Board Paper of Class 12-Commerce 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 toÂ 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 1
What is perfect oligopoly? VIEW SOLUTION

Question 2
Give meaning of 'returns to a factor.' VIEW SOLUTION

Question 3
Define budget line. VIEW SOLUTION

Question 4
Unemployment is reduced due to the measures taken by the government. State its economic value in the context of production possibilities frontier. VIEW SOLUTION

Question 5
What is meant by cost in economics? VIEW SOLUTION

Question 6
State the relation between marginal revenue and average revenue.

OR

State the relation between total cost and marginal cost. VIEW SOLUTION

Question 7
Explain the central problem 'for whom to produce.' VIEW SOLUTION

Question 8

Price elasticity of demand of a good is (−)1. When its price per unit falls by one rupee, its demand rises from 16 to 18 units. Calculate the price before change.
VIEW SOLUTION

Question 9
Why are the firms said to be interdependent in an oligopoly market? Explain. VIEW SOLUTION

Question 10
What is the behaviour of average fixed cost as output is increased? Why is it so? VIEW SOLUTION

Question 11
State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour. VIEW SOLUTION

Question 12

A consumer consumes only two goods. Explain consumer's equilibrium with the help of utility analysis.

OR

A consumer consumes only two goods A and B and is in equilibrium. Show that when price of good B falls, demand for B rises. Answer this question with the help of utility analysis.
VIEW SOLUTION

Question 13
Explain the change in demand of a good on account of change in prices of related goods. VIEW SOLUTION

Question 14

Market for a product is in equilibrium. Demand for the product "decreases." Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.
VIEW SOLUTION

Question 15

Explain the conditions of consumer's equilibrium with the help of the indifference curve analysis.

Or

Explain the three properties of the indifference curves.
VIEW SOLUTION

Question 16
From the following information about a firm, find the firms 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 7 8

2 14 15

3 21 21

4 28 28

5 35 36

VIEW SOLUTION

Question 17
Define marginal propensity to consume. VIEW SOLUTION

Question 18
What is 'current account deficit' in the balance of payments? VIEW SOLUTION

Question 19
What are demand deposits? VIEW SOLUTION

Question 20
Give meaning of full employment. VIEW SOLUTION

Question 21
Define government budget. VIEW SOLUTION

Question 22
Explain the significance of 'store of value' function of money.

Or

Explain the significance of 'medium of exchange' function of money. VIEW SOLUTION

Question 23
Explain the meaning of balance of payments deficit. VIEW SOLUTION

Question 24
Visits of foreign countries for sightseeing etc. by the people of India is on the rise. What will be its likely impact on foreign exchange rate and how? VIEW SOLUTION

Question 25
Define externalities. Give an example of negative externality. What is its impact on welfare? VIEW SOLUTION

Question 26
Is the following revenue expenditure or capital expenditure in the context of government budget? Give reason.
(i) Expenditure on collection of taxes.
(ii) Expenditure on purchasing computers. VIEW SOLUTION

Question 27
Government raises its expenditure on producing public goods. Which economic value does it reflect? Explain. VIEW SOLUTION

Question 28
Define money supply and explain its components.
Or

Explain the 'lender of last resort' function of central bank. VIEW SOLUTION

Question 29
Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium.
National income = 1200
Marginal propensity to save = 0.20
Investment expenditure = 100 VIEW SOLUTION

Question 30
Explain national income equilibrium through aggregate demand and aggregate supply. Use diagram. Also explain the changes that take place in an economy when the economy is not in equilibrium.

OR

Outline the steps required to be taken in deriving saving curve from the given consumption curve. Use diagram. VIEW SOLUTION

Question 31

Calculate 'net national product' at factor cost and 'private income' from the following:

		(Rs. Arab)
(i)	National debt interest	60
(ii)	Wages and salaries	600
(iii)	Net current transfers to abroad	20
(iv)	Rent	200
(v)	Transfer payments by government	70
(vi)	Interest	300
(vii)	Net domestic product at factor cost accruing to government	400
(viii)	Social security contributions by employers	100
(ix)	Net factor income paid to abroad	50
(x)	Profits	300

VIEW SOLUTION

Question 32
Giving reason explain how should the following be treated in estimating gross domestic product at market price ?
(i) Fees to a mechanic paid by a firm.
(ii) Interest paid by an individual on a car loan taken from a bank.
(iii) Expenditure on purchasing a car for use by a firm. VIEW SOLUTION

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Output (units)	Total Revenue (Rs.)	Total Cost (Rs.)
1	7	8
2	14	15
3	21	21
4	28	28
5	35	36