S.NOCONTENTMARKS

1.UNITPart A Introductory Micro Economics50

a. Introduction04

b. Theory of Consumer Behaviour& Demand18

c. Producer's Behaviour& supply18

d. Firms of Market and Price Determination10

e. Simple application of tools of demand and supply curves**

2.UNITPart B Introductory Macro Economics50

a. National Income Accounting & related aggregates15

b. Determination of Income and Employment12

c. Money & Banking08

d. The government budget and the Economy 08

e. Balance of Payment07

TOTAL100

Design of sample Question PaperObjectivesPercentage of MarksKnowledge30 %Understanding50 %Application20 %Form of QuestionsNo .of. questionsMark for each QuestionTotal MarksEstimated Time(in minutes)

Long answer (L.A)663666 Mins

Short answer (S.A.I)642442Mins

Short answer (S.A.II)1033050 Mins

Very Short answer1011010 Mins

Total32100(Four parts each)168 + 12minutes for revision

Group -1QUESTION PAPER N0-1CLASS-XIIECONOMICSQ.No.QuestionMarksType

1. What causes an upward movement along a demand curve of acommodity ?1U

2. What is the price elasticity of supply of a commodity whose straight linesupply curve passes through the origin forming an angle of 75?1A

3. What change will take place in marginal product, when total productincreases at a diminishing rate?1U

4. Give the meaning of marginal cost.1K

5. Give the meaning of oligopoly.1K

6. Explain the inverse relationship between the price of a commodity andits demand.3K

7. State the law of supply. What is meant by the assumption other thingsremaining the same on which the law is based?3U

8. The price elasticity of supply of good X is half the price elasticity ofsupply of Good Y. A 10% rise in the price of good Y results in a rise inits supply from 400 units to 520 units. Calculate the percentage changein quantity supplied of good X when its price falls from Rs 10 to Rs 8per unit.3A

9. State the distinction between explicit cost and implicit cost. Give anexample of each.3U

10. Explain the implication of product differentiation feature ofmonopolistic competition.ORExplain the implication of homogenous product feature of perfectcompetition.3U

11. Distinguish between:How is PPC affected by unemployment in the economy.ORExplain the central problem of distribution in an economy.4U

12. If more and more resources are constantly explored and new technology of production are constantly discovered, don't you think a day will come when all our central problems will be solved once for all.4Value Based

13. Calculate the percentage fall in demand for a good whose price risesfrom Rs. 10 per unit to Rs. 11 per unit. Its price elasticity of demand is-0.25.4A

14. Explain the likely behaviour of Total Product and Marginal Productwhen for increasing production only one input is increased while allother inputs are kept constant.6K

15. There is a simultaneous decrease in demand and supply of acommodity. When will it result in:(a) No change in equilibrium price.(b) A fall in equilibrium price.Use diagrams.6A

16. (a) What is a budget line? What does the point on it indicate in terms ofprices?(b) A consumer consumes only two goods X and Y. Her money incomeis Rs 24 and the prices of Goods X and Y are Rs 4 and Rs 2respectively. Answer the following questions:(i) Can the consumer afford a bundle 4X and 5Y? Explain(ii) What will be the MRSXY when the consumer is in equilibrium?Explain.ORExplain the following:(a) Why is an indifference curve convex to the origin?(b) Why does a higher indifference curve represent a higher level ofsatisfaction?6U/A

Section B

17. What is meant by foreign exchange rate?1K

18. What is meant by Statutory Liquidity Ratio?1K

19. How is primary deficit calculated?1U

20. What is meant by balance of trade?1K

21. State two sources of supply of foreign currency.1K

22. Can an economy be in equilibrium when there is unemployment in theeconomy. Explain.3value

23. In an economy income increases by 10,000 as a result of a rise ininvestment expenditure by 1,000. Calculate:(a) Investment Multiplier(b) Marginal Propensity to Consume3A

24. How does money solve the problem of double coincidence of wants?3U

25. How can budgetary policy be used for reducing inequalities in incomeand wealth?3U

26. Calculate gross fixed capital formation from the following data:Rs crores(i) Private final consumption expenditure 1,000(ii) Government final consumption expenditure 500(iii) Net exports (-) 50(iv) Net factor income from abroad 20(v) Gross domestic product at market price 2,500(vi) Opening stock 300(vii) Closing stock 2003A

27. What are the implications of a large revenue deficit? Give two measuresto reduce this deficit.4U

28. Explain the function of a Central Bank as a banker to the government.ORExplain the open market operations method of credit control used by aCentral Bank.4K

29. Explain the meaning of deficit in a Balance of Payments account.4K

30. State whether the following statements are true or false. Give reasonsfor your answer:(a) Capital formation is a flow.(b) Bread is always a consumer good.(c) Nominal GDP can never be less than Real GDP.(d) Gross domestic capital formation is always greater than gross fixed capital formation.6U

31. Given below is the consumption function in an economy:C = 100 + 0.5YWith the help of a numerical example show that in this economy asincome increases APC will decrease. ORThe savings function of an economy is S = - 200 + 0.25Y. The economyis in equilibrium when income is equal to 2,000. Calculate:(a) Investment expenditure at equilibrium level of income.(b) Autonomous consumption.(c) Investment multiplier6A

32. Calculate Gross National Product at market price and PersonalDisposable income from the following data (Rs crores):(i) Subsidy 20(ii) Net factor income from abroad (-) 60(iii) Consumption of fixed capital 50(iv) Personal tax 110(v) Savings of private corporations 40(vi) Dividend 20(vii) Indirect tax 100(viii) Corporation tax 90(ix) Net national disposable income 1,000(x) National debt interest 30(xi) Net current transfers from abroad 20(xii) Current transfers from government 50(xiii) Miscellaneous receipts of the government administrative departments 30 (xiv) Private income 700(xv) Private final consumption expenditure 3806A

Marking Scheme Set-1Q.No.QuestionMarks

1. Rise in the price of the good.1

2. Price elasticity of supply is equal to one.1

3. Marginal product will decline but remain positive.1

4. Marginal cost is the addition to total cost on producing one more unit of output.1

5. It is a form of market in which there are a few firms1

6. A consumer purchases that much quantity of a good at which its marginal utility equals its price. Given this situation, suppose price falls. It makes marginal utility greater than the price and induces the consumer to buy more of the good. This establishes inverse relation between price and demand.3

7. According to the law there is a direct relation between price of the good and its supply, other things remaining the same. Other things include all factors other than the price which can influence supply, like prices of inputs, taxes on production, prices of other goods, etc.3

8. Es of good Y = % change in supply of Y/% change in price of Ysupply of X falls by 30 percent.3

9. Explicit cost is the actual monetary expenditure on inputs, like expenditure onpurchases of raw materials, on payment of wages, interest, rent, etc. 1Implicit cost is the estimated value of inputs supplied by the owner of the firm, like imputed salaries of the owners, imputed rent of the building of the owners, imputed interest on the money invested by the owners, etc.3

10. Product differentiation means that the buyers of a product differentiate between the same product produced by different firms. Therefore, they are also willing to pay different prices for the same product produced by different firms. This gives an individual firm some monopoly power to influence market price of its product. ORHomogonous product means that the buyers treat products of all the firms in theindustry as identical. Therefore, the buyers are willing to pay only the same price for the products of all the firms in the industry. It also implies that no individual firm is in a position to charge a higher price for its product. This ensures uniform price in the market.3

11. When there is unemployment the maximum output that an economy can produce does not change. So there is almost no effect on position of PPC , the only thing is that economy produces some where below the PPC. ORThe problem is related to distribution of goods and services produced in the economy. It arises because the output produced is limited while the wants of people are unlimited. In other words it is the problem of distribution of income because income gives the people power to purchase these goods. 4 Differences between:(a) Positive and normative economic perspectives in economics(b) Microeconomics and Macroeconomics4

12. If more and more resources are constantly explored and new technology of production are constantly discovered, I don't you think that the day will come when all our central problems will be solved once for all , because wants are never ending and reoccurring in nature.4

13. Formula /Calculation/The percentage fall in demand for a good will be 2.51+2+1

14. The likely behaviour of TP and MP is summed up as the Law of Variable proportions and is :Phase I :Initially TP increases at increasing rate i.e. MP rises. It is because initially the quantity of the variable input is too small in relation to the fixed input. As the quantity of the variable input increases the fixed input is effectively utilized leading to rise in MP ofthe variable input. 2Phase II :After a certain level of output TP increases at a decreasing rate i.e. MP starts falling but remaining positive. It is because now a pressure is being felt on fixed inputs as the variable input is increased further. This leads to fall in MP of the variable input. 2Phase III :Ultimately TP starts falling and MP is negative and decreasing. It is because thequantity of fixed input now becomes too small to accommodate the continuously rising variable input. This makes MP of the variable input negative. 26

