SOLVED* C.B.S.E. PAPER WITH 2019 MARKING Class–XII … · Economics *Note : This paper is solely for reference purpose only. The format and syllabus have now been modified by CBSE

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SOLVED*PAPERWITH

MARKING SCHEME

C.B.S.E.2019

Class–XIIDelhi/Outside Delhi Set

Economics

*Note : This paper is solely for reference purpose only. The format and syllabus have now been modified by CBSE for March 2020 examination.

Time : 3 Hours Max. Marks : 80

General Instructions : (i) All questions in both the sections are compulsory. (ii) Marks for questions are indicated against each question. (iii) Question Nos. 1 – 4 and 13 – 16 are Very Short-answer questions carrying 1 mark each. They are required to be answered in

one sentence each. (iv) Question Nos. 5 – 6 and 17 – 18 are Short-Answer questions carrying 3 marks each. Answers to them should normally not

exceed 60 words each. (v) Question Nos. 7 – 9 and 19 – 21 are also Short-Answer questions carrying 4 marks each. Answers to them should (normally)

not exceed 70 words each. (vi) Question Nos. 10 – 12 and 22 – 24 are Long-Answer questions carrying 6 marks each. Answers to them should normally

not exceed 100 words each. (vii) Answers should be brief and to the point and the above word limits should be adhered to as far as possible.

Delhi Set – 1 Code No. 58/1/1

SECTION – A (Microeconomics)

1. In the given figure, the movement on the production possibility curve from point A to point B shows ................... (Choose the correct alternative)

A

B

Good X

Good Y

O

(a) Growth of all the resource in the economy (b) Under utilisation of resources (c) Production of more units of Good X and less units of Good Y (d) Production of more units of Good Y and less units of Good X 1 2. Average Fixed Cost curve ................... . (Choose the correct alternative) (a) is a straight line parallel to X-axis (b) is straight line parallel to Y-axis (c) falls, as more units are produced (d) rises, as more units are produced 1

OR

Which of the following formula is correct for calculating marginal cost ? (Choose the correct alternative)

(a) MCn = TFCn – TFCn–1 (b) MCn = ACn – ACn–1

(c) MCn = AVCn – AVCn–1 (d) MCn = TCn – TCn–1 1

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2 Oswaal CBSE Solved Paper - 2019, ECONOMICS, Class-XII


3. The average product curve in the input-output plane, will be .................. . (Choose the correct alternative) (a) an ‘S’ shaped curve (b) an inverse ‘S’ shaped curve (c) a ‘U’ shaped curve (d) an inverse ‘U’ shaped curve 1 4. If the market supply of a commodity X changes due to improvement in technology, the market supply curve will

........................... . (Fill up the blank) 1OR

If the market supply of a commodity X changes due to rise in price of a factor input, the market supply curve will ........................... . (Fill up the blank) 1

5. Identify and discuss the nature of the following newspaper reports in terms of positive or normative economic analysis : 3

(i) “India jumped 23 points in the World Bank’s ease of doing business index to 77th place, highest in 2 years.”— The Economic Times

(ii) “Government should further liberalise the business rules.” — The Economic Times 6. Distinguish between substitute goods and complementary goods, with examples. 3

OR Distinguish between normal goods and inferior goods, with examples. 3 7. Discuss briefly, using a hypothetical schedule, the relation between marginal utility and total utility. 4

OR Discuss briefly, using a hypothetical schedule the concept of diminishing marginal rate of substitution. 4 8. Complete the following cost schedule : 4

Quantity (in Units) 0 1 2 3 4

Total cost (in `) 200 ...... ...... ...... 490

Total variable cost (in `) 0 ...... 180 ...... ......

Average variable cost (in `) — 100 ...... 80 ......

9. In the given diagram, OP is the market determined price and OP1 is the price fixed by the government. 4

Quantity (in Units)

Pric

e(i

n`a) A B

SS

E

DD

O

P1

P

(a) Identify if the diagram represents, price ceiling or price flooring. (b) Discuss the likely behaviour of the market in the given condition.

OR Suppose the demand and supply equations of a commodity X in a perfectly competitive market are given by : Qd = 1700 – 2P Qs = 1300 + 3P

Calculate the value of equilibrium price and equilibrium quantity of the commodity X. 4 10. (a) Define price elasticity of demand. (b) If the price of a commodity rises by 40% and its quantity demanded falls from 150 units to 120 units, calculate

coefficient of price elasticity of demand for the commodity. 6

11. What is meant by “diminishing returns to a factor” ? Discuss any two reasons for the operation of diminishing returns to a factor. 6

12. Elaborate three main features of monopoly form of market. 6

OR

Distinguish between perfect competition and monopolistic competition on the basis of following :


Oswaal CBSE Solved Paper - 2019, ECONOMICS, Class-XII 3


(a) Number of sellers (b) Nature of product (c) Selling cost 6

SECTION – B (Macroeconomics)

13. Give any two examples of flow concept. 1

14. Define the term ‘tax’. 1 15. Suppose in a hypothetical economy, the income rises from ` 5,000 crore to ` 6,000 crore. As a result, the con-

sumption expenditure rises from ` 4,000 crore to ` 4,600 crore. Marginal propensity to consume in such a case would be ............... . (Choose the correct alternative) 1

(a) 0.8 (b) 0.4 (c) 0.2 (d) 0.6 16. What is meant by primary deficit ? 1

OR What is meant by fiscal deficit ? 1 17. Define the problem of double counting in the computation of national income. State any two approaches to

correct the problem of double counting. 3OR

“Gross Domestic Product (GDP) does not give us a clear indication of economic welfare of a country.” Defend or refute the given statement with valid reason. 3

18. If in an economy : Change in initial Investments (DI) = ` 500 crore Marginal Propensity to Save (MPS) = 0.2 Find the values of the following : (a) Investment multiplier (k) (b) Change in final income (DY) 3 19. How are capital receipts different from revenue receipts ? Discuss briefly. 4

20. State and discuss the components of Aggregate Demand in a two sector economy. 4

OR

In the given figure, what does the gap ‘KT’ represent ? State any two fiscal measures to correct the situation.

}

O

K

TE

45º

AD1

AD

YF Income

(Ag

gre

gat

eD

eman

d)

(Full Employment Level of Income)

4

21. Discuss the working of the adjustment mechanism in the following situations : (a) Aggregate Demand is greater than Aggregate Supply. (b) Ex Ante Investments are lesser than Ex Ante Savings. 4 22. (a) Define “Trade surplus”. How is it different from “Current account surplus” ? (b) “Indian Rupee (`) plunged to all time low of ` 74.48 against the US Dollar ($)”. – The Economic Times In the light of the above report, discuss the impact of the situation on Indian Imports. 6 23. (i) State any two components of M1 measure of money supply. (ii) Elaborate any two instruments of Credit Control, as exercised by the Reserve Bank of India. 6

OR Define Credit Multiplier. What role does it play in determining the credit creation power of the banking system ?

