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# Board Paper of Class 12-Commerce 2010 Economics (SET 1) - Solutions

General Instructions:
(i) All questions in both the sections are compulsory.
(ii) Marks for questions are indicated against each.
(iii) Questions Nos. 1-5 and 17-21 are very short-answer questions carrying 1 mark each. They are required to be answered in one sentence each
(iv) Questions Nos. 6-10 and 22-26 are short-answer questions carrying 3 marks each. Answers to them should normally not exceed 60 words each.
(v) Questions Nos. 11-13 and 27-29 are also short-answer questions carrying 4 marks each. Answers to them should normally not exceed 70 words each.
(vi) Questions Nos. 14-16 and 30-32 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 2

Name the characteristic which makes monopolistic competition different from perfect competition.

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• Question 5

In which market form demand curve of a firm is perfectly elastic?

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• Question 6

Distinguish between ‘increase in demand’ and ‘increase in quantity demanded’ of a commodity.

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• Question 7

Explain the law of diminishing marginal utility with the help of a utility schedule.

OR

Goods X and Y are substitutes. Explain the effect of fall in price of Y on demand for X.

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• Question 8

At a price of Rs 5 per unit of commodity A, total revenue is Rs 800. When its price rises by 20 per cent, total revenue increase by Rs 400. Calculate its price elasticity of supply.

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• Question 9

Explain the implications of freedom of entry and exit of firms under perfect competition.

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• Question 10

Given below is the cost schedule of a firm. Its average fixed cost is Rs. 20 when it produces 3 units.

 Output (units) 1 2 3 Average variable cost (Rs) 30 28 32

Calculate its marginal cost and average total cost at each given level of output.

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• Question 11

Explain the problem of ‘what to produce’.

OR

Explain any two main features of a centrally planned economy.

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• Question 12

When the price of a commodity falls by Rs. 2 per unit, its quantity demanded increases by 10 units. Its price elasticity of demand is (−) 1. Calculate its quantity demanded at the price before change which was Rs 10 per unit.

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• Question 13

Explain the effect of increase in income of buyers of a ‘normal’ commodity on its equilibrium price.

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• Question 14

Using indifference curves approach, explain the conditions of consumer’s equilibrium.

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• Question 15

State whether the following statements are true or false. Give reasons for your answer.

(a) When total revenue is constant average revenue will also be constant.

(b) Average variable cost can fall even when marginal cost is rising.

(c) When marginal product falls, average product will also fall.

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• Question 16

Explain the law of variable proportions with the help of total product and marginal product curves.

OR

Explain producer’s equilibrium with the help of a marginal cost and marginal revenue schedule.

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• Question 17

State the components of money supply.

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• Question 20

Give the meaning of deflationary gap.

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• Question 21

State two sources of supply of foreign exchange.

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• Question 22

Explain how distribution of gross domestic product is its limitation as a measure of economic welfare.

OR

Explain the basis of classifying goods into intermediate and final goods. Give suitable examples.

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• Question 23

Explain the ‘lender of last resort ‘function of the Central Bank.

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• Question 24

How can Government budget be helpful in altering distribution of income in an economy? Explain.

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• Question 25

Explain the meaning of deficit in balance of payments.

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• Question 26

Distinguish between devaluation and depreciation of domestic currency.

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• Question 27

Explain the process of money creation by Commercial Banks.

OR

How do changes in bank rate affect money creation by Commercial Banks? Explain.

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• Question 28

State whether the following statements are true or false. Give reasons for your answer:

(a) When marginal propensity to consume is greater than marginal propensity to save, the value of investment multiplier will be greater than 5.

(b) The value of marginal propensity to save can never be negative.

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• Question 29

Distinguish between:

(a) Capital receipts and revenue receipts.

(b) Direct tax and indirect tax.

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• Question 30

How will you treat the following while estimating national income India?

(a) Dividend received by an Indian from his investment in shares of a foreign company.

(b) Money received by a family in India from relatives working abroad.

(c) Interest received on loans given to a friend for purchasing a car.

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• Question 31

From the following data, calculate (a) Gross Domestic Product at Factor Cost and (b) Factor Income To Abroad:

 S. No. Items (Rs. in 000 crore) (i) Compensation of employees 800 (ii) Profits 200 (iii) Dividends 50 (iv) Gross national product at market price 1,400 (v) Rent 150 (vi) Interest 100 (vii) Gross domestic capital formation 300 (viii) Net fixed capital formation 200 (ix) Change in stock 50 (x) Factor income from abroad 60 (xi) Net indirect taxes 120

OR

Calculate Net National Product at Factor Cost and Gross National Disposable Income from the following:

 S. No. Items (Rs in crore) (i) Saving of non-departmental enterprises 50 (ii) Income from property and entrepreneurship accruing to the government administrative departments 70 (iii) Personal tax 90 (iv) National debt interest 20 (v) Retained earnings of private corporate sector 10 (vi) Current transfer payments by government 40 (vii) Consumption of fixed capital 60 (viii) Corporation tax 30 (ix) Net indirect-tax 80 (x) Net current transfers from rest of the world (–) 10 (xi) Personal disposable income 1000

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• Question 32

In an economy 75 per cent of the increase in income is spent on consumption. Investment is increased by Rs 1,000 crore. Calculate:

(a) Total increase in income

(b) Total increase in consumption expenditure.

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