12 - KopyKitab · 12 31 50 110 Part B Introductory Macroeconomics National Income and Related Aggregates 15 32 Money and Banking 8 18 Determination of Income and Employment 12 27

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MBD BOOKS FOR XII (C.B.S.E.) MBD Super Refresher English MBD Super Refresher Science MBD Super Refresher Hindi MBD Super Refresher Social Science MBD Sanskrit MBD Super Refresher Mathematics


ECONOMICSCLASS–XII

Paper 1 100 Marks 3 Hours

Units Marks Periods

Part A Introductory Microeconomics

Introduction 6 11

Consumer’s Equilibrium and Demand 16 34

Producer Behaviour and Supply 16 34

Forms of Market and Price Determination under perfect competition with simple applications

12 31

50 110

Part B Introductory Macroeconomics

National Income and Related Aggregates 15 32

Money and Banking 8 18

Determination of Income and Employment 12 27

Government Budget and the Economy 8 17

Balance of Payments 7 16

50 110

Part A: Introductory Microeconomics

Unit 1: Introduction 11 Periods

Meaning of microeconomics and macroeconomics, Positive and Normative Economics

What is an economy? Central problems of an economy: what, how and for whom to produce; concepts of production possibility frontier and opportunity cost.

SYLLABUS


Unit 2: Consumer’s Equilibrium and Demand 34 Periods

Consumer’s equilibrium - meaning of utility, marginal utility, law of diminishing marginal utility, conditions of consumer’s equilibrium using marginal utility analysis.

Indifference curve analysis of consumer’s equilibrium-the consumer’s budget (budget set and budget line), preferences of the consumer (indifference curve, indifference map) and conditions of consumer’s equilibrium.

Demand, market demand, determinants of demand, demand schedule, demand curve and its slope, movement along and shifts in the demand curve; price elasticity of demand - factors affecting price elasticity of demand; measurement of price elasticity of demand - (a) percentagechange method and (b) geometric method (linear demand curve); relationship between price elasticity of demand and total expenditure.

Unit 3: Producer Behaviour and Supply 34 Periods

Production function – Short-Run and Long-Run Total Product, Average Product and Marginal Product. Returns to a Factor Cost:Shortruncosts-totalcost,totalfixedcost,totalvariablecost;Averagecost;Averagefixed

cost, average variable cost and marginal cost-meaning and their relationships. Revenue - total, average and marginal revenue - meaning and their relationships. Producer’s equilibrium-meaning and its conditions in terms of marginal revenue-marginal cost.

Supply, market supply, determinants of supply, supply schedule, supply curve and its slope, movements along and shifts in supply curve, price elasticity of supply; measurement of price elasticity of supply - (a) percentage-change method and (b) geometric method.

Unit 4: Forms of Market and Price Determination under Perfect Competition with simple applications. 31 Periods

Perfect competition - Features; Determination of market equilibrium and effects of shifts in demand and supply.

Other Market Forms - monopoly, monopolistic competition, oligopoly - their meaning and features. SimpleApplicationsofDemandandSupply:Priceceiling,pricefloor.

Part B: Introductory MacroeconomicsUnit 5: National Income and Related Aggregates 32 Periods

Somebasicconcepts:consumptiongoods,capitalgoods,finalgoods, intermediategoods;stocksandflows;grossinvestmentanddepreciation.

Circularflowofincome;MethodsofcalculatingNationalIncome-ValueAddedorProductmethod,Expenditure method, Income method.

Aggregates related to National Income: Gross National Product (GNP), Net National Product (NNP), Gross and Net Domestic Product (GDP and NDP) - at market price, at factor cost; National

Disposable Income (gross and net), Private Income, Personal Income and Personal Disposable Income; Real and Nominal GDP.

GDP and Welfare


Unit 6: Money and Banking 18 Periods

Money - its meaning and functions.

Supply of money - Currency held by the public and net demand deposits held by commercial banks.

Money creation by the commercial banking system. Central bank and its functions (example of the Reserve Bank of India): Bank of issue, Govt. Bank,

Banker’s Bank, Controller of Credit through Bank Rate, CRR, SLR, Repo Rate and Reverse Repo Rate, Open Market Operations, Margin requirement.

Unit 7: Determination of Income and Employment 27 Periods

Aggregate demand and its components.

Propensity to consume and propensity to save (average and marginal).

Short-run equilibrium output; investment multiplier and its mechanism.

Meaning of full employment and involuntary unemployment.