Use a numerical illustration to explain. 6




24. Given the following data, find the missing value of ‘Government Final Consumption Expenditure’ and ‘Mixed Income of Self Employed’. 6

S. No. ParticularsAmount

(in ` crores)

(i) National Income 71,000

(ii) Gross Domestic Capital Formation 10,000

(iii) Government Final Consumption Expenditure ?

(iv) Mixed Income of Self-Employed ?

(v) Net Factor Income from Abroad 1,000

(vi) Net Indirect Taxes 2,000

(vii) Profits 1,200

(viii) Wages and Salaries 15,000

(ix) Net Exports 5,000

(x) Private Final Consumption Expenditure 40,000

(xi) Consumption of Fixed Capital 3,000

(xii) Operating Surplus 30,000


Note : Except these, all other Questions are from Delhi Set-I. 6. Good X and Good Y are substitute goods. If price of Good X increases, discuss briefly its likely impact on the

demand for Good Y. 4OR

If the income of a consumer increases, discuss briefly its likely impact on the demand for an inferior good, Good X. 4 9. Explain the law of diminishing marginal utility using a hypothetical schedule. 4

OR What is a budget line ? Why the budget line is left to right downward sloping ? 4 11. Elaborate three main features of oligopoly form of market. 6

OR Distinguish between monopoly and monopolistic competition on the basis of the following : (a) Number of sellers (b) Nature of product (c) Selling cost 6 17. If in an economy : Change in initial investments (DI) = ` 700 crore Marginal Propensity to Save (MPS) = 0.2 Find the values of the following : (a) Investment Multiplier (k) (b) Change in final income (DY) 3 20. How are capital expenditure different from revenue expenditure ? Discuss briefly. 4 23. Given the following data, find the missing value of ‘Government Final Consumption Expenditure’ and ‘Mixed

Income of Self Employed’. 6


(in ` crores)


(ii) Net Indirect Taxes 1,000

(iii) Private Final Consumption Expenditure ?

(iv) Gross Domestic Capital Formation 17,000

(v) Profits 1,000




(vi) Government Final Consumption Expenditure 12,500

(vii) Wages & Salaries 20,000

(viii) Consumption of Fixed Capital 700

(ix) Mixed Income of Self Employed 13,000

(x) Operating Surplus ?

(xi) Net Factor Income from Abroad 500

(xii) Net Exports 2,000

6


Note : Except these, all other Questions are from Delhi Set-I and Set - II.

5. Good X and Good Y are complementary goods. If price of Good X increases, discuss briefly its likely impact on the demand for Good Y. 3

OR If the income of a consumer increases, discuss briefly its likely impact on the demand for a normal good,

Good X. 3 7. Explain the law of equi marginal utility. 4

OR State and discuss the conditions of consumer’s equilibrium under ordinal approach. 4 10. Elaborate three main features of monopolistic competition form of market.

OR Distinguish between perfect competition and monopolistic competition on the basis of the following : (a) Number of sellers (b) Nature of product (c) Selling cost 6 18. If in an economy : Change in initial Investment (DI) = ` 1,200 crore Marginal Propensity to Save (MPS) = 0.2 Find the values of : (a) Investment Multiplier (k) (b) Change in final income (DY) 3 21. (a) How are tax receipts different from non-tax receipts ? Discuss briefly. (b) State any two items of revenue expenditure in a Government budget. (3, 1) 22. Given the following data, find the missing value of ‘Government Final Consumption Expenditure’ and ‘Mixed

Income of Self Employed’. 6


(in ` crores)

(i) Mixed Income of Self Employed 3,500

(ii) Net Indirect Taxes 300

(iii) Wages & Salaries ?

(iv) Government Final Consumption Expenditure 14,000

(v) Net Exports 3,000

(vi) Consumption of Fixed Capital 300

(vii) Net Factor Income from Abroad 700

(viii) Operating Surplus 12,000

(ix) National Income 30,000

(x) Profits 500

(xi) Gross Domestic Capital Formation ?

(xii) Private Final Consumption Expenditure 11,000




Outside Delhi Set – 1 Code No. 58/2/1


1. The Total Revenue earned by selling 20 units is ` 700. Marginal Revenue earned by selling 21st unit is ` 70. The value of Total Revenue earned by selling total 21 units will be ................. . (Choose the correct alternative) 1

(a) ` 721 (b) ` 630 (c) ` 770 (d) ` 720 2. In the given figure X1Y1 and X2Y2 are Production Possibility Curves in two different periods T1 and T2 respectively

for Good X and Good Y. A1 and A2 represent actual outputs and P1 and P2 represent potential outputs respectively in the two time periods.

Y2

Y1

P2

P1

A2

A1

X1 X2

Good X

Good Y

O

The change in actual output of Goods X and Y over the two periods would be represented by movement from ........... . (Fill up the blank)

(a) A2 to P2 (b) A1 to P2

(c) P1 to A2 (d) A1 to A2 1

OR

The Marginal Rate of Transformation (MRT) is constant. The Production Possibility Curve, so formed, would be ............................. to the origin. (Fill up the blank) 1

3. Under imperfect competition, Average Revenue (AR) remains .................... Marginal Revenue (MR). (Fill up the blank) 1

OR

“For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be .................... and beyond that level of output Marginal Cost must be ...................... .” (Fill up the blank) 1

4. If the supply curve is a straight line parallel to the vertical axis (Y-axis), supply of the good is called as ............... . (Fill up the blank) 1

(a) Unitary Elastic Supply (b) Perfectly Elastic Supply

(c) Perfectly Inelastic Supply (d) Perfectly Elastic Demand

5. Distinguish between positive economics and normative economics, with suitable examples. 3

6. Explain the law of diminishing marginal utility, with the help of a hypothetical schedule. 3

OR

Elaborate the law of demand, with the help of a hypothetical schedule. 3

7. The market for a good is in equilibrium. How would an increase in an input price affect the equilibrium price and equilibrium quantity, keeping other factors constant ? Explain using a diagram. 4

8. (a) The coefficient of price elasticity of demand for Good X is (–) 0.2. If there is a 5% increase in the price of the good, by what percentage will the quantity demanded for the good fall ?

