# 12th Economics Paper Solutions Set 2 : 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 :

What is perfect oligopoly?

Perfect oligopoly is the form of oligopoly in which each firm produces homogeneous products (i.e. same in size, colour, etc.). For example, Cement industry or Chemical industry.

Q2 :

Give meaning of 'returns to a factor.'

Returns to a factor refers to the change in output when an additional unit of variable input is employed. The Law of Variable Proportion can be regarded as 'Returns to a Factor'.

Q3 :

Define budget line.

A budget line represents different affordable combinations of two goods that are available to a consumer at the given market prices of the goods, provided that the consumer spends his/her entire income on these goods.

Q4 :

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

Q5 :

What is meant by cost in economics?

Q6 :

State the relation between marginal revenue and average revenue.

OR

State the relation between total cost and marginal cost.

Q7 :

Explain the central problem 'for whom to produce.'

Q8 :

Price elasticity of demand of a good is (−)1. When its price per unit falls by one rupee, its demand rises from 16 to 18 units. Calculate the price before change.

Q9 :

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

Q10 :

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

Q11 :

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

Q12 :

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.

Q13 :

Explain the change in demand of a good on account of change in prices of related goods.

Q14 :

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

Q15 :

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

Or

Explain the three properties of the indifference curves.

Q16 :

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

Q17 :

Define marginal propensity to consume.

Q18 :

What is 'current account deficit' in the balance of payments?

Q19 :

What are demand deposits?

Q20 :

Give meaning of full employment.

Q21 :

Define government budget.

Q22 :

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

Or

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

Q23 :

Explain the meaning of balance of payments deficit.

Q24 :

Visits of foreign countries for sightseeing etc. by the people of India is on the rise. What will be its likely impact on foreign exchange rate and how?

Q25 :

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

Q26 :

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

Q27 :

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

Q28 :

Define money supply and explain its components.

Or

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

Q29 :

Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium.
National income = 1200
Marginal propensity to save = 0.20
Investment expenditure = 100

Q30 :

Explain national income equilibrium through aggregate demand and aggregate supply. Use diagram. Also explain the changes that take place in an economy when the economy is not in equilibrium.

OR

Outline the steps required to be taken in deriving saving curve from the given consumption curve. Use diagram.

Q31 :

Calculate 'net national product' at factor cost and 'private income' from the following:

 (Rs. Arab) (i) National debt interest 60 (ii) Wages and salaries 600 (iii) Net current transfers to abroad 20 (iv) Rent 200 (v) Transfer payments by government 70 (vi) Interest 300 (vii) Net domestic product at factor cost accruing to government 400 (viii) Social security contributions by employers 100 (ix) Net factor income paid to abroad 50 (x) Profits 300