GENERAL INSTRUCTIONS:-
1. All questions in both the sections are compulsory.
2. Marks for questions are indicated against each question.
3. Questions no 1-5 and 16-20 are very short answer type questions
carrying 1
mark each.
4. Questions no 6-8 and 21-23 are short answer type questions
carrying 3
marks each. Answers to them should normally not exceed 60 words
each.
5. Questions no 9-11 and 24-26 are also short answer questions
carrying 4
marks each. Answers to them should normally not exceed 70 words
each.
6. Questions no 12-15 and 27-30 are long answer questions carrying
6 marks
each. Answers to them should normally not exceed 100 words
each.
7. Answers should be brief and to the point and the above word
limit should
be adhered to as far as possible.
S E C T I O N – A
1.Micro economics studies the economic behavior of 1M
a. Economy as a whole
b. Individual economic units
d. World economy
a.
b.
c.
d.
2 .Say true or false 1 M
The problem of “how to produce “involves the choice between
consumer goods and capital goods.
3. When all the inputs used in production of a good are increased
simultaneously in the same proportion , that production function is
known as 1 M a. Law of Variable proportions
b. Law of returns to scale
c. Law of returns to a factor
d. Its not a production function
)
)
)
)
4. Shantha Bio Tech Company came out with a new vaccination to
prevent “Ebola Virus”. The company alone enjoys an exclusive right
to produce the vaccination. This right is known as 1 M
a. Fundamental right
b. Human right
c. Patent right
d. RTI
)
3
a The maximum price fixed above the equilibrium price
b Minimum price fixed below the equilibrium price
c Equal to the equilibrium price
d None
)
)
)
)
6. When the price of a commodity falls by 80%, the quantity
demanded of it increases by 100 %. Find out its price elasticity of
demand. 3M
80%, 100 %.
7. A consumer consumes only two goods X & Y and is in
equilibrium. Show that when the price of good X falls, the consumer
buys more of good X. Use utility ]analysis. 3 M
x y x
x .
OR
Given the price of a good how will a consumer decide as to how much
quantity of that good to buy? Use utility analysis.
? 8. From the following table calculate Average revenue at each
level of output. 3 M
Output 1 2 3 4
Marginal revenue 6 4 2 0
4
1 2 3 4
6 4 2 0
9. Distinguish between change in quantity demanded and change in
demand. Which of these causes a shift of the demand curve ? 4
M
Or
Explain the inverse relationship between price and the quantity
demanded of a commodity.
?
10. Draw a PPC and show the following situations. 4 M a. All the
land resources are used.
b. Government started promoting foreign capital.
c. Some of the labor force remaining unemployed.
d. Destruction of resources in the recent natural calamity.
)
)
)
)
11. To what extent can a firm influence the price under a) Perfect
competition b) Monopolistic competition
C) Monopoly d) Oligopoly 4 M
OR
5
i) Non price competition
ii) Few firms
?
) )
) )
-
i)
ii)
12. Define market supply. What is the effect on the supply of a
good?
a) When the government imposes a tax on the production of that
good
b) When the government gives a subsidy. Explain using a diagram. 6
M
)
) ? 13. Explain why is an indifference curve
a) Downward sloping b) Convex to the origin 6 M
OR
Explain the concept of MRS with the help of a numerical example.
Also explain its behavior along an indifference curve.
)
)
6
14. What is producers equilibrium? Explain the conditions of
producers equilibrium through MC-MR approach when price remains the
same at all levels of output. Use a diagram. 6 M
?,
15. If equilibrium price of a good is less than its market price,
explain all the changes that will take place in the market. Use a
diagram. 6 M
, ?
S E C T I O N - B
16. If MPC =1 the value of the multiplier is 1 M
a) 0 b) 1 c) between 0 and 1 d) All of the above
= ,
) 0 ) 1 ) 0 1 )
17. APC = 1 when 1M
a) C > Y b) C=Y c) C < Y d) C = 0
=1 „
) C > Y ) C=Y ) C < Y ) C = 0
18. which of the following is not an indirect tax 1 M
a) Corporate tax b) VAT c) service tax d) excise duty
) ) ) )
19. Disinvestment is a 1 M
a) capital receipt b) revenue expenditure
c) budget expenditure d) direct tax
7
) ) ) ) 20. Say true or false. 1 M
Appreciation of Indian rupee will occur when Rs 66 have to be paid
to exchange one US dollar instead of Rs 40.
40 66
21. Explain how “distribution of GDP “is limitation in taking GDP
as an index of welfare.
3 M
„ „
22. Which transaction determine the BOT? When is BOT in surplus? 3
M
? ?
23. When the price of a foreign currency rises, its demand falls.
Explain why? 3M
OR
When the price of a foreign currency rises its supply also rises.
Explain why?
24. A farmer wants to exchange his wheat for cricket bats. What
problems he may face in this transaction, and how can he overcome
them? 4 M
- ?
25. In an economy the MPC = 0.75. Investment expenditure in the
economy increases by Rs 75 Crores. Calculate the total increase in
national income. 4 M
8
OR
Define Investment multiplier and explain its working with a help of
table
0.75 . 75 .
