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Board Paper of Class 12-Commerce 2014 Economics (SET 1) - 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 1
    Unemployment is reduced due to the measures taken by the government. State its economic value in the context of production possibilities frontier. VIEW SOLUTION

  • Question 3
    What is meant by revenue in microeconomics ? VIEW SOLUTION

  • Question 4
    Give meaning of 'returns to a factor.' VIEW SOLUTION

  • Question 6
    Explain the central problem 'for whom to produce.' VIEW SOLUTION

  • Question 7

    A consumer buys 18 units of a good at a price of Rs. 9 per unit. The price elasticity of demand for the good is (−) 1. How many units the consumer will buy at a price of Rs. 10 per unit ? Calculate.


  • Question 8
    State the relation between marginal revenue and average revenue.
    State the relation between total cost and marginal cost. VIEW SOLUTION

  • Question 9
    What is the behaviour of average fixed cost as output is increased? Why is it so? VIEW SOLUTION

  • Question 10
    Why are the firms said to be interdependent in an oligopoly market? Explain. VIEW SOLUTION

  • Question 11

    A consumer consumes only two goods. Explain consumer's equilibrium with the help of utility analysis.

    A consumer consumes only two goods A and B and is in equilibrium. Show that when price of good B falls, demand for B rises. Answer this question with the help of utility analysis.

  • Question 12
    What happens to the demand of a good when consumer's income changes? Explain. VIEW SOLUTION

  • Question 13
    State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour. VIEW SOLUTION

  • Question 14

    Explain the conditions of consumer's equilibrium with the help of the indifference curve analysis.


    Explain the three properties of the indifference curves.


  • Question 15
    From the following information about a firm, find the firms equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output.
    Output (units) Total Revenue (Rs.) Total Cost (Rs.)
    1 7 8
    2 14 15
    3 21 21
    4 28 28
    5 35 36

  • Question 16
    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 19
    Define marginal propensity to consume. VIEW SOLUTION

  • Question 22
    Define externalities. Give an example of negative externality. What is its impact on welfare? VIEW SOLUTION

  • Question 23
    Explain the significance of 'store of value' function of money.


    Explain the significance of 'medium of exchange' function of money. VIEW SOLUTION

  • Question 24
    Is the following revenue expenditure or capital expenditure in the context of government budget? Give reason.
    (i) Expenditure on collection of taxes.
    (ii) Expenditure on purchasing computers. VIEW SOLUTION

  • Question 25
    Explain the meaning of balance of payments deficit. VIEW SOLUTION

  • Question 26
    Recently Government of India has doubled the import duty on gold. What impact is it likely to have on foreign exchange rate and how? VIEW SOLUTION

  • Question 27
    Define money supply and explain its components.

    Explain the 'lender of last resort' function of central bank. VIEW SOLUTION

  • Question 28
    Calculate investment expenditure from the following data about an economy which is in equilibrium :
    National income = 1000
    Marginal propensity to save = 0.25
    Autonomous consumption expenditure = 200 VIEW SOLUTION

  • Question 29
    Government raises its expenditure on producing public goods. Which economic value does it reflect? Explain. VIEW SOLUTION

  • Question 30
    Calculate national income and gross national disposable income from the following:
        (Rs. Arab)
    (i) Net current transfers to abroad (−) 15
    (ii) Private final consumption expenditure 600
    (iii) Subsidies 20
    (iv) Government final consumption expenditure 100
    (v) Indirect tax 120
    (vi) Net imports 20
    (vii) Consumption of fixed capital 35
    (viii) Net change in stocks (−) 10
    (ix) Net factor income to abroad 5
    (x) Net domestic capital formation 110

  • Question 31
    Giving reason explain how should the following be treated in estimating gross domestic product at market price ?
    (i) Fees to a mechanic paid by a firm.
    (ii) Interest paid by an individual on a car loan taken from a bank.
    (iii) Expenditure on purchasing a car for use by a firm. VIEW SOLUTION

  • Question 32
    Explain national income equilibrium through aggregate demand and aggregate supply. Use diagram. Also explain the changes that take place in an economy when the economy is not in equilibrium.
    Outline the steps required to be taken in deriving saving curve from the given consumption curve. Use diagram. VIEW SOLUTION
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