BOARD QUESTION PAPER: JULY 2022 - ECONOMICS (SOLVED)
Note: (1) All questions are compulsory. (2) Draw neat tables/diagrams wherever necessary. (3) Figures to the right indicate full marks. (4) Write answers to all main questions on a new page.
Q.1. (A) Choose the correct option: [5 Marks]
(i) The branch of economics that deals with the allocation of resources:
- (a) Micro economics
- (b) Macro economics
- (c) Econometrics
- (d) Monetary economics
Options: (1) a, b, c (2) a, b (3) only ‘a’ (4) None of these
(ii) Classification of markets is done on the basis of place:
- (a) Local market, National market, International market
- (b) Very short period market, Local market, National market
- (c) Short period market, National market, International market
- (d) Local market, National market, Short period market
Options: (1) a, b, c (2) b, c, d (3) Only ‘a’ (4) a, d
(iii) Statements that are incorrect in relation to index numbers:
- (a) Index number is a geographical tool.
- (b) Index numbers measure changes in the air pressure.
- (c) Index numbers measure relative changes in an economic variable.
- (d) Index numbers are specialized averages.
Options: (1) c, d (2) a, b (3) b, c (4) a, b, c, d
(iv) Non-tax sources of revenue:
- (a) Direct and indirect taxes
- (b) Direct tax and fees
- (c) Fees
- (d) Special levy
Options: (1) b, c (2) a, c (3) a, b, c, d (4) c, d
(v) Methods of quantitative credit control:
- (a) Bank rate
- (b) Open market operation
- (c) Cash reserve ratio
- (d) Credit rationing
Options: (1) a, b, c (2) b, c, d (3) a, b, d (4) a, c, d
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Q.1. (B) Complete the correlations: [5 Marks]
(i) Micro economics : Tree : : Macro economics : Forest
(ii) Price and demand for normal good : Inverse relationship : : Giffen goods : Direct relationship
(iii) Perfect competition : Large number of sellers : : Monopoly : Single seller
(iv) Total revenue : Price \(\times\) Quantity : : Average revenue : \(\frac{\text{Total Revenue}}{\text{Total Quantity}}\)
(v) Output method : Product method (or Inventory method) : : Income method : Factor cost method
Q.1. (C) Find the odd word out: [5 Marks]
(i) Types of elasticity of demand - Price elasticity, Income elasticity, less elastic, cross elasticity.
(ii) External debt - Foreign banks, World bank, International monetary fund, Central bank.
(iii) Organised sector - Money lender, Commercial bank, Co-operative Bank, Reserve Bank of India.
(iv) Transfer income - Pension, unemployment allowance, wages, gifts.
(v) Types of foreign trade - Local trade, Import trade, Export trade, Entrepot trade.
Q.1. (D) Complete the following statements: [5 Marks]
(i) The relationship between demand for a good price is _______.
(a) direct (b) inverse (c) no effect (d) can be direct and inverse
(ii) Demand curve is parallel to ‘X’ axis in case of _______.
(a) Perfectly elastic demand (b) Perfectly inelastic demand (c) Relatively elastic demand (d) Relatively inelastic demand
(iii) A rightward shift in supply curve shows:
(a) Contraction of supply (b) Decrease in supply (c) Expansion of supply (d) Increase in supply
(iv) Trade of goods and service within the geographical boundaries of a nation:
(a) International trade (b) Internal trade (c) Currency trade (d) Inter-continental trade
(v) Stock exchange is an important constituent of the _______.
(a) Capital market (b) Money market (c) Local market (d) International market
Q.2. (A) Identify and explain the following concepts (Any THREE): [6 Marks]
(i) Salma purchased sweater for her father in winter season.
Concept: Time Utility.
Explanation: Time utility refers to the increase in the utility of a commodity when it is available at a time when it is needed the most. In this case, the sweater has more utility in the winter season than in other seasons.
(ii) Sanket’s demand for consumer goods increased by 20% due to an increase in his income by 50%.
Concept: Income Elasticity of Demand (Relatively Inelastic Income Demand).
Explanation: Income elasticity of demand measures the responsiveness of demand to a change in income. Here, the percentage change in demand (20%) is less than the percentage change in income (50%), indicating that the demand is less responsive to income change.
(iii) Anita receives monthly pension of ₹ 15,000/- from the State Government.
Concept: Transfer Income (or Transfer Payment).
Explanation: Transfer income is the income received by individuals without rendering any productive service in return. Pensions, scholarships, and unemployment allowances are examples of transfer incomes.
(iv) John produces 5 units of mobile in his factory at ₹ 50,000. When he produced the 6th unit of mobile total cost was ₹ 58,000.
Concept: Marginal Cost.
Explanation: Marginal cost is the net addition made to the total cost by producing one more unit of output. Here, the marginal cost for the 6th unit is ₹ 58,000 - ₹ 50,000 = ₹ 8,000.
(v) Samir paid wages to workers in his factory and interest on his bank loan.
Concept: Explicit Cost (or Cost of Production).
Explanation: Explicit costs are the actual money expenses incurred by a firm on purchasing or hiring inputs for production, such as wages, rent, and interest.