(b) Arrange the following coefficients of price elasticity of demand in ascending order : (–) 3.1, (–) 0.2, (–) 1.1 4

OR How would the demand for a commodity be affected by a change in “tastes and preferences” of the consumers in

favour of the commodity ? Explain using a diagram. 4




9. Which of the following statements are true or false ? Give valid reasons in support of your answer.

(a) Average cost curve cuts Average variable cost curve, at its minimum level.

(b) Average product curve and Marginal product curve are ‘U-shaped’ curves

(c) Under all market conditions, Average revenue and Marginal revenue are equal to each other

(d) Total cost curve and Total variable cost curve are parallel to each other 4

OR

Explain a firm’s equilibrium under perfect competition, using a hypothetical schedule. 4

10. Explain the meaning of the following features of the Oligopoly Market :

(a) Non-Price Competition

(b) Few Sellers 6

11. (a) What is meant by increasing returns to a variable factor ?

(b) Discuss briefly, any two reasons, for the decreasing returns to a variable factor. 6

12. Explain the following conditions :

(a) Movement along the same indifference curve.

(b) Shift from a lower to a higher indifference curve. 6OR

Explain the Law of Equi Marginal Utility. 6


13. Primary deficit in a government budget will be zero, when ........................ . (Choose the correct alternative) 1 (a) Revenue deficit is zero (b) Net interest payments are zero (c) Fiscal deficit is zero (d) Fiscal deficit is equal to interest payment 14. In order to encourage investment in the economy, the Central Bank may ............................ . (Choose the correct

alternative) (a) Reduce Cash Reserve Ratio (b) Increase Cash Reserve Ratio (c) Sell Government securities in open market (d) Increase Bank Rate 1 15. What do you mean by a direct tax ? 1

OR What do you mean by an indirect tax ? 1 16. Define ‘Money multiplier’. 1

17. Calculate change in final income, if Marginal Propensity to Consume (MPC) is 0.8 and change in initial investment is ` 1,000 crore. 3

18. State the impact of “Excess Demand” under the Keynesian theory on employment, in an economy. 3

OR

State the meaning of the following : (a) Ex-Ante Savings (b) Full Employment (c) Autonomous Consumption 3

19. Classify the following statements as revenue receipts or capital receipts. Give valid reasons in support of your answer. 4

(a) Financial help from a multinational corporation for victims in a flood affected area (b) Sale of shares of a Public Sector Undertaking (PSU) to a private company, Y Ltd. (c) Dividends paid to the Government by the State Bank of India. (d) Borrowings from International Monetary Fund (IMF). 4

20. “Higher Gross Domestic Product (GDP) means greater per capita availability of goods in the economy.” Do you agree with the given statement ? Give valid reason in support of your answer. 4




OR

Explain the meaning of Real Gross Domestic Product and Nominal Gross Domestic Product, using a numerical example. 4

21. Distinguish between ‘Qualitative and Quantitative tools’ of credit control as may be a Central Bank. 4 22. (a) Define “Trade Surplus” and “Trade Deficit”. (b) Discuss briefly the concept of managed floating system of foreign exchange rate determination. 6 23. Discuss the adjustment mechanism in the following situations : (a) Aggregate demand is lesser than Aggregate Supply. (b) Ex-Ante Investments are greater than Ex-Ante Savings. 6 24. Define the following : (a) Value Addition (b) Gross Domestic Product (c) Flow Variables

(d) Income from property and entrepreneurship 6

OR

Given the following data, find the values of “Gross Domestic Capital formation” and “Operation Surplus”.


(in ` crores)


(ii) Wages and Salaries 12,000

(iii) Private Final Consumption Expenditure 7,200

(iv) Net Indirect Taxes 700

(v) Gross Domestic Capital Formation ?

(vi) Depreciation 500

(vii) Government Final Consumption Expenditure 6,100

(viii) Mixed Income of Self-Employed 4,800

(ix) Operating Surplus ?

(x) Net Exports 3,400

(xi) Rent 1,200

(xii) Net Factor Income from Abroad (–) 150

6


Note : Except these, all other Questions are from Outside Set-I. 6. Differentiate between Microeconomics and Macroeconomics, with suitable examples. 3 8. The market for a good is in equilibrium. Explain, using a diagram, how a decrease in input price would affect the

equilibrium price and equilibrium quantity, keeping other factors constant. 4 10. (a) Explain the meaning of the ‘‘Price Discrimination’’ feature under the monopoly form of market. (b) Compare the nature of demand curves under monopoly and monopolistic competition. 3+3 17. Estimate the change in initial investment if Marginal Propensity to Save (MPS) is 0·10 and change in final income

is ` 15,000 crore. 3 19. Discuss briefly the following functions of a Central Bank : (i) Banker’s bank (ii) Lender of last resort 4 22. (a) Distinguish between appreciation of home currency and depreciation of home currency. (b) What is meant by ‘‘current account surplus’’ ?

(c) State any one source of supply of foreign currency for a country. 4+1+1

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Note : Except these, all other Questions are from Outside Delhi Set-I and Set-II. 5. Discuss briefly the concept of normative economics, with suitable example. 3 9. The market for a good is in equilibrium. Explain, using a diagram, how an improvement in technology for

producing the good would affect the equilibrium price and equilibrium quantity, keeping other factors constant. 4 11. (a) ‘‘A firm under perfect competition is a price taker, whereas, a firm under monopoly is a price maker.’’ Defend

or refute the given statement with valid reasons. (b) What is meant by ‘‘product differentiation’’ ? Explain with example. 3+3 18. Estimate the change in final income if Marginal Propensity to Consume (MPC) is 0·75 and change in initial

investment is ` 2,000 crore. 3 20. Discuss briefly the ‘‘credit controller’’ function of a Central Bank. 4 24. (a) Distinguish between ‘Trade Deficit’ and ‘Current Account Deficit’. (b) Discuss briefly the concept of flexible exchange rate system of foreign exchange rate determination. 3+3

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ANSWERS with CBSE MARKING SCHEME, 2019 (Issued by Board)



1. (c) Production of more units of Good X and less units of Good Y. 1

2. (c) falls, as more units are produced 1OR

(d) MCn = TCn – TCn–1 1

3. (d) an inverse ‘U’ shaped curve 1

4. Shift rightwards 1OR

Shift leftwards. 1

5. (i) Positive statement : It deals with a real life situation, justifiable by facts. 1½ (ii) Normative statement : It deals with a situation as it ‘ought to be’. 1½

(No marks to be awarded if reason not given)

6. Substitute Goods can be used in place of each other to satisfy the same want, examples: Coke and Pepsi. 1½ whereas; Complementary Goods are a pair of goods which are jointly demanded for the satisfaction of wants, for

example: petrol car and petrol. (or any other relevant example) 1½OR

Normal Goods are those goods which demand tends to increase with an increase in the income of a consumer. The demand for the normal goods is directly related to the income of a consumer. 1½

Inferior Goods are those goods which demand decreases with an increase in the income of a consumer. The demand for the inferior goods is inversely related to the income of a consumer. 1½

For example – with an increase in income, more generally, a consumer would like to shift to a smart phone from a simple mobile phone he is using at present. Now, the simple mobile phone is an inferior good for him whereas, the smart phone is a normal good. 1

(or any other relevant example)




7.

