Which of the following statements is correct regarding the demand curve? I. It is a graphical representation of the demand function. II. It gives the quantity demanded by the consumer at each price.

The correct answer is A, inversely related to the price of the good. The law of demand says that, other things remaining the same, a consumer buys more of a good when its price falls and less when the price rises, so price and quantity demanded move in opposite directions. That is why the demand curve slopes downward from left to right. Two forces explain it: the income effect, since a lower price leaves more purchasing power in hand, and the substitution effect, since the cheaper good replaces costlier substitutes. The phrase other things remaining the same matters, because income, tastes, the prices of related goods and expectations are all held constant. B is wrong because supply is the seller's side and the law of demand does not tie demand to it. D is wrong for the same reason, as demand is compared with price and not with supply. C is wrong because a direct relation with price would make the demand curve rise, which happens only in exceptional cases such as Giffen goods. Exam tip: price up, quantity demanded down, so the demand curve slopes downward.

The correct answer is B, less elastic. A monopolist is the only seller of a good that has no close substitute, so buyers cannot shift away easily when the price rises and the demand curve the firm faces is steeper, that is less elastic. Under monopolistic competition many firms sell differentiated but similar products, so a buyer put off by one firm's price can move to a near substitute, and the demand curve of each firm is therefore flatter and more elastic. Both curves slope downward, which is why each such firm is a price maker to some degree, but the hold of the monopolist over price is firmer. A is wrong because the two market forms do not face demand of the same elasticity. C is wrong because infinitely elastic, that is horizontal, demand belongs to a firm in perfect competition. D is wrong because more elastic demand is the case of monopolistic competition, not of monopoly. Exam tip: fewer substitutes mean less elastic demand and greater power over price.

The correct answer is C, 1950. The Planning Commission was set up in March 1950 by a resolution of the Union Cabinet, so it was neither a constitutional nor a statutory body. The Prime Minister was its chairman, and Jawaharlal Nehru therefore became the first chairman, with Gulzarilal Nanda as the first deputy chairman. Its task was to assess the country’s resources and draw up five year plans, the first of which ran from 1951 to 1956 and focused on agriculture and irrigation. The commission was replaced on 1 January 2015 by NITI Aayog, which advises rather than allocates funds. A is wrong because 1962 is the year of the India-China war, not of the commission. B is wrong because 1945 is before independence; the Planning and Development Department of that time was a colonial office. D is wrong because 1958 falls in the middle of the second five year plan. Exam tip: fix the pair - Planning Commission in March 1950, NITI Aayog on 1 January 2015.

The correct answer is A, 3. The Industrial Policy Resolution of 1956 divided industries into three schedules. Schedule A listed seventeen industries to be the exclusive responsibility of the state, such as arms, atomic energy, railways and heavy industry. Schedule B listed twelve industries in which the state would set up new units while private enterprise could also work alongside. Schedule C left all the remaining industries to the private sector, though they stayed under licensing. This resolution is called the economic constitution of India because it shaped the second five year plan and the mixed economy, and it also stressed small-scale industry and the removal of regional imbalance. B, C and D are wrong because the resolution drew up exactly three schedules, not five, six or four; the earlier resolution of 1948 had used a four-fold classification, which is a common confusion. Exam tip: remember the split - 1948 had four groups, 1956 had three schedules, A, B and C.

The correct answer is A, depreciation. Consumption of fixed capital is the national income term for depreciation, the fall in the value of machines, buildings and other fixed assets as they are used up or become obsolete over the year. It matters because it is the bridge between gross and net aggregates. Subtract it from gross domestic product and you get net domestic product, and the same step turns gross national product into net national product and gross investment into net investment. B is wrong because net investment is gross investment after depreciation has been taken out, so it is the result, not the same thing. C is wrong because appreciation is a rise in the value of an asset, the opposite of this wearing out. D is wrong because gross investment is total spending on capital goods before depreciation is deducted. Exam tip: remember the one line - NDP equals GDP minus depreciation, which is the consumption of fixed capital.