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Board Paper of Class 12-Commerce 2013 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 does zero cross elasticity of demand between two goods imply ? Give an example to explain.

    (ii) Why is the marginal cost curve U shaped ?

    (iii) Differentiate between monopoly and monopsony. Give an example for each.

    (iv) What is market period ? What is the shape of the supply curve in this period ?

    (v) Give two assumptions of the law of Variable Proportions.

    (vi) Explain the meaning of price ceiling with the help of a diagram.

    (vii) Why is the central bank considered to be the lender of the last resort ?

    (viii) What is Vote-on-account budget ?

    (ix) Explain how taxation can be used to reduce inequality of income.

    (x) What is meant by unlimited legal tender ?

    (xi) Distinguish between CRR and SLR.

    (xii) Calculate the value of multiplier if MPC is equal to MPS.

    (xiii) Define GNP at factor cost. How is it different from national income ?

    (xiv) Explain with the help of an example how inflation affects the debtors.**

    (xv) How does an increase in the price of a commodity affect its quantity demanded ? Show it with the help of a diagram.


  • Question 2

    (a) Explain with the help of a well labelled diagram how a perfectly competitive firm earn normal profit in short run equilibrium.      [4]

    (b) Why does the TC curve start from the Y axis and the TVC curve from the Origin ?    [4]

    (c) Discuss four features of Oligopoly.        [6]


  • Question 3

    (a) Complete the following table and draw a supply curve for the firm A:              [4]

    Price per unit Supply by firm A Supply by firm B Market Supply

    (b) Explain what happens when the market price is less than the equilibrium price.    [4]

    (c) Explain the four determinants of supply of a commodity.        [6]


  • Question 4

    (a) Explain the nature of the AR and MR curve under perfect and imperfect competition.       [4]

    (b) Explain any one internal and any one external economy of scale.      [4]

    (c) How does a producer attain equilibrium under perfect competition through the MR and MC approach?        [6]


  • Question 5

    (a) Explain how the income effect and the substitution effect are the reasons for the downward slope of the demand curve.          [4]

    (b) Price elasticity of demand for a product is unity. A household buys 50 units of this product when its price is Rs 10 per unit. If its price rises to Rs 12 per unit, how much quantity of the product will be bought by the household?          [4]

    (c) A marginal utility schedule of a person is given below. Discuss the law underlying the given schedule:          [6]

    Pen (units) 1 2 3 4 5
    MU (units) 25 20 15 10 5

  • Question 6

    (a) Calculate MPC, MPS and APC from the following data:          [4]

    Income (Y) Consumption

    (b) Discuss the fiscal measures used to solve the situation of deficient demand.          [4]

    (c) Explain how the equilibrium level of income can be determined by aggregate demand and aggregate supply.          [6]


  • Question 7

    (a) Explain the following functions of money:          [4]

    (i) Medium of exchange

    (ii) Store of value

    (b) Explain how bank rate and open market operations can be used by the central bank of control credit.          [4]

    (c) How do commercial banks create credit? Explain with the help of an example.          [6]


  • Question 8

    (a) Explain any two objectives of the fiscal policy in a developing economy.          [4]

    (b) What is primary deficit and fiscal deficit in a government budget? What is the implication of the primary deficit on the economy?            [4]

    (c) Explain cost-push inflation with the help of a diagram.          [6]


  • Question 9

    (a) Classify the following as final or intermediate goods. Give reasons for your answer.          [4]

    (i) A car purchased by a company for business purpose.

    (ii) Pen or paper purchased by a consumer.

    (b) Discuss two reasons why the per capita real income is considered to be a better index of economic welfare than gross domestic product.          [4]

    (c) Calculate national income and GDPmp by the income method using the following information:          [6]

      Items Rs
    in crores
    (i) Private final consumption expenditure 1,300
    (ii) Net factor income earned from abroad 50
    (iii) Mixed income of self employed 500
    (iv) Subsidies 100
    (v) Indirect tax 200
    (vi) Consumption of fixed capital 1,000
    (vii) Operating surplus 5,000
    (vii) Compensation of employees 1,500
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