26. What is excess demand? Explain the role of Repo rate in
removing it. 4M
?
27 Explain the re-allocation of resources objective of Government
budget.
Tax rates on higher income groups have been increasing. Which
economic value does it reflect? Explain using examples. 6 M
?
28. When is an economy in equilibrium? Explain with the help of
saving and
investment functions. Also explain the changes that takes place in
an economy when
economy is not in equilibrium. Use diagram or a table. 6 M
? „ ?
29. How will you treat the following while estimating national
income of India? Give reasons for your answer. 6 M
I) Dividend received by a foreigner from investment in share of an
Indian company.
II) Profits earned by a branch of an Indian bank in Canada.
III) Scholarship given to Indian students, studying in India by a
foreign company.
OR
9
Explain the problem of double counting in estimating the national
income with help of an example. Also explain two alternative ways
of avoiding the problem.
?
)
)
)
30. Calculate GNP at MP from the following data. 6 M
( In crores)
(ii) Interest 500
(iii) Rent 700
(iv) Profit 800
(vi) Dividends 300
(vii) CFC 100
(ix) Net export 70
(xi) Mixed income of self-employed 1500
10
( )
(ii) 500
(iii) 700
(iv) 800
(v) 200
(vi) 300
(vii) 100
(viii) 250
(ix) 70
150
(x) - 1500
1
% change in the quantity demanded / % chage in price= ( -)
1.25
In the case of two goods , X and Y , a consumer will be in
equilibrium when Mux/Px =MUy/Py -- 1 M When the price of X falls,
then rupee worth satisfaction from X will be more than Y. i.e.,
Mux/Px > MUy/Py ---- 1 M Therefore he will buy more of X and
less of Y.This will lead to a fall in the MUx and a rise in MUy.
This will continue till Mux/Px = MUy/Py -- 1 M
OR
Based on the principle of MU = P with explanation --- 3 M
Calculation of TR -- 1.5 M Calculation of AR -- 1.5 M
TR AR
6 6
Change in quantity demanded Change in demand
Due to change in price Due to change in factors other than
price
Movement along the curve Shift of the curve
Expansion and contraction Increase and decrease
diagram diagram
OR
Due to law of DMU Due to substitution effect Due to price effect
Due to income effect -- 1x 4 with explanation
1. Fuller utilization of resources … 1 M 2. Economic growth ... 1M
3. Decrease in resources ... 1 M 4. Under utilization of resources
... 1 M
The above situations to be shown in the PPC with proper labeling
and explanation.
a. Uniform price as each firm is a price taker. b. Firm has partial
control over price due to product differentiation. c. Firm is a
price maker . so price discrimination is possible. d. Price
rigidity due to fear of price war. 1 x 4 = 4
or
Collusive oligopoly Non collusive oligopoly
Collusive oligopoly is one in which the firms co- operate with each
other. Price rigidity is observed.
Non collusive oligopoly is one in which firms compete with each
other.
……………………… …………..2m
price competition : The firms are afraid of competition through
lowering the price because it may start price war. Therefore they
compete the non price factors like advertising, after sale service
etc.
Few firms: There are few sellers of the commodity and each seller
sells a substantial portion of the output of the industry. The
number of firms is so small that each seller knows that he
can
3
12
13
influence the price by his own action and that he can provoke rival
firms to react. ……………………………………………..2m
Market supply refers to quantity of commodity that the firms are
willing to offer for sale at a given price during given period of
time. ………………1m Rise in taxes increases the cost of production and
reduces the profit margin. As a result supply falls from OQ to OQ1
at the same price OP. It leads to a leftward shift in the supply
curve from SS to S1S1
a) Slopes downwards :- It means that an IC has a negative slope. It
is because if the consumer wants to have more units of one good he
will have to sacrifice the consumption of number of units of
another good in order to maintain the same level of satisfaction. 3
b) It is convex to the origin because of diminishing MRS or slope
of IC. In order to gain an additional unit of good 1 , the consumer
is prepared to give up less and less units of good 2. in
good2
MRSxy =
in good 1 3
Or MRS means the rate at which a consumer will sacrifice one good
to get another good so as to maintain the same level of
satisfaction. 1
bundles good1 good2 MRS
4
14
15
explanation 2m .A producer is said to be in equilibrium when he
produces that level of output at which his profits are maximum 1m
Producer’s equilibrium is determined at OM level of output , as at
this point i) MC= MR ii) MC > MR after MC = MR output. III) MC
cuts MR from below. 3m Diagram wih explanation. 2m
1. OP * is the equilibrium price and OP 2 is the market price. At
OP2 price there is excess supply .
2. Excess supply is that supply of that commodity, which is greater
than that the consumers are willing to demand at a given price. In
the above diagram
OQ s (quantity supplied) > OQ d (quantity demanded)
3. This will result in competition among the sellers to clear of
their stock and the price falls.
4. This process continues till the price reaches OP * from OP 2
Diagram 2 M + Explanation 4 M
CBSE Pre Board Set-II Solved Question Paper Class XII
Economics
Publisher : Faculty Notes Author : Panel Of Experts
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