# 12th Economics Paper Solutions Set 3 : CBSE All India Previous Year 2012

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 :

Define Microeconomics?

Microeconomics is that branch of economics that deals with the issues pertaining to individual economic units such as consumers and firms. This branch basically focuses on how these economic units interact in the market of a single commodity.

Q2 :

Give one reason for shift in demand curve.

One of the many possible reasons for the shift in the demand curve is change in the income of a consumer. The demand curve for a commodity shifts parallely outwards (or inwards) due to rise (or fall) in the consumer”™s income.

Q3 :

What is the behaviour of Total Variable Cost, as output increases?

Initially, as more and more units of output are produced, then total variable cost increases at a diminishing rate and thereafter a certain level of output, it increases but with increasing rate.

Q4 :

What is the behaviour of Marginal Revenue in a market in which a firm can sell any quantity of the output it produces at a given price?

Q5 :

What is a price-maker firm?

Q6 :

What is Opportunity Cost? Explain with the help of an example.

Q7 :

A consumer consumes only two goods X and Y and is in equilibrium. Price of X falls. Explain the reaction of the consumer through the Utility Analysis.

Q8 :

Draw total Variable Cost, Total Cost, and Total Fixed Cost curves in a single diagram.

Q9 :

A producer borrows money and starts a business. He himself looks after the business. Identify implicit and explicit costs from this information. Explain.

Q10 :

Explain the implications of large number of sellers in a perfectly competitive market.

OR

Explain why there are only a few firms in an oligopoly market.

Q11 :

Define an indifference map. Why does an indifference curve to the right show more utility? Explain.

Q12 :

A consumer buys 8 units of a good at a price of Rs 7 per unit. When price rises to Rs 8 per unit he buys 7 units. Calculate price elasticity of demand through the expenditure approach. Comment upon the shape of demand curve based on this information.

Q13 :

What does the Law of Variable Proportions show? State the behaviour of marginal product according to this law.

OR

Explain how changes in prices of inputs influence the supply of a product.

Q14 :

Explain the difference between (i) inferior goods and normal goods and (ii) cardinal utility and ordinal utility. Give example in each case.

Q15 :

Explain the distinction between “change in quantity supplied” and “change in supply”. Use diagram.

Q16 :

Market for a good is in equilibrium. There is simultaneous “decrease” both in demand and supply but there is no change in market price. Explain with the help of a schedule how it is possible.

OR

Market for a good is in equilibrium. Explain the chain of reactions in the market if the price is (i) higher than equilibrium price and (ii) lower than equilibrium price.

Q17 :

Define flow variable.

Q18 :

Define Consumption Goods.

Q19 :

What are time deposits?

Q20 :

Define a “Direct tax”™.

Q21 :

What is a fixed exchange rate?

Q22 :

Find out Net Value added at Factor Cost:

 S. No. Items Amount (i) Price per unit of output (Rs) 25 (ii) Output sold (units) 1,000 (iii) Excise duty (Rs) 5,000 (iv) Depreciation (Rs) 1,000

Q23 :

Explain the “standard of deferred payment”™ function of money.

Q24 :

Outline the steps taken in deriving Consumption Curve from the Saving Curve. Use diagram.

Q25 :

Find Investment from the following:

 Items Amount National Income Rs 600 Autonomous Consumption Rs 150 Marginal propensity to consume 0.70

Q26 :

Distinguish between revenue receipts and capital receipts in a government budget. Give example in each case.

OR

Explain the role of government budget in bringing economic stability

Q27 :

How should the following be treated while estimating national income” Give reasons.

(i) Expenditure on education of children by a family.

(ii) Payment of electricity bill by a school.

Q28 :

Explain the “lender of last resort”™ function of the central bank.

OR

Explain “government”™s banker”™ function of the central bank.

Q29 :

Explain the concept of “fiscal deficit”™ in a government budget. What does it indicate?

Q30 :

Find out (i) Net National Product at market Price and (ii) Gross National Disposable Income from the following:

 S. No Items (Rs crore) (i) Undistributed profits 20 (ii) Compensation of employees 800 (iii) Rent 300 (iv) Dividend 100

Q31 :

Explain the concept of “inflationary gap”™. Also explain the role of “legal reserves”™ in reducing it.

OR

Explain the concept of “deflationary gap”™. Also explain the role of “margin requirements”™ in reducing it.