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HSC Economics Board Question Paper Solution July 2023 - Maharashtra Board

HSC Economics Board Question Paper Solution July 2023
HSC Board Question Paper Economics

BOARD QUESTION PAPER : JULY 2023
ECONOMICS

Time: 3 Hrs.
Max. Marks: 80
Economics - July 2023 - English Medium Page No. 1 Economics - July 2023 - English Medium Page No. 2 Economics - July 2023 - English Medium Page No. 3
Q.1. (A) Complete the following statements: (5) [20]

i. The branch of economics that deals with the allocation of resources is known as _______.

(a) Micro economics (b) Macro economics (c) Econometrics (d) Agricultural economics

Answer: (a) Micro economics

ii. Net addition made to the total revenue by selling an extra unit of a commodity is _______.

(a) total revenue (b) marginal revenue (c) average revenue (d) marginal cost

Answer: (b) marginal revenue

iii. Symbolically, the functional relationship between Demand and Price can be expressed as _______.

(a) Dx = f(Px) (b) Dx = f(Pz) (c) Dx = f(y) (d) Dx = f(T)

Answer: (a) Dx = f(Px)

iv. In India, National Income Committee establishment year is _______.

(a) 1952 (b) 1949 (c) 1947 (d) 1950

Answer: (b) 1949

v. Marginal Utility of the commodity becomes negative when Total Utility of a commodity is _______.

(a) rising (b) constant (c) falling (d) zero

Answer: (c) falling

Economics Board Questions with Solution

Q.1. (B) Find the odd word out: (5)

i. Types of Elasticity of Demand: Income elasticity, Unitary elasticity, Cross elasticity, Price elasticity.

Answer: Unitary elasticity
(Reason: It is a degree of elasticity, whereas others are types of elasticity.)

ii. Factors of production: Profit, Labour, Capital, Entrepreneur.

Answer: Profit
(Reason: It is a reward for production, whereas others are factors of production.)

iii. Market structure on the basis of competition: Perfect competition, Monopoly, Oligopoly, Very short period market.

Answer: Very short period market
(Reason: It is a market based on time, whereas others are based on competition.)

iv. Types of Bank Accounts: Saving account, D-mat account, Recurring account, Current account.

Answer: D-mat account
(Reason: It is related to shares/securities, whereas others are banking fund accounts.)

v. Classification of Public Expenditure: Revenue expenditure, Capital expenditure, Consumption expenditure, Developmental expenditure.

Answer: Consumption expenditure
(Reason: The others are major classifications of public expenditure in the syllabus context, while consumption is a functional nature.)
Q.1. (C) Give economic term: (5)

i. The cost incurred by the firm to promote sales.

Answer: Selling Cost

ii. The tax which is paid by the taxpayer on his income and property.

Answer: Direct Tax

iii. The capacity of a commodity to satisfy human wants.

Answer: Utility

iv. Wear and tear of capital assets, due to their use in the process of production.

Answer: Depreciation

v. A desire which is backed by willingness to purchase and ability to pay.

Answer: Demand (or Effective Demand)
Q.1. (D) Complete the correlation: (5)

i. Pen and ink :       : : Tea and coffee : substitute goods

Answer: Complementary goods (or Joint demand)

ii. Micro economics: Tree : : Macro economics :      .

Answer: Forest

iii.       : Base year prices : : P1 : Current year prices

Answer: P0

iv. Demand curve :       : : Supply curve : Upward

Answer: Downward

v. Theoretical difficulty : Transfer payments : :       : Valuation of inventories.

Answer: Practical difficulty
Q.2. (A) Identify and explain the following concepts (Any THREE): (6) [12]

i. Savita collected the information about individual income in a particular firm.

(A) Identified Concept: Micro Economics (or Study of Individual Units).
(B) Explanation: Micro economics is the branch of economics that studies the behaviour of individual economic units such as an individual consumer, individual producer, or individual firm. Savita is studying a specific, small component of the economy.

ii. India purchased petroleum from Iran.

(A) Identified Concept: Import Trade.
(B) Explanation: Import trade refers to the purchase of goods and services by one country from another country. Here, India is buying petroleum from a foreign country (Iran), which constitutes an import.

iii. Prakash receives monthly pension of ₹ 15,000/- from the State Government.

