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Board Paper of Class 12-Commerce 2015 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 ten sub-parts.
ii. Question No. 1 is compulsory.
iii. Attempt all the sub-parts of 2 marks each.
iv. This section is of 20 marks in total.

Section B
i. This section consists of 8 questions of 12 marks each.
ii. Attempt any 5 questions from question nos. 2 to 9.
iv. This whole section is of 60 marks in total.

  • Question 1
    Answer briefly each of the following questions (i) to (x):                                                  10 × 2 = 20
    (i)  Define marginal utility.  When can it be negative?
    (ii)  What is meant by production function?
    (iii)  Name the market where average revenue is equal to marginal revenue. Give a reason for your answer.
    (iv) Give one difference between accounting cost and opportunity cost.
    (v) What is the reason for an in determinate demand curve under Oligopoly?
    (vi) What is meant by propensity to consume?
    (vii) Explain discounting bills of exchange as one of the function of the  banks.
    (viii) Differentiate between revaluation of currency and appreciation of currency.
    (ix) How can gross domestic product at factor cost be obtained from gross national product at market price?
    (x) What is meant by revenue deficit? Explain its implication.
  • Question 2
    (a) Discuss the relationship between income of the consumer and demand for a commodity with respect to normal goods, inferior goods and necessities. [3]
    (b) Differentiate between extension of demand and increase in demand, using diagrams. [3]
    (c) Explain with the help of a diagram the consumer's equilibrium through utility approach. [6]
  • Question 3
    (a) Discuss any two properties of indifference curve. [3]
    (b) Draw diagrams to show the elasticity of demand when it is:
    (i) Greater than one
    (ii) Less than one
    (iii) Unity
    (c) Explain the geometric method of calculating elasticity of supply. [6]
  • Question 4
    (a) Show with the help of diagrams, the effect on equilibrium price and quantity when:
    (i) There is fall in price of substitute goods.
    (ii) There is a rise in prices of inputs.
    (b) The cost function of a firm is given below:
    Output 0 1 2 3 4
    Total cost Rs 100 250 370 550 740
    (i) AFC
    (ii) AVC
    (iii) MC
    (c) Explain the law of variable proportion with the help of a diagram. [6]
  • Question 5
    (a) Discuss two features of monopoly. [3]
    (b) Show with the help of a diagram, how a perfectly competitive firm earns normal profit in short run equilibrium. [3]
    (c) Explain how a producer can maximise profit by using MR and MC curves. [6]
  • Question 6
    (a) Find the value of additional investment made by the government, when MPC = 0.5 and increase in income (ΔY) = Rs 1,000. [3]
    (b) What is mean by autonomous consumption? Explain with the help of a diagram. [3]
    (c) Explain the concept of deficient demand with the help of aggregate demand and aggregate supply curves. Discuss one fiscal and one monetary measure to correct it. [6]
  • Question 7
    (a) Discuss two qualitative methods of credit control. [3]
    (b) Explain any two secondary functions of money. [3]
    (c) Discuss the various components of the current account of balance of payment. [6]
  • Question 8
    (a) Highlight two differences between sales tax and income tax. [3]
    (b) What is meant by:
    (i) Union budget
    (ii) State budget
    (c) Explain four ways of Redemption of Public Debt. [6]
  • Question 9
    (a) With the help of a diagram. Show the circular flow of income in a two sector model with Savings and Investment. [3]
    (b) The growth of Gross Domestic Product is not a real indicator of economic welfare. Discuss two reasons to justify the given statement. [3]
    (c) From the following data, calculate GNPMP and NNPFC by Expenditure Method. [6]
        Rs in crores
    (i) Mixed income of self employed 450
    (ii) Compensation of employees 550
    (iii) Private final consumption expenditure 1,000
    (iv) Net factor income from abroad (–) 20
    (v) Net indirect taxes 150
    (vi) Consumption of fixed capital 170
    (vii) Net domestic capital formation 380
      (viii) Net exports (–) 30
      (ix) Profits 400
      (x) Rent 150
      (xi) Interest 200
      (xii) Government final consumption expenditure 550
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