Problems of excess demand and deficient demand; measures to correct them - changes ingovernment spending, taxes and money supply.

Unit 8: Government Budget and the Economy 17 Periods

Government budget - meaning, objectives and components. Classification of receipts - revenue receipts and capital receipts; classification of expenditure –

revenue expenditure and capital expenditure.

Measuresofgovernmentdeficit-revenuedeficit,fiscaldeficit,primarydeficittheirmeaning.

Unit 9: Balance of Payments 16 Periods

Balanceofpaymentsaccount-meaningandcomponents;balanceofpaymentsdeficit-meaning.

Foreignexchangerate-meaningoffixedandflexibleratesandmanagedfloating.

Determination of exchange rate in a free market.

Prescribed Books:

1. Statistics for Economics, Class XI, NCERT

2. Indian Economic Development, Class XI, NCERT

3. Introductory Micro Economics, Class XII, NCERT

4. Macro Economics, Class XII, NCERT

5. Supplementary Reading Material in Economics, Class XII, CBSE

Note: The above publications are also available in Hindi Medium.


Suggested Question Paper DesignEconomics (Code No. 030)

Class XIIMarks: 100 Duration: 3 hr

S. No. Typology of Questions

Very Short

Answer MCQ 1 Mark

Short Answer I 3 Marks

ShortAnswer II 4 Marks

Long Answer 6 Marks

Marks %

1

Remembering- (Knowledge based Simple recall questions, to know specific facts, terms, concepts,principles,ortheories;identify,define,or recite, information)

2 1 2 2 25 25%

2

Understanding- (Comprehension tobe familiar with meaning and to understand conceptually, interpret, compare, contrast, explain, paraphrase, or interpret information)

3 2 1 2 25 25%

3

Application- (Use abstract informationin concrete situation, to apply knowledge to new situations; Use given content to interpret a situation,provide an example, or solve a problem)

3 1 2 1 20 20%

4

High Order Thinking Skills- (Analysis& Synthesis- Classify, compare, contrast, or differentiate between different pieces of information, Organize and/or integrate unique pieces of information from a variety of sources

1 1 1 2 20 20%

5Evaluation- (Appraise, judge, and/or justify the value or worth of a decision or outcome, or to predict outcomes based on values)

1 1 - 1 10 10%

Total 10×1=10 6×3=18 6×4=24 8×6=48 100(30) 100%

Note: There will be Internal Choice in questions of 3 marks, 4 marks and 6 marks in both sections (A and B).(Total 3 internal choices in section A and total 3 internal choices in section B).


CONTENTS

INTRODUCTORY MICROECONOMICS 1 Introduction 2 – 29

2 Theory of Consumer Behaviour 30 – 107

3 Production and Cost 108 – 149

4 The Theory of the Firm under Perfect Competition 150 – 211

5 Market Equilibrium 212 – 248

6 Non-competitive Markets 249 – 270

INTRODUCTORY MACROECONOMICS 7 Introduction 272 – 277

8 National Income Accounting 278 – 340

9 Money and Banking 341 – 366

10 Income Determination 367 – 429

11 Government Budget and the Economy 430 – 454

12 Open Economy Macroeconomics 455 – 485

Model Question Papers M-1 – M-8

PART–A

PART–B


Part A

Introductory Microeconomics

Introduction

Theory of Consumer Behaviour

Production and Cost

The Theory of the Firm under Perfect Competition

Market Equilibrium

Non-competitive Markets

CBSE_GR_ECO_G12_C01.indd 1 1/9/2017 4:20:40 PM

2

1.1 Scarcity and Choice

Scarcity is a situation when demand for a good exceeds its supply even at a zero price. Scarcity occurs when there are limited resources in relation to unlimited wants.Choice is the act of selecting among restricted alternatives.Resources are the inputs or factors of production used to produce economic goods that people want. Four major resources are land, labour, capital and entrepreneur.Production is the process of converting resources into final goods and services. It results in creation of utility.Prices of the goods and services are influenced by the degree of scarcity.More scarce resources like diamonds or precious stones have high prices.Less scarce resources like water have low price.Absence of scarcity implies zero price. For example: There is no price of ice in the snow covered area.

1.2 Economic Problem

Economics is a science of human behaviour concerned with allocation of scare resources in such a manner that consumers can maximise their satisfaction, producers can maximise their profits and the society can maximise its social welfare.Economic problem is the problem arising from the necessity of choice. Economic problems arise because:

(i) resources are scarce, and(ii) resources have alternative uses.

