12th Economics Paper Solutions Set 1 : CBSE Delhi Previous Year 2014

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 to  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.
Q1 :

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

Due to the measures taken by the government to reduce the unemployment, the point which was earlier below the Production possibility curve (indicating under utilisation of resources) will shift close to or on the PPC (indicating better utilisation of resources). Hence, economic value is reflected in terms of increased output and income.

Q2 :

Define budget set.

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.

Q3 :

What is meant by revenue in microeconomics ?

In microeconomics, revenue can be defined as the money income for a firm which it receives from the sale of goods/services produced.

Q4 :

Give meaning of 'returns to a factor.'

Q5 :

What is perfect oligopoly?

Q6 :

Explain the central problem 'for whom to produce.'

Q7 :

A consumer buys 18 units of a good at a price of Rs. 9 per unit. The price elasticity of demand for the good is (−) 1. How many units the consumer will buy at a price of Rs. 10 per unit ? Calculate.

Q8 :

State the relation between marginal revenue and average revenue.

OR
State the relation between total cost and marginal cost.

Q9 :

What is the behaviour of average fixed cost as output is increased? Why is it so?

Q10 :

Why are the firms said to be interdependent in an oligopoly market? Explain.

Q11 :

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.

Q12 :

What happens to the demand of a good when consumer's income changes? Explain.

Q13 :

State the behaviour of marginal product in the law of variable proportions. Explain the causes of this behaviour.

Q14 :

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

Or

Explain the three properties of the indifference curves.

Q15 :

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

Q16 :

Market of a commodity is in equilibrium. Demand for the commodity "increases." Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.

Q17 :

What are demand deposits?

Q18 :

What is involuntary unemployment?

Q19 :

Define marginal propensity to consume.

Q20 :

Define government budget.

Q21 :

Give meaning of balance of trade.

Q22 :

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

Q23 :

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

Or

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

Q24 :

Is the following revenue expenditure or capital expenditure in the context of government budget? Give reason.
(i) Expenditure on collection of taxes.

Q25 :

Explain the meaning of balance of payments deficit.

Q26 :

Recently Government of India has doubled the import duty on gold. What impact is it likely to have on foreign exchange rate and how?

Q27 :

Define money supply and explain its components.

Or

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

Q28 :

Calculate investment expenditure from the following data about an economy which is in equilibrium :
National income = 1000
Marginal propensity to save = 0.25
Autonomous consumption expenditure = 200

Q29 :

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

Q30 :

Calculate national income and gross national disposable income from the following:

 (Rs. Arab) (i) Net current transfers to abroad (−) 15 (ii) Private final consumption expenditure 600 (iii) Subsidies 20 (iv) Government final consumption expenditure 100 (v) Indirect tax 120 (vi) Net imports 20 (vii) Consumption of fixed capital 35 (viii) Net change in stocks (−) 10 (ix) Net factor income to abroad 5 (x) Net domestic capital formation 110

Q31 :

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.