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# Board Paper of Class 12-Humanities 2013 Economics (SET 2) - Solutions

General Instructions:
(i) All questions in both the sections are compulsory.
(ii) Marks for questions are indicated against each.
(iii) Questions Nos. 1-5 and 17-21 are very short-answer questions carrying 1 mark each. They are required to be answered in one sentence each
(iv) Questions Nos. 6-10 and 22-26 are short-answer questions carrying 3 marks each. Answers to them should normally not exceed 60 words each.
(v) Questions Nos. 11-13 and 27-29 are also short-answer questions carrying 4 marks each. Answers to them should normally not exceed 70 words each.
(vi) Questions Nos. 14-16 and 30-32 are long-answer questions carrying 6 marks each. Answers to them should normally not exceed 100 words each.
(vii) Answers should be brief and to the point and the above word limits should be adhered to as far as possible.

• Question 1

Give two examples of variable costs. (1)

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• Question 2

Given the meaning of market demand. (1)

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• Question 3

Under which market form a firm’s marginal revenue is always equal to price? (1)

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• Question 4

When is the demand for a good said to be inelastic? (1)

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• Question 6

Explain the law of diminishing marginal utility with the help of a total utility schedule.

OR

Explain the condition of consumer’s equilibrium with the help of utility analysis. (3)

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• Question 7

Explain the difference between an inferior good and a normal good. (3)

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• Question 8

A firm’s revenue rises from Rs 400 to Rs 500 when the price of its product rises from Rs 20 per unit to Rs 25 per unit. Calculate the price elasticity of supply. (3)

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• Question 9

Complete the following table: (3)

 Output Average Cost Marginal Cost (Units) (Rs) (Rs) 1 12 ……. 2 10 …….. 3 ……. 10 4 10.5 …….. 5 11 …….. 6 …….. 17
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• Question 10

Explain any two features of monopoly market. (3)

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• Question 11

Production in an economy is below its potential due to unemployment. Government starts employment generation schemes. Explain its effect using production possibilities curve. (4)

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• Question 12

The demand for good rises by 20 percent as a result of all in its price. Its price elasticity of demand is (−) 0.8. Calculate the percentage fall in price.

OR

How is price elasticity of demand affected by:

(i) Number of substitutes of available for the good.

(ii) Nature of the good. (4)

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• Question 13

Explain the conditions of producer’s equilibrium with the help of a numerical example. (4)

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• Question 14

Explain consumer’s equilibrium with the help of Indifference Curve Analysis.

OR

Explain the relationship between

(i) Prices of other goods and demand for the given good.

(ii) Income of the buyers and demand for a good. (6)

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• Question 15

Giving reasons, state whether the following statements are true or false.

(i) A monopolist can sell any quantity he likes at a price.

(ii) When equilibrium price of a good is less than its market price, there will be competition among the sellers. (6)

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• Question 16

Explain the Law of Variables Proportions with the help of total product and marginal product curves. (6)

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• Question 18

Give two examples of indirect taxes. (1)

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• Question 19

Give one example of “externality” which reduces welfare of the people. (1)

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• Question 20

How can increase in foreign direct investment affect the price of foreign exchange? (1)

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• Question 22

Distinguish between balance of trade and balance on current account. (3)

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• Question 23

Explain the effect of appreciation of domestic currency on imports. (3)

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• Question 24

Explain the problem of double coincidence of wants faced under barter system. How has money solved it? (3)

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• Question 25

Explain any one objective of Government Budget. (3)

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• Question 26

Distinguish between revenue expenditure and capital expenditure in Government budget. Give an example of each. (3)

OR

Distinguish between revenue deficit and fiscal deficit.

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• Question 27

Giving reasons categorise the following into stock and flow: (4)

(i) Capital

(ii) Saving

(iii) Gross domestic product

(iv) Wealth

OR

Explain the circular flow of income.

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• Question 28

How do commercial banks create deposits? Explain. (4)

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• Question 29

Calculate “sales” from the following data: (4)

 S. Particulars (Rs No. in lakhs) (i) Net value added 560 at factor cost (ii) Depreciation 60 (iii) Change in stock (−) 30 (iv) Intermediate 1,000 cost (v) Exports 200 (vi) Indirect taxes 60
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• Question 30

In an economy, S = −100 + 0.6 Y is the saving function, where S is Saving and Y is National Income. If investment expenditure is 1,100, calculate: (6)

(i) Equilibrium level of National Income

(ii) Consumption expenditure at equilibrium level of National Income.

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• Question 31

Calculate National Income from the following data: (6)

 S. Particulars (Rs No. in crores) (i) Private final 900 consumption expenditure (ii) Profit 100 (iii) Government final 400 consumption expenditure (iv) Net indirect 100 taxes (v) Gross domestic 250 capital formation (vi) Change in stock 50 (vii) Net factor (−) income from abroad 40 (viii) Consumption of 20 fixed capital (ix) Net imports 30

OR

Calculate net national disposable income from the following data:

 S. Particulars (Rs No. in crores) (i) Gross domestic 2,000 product at market price (ii) Net current (−) transfers to rest of the world 200 (iii) Net indirect 150 taxes (iv) Net factor 60 income to abroad (v) National debt 70 interest (vi) Consumption of 200 fixed capital (vii) Current 150 transfers from Government
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• Question 32

Complete the following table: (6)

 Income Consumption expenditure Marginal Average (Rs) (Rs) propensity propensity to save to save 0 80 100 140 0.4 …… 200 …… …… 0 …… 240 …… 0.20 …… 260 0.8 0.35
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