Every individual, society, state, country and nation faces economic problem.

CHAPTER IN A NUTSHELL

Introduction11.1 Scarcity and Choice1.2 Economic Problem1.3 Economy and its Central Problems1.4 Production Possibility Curve and

Opportunity Cost1.5 Microeconomics and Macroeconomics

CONCEPTS


IntroductionMBD Super Refresher Economics - XIIPB 3

1.3 Economy and its Central Problems

Economy refers to the system of production, distribution and consumption of economic goods and services by different agents in a country or region.Economic activities are those human activities that are related to the production, distribution and consumption of final goods and services.Market economy is a free economy in which economic activities are carried out through free price mech-anism independent of any intervention by the central authority.Centrally planned economy is an economy in which the economic activities are planned by the central government with an objective of maximising social welfare.Mixed economy is an economic system in which production, distribution and consumption decisions are left to the free play of the market forces. However, a large part of economic activities are regulated by the government to maximise the social welfare along with individual welfare or self-interest.Central problems of an economy are the problems related to efficient allocation of limited resources. Every economy faces three central problems.

(i) ‘What to Produce and in What Quantities’ refers to the problem relating to the choice of what goods and services are to be produced by an economy and the quantity of each of these.

(ii) ‘How to Produce’ refers to the problem of choice between combinations of factors of production in producing a good or service.

(iii) ‘For Whom to Produce’ refers to how the final goods and services are to be distributed among different individuals.

1.4 Production Possibility Curve (PPC) and Opportunity Cost

Production Possibility Curve (PPC) is a curve that shows different combinations of two goods that can be produced with available resources and given state of technology. It is also known as Production Possibility Frontier (PPF) or transformation curve.Opportunity cost is the value of the next best alternative foregone.Marginal opportunity cost is the loss of output of good 2 when an additional unit of good 1 is produced by shifting the resources from the production of good 2 to the production of good 1.Some Diagrammatic Presentation(a) Shape of PPC

(i) PPC is a downward sloping curve.(ii) PPC is concave to the origin because of increasing marginal opportunity cost.

Fig. 1


IntroductionMBD Super Refresher Economics - XII4 5

(b) Growth of resources leads to a rightward shift in the Production Possibility Curve (Fig.2). Causes of Growth of Resources

(i) Increase in the supply of economy’s resources(ii) Technological advancement

(c) Reduction of resources leads to a leftward shift in the Production Possibility Curve (Fig.3). Causes of Reduction of Resources

(i) Decrease in the supply of economy resources(ii) Technological degradation

Fig. 2 Fig. 3

(d) Point On and Inside PPC: A point on PPC shows full utilisation of resources and a point inside PPC shows under utilisation of resources.

Fig. 4

1. 5 Microeconomics and Macroeconomics

Microeconomics is the branch of economics that studies the behaviour of individual economic unit, such as a consumer or a producer.Macroeconomics is the branch of economics that studies the behaviour of the economy as a whole. Level of output and employment are the principal macroeconomic issues.



Difference between Microeconomics and Macroeconomics

S. No. Microeconomics Macroeconomics1. Microeconomics is the study of individual

decision-making units.Macroeconomics is the study of aggregates or economy as a whole.

2. Microeconomics is based on the principles of partial equilibrium.

Macroeconomics is based on the principles of general equilibrium.

TEXTUAL QUESTIONS (Solved)

Q.1. Discuss the central problem of an economy. Ans. Following are the central problems of an economy:

(i) What to Produce and in What Quantities: Every society faces similar problem of choice due to limited resources. Hence, every society must decide on how much of each of the many possible goods and services it will produce, as an economy cannot produce all that society needs. However, the priorities may be different. Less developed economies may have to choose between production of food crops and manufacturing computers. Advanced economies, on the other hand, may have to make a choice between building more malls and producing more cars.

(ii) How to Produce: It is related to the technique of production. Once the goods to be produced are decided, there is a problem of how to produce them. What tools and equipment are needed? How much land and how many workers are required? There are various ways of producing things. For example, a firm manufacturing ready-made garments needs to determine the technique of production (capital intensive or labour intensive) for producing clothes.

(iii) For Whom to Produce: The problem of ‘for whom to produce’ refers to how all the final goods and services are to be distributed among the individuals in the economy. Who gets more and who gets less? Whether or not to ensure a minimum amount of consumption for everyone in the economy? Since is not feasible for an economy to satisfy everyone’s want due to scarcity, it must decide on whose wants are to be satisfied. In short, ‘for whom to produce’ problem is related to the distribution of production.