Q.2. (B) Distinguish between (Any THREE): [6 Marks]
(i) Individual demand and Market demand.
- Individual Demand: It refers to the quantity of a commodity demanded by a single consumer at a given price during a given period of time. It is a microeconomic concept.
- Market Demand: It refers to the total quantity of a commodity demanded by all consumers in the market at a given price during a given period of time. It is a macroeconomic concept (aggregate of individual demands).
(ii) Slicing method and Lumping method.
- Slicing Method: Used in Microeconomics, it splits the economy into small individual units (slices) and studies each unit separately in detail (e.g., study of individual income).
- Lumping Method: Used in Macroeconomics, it groups the economy into large aggregates (lumps) and studies the relationship between these aggregates (e.g., study of national income).
(iii) Stock and Supply.
- Stock: It is the total quantity of a commodity available for sale with a seller at a particular point in time. It is the potential supply.
- Supply: It is that part of the stock which is offered for sale at a specific price during a specific period of time. Supply is a flow concept.
(iv) Simple index number and Weighted Index number.
- Simple Index Number: In this method, every commodity is given equal importance. It is the simple average of prices.
- Weighted Index Number: In this method, weights are assigned to various commodities according to their relative importance. It provides a more accurate picture of price changes.
(v) Direct tax and Indirect tax.
- Direct Tax: It is paid by the person on whom it is levied. The burden cannot be shifted to others (e.g., Income Tax).
- Indirect Tax: It is levied on goods and services. The burden can be shifted from the taxpayer to the consumer (e.g., GST).
Q.3. Answer the following (Any THREE): [12 Marks]
(Note: Students are expected to write detailed points for 4 marks each. Below are the key points.)
(i) Explain the four features of micro economics.
- Study of Individual Units: Micro economics studies small individual units like individual consumer, individual firm, etc.
- Price Theory: It is primarily concerned with determination of prices of goods and factors of production.
- Slicing Method: It uses slicing method to split the economy into small units for detailed study.
- Partial Equilibrium: It analyzes equilibrium of a single unit assuming other things remain constant (Ceteris Paribus).
- Based on Certain Assumptions: It assumes full employment, perfect competition, laissez-faire policy, etc.
(ii) Explain any four points related to the significance of index number.
- Framing Suitable Policies: Helps government in formulating economic policies like taxation, wage fixation, etc.
- Studies Trends and Tendencies: Helps in studying changes in variables like production, prices, and exports over time.
- Forecasting Future Economic Activity: Useful for predicting future business cycles and economic trends.
- Measurement of Inflation: Cost of Living Index numbers are used to measure inflation and adjust wages (Dearness Allowance).
(iii) Explain any four features of monopoly.
- Single Seller: There is only one seller controlling the entire supply of the product.
- No Close Substitutes: The product has no close substitutes, forcing buyers to buy from the monopolist.
- Barriers to Entry: Strict barriers (legal, natural, technological) prevent new firms from entering the market.
- Price Maker: The monopolist has complete control over price determination.
- Price Discrimination: The monopolist may charge different prices to different consumers for the same product.
(iv) Explain any four points related to the role of money market in India.
- Short-term Requirements of Borrowers: Provides short-term funds to trade, industry, and government.
- Liquidity Management: Helps in managing liquidity in the economy through monetary policy tools.
- Portfolio Management: Helps banks and financial institutions manage their assets and liabilities.
- Equilibrating Mechanism: Helps in balancing the demand and supply of short-term funds.
- Implementation of Monetary Policy: Acts as a channel for the central bank to implement monetary policy.
(v) Explain any four points related to the role of foreign trade.
- Earns Foreign Exchange: Exports help the country earn valuable foreign currency to pay for imports.
- Encourages Investment: Opens up global markets, encouraging domestic producers to invest and expand.
- Division of Labour and Specialization: Allows countries to specialize in producing goods where they have a comparative advantage.
- Optimum Allocation of Resources: Ensures resources are used efficiently on a global scale.
- Price Stability: Imports can help stabilize domestic prices during shortages.
Q.4. State with reasons whether you agree or disagree with the following statements (Any THREE): [12 Marks]
(i) Every desire of an individual is a demand.
Disagree.
Reason: Desire is merely a wish to possess something. Demand is desire backed by the ability to pay and the willingness to pay. A poor person's desire for a car is not demand because they lack the ability to pay. Therefore, demand = Desire + Ability to pay + Willingness to pay.
(ii) There is a direct relationship between price and quantity supplied.
Agree.
Reason: According to the Law of Supply, other things remaining constant, higher the price, larger is the quantity supplied, and lower the price, smaller is the quantity supplied. Sellers are motivated by profit; thus, they supply more at higher prices.
(iii) Commercial bank performs various functions.
Agree.
Reason: Commercial banks perform Primary functions (Accepting deposits and Granting loans) and Secondary functions (Agency functions like collecting cheques, and Utility functions like locker facilities). They act as intermediaries in the financial system.
(iv) Index numbers can be constructed without base year.
Disagree.