15. There is a simultaneous decrease in demand and supply of acommodity. When will it result in:(a) No change in equilibrium price.(b) A fall in equilibrium price.Use diagrams.6

16. (a) Budget line is the locus of points that show different possible combinations of the two goods which a consumer can afford, given his income and the market prices of the two goods. 1In terms of prices, a point on the budget line represents the ratio of price of thegood shown on the X-axis to the price of the good shown on the Y-axis. 2(b) (i) The cost of 4X + 5Y = (4x4) + (5x2) = Rs. 26 1Since the income is only Rs. 24 the consumer cannot afford the bundle.(ii) When the consumer is in equilibrium,MRS = Px/PySubstituting Px = 4, and Py = 2,MRS = 4/2 = 2 OR(a) The indifference curve being convex to origin means that Marginal Rate ofSubstitution (MRS) between the two goods continuously falls. Let the two goodsbe X and Y shown on the X-axis and the Y-axis respectively. It means that theconsumer is willing to sacrifice less and less of Y each time he obtains one moreunit of X. Sacrifice of Y is the price the consumer is willing to pay for obtainingX. As he obtains more and more units of X marginal utility of X declines andtherefore he is willing to sacrifice only less of Y. 3(b) Any point on a higher indifference curve means more of both the goods or thesame quantity of one good and more quantity of the other good. The indifferencecurve analysis is based on the assumption that preference are monotonic whichmeans that consumption of more goods means more satisfaction. Therefore, ahigher indifference curve represents higher level of satisfaction. 6

Section B

17. . Foreign exchange rate is the price of one unit of foreign currency in terms ofthe domestic currency.1

18. Statutory Liquidity Ratio is the ratio of demand deposits of a commercialbank which it has to keep in the form of special liquid assets.1

19. . Primary deficit = Fiscal deficit interest payments.1

20. Balance of trade is the difference between value of exports and imports ofgoods.1

21. . Exports of goods; exports of services; remittances into a country; loans;grants; foreign direct investment; portfolio investment etc.Any two.1

22. An economy is in equilibrium when aggregate demand and aggregatesupply are equal. Aggregate demand may not be sufficient for aggregatesupply at full employment. This means aggregate demand is only sufficientto support aggregate supply at less than full employment level. So the twowould be equal at less than full employment. Thus the economy can be inequilibrium when there is unemployment in the economy.3

23. (a) Multiplier Y = I 10,000= 1,000 = 10(b) Multiplier 1 1-MPC =10 1 = 1-MPCMPC = 0.91+1+.

24. Double coincidence of wants means that what one person wants to sell andbuy must coincide with what some other person wants to buy and sell. It wasvery difficult that such coincidence of wants to take place. Money hasremoved this difficulty. You can sell your goods for money to whosoeverwants it and with this money you can buy what you want from whosoeverwants to sell that.3

25. To reduce inequalities in income and wealth government can use aprogressive taxation policy. The government puts a higher rate of taxation onrich people and lower rates of taxation on lower income groups. This reducesdisparities in income and wealth.The government can provide subsidies and other amenities to people whoseincome levels are low. This increases their disposable income and thusreduces the inequalities.3

26. . Gross fixed capital formation = (v) (i) (ii) (iii) - (vii) + (vi)= 2500 1000 500 (-) 50 - 200 + 300= Rs 1150 crores.1.5+1.5=3

27. Revenue deficit is the excess of governments revenue expenditure over itsrevenue receipts. A large revenue deficit means large borrowings forfinancing this deficit. Large borrowings will result in increased revenueexpenditure (interest payments) and a larger revenue deficit in future.For reducing revenue deficit the government should reduce its revenueexpenditure and raise more tax revenue..2+2+=4

28. . The Central Bank acts as a banker to the Central government and stategovernments. It carries out all the banking business of the government Itaccepts receipts and makes payments for the government. It provides shortterm credit to the government. It also advises the government on bankingand financial matters.ORBuying and selling of government securities by the Central Bank is calledopen market operations. When Central bank buys securities fromcommercial banks it increases the reserves of the banks and thus directlyincreases banks ability to give credit. When central bank sells securities tocommercial banks their reserves decrease. This reduces their ability to givecredit.4

29. The transactions recorded in the balance of payments accounts can becategorized as autonomous transactions and accommodating transactions.Autonomous transactions are transactions done for some economicconsideration such as profit. When the total inflows on account ofautonomous transaction is less than total outflows on account of suchtransactions, there is a deficit in the balance of payments account.Explain the meaning of deficit in a Balance of Payments account.4

30. (a) True. Capital formation is measured over a period of time.(b) False. It depends on the use of bread. When it is purchased by ahousehold, it is a consumer good. If it is purchased by restaurant, it is aproducer (intermediate) good.(c) False. Nominal GDP can be less than real GDP, if prices in the currentyear are less than the prices in the base year.(d) False. Gross domestic capital formation can be less than gross fixedcapital formation if change in stock is negative.1.5+15+1.5+1.5=6

31. . C = 100 + 0.5YLet us take Y as 400, 500, 600C = 100 + 0.5 x 400 = 300C = 100 + 0.5 x 500 = 350C = 100 + 0.5 x 600 = 400APC = C/YYCAPC

4003000.75

5003500.7

6004000.67

Thus as income increases APC falls.ORS = -200 + 0.25Y(a) At equilibrium planned savings are equal to planned investment.Equilibrium level of income is 2,000. Substituting the value of Y inthe savings function, we get;S = - 200 + 0.25 x 2000S = 300I = 300Thus, investment expenditure at equilibrium level of income is 300.(b) Consumption + Savings = IncomeAutonomous consumption means the level of consumptionexpenditure when income is zero.When y = 0, Saving = -200So autonomous consumption = 200(c) Investment multiplier = 1/MPSFrom the savings function, we know that MPS = 0.25Investment multiplier = 1/0.25 = 4.6

32. GNP at market price = (ix) + (iii) (xi)= 1000 + 50 20= Rs 1030 croresPersonal disposable income = (xiv) (v) (viii) (iv) (xiii)= 700 40 90 110 30= Rs 430 crores

6

Group -1QUESTION PAPER N0-2CLASS-XII Economics1) What is production function?1K

2) Define Marginal Utility. 1K

3) How does the market supply curve derived from individual supply curves? 1U

4) What is the shape of MR and AR in Perfect competition? 1U

5) Draw a diagram and show Break-even Point.1A

6) What are the properties of Indifference Curve? 3K

7) What is the relationship between MP and AP?3U

8) Define and Draw the curve:- TC,TVC,TFC. 3A

9) What happen if demand changes and supply in perfect inelastic? Explain. 3U

10) Define fixed cost and variable cost. 3K

11) Explain the problem How to produce? 4K

12) What is Complementary Commodity? How does change in the price of complementary commodity effect the demand of a commodity? Explain with the diagram. ORDistinguish between change in demand and change in quantity demand with the help of diagram.4A

13) The demand function of good X is given Qx = 40-2P , Calculate price elasticity of demand when price rises from Rs 4 to Rs 5 per unit.4A

14) Why does demand curve slope downwards?.6U

15) Explain the law of variable proportions? .6U

16) What happen if supply changes and demand is perfect elastic? Explain with diagram 6A

17) Define central Bank.1K

18) Distinguish between direct and indirect taxes. 1A

19) What is a foreign exchange rate?1K

20) Why is foreign exchange demanded ?1U

21) Why does a rise in foreign exchange rate cause a rise in its supply?( give any one cause)1U

22) Define aggregate demand. State its components.3K

23) What are the functions of Central Bank? 3K

24) Explain the meaning of investment multiplier. What is the minimum value of the multiplier?3U

25) In a government budget , revenue deficit is Rs.50000 core and borrowings are Rs.75000 cores. How much is the fiscal deficit? 3A

26) How does Appreciation of a currency takes place?4

U

27) What are the drawbacks of barter system? 4K

28) Giving reasons, categories the following into revenue expenditure and capital expenditure: (i)Subsidies, (ii)Grants given to state governments4U

