Series ECO/SP/1A Code No. SP/1-A€¦ · Explain consumer’s equilibrium in case of a single commodity with the help of utility schedule. 12. Explain using diagramthe factors which

Sample Paper (CBSE)

Series ECO/SP/1A Code No. SP/1-A

SP/1-A ©Educomp Solutions Ltd. 2014-15

ECONOMICS Time Allowed: 3 hours Maximum Marks: 100

General Instructions:

(i) All Questions in both the sections are compulsory. However there is internal

choice in some questions.

(ii) Marks for Questions are indicated against each.

(iii) Question Nos. 1-3 and 15-19 are very short-answer questions carrying 1 mark

each. They are required to be answered in one sentence each.

(iv) Question Nos. 4-8 and 20-22 are short-answer questions carrying 3 marks each.

Answer to them should not normally exceed 60 words each.

(v) Question Nos. 9-10 and 23-25 are also short-answer questions carrying 4 marks

each. Answer to them should not normally exceed 70 words each.

(vi) Question Nos. 11-14 and 26-29 are long-answer questions carrying 6 marks

each. Answer 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 for as possible.

SECTION A

Introductory Microeconomics

1. A rise in the income of a consumer leads to fall in the demand of good X by the consumer. What is the good X called?

2. What is meant by Marginal Physical Product (MPP)? 3. How does TR behave when MR falls but remains positive?

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4. Briefly explain the central problems of an economy. 5. There are various sources of income a teacher has such as

a. He can earn Rs 40000 from teaching in school. b. He can earn Rs 50000 by tuition/coaching c. He earns Rs 60000 by writing help book guides.

What is the opportunity cost of teaching in school? Why should he choose teaching profession? 6. Define Price elasticity of demand. Calculate the price elasticity of

demand for a commodity when its price increases by 25% and quantity demanded falls from 150 units to 120 units.

OR Why is there an inverse relationship between the price of a commodity and its quantity demanded?

7. Under perfect competition, a firm is a price taker and a monopoly is a price maker. Explain.

8. State three features of oligopoly. Explain any one feature.

9. Why is the MC curve in the short run U-shaped?

OR Explain the geometric method of measuring the price elasticity of supply.

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10. Complete the following table.

Output (units) 1 2 3 4 5

AR (Rs.) 10 - 8 - -

MR (Rs.) 10 8 - 0 -

TR (Rs.) 10 - - - 20 11. Explain consumer’s equilibrium in case of a single commodity

with the help of utility schedule. 12. Explain using diagramthe factors which may cause a rightward

shift of the demand curve of a commodity.

13. To increase the production of a good, only one input is increased while other inputs are held constant. Explain its effect on total physical product using diagram.

14. What do you mean by excess demand? Explain with the help of a diagram as to what will be the effect of an excess demand on the price of a commodity.

OR

Equilibrium price may or may not change with shifts in both demand and supply curves. Explain.

SECTION B Introductory Macroeconomics

15. Shivani deposited Rs. 15000 in a current account today and will

withdraw after a month as she wants to pay her tuition fees next

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month. Which function of money is depicted here? 16. Define Statutory Liquidity Ratio(SLR).

17. If APC = 0.7, what is the value of APS? 18. What is meant by full employment? 19. Give two examples of non-tax revenue receipts.

20. What is the relationship between Personal Income and National

Income? List the items which are deducted from the personal income to get personal disposable income.

21. Define fiscal deficit. A Government budget shows a primary deficit of Rs. 4400 crores. The revenue expenditure of interest payments is Rs. 400 crores. How much is the fiscal deficit?

22. Define foreign exchange rate. What does a change from $3 = £1 to $5 = £1 represent?

23. Explain the concept and components of consumption function.

Would the consumption function be linear in case MPC is found to be constant? Give reason.

OR

Define aggregate demand. What are its components?

24. Define Government budget. State any three objectives of Government budget.

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25. Explain the merits of flexible exchange rate.

26. Calculate (i) GNPFC and (ii) NNDI from the following data: Amount (Rs. In crores) a. Net indirect tax 800 b. Net domestic fixed capital formation 500 c. Consumption of fixed capital 100 d. Private final consumption expenditure 5000 e. Government final consumption expenditure 2000 f. Net factor income to abroad 50 g. Net exports -50 h. Change in stock -30 i. Current transfers from rest of the world 70 j. Compensation of employees 2500 k. Current transfers to rest of the world 40

27. Explain

a. how the flow of income is circular b. The concept of leakages and injections in the circular flow of

income.

OR Explain briefly the difference between a. GDPFC and NNPMP b. National Income and Net National Disposable Income

28. Recent Times of India article talks about “Pro-growth agenda of

Prime minister Shri Narendra Modi”. Assuming the economy does not have high inflation, which quantitative policies of RBI can help in promoting economic growth?

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29. Given that MPC = 0.8 and investment at all levels of income is Rs. 40 crores, complete the following table.

Income Consumption Saving Investment AD AS = Y

0 60 - - - -

100 - - - - - 200 - - - - -

300 - - - - -

400 - - - - -

500 - - - - - 600 - - - - -

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Section A:

Introductory Microeconomics

1. Inferior good 2. Addition to the total product when an additional unit of variable input is

employed 3. When MR is positive, TR rises at decreasing rate. 4. Central Problems of economy: “What to produce?”, “how to produce?” and

“for whom to produce?” 5. Opportunity cost of teaching is writing books. He should choose teaching

profession because it provides maximum social welfare Value - Social Welfare

6. 0.8

OR There is inverse relationship of price with the quantity demanded due to the following factors: a. Law of DMU – Marginal utility of extra unit consumed decreases. So

the consumer is willing to pay a lesser price for it. b. Income effect: With a fall in price, real income increases and demand

for commodity increases

ANSWERS


c. Substitution effect: With increase in the price of the good, the substitute becomes cheaper in relation to the good. Some consumers therefore shift to substitute, which reduces the quantity demanded of the good.

