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Board Paper of Class 12-Commerce 2010 Economics (SET 1) - Solutions

General Instructions
1) This question paper contains two sections: A and B.
2) There are 9 questions in total.

Section A
i. This section contains 1 question with fifteen sub-parts.
ii. Question No. 1 is compulsory.
iii. Attempt all the sub-parts of 2 marks each.
iv. This section is of 30 marks in total.

Section B
i. This section consists of 8 questions of 14 marks each.
ii. Attempt any 5 questions from question nos. 2 to 9.
iv. This whole section is of 70 marks in total.

  • Question 1
    Answer briefly each of the questions (i) to (xv) :                                                            [15 × 2] = [30 Marks]
    (i) What is micro economics ? Give an example.
    (ii) How is exante demand different from expost demand ?
    (iii) Draw two supply curves, the first one showing elasticity of supply greater than one and the second one showing elasticity of supply less than one.
    (iv) Define marginal revenue. How can we get marginal revenue from total revenue ?
    (v) Explain two advantages of international trade.**
    (vi) What is meant by actual earning of a factor ?**
    (vii) How is Net National Product at factor cost obtained from Net National Product at market price ?
    (viii) Distinguish between productive debt and unproductive debt citing an example of each.
    (ix) Mention two similarities between perfect competition and monopolistic competition.
    (x) Define Balance of Trade.
    (xi) Differentiate between consumer goods and producer goods. Give one example of each.***
    (xii) Identify whether the costs stated below are implicit costs or explicit costs. Justify your answer for each :
      (a) Rent for self owned land.
      (b) Payment made for advertising.
    (xiii) What is meant by a balanced budget ?
    (xiv) Define proportional tax and show it graphically.**
    (xv) When can the equilibrium price remain unaffected by a change in demand ? Show with the help of a diagram.
  • Question 2
    (a) In a straight line demand curve touching the two axes, show the different degrees of elasticity of demand. [4]
    (b) The price of a commodity falls from Rs 50 to Rs 30, resulting in an increase in the purchase of the commodity from 200 units to 220 units. Calculate the price elasticity of demand. [4]
    (c) State the Law of Demand with two assumptions. Briefly discuss two exceptions to the Law of Demand. [6]
  • Question 3
    (a) Discuss two differences between micro and macro economics. [4]
    (b) With the help of diagrams, show the shift and movement on the demand curves. [4]
    (c) Using the utility approach, discuss how a consumer attains equilibrium. [6]
  • Question 4
    (a) Distinguish between monopoly and monopolistic competition on the basis of average revenue curves and entry of firms. [4]
    (b) What is meant by returns to scale ? Differentiate between short run production function and long run production function. [4]
    (c) Show how a firm in a perfectly competitive market earns normal profit in the long run. [6]
  • Question 5
    (a) Show the circular flow of income in a two sector model with leakages and injections. [4]
    (b) Discuss the problem of double counting in the estimation of national income. [4]
    (c) Calculate national income and gross domestic product at factor cost from the following data : [6]
        Rs (in crores)    
      (i) Wages and salaries 120      
      (ii) Rent 60      
      (iii) Interest 25      
      (iv) Dividend 15      
      (v) Undistributed profit 50      
      (vi) Corporation tax 30      
      (vii) Mixed income 20      
      (viii) Net factor income earned from abroad 10      
      (ix) Depreciation 5      
  • Question 6
    (a) The following table shows the production of two commodities A and B, manufactured by Country 1 and Country 2, using one labour each. [4]
    Commodity A (kg) B (kg)
    Country 1 100 80
    Country 2 60 120
      (i) Draw the opportunity cost curves for Country 1 and Country 2.  
      (ii) Name the country which will specialise in commodity A. Give reasons.  
    (b) Mention one difference between devaluation and depreciation of currency. How can depreciation of a currency be a measure to correct disequilibrium of Balance of Payment. [4]
    (c) Explain the components of the current of the Balance of Payment. [6]
  • Question 7
    (a) Define gross profit. How is net profit different from gross profit ? [4]
    (b) Explain the components of gross interest. [4]
    (c) Discuss four differences between rent and quasi rent. [6]
  • Question 8
    (a) Draw the average variable cost and average total cost curves. Do they intersect each other ? Give one reason for your answer. [4]
    (b) Discuss two exceptions to the Law of Supply. [4]
    (c) 'If more variable factors are employed with fixed factors, the total product increases at increasing rate and finally it falls'. Explain the three stages of the Law with the help of TP, AP and MP curves. [6]
  • Question 9
    (a) Explain two effects of deficit financing. [4]
    (b) Differentiate between fiscal deficit and primary deficit. [4]
    (c) Discuss four characteristics of a good tax system.** [6]
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