominator.
\[ 1-0.6 = 0.4 \]
Therefore: \[ k_T = -\frac{0.6}{0.4} \]
Step 3: Calculate the value.
\[ k_T = -1.5 \]
Hence, the value of the tax multiplier is: \[ \boxed{-1.5} \] Quick Tip: Remember: Tax Multiplier: \[ k_T=-\frac{MPC}{1-MPC} \] Tax multiplier is always negative because: Increase in tax \rightarrow Decrease in income 

Concept:
Open Market Operations (OMO) are monetary policy tools used by the Reserve Bank of India (RBI) to regulate money supply through buying and selling government securities.
Step 1: Identify the first action by RBI.
The process begins when:  RBI buys government bonds from the market 
Thus: \[ (B) comes first \]
Step 2: Understand the effect of bond purchase.
When RBI purchases bonds: Payment is made to sellers 
This increases:  Total reserves in the banking system 
Thus: \[ (A) comes next \]
Step 3: Effect of higher reserves.
Higher reserves enable banks to:
Give more loans
Create more credit
Hence:  Money supply increases 
Thus: \[ (D) follows \]
Step 4: Control excess money supply.
If money supply becomes excessive: RBI sells government bonds 
This absorbs liquidity from the economy.
Thus: \[ (C) comes last \]
Therefore, the correct chronological order is: \[ (B) \rightarrow (A) \rightarrow (D) \rightarrow (C) \]
Hence, \[ \boxed{(B),\ (A),\ (D),\ (C)} \] Quick Tip: Remember: RBI buys bonds \(\rightarrow\) Money supply increases RBI sells bonds \(\rightarrow\) Money supply decreases Open Market Operations regulate liquidity in the economy

Concept:
Average Fixed Cost (AFC) is the fixed cost per unit of output.
It is calculated as:
\[
AFC = \frac{TFC}{Q}
\]
where: \[ TFC = Total Fixed Cost \]
and \[ Q = Quantity of output \]
Step 1: Understand the behavior of fixed cost.
Fixed cost remains constant irrespective of output.
Thus: \[ TFC = Constant \]
Step 2: Analyze what happens when output increases.
As: \[ Q \uparrow \]
Average fixed cost: \[ AFC = \frac{TFC}{Q} \] keeps decreasing.
However, it never becomes zero.
Step 3: Identify the shape of the curve.
The AFC curve:
Slopes downward continuously
Approaches both axes but never touches them
Such a curve is called a: \[ Rectangular Hyperbola \]
Therefore, the correct answer is: \[ \boxed{Rectangular hyperbola} \] Quick Tip: Remember: AFC decreases continuously as output increases Shape of AFC curve: \[ Rectangular\ Hyperbola \] Fixed cost spreads over more units of output

Concept:
Every economy faces the problem of scarcity of resources. Therefore, it must decide:
Which goods should be produced
How much of each good should be produced
This is known as the central problem of:  What to produce and in what quantities 
Step 1: Understand the issue mentioned in the question.
The question asks whether an economy should produce:
More consumption gods, or
More investment goods
This is a choice regarding: Allocation of resources among different goods 
Step 2: Identify the related central problem.
Choosing between consumption goods and capital goods directly concerns:  What goods should be produced and in what quantities 
Thus: \[ (D) is correct \]
Step 3: Eliminate the incorrect options.
For whom to produce deals with distribution of goods among people.
How to produce concerns production techniques.
Why are these goods produced is not considered a central economic problem.
Therefore, the correct answer is: \[ \boxed{What\ to\ produce\ and\ in\ what\ quantities} \] Quick Tip: Remember: Central problems of an economy: What to produce? How to produce? For whom to produce? Choice between consumption and capital goods: What to produce problem.