Thus, every economy faces the problem of allocating the limited resources to the production of various possible goods and services, and distributing the output among the individuals in the economy.

Q.2. What do you mean by the production possibilities of an economy? Ans. Production possibilities of an economy refer to all possible combinations of goods (services) that can

be produced in an economy by making an efficient and full utilisation of all resources and given state of technical knowledge.

Q.3. What is a Production Possibility Frontier? Ans. Production Possibility Frontier (PPF) is the graph depicting all the possible combinations of two

goods (services) that can be produced in an economy by making an efficient and full utilisation of all the resources and given state of technology. It is also known as the Production Possibility Curve (PPC). PPF can be shown with the help of the given figure.



Fig. 5 The figure illustrates the production possibilities of the economy. Any point on the curve represents

a combination of corn and cotton that can be produced with full utilisation of the economy’s resources. The curve represents the maximum amount of corn that can be produced in the economy for any given amount of cotton and vice-versa.

Q.4. Discuss the subject matter of economics. Ans. The subject matter of economics has been studied under two broad branches:

(i) Microeconomics(ii) Macroeconomics

In microeconomics, we study the behaviour of individual decision-making units, such as households and firms. Equilibrium prices and quantities of goods and services are determined through the interaction of individuals in the markets.

In macroeconomics, we study the behaviour of factors affecting the economy as a whole. It focuses on the behaviour of national level aggregates such as national income, total output, employment level, price level, etc. Here, we are interested in finding out how the levels of these aggregate measures are determined and how these measures change over time.

Q.5. Distinguish between centrally planned economy and a market economy. Ans. Following are the points of distinction between centrally planned economy and market economy:

S. No. Centrally Planned Economy Market Economy

1. Economic activities are planned by the government or the central authority in the economy.

Economic activities are managed through the market.

2. The central authority is the only owner of the resources and is solely engaged in the production and distribution of goods and services.

Prices of goods and services are determined by market forces of demand and supply with minimum intervention by the government.

3. Primary motive of a centrally planned economy is social welfare.

Profit is the primary motive of the market economy.

4. Economic planning solves the central problems of the centrally planned economy.

Price signals solve the central problems of the market economy.



Q.6. What do you understand by positive economic analysis? Ans. Positive economic analysis discusses the economics of ‘what is’. In positive economic analysis, the

functioning of different mechanisms is analysed and their respective outcomes are figured out for reference in future.

Q.7. What do you understand by normative economic analysis? Ans. Normative economic analysis discusses the economics of ‘what ought to be’. In normative economic

analysis, the desirability of different mechanisms is checked and recommendations are prescribed for making corrections, if necessary.

Q.8. Distinguish between microeconomics and macroeconomics. Ans. Following are the points of distinction between microeconomics and macroeconomics:

Basis Microeconomics Macroeconomics

Scope of the Study Microeconomics is the study of a particular household, firm, industry, good, individual price, wage, income, etc.

Macroeconomics is the study of economy as a whole or its aggregates such as national income, level of employment, general price level, aggregate demand, aggregate demand, etc.

Subject Matter Microeconomics deals with the price of individual goods and individual factors of production.

Macroeconomics deals with the general price level.

Central Problem Microeconomics emphasises on the price determination and allocation of resources.

Macroeconomics emphasises on the determination of national income and employment.

ADDITIONAL IMPORTANT QUESTIONS (Solved)

1.1 Scarcity and ChoiceVery Short Answer Type Questions

Q.1. What is meant by scarcity? Ans. Scarcity is a situation when demand for a good exceeds its supply even at a zero price. Scarcity

occurs when there are limited resources in relation to unlimited wants.

Q.2. Give two reasons for the problems of choice. (C.B.S.E. Outside Delhi 2007) Ans. Following are the two reasons for the problems of choice:

(i) Unlimited wants(ii) Limited means

Q.3. What is rationality? Ans. Rationality refers to the quality of making reasonable comparison of all possible combinations of

goods and prices by an individual while making purchase decisions.

Q.4. What is optimisation? Ans. Maximisation of output per unit of input is known as optimisation.


MBD CBSE Super Refresher EconomicsFor Class 12

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Author : Neera Sharma

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12 - KopyKitab · 12 31 50 110 Part B Introductory Macroeconomics National Income and Related Aggregates 15 32 Money and Banking 8 18 Determination of Income and Employment 12 27