## CBSE Sample Papers for Class 12 Economics Compartment Delhi -2012

Time allowed : 3    hours                                                                                         Maximum marks 100

GENERAL INSTRUCTIONS

1.  All questions in both the sections are compulsory.
2. Marks for questions are indicated against each.
3. Questions No. 1-5 and 17-21 are very short-answer questions carrying 1 nick each. They are required to be answered in one sentence each.
4.  Questions No. 6-10 and 22-26 are? short-answer questions carrying 3 marks each. Answers to them should normally not exceed 60 words each.
5.  Questions No. 11-13 and 27-29 are also short-answer questions carrying 4 marks each. Answers to them should normally not exceed 70 words each.
6.  Questions No. 14-16 and 30-32 are long-answers questions carrying 6 marks each. Answers to them should normally not exceed 100 words each.
7.  Answers should be brief and to the point and the above word limit should be adhered to as far as possible.

### SET I

SECTION A
Question.1. Give the meaning of opportunity cost.
Answer. Opportunity cost is defined as the value of..the benefit that is foregone by choosing one alternative rather than the other. .

Question.2. In economics what is an inferior good?
Answer. An inferior good is one whose demand falls with a rise in the income of the consumer, i.e., it has a negative income effect.

Question.3. When is the demand for a good said to be inelastic?
Answer. When the proportionate change in quantity demanded is less than the proportionate change in price, the demand for a commodity is said to be inelastic.

Question.4. Define market supply.
Answer. The total supply of a good by all the sellers (producers) at a given price and during a given period is market supply.

Question.5. When does a supply curve shift?
Answer. If the supply curve of a good changes due to a factor other than its own price it is termed as a shift in supply curve. For example, technological changes, change in price of factor input etc.

Question.6. Define an economy. Why does it face the problem of ‘what to produce’?
Answer. An economy is a system which provides people with a means to work and earn their living. It faces the problem of ‘What to produce?’ because resources are scarce and they have alternate uses. This is the problem of what goods should be produced and in what quantities. We have to see whether we have to produce consumer goods or producer goods or defense goods or all the goods in some quantity combination.

Question.7. Give three causes of a leftward shift in demand curve.
Answer. There can be a leftward shift in demand curve when the demand for a good falls because of the following reasons:

1. In the case of a normal good, the income of a consumer may fall thereby reducing the demand for a good.
2. There may be a fall in the price of substitute goods, leading to a fall in the demand for the good.
3. There may be increase in the price of complementary good thereby reducing the demand of the particular good.

Or
State three properties of indifference curves.
Answer. See Q. 15, 2011 (I Delhi).

Question.8. The price elasticity of demand of X is (-) 1.25. Its price falls from ? 10 to ? 8 per unit. Calculate the percentage change in its demand.

Question.9. Explain the relationship between marginal product and average product.
Answer. Average product CAP). It is per unit product of a variable factor.
Marginal product (MP). It is an addition to the total product when an additional unit of a variable factor is employed.
The relationship between marginal product and average product is as follows:

1. When MP is greater than AP, AP increases.
2. When MP is equal to AP, AP is constant and maximum.
3. When MP is less than AP, AP falls/
4. MP can be zero and negative but AP is never zero.

Question.10. When the price of a commodity rises by 10 percent, its supply rises by 40 units. Its elasticity of supply is 1. Calculate its supply at the original price.

Question.11. Define a budget line. Explain why is it a straight line.
Answer. A budget line graphically shows all the bundles of two goods (i.e., all possible combinations of two goods) that can be bought by spending the entire income (M) at the prevailing prices. ${ P }_{ 1 }{ x }_{ 1 }$ is the money spent on good${ x }_{ 1}$ and ${ P }_{ 2 }{ x }_{ 2 }$is the money spent on good ${ x }_{ 2}$. Thus the total money spent is ${ P }_{ 1 }{ x }_{ 1 }+{ P }_{ 2 }{ x }_{ 2 }$ which is equal to the income M.

### SET III

Note: Except for the following questions, all the remaining questions have been asked in Set-I and Set-II.
SECTION A
Question.4. Define supply.
Answer. Supply is that part of stock of a commodity which is offered for sale at a given price during a given period of time.

Question.6. Explain the problem of ‘how to produce’.
Answer. It is a problem of the choice of technique of production. There are number of techniques available, for example, labour intensive or capital intensive techniques. This problem arises due to scarcity of resources which can be put to alternate uses. The decision of how goods should be produced depends on the price of factor inputs. For example, in India, labour intensive technology is adopted whereas in a country like Japan, capital intensive technique is used.

Question.9. Explain the relationship between marginal revenue and average revenue.
Answer. Average Revenue (AR) is the revenue per unit of the product sold.
Marginal Revenue (MR) is the addition to the total revenue from sale of an additional unit of a commodity.
Relationship between MR and AR:

1. AR increases as long as MR is higher than AR, i.e., when MR > AR, AR increases.
2. AR is maximum and constant when MR is equal to AR, i.e., MR = AR, AR is constant,
3. AR falls when MR is less than AR, i.e., when MR < AR, AR falls Point (ii) relates to the relationship between MR and AR in perfect competition whereas point (iii) relates to monopoly and monopolistic competition.

Question.10. The price of a commodity falls by 15 per cent and its supply falls from 200 units to 155 units. Calculate its elasticity of supply.

Question.13. Explain the chain of effects of excess demand on equilibrium price.
Answer. Equilibrium price of a commodity is determined where quantity demanded and supplied are equal. If market price is fixed below the equilibrium price, it creates a situation of excess demand. In such a case, there is competition among buyers which results in more demand than the supply of goods. This will increase the price of goods and bring it back to the equilibrium price where the demand and supply are equal the situation of equilibrium price. This can be explained with the help of a diagram.

In the diagram, equilibrium price is OP, where demand and supply are equal. If market price is fixed at OP1 there will be excess demand equal to FG. In such a case, because of the competition among the buyers, the price will increase bringing it equal to OP, where the demand and supply are equal.

Question.15. Giving numerical examples, explain the following:
(i) Budget set
(ii) Marginal rate of substitution .
Answer. (i) Budget set. The set of bundles of two goods that are available to the consumer given his income at prevailing market prices is called the budget set. Using M as income, P, as price of good X and P2 as price of good Y, a consumer can buy any bundle which he can get by spending M (income) on good X and good Y in the following manner:
${ P }_{ 1 }X+{ P }_{ 2 }Y\le M$
(ii) Marginal rate of substitution. Each bundle is different from other bundle so far the quantities of goods (X and Y) are concerned. The consumer substitutes one good for another. But the question is how much of good Y the consumer is willing to give up for getting an extra unit of good X. The rate at which the consumer can substitute good X for good Y is called the marginal rate of substitution. In other words, marginal rate of , substitution measures the consumer’s willingness to give up good X to get an additional unit of good Y without affecting total utility. Marginal rate of substitution is always declining. It can be measured in the following manner:

SECTION B
Question.20. Give the meaning of aggregate demand.
Answer. Aggregate demand is the value of total expected demand for all goods and services in the economy during a given period of time.

Question.21. What is a tax?
Answer. Tax is a payment, charged by the Government, which is to be paid legally by the people.

Question.27. Complete the following table: