# 12th Economics Paper Solutions Set 1 : CBSE All India Previous Year 2013

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 marginal revenue. (1)

Marginal Revenue is defined as the change in the total revenue due to the sale of one more unit output.

Q2 :

What does a rightward shift of demand curve indicate? (1)

The rightward shift of demand curve indicates the increase in demand for a good due to change in the factors other than the price of the good. These factors can be increase in the income of a consumer, increase in the total number of consumers, increase in the price of substitute goods, etc.

Q3 :

Under which market form is a firm a price taker? (1)

Under the perfect competition form of a market, the firm is a price taker.

Q4 :

When is the demand for a good said to be perfectly inelastic? (1)

Q5 :

Give one reason for an “increase” in supply of a commodity. (1)

Q6 :

How is the demand for a good affected by a rise in the prices of other goods? Explain. (3)

Q7 :

A firm supplies 10 units of a good at a price of Rs 5 per unit. Price elasticity of supply is 1.25. What quantity will the firm supply at a price of Rs 7 per unit? (3)

Q8 :

Explain the meaning of diminishing marginal rate of substitution with the help of a numerical example. (3)

Q9 :

From the following table, find out the level of output at which the producer will be in equilibrium. Give reasons for your answer. (3)

 Output (units) Marginal Revenue Rs Marginal Cost Rs 1 8 10 2 8 8 3 8 7 4 8 8 5 8 9

Q10 :

Why can a firm not earn abnormal profits under perfect competition in the long run? Explain. (3)

OR

Why is the demand curve of a firm under monopolistic competition more elastic than under monopoly? Explain.

Q11 :

Equilibrium price of an essential medicine is too high. Explain what possible steps can be taken to bring down the equilibrium price but only through the market forces. Also explain the series of changes that will occur in the market. (4)

Q12 :

Explain the meaning of opportunity cost with the help of production possibility schedule. (4)

OR

With the help of suitable example explain the problem of “for whom to produce”™.

Q13 :

A 5 percent fall in the price of a good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand. (4)

Q14 :

Explain three properties of indifference curves. (6)

OR

Explain the conditions of consumer”™s equilibrium under indifference curve approach.

Q15 :

If equilibrium price of a good is greater than its market price, explain all the changes that will take place in the market. Use diagram. (6)

Q16 :

Giving reasons, state whether the following statements are true or false: (6)

(i) Average product will increase only when marginal product increases.

(ii) With increase in level of output, average fixed cost goes on falling till it reaches zero.

(iii) Under diminishing returns to a factor, total product continues to increase till marginal product reaches zero.

Q17 :

Give two examples of intermediate goods. (1)

Q18 :

State the components of supply of money. (1)

Q19 :

What one step can be taken through market to reduce the consumption of a product harmful for health? (1)

Q20 :

How can Reserve Bank of India help in bringing down the foreign exchange rate which is very high? (1)

Q21 :

What is revenue deficit? (1)

Q22 :

Explain the “medium of exchange”™ function of money. (3)

OR

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

Q23 :

Distinguish between revenue receipts and capital receipts. Give an example of each. (3)

Q24 :

How can budgetary policy be used to reduce inequalities of income? (3)

Q25 :

Explain the effect of depreciation of domestic currency on exports. (3)

Q26 :

How is exchange rate determined in the foreign exchange market? Explain. (3)

Q27 :

Calculate “Sales”™ from the following data: (4)

 (Rs in lakhs) (i) Subsidies 200 (ii) Opening stock 100 (iii) Closing stock 600 (iv) Intermediate consumption 3,000 (v) Consumption of fixed capital 700 (vi) Profit 750 (vii) Net value added at factor cost 2,000

Q28 :

Distinguish between “real” gross domestic product and “nominal” gross domestic product. Which of these is a better index of welfare of the people and why? (4)

OR

Distinguish between stocks and flows. Give two examples of each.

Q29 :

Explain the credit creation role of commercial banks with the help of a numerical example. (4)

Q30 :

From the data given below about an economy, calculate (a) investment expenditure and (b) consumption expenditure. (6)

 (i) Equilibrium level of income 5,000 (ii) Autonomous consumption 500 (iii) Marginal propensity to consume 0.4

Q31 :

Explain the meaning of under-employment equilibrium. Explain two measures by which full-employment equilibrium can be reached. (6)