29) Calculate Gross National Disposable Income And net National Disposable Income from the Following Data: (Rs. In Crores) (i) Consumption of fixed capital 30(ii) Net national product at market price240(iii) Net Indirect taxes 40(iv) Net current transfers from rest of the world(-)20(v) Net factor income from abroad(-) 103A

30) Define GDP at market price ,GNP at market price, NDP at market price, National Income, NDP at factor cost, GNP at factor cost, NNP at market price.6U

31) . Explain the theory of determination of Income and employment with the help of aggregate demand and aggregate supply curves.6U

32) From the following date calculate national income by(a) Income method and (b) Expenditure method.(Rs. In cores)(i) Private final consumption expenditure2,000(ii) Net capital formation400(iii) Change in stock50(iv) Compensation of employees1,900(v)Rent200(vi) Interest150(vii) operating surplus720(viii) Net indirect tax400(x) Employers contribution to social security schemes100(xi)Net exports20(xii) Net factor income from aboard(-)20(xii) Government final consumption expenditure600(xvi) Consumption of fixed capital100

6A

Marking Scheme-Set-233) It is the functional relationship between input and output.1K

34) Marginal Utility is the additional utility derived from one additional unit of consumption.1K

35) By summing up all individual supply curves1U

36) The shape of MR and AR in Perfect competition is parallel to x axis. 1U

37) Diagram showingBreak-even Point(TR & TC).1A

38) The properties of Indifference Curve:i. Downward Slopingii. Convex to originiii. Never intersect each other.iv. Never touches either axisv. Higher the IC higher the satisfaction.3K

39) The relationship between MP and AP:AP increases : MP >APAP is max. : MP=APAP decreases : MP1,Ed=1 and Edchange in supply, with diagramiii. Decreases if change in demand MR 3) MR can be ve but not AR 38. Land

Labour TP MP

1111111112345678259121415151423 =increasing 4 MP3 2= Diminishing1 MP0-1 = -ve MP

39.Revenue Curve Under monopolistic compt. Is same as under mnonopoly

A

RevenueMRAR Output 310. calculate AVC OutputMCTCAC

1404040

2307035

33510535

43914436

311. demand for goods which are related (like Tea and Coffie ) is more elastic because when price of such goods rises the consumer have the option to shifting to the related goods . 12. perfectly inelastic supply: when supply does not response to change in price of the commodity . Perfectly elastic supply : change in price will cause an infinite change in quantity demanded. 1.1/2+1.1/214. S.No.RefrencePerfect competitionMonopoly

1.Number of saller and buyersLargeOne saller , but larg number of buyers

2.ProductHomogeneous Homogenous or differentiated

3.PriceUniform Not uniform because of price discrimination

4.Entry of firmFree entry Not possible

13. Fixed costVariable cost

1.Fixed costs do not change with change with change in quantity of output.1. Variable costs change with change in quantity of output.

2. Fixed cost remains the same whether output is zero or maximum. 2Variable cost are zero when output Is zero. These costs increase when output increase and decrease when output decreases.

Diagramitcal relation between MC and AC 3,3 15.Law of variable proportion state that as more and more variable factor are used with fixed factor then marginal product of variable factor start declining. Table , diagram 2,2,2 ORThree stages are :1) Increasing returns 2) Diminishing returns3) Negative returns 2,416. a) Law of diminishing marginal utility 2 b) Exception of law of demand 4SECTION-B17. Macro variable are agg consumption , agg demand, agg supply , general price level. 1/2+1/218. Transfer payment are one sided payment from one sector to other sector. 119. aggregate supply refers to the flow of goods and services as planned by the producers during a accounting period. 120. BOT= export of visible items import of visible item. 121. autonomous consumption is compulsory consumption . 11. 22 FDI can be useful to create employment, control inflation & reduce inequality of income & wealth which increase the purchasing power & thus improve the standard of living of the people.23. Depricition means loss of value of fixed assets . 1.1/2+1.1/2 24. GDP is not true indicator of welfare 1) Distribution of income 2) composition of GDP 3) non monetary transaction 1,1,125. Intermediate goodsFinal goods

1. These goods may be used as raw material for the production.2. Value to be added to these goods. 1. These goods are not used as raw material.2. Value is not to be added to these goods.

1.1/2+1.1/2 26. Gross value added at factor cost = Sales+(closing stock opening stock)-purchased of intermediate product purchase of machinery + subsidies. 327. While the impact of indirect taxation (like sales tax) can be shifted on to others, the impact of indirect taxation(like income tax) cannot be shifted. For example: 2+228. Investment Multiplier and MPC: Investment multiplier is the ratio between change in income and change in investment. K = Change in Y/change in I 2+229. Many Creation Process Formula- 1 Marks Process-330. Fiscal deficit is equal to the total borrowing of the government its shows estimated borrowing by the government to cope with its expenditure during the year . 2+431. Central bank: the central bank is an apex bank of the entire banking system of the country , RBI is the central bank of india. Function of the central bank 1. Issuing of notes 2. Banker of the government3. Bankers bank4. Supervision of bank5. Lender of the last resort.6. Control of credit. 2+432. INCOME METHOD NNP FC =(iii) +(viii)+(ix)+(iv)-(x)+(xi)+(xiii)-(v)+(xiv) Expenditure Method : NNPFC= (i)+(ii)-(iv)+(vi)+(vii)-(x)+(xii)+(xiv) Group -2QUESTION PAPER Set -2CLASS-XIIECONOMICS1Define Budget Line1K

2Define marginal rate of transformation1K

3What do you mean by inferior goods in economics?1K

4Give two differences between fixed cost and variable cost1U

5What is the effect on price when a monopoly firm tries to sell more ?1U

6Explain the central problem How to produce. 3U

7State any three causes of a rightward shift of demand curve of acommodity.3K

8If both goods are complimentary, price of X good rises what happens on demand of Y good show with the help of diagram3U

9State the law of supply.3U

10Explain collusive & non collusive oligopoly ORExplain any three features of perfect competion market. 3U

11The quantity demanded of a commodity falls by 5 units, when its price rises by Rs. 1 per unit. Its price elasticity of demand is (-1.5). Calculate the price before change. If at this price quantity demanded was 60 units.4A

1212)Complete the table. Output Total Variable costAverage Variable costMargined Cost

120--

--1612

354--

--2026

OrWhy does Total Variable cost increases at diminishing rate in the intial stage of production4

A

13 Explain the value involved in law of diminishing marginal utility.4S

14Explain consumer equilibrium with the help of indifference curve approach, use diagram. 6U

15Explain the condition leading to maximization of profits by a producer use Marginal cost and Marginal revenue approachOr State the phases of the law of variable proportion in terms of total physical product use diagram6U

16How the equilibrium price and quantity of a normal good affected? When income of the consumer. (i)Increases (ii) decreases PART-B6U

17 Give the meaning of money1K

18What is meant by cash reserve ratio1K

19What do you mean by full employment?1K

20Give two fiscal measures to control excess demand. 1K

21Define spot market.1K

22What is the difference between final Goods & Intermediate Goods ?ORDoes Gross domestic product is indicator of the welfare of economy? 3U

23Will the following be a part of national in come of India ? Why?I Salaries received by Indian residents working in American embassy in India. II Prize won in a lottery. Iii Wheat grown by a farmer but used entirely for family consumption3U

24. Calculate Gross national disposable income from the following data. Items Rs. In crores INet factor income from abroad. (-10)IINation of income. 1000IIINet indirect taxes. 20IVNet current transfer from Row. 150 VConsumption of fixed capital 1003A

25State any three sources of demand of foreign exchange3U

26State any three components of current account of balance of payment. 3U

27Explain any two objective of government Budget.4K

28Differentiate between revenue receipts and capital receipts.with example. OrExplain any two each features of progressivetax and regressive tax.4U

29Complete the following table IncomeSavingMarginal Propensity to consume Average Propensity to save

0-6--

20-3--

400--

603--

4A

30Explain the equilibrium level of income with the help of saving & Investment approach. 6U

31Explain the following function of central Bank? 1. Bankers Bank 2. Bank of the GovtOrDescribe the process of money multiplier by commercial bank. 6K

32From the following data calculate Gross national product at factor cost by (i) income method (ii) expenditure method. Items Rs. in Crores