Quantity (in units)

MU (Utils) TU (Utils)

1 8 8

2 5 13

3 3 16

4 1 17

5 0 17

6 –1 16

Relationship between Total Utility and Marginal Utility (i) Marginal Utility falls but remains positive as long as Total Utility increases from 1st unit to 4th unit of

consumption. (ii) When Marginal Utility is Zero, Total Utility is maximum i.e. at 5th unit of consumption. (iii) When Marginal Utility becomes negative, Total Utility starts falling but remains positive i.e. at 6th unit of

consumption and beyond. 4(or any other relevant schedule with explanation)

(to be marked as a whole)

OR

Combination Good X (in units)

Good Y (in units)

MRSxy (Dy/Dx)

A 1 8 —

B 2 4 4Y : 1X

C 3 2 2Y : 1X

D 4 1 1Y : 1 X

Diminishing Marginal Rate of Substitution implies that a consumer is willing to sacrifice lesser units of Good Y for every additional unit of Good X. As given in the schedule, moving from combination B to C the consumer is willing to give up 2 units of Good Y so as to gain an additional unit of Good X (2Y : 1X), which diminishes to 1Y : 1X in combination D. 4

(or any other relevant schedule with explanation) (to be marked as a whole)

8. Total Quantity (in units) TC (in `) TVC (in `) AVC(in `)

0 200 0 —

1 300 100 100

2 380 180 90

3 440 240 80

4 490 290 72.50 ½×8=4

9. (a) ‘AB’ in the given diagram represents ‘Price Floor’. 1 (b) In the situation of price floor the Government sets the price above the equilibrium price, it creates the

situation of excess supply in the market that leads to surplus of unsold stock with the producer and other consequences. 3

OR Equilibrium price and quantity for the commodity X in a perfectly competitive market will be determined

where : Qd = Qs 1 1700 – 2P = 1300 + 3P ½ 1700 – 1300 = 3P + 2P ½ 400 = 5P




P = ` 80 ½ Therefore, Equilibrium price = ` 80 Equilibrium quantity can be ascertained by substituting equilibrium price = ` 80, either in Qd or Qs. ½ Qd = 1700 – 2P Qd = 1700 – 2(80) ½ Qd = 1700 – 160 = 1,540 units ½ Therefore, equilibrium quantity = 1,540 units.

10. (a) Price elasticity of demand is the measure of the degree of responsiveness of change in quantity demanded for a good due to given change in its price. 2

(b) Ed = % change in quantity demanded

%change in price (ignoring minus sign) 1

% Change in quantity demanded= ∆QQ

× 100 ½

= 30

150100× 1

= 20% fall in the quantity demanded ½

Ed = 2040

0 5%%

.= (ignoring minus sign) 1

11. Diminishing returns to a variable input referred to a stage in production when with the employment of more and more units of variable factor with the given fixed factor, marginal product (MP) decreases and total product (TP) increases at diminishing rate. 2

Reasons for the decreasing returns to a variable factor are :

(i) Over-utilisation of the Fixed Factor : As we keep on increasing the variable factor along with the fixed factor eventually a position comes when the fixed factor has its limits and starts yielding diminishing returns.

(ii) Improper coordination between Fixed and Variable factors : After a certain level of employment, the production process becomes too crowded with the variable input and factor proportion tends to become less and less suitable for the production. 2

12. Features of monopoly form of market :

(i) Single seller : There is a single producer of a commodity therefore the difference between firm and industry disappears. The firm has full control over supply of the commodity.

(ii) No close substitutes : The product offered by a monopolist has no close substitute. So, the monopoly firm has no fear of competition from new or existing rivals.

(iii) Restriction on entry : There exist strong barriers to entry of new firm under monopoly. As a result, a monopoly firm can manipulate the market and earn abnormal profits in the long run too. 2×3=6

(any other relevant features with explanation)OR

Distinction between Perfect Competition and Monopolistic Competition : (i) Number of sellers : Perfect competition and monopolistic competition, both the markets consists of large

number of sellers but there is lesser number of sellers in monopolistic competition as compared to the number of sellers in perfect competition.

(ii) Nature of product : Under perfect competition, product is homogeneous. Whereas, in monopolistic competition products are differentiated on the basis of brand, size, colour, etc.

(iii) Selling cost : Under perfect competition, products are homogeneous in nature therefore there is no selling cost required whereas under monopolistic competition, products are differentiated. Therefore, huge selling costs are required to be incurred to attract consumers. 2×3=6





13. National income, Investment (any other relevant example) ½ + ½

14. Tax is a compulsory payment made by the individuals and the firms to the government. 1

15. (d) 0.6. 1

16. Primary deficit is the difference between fiscal deficit and the interest payments made by the government. 1

OR Fiscal deficit is the difference between the Government’s Budgetary Expenditure and its Budgetary Receipts

excluding borrowings. 1

17. The problem of double counting arises when the value of some goods and services are counted more than once while estimating national income. 1

Two ways to avoid double counting are : (a) Deduct intermediate consumption from value of output to arrive at value added; 1 (b) Take the value of final product only. 1

OR Yes, given statement is defended. As GDP may not take into account (i) Non-monetary exchanges like services of housewife; (ii) Externalities i.e. benefits and harms which are caused due to economic activities; (iii) Distribution of income. 3

18. k = 1

MPS =5 1

k = 1

0.2= 5 ½

ΔY=k(Δl) 1 ΔY=5×500=` 2,500 crore ½

19. Capital Receipts are those receipts of government which either lead to increase in its liabilities or reduction in its assets. For Example: receipts from recovery of loans, borrowings, receipts from disinvestment. 1½

Whereas; Revenue receipts are those receipts of government which neither lead to increase in its liabilities nor reduction in its assets. For example: income tax, profit of PSU, dividends, fees and fines, etc. 1½

(any other relevant example)

20. Components of Aggregate Demand are : (i) Consumption Expenditure(C). 1½ (ii) Investment Expenditure(I). 1½

(a) Consumption Expenditure(C)– It is that portion of income which is spent on purchase of goods and services by the consumers in an economy during the accounting period. ½

(b) Investment Expenditure(I)– The addition to the stock of physical capital and change in inventories of a firm in an economy. ½

OR The vertical gap ‘KT’ represents ‘Deficient Demand’. 1 The fiscal measures to correct ‘Deficient Demand’ are: (a) Increase in government expenditure (b) Reduction in taxes. 1½+1½ (Marks may be awarded for both ‘Deficient Demand’ or ‘Excess Demand’.

