# 12th Economics Paper Solutions Set 1 : CBSE All India Previous Year 2009

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.
Q1 :

Give the meaning of opportunity cost.

Opportunity cost refers to the cost of enjoying more of one good in term of sacrificing the benefit of another good.

Q2 :

What is meant by inferior good in economics?

Inferior good refers to those goods for which the demand shares a negative relationship with the income of a consumer. That is, as income of the consumer increases, demand for the inferior goods falls and vice-versa. For example, coarse cereals are inferior goods.

Q3 :

Define marginal cost.

Marginal Cost is defined as the addition to the Total Cost, when one additional unit of the output is produced. Mathematically, it represented as the difference of the Total Cost of the nth unit and the Total Cost of the (n -1)th unit. That is, Q4 :

Give one reason for a rightward shift in supply curve.

Q5 :

Why is Average Total Cost greater than average variable cost?

Q6 :

State the law of demand and show it with the help of a schedule.

Q7 :

Explain the geometric method of measuring price elasticity of demand.

Q8 :

Why do problems related to allocation of resources in an economy arise? Explain.

OR

Explain the problem of “for whom to produce”™.

Q9 :

Complete the following table:

 Output (Units) Total Revenue  (Rs) Marginal Revenue (Rs) Average Revenue (Rs) 1 — — 8 2 — 4 — 3

Q10 :

Explain the effect of fall in prices of other goods on the supply of given good.

Q11 :

Explain two points of distinction between monopoly and monopolistic competition.

OR

Explain any two main features of perfect competition.

Q12 :

The price elasticity of supply of commodity Yis half the price elasticity of supply of commodity X. 16 per cent rise in the price X results in a 40 per cent rise in its supply. If the price of Yfalls by 8 per cent, calculate the percentage fall in its supply.

Q13 :

Given below is a cost and revenue schedule of a produce. At what level of output is the producer in equilibrium? Give reasons for your answer.

 Output (Units) Price (Rs) Total Cost (Rs) 1 10 13 2 10 22 3 10 30 4

Q14 :

With the help of a demand and supply schedule, explain the meaning of excess demand and its effect on price of a commodity.

OR

Define equilibrium price of a commodity. How is it determined? Explain with the help of a schedule.

Q15 :

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

(i) Average cost falls only when marginal cost falls.

(ii) The difference between average total cost and average variable cost is constant.

(iii) When total revenue is maximum, marginal revenue is also maximum.

Q16 :

Explain the effect of the following on the market demand of a commodity:

(i) Change in price of related goods

(ii) Change in the number of its buyers

Q17 :

Give meaning of aggregate supply.

Q18 :

Why are taxes received by the government not capital receipts?

Q19 :

Give the meaning of excess demand in an economy.

Q20 :

What is meant by cash reserve ratio?

Q21 :

Define involuntary unemployment.

Q22 :

Complete the following table:

 Income Marginal Propensity to Consume Saving Average Propensity to save 0 – 90 100 0.6 — — 200 0.6 —

Q23 :

Give the meaning of factor income to abroad and factor income from abroad. Also give an example of each.

OR

Distinguish between domestic product and national product. When can domestic product be more than national product?

Q24 :

Distinguish between balance on trade account and balance on current account.

Q25 :

State the main functions of commercial bank. Explain any one of them.

Q26 :

Give the meaning of revenue deficit, fiscal deficit and primary deficit.

Q27 :

Describe the evolution of money.

OR

Explain any two functions of money.

Q28 :

Explain any two objectives of a government budget.

Q29 :

Explain two merits each of flexible foreign exchange rate and fixed foreign exchange rate.

Q30 :

While estimating national income, how will you treat the following? Give reasons for your answer.

(i) Imputed rent of self occupied houses.

(ii) Interest received on debentures.

(iii) Financial help received by flood victims.

Q31 :

In an economy S = − 50 + 0.5 Y is the saving function (where, S = saving and Y = national income) and investment expenditure is 7000. Calculate:

(i) Equilibrium level of national income.

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

OR

Consumption function: C = 200 + 0.9 Y

(where, C = consumption expenditure and Y = national income)

Investment expenditure: I = 3000

Calculate:

(i) Equilibrium level of national income.

(ii) Consumption expenditure at equilibrium level of national income