JULY 2017 BOARD SOLUTION ECONOMICS

Q. 2. A. Define or Explain the following concepts.

(1) Individual Demand.
Ans. Individual demand is a demand by an individual. Individual demand indicates amount of goods purchased by an individual at different prices during a given period of time.

(2) Cross Elasticity of Demand.
Ans. It refers to the responsiveness of quantity demand of 'X' commodity with given change in the price of 'Y' commodity assuming that except prices of 'Y' commodity all other conditions of demand remains same.
3. Stock
Ans. Stock is a potential supply. It refers to the quantity possessed by a seller. It is a static concept and inversely related to price.

4. Entrepreneur.
Ans. Meaning: -An entrepreneur is one who organIses the factors of production and takes necessary actions to run the business.
The new Encyclopaedia of Britannica defines “An entrepreneur is an individual who bears the risk of operating a business in the face of uncertainty about the future conditions”.

5. Effective Demand:
Ans. The concept of effective demand is given by J.M. Keynes. In Economics, effective demand is determined at the point where aggregate demand is equal to aggregate supply.
Effective demand = ADD = ASS

6. Clearing Home
Ans. This is the important function of Central bank. A clearing house is a place of exchange of cheques by bank. It helps of transfer funds of one bank to another bank and also helps to settle claim of Banks again each other by passing debit and credit entry and adjusting balances of commercial banks with that of central bank.
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Q. 2. B. Give reasons or explain the following statements.
1. All desires are not demand.
Ans. It is because in Economics demand means a desire which is backed by ability and willingness to buy and desire to pay at given market price.

2. Perfectly inelastic demand curve is parallel to OY axis.
Ans. It is because perfectly inelastic demand indicates that even price rises or fall demand will not change and responsiveness of change in quantity demanded to given change in price is zero as shown in the following diagram.

3. Agricultural goods are exceptions to the law of supply.
Ans. Agricultural goods are exceptions to the law of supply. It is because supply of agricultural goods almost depend on nature i.e. monsoon. Therefore it cannot be adjusted with the change in price. Even if prices are rises or fall we cannot increase or decrease it. Therefore is correctly said that the agricultural goods are exceptions to the law of supply.

4. Macro Economic is also known as income and employment theory.
Ans. It is because, it explains the forces which determine the level of national incomes and employment in an economy and analyses the causes of fluctuations in them. Further, it also explains the determinants, which will bring about increase in national income, output and employment over a long period.

5. Rate of interest on fixed deposit is high.
Ans. It is that type of account where a fixed sum of money is deposited for a fixed period. Amount kept in fixed deposit can be used by common bank for long term investment. Since bank can earn higher income from fixed deposit bank also pay higher interest on Fixed deposit.

6. During the period of depression deficit budgets is used.

Ans. It is because in the period of depression government expenditure is expected to be more than government revenue to boost economic activities and to increase the level of investment, employment, income and aggregate demand. In depression due to slow down of economic activities it is not possible to increase revenue by higher taxes or public borrowings so during the period of depression deficit budget is used.

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