(A) Identified Concept: Transfer Payment.
(B) Explanation: Transfer payments are unilateral payments made by the government to individuals without any corresponding production of goods or services. A pension is income received without rendering current productive services.

iv. Price of salt increases by ₹ 20 to ₹ 50, still there is no change in demand for salt.

(A) Identified Concept: Perfectly Inelastic Demand.
(B) Explanation: When a percentage change in price leads to no change in the quantity demanded, it is called perfectly inelastic demand (Ed = 0). Salt is a necessity, so demand remains constant despite price rise.

v. Meena deposited a lumpsum amount of ₹ 1,50,000 in the bank, for a period of one year.

(A) Identified Concept: Fixed Deposit (Time Deposit).
(B) Explanation: A Fixed Deposit is a type of account where a lump sum amount is deposited by a customer for a specified period of time. It carries a higher rate of interest compared to savings accounts.
Q.2. (B) Distinguish between (Any THREE): (6)

(Note: In the exam, students are expected to draw two columns.)

i. Micro Economics and Macro Economics

  • Meaning: Micro economics studies the behaviour of individual economic units. Macro economics studies the behaviour of the whole economy / aggregates.
  • Scope: Micro deals with individual demand, supply, product pricing, etc. Macro deals with national income, general price level, employment, etc.
  • Method: Micro uses the Slicing method. Macro uses the Lumping method.

ii. Expansion of demand and Contraction of demand

  • Meaning: Expansion of demand refers to a rise in quantity demanded due to a fall in price alone. Contraction of demand refers to a fall in quantity demanded due to a rise in price alone.
  • Movement: Expansion involves a downward movement along the same demand curve. Contraction involves an upward movement along the same demand curve.

iii. Gross Domestic Product (GDP) and Gross National Product (GNP)

  • Meaning: GDP is the market value of all final goods and services produced within the domestic territory of a country during a year. GNP is the market value of all final goods and services produced by the residents of a country (including net factor income from abroad) during a year.
  • Formula: GDP = C + I + G + (X - M). GNP = C + I + G + (X - M) + (R - P), where (R-P) is Net factor income from abroad.

iv. Public Finance and Private Finance

  • Objective: The objective of Public Finance is to maximize social welfare. The objective of Private Finance is to fulfill private interests or maximize personal profit.
  • Determination of Expenditure: Government first determines the volume of expenditure and then finds resources (income). Individuals determine income first and then plan expenditure.

v. Simple Index Number and Weighted Index Number

  • Definition: Simple Index Number is constructed where every commodity is given equal importance. Weighted Index Number is constructed where weights are assigned to various commodities according to their relative importance.
  • Method: Simple uses Simple Aggregative or Simple Average of Price Relatives method. Weighted uses Weighted Aggregative (Laspeyre’s, Paasche’s) or Weighted Average of Price Relatives.
Q.3. Answer the following (Any THREE): [12]

i. Explain any four features of Micro economics.

1. Study of Individual Units: Micro economics focuses on small individual units like individual consumer, individual firm, or price of a particular commodity.
2. Price Theory: It is known as price theory because it deals with the determination of prices of goods and services as well as factors of production.
3. Slicing Method: It splits or slices the whole economy into small individual units and studies each unit separately in detail.
4. Partial Equilibrium: It analyzes the equilibrium position of an individual economic unit assuming 'other things being constant' (Ceteris Paribus), ignoring the interdependence of other variables.

ii. Explain the two sector model of circular flow of national income.

The two-sector model involves Households and Firms (Business Sector) in a closed economy without government or foreign trade.
1. Upper Loop (Factor Market): Households supply factors of production (Land, Labour, Capital, Entrepreneur) to firms. In return, firms make factor payments (Rent, Wages, Interest, Profit) to households.
2. Lower Loop (Product Market): Firms produce goods and services and sell them to households. Households spend their income on these goods (Consumption Expenditure), which flows back to firms as revenue.
This continuous flow of production, income, and expenditure creates a circular flow.

iii. Explain any four types of Utility.

1. Form Utility: Created by changing the shape or structure of existing material (e.g., wood into furniture).
2. Place Utility: Created by changing the place of utilization. Transport creates place utility (e.g., mangoes transported from Konkan to Mumbai).
3. Time Utility: Created when utility increases with a change in time of utilization (e.g., storing blood in a blood bank for later use).
4. Service Utility: Arises when personal services are rendered by professionals (e.g., services of a doctor or teacher).

iv. Explain the meaning of budget with its types.