1.Net domestic capital formation 500

2.Compensation of employees. 1850

3.Consumption of fixed capital 100

4.Govt. final consumption expenditure 1100

5.Private final consumption expenditure 2600

6.Rent 400

7.Dividend 200

8.Internet 500

9.Net export -100

10.Profit 1100

11.Net factor income from abroad -50

12.Net indirect taxes. 250

6A

Marking Scheme of Question set-21.Budget line represent the different combination of commodities that a consumer can buy by spending all his money income with the given price of commodities.12.MRT is the rate a which the quantity of output of one good is scarified to produce one more unit of another commodity. 13.When with increase in income , demand of these goods decreases. 14.Fixed cost does not change with change in output.Variable cort change with change in output 15.The price will reduce. 16.The economy has to decide what goods & service are to be produced which of consumer goods & which of capital goods are to be produced, Similarly choice has to be made between production of war time goods & peace time goods.37.When income of the consumer increase when price of Substitute good increases when price of complementary good falls. 1+1+18.Substitute goods are refers than goods when Px increases, Dy will also increase for example Coca Cola Pepsi 1 Complementary goods are those goods when Px Increases Dy will decrease for example car & Petrol 1 9..Other things being Constant with increase in price, supply with increase &vice verse.1. Table &Diaagram1Exception:-(i) In case of perishable goods(ii) In case of Agriculture goods due do natural calamities. 110.Collusive oligopoly is a firm of market in which firms decide to avoid Completion through a for mal agreement 1 Non Collusive oligopoly is a form of market when each firm pursues its price &out put policy independent of the rival firms. 11/2or(i) Large number of buyers & sellers.(ii) Homogeneous product in the market (iii) Free entry & exit of firms 1+1+1 11.The price before change= Rs 184Out put TVCAVCMC

1202020

2321612

3541822

4802026

12.

2+2orBecause it enjoy increase return to factor out put increase at increasing rate, MP increase means falling cost. When the cost of producing on additional unit is falling. TVC should be increase only at decreasing 413.That we should not have a greed for consuming more than requirement because that may lead to negative marginal utility and we may spoil our health ourselvesPerfectly completion MonopolyMonolithic MarketMarketCompletion market14. Conditions for Consumer's equilibrium (i) MRS xy =PxPy (ii) MRS is dimishing2Diagram 2 y

Y-good O x-good xExplanation 2 Its depend on the two condition- (i) Where slope of Indifference curve and Budget line will be equal.(ii) Mux/MUy=Px/Py 15. (i)MR=MC (ii)MC cuts MR belowTable 2OutputMRMC

11620

21618

31616

41615

51616

61617

Diagram 2 y

MR&MC E E1 x O Q Q1\ outputOr Stage 1When MP is increase, Called the stage of increase return.Stage 2When MP is dim shining, called a stage of dim shiny return Stage 3When MP is negative, called the stage of negative return. 3Table & Diagram 316.

When income of When income of ConsumerConsumerIncrease(3)Decrease(3)17.Money is anything that is generally accepted as medium of exchange & at the same time act as a measure & store of value.118.CRR is the ratio. of Bank deposits that commercial bank must keep with central bank.119.Workers are able and willing to do work at prevailing wage rate & getting the work.120.(i) Tax imposed by Govt should be increase.(ii) Govt expenditure by Govt should be reduced.121.Statement of estimated receipts & expenditure of Government for the next financial year.1 22.Final GoodsIntermediate Goods

Not Resold in market No Value is addedResold in Market Value is added at each stage of production

Included in estimation of national incomeNot Included in estimation of national in come.

11/2+11/2orIt is not necessary that higher the GDP & higher the welfare If distribution of income is unequal If production of necessity goods are comparatively low. If increase in production tends to pollution in economy will not increase the welfare323.Yes, these are wages of resident of India.No, it is a transfer incomeYes, it is a part of product of self consumption. 1+1+1 24.Gross National disposable income =(ii)+(iii)+(iv)+(v) 1000+20+150+100Rs 1270 crores 3Direct TaxesIndirect Taxes

These are imposed on income & wealth of person These taxes are imposed on goods & service

Burden of these tax can't be shifted to another person Burden of these taxes can be shifted to another person

Income TaxSale Tax

25.

26. 11/2+11/2 Import & export of visible items Import & export of invisible items Unilateral transfers from one country to the other. 1+1+127.Demand for foreign exchange depends upon Payments of loans Investment in rest of the world Supply of foreign exchange depends upon Exports Direct foreign investment 28.Fiscal deficit2+2 Budget expenditure Budget receipts (When BE>BR)(Other than Barrowing )1Budget deficit Budget expenditure -Budget receipts(When BE>BR) 1Revenue deficitRevenue expenditure -Revenue reaction 1(When RE>RR) Primary deficit - = Fiscal deficit interest payment 1or Revenue receipts are the receipts which don't create liabilities to Govt. & do not cause reduction in Assets of Govt ex:- Tax & non tax receipt Capital receipts :- are the receipts which create liabilities to Govt& cause reduction in Assets of Govt.Ex:- Disinvestment 2+2MPCAPS

--

850.15

850

850.05

29.df

30. Condition 2Diagram 2Explanation 2

31.Bank of Govt :- Act on Financial advance of Govt and manages accounts of Govt.Banker's Banks:- Central Bank keeps same cards balance of commerce this is to help them during financial Crisis.3+3orMoney creation = 1 s SLRDD=__1__ Cash deports 3SLRExplain the Concept with example 332.GNPat fc(income method)=(ii)+(vi)+(viii)+(x)+ (iii)+(xi) 3 =1850+400+500+1100+100+(-50)=3900 croreGNPat fc ( Expenditure Method )=(v)+(iv)+(i)+(iii)+(ix)+(xi)-(xii)3=2600+1100+500+100+(-100)+(-50)-250= Rs 3900 Cores

============================================================================

Group -2QUESTION PAPER Set -3CLASS-XIIECONOMICSQ 1. Define Scarcity?1K

Q 2. If the value of elasticity of demand is =.98 is it elastic or inelastic?1A

Q 3. Define consumer equilibrium.1K

Q 4. What do you mean by cartel? 1U

Q 5. Give the profit maximization situation in case of producer equilibrium. 1A

Q 6. The total expenditure of the consumer on a commodity remains oppositely affected due to change in price. Comment on the elasticity of demand for the commodity.3U

Q 7. Differentiate between micro& macroeconomics.3U

Q 8. With the help of a suitable schedule, explain the relationship between TU and MU3A

Q 9. Explain the monopolyMarketwith the help of average revenue and marginal revenue curves. 3U

Q 10. Calculate AVC at each level of output.OUTPUT MC140 230335439 3A

Q 11. Explain the effect of the rise in the income of consumer on the demand for a good X. 4U

Q 12. Give the meaning of perfectly elastic supply and perfectly inelastic supply with the help of Diagram. 4U

Q 13. Differentiate between Monopoly and Perfect Competition of Market. Any six.4U

Q 14. Distinguish between fixed costs and variable costs.6U

Q 15. Explain the law of variable Proportion.6U

Q 16. Explain the following:-a) Law of diminishing Marginal utilityb) Explain geometric method of measuring Price Elasticity of Supply.. SECTION-B

6K

Q 17. Give the example of Macro variables?1K

Q 18. Define Transfer payment?1K

Q 19. Define aggregate supply1K

Q 20. What is balance of trade?1K

Q 21. Define autonomous consumption. 1K

Q 22. Distinguish between development expenditure and non-development expenditure. Is government expenditure on administration and defence a development expenditure? 3U

Q 23. Differentiate between depreciation and value loss.3U

Q 24. "GDP is not the real indicator of welfare". Explain.3U

Q 25. Differentiate between Intermediate product and Final product? 3U

Q 26. . Calculate Gross Value Added at factor cost:-a) Sales800

b) Opening stock 40c) Closing stock30d) Subsidies50e) Purchase of intermediate product 400 f)Purchase of machinery 200

3A

Q 27. Distinguish between direct tax and indirect tax. Give two examples of each. 4U

Q 28. Differentiate between money multiplier and investment multiplier 4U

Q 29. Distinguish between a commercial bank and a central bank.4U

Q 30. Describe fiscal deficit and its importance in economic development? 6U

Q 31. Define central bank. What are the functions of central bank? 6K

Q 32. From the following data calculate National Income by Income and Expenditure methods. (I)Government final consumption expenditure 110 (ii) Subsidies 10(iii) Rent200(iv) Wages and salaries600(v)Indirect tax60(vi) Private final consumption expenditure800(vii) Gross domestic capital formation120(viii) Social security contributions by employers 55(ix) Royalty 25(x) Net factor income paid to abroad 30(xi) Interest 20(xii) Net domestic capital formation110(xiii)Profit130(xiv) Net exports706A

