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# Board Paper of Class 12-Science 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 toÂ  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
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
Give meaning of 'returns to a factor.' VIEW SOLUTION

• Question 6
What is the behaviour of average fixed cost as output is increased? Why is it so? VIEW SOLUTION

• Question 7
State the relation between marginal revenue and average revenue.

OR

State the relation between total cost and marginal cost. VIEW SOLUTION

• Question 8
Why are the firms said to be interdependent in an oligopoly market? Explain. VIEW SOLUTION

• Question 9
Explain the central problem 'for whom to produce.' VIEW SOLUTION

• Question 10

A consumer buys 30 units of a good at a price of Rs. 10 per unit.  Price elasticity of demand for the good is (−) 1. How many units the consumer will buy at a price of Rs. 9 per unit ? Calculate.

VIEW SOLUTION

• Question 11
What is market demand for a good? Name the factors determining market demand. VIEW SOLUTION

• Question 12
State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour. VIEW SOLUTION

• Question 13

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

OR

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.
VIEW SOLUTION

• Question 14
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
VIEW SOLUTION

• Question 15

Market for a product is in equilibrium. Supply of the product "decreases." Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.

VIEW SOLUTION

• Question 16

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

Or

Explain the three properties of the indifference curves.

VIEW SOLUTION

• Question 21
Define marginal propensity to consume. VIEW SOLUTION

• Question 22
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 23
How does giving incentives for exports influence foreign exchange rate? Explain. VIEW SOLUTION

• Question 24
Define externalities. Give an example of negative externality. What is its impact on welfare? VIEW SOLUTION

• Question 25
Explain the significance of 'store of value' function of money.

Or

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

• Question 26
Explain the meaning of balance of payments deficit. VIEW SOLUTION

• Question 27
Calculate marginal propensity to consume from the following data about an economy which is in equilibrium:
National Income = 1500
Autonomus consumption expenditure = 300
Investment expenditure = 300 VIEW SOLUTION

• Question 28
Government raises its expenditure on producing public goods. Which economic value does it reflect? Explain. VIEW SOLUTION

• Question 29
Define money supply and explain its components.

Or

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

• Question 30
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 31
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.
OR
Outline the steps required to be taken in deriving saving curve from the given consumption curve. Use diagram. VIEW SOLUTION

• Question 32
Calculate net domestic product at factor cost and net national disposable income from the following:
 (Rs. Arab) (i) Net current transfers to abroad 5 (ii) Government final consumption expenditure 100 (iii) Net indirect tax 80 (iv) Private final consumption expenditure 300 (v) Consumption of fixed capital 20 (vi) Gross domestic fixed capital formation 50 (vii) Net imports (–)10 (viii) Closing stock 25 (ix) Opening stock 25 (x) Net factor income to abroad 10
VIEW SOLUTION
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