# 12th Economics Paper Solutions Set 1 : CBSE Delhi Previous Year 2015

General Instructions:
(i) All questions in both sections are compulsory. However, there is internal choice in some questions.
(ii) Marks for questions are indicated against each question.
(iii) Question No.1-3 and 15-19 are very short answer questions carrying 1 mark each. They are required to be answered in one sentence.
(iv) Question No.4-8 and 20-22 are short answer questions carrying 3 marks each. Answers to them should not normally exceed 60 words each.
(v) Question No.9-10 and 23-25 are also short answer questions carrying 4 marks each. Answers to them should not normally exceed 70 words each.
(vi) Question No.11-14 and 26-29 are long answer questions carrying 6 marks each. Answers to them should not normally exceed 100 words each.
(vii) Answers should be brief and to the point and the above word limit be adhered to as far as possible.
Q1 :

Give equation of Budget Line.

The equation for budget line is as follows.
P1X1+ P2X2 = M
Where,
P1 represents price of good 1
P2represents price of good 2
M represents income of the consumer

Q2 :

When income of the consumer falls the impact on price-demand curve of an inferior good is : (choose the correct alternative)
(a) Shifts to the right.
(b) Shifts of the left.
(c) There is upward movement along the curve.
(d) There is downward movement along the curve.

Demand for inferior goods share a negative relationship with consumer's income. So, when the income of the consumer falls, the demand for an inferior good increases leading to the rightward shift of the demand curve.
Hence, the correct answer is option (a).

Q3 :

If Marginal Rate of Substitution is constant throughout, the Indifference curve will be : (choose the correct alternative)
(a) Parallel to the x-axis.
(b) Downward sloping concave.
(c) Downward sloping convex.
(d) Downward sloping straight line.

If Marginal Rate of Substitution is constant throughout, the Indifference curve will be downward sloping straight line.
Hence, the correct answer is option (d).

Q4 :

Giving reason comment on the shape of Production Possibilities curve based on the following schedule :

 Good X (units) Good Y (units) 0 10 1 9 2 7 3 4 4 0

Q5 :

What will be the impact of recently launched 'Clean India Mission' (Swachh Bharat Mission) on the Production Possibilities curve of the economy and why?

OR

What will likely be the impact of large scale outflow of foreign capital on Production Possibilities curve of the economy and why?

Q6 :

The measure of price elasticity of demand of a normal good carries minus sign while price elasticity of supply carries plus sign. Explain why?

Q7 :

There are large number of buyers in a perfectly competitive market. Explain the significance of this feature.

Q8 :

Explain the effects of 'maximum price ceiling' on the market of a good'? Use diagram.

Q9 :

A consumer spends Rs. 1000 on a good priced at Rs. 8 per unit. When price rises by 25 per cent, the consumer continues to spend Rs. 1000 on the good. Calculate price elasticity of demand by percentage method.

Q10 :

Define cost. State the relation between marginal cost and average variable cost.

Or

Define revenue. State the relation between marginal revenue and average revenue.

Q11 :

A consumer consumes only two goods X and Y both priced at Rs. 3 per unit. If the consumer chooses a combination of these two goods with Marginal Rate of Substitution equal to 3, is the consumer in equilibrium? Give reasons. What will a rational consumer do in this situation? Explain.

Or

A consumer consumes only two goods X and Y whose prices are Rs. 4 and Rs. 5 per unit respectively. If the consumer chooses a combination of the two goods with marginal utility of X equal to 5 and that of Y equal to 4, is the consumer in equilibrium? Give reason. What will a rational consumer do in this situation? Use utility analysis.

Q12 :

State the different phases of changes in Total Product and Marginal Product in the Law of Variable Proportions. Also show the same in a single diagram.

Q13 :

Why is the equality between marginal cost and marginal revenue necessary for a firm to be in equilibrium? Is it sufficient to ensure equilibrium? Explain.

Q14 :

Market for a good is in equilibrium. The demand for the good 'increases'. Explain the chain of effects of this change.

Q15 :

What is 'aggregate supply' in macroeconomics?

Q16 :

The value of multiplier is : (choose the correct alternative)
(a) 1MPC
(b) 1MPS

Q17 :

Borrowing in government budget is : (choose the correct alternative)
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit
(d) Deficit in taxes

Q18 :

The non-tax revenue in the following is : (choose the correct alternative)
(a) Export duty
(b) Import duty
(c) Dividends
(d) Excise

Q19 :

Other things remaining unchanged, when in a country the price of foreign currency rises, national income is : (choose the correct alternative)
(a) Likely to rise
(b) Likely to fall
(c) Likely to rise and fall both
(d) Not affected

Q20 :

If Real GDP is Rs. 200 and Price Index (with base = 100) is 110, calculate Nominal GDP.

Q21 :

Name the broad categories of transactions recorded in the 'capital account' of the Balance of Payments Accounts.

OR

Name the broad categories of transactions recorded in the 'current account' of the Balance of Payments Accounts.

Q22 :

Where will sale of machinery to abroad be recorded in the Balance of Payments Accounts? Give reasons.

Q23 :

Explain the 'bank of issue' function of the central bank.

OR

Explain 'Government's Bank' function of central bank.

Q24 :

Government of India has recently launched 'Jan-Dhan Yojna' aimed at every household in the country to have at least one bank account. Explain how deposits made under the plan are going to affect national income of the country.

Q25 :

An economy is in equilibrium. Calculate national income from the following :
Autonomous consumption = 100
Marginal propensity to save = 0.2
Investment expenditure = 200

Q26 :

Giving reason explain how should the following be treated in estimation of national income:
(i) Expenditure by a firm on payment of fees to a chartered accountant
(ii) Payment of corporate tax by a firm
(iii) Purchase of refrigerator by a firm for own use

Q27 :

Explain the concept of Inflationary Gap. Explain the role of Repo Rate in reducing this gap.

OR

Explain the concept of Deflationary Gap and the role of 'Open Market Operations' in reducing this gap.

Q28 :

Explain the role the government can play through the budget in influencing allocation of resources.