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# Board Paper of Class 12-Commerce 2008 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 1

Define ‘Marginal Rate of Transformation’.

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• Question 6

Explain the central problem of ‘choice of technique’.

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• Question 7

Price elasticity of demand of a good is (−) 1. At a given price the consumer buys 60 units of the good. How many units will the consumer buy if the price falls by 10 per cent?

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• Question 8

Given the market price of a good, how does a consumer decide as to how many units of that good to buy? Explain.

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• Question 9

What is the likely effect on the supply of a good if the prices of the inputs used in production of that good fall? Explain.

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• Question 10

Explain what happens to the profits in the long run if the firms are free to enter the industry.

OR

Explain what happens to losses in the long run if the firms are free to leave the industry.

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• Question 11

Explain producer’s equilibrium using a schedule. Use total cost and total revenue approach.

OR

Distinguish between (i) fixed cost and variable cost giving examples and (ii) average cost and marginal cost giving an example.

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• Question 12

Draw supply curves with price elasticity of supply throughout equal to (i) zero, (ii) one, (iii) infinity and (iv) less than one.

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• Question 13

Complete the following table:

 Price (Rs) Output (Units) Total Revenue (Rs) Marginal Revenue (Rs) – 1 6 – 4 – – 2 – 3 6 – 1 – – (–) 2

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• Question 14

Explain the effect of the following on demand for a good:

(i) Rise in income.

(ii) Rise in prices of related goods.

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• Question 15

Explain, with the help of numerical examples, the effect on total output of a good when all the inputs used in production of that good are increased simultaneously and in the same proportion.

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• Question 16

Given market equilibrium of a good, what are the effects of simultaneous increase in both demand and supply of that good on its equilibrium price and quantity.

OR

Explain the implications of the following:

(i) The feature differentiated products’ under monopolistic competition.

(ii) The feature large number of seller’s under perfect competition.

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• Question 22

Calculate Net Value Added at factor cost from the following data:

 S. No. Items (Rs lakhs) (i) Depreciation 20 (ii) Intermediate cost 90 (iii) Subsidy 5 (iv) Sales 140 (v) Exports 7 (vi) Change in stock (–) 10 (vii) Imports of raw materials 3

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• Question 23

When exchange rate of foreign currency falls, its demand rises. Explain, how?

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• Question 24

Distinguish between balance of trade and balance on current account.

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• Question 25

Explain the ‘medium of exchange’ function of money.

OR

Explain the evolution of money.

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• Question 26

Give meaning of capital expenditure and revenue expenditure in a government budget.

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• Question 27

In an economy an increase in investment leads to increase in national income which is three times more than the increase in investment. Calculate marginal propensity of consume.

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• Question 28

Explain the lending function of commercial banks.

OR

Explain ‘banker to the government’ function of central bank.

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• Question 29

What is revenue deficit? What are its implications?

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• Question 30

Calculate ‘National Income’ and Private Income’ from the following data:

 S. No. Items (Rs in crore) (i) Net current transfers to the rest of the world 10 (ii) Private final consumption expenditure 600 (iii) National debt interest 15 (iv) Net exports (–) 20 (v) Current transfers from government 5 (vi) Net domestic product at factor cost accruing to government 25 (vii) Government final consumption expenditure 100 (viii) Net indirect tax 30 (ix) Net domestic capital formation 70 (x) Net factor income from abroad 10

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• Question 31

Explain consumption function with the help of a schedule and diagram.

OR

Explain ‘saving function’ with the help of a schedule and diagram.

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• Question 32

Giving reasons, explain how the following are treated in estimating national income:

(i) Wheat grown by a farmer but used entirely for family’s consumption.

(ii) Earnings of the shareholders from the sale of shares.

(iii) Expenditure by government on providing free education.

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