Meaning: A budget is a financial statement showing the expected receipts and proposed expenditure of the government for the coming financial year.
Types:
1. Balanced Budget: Estimated Revenue = Estimated Expenditure.
2. Surplus Budget: Estimated Revenue > Estimated Expenditure. (Used during inflation).
3. Deficit Budget: Estimated Revenue < Estimated Expenditure. (Used during depression/developing economy).

v. Explain any four factors influencing elasticity of demand.

1. Nature of Commodity: Necessities (salt, medicine) have inelastic demand, while luxuries (car, AC) have elastic demand.
2. Availability of Substitutes: Goods with close substitutes (tea/coffee) have elastic demand. Goods without substitutes (salt) have inelastic demand.
3. Number of Uses: Single-use goods have less elastic demand. Multi-use goods (electricity, coal) have more elastic demand.
4. Habits: Habitual goods (cigarettes, liquor) have inelastic demand as consumers are addicted.
Q.4. State with reasons whether you agree or disagree with the following statements (Any THREE): [12]

i. The Law of diminishing marginal utility is based on many assumptions.

Agree.
Reason 1: The law assumes homogeneity, meaning all units consumed are identical in size, shape, color, and taste.
Reason 2: It assumes continuity in consumption without time gaps.
Reason 3: It assumes the consumer is rational and seeks to maximize satisfaction.
Reason 4: It assumes constancy of all other factors like income, taste, and habits.

ii. Index numbers are free from limitations.

Disagree.
Reason 1: Index numbers are based on samples, so sampling errors are possible.
Reason 2: There is a bias in the selection of the base year; if the base year is not normal, results are misleading.
Reason 3: Quality changes in commodities are often ignored.
Reason 4: Different formulas (Laspeyre's vs Paasche's) give different results.

iii. Supply curve slopes downwards from left to right.

Disagree.
Reason 1: The supply curve slopes upwards from left to right.
Reason 2: This is due to the direct relationship between price and quantity supplied.
Reason 3: According to the Law of Supply, higher prices induce producers to supply more to maximize profit.
Reason 4: Only in exceptional cases (like the backward bending supply curve of labour) does it slope backwards/downwards, but the general supply curve is upward sloping.

iv. Foreign trade plays an important role in economic development of country.

Agree.
Reason 1: It allows a country to earn foreign exchange.
Reason 2: It encourages investment and division of labour.
Reason 3: It provides consumers with a variety of goods and stabilizes price levels.
Reason 4: It helps in the import of advanced technology and capital goods necessary for development.

v. Fees, fines and penalties are a major source of revenue for the Government.

Disagree.
Reason 1: The major source of revenue for the government is Taxes (Direct and Indirect).
Reason 2: Fees, fines, and penalties are sources of Non-Tax Revenue.
Reason 3: The objective of fines and penalties is not to earn revenue but to impose discipline and check rule violations.
Reason 4: The collection from these sources is very small compared to tax revenue.
Q.5. Study the following table, figure, passage and answer the questions given below it (Any TWO): [8]

i. Observe the following table and answer the questions given below it: (4)

Commodity Base Year Current Year p1q1 p0q1
Price p0 Qty q0 Price p1 Qty q1
A 2 10 5 8 40 16
B 4 5 8 3 24 12
C 1 7 2 10 20 10
D 5 8 10 5 50 25
Total - - - - 134 63

Questions:

1. Fill the blank boxes of the above schedule. (2)

Answer:
For Commodity B, p1q1 = 8 × 3 = 24
For Commodity C, p0q1 = 1 × 10 = 10

2. Apply the given formula and find out Paasche’s Index Number. (2)

Formula: $$ P_{01} = \frac{\sum p_1q_1}{\sum p_0q_1} \times 100 $$

Calculation:
$$ P_{01} = \frac{134}{63} \times 100 $$
$$ P_{01} = 2.1269 \times 100 $$
$$ P_{01} = 212.70 $$

ii. On the basis of the given diagram state whether the following statements are True or False: (4)

(Refer to the diagram in the question paper where A is the Y-intercept, E is the X-intercept, and C is the midpoint.)

1. Demand at point ‘C’ is relatively elastic demand.

False. (Point C appears to be the geometric midpoint of the demand curve. At the midpoint, demand is Unitary Elastic, Ed = 1).

