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# Board Paper of Class 12-Science 2014 Economics (SET 2) - Solutions

General Instructions :
(i) All questions in both the sections are compulsory.
(ii) Marks for questions are indicated against each.
(iii) Question 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) Question Nos. 6-10 and 22-26 are short-answer questions carrying 3 marks each. Answer to  them should not normally exceed 60 words each.
(v) Question Nos. 11-13 and 27-29 are also short-answer questions carrying 4 marks each. Answer to them should not normally exceed 70 words each.
(vi) Question Nos. 14-16 and 30-32 are long-answer questions carrying 6 marks each. Answer to them should not normally exceed 100 words each.
(vii) Questions marked star (*) are value based questions.
(viii) Answer should be brief and to the point and the above word limit should be adhered to as far as possible.

• Question 3
Give the meaning of 'inelastic demand'. VIEW SOLUTION

• Question 4
The government has started promoting foreign capital. What is its economic value in the context of Production Possibilities Frontier? VIEW SOLUTION

• Question 6
Explain how technological progress is a determinant of supply of a good by a firm.

OR

Explain how input prices are a determinant of supply of a good by a firm. VIEW SOLUTION

• Question 7
Why is Production Possibilities Curve concave ? Explain. VIEW SOLUTION

• Question 8
When the price of a good rises from Rs 10 to Rs 12 per unit, its demand falls from 25 units to 20 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'? VIEW SOLUTION

• Question 9
Why is the number of firms small in oligopoly? Explain. VIEW SOLUTION

• Question 10
Why is Average Revenue always equal to price? VIEW SOLUTION

• Question 11
Giving reasons, explain the 'Law of Variable Proportions'. VIEW SOLUTION

• Question 12
A consumer consumes only two goods X and Y and is in equilibrium. Show that when the price of good X rises, the consumer buys less of good X. Use utility analysis.

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. VIEW SOLUTION

• Question 13
How does change in price of a substitute good affect the demand of the given good? Explain with the help of an example. VIEW SOLUTION

• Question 14
Market of a commodity is in equilibrium. Demand for the commodity 'increases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram. VIEW SOLUTION

• Question 15
Explain why is an indifference curve (a) downward sloping and (b) convex.

OR

Explain the concept of 'Marginal Rate of Substitution' with the help of a numerical example. Also explain its behaviour along an indifference curve. VIEW SOLUTION

• Question 16
From the following information about a firm, find the firm's equilibrium output in terms of marginal cost and marginal revenue. Give reasons. Also find profit at this output.
 Output (units) Total Revenue (Rs) Total Cost (Rs) 1 6 7 2 12 13 3 18 17 4 24 23 5 30 31
VIEW SOLUTION

• Question 22
Explain the significance of the 'Unit of Account' function of money.

OR

Explain the significance of the 'Standard of Deferred Payment' function of money VIEW SOLUTION

• Question 23
Distinguish between 'autonomous' and accommodating' Balance of Payments transactions VIEW SOLUTION

• Question 24
When foreign exchange rate in a country is on the rise, what impact is it likely to have on imports and how? VIEW SOLUTION

• Question 25
What are externalities? Give an example of a positive externality and its impact on welfare of the people. VIEW SOLUTION

• Question 26
Is the following a revenue receipt or a capital receipt in the context of government budget and why?
(i) Tax receipts
(ii) Disinvestment VIEW SOLUTION

• Question 27
Tax rates on higher income group have been increased. Which economic value does it reflect ? Explain. VIEW SOLUTION

• Question 28
Explain 'Banker to the Government' function of the central bank.

OR

Explain 'Bankers' Bank' function of the central bank. VIEW SOLUTION

• Question 29
Calculate investment expenditure from the following date about an economy which is in equilibrium :  National Income = 1000 Marginal propensity to save = 0.2 Autonomous consumption expenditure = 100
VIEW SOLUTION

• Question 30
When is an economy in equilibrium ? Explain with the help of Saving and Investment functions. Also explain the changes that take place in an economy when the economy is not in equilibrium. Use diagram.
OR

Outline the steps required to be taken in deriving the Consumption Curve from the given Saving Curve. Use diagram. VIEW SOLUTION

• Question 31
Calculate 'National Income' and 'Net National Disposable Income' from the following:
 (Rs in Arab) (i) Net change in stocks 50 (ii) Government final consumption expenditure 100 (iii) Net current transfers to abroad 30 (iv) Gross domestic fixed capital formation 200 (v) Private final consumption expenditure 500 (vi) Net imports 40 (vii) Depreciation 70 (viii) Net factor income to abroad (−) 10 (ix) Net indirect tax 120 (x) Net capital transfers to abroad 25
VIEW SOLUTION

• Question 32
How should the following be treated in estimating national income of a country? You must give reason for your answer.
(i) Taking care of aged parents
(ii) Payment of corporate tax
(iii) Expenditure on providing police services by the government VIEW SOLUTION
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