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Board Paper of Class 12-Humanities 2016 Economics (SET 1) - 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
    What is the relation between marginal cost and average variable cost when marginal cost is rising and average variable cost is falling? VIEW SOLUTION

  • Question 2
    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 3
    When does 'increase' in demand take place? VIEW SOLUTION

  • Question 4
    '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 5
    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 6
    A Consumer consumes only two goods X and Y. Marginal utilities of X and Y are 5 and 4 respectively. The prices of X and Y are Rs. 4 per unit and Rs. 5 per unit respectively. Is the consumer in equilibrium? What will be the further reaction of the consumer? Explain. VIEW SOLUTION

  • Question 7
    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 8
    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 9
    Explain the effect of change in prices of the related goods on demand for the given good. VIEW SOLUTION

  • Question 10
    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 11
    A producer supplies 80 units of a good at a price of Rs. 10 per unit. Price elasticity of supply is 4. How much will he supply at Rs. 9 per unit? VIEW SOLUTION

  • Question 12
    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 13
    Explain the conditions of consumer's equilibrium using indifference curve analysis. VIEW SOLUTION

  • Question 14
    Explain the distinction between "change in quantity supplied" and "change in supply". Use diagram. VIEW SOLUTION

  • Question 15
    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 17
    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
    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 20
    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 21
    Find net value added at factor cost :
        (Rs. Lakh)
    (i)  Durable use producer goods with a life span of 10 years 10
    (ii)  Single use producer goods 5
    (iii)  Sales 20
    (iv)  Unsold output produced during the year 2
    (v)  Taxes on production 1

  • Question 22
    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 23
    In an economy investment is increased by Rs. 300 crore. If marginal propensity to consume is 2/3, calculate increase in national income. VIEW SOLUTION

  • Question 24
    Government incurs expenditure to popularize yoga among the masses. Analyse its impact on gross domestic product and welfare of the people. VIEW SOLUTION

  • Question 25
    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 26
    Explain how open market operations are helpful in controlling credit creation. VIEW SOLUTION

  • Question 27
    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

  • Question 28
    Given consumption curve, derive saving curve and state the steps taken in the process of derivation. Use diagram. VIEW SOLUTION

  • Question 29
    (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 30
    Find national income and private income :
        (Rs crores)
    (i) Wages and salaries 1,000
    (ii) Net current transfers to abroad 20
    (iii) Net factor income paid to abroad 10
    (iv) Profit 400
    (v) National debt interest 120
    (vi) Social security contributions by employers 100
    (vii) Current transfers from government 60
    (viii) National income accruing to government 150
    (ix) Rent 200
    (x) Interest 300
    (xi) Royalty 50
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