# 12th Economics Paper Solutions Set 3 : 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 :

Define marginal revenue.

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

Q2 :

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.

Q3 :

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'.

Q4 :

What is perfect oligopoly?

Q5 :

Define indifference map.

Q6 :

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

Q7 :

State the relation between marginal revenue and average revenue.

OR

State the relation between total cost and marginal cost.

Q8 :

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

Q9 :

Explain the central problem 'for whom to produce.'

Q10 :

A consumer buys 30 units of a good at a price of Rs. 10 per unit.  Price elasticity of demand for the good is (−) 1. How many units the consumer will buy at a price of Rs. 9 per unit ? Calculate.

Q11 :

What is market demand for a good? Name the factors determining market demand.

Q12 :

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

Q13 :

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.

Q14 :

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

Q15 :

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

Q16 :

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

Or

Explain the three properties of the indifference curves.

Q17 :

Define aggregate supply?

Q18 :

Define government budget.

Q19 :

What is 'devaluation'?

Q20 :

What are demand deposits?

Q21 :

Define marginal propensity to consume.

Q22 :

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

Q23 :

How does giving incentives for exports influence foreign exchange rate? Explain.

Q24 :

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

Q25 :

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

Or

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

Q26 :

Explain the meaning of balance of payments deficit.

Q27 :

Calculate marginal propensity to consume from the following data about an economy which is in equilibrium:
National Income = 1500
Autonomus consumption expenditure = 300
Investment expenditure = 300

Q28 :

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

Q29 :

Define money supply and explain its components.

Or

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

Q30 :

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.

Q31 :

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.