Reason: A base year is the reference year against which changes in the current year are measured. Without a base year, it is impossible to compare data and calculate the relative change in variables. It is an essential component of index number construction.
(v) Slope of relatively elastic demand curve is steeper.
Disagree.
Reason: A relatively elastic demand curve represents a situation where a small change in price leads to a large change in quantity demanded. Graphically, this results in a flatter slope. A steeper slope indicates relatively inelastic demand.
Q.5. Study the following table, figure, passage and answer the questions given below it (Any TWO): [8 Marks]
(i) Table Analysis
(1) Complete the above table.
| Price of Apple [Per kg ₹] | Demand [Per kg] | Supply [Per kg] |
|---|---|---|
| 100 | 50 | 10 |
| 200 | 40 | 20 |
| 300 | 30 | 30 |
| 400 | 20 | 40 |
| 500 | 10 | 50 |
(Logic: Demand decreases by 10 units for every ₹100 increase. Supply increases by 10 units for every ₹100 increase.)
(2) Draw an equilibrium price determination diagram based on the above table.
Diagram Description:
- X-axis: Quantity Demanded and Supplied (Units: 10, 20, 30, 40, 50).
- Y-axis: Price (₹ 100, 200, 300, 400, 500).
- DD Curve: Downward sloping demand curve.
- SS Curve: Upward sloping supply curve.
- Intersection: The two curves intersect at Price ₹ 300 and Quantity 30 kg. This is the Equilibrium point.
(ii) Diagram Analysis (Linear Demand Curve)
(1) Demand at point ‘P2’ is relatively inelastic. Is this statement true or false?
False. (Assuming P2 is the midpoint of the linear demand curve, the elasticity at the midpoint is unitary elastic, Ed = 1. If it were below the midpoint, it would be inelastic.)
(2) Identify the elasticity of demand at point ‘P’.
Perfectly Elastic Demand (Ed = \(\infty\)). (Point P represents the Y-intercept where the price is finite but quantity approaches zero, typically corresponding to infinite elasticity in geometric method context for the upper intercept.)
(3) What is denoted on ‘X’ axis in the above diagram?
Quantity Demanded.
(4) Which method of measuring elasticity of demand is denoted in the above diagram?
Point Method (or Geometric Method).
(iii) Passage Analysis (Galaxy Enterprise)
(1) Find out the examples of types of demand from the above passage:
(a) Direct Demand: Demand for biscuits / Demand for tea (Consumer goods).
(b) Indirect Demand: Demand for wheat / Demand for capital (Factors of production).
(2) Give your opinion with reference to above passage.
Opinion: Galaxy Enterprise shows proactive business behavior by identifying market trends (change in taste) and diversifying efficiently. By leveraging the complementary relationship (Cross elasticity) between tea and biscuits, they created a competitive edge against Andromeda Foods. It highlights the importance of market research in business success.
Q.6. Answer the following questions in detail (Any TWO): [16 Marks]
(i) State and explain the law of diminishing marginal utility with exceptions.
Statement of Law: According to Prof. Alfred Marshall, "Other things remaining constant, the additional benefit which a person derives from a given increase in his stock of a thing, diminishes with every increase in the stock that he already has."
Explanation: As a consumer consumes more and more units of a specific commodity in succession, the marginal utility (MU) derived from each successive unit goes on diminishing. This can be explained with a schedule and diagram showing a downward sloping MU curve.
Exceptions (Real or apparent):
- Hobbies: In collections (stamps, coins), every addition increases pleasure. (However, this violates homogeneity assumption).
- Miser: Every additional rupee gives more satisfaction to a miser.
- Addictions: For a drunkard, the level of intoxication and satisfaction increases with every drink.
- Power: The lust for power increases with every acquisition of power.
- Money: It is said MU of money never becomes zero; however, rich people have lower MU of money than poor people.
(ii) Explain the concept of National income and explain the features of National Income.
Concept: National Income is the total money value of all final goods and services produced in a country during a financial year. It represents the total income of the nation.
Features:
- Macroeconomic Concept: It is an aggregate concept representing the income of the whole economy, not an individual.
- Flow Concept: It is a flow of goods and services produced over a period of time (one year), not a stock.
- Money Value: Only goods and services exchanged for money are included. Unpaid services are excluded.
- Final Goods and Services: Only final goods are counted to avoid double counting. Intermediate goods are excluded.
- Net Aggregate Value: It includes net income from abroad (X-M) and deducts depreciation to find Net National Product.
(iii) Explain various reasons for the growth of public expenditure.
Reasons for Growth:
- Increase in the Activities of the Government: Modern governments are Welfare States, undertaking social and economic development, not just police states.
- Rapid Increase in Population: Growing population requires more spending on health, education, and infrastructure.
- Growing Urbanization: Shift to cities requires huge expenditure on water, energy, roads, and transport.
- Defense Expenditure: Unstable international relations force countries to spend heavily on defense equipment and personnel.
- Spread of Democracy: Democratic governments spend on elections and fulfilling public demands to stay in power.
- Inflation: Rising prices increase the cost of government projects and administration.
- Disaster Management: Frequent natural calamities (floods, cyclones, pandemics) require massive government relief funds.