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# Board Paper of Class 12-Commerce 2011 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 6

How is production possibility curve affected by unemployment in the economy? Explain.

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• Question 7

When price of a good is Rs 13 per unit, the consumer buys 11 units of that good. When price rises to Rs 15 per unit, the consumer continues to buy 11 units. Calculate price elasticity of demand.

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• Question 8

Distinguish between explicit cost and implicit cost and give examples.

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• Question 9

Draw in a single diagram the average revenue and marginal revenue curves of a firm which can sell any quantity of the good at a given price. Explain.

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• Question 10

Explain the implications of the feature ‘large number of buyers’ in a perfectly competitive market.

OR

Explain the implications of the feature ‘homogeneous products’ in a perfectly competitive market.

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• Question 11

A consumer consumes only two goods X and Y. At a consumption level of these two goods, he finds that the ratio of marginal utility to price in case of X is higher than in case of Y. Explain the reaction of the consumer.

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• Question 12

Explain how rise in income of a consumer affects the demand of a good. Give examples.

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• Question 13

Define marginal cost. Explain its relation with average cost

OR

Define variable cost explain the behaviour of total variable cost as output increases.

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• Question 14

What is producer’s equilibrium? Explain the conditions of producer’s equilibrium through the ‘marginal cost and marginal revenue’ approach. Use diagram.

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• Question 15

Explain the conditions of consumer’s equilibrium with the help of the Indifference Curve Analysis.

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• Question 16

Market for a good is in equilibrium. There is ‘increase’ in supply of the good. Explain the chain of effect of this change. Use diagram.

OR

Distinguish between ‘non-collusive’ and ‘collusive’ oligopoly. Explain the following features of oligopoly:

(i) Few firms

(ii) Non-price competition

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• Question 19

Define ‘Statutory Liquidity Ratio’.

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• Question 22

Which transactions determine the balance of trade? When is balance of trade in surplus?

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• Question 23

Explain how ‘non-monetary exchanges’ are a limitation in taking gross domestic product as an index of welfare.

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• Question 24

In an economy the marginal propensity to consume is 0.75. investment expenditure in the economy increases by Rs 75 crore. Calculate the total increase in national income.

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• Question 25

Explain the distinction between voluntary and involuntary unemployment.

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• Question 26

When price of a foreign currency falls, the demand for that foreign currency rises. Explain why.

OR

When price of a foreign currency falls, the supply of that foreign currency also falls. Explain, why.

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• Question 27

Explain the ‘redistribution of income’ objective of a government budget.

OR

Explain the ‘economy stability objective of a government budget.

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• Question 28

From the following data about a government budget find (a) revenue deficit, (b) fiscal deficit and (c) primary deficit:

 S. No. Items (Rs Arab) (i) Tax revenue 47 (ii) Capital receipts 34 (iii) Non-tax revenue 10 (iv) Borrowings 32 (v) Revenue expenditure 80 (vi) Interest payments 20

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• Question 29

Giving reasons, explain the treatment assigned to the following while estimating national income:

(i) Family members working free on the farm owned by the family.

(ii) Payment of interest on borrowings by general government.

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• Question 30

Explain the role of the following in correcting the inflationary gap in an economy:

(i) Legal reserves

(ii) Bank rate

OR

Explain the role of the following in correcting the deflationary gap in an economy:

(i) Open market operations

(ii) Margin requirements

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• Question 31

Explain the following functions of the central bank:

(i) Bank of issue

(ii) Banker’s bank

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• Question 32

Calculate (a) ‘Net Domestic product at Factor Cost’ and (b) ‘Private Income’ from the following:

 S. No. Items (Rs in crore) (i) Domestic product accruing to government 300 (ii) Wages and salaries 1000 (iii) Net current transfers to abroad (–) 20 (iv) Rent 100 (v) Interest paid by the production units 130 (vi) National debt interest 30 (vii) Corporation tax 50 (viii) Current transfers by government 40 (ix) Contribution to social security schemes by employers 200 (x) Dividends 100 (xi) Undistributed profits 20 (xii) Net factor income to abroad 0

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