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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.1-5 and 16-20 are very short answer questions carrying 1 mark each. They are required to be answered in one sentence.

(iv) Question No.6-8 and 21-23 are short answer questions carrying 3 marks each. Answers to them should not normally exceed 60 words each.

(v) Question No.9-11 and 24-26 are also short answer questions carrying 4 marks each. Answers to them should not normally exceed 70 words each.

(vi) Question No.12-15 and 27-30 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.

Question 1
• Q1

As we move along a downward sloping straight line demand curve from left to right, price elasticity of demand : (choose the correct alternative)   (1)

(a) remains unchanged
(b) goes on falling
(c) goes on rising
(d) falls initially then rises

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• Q2

Define market demand.    (1)

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• Q3

The demand of a commodity when measured through the expenditure approach is inelastic. A fall in its price will result in : (choose the correct alternative)   (1)

(a) no change in expenditure on it.
(b) increase in expenditure on it.
(c) decrease in expenditure on it.
(d) any one of the above.

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• Q4

State any one feature of oligopoly.    (1)

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• Q5

Average revenue and price are always equal under : (choose the correct alternative)   (1)

(a) perfect competition only
(b) monopolistic competition only
(c) monopoly only
(d) all market forms

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• Q6

Explain the problem of 'how to produce.'    (3)

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• Q7

State the meaning and properties of production possibilities frontier.   (3)

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• Q8

Show that demand of a commodity is inversely related to its price.     (3)

Explain with the help of utility analysis.

Or

Why is an indifference curve negatively sloped? Explain.

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• Q9

Explain the meaning of diminishing marginal rate of substitution with the help of an example.   (4)

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• Q10

State different phases of the law of variable proportions on the basis to total product. Use diagram.  (4)

Or

Explain the geometric method of measuring price elasticity of supply. Use diagram.

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• Q11

Explain the 'free entry and exit of firms' feature of monopolistic competition.    (4)

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• Q12

Complete the following table :    (6)

 Output units Total cost Rs. Average variable cost Rs. Marginal cost Rs. Average fixed cost Rs. 0 30 1 ... ... 20 ... 2 68 ... ... ... 3 84 18 ... ... 4 ... ... 18 ... 5 125 19 ... 6

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• Q13

Good Y is a substitute of good X. The price of Y falls. Explain the chain of effects of this change in the market of X.

Or

Explain the chain of effects of excess supply of a good on its equilibrium price.    (6)

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• Q14

When price of a commodity X falls by 10 per cent, its demand rises from 150 units to 180 units. Calculate is price elasticity of demand. How much should be the percentage fall in its price so that its demand rises from 150 to 210 units?    (6)

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• Q15

Using marginal cost and marginal revenue approach, find out the level of output at which producer will be in equilibrium. Give reasons for your answer.      (6)

 Output (Units) 1 2 3 4 5 6 Average Revenue (Rs.) 20 20 20 20 20 20 Total Cost (Rs.) 22 42 60 76 96 120

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• Q16

Aggregate demand can be increased by : (choose the correct alternative)  (1)

(a) increasing bank rate

(b) selling government securities by Reserve Bank of India

(c) increasing cash reserve ratio

(d) none of the above

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• Q17

Give the meaning of involuntary unemployment.  (1)

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• Q18

Give the meaning of balance of payments.  (1)

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• Q19

The ratio of total deposits that a commercial bank has to keep with Reserve Bank of India is called : (choose the correct alternative)  (1)

(a) Statutory liquidity ratio

(b) Deposit ratio

(c) Cash reserve ratio

(d) Legal reserve ratio

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• Q20

What is fiscal deficit?   (1)

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• Q21

Distinguish between final goods and intermediate goods. Give an example of each.  (3)

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• Q22

Explain the store of value function of money.  (3)

Or

State the meaning and components of money supply.

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• Q23

Explain the basis of classifying taxes into direct and indirect tax. Give examples.  (3)

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• Q24

Explain 'banker to the government' function of the central bank.  (4)

Or

Explain the role of reverse repo rate in controlling money supply.

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• Q25

Explain how government budget can be used to influence distribution of income?  (4)

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• Q26

An economy is in equilibrium. From the following data calculate autonomous consumption.   (4)

(i) Income = 10000

(ii) Marginal propensity to save = 0.2

(iii) Investment = 1500

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• Q27

Explain 'non-monetary exchanges' as a limitation of using gross domestic product as an index of welfare of a country.  (6)

Or

How will you treat the following while estimating domestic product of a country? Give reasons for your answer:

(a) Profits earned by branches of country's bank in other countries

(b) Gifts given by an employer to his employees on independence day

(c) Purchase of goods by foreign tourists

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• Q28

Assuming that 'increase' in investment is Rs. 900 crore and marginal propensity to consume is 0.6, explain the working of multiplier.  (6)

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• Q29

Calculate (a) net national product at market price and (b) gross national disposable income:  (6)

 Rs. in crores (i) Gross domestic fixed capital formation 400 (ii) Private final consumption expenditure 8000 (iii) Government final consumption expenditure 3000 (iv) Change in stock 50 (v) Consumption of fixed capital 40 (vi) Net indirect taxes 100 (vii) Net exports (–) 60 (viii) Net factor income to abroad (–) 80 (ix) Net current transfers from abroad 100 (x) Dividend 100

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• Q30

Why does the demand for foreign currency fall and supply rises when its price rises? Explain.  (6)

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