12th Economics Paper Solutions Set 2 : CBSE Delhi Previous Year 2011

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 :

What is positive economics?


Answer :

Positive economics refers to the factual situations that describe the actual situation of what was, what is and what would be. These situations can be tested, proven or disproven and do not involve any personal value judgment. For example, the statement 'rate of inflation at present is 4%' is a positive economic statement.

Q2 :

When is a firm called “price-taker”™?


Answer :

A firm is said to be a price taker when it has no control over the existing market price and accepts the price as determined by the invisible hands of market”™, i.e. by demand for and supply of the commodities.

Q3 :

Define budget set.


Answer :

A budget set represents those combinations of consumption bundles that are available to the consumer given his/her income level and at the existing market prices. In other words, it represents those consumption bundles that the consumer can purchase using his/her money income (M). It is represented by the following inequality condition.

Q4 :

What is meant by “increase”™ in supply?


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Q5 :

Define supply.


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Q6 :

Why is a production possibilities curve concave? Explain.


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Q7 :

A consumer buys 10 units of a good at a price of Rs. 6 per unit. Price elasticity of demand is (−) 1. At what price will be buy 12 units? Use expenditure approach of price elasticity of demand to answer this question.


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Q8 :

Giving examples, explain the meaning of cost in economics.


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Q9 :

Draw average revenue and marginal revenue curves in a single diagram of a firm which can sell more units of a good only by lowering the price of that good. Explain.


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Q10 :

Explain the implication of “freedom of entry and exit to the firms”™ under perfect competition.

OR

Explain the implication of “perfect knowledge about market”™ under perfect competition.


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Q11 :

Explain the conditions determining how many units of a good the consumer will buy at a given price.


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Q12 :

Explain how the demand for a good is affected by the prices of its related goods. Give examples.


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Q13 :

Define “Market-supply”™. What is the effect on the supply of a good when Government imposes a tax on the production of that good? Explain.

OR

What is a supply schedule? What is the effect on the supply of a good when Government gives a subsidy on the production of that good? Explain.


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Q14 :

What is meant by producer”™s equilibrium? Explain the conditions of producer”™s equilibrium through the “total revenue and total cost”™ approach. Use diagram.


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Q15 :

Explain the concept of Marginal Rate of Substitution (MRS) by giving an example. What happens to MRS when consumer moves downwards along the indifference curve? Give reasons for your answer.


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Q16 :

Market for a good is in equilibrium. There is an “increase”™ in demand for this good. Explain the chain of effects of this change. Use diagram.


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Q17 :

What is nominal gross domestic product?


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Q18 :

Define flow variables.


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Q19 :

Define cash reserve ratio.


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Q20 :

Define money supply.


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Q21 :

Define foreign exchange rate.


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Q22 :

State the components of capital account of balance of payments.


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Q23 :

Explain how “distribution of gross domestic product”™ is a limitation in taking gross domestic product as an index of welfare.


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Q24 :

If National Income is Rs. 50 crore and Saving Rs 5 crore, find out average propensity to consume. When income rises to Rs 60 crore and saving to Rs 9 crore, what will be the average propensity to consume and the marginal propensity to save?


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Q25 :

Explain the relationship between investment multiplier and marginal propensity to consume.


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Q26 :

When price of a foreign currency rises, its demand falls. Explain why.

OR

When price of a foreign currency rises, its supply also rises. Explain why.


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Q27 :

Explain the “allocation of resources”™ objective of Government budget.

OR

Explain the “redistribution of income”™ objective of Government budget.


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Q28 :

From the following data about a Government budget, find out (a) Revenue deficit, (b) Fiscal deficit and (c) Primary deficit:

S. No.

Items

(Rs Arab)

(i)

Capital receipts net of borrowings

95

(ii)

Revenue expenditure

100

(iii)

Interest payments

10

(iv)

Revenue receipts

80


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Q29 :

Giving reasons classify the following into intermediate products and final products:

(i) Computers installed in an office.

(ii) Mobile sets purchased by a mobile dealer.


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Q30 :

Explain the role of the following in correcting “deficient demand”™ in an economy:

(i) Open market operations.

(ii) Bank rate.

OR

Explain the role of the following in correcting “excess demand”™ in an economy:

(i) Bank rate

(ii) Open market operations


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Q31 :

Explain the process of money creation by the commercial banks with the help of a numerical example.


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Q32 :

Find the gross National Product at market price and Net National Disposable Income from the following:

S. No.

Items

(Rs Arab)

(i)

Opening stock

50

(ii)

Private final consumption expenditure

1000

(iii)

Net  current transfers to abroad

5

(iv)

Closing stock

40


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