(marking scheme of Set-31 Economic problem arises because: a) resourses are scarce b) resources are alternative uses 1/2+1/22. Law of demand state that other things remain constant when price increases demand decreases and price decreases demand increases . 13. Change in supply means increase in supply and decrease in supply . 14. This is because TVC = sum of MC . 15. Producer get maximum profit were Profit = TR-TC. 16 If the rise or fall in own price of a commodity causes no change in total expenditure on commodity then elasticity of demand is unitary. Situation Price of commodityQuantity Kg Total expenditureChange in total expenditureElasticity of demand

A 2 1 4 8 8 8 8 8 Unitary elastic

1.1/2=+1.1/27. Relation between AR and MR 1) If AR is constant AR = MR 2) If AR is diminishing AR> MR 3) MR can be ve but not AR 38. Land

LabourTP MP

1111111112345678259121415151423 =increasing 4 MP3 2= Diminishing1 MP0-1 = -ve MP

39.Revenue Curve Under monopolistic compt. Is same as under mnonopoly

A

Revenue

AR

MR

Output 3

10. calculate AVC OutputMCTCAC

1404040

2307035

33510535

43914436

311. demand for goods which are related (like Tea and Coffie ) is more elastic because when price of such goods rises the consumer have the option to shifting to the related goods . 312. perfectly inelastic supply: when supply does not response to change in price of the commodity . Perfectly elastic supply : change in price will cause an infinite change in quantity demanded. 1.1/2+1.1/213. S.No.RefrencePerfect competitionMonopoly

1.Number of saller and buyersLargeOne saller , but larg number of buyers

2.ProductHomogeneous Homogenous or differentiated

3.PriceUniform Not uniform because of price discrimination

4.Entry of firmFree entry Not possible

314. Fixed costVariable cost

1.Fixed costs do not change with change with change in quantity of output.1. Variable costs change with change in quantity of output.

3. Fixed cost remains the same whether output is zero or maximum. 2Variable cost are zero when output Is zero. These costs increase when output increase and decrease when output decreases.

Diagramitcal relation between MC and AC 3,3 15.Law of variable proportion state that as more and more variable factor are used with fixed factor then marginal product of variable factor start declining. Table , diagram 2,2,2OR16. a) Law of diminishing marginal utility 3 b) Methods 3

SECTION-B 17. Macro variable are agg consumption , agg demand, agg supply , general price level. 1/2+1/218. Transfer payment are one sided payment from one sector to other sector. 119. aggregate supply refers to the flow of goods and services as planned by the producers during a accounting period. 120. BOT= export of visible items import of visible item. 121. autonomous consumption is compulsory consumption . 11. 22.FDI can be useful to create employment, control inflation & reduce inequality of income & wealth which increase the purchasing power & thus improve the standard of living of the people.23. Depricition means loss of value of fixed assets . 1.1/2+1.1/2 24. GDP is not true indicator of walfare 1) Distribution of income 2) composition of GDP 3) non monetary transaction 1,1,125. Intermediate goodsFinal goods

7 These goods may be used as raw material for the production.8 Value to be added to these goods. 3. These goods are not used as raw material.4. Value is not to be added to these goods.

1.1/2+1.1/2 26. Gross value added at factor cost = Sales+(closing stock opening stock)-purchased of intermediate product purchase of machinery + subsidies. 327. While the impact of indirect taxation (like sales tax) can be shifted on to others, the impact of indirect taxation(like income tax) cannot be shifted. For example: 2+228. Investment Multiplier and MPC: Investment multiplier is the ratio between change in income and change in investment. K = Change in Y/change in I 2+229. Commercial bank: A commercial bank is a financial institute engagedin the business of accepting deposit and making loans to the people. Central bank: the central bank is an apex bank of the entire banking system of the country , RBI is the central bank of india. 2+230. Fiscal deficit is equal to the total borrowing of the government its shows estimated borrowing by the government to cope with its expenditure during the year . 2+431. Central bank: the central bank is an apex bank of the entire banking system of the country , RBI is the central bank of india. Function of the central bank 7. Issuing of notes 8. Banker of the government9. Bankers bank10. Supervision of bank11. Lender of the last resort.12. Control of credit. 2+432. INCOME METHOD NNP FC =(iii) +(viii)+(ix)+(iv)-(x)+(xi)+(xiii)-(v)+(xiv) Expenditure Method : NNPFC = (i)+(ii)-(iv)+(vi)+(vii)-(x)+(xii)+(xiv) 3+3 Group -3QUESTION PAPER Set -1CLASS-XIIECONOMICSS. No.Section A

1. What is law of demand? 1K

2. State one feature of oligopoly 1K

3. In which market form demand curve of a firm is perfectly elastic. 1K

4. Why is demand for water inelastic?1A

5. Name one characteristic which make monopolistic competition different from prefect competition. 1K

6. Explain any two factors that affect elasticity of demand. 3U

7. Given below is the cost schedule of a firm. Its average fixed cost is Rs 20 when it produced 3 units.Output(units)123

Average variable cost (Rs)302832

Calculate its marginal cost and average cost at each given level of output.3A

8. Total revenue at the price of Rs 4 per unit of a commodity is Rs 480. Total revenue increase by Rs 240 when its price rises by 25 percent. Calculate its price elasticity of supply.3A

9. Explain the implication of homogenous product feature of prefect competition. 3U

10. Explain the law of diminishing marginal utility with the help of utility schedule. 3U

11. Explain the effect of increase the income of buyer of a normal commodity on its equilibrium price. 4U

12. Explain the problem of what to produce Give diagram?.4U

13. When the price of the commodity falls by Rs. 2 per unit, its quantity demanded increase by 10 units .its price elasticity of demand is ( -)1. Calculate its quantity demanded at the price before change which was Rs 10 per unit. 4A

14. State explains the characteristic of indifference curve. 6K

15. Explain the law of variable proportion with the help of total product and marginal product curve. 6U

16. State whether the following statement are true or false. Give reason for your answer. (a) When total revenue is constant average revenue will also will constant.(b) Average variable cost can fall even when marginal cost is rising. (c) When marginal product falls average will also fall. 6U

Section B

17. State two source of supply of foreign exchange. 1K

18. Give the meaning of aggregate demand. 1K

19. State the meaning of money supply. 1K

20. How is the primary deficit calculated? 1U

21. Give the meaning of deflationary gap. 1K

22. How can Government budget be helpful in altering distribution of income in an economy? Explain. 3K

23. Explain center bank function as currency authority. 3K

24. Explain how distribution of gross domestic product is its limitation as a measure of economic welfare. 3U

25. Distinguish between autonomous and accommodating transaction of balance of payment account. 3U

26. Giving any two examples explain the relation between the rise in price of foreign currency and its demand. 3K

27. Distinguish between :(a) Capital receipts and revenue receipts.(b) Direct tax and indirect tax. 4K

28. Giving reason , state whether the following statement true and false :(a) Average propensity to save is always greater than zero (b) Value of investment multiplier varies between zero and infinity. 4K

29. Explain the process of money creation by commercial Banks. 4A

30. In an economy75 percent of the increase income is spent on consumption. Investment is increase by Rs 1,000 crore . calculate:(a) Total increase in income (b) Total increase in consumption expenditure.6 A

31. How will you treat the following while estimating national income of India? (a) Dividend received by an Indian from his investment in share of a foreign company.(b) Money received by a family in India from relative working in abroad.(c) Interest received on loan given to a friend for purchasing a car. 6U

32. From the following data calculate (a) GDP at factor cost and (b) factor income to abroad :

(Rs. In Crores)

(I) Compensation of employees800

(II) Profit200

(III) Dividend50

(IV) GNP at market price1400

(V) Rent150

(VI) Interest100

(VII) Gross domestic capital formation300

(VIII) Net fixed capital formation200

(IX) Change in stock50

(X) Factor income from abroad60

(XI) Net indirect taxes120

6A

MARKING SCHEME SET-1 ONE MARKS ANSWERS1. Inverse relationship between price and demand of a good , other things remains constant , is termed law of demand .2. (a) few firm (b) Firms are interdependence in taking price and output decision.(c) Non price competition (any one) 3. Prefect competition. 4. Because it is a necessity. 5. Forms produced differentiated products. 6. (i) NATUR OF GOOD 1\2Demand is inelastic in case necessities while elastic in case of luxuries 1(II) Number of substitution More the number of substitution more the choice the consumer has and therefore more elastic the demand 17 output AVC AFC TVC MC ATC*613060 30 30 90228 3056 26 583 322096 4052

