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# Board Paper of Class 12-Science 2012 Economics (SET 3) - 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 2

Give one reason for shift in demand curve.

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• Question 3

What is the behaviour of Total Variable Cost, as output increases?

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• Question 4

What is the behaviour of Marginal Revenue in a market in which a firm can sell any quantity of the output it produces at a given price?

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• Question 6

What is Opportunity Cost? Explain with the help of an example.

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• Question 7

A consumer consumes only two goods X and Y and is in equilibrium. Price of X falls. Explain the reaction of the consumer through the Utility Analysis.

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• Question 8

Draw total Variable Cost, Total Cost, and Total Fixed Cost curves in a single diagram.

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• Question 9

A producer borrows money and starts a business. He himself looks after the business. Identify implicit and explicit costs from this information. Explain.

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• Question 10

Explain the implications of large number of sellers in a perfectly competitive market.

OR

Explain why there are only a few firms in an oligopoly market.

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• Question 11

Define an indifference map. Why does an indifference curve to the right show more utility? Explain.

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• Question 12

A consumer buys 8 units of a good at a price of Rs 7 per unit. When price rises to Rs 8 per unit he buys 7 units. Calculate price elasticity of demand through the expenditure approach. Comment upon the shape of demand curve based on this information.

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• Question 13

What does the Law of Variable Proportions show? State the behaviour of marginal product according to this law.

OR

Explain how changes in prices of inputs influence the supply of a product.

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• Question 14

Explain the difference between (i) inferior goods and normal goods and (ii) cardinal utility and ordinal utility. Give example in each case.

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• Question 15

Explain the distinction between “change in quantity supplied” and “change in supply”. Use diagram.

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• Question 16

Market for a good is in equilibrium. There is simultaneous “decrease” both in demand and supply but there is no change in market price. Explain with the help of a schedule how it is possible.

OR

Market for a good is in equilibrium. Explain the chain of reactions in the market if the price is (i) higher than equilibrium price and (ii) lower than equilibrium price.

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• Question 22

Find out Net Value added at Factor Cost:

 S. No. Items Amount (i) Price per unit of output (Rs) 25 (ii) Output sold (units) 1,000 (iii) Excise duty (Rs) 5,000 (iv) Depreciation (Rs) 1,000 (v) Change in stocks (Rs) (–) 500 (vi) Intermediate costs (Rs) 7,000

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• Question 23

Explain the ‘standard of deferred payment’ function of money.

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• Question 24

Outline the steps taken in deriving Consumption Curve from the Saving Curve. Use diagram.

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• Question 25

Find Investment from the following:

 Items Amount National Income Rs 600 Autonomous Consumption Rs 150 Marginal propensity to consume 0.70

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• Question 26

Distinguish between revenue receipts and capital receipts in a government budget. Give example in each case.

OR

Explain the role of government budget in bringing economic stability

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• Question 27

How should the following be treated while estimating national income” Give reasons.

(i) Expenditure on education of children by a family.

(ii) Payment of electricity bill by a school.

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• Question 28

Explain the ‘lender of last resort’ function of the central bank.

OR

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

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• Question 29

Explain the concept of ‘fiscal deficit’ in a government budget. What does it indicate?

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• Question 30

Find out (i) Net National Product at market Price and (ii) Gross National Disposable Income from the following:

 S. No Items (Rs crore) (i) Undistributed profits 20 (ii) Compensation of employees 800 (iii) Rent 300 (iv) Dividend 100 (v) Royalty 40 (vi) Net current transfers to abroad (–) 30 (vii) Corporation tax 50 (viii) Interest 400 (ix) Depreciation 70 (x) Net factor income from abroad (–)10 (xi) Net indirect Tax 60

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• Question 31

Explain the concept of ‘inflationary gap’. Also explain the role of ‘legal reserves’ in reducing it.

OR

Explain the concept of ‘deflationary gap’. Also explain the role of ‘margin requirements’ in reducing it.

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• Question 32

Give the meaning of ‘foreign exchange’ and ‘foreign exchange rate’. Giving reason, explain the relation between foreign exchange rate and demand for foreign exchange.

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