However, the ‘measures to control’ must be correct accordingly)

21. (a) When Aggregate Demand is greater than Aggregate Supply (AD>AS), buyers are planning to, buy more goods and services than what producers are planning to produce. It will lead to fall in planned inventories below the desired level. The producers in turn will produce more, which will raise the income level i.e. AS, till AD becomes equal to AS. 2




(b) Ex-ante investments are lesser than ex-ante saving (I < S) means buyers are planning to buy lesser output as to what producers are planning to produce. It will lead to rise in planned inventories above the desired level. As a result the producers will cut down production, leading to reduction of income till savings becomes equal to investments. 2

22. (a) Trade Surplus refers to excess of value of export of visible items over value of import of visible items in the balance of payment account of a country. 1

Current account surplus refers to excess of receipts from value of export of visible items, invisible items and unilateral transfers over payments for value of import of visible items, invisible items and unilateral transfers. It is relatively broader concept as compare to trade surplus. 2

(b) Indian rupee plunged to all time low of 74.48 against US dollar. It is called depreciation in the value of Indian Rupees. It may lead to fall in imports as foreign goods will become costlier for the domestic consumers. 3

(To be marked as a whole)

23. (i) Two components of money supply are : (a) Currency held with the public. (b) Demand deposits held with commercial banks. 2

(ii) Two instruments of credit control are : (a) Repo rate : It is the rate of interest at which central bank lends to commercial banks for their short

term requirements. An increase in repo rate will force commercial banks to increase their lending rates. It will make borrowings costlier to general public. 2

(b) Open market operations: It refer to buying and selling of government securities by the central bank from and to the general public. When central bank sells its securities, it reduces liquidity (deposits) with commercial banks and adversely affects credit creating power of banks. 2

(any other instrument with relevant explanation )OR

Credit multiplier measures the amount of money that the banks are able to create in the form of deposits with every initial deposit. 1

The credit creation by commercial banks depends on credit multiplier as it is inversely related to LRR. Higher the credit multiplier, higher will be the total credit created and vice - versa. 2

For example suppose the LRR is 0.2 and initial deposit is ` 1000

Credit multiplier = 10.2

= 5

Totalcreditcreated=5×` 1,000= ` 5,000

Whereas, suppose LRR is 0.5 and initial deposit is ` 1,000

Credit multiplier = 10.5

= 2

Totalcreditcreated=2×1000=` 2,000

Thus, with the same initial deposit total credit creation decreases with an increase in the value of credit

multiplier. (Any other relevant example) 3

24. Mixed income of self-employed = (i) – [(viii)+(xii)+(v)] 1½ = 71,000-(15,000 + 30,000 + 1,000) 1 Mixed income of self-employed = ` 25,000 crore ½ Government final consumption expenditure = (i) – [(x)+(ii)+(v)+(ix)]+(vi)+(xi) 1½ = 71,000 –(40,000 + 10,000 + 1,000 + 5,000) + 2,000 + 3,000 1 = ` 20,000 crore ½





6. Good X and Good Y are substitute goods, if the price of Good X rises, it makes the Good X costlier and Good Y relatively cheaper. As a result demand for Good Y will increase and consumer will substitute Good Y over Good X. 3

OR

Increase in income of consumer leads to an increase in her purchasing power so the demand for inferior goods falls as consumer will tend to shift from an inferior product to a better quality product. 3

9.

Quantity(in units)

MU(in units)

1 8

2 5

3 3

4 1

5 0

6 –1

Law of diminishing marginal utility states that keeping other factors constant, as a consumer consumes more and more units of a good, the utility obtained from the consumption of every additional unit consumed goes on falling.

As per the schedule marginal utility at first unit of consumption is 8 utils and it goes on falling as consumption increases. It is zero at the 5th unit of consumption and negative at 6th unit of consumption and beyond. 4

(any other relevant example)(to be marked as a whole)

OR Budget line – It is a graphical presentation of all those combinations of two goods which costs the consumer

exactly his income. 2 It is downward sloping because to buy more of one good, the consumer must reduce the purchase of the other

goods as income remains same. 2

11. Three main features of oligopoly form of market : (i) Few firms : This market comprises of few firms, each firm is likely to have market share big enough to

have some influence on the price of product. (ii) Interdependence : As the number of competing firms is limited under oligopoly therefore each firm has

to take into account the likely reactions of the rival firms before taking any price and output decision. (iii) Non-price competition : In order to avoid any possible price war in the market the firms resort to the use

of promotional techniques. 2×3=6

(Any other relevant feature)

OR Distinction between Monopoly and Monopolistic Competition : (i) Number of seller : There exists a single seller in the monopoly market whereas there are large numbers

of sellers under monopolistic competition form of market. (ii) Nature of the product : There is unique product in monopoly market whereas under monopolistic

competition products are differentiated. (iii) Selling cost : Under monopoly market selling cost are negligible as product is unique in its nature. Under

monopolistic competition market huge selling cost are incurred due to product differentiation. 2×3=6




17. k=1

MPC 1

k=1

0.2= 5 ½

DY=k (Dl) 1 DY=5×700=` 3500 crore ½

20. Revenue expenditure is that expenditure of the government that neither creates any asset nor reduces any liability. For example: Expenditure on salaries, pensions, interest payments. 2

Whereas; Capital expenditure is that expenditure of the government that either creates assets or reduces liabilities. For example: Expenditure on construction of flyovers , repayment of loans.

2

23. Operating surplus =(i) – [(vii)+(ix)+(xi)] 1½ =50,000 – (20,000+13,000+500) 1 =16,500 crore ½ Private final consumption expenditure=(i) – [(iv)+(vi)+(xi)+(xii)]+(vii)+(ii) 1½ =50000 – (17000 +12500 +2000+500) +700+1000 1 =` 19,700 crore ½


5. Good X and Good Y are complementary goods which are jointly demanded therefore if the price of Good X increases the demand for Good Y will decrease. This is due to the inverse relationship between the price of given good and demand for its complementary good. (to be marked as a whole) 3

OR Increase in income of consumer leads to an increase in purchasing power of consumer so the demand for

normal goods X increase, as the demand for normal good is directly related to the income of consumer. (to be marked as a whole) 3

7. Law of equi marginal utility states that a consumer will get maximum satisfaction if the marginal utility of last rupee spent on each good is same.