7. Perfect competition: Every firm is too small to influence the market. The price is determined by forces of demand and supply. Monopoly: Single seller, who has substantial influence over the market. So monopolist maximizes profits and sets price according to MC curve faced by him.

8. a. Few sellers and each sells substantial portion of the output of the industry b. Homogenous or differentiated products c. Interdependence of decisions among firms

9. Law of increasing, constant and decreasing returns

OR In geometric method, elasticity of supply is measured at a point on the supply curve.

At point A, elasticity of supply is given as:

es =


10.

Output (units) 1 2 3 4 5

AR (Rs.) 10 9 8 6 4 MR (Rs.) 10 8 6 0 -4

TR (Rs.) 10 18 24 24 20

11. Consumer’s equilibrium refers to situation where consumer gets

maximum satisfaction. Condition for equilibrium is when MU = P. E.g.

Units of oranges consumed

Marginal utility Price

1 10 4

2 8 4

3 6 4

4 4 4(Consumer’s equilibrium)

5 2 4

12. Price of the good does not change, but the other factors affecting demand

may change. This causes a rightward shift in demand and not an expansion in demand.

Factors that may increase demand are: a. Increase in income of consumers b. Rise in price of substitute goods c. Fall in price of complementary goods d. Improvement in tastes and preferences of buyers e. Increase in number of buyers


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Phase 1: TPP rises at an increasing rate Phase 2: TPP rises at decreasing rate Phase 3: TPP declines


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Effect of excess demand a. Competition among buyers will exert upward pressure on price b. With rise in price, seller will supply more c. With rise in price, buyers will demand less and lead to contraction of

demand d. This combined effect will wipe out the excess demand and establish

equilibrium price and quantity

OR Price may nor change if change in demand = change in supply. Following are the two cases showing simulataneous changes in demand and supply and no change in price.


Section B: Introductory Macroeconomics

15. Store of Value 16. SLR refers to the liquid assets of the commercial banks which they are

required to maintain as a minimum percentage of their total deposits. Liquid assets include cash, gold and unencumbered approved securities.

17. APC = 1 – APS = 0.3

18. Situation where there is no involuntary unemployment. 19. Commercial revenue; interest receipts 20. Personal Income = National Income – Undistributed profits – Net interest

payments made by households – Corporation tax + Transfer payments to the households from the Government and firms.


Personal taxes, Miscellaneous receipts of the Government’s administrative department

21. Fiscal deficit is the difference between the Government’s total expenditure

and its total receipts excluding borrowing. Fiscal deficit = Primary deficit + Interest liabilities = Rs. 4800 crores

22. UK pound is appreciating and US dollar is depreciating

23. Consumption function: C = C0 + bY, where C0 is autonomous consumption, i.e. minimum level of consumption even if

income(Y) is 0 b is Marginal Propensity to Consume, i.e. rate at which consumption

increases in proportion of additional income that goes to consumption Y is income When MPC is constant, b or slope is constant. This implies that the

consumption function is a straight line linear consumption function.

OR Aggregate demand is the total demand for goods and services in the

economy. Components are Consumption, Investment, Government expenditure and Net exports.

24. Government budget is a detailed statement of the estimates of the government receipts and government expenditure during a specified period of time Objectives a. Promoting economic growth b. Reducing income inequalities c. Ensuring stability in prices


25. Merits: a. Eliminates problem of overvaluation or undervaluation of currencies b. Frees Government from the problem of balance of payments c. No need for government to hold any foreign reserves d. Optimum resource allocation enhances efficiency in the economy.

26. GNPFC = Rs. 6670 crores and NNDI = Rs. 7440 crores

27. a. Flow of income is circular because stemming from the production of goods and services by the producing units, it translates into income of the households(as rewards for their factor services to the producing units), and income translates into expenditure on the goods and services produced in the economy. Thus, production, income generation and expenditure propel each other to form a circularity, which is called Circularity of Income. b. Leakage: any part of income generated in producing the national output which is not passed on within the system.

i. savings ii. Payments for imports

iii. Taxes Injections: addition to the circular flow of income.

i. Autonomous Government investment; ii. Payment for exports;

iii. Government consumption expenditure For macroeconomic equilibrium to exist, leakages = injections

OR

a. NNPMP = GDPFC – Depreciation + Net factor income from abroad + net indirect taxes


b. Net National Disposable income = NNPFC (NI) + Net indirect taxes + net current transfers from abroad

28. a. Pro-growth policies that can be taken up by RBI are to increase money supply to push aggregate demand through: Reduce bank rate b. Buy Government securities in open market operations c. Reduce reserve requirements like CRR and SLR

29. C = 60 + 0.8Y and I = 40

Income Consumption Saving Investment AD AS = Y

0 60 -60 40 100 0

100 140 -40 40 180 100 200 220 -20 40 260 200

300 300 0 40 340 300

400 380 +20 40 420 400

500 460 +40 40 500 500

600 540 +60 40 580 600

Documents

Series ECO/SP/1A Code No. SP/1-A€¦ · Explain consumer’s equilibrium in case of a single commodity with the help of utility schedule. 12. Explain using diagramthe factors which