8. PRICE (Rs)TR(Rs)OUTPUT(RS)4480 120 1 5720 144 1Ed= % change in quantity/% change in price 1= 24/1*4/120 = .89 Due to homogenous product price remain constant .Because supplier has no ground to change price.10Consumption unitsTotal utilityMarginal utility

144

273

392

4101

Or any other relevant scheduleExplain the law of diminishing marginal utility on the base of schedule11 Increase in income increase in demand at the given price ;4(I) This lead to excess demand.(II) Leads to competition among the buyers as a result price start rising.(III) Rise in price leads to rise in supply and fall in demand(IV) These change continue till supply and demand become equal at new equilibrium price.(V) Equilibrium price rise.12. The economy can produced different possible combination of goods and services from the given resource.The problem is that which of this combination should be economy produce. This is the problem of choice if more of one goods produced then lesser resources are left for producing other goods.13 GivenChange in price = -4Change in quantity = -10Ed = %change in quantity of demand /%change in price-1=10/-2*10/QQ = 50 UNITS.14(i) sloping down ward from left to right. 6(II) Strictly convex to the origin(III) Higher indifference curve represent higher utility(Explanation)15

According to the law of variable proportion when only one factor is increased while other factor remain unchanged, MP and TP change in the following manner:Phase - 1 MP increase and TP increase at increase rate Phase - 2MP decrease but is positive and TP increase at decreasing ratePhase - 3 MP decrease and is negative and TP falls 16(a) false because when TR is constant, AR will fall as output increases (c) True, provided MCAP.(d) False because AP falls only when MP AP. AP falls not because MP falls but because MP APSECTION - B17 Exports, foreign tourism etc.18It is the expected demand for all goods and services in the economy.19. (i) Currency and coin with public (ii) demand deposit of commercial bank.20Primary deficit = fiscal deficit - interest paid.21Excess of aggregate supply over aggregate demand at full employment level22Through the budget government can reduce inequality of income. It can adopt progressive taxation policy and spend more on requirement of the poor.23It has solo authority to issue currency. It does so in accordance with the requirement of the economy.24If with increase in GDP inequality of income increase, poor become poorer while rich become richer. This may lead to decline in welfare even though GDP has increased.25Autonomous transaction take place independently of the state of B.P.O. Accommodating transaction are transaction that are determine by net consequence of Autonomous transaction.26When price of foreign exchange rises,(i) Import become dearer resulting in less import and therefore falls demand for foreign currency.(ii) Tourism abroad become costlier and so demand for foreign currency falls.(or any other points27(a) Receipts which lead to either reduction in assets or increase in liabilities are called capital receipts. Receipts which neither reduced assets not create any liability are revenue receipts.(b)Direct tax is a tax whose incidence and impact fall on the same person .indirect tax is a tax whose incidence and impact fall on the different person. 28. (I) false, it can be negative at low level of income when consumption expenditure is greater than income.(II) false, it varies from 1 to infinity.29. Money creation by bank is determine by (1) fresh deposit and( 2) legal reserve ratio. Suppose fresh deposit is Rs 10000 and LRR is 20%. Initially bank keeps Rs. 2000 as cash and lendsRs 8000. Those who barrow spend this Rs8000. it is assumed that this rupees 8000 comes into bank as a fresh deposit .bank again keep 20% of it as cash reserve and lend the rest . in this way money creation goes on. Total money creation is Rs 50000.Money creation = initial deposit X 1/LRR.30. MPC = 3 / 4 , MPS =1 / 4, K = 430. (i) Y = I*K = 1000*4 = RS4000 Crore

ii.Given that Y = C + I C = Y- I = 4000- 1000Rs 3000 crore31. (a) it is factor income from abroad , so will be included in N.I (b) It is transfer receipts, so it is not included in N.I.(c) Not included in N.I. because it is a non-factor receipt as the loan is not used for production but for consumption. 32. (A) GDP at factor cost = (i) + (ii) + (v) + ((VI) - (vii) - (viii+ix)) = 800 + 200 +150 + 100+ (300-200-50)= Rs 1300 crore.(B) NFIFA = GNP @MP GDP @ MP= (VI) - (GDP@FC+ (XI)) = 1400-(1300+120) = -20FITA = FIFA - NFIFA = 60- ( -20) == Rs 80 crore===================================================================Group -3QUESTION PAPER SET -2CLASS-XIIECONOMICSSNo.Section A

1 What happens to total utility when marginal utility is negative?1K

2Why is the PPC concave to origin?1U

3 How many firms are there in Monopoly Market? 1K

4 When demand for a good rise due to rise in price of substitute goods?1U

5 What is meant by change in demand called?1K

6 What is meant by Fixed Cost?3K

7 A lot of people died and many factories are destroyed because of a severe earthquake in a country. How will it affect the countrys PPC?3U

8Why does budget line slope downwards from left to right?3U

9Explain the effects of change in income of the buyers of a good on its demand.ORExplain any there determinants of demand for a commodity for a household.3U

10Explain the effect of Change in Prices of inputs used on the supply of a product.3U

11 Define Perfect competition. State its any two features.4K

12 A consumer buys 80 units of a good at a price of Rs. 5/- per unit. Suppose price elasticity of demand is (-) 2. At what price will he buy64 units?4A

13

Define Producers Equilibrium. Explain producers Equilibrium with Marginal Revenue (MR) and Marginal cost (MC) approach under perfect competition. OrCalculate total variable cost and marginal cost at each given level of output from the following table-Output 01234

Total40607897124

4A

14When will the equilibrium price of a commodity not change if its demand and supply both increase? Explain through a diagram.OR There is a simultaneous decrease in demand and supply of a commodity. When it will result in: No change in equilibrium Price. A fall in equilibrium price.6U

15 Explain the meaning of increasing returns to a factor with the help of TPP schedule and TPP curve. 6U

16 Explain different situation under which budget line shifts. Use diagram.6A

Section B

17. Give the meaning of ex-ante aggregate demand.1K

18. State the relationship between MPC and investment multiplier.1

19. What is Dirty Floating?1K

20. State the two components of money supply.1K

21. Name the primary function of money.1K

22. From the following data relating to a firm, calculates its net Value Added at factor cost:Items(Rs. In Lacs)

Sales1600

Subsidy80

Closing stock40

Depreciation60

Intermediate purchase1000

Import of raw material120

Exports200

Opening stock100

Purchase of machinery for own use400

3A

23. Distinguish between Domestic and National product. When can National product be more than Domestic product?3U

24. Machine purchased is always a final good. Do you agree? Give reasons for your answer.3U

25. Give three reasons why people desire to have foreign exchange.3U

OR Explain the effect of Appreciation of domestic currency on Imports.

26. Distinguish between the current account and capital account of balance of payments account. Is import of machinery recorded in current account or capital account? Give reasons for your answer.3U

27. Categories the following government receipts into revenue and capital receipts. Give reasons for your answer.(a) Receipts from sale of share of a public sector undertaking.(b) Borrowings from public.(c) Profits of public sector undertakings.(d) Income tax received by government.4U

28.

What is Deficient demand? Give any Three Measurement to Correct It.OR Complete the following table-IncomeMarginal Propensity to ConsumeSavingAverage Propensity to Consume

0---40--

100---20--

200--0--

300--60--

400--120--

4A

29. What is the government budget? Give the meaning of : (a) Revenue deficit,(b) Fiscal deficit,(c) Primary deficit.4K

30. In an economy S=-100+0.5Y is the saving function. (Where S=saving and Y=national Income) and investment expenditure is Rs. 7000. Calculate :(a) Equilibrium level of national income (b) Consumption expenditure at equilibrium level of national income.6A

31. Explain Any Six Function of RBI.6U

32. From the following data calculate National Income by expenditure and Income method : (Rs in crores)

Government final consumption expenditure 300

Subsidies 30

Rent 600

Wages and salaries 1800

Indirect Tax 180

Private final consumption expenditure 2400

Gross domestic capita information 360

Social security contribution by employers 165

Royalty 75

Net factor income paid to abroad 90

Interest 60

Consumption of fixed capital 30

Profit 390

Net exports 210

Change in stock 150

ORCalculate Personal Income and Gross National Disposable Income from the given data : (Rs in crores)Personal Tax 240Net indirect tax 200Corporation tax 180National income 200Net factor income abroad 10Consumption of fixed capital 100National debt interest 140Retained earnings of private corporate sector 80Net current transfers to the rest of world (-)40Current transfers from government 60Current transfer from government 60Share of government in National income 1606A