The condition for consumer to be in equilibrium in case of equi marginal utility will be MU

P

MU

Px

x

y

y= = MU

of last rupee spent on each good. 4OR

The condition of consumer’s equilibrium under ordinal approach are :

(i) MRSxy = PPx

y

1

(ii) MRSxy declines as more of Good X is consumed. 1

Explanation :

(i) Suppose MRSxy >

PPx

y, it means that the consumer is willing to sacrifice more for Good X than market price

of Good X. It will induce a consumer to buy more of Good X and less of Good Y. Buying more of

Good X reduces MRSxy. This process will continue till MRSxy = PPx

y. 1½

(explanation with MRSxy < PPx

y is also correct)

(ii) MRSxy must decline for the consumer to attain equilibrium. (Diagram not required) ½




10. Feature of Monopolistic Competition : (i) Large number of seller : Large number of sellers selling closely related but differentiated products. Each

firm acts independently and has limited share of the market which leads to limited degree of monopoly overprice.

(ii) Product differentiation : Products are differentiated on the basis of brand name, colour, size, etc. these differentiated products are close substitute of each other. Since a group of buyers prefers the product of a particular producer, that producer enjoys some monopoly in the market.

(iii) Freedom of entry and exit to firms : There exist no barriers to entry or exit, as a result firms earn only normal profits in the long run. 2×3=6

OR (i) Number of sellers : Perfect and monopolistic, both the market consist of large number of sellers but there

are comparatively less number of sellers in monopolistic market. (ii) Nature of product : Under perfect competition product is homogeneous. In monopolistic competition

products are differentiated on the basis of brand, size, colour, etc. (iii) Selling cost : Under perfect competition, products are homogeneous in nature therefore no selling cost is

required. Under monopolistic competition, products are differentiated thus huge selling cost is required promote the good and to attract the consumers. 2×3=6

18. k = 1

MPC 1

k = 1

0.2= 5 ½

DY = k (DI) 1

DY=5×1200=` 6000 crore ½

21. (a) Tax receipt is the revenue earned by the government from taxes levied on income, wealth and commodities. E.g. Income Tax, GST, etc., whereas; non- tax receipts are the revenue earned by the government from sources other than taxes, E.g. fees, fines, interest earned, etc. 3

(b) Expenditure of the government on salaries, pensions, subsidies, grants etc. 1(any other relevant examples)

22. Wages and salaries = ix-[(i)+(viii)+(vii)] 1½ = 30,000 – (3,500+12,000+700) 1 = 13,800 crore ½ Gross domestic capital formation = (ix)-[(iv)+(v)+(vii)+(xii)]+(ii)+(vi) 1½ = 30000-(14000+3000+700+11000)+300+300 1 = 1,900 crore ½

½



1. (c) ` 770. 1

2. (d) A1 to A2. 1OR

Straight Line. 1

3. Above (higher/ greater than/ more than). 1OR

Equal, rising. ½ + ½

4. (c) Perfectly inelastic supply. 1




5.

Positive Economics Normative Economics

Positive economics is that branch of economics which deals with economic issues as “what is”. It is based on facts and objective in nature.

Normative economics is that branch of economics which deals with economic issues as “what ought to be“. It is suggestive in nature.

E.g. Western Railways has earned ` 517.41 crore by selling scrap material in 2018-19.

E.g. The government should promote social safety nets to take care of the poor population

(Any other relevant example) 3

6. The law of diminishing marginal utility states as follows : ‘As a consumer consumes more and more units of a specific commodity, without a time lag, the additional

utility (satisfaction), he expects to derive from each successive unit will go on diminishing. 1½

Units Consumed( in units)

Total Utility( in units)

Marginal Utility

( in units)

1 20 20

2 35 15

3 45 10

4 50 5

5 50 0

6 47 (–) 3

1½ (Any other relevant example with explanation)

OR Law of Demand : Law of Demand states that other things being equal; there exists an inverse relation between

price of a commodity and its quantity demanded. In other words, when the price of a commodity increases, its quantity demanded falls and vice-versa, other factors remaining the same. 1½

Demand Schedule :

Price of theCommodity X

(in `)

Quantity Demandedof the Commodity X

(in units)

10 1

8 2

6 3

4 4

2 5

1½(Any other relevant schedule with explanation)




7. Y

X

D

Pe'

S'price

e'

e

Qe' Qe quantity

DS'

S

S

Pe

O 2 The market for a good is in equilibrium at point e, increase in the input price will decrease the supply in the

market and supply curve will shift towards left from SS to S’S’. 2 New supply curve intersects the original demand curve DD at higher point e’, so equilibrium price will increase

from OPe to OPe’ and equilibrium quantity will fall from OQe to OQe’.(any other valid explanation)

8. (a) Ed = (–) 0.2 (given) Percentage rise in price = 5% (given) Let percentage change in quantity demanded = x

Ed =Percentage change in quantity demanded

percentage change in price (ignoring minus sign) 1

0.2 = x

5% 1

x = 1 % ½ Percentage fall in quantity demanded is 1% ½ (b) (–) 0.2, (–)1.1, (–) 3.1 (marks should not be deducted if minus sign is not mentioned ) 1 OR

Y

X

P

O

D

D'

Q Q'Quantity

(in units)

Price

in `e e'

2 If there is a favourable change in taste and preferences of the consumer for a good. At the same price

OP the quantity demanded would increase from OQ to OQ’. Demand curve (DD) will shift to the right (D’D’). This rightward shift shows increase in demand for the good at the same price, keeping other factors constant. 2

9. (a) The given statement is false. Average Cost curve is the vertical summation of Average Variable Cost and AverageFixedCost(AC=AFC+AVC).Since,AverageFixedCostcannotbezero(AFC≠0)thetwocurveswould never touch each other. 1

(b) The given statement is false. As per Laws of Returns to a Factor, Average Product Curve and Marginal Product Curve both rise and then tend to fall. Thus, the two curves are inverted ‘U’ shaped curves and not ‘U’ shaped curves. 1

(c) The given statement is false. This condition is obtained in perfect competition market a price remains constant only under the perfect competition a market. 1




(d) The given statement is true. The difference of the two is represented by Total Fixed Cost (TFC). TFC remains constant at all levels of output. It represents the vertical distance between the two curves making them parallel to each other. 1

OR A firm’s equilibrium under perfect competition is obtained when both the following two conditions are

satisfied: (i) Marginal Revenue = Marginal Cost (ii) After point of equalisation Marginal Cost should be rising. 2

Schedule :

Output (in units) Marginal Revenue(in `) Marginal Cost (in `)

1 10 < 12

2 10 = 10

3 10 > 8

4 10 > 9

5 10 = 10

6 10 < 12 2 (or any other relevant schedule) As per the schedule, producer is in equilibrium at 5th unit of output where both the conditions are fulfilled.

