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Board Paper of Class 12-Commerce 2014 Economics (SET 3) - Solutions

General Instructions :
(i) All questions in both the sections are compulsory.
(ii) Marks for questions are indicated against each.
(iii) Question 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) Question Nos. 6-10 and 22-26 are short-answer questions carrying 3 marks each. Answer to  them should not normally exceed 60 words each.
(v) Question Nos. 11-13 and 27-29 are also short-answer questions carrying 4 marks each. Answer to them should not normally exceed 70 words each.
(vi) Question Nos. 14-16 and 30-32 are long-answer questions carrying 6 marks each. Answer to them should not normally exceed 100 words each.
(vii) Questions marked star (*) are value based questions.
(viii) Answer should be brief and to the point and the above word limit should be adhered to as far as possible.

  • Question 2
    The government has started promoting foreign capital. What is its economic value in the context of Production Possibilities Frontier ? VIEW SOLUTION

  • Question 5
    What is meant by monotonic preferences? VIEW SOLUTION

  • Question 6
    Why is Average Revenue always equal to price? VIEW SOLUTION

  • Question 7
    Explain how technological progress is a determinant of supply of a good by a firm.

    Explain how input prices are a determinant of supply of a good by a firm. VIEW SOLUTION

  • Question 8
    Why is the number of firms small in oligopoly? Explain. VIEW SOLUTION

  • Question 9
    Why is Production Possibilities Curve concave ? Explain. VIEW SOLUTION

  • Question 10
    A consumer buys 27 units of a good at a price of Rs 10 per unit. When the price falls to Rs 9 per unit, the demand rises to 30 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'? VIEW SOLUTION

  • Question 11
    How does change in price of complementary good affect the demand of the given good? Explain with the help of an example. VIEW SOLUTION

  • Question 12
    Giving reasons, explain the 'Law of Variable Proportions'. VIEW SOLUTION

  • Question 13
    A consumer consumes only two goods X and Y and is in equilibrium. Show that when the price of good X rises, the consumer buys less of good X. Use utility analysis.
    Given the price of a good, how will a consumer decide as to how much quantity of that good to buy? Use utility analysis. VIEW SOLUTION

  • Question 14
    From the following information about a firm, find the firm's equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output.
    Total Revenue
    Total Cost
    1 6 7
    2 12 13
    3 18 17
    4 24 23
    5 30 31

  • Question 15
    Market of a commodity is in equilibrium. Demand for the commodity 'increases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram. VIEW SOLUTION

  • Question 16
    Explain why is an indifference curve (a) downward sloping and (b) convex.

    Explain the concept of 'Marginal Rate of Substitution' with the help of a numerical example. Also explain its behaviour along an indifference curve. VIEW SOLUTION

  • Question 17
    What is 'excess demand' in macroeconomics? VIEW SOLUTION

  • Question 19
    What is 'managed floating exchange rate'? VIEW SOLUTION

  • Question 22
    Is the following a revenue receipt or a capital receipt in the context of government budget and why?
    (i) Tax receipts
    (ii) Disinvestment VIEW SOLUTION

  • Question 23
    Explain the effect of appreciation of domestic currency on exports. VIEW SOLUTION

  • Question 24
    What are externalities? Give an example of a positive externality and its impact on welfare of the people. VIEW SOLUTION

  • Question 25
    Explain the significance of the 'Unit of Account' function of money.

    Explain the significance of the 'Standard of Deferred Payment' function of money. VIEW SOLUTION

  • Question 26
    Distinguish between 'autonomous' and accommodating' Balance of Payments transactions. VIEW SOLUTION

  • Question 27
    Calculate Autonomous Consumption Expenditure from the following data about an economy which is in equilibrium:
    National income = 500
    Marginal propensity to save = 0.30
    Investment expenditure = 100

  • Question 28
    Tax rates on higher income group have been increased. Which economic value does it reflect ? Explain. VIEW SOLUTION

  • Question 29
    Explain 'Banker to the Government' function of the central bank.


    Explain 'Bankers' Bank' function of the central bank. VIEW SOLUTION

  • Question 30
    How should the following be treated in estimating national income of a country? You must give reason for your answer.
    (i) Taking care of aged parents
    (ii) Payment of corporate tax
    (iii) Expenditure on providing police services by the government VIEW SOLUTION

  • Question 31
    When is an economy in equilibrium ? Explain with the help of Saving and Investment functions. Also explain the changes that take place in an economy when the economy is not in equilibrium. Use diagram.


    Outline the steps required to be taken in deriving the Consumption Curve from the given Saving Curve. Use diagram. VIEW SOLUTION

  • Question 32
    Calculate 'Net National Product at Market Price' and 'Gross National Disposable Income' from the following:
      (Rs in Arab)
    (i) Closing stocks 10
    (ii) Consumption of fixed capital 40
    (iii) Private final consumption expenditure 600
    (iv) Exports 50
    (v) Opening Stock 20
    (vi) Government final consumption expenditure 100
    (vii) Imports 60
    (viii) Net domestic fixed capital formation 80
    (ix) Net current transfers to abroad ()10
    (x) Net factor income to abroad 30
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