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# Board Paper of Class 12-Commerce 2019 Economics Abroad(Set 2) - Solutions

General Instructions :

(i) All questions in both the sections are compulsory.

(ii) Marks for questions are indicated against each question.

(iii) Question Nos. 1 - 4 and 13 - 16 are very short-answer questions carrying 1 mark each. They are required to be answered in one sentence each.

(iv) Question Nos. 5 - 6 and 17 - 18 are short-answer questions carrying 3 marks each. Answers to them should normally not exceed 60 words each.

(v) Question Nos. 7 - 9 and 19 - 21 are also short-answer questions carrying 4 marks each. Answers to them should normally not exceed 70 words each.

(vi) Question Nos. 10 - 12 and 22 - 24 are long-answer questions carrying 6 marks each. Answers to them should normally not exceed 100 words each.

(vii) Answers should be brief and to the point and the above word limits should be adhered to as far as possible.

• Question 1
The coefficient of price elasticity of supply of a good is 3. It is known as ___________. (Choose the correct alternative)
(a) Unitary Elastic Supply
(b) Perfectly Inelastic Supply
(c) Elastic Supply
(d) Inelastic Supply VIEW SOLUTION

• Question 2
Shift from Point A on Production Possibility Curve X1Y1 to point B on X2Y2 in the given figure indicates: (Choose the correct alternative)

(a) Decrease in resources
(b) Increase in resources
(c) Full and efficient utilisation of resources
(d) Wastage of resources
OR
A Production Possibility Curve (PPC) would be convex to the origin if Marginal Rate of Transformation (MRT) is _______. (Fill up the blank) VIEW SOLUTION

• Question 3
The shape of the average revenue curve under perfect competition would be ______. (Fill up the blank) VIEW SOLUTION

• Question 4
Mention any two examples of implicit cost incurred by a firm.
OR
Define variable cost. VIEW SOLUTION

• Question 5
Discuss briefly the central problem of "For whom to produce".
OR
Classify the following statements into positive economics or normative economics, with suitable reasons:
(a) Government should try to control the rising fiscal deficit.
(b) Real Gross Domestic Product (GDP) is calculated on the basis of 'base year price'. VIEW SOLUTION

• Question 6
Discuss the relationship between total utility and marginal utility, using a hypothetical schedule. VIEW SOLUTION

• Question 7
Discuss briefly the meaning of "Price discrimination" and "Product differentiation" with the help of suitable examples.
OR
Is a firm under perfect competition a price taker, or a price maker? Justify your answer. VIEW SOLUTION

• Question 8
The price of a commodity increases from ₹ 10 to ₹ 14. Calculate percentage fall in quantity demanded of the commodity if coefficient of price elasticity of demand is (−) 1.25.
OR
State whether the following statements are true or false. Give valid reasons in support of your answer.
(a) The coefficient of price elasticity of demand for the commodity is inversely related to the number of alternative uses of the commodity.
(b) Luxury goods often have lower price elasticity of demand.
VIEW SOLUTION

• Question 9
With the help of the given schedule, determine the firm's equilibrium using marginal revenue − marginal cost approach. Give valid reasons in support of your answer.  Output (in units) Total revenue (TR) (in ₹) Total  Cost (TC) ( in ₹) 1 20 20 2 40 30 3 60 36 4 80 40 5 100 60 6 120 90
VIEW SOLUTION

• Question 10
(a) Identify the market form and explain the corresponding feature, as given in the following statement:
"The commodity in this market has attributes which are identical for sellers and buyers."
(b) Define Price Floor. State the likely consequence of this type of intervention by the government. VIEW SOLUTION

• Question 11
Suppose a consumer whose budget is ₹ 500, wants to consume only two goods, Good X and Good Y. The goods are respectively priced at ₹ 50 and ₹ 25.
Answer the following questions on the basis of the given information:
(a) State the budget equation of the consumer.
(b) What is the slope of the budget line?
(c) How many units can she purchase if she spends the entire ₹ 500 on Good X?
(d) How many units can she purchase if she spends the entire ₹ 500 on Good Y, given that the price of good Y has doubled?
OR
"For a consumer to be in equilibrium position, marginal rate of substitution between the two goods must be equal to ratio of prices of the two goods." Do you agree with the given statement? Justify your answer. VIEW SOLUTION

• Question 12
(a) Why is the Total Fixed Cost curve parallel to the horizontal axis (x-axis)?
(b) Explain the relation between Average Variable Cost (AVC) curve and Marginal Cost (MC) curve. Use diagram VIEW SOLUTION

• Question 13
State any two examples of non-tax revenue receipts of the government.
OR
Dividends received from Public Sector Undertakings (PSUs) are a part of the government's ______. (Choose the correct alternative)
(a) Non-tax Revenue Receipts
(b) Tax Receipts
(c) Capital Receipts
(d) Capital Expenditure VIEW SOLUTION

• Question 14
Suppose you are a member of the "Advisory Committee to the Finance Minister of India". The Finance Minister is concerned about the rising Revenue Deficit in the budget.
Suggest any one measure to control the rising Revenue Deficit of the government. VIEW SOLUTION

• Question 16
State the role played by the central bank as the "lender of last resort". VIEW SOLUTION

• Question 17
The consumption function of an economy is : C = 40 + 0.8 Y (amount in ₹ crores). Determine that level of income where average propensity to consume will be one.
OR
Which of the two, average propensity to consume or average propensity to save, can be negative and why? VIEW SOLUTION

• Question 18
Describe the adjustments that may take place in an economy when ex-ante Aggregate Demand is greater than ex-ante Aggregate Supply. VIEW SOLUTION

• Question 19
Explain, using a numerical example, how a reduction in reserve deposit ratio, affects the credit creation power of the banking system. VIEW SOLUTION

• Question 20
Explain how the government can use the budgetary policy in reducing inequality of income in the economy.
OR
Discuss briefly the role of the government budget in influencing "allocation of resources" in the economy. VIEW SOLUTION

• Question 21
How is Real Gross Domestic Product (GDP) different from Nominal Gross Domestic Product (GDP)? Explain using a numerical example. VIEW SOLUTION

• Question 22
(a) State any two factors responsible for inflow of foreign currency.

(b) State on which side of capital account/current account will the following transactions be recorded and why:

(i) Interest on loan received from Nepal

(ii) Import of mobile phones from China
OR
(a) Distinguish between Autonomous and Accommodating transactions of Balance of Payments account.

(b) Distinguish between depreciation of a currency and devaluation of a currency. VIEW SOLUTION

• Question 23
(a) Define net exports. How is it different from net factor income from abroad?
(b) Calculate value of "Interest" from the following data:  S. No. Particulars Amount (₹ in crores) (i) Indirect tax 1,500 (ii) Subsidies 700 (iii) Profits 1,100 (iv) Consumption of fixed capital 700 (v) Gross domestic product at market price 17,500 (vi) Compensation of employees 9,300 (vii) Interest ? (viii) Mixed income of self-employed 3,500 (ix) Rent 800
VIEW SOLUTION

• Question 24
What is meant by the "Effective Demand Principle" in Keynesian theory of employment? Discuss using a schedule or a diagram. VIEW SOLUTION
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