10. (a) Non Price Competition : In oligopoly market firms generally collude and make cartels/group to avoid price war, rather they indulge themselves in product war (exhibiting their product to be superior). Normally, the oligopoly firms do not respond to a rise in price by the rivals. However, they have to respond if a rival firm reduces the price of the product. 3

(b) Few Seller : Oligopoly is a market structure where the number of sellers is limited. Each producer has some effective control over the market. The degree of control rises as the number of firms in the industry falls and vice versa. (any other valid explanation) 3

11. (a) Increasing returns to a variable factor, implies that as we keep on increasing the units of variable factor along a given fixed factor, the total production increases at an increasing rate i.e. Marginal Product increases. This is due to the factors like division of labour, proper coordination between fixed and variable factor, etc. 2

(b) Reasons for the decreasing returns to a variable factor (i) Over-utilisation of the Fixed Factor : As we keep on increasing the variable factor along with the fixed

factor eventually a position comes when the fixed factor has its limits and starts yielding diminishing returns. 2

(ii) Improper coordination between Fixed and Variable Factors : After a certain level of employment of variable factors along with the fixed factors, the production process becomes too crowded. With the employment of additional variable inputs, factor proportion become lesser and lesser suitable for the production and start yielding diminishing returns. (any other valid explanation) 2

12. (a) Movement along the same indifference curve shows various bundles of two goods that provide equal satisfaction to the consumer. In order words, to increase the consumption of one commodity, the consumer has to sacrifice the consumption of the other and moves up or down on the same indifference curve. 3

(b) A consumer will shift from a lower indifference curve to a higher indifference curve when he/she wants to have a new bundle of two goods, which has more quantity of at least one good and no less of the other good (monotonic preference). Alternatively, the new bundle may offer more quantity of both the goods, thereby providing the consumer greater level of satisfaction. 3

OR The Law of Equimarginal utility is an extension of the Law of Diminishing Marginal Utility. The consumer

may expect to get maximum utility by allocating the income among various goods in such a way that last rupee spent on each good yields the same Marginal Utility. In other words, the law states that the consumer will get maximum satisfaction if the marginal utility of the last rupee of expenditure on each good is the same.




Conditions:

(a) MU

P

MU

Px

x

y

y= = MU of last rupee on each good

(b) Law of diminishing marginal utility operates.

Suppose MU

P

MU

Px

x

y

y> it means that per rupee MU gained from consumption of Good- X is higher than

the price to be paid for it. This induces the consumer to buy more of Good-X and less of Good-Y. This

reduces the MUx and raises MUy till MU

P

MU

Px

x

y

y= .

(Explanation based on MUP

<MU

Px

x

y

y

is also correct) (to be marked as a whole) 6


13. (d) Fiscal deficit is equal to interest payment. 1

14. (a) Reduce Cash Reserve Ratio. 1

15. Direct taxes are those taxes which cannot be shifted to the other person/entity. Their monetary burden is borne by those on whom they are levied. 1

OR Indirect taxes are those taxes which can be shifted to another person/entity. The irmonetary burden is ultimately

borne by final users of goods and services, rather than the person on whom the tax is levied. (Any other valid definition) 1

16. Money multiplier is the number by which total deposits can increase due to a given change in deposits. It is inversely related to legal reserve ratio. 1

(Any other valid definition)

17. Investment Multiplier (K)

= 1

1 MPC− = 1

1 0.8− 1

K = 1

0.2= 5 ½

Also, K = ΔYΔI

½

5 = ΔY1000

½

ΔY=5,000crore Change in final income = ` 5,000 crore ½

18. In case of ‘Excess Demand’ under the Keynesian Theory, there will be no change in the employment as the economy is already working at the full employment. Thus, there is no further scope of creation of employment. 3

OR Ex-Ante Savings : It refers to the planned savings, at different levels of income in an economy. 1 Full employment : It refers to a situation of no involuntary unemployment. 1 Autonomous consumption : It refers to the minimum level of consumption for survival even at a zero level of

income. (any other valid definitions) 1




19. (a) Revenue Receipt of the government, as it is neither creating any liability nor reducing any assets for the government. 1

(b) Capital Receipt of the government, as it is reducing the assets of the government. 1 (c) Revenue Receipt of the government, as it is neither creating any liability nor reducing any assets for the

government. 1 (d) Capital Receipt, as it is increasing the liability of the Government. 1

20. “Higher Gross Domestic Product (GDP) means greater per capita availability of goods in the economy.” This statement is not true.

(i) If the rate of population growth is more than the rate of growth of GDP, the per capita availability of goods and services will fall. 2

(ii) GDP doesn’t account for changes in inequalities in distribution of Income. If the rising GDP is concentrated in a few hands, per capita availability of goods in the economy might not increase. 2

(Any two other relevant reasons)OR

Nominal Gross Domestic Product (GDP) is measured as the product of current year output (Q1) of final goods and services and their current year price (P1).

Real Gross Domestic Product (GDP), on the other hand, is measured as product of current year output (Q1) and their base year price (P0). Real GDP will increase if the output of goods and services produced in an economy is increasing. 1

For Example : Suppose current year’s production in a hypothetical economy is 1,000 units at a price of ` 500,theGDPatcurrentyearpriceis1000×500=` 5,00,000, so the nominal GDP is ` 5,00,000

Suppose base year price is `400,theGDPatbaseyearpricesis1000×400=`4,00,000. So the Real GDP is `4,00,000. 2

(Any other relevant example)

21. The tools used by the Central bank to control money supply can be quantitative tools or qualitative tools. Quantitative tools control the extent of money supply by changing the CRR or bank rate or open market operations. Qualitative tools include persuasion by the Central bank in order to make commercial banks discourage or encourage lending which is done through moral suasion, margin requirement, etc. 2+2=4

22. (a) Trade surplus will arise if the total value of country’s exports of merchandise is more than value of its imports of the merchandiser.

Trade deficit will arise if value of country’s imports is more than the value of its exports during the year. 3 (b) Managed floating exchange rate system is the amalgamation of clock word the flexible exchange rate system and

the fixed exchange rate system. Under this system, central banks intervene to buy and sell foreign currencies in an attempt to moderate exchange rate movements. This system is also called ‘dirty floating’. 3

(to be marked as a whole)

23. (a) When Aggregate Demand is lesser than Aggregate Supply (AD<AS), buyers are planning to buy lesser goods and services than what producers are planning to produce.