2. Demand at point ‘B’ is unitary elastic demand.

False. (Point B is on the upper segment of the demand curve. Here, the lower segment is greater than the upper segment, so demand is Relatively Elastic, Ed > 1).

3. Demand at point ‘D’ is perfectly inelastic demand.

False. (Point D is on the lower segment. Here, the lower segment is less than the upper segment, so demand is Relatively Inelastic, Ed < 1. Perfectly Inelastic is at the X-axis intercept).

4. Demand at point ‘A’ is perfectly elastic demand.

True. (Point A is the Y-axis intercept. At this point, elasticity is infinite, Ed = ∞).

iii. Read the given passage and answer the questions: (4)

1. Name the largest tur dal producer districts in Maharashtra. (1)

Answer: Latur, Hingoli, and Akola are the largest tur dal producer districts.

2. What was the production of tur dal in the year 2020-21 of Maharashtra? (1)

Answer: The production of tur dal in the year 2020-21 was 42.24 lakh tonne.

3. Express your opinion about given passage. (2)

Answer: Agriculture is highly dependent on climatic conditions, making production unpredictable. The fluctuation in production (like the 20-25% drop) directly impacts prices, causing inflation for consumers and potential losses for farmers if not managed. The government's intervention (Minimum Support Price, buying stock) is crucial to stabilize prices and support farmers, but logistical issues like storage (godowns) need to be addressed to prevent wastage.

Q.6. Answer the following questions in detail (Any TWO): [16]

i. State and explain the law of demand with exceptions.

Statement of the Law: According to Prof. Alfred Marshall, "Other things being equal, higher the price of a commodity, smaller is the quantity demanded and lower the price of a commodity, larger is the quantity demanded."

Formula: Dx = f(Px) where D is Demand and P is Price. There is an inverse relationship.

Exceptions to the Law of Demand:
1. Giffen's Paradox: For inferior goods or 'Giffen goods', demand decreases when price falls (due to the income effect). Sir Robert Giffen observed this with bread in England.
2. Prestige Goods: Rich people buy more of expensive goods like diamonds or luxury cars when their prices rise to display status (Veblen Effect).
3. Speculation: If consumers expect prices to rise further in the future, they will buy more now even at a higher price.
4. Price Illusion: Consumers may believe that high-priced goods are of better quality and thus demand more.
5. Habitual Goods: Even if prices rise, demand for habitual goods (like tea or tobacco) may not fall.

ii. Explain the functions of Reserve Bank of India.

The Reserve Bank of India (RBI) is the central bank of the country, established in 1935. Its main functions are:

1. Issue of Currency Notes: RBI has the monopoly/sole right to issue currency notes (except one rupee notes and coins) in India to ensure uniformity.

2. Banker to the Government: It acts as a banker, agent, and advisor to the Central and State Governments. It manages government accounts and public debt.

3. Banker's Bank: It exercises statutory control over commercial banks. Banks must maintain a certain Cash Reserve Ratio (CRR) with the RBI. It acts as the 'Lender of Last Resort' for banks.

4. Controller of Credit: This is a vital function. RBI controls the money supply and credit in the economy using quantitative (Bank Rate, OMO, CRR) and qualitative methods to maintain stability.

5. Custodian of Foreign Exchange Reserves: RBI maintains and manages the country's foreign exchange reserves and maintains the external value of the Rupee.

iii. Explain the meaning of perfect competition with its features.

Meaning: Perfect competition is an ideal and imaginary market structure where there are a large number of buyers and sellers producing and selling homogeneous products at a single uniform price determined by market forces (demand and supply).

Features:
1. Large Number of Sellers and Buyers: There are so many sellers and buyers that no single individual can influence the market price. Each seller is a 'price taker'.
2. Homogeneous Product: Products sold are identical in size, shape, color, taste, and quality. They are perfect substitutes.
3. Free Entry and Exit: There are no barriers to entry or exit. Firms can enter if there is profit and leave if there is a loss.
4. Single Price: A single, uniform price prevails in the market, determined by the interaction of total demand and total supply.
5. Perfect Knowledge: Buyers and sellers have perfect knowledge about market conditions and prices.
6. Perfect Mobility of Factors: Factors of production (labour, capital) are perfectly mobile geographically and occupationally.
7. No Transport Cost: It is assumed that transport costs do not exist, ensuring price uniformity.

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