MARKING SCHEME FOR QUESTION PAPER -SET-IISECTION A1. Total utility should be falling.12. Because of increased marginal opportunity cost.13. One14. Increase in demand. 15. Costs, which incurred on fixed factor.16. With the death of lot of people amount of labour will fall and destruction of factories will cause a reduction in the stock of capital. This decrease in resources causes of shift of production possibility curve to the left showing less production of two goods than before. 1.1/2*2=37. Because with given income and given prices of two goods, if a consumer buys more of one good he has to buy less of the other good. 38. Normal goods Increase in the income of consumer increases his demand.1Inferior goods- Negative relationship between income and demand. 1Necessities of life- demand is unaffected.1ORFollowing are the factors that affecting demand for a commodity by a consumer.(1)Price of the commodity1(2)Income of the consumer1(3)Price of Related goods (Substitute and Complementary goods)19. Supply curve shifts rightward and leftward due to increase or decrease in price of the inputs.Diagram3

10. Perfect competition- It refers to a market situation in which there are large number of buyers and sellers selling homogeneous product.1Features- (any two) 1*2=2(1) Very Large number of buyers and sellers.(2) Homogeneous Product(3) Free entry and exit of firms(4) Perfect knowledge about market(5) No Transport Cost. 11. ep = (-)2 = 12 = 1 = P = 0.51New price P +P = 5+0.5 = Rs 5.5 per unit.112. PRODUCERS EQUILIBRIUM-A producers said to be in equilibrium when he produces the level of output at which his profit is maximum.3+1=4

Under perfect competition, price =MR=AR which is parallel to X axis. Two conditions must be satisfied to achieve producers equilibrium.(1) MR=MC, (2) MC cuts MR from below

In the diagram OQ2 is the equilibrium level of output because it satisfies both the conditions of equilibrium that is MR=MC and MC cuts MR from below.(2). MC should be greater than MR after equilibrium output.If the firm produces less than OQ2 then profit are not maximize. On the other hand, if firm produces more than OQ2 then there will be a loss and total profits will be reduced.OR 2+2=4OutputTotal CostTFCTVCMC

0404000

160402020

278403818

397405719

4124408427

13. When both demand and supply of a commodity increase (when both demand and supply curve of a commodity shift to the right), the equilibrium quantity will increase but the equilibrium price may or may not be affected. This can be shown by diagram.

When both demand and supply of a commodity increase in equal proportion, the equilibrium price will remain the same. As shown in the diagram after change in both demand and supply price will remain the same as P and the equilibrium quantity changed from Q to Q. 3+3=6ORDecrease means less quantity at the same price. Decrease in demand shift the demand curve to the left downwards. Decrease in supply shifts the supply curve to the left upwards.(i)If decrease in demand is equal to decrease in supply, there will be no change in the equilibrium price .In the figure, both demand and supply decrease by EE = QQ at a given price OP(ii)If decrease in demand is greater than decrease in supply, the equilibrium price will fall. In the figure, decrease in DD=AE. While decrease in supply is lower i.e. BE. Therefore, equilibrium price falls from OP to OP.15 law of variable proportions The law of variable proportion states that if we go on using more and more units of a variable factor (Labour) with a fixed factor (land), the total physical product increases at an increasing rate in the beginning,then increases at a decreasing rate after a level of output and ultimately it falls. In accordance with the law , the Marginal Physical Product increases in the beginning, then its start falling but remain positive and ultimately it continues to fall but also becomes negative. The following schedule and diagram illustrate the law.Schedule and Diagram-Fixed FactorVariable FactorTotal ProductMarginal ProductAverage ProductStages

11101010First Stage (Increasing Returns to Factor)

12302015

13451513Second Stage (Decreasing Returns to factor)

1452713

1552010.4

1648-48Third Stage (Negative Returns to a Factor)

1738-105.4

The schedule and the diagram shows that there are three phases of the law of variable proportions. In the First phase, TPP increases at an increasing rate and MPP rises. In phase II, TPP increases at a diminishing rate and MPP falls but remain positive. In phase III, TPP starts falling and MPP becomes negative. Phase I is up to unit 2 and phase II is from unit 2 to unit 5. Phase III is after unit 5. 2+2+2=616. Shifts In Budget Line.Case I When consumers money income increases but price of commodities remain constant.3If LM is the Budget Line. Suppose if money income is increases then consumer will be able to purchase more goods with the new income at the given prices, therefore budget line will shift to the right (LM). Suppose if money income is decreases then consumer will be able to purchase less goods with the new income at the given prices, therefore budget line will shift to the left (LM). New budget line LM and LM is parallel to the original budget line LM because slope of new budget lines remain same since price do not change.

Case II When prices of good X change and income of consumers remain constant.3If LM is the Budget Line. Suppose if price of good X falls but money income and price of Y good remain constant then consumer will be able to purchase more of good X only, therefore

budget line will shift to the right (LM). Suppose if price of good X rises but money income and price of Y good remain constant then consumer will be able to purchase less of good X only, therefore budget line will shift to the right (LM). SECTION B17. Ex-ante aggregate demand refers to the anticipated total demand for goods and services in an economy during a given period of time. 1 18.Multiplier (K) = 1/1-mpc119.Definition 120.The two components of money supply are : Currency held with the public and demand deposits with commercial banks.121. Money as the measure of Value And Money as a medium of exchange.1 22.NVA fc = 1600+40-100-1000-60+80= Rs560 lakhs323.Domestic Product refers to the output produced by all production units located within the domestic territory of a country during a accounting period.1National product refers to the output produced by normal resident of a country (within and outside the country) during an accounting year.1When Net Factor Income from Abroad is positive then National product can be more than Domestic product124. Whether machine is a final good or not depends on how it is being used . If the machine is bought by a household, then it is a final good.1If the machine is bought by a firm for its own use, then also it is a final good.1If the machine is bought by a firm for resale then it is an intermediate good.1 25.Three reasons.(1x3 = 3)(1) To purchase goods and services from other countries by the domestic residents.(2) To send gifts and grants to foreign countries.(3) To invest and purchase financial assets in some other countryORAppreciation of domestic currency means a rise in the price of domestic currency (say rupee) in terms of a foreign currency (say $). It means one rupee can be exchanged for more $. So with the same amount of money more goods can be purchased from USA. It means imports from USA have become cheaper. They may result in increase of imports (from USA).326.The current account records transactions relating to the export and import of goods and services, income and transfer receipts and payments during a year. 1The capital accounts records transactions affecting foreign assets and foreign liabilities during a year.1Since import of machinery is an import of good, it is recorded in the current account.127.(a) It is a capital receipt as it results in reduction of assets.1(b) It is a capital receipt as it creates a liability.1(c) It is a revenue receipt as it neither creates a liability nor reduces any assets.1(d) It is a revenue receipt as it neither creates a liability nor reduces any assets.128.Definition = 1 Any Three Measurement-3ORIncome YSavingConsumption CMPCAPC

0---4040------

100100-20120800.81.2

2001000200800.81.0

30010060240400.40.8

400100120280400.40.7

9.Government Budget is a statement of expected receipt and expenditure of the government during a financial year.1(a) Revenue deficit is the excess of revenue expenditure over revenue receipts.1(b) Fiscal deficit is the excess of total expenditure over total receipts excluding borrowings.1(c) Primary deficit refers to the deference between fiscal deficit of the current year and interest payments on the previous borrowings. 130. Saving FunctionS = - 100 + 0.5 YConsumption Function C = Y- SC = Y + 100 0.5 YC = 100 + 0.5 YInvestment I = 7000(a) Equilibrium Level of National Income3Y = AD = C + IY = 100 + 0.5 Y + 7000 0.5 Y = 7100Y = 7100 / 0.5 = Rs. 14200(b) Consumption expenditure at equilibrium level of national income3C = Y + 100 0.5 YY = 14200 = 100 + 0.5 (14200) = 720031.Any six function of RBI1*632-Expenditure MethodNational Income=vi + i + vii + xiv v + ii xii x 1=2400+300+360+210-180+30-30-90 1.1/2=Rs. 3000 Crores. 1/2Income MethodNational Income= iv + viii + (iii + ix) +xi + xiii x 1=1800+165+(600+75)+60+390-90 1.1/2=Rs. 3,000 Crores. 1/2ORPersonal Income=(iv - xi) + (vii- ix- x) viii iii 1=2000 - 160 + 140- (-40) + 60 80 180 1.1/2=Rs. 1820 Crores. 1/2GNDI=iv + ii + vi ix 1=2000 + 200 + 100 - (-40) 1.1/2=Rs. 2340 Crores.Group -3QUESTION PAPER SET -3CLASS-XIIECONOMICS1. Why does an economic problem arise? 1U

2. What is meant by Consumers equilibrium? 1K

3 What do you mean by MU? 1K

4 What is MC?1K

5 In which market both AR and MR equal. 1U

6 Explain why production possibility curve is concave to the origin. 3U

7 What are the factors affecting demand? Any Three3K

8 Explain the relationship between TR and MR . 3U

9 Differentiate between Change in Quantity demanded and Change in demand 3A

or

Differentiate between Change in Quantity supply and Change in supply.