It will lead to rise in planned inventories above the desired level. The producers in turn will produce less, which will reduce the income level i.e. AS. This process will continue till AD becomes equal to AS. 3

(b) Ex-ante investments are greater than ex-ante saving (I > S), means buyers are planning to buy more output as to what producers are planning to produce. It will lead to fall in planned inventories below the desired level. As a result the producers will raise production, leading to increase in income till savings becomes equal to investments. 3

24. (a) Value Addition – It is the excess of value of output over the value of intermediate consumption. (b) Gross Domestic Product – It is the money value of all final goods and services produced in an economy

during an accounting year. (c) Flow Variables – Flow Variables are those economic variables which can be measured over a period of time

e.g. national income, money creation etc.




(d) Income from Property and Entrepreneurship – These are incomes earned by property owners. It includes, rent and royalty, profit, interest. It can also be termed as Operating Surplus.

(any other valid definition) 1½×4=6

OR Gross Domestic Capital Formation = (i) – {iii+vii+x} + vi – xii +iv GDCF = 22,100 – {7,200 + 6,100 + 3,400} + 500 – ( – 150)+700 GDCF = 6,750 crore 3 Operating surplus = National Income – wages and salaries – Mixed Income of Self Employed – Net Factor

Income from Abroad = (i) – (ii) – (viii) – (xii) = 22,100 – 12,000 – 4,800 – ( – 150) = 5,450 crore 3


6. Microeconomics studies the behaviour of individual economic units e.g. demand and supply whereas Macroeconomics studies the behaviour of the economy as a whole e.g. Aggregate Demand and Aggregate Supply. (or any other relevant example) 1½+1½

8.

Y

XO

P

P'

E

E'

S

S'

Q Q'

Quantity

Price

S

S'

D

D

1½ If the market for a Good is in equilibrium at point E, a decrease in input price will result in a fall in the cost

of production. The producers will be increasing the supply of the product, thus, the supply curve will shift rightward from SS to S’S’. The new supply curve will now intersect the original demand curve, DD at lower point E’, equilibrium price will fall from OP to OP’. Equilibrium quantity will increase from OQ to O Q’. 1½

10. (a) In a monopoly market, there is only a single firm that controls the market. It can sell the same good at different prices to different consumers. For example: If there is only one doctor in a locality he may charge lesser fee from the poor and higher from the others. 3

(b) In monopoly market, the demand curve is steeper (less elastic) in comparison to a monopolistic competitive market because there is no close substitute for the product. The demand curve in monopolistic competitive market is more elastic as compared to monopoly market because in this market substitutes produced by rival firm are available. (any other valid explanation) 3

17. Investment Multiplier (K) = 1

MPC ½

K = 1

0 110

.= ½

Also, K = ΔYΔI

½

10 = 15000

ΔI ½




ΔI=15000

10 ½

Change in final income = ` 1,500 crore ½

19. (i) Banker’s Bank : As the bankers to the banks, the central bank holds surplus cash reserves of commercial

banks. It also lends to commercial banks when they are in need of funds. Central bank also provides a large

number of routine banking functions to the commercial banks. It also acts as a supervisor and a regulator

of the banking system. 2

(ii) Lender of Last Resort : It refer to the role of RBI, of being ready to lend to banks, especially when a bank is

faced with unanticipated severe financial crises, and due to this central bank is said to be the lender of last

resort. If the central bank refuses to extend this help there is no option for the bank but to shut down.

(any other relevant explanation) 2

22. (a) Appreciation of home currency implies that purchasing power of home currency in terms of a foreign currency has gone up, whereas; depreciation of a home currency implies fall in the purchasing power of domestic currency in terms of foreign currency. 2

Appreciation makes foreign goods cheaper for the domestic buyer whereas; depreciation of home currency implies fall in the price of domestic goods for the foreign buyers. 2

(b) Current Account in BOP is in surplus when the total receipts on account of total export of goods and services are greater than payments on account of import of goods and services in a year. 1

(c) Exports of goods and services. (any other relevant example) 1


5. Normative Economics is that branch of economics which is suggestive in nature. It deals with economic issues as they ‘ought to be’. Normative statements can only be assessed relative to beliefs and value judgements. E.g. the unemployment rate should be reduced. 3

9. If the market for a good is in equilibrium, the improvement in technology will reduce the cost of production. Fall in cost of production will shift the supply curve to rightward from SS to S’S’. The new supply curve will intersect the original demand curve DD at lower point E’. As a result, equilibrium price will reduce from OP to OP’ and equilibrium quantity will increase from OQ to O Q’. 2

Y

XO

P

P'

E

E'

S

S'

Q Q'

Quantity

Price

S

S'

D

D

2




11. (a) The given statement is true. In a perfect competitive market, there are a very large number of firms. Each firm has insignificant share in the market. The price at which a firm has to sell its product is decided by the industry as a whole. Every firm has to sell at this price. Thus, the firm is called a price taker. 1½

In a monopoly market, there is a single firm that controls the market. In absence of any rival firm, the existing firm decides the price of its product. Hence, firm is called the price maker. 1½

(b) Product differentiation implies that the consumers differentiate among the similar products of different firms on the basis of packing, colour, shape etc. They differ in colour, packing, taste etc. these differentiated product are close substitutes to each other. 2

For example, there are a number of toothpastes available in the market like Colgate, Closeup, Pepsodent etc. (any other relevant example) 1

18. Multiplier = 1

1 MPC− ½

When MPC = 0.75

K = 1

1 0 75− . ½

K = 1

0 254

.= ½

K = ΔYΔI

½

4 = ΔY2000

½

ΔY=8000 Change in final income = ` 8,000 crore ½

20. Central Bank as Controller of Credit : The primary objective of credit control is to remove causes responsible for instability in price fluctuations which in turn are related to the supply of money. By controlling credit, the central bank can exercise an effective control over economic activity and mobilise it in the desired direction. Central Bank regulates the volume and use of credit by using quantitative and qualitative tools.

(to be marked as a whole) 4

24. (a) Trade deficit will arise if the value of a country’s merchandise imports is more than the value of its merchandise exports during a year. 1½

Current Account is in deficit when receipts from exports of visible and invisibles are less than payments against imports of visible and invisible items. 1½

(b) Flexible Exchange Rate : This exchange rate is determined by the market forces of demand and supply. It is also known as Floating Exchange Rate. The exchange rate is determined at the price where the demand for foreign currency is equal to the supply of foreign currency. In a completely flexible system, the Central Banks do not intervene in the foreign exchange market. 3

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SOLVED* C.B.S.E. PAPER WITH 2019 MARKING Class–XII … · Economics *Note : This paper is solely for reference purpose only. The format and syllabus have now been modified by CBSE