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# Board Paper of Class 12-Science 2013 Economics (SET 3) - 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 an example each of fixed cost and variable cost. (1)

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• Question 2

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

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• Question 3

Given the meaning of market demand. (1)

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• Question 5

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

The price elasticity of supply of a good is 0.8. Its price rises by 50 percent. Calculate the percentage increase in its supply. (3)

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• Question 9

Complete the following table: (3)

 Units Average Product Marginal Product of Labour (Units) (Units) 1 16 ……. 2 20 …….. 3 ……. 20 4 18 …….. 5 …… 8 6 14 ……..
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• Question 10

Explain “freedom of entry and exit to firms in industry” feature of monopolistic competition.

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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

Give the meaning of producer’s equilibrium. A producer that quantity of his product at which marginal cost and marginal revenue are equal. Is he earning maximum profits? Give reason for your answer. (4)

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• Question 13

The price elasticity of demand for a good is − 0.4. If its price increases by 5 percent, by what percentage will its demand fall? Calculate. (4)

OR

Explain any two factors that affect the price elasticity of demand. Give suitable examples.

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• Question 14

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

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• Question 15

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 16

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 17

Give two examples of indirect taxes. (1)

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• Question 18

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

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• Question 19

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

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• Question 22

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 23

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

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• Question 24

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

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• Question 25

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

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• Question 26

Explain any one objective of Government Budget. (3)

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• Question 27

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

 (Rs in lakhs) (i) Intermediate costs 700 (ii) Consumption of fixed capital 80 (iii) Change in stock (−) 50 (iv) Subsidy 60 (v) Net value added at factor cost 1300 (vi) Exports 50
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• Question 28

Explain “Banker to the Government” function of the Central Bank. (4)

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• Question 29

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 30

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 31

C = 50 + 0.5 Y is the Consumption Function where C is consumption expenditure and Y is National Income and Investment expenditure is 2000 is an economy. Calculate (6)

(i) Equilibrium level of National Income.

(ii) Consumption expenditure at equilibrium level of national income.

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• Question 32

Complete the following table: (6)

 Consumption expenditure Savings Income Marginal (Rs) (Rs) (Rs) propensity to Consume 100 50 150 175 75 ……. …… 250 100 ……. …… 325 125 ……. ……
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