10 How Monopoly Affect the lower class consumers?3U

11 A consumer buys 160 units of a good at a price of Rs 8 per unit. Price falls to Rs 6 per unit. How much quantity will the consumer buy at the new price if price elasticity of demand is (-)2) ? 4A

12 Why demand curve slopes downward? 4U

13 Calculate Total Variable Cost and Marginal Cost from the following cost schedule of a firm whose Total Fixed Cost is Rs. 12 :OutputTotal Cost

(Unit)(Rs.)

120

226

331

438

4A

14 Explain the likely behaviour of Total Product and Marginal Product when only one input is increased while all other inputs are kept unchanged. ORExplain the producer equlibrium with the help of MR-MC approach. 6U

15 There is a simultaneous decrease in demand and supply of a commodity. When will it result in:(a) No change in equilibrium price. (b) A fall in equilibrium price. Use Diagram.6A

16 What are the determinants of market supply? 6K

SECTION : B

17 What do you meant by Deficient demand? 1K

18 What do you meant by Bartersystem. 1K

19 What do you mean by Inflationary gap? 1K

20 Give the relationship between APC and APS. 1U

21 What do you meant by Primary Deficit? 1K

22 Calculate Personal Income from the following data :

Items(Rs. crores)

(i) Undistributed profits of corporations20

(ii) Net domestic product accruing to the private sector500

(iii) Corporation tax55

(iv) Net factor income from abroad(-) 10

(v) Net current transfers from government15

(vi) National debt interest40

(vii) Net current transfers from the rest of the world15

3A

OR

Calculate Gross Value Added at MP from the following data.

Sl.NoItemsRs. In lakhs

1CFC/ Depreciation15

2Sales in domestic market250

3Exports50

4Opening stock20

5Purchase of raw material150

6Closing stock30

7Import of raw material25

23 State any three functions of money.3K

or

What are three drawbacks of barter system

24 Differentiate between fiscal deficit and revenue deficit. 3U

25 A Rs. 200 crore increase in investment leads to a rise in national income by Rs. 1000 crores. Find out marginal propensity to consume. 3A

26 What are causes for disequilibrium of balance of payments. 3K

27 Explain how foreign exchange rate is determined in a foreign exchange market ? 4U

28 Distinguish between revenue receipt and capital receipt and give two examples of each. 4U

29 What are the functions of Central bank. Explain any two. 4K

or

Give reasons to categorize the following into revenue receipts and capital receipts? 1. Recovery of loans1. Income tax1. dividends on investment made by government(i) Sale of public undertaking

30 How will you treat the following while estimating domestic product of India?(i) Rent received by a resident Indian from his property in Singapore.(ii) Salaries to Indians working in Japanese Embassy in India.(iii) Profits earned by a branch of an American Bank in India.6U

OR

Explain any two precautions that should be taken while estimating national income each by (a) value added method, and (b) income method

31Can an economy be in a state of under employment equilibrium? Explain with the help of a diagram. 6U

32 Calculate GDP at MP by a) Expenditure method, b) Income method Items (Rs. In Crores)1)Net domestic fixed capital formation502)Operating Surplus503)Subsidies 54)Mixed income605)Pvt. Final consumption expenditure1206)Social security contributions by employees107)Net factor income from abroad (-)108)Indirect tax309)Addition to stocks 510)Compensation of employees7011)Govt. final consumption expenditure2512)Net exports 56A

ANSWER KEYSET-31. An economic problem is basically the problem of choice, which arises because of scarcity of resources. Human wants are unlimited but resources to satisfy them are limited. In such a situation every individual and society have to make a choice as to which wants should be satisfied by making use of scarce resources which have alternative uses. 2) Consumer equilibrium:-It refers to a situation when he spends his given income on purchase of a commodity ( or commodities) in such a way that yields him maximum satisfaction3) Marginal utility is the satisfaction derived from consumption of additional commodity,MUn= TUnTUn-14) Defunation5) Perfect competitive market.6) Shape of PPC:- Normally, the PPC is concave to the origin and slopes downwards, because of increasing marginal rate of substitution. Downward sloping concave PP curve shows increasing Marginal Rate of Transformation (MRT) as more quantity of one good is produced by reducing quantity of the other good. This behaviour of the MRT is based on the assumption that all resources are not equally efficient in production of all goods. As more of one good is produced, less and less efficient resources have to be transferred to the production of the other good which raises marginal cost i.e. MRT.7. a. Price of the commodity: With the fall in the price of a commodity, its demand extends. b. Price of other related goods: Demand for a commodity is also influenced by the change in the price of other related goods. (i) Substitute goods: Increase in the price of one causes increase in demand for the other and decrease in the price of one causes decrease in demand for the other. (ii) Complementary goods: A fall in price of one causes increase in the demand of the other and a rise in the price of one causes decrease in the demand for the other.c. Income of the consumer: Change in the income of the consumer also influences his demand for different goods. The demand for normal goods tends to increase with increase in income, and vice-versa. On the other hand, the demand for inferior goods like coarse grain tends to decrease with increase in income and vice-versa.

When TR increases MR is positiveWhen TR is maximum MR is zeroWhen TR decreases MR is negative 8.Output(units)Price(Rs.)MR(Rs.)TR(Rs.)

1101010

29818

38624

45- 420

9. Change in Quantity demanded: The change in the price of commodity leads, there will be change in quantity of demand for the commodity .Expansion due to fall in price, and Contraction due to rise in price. (diagram A) Change in demand: A change or shift of demand curve is due to a change the other factors(Income of the consumer iii) Price of related goods and iv) Tastes and preferences of the individual/ consumer) than price of the commodity. Rightward shift of DDcurve means increase quantity, while leftward shift DDcurve means decrease quantity. OrCHANGE IN QUANTITY SUPPLIED:- It is caused by a rise/fall in the price of a commodity. It is expressed either in form of an expansion in supply or contraction in supply. Expansion and contraction in supply are represented diagrammatically in the form of a movement along a given supply curve. Contraction is due to fall in price.CHANGE IN SUPPLY:- A change in supply of a commodity caused by factors other than (Income of the consumer ii) Price of related goods and iii) Tastes and preferences of the individual/ consumer) the price of a commodity. Change in supply is represented graphically by a rightward or leftward shift. Decrease is due to fall in other factors than the price. Leftward shift shifting of supply curve leads to decrease the supply.

10. MONOPOLY: 1) Effect of Price Discrimation

11. , , X = 160 = +80 , X = +80 + 160 = 240The Consumer will buy 240 units12. The demand curve slopes downward because of :- i)Law of diminishing marginal utility : According to this law, as a consumer in a given time, increases the consumption of a thing, the utility from each successive unit goes on diminishing A Consumer gets maximum satisfaction. When the price of a commodity is equal he its marginal utility. As more units are bought, their marginal utility diminishes. Thus, a consumer will boy more units of a commodity, with fall in its price.ii)Income effect : Change in the price of a commodity causes a change in the real income of the consumer. With fall in price, real income increases. The increased real income is used to boy more units of the commodity.iii)Substitution effect : When the price of community X falls it becomes cheaper in relation to commodity. Accordingly X is substituted for the commodity. A consumer in order to get more satisfaction, will boy more units of the commodity whose price has fallen in relation to the commodity. iv)Uses of commodity : If a commodity has diverse uses, with the fall in the price of product consumer will buy more.QTCTFCTVCMC

1201288

22612146

331121915

43812267

13.

A.14.L12345678910

TPP371216192122222119

APP33.5443.83.53.142.752.331.9

MPP34543210-1-2

Law of Variable Proportions- The law states that if we go on using more and more units of a variable factor (Labour) with a fixed factor( land , Capital) the total output initially increa