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Board Paper of Class 12-Commerce 2016 Economics (SET 2) - Solutions

General Instructions:

 (i) All questions in both sections are compulsory. However, there is internal choice in some questions.

(ii) Marks for questions are indicated against each question.

(iii) Question No.1-5 and 16-20 are very short answer questions carrying 1 mark each. They are required to be answered in one sentence.

(iv) Question No.6-8 and 21-23 are short answer questions carrying 3 marks each. Answers to them should not normally exceed 60 words each.

(v) Question No.9-11 and 24-26 are also short answer questions carrying 4 marks each. Answers to them should not normally exceed 70 words each. 

(vi) Question No.12-15 and 27-30 are long answer questions carrying 6 marks each. Answers to them should not normally exceed 100 words each.

(vii) Answers should be brief and to the point and the above word limit be adhered to as far as possible.

  • Question 1
    There is inverse relation between price and demand for the product of a firm under : (choose the correct alternative)
    (a) Monopoly only
    (b) Monopolistic competition only
    (c) Both under monopoly and monopolistic competition
    (d) Perfect competition only VIEW SOLUTION

  • Question 2
    'Homogenous products' is a characteristic of : (choose the correct alternative)

    (a) Perfect competition only

    (b) Perfect oligopoly only

    (c) Both (a) and (b)

    (d) None of the above VIEW SOLUTION

  • Question 3
    Suppose total revenue is rising at a constant rate as more and more units of a commodity are sold, marginal revenue would be :
    (choose the correct alternative)

    (a) Greater than average revenue

    (b) Equal to average revenue

    (c) Less than average revenue

    (d) Rising VIEW SOLUTION

  • Question 4
    When does 'increase' in supply take place? VIEW SOLUTION

  • Question 5
    What is the relation between marginal cost and average cost when average cost is constant? VIEW SOLUTION

  • Question 6
    What is maximum price ceiling? Explain its implications.


    Explain the chain effects, if the prevailing market price is below the equilibrium price. VIEW SOLUTION

  • Question 7
    A consumer consumes only two goods X and Y. If marginal utilities of X and Y are 4 and 5 respectively, and if price of X is Rs. 5 per unit and that of Y is Rs. 4 per unit, is the consumer in equilibrium? What will be further reaction of the consumer? Explain. VIEW SOLUTION

  • Question 8
    Price elasticity of demand of good X is –2 and of  good Y is –3. Which of the two goods is more price elastic and why? VIEW SOLUTION

  • Question 9
    Price elasticity of supply of a good is 2. A producer supplies 100 units of a good at a price of Rs. 20 per unit. At what price will he supply 80 units. VIEW SOLUTION

  • Question 10
    Explain the effects of change in income on demand for a good. VIEW SOLUTION

  • Question 11
    Define production function. Distinguish between short run and long run production functions.

    Define cost. Distinguish between fixed and variable costs. Give one example of each. VIEW SOLUTION

  • Question 12
    Explain the implications of the following in a perfectly competitive market :

    (a) Large number of buyers

    (b) Freedom of entry and exit to firms

    Explain the implications of the following in an oligopoly market :

    (a) Inter-dependence between firms

    (b) Non-price competition VIEW SOLUTION

  • Question 13
    Explain the distinction between "change in quantity supplied" and "change in supply". Use diagram. VIEW SOLUTION

  • Question 14
    Explain the conditions of consumer's equilibrium using indifference curve analysis. VIEW SOLUTION

  • Question 15
    Assuming that no resource is equally efficient in production of all goods, name the curve which shows production potential of the economy. Explain, giving reasons, its properties. VIEW SOLUTION

  • Question 16
    Foreign exchange transactions dependent on other foreign exchange transactions are called: (choose the correct alternative)
    (a) Current account transactions
    (b) Capital account transactions
    (c) Autonomous transactions
    (d) Accommodating transaction VIEW SOLUTION

  • Question 17
    Fiscal deficit equals : (choose the correct alternative)
    (a) Interest payments
    (b) Borrowings
    (c) Interest payments less borrowing
    (d) Borrowings less interest payments VIEW SOLUTION

  • Question 18
    Depreciation of fixed capital assets refers to : (choose the  correct alternative)
    (a) Normal wear and tear
    (b) Foreseen obsolescence
    (c) Normal wear and tear and foreseen obsolescence
    (d) Unforeseen obsolescence. VIEW SOLUTION

  • Question 19
    What are revenue receipts in a government budget? VIEW SOLUTION

  • Question 21
    Suppose marginal propensity to consume is 0.8. How much increase in investment is required to increase national income by Rs. 2000 crore? Calculate. VIEW SOLUTION

  • Question 22
    Find net value added at market price :
        (Rs. lacs)
    (i) Fixed capital good with a life span of 5 years 15
    (ii) Raw materials 6
    (iii) Sales 25
    (iv) Net change in stock (–)2
    (v) Taxes on production 1

  • Question 23
    Distinguish between marginal propensity to consume and average propensity to consume. Give a numerical example.

    Explain the role of taxation in reducing excess demand. VIEW SOLUTION

  • Question 24
    Explain how 'bank rate' is helpful in controlling credit creation? VIEW SOLUTION

  • Question 25
    Government incurs expenditure to popularize yoga among the masses. Analyse its impact on gross domestic product and welfare of the people. VIEW SOLUTION

  • Question 26
    Explain the 'store of value' function of money. How has it solved the related problem created by barter?


    Explain the 'unit of account' function of money. How has it solved the related problem created by barter? VIEW SOLUTION

  • Question 27
    Find net domestic product at factor cost and personal income :
        (Rs crores)
    (i) Rent 200
    (ii) Net current transfers to abroad 10
    (iii) National debt interest 60
    (iv) Corporate tax 100
    (v) Compensation of employees 900
    (vi) Current transfers by government 150
    (vii) Interest 400
    (viii) Undistributed profits 50
    (ix) Dividend 250
    (x) Net factor income to abroad (–) 10
    (xi) Income accruing to government 120

  • Question 28
    (a) In which sub-account and on which side of balance of payments account will foreign investments in India be recorded? Given reasons.

    (b) What will be the effect of foreign investments in India on exchange rate? Explain. VIEW SOLUTION

  • Question 29
    Given consumption curve, derive saving curve and state the steps taken in the process of derivation. Use diagram. VIEW SOLUTION

  • Question 30
    What is government budget? Explain how taxes and subsidies can be used to influence allocation of resources.


    Define revenue receipts in a government budget. Explain how government budget can used to bring in price stability in the economy. VIEW SOLUTION
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