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HSC Economics Question Paper Solution March 2023 | Maharashtra Board

Maharashtra Board Class 12 Economics Question Paper Solution March 2023
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BOARD QUESTION PAPER : MARCH 2023
ECONOMICS

Time: 3 Hrs. | Max. Marks: 80

Q.1. (A) Complete the following sentences: (5)

i. Micro Economics is also called as _______.
Answer: (b) Price theory
ii. Money market faces shortage of funds due to _______.
Answer: (a) Inadequate savings
iii. Marginal utility of the commodity becomes negative when Total Utility of a commodity is _______.
Answer: (c) falling
iv. Public expenditure of any government shows _______.
Answer: (b) increasing trend
v. The relationship between income and demand for inferior goods is _______.
Answer: (b) inverse

Economics Board Questions with Solution

(B) Find the odd word out: (5)

i. Revenue concepts:
Total Revenue, Average Revenue, Total Cost, Marginal Revenue.
Answer: Total Cost (The others are revenue concepts).
ii. Quantitative Tools of credit control:
Bank rate, Open market operations, Foreign Exchange rate, Variable reserve ratio.
Answer: Foreign Exchange rate (The others are quantitative tools of credit control by RBI).
iii. Scope of Micro Economics:
Theory of product pricing, Theory of factor pricing, Theory of Economic growth and Development, Theory of Economic welfare.
Answer: Theory of Economic growth and Development (This falls under the scope of Macro Economics).
iv. Non-tax revenue:
Fees, Penalty, Wealth tax, Special levy.
Answer: Wealth tax (This is a direct tax, whereas others are sources of non-tax revenue).
v. Types of Simple Index Number:
Laspeyre’s Price Index Number, Price Index Number, Quantity Index Number, Value Index Number.
Answer: Laspeyre’s Price Index Number (This is a method of Weighted Index Number, others are Simple Index Numbers).

(C) Give economic term: (5)

i. The volume of commodities and services turned out during a given period counted without duplication.
Answer: National Income (or National Product)
ii. A desire which is backed by willingness to purchase and ability to pay.
Answer: Demand
iii. Degree of responsiveness of a change of quantity demanded of a good to a change in its price.
Answer: Price Elasticity of Demand
iv. Very realistic competition in nature.
Answer: Monopolistic Competition
v. Swati purchased raincoat for her father in rainy season.
Answer: Time Utility

(D) Assertion and reasoning questions: (5)

i. Assertion (A): In perfect competition, price is determined by the forces of demand and supply.
Reasoning (R): The number of buyers and sellers is so large that one person can not influences prices.
Answer: 3. Both (A) and (R) are True and (R) is the correct explanation of (A).
ii. Assertion (A): A change in quantity demanded of one commodity due to a change in the price of other commodity is cross elasticity.
Reasoning (R): Changes in consumers’ income leads to a change in the quantity demanded.
Answer: 4. Both (A) and (R) are True and (R) is not the correct explanation of (A).
(Note: R defines Income Elasticity, while A defines Cross Elasticity. They are distinct concepts.)
iii. Assertion (A): Production for self-consumption is not accounted for in the national income.
Reasoning (R): The products kept for self consumption do not enter the market.
Answer: 3. Both (A) and (R) are True and (R) is the correct explanation of (A).
iv. Assertion (A): Foreign exchange management and control is undertaken by commercial banks.
Reasoning (R): RBI has to maintain the official rate of exchange of rupee and ensure its stability.
Answer: 2. (A) is false, but (R) is true.
(Note: Forex management is the function of the Central Bank/RBI, not Commercial Banks).
v. Assertion (A): Supply is a relative term.
Reasoning (R): Supply is always expressed in relation to price, time and quantity.
Answer: 3. Both (A) and (R) are True and (R) is the correct explanation of (A).

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

i. A table seller sold the table for ₹ 2,000 per piece. In this way he sold 15 tables and earned ₹ 30,000.
Concept: Total Revenue.
Explanation: Total revenue refers to the total amount of income received by a firm from selling a given amount of commodity. It is obtained by multiplying the Price per unit by the Quantity sold.
Formula: \(TR = P \times Q\) (i.e., \(2000 \times 15 = 30,000\)).
ii. England imported cotton from India, made readymade garments from it and sold them to Malaysia.
Concept: Entrepot Trade (Re-export trade).
Explanation: It refers to the purchase of goods and services from one country for the purpose of selling them to another country. Here, England is processing Indian cotton to sell to Malaysia.
iii. Ashok paid the tax on his income and property.
Concept: Direct Tax.
Explanation: A direct tax is a tax levied on the income or wealth of a person and is paid directly to the government by the person on whom it is imposed. The burden of this tax cannot be shifted to others.
iv. Raju’s father invests his money in a market for long term funds both equity and debt raised within and outside the country.
Concept: Capital Market.
Explanation: Capital market is a market for long-term funds both equity and debt raised within and outside the country. It deals in financial assets having a maturity period of more than one year.
v. A poor person wants to buy a car.
Concept: Desire.
Explanation: Desire is a mere wish to have a commodity. In this case, the poor person has the willingness to purchase but lacks the ability to pay (purchasing power), so it remains a desire and does not become demand.

(B) Distinguish between (Any THREE): (6)

i. Unitary elastic demand and Relatively elastic demand
Unitary Elastic Demand: When a percentage change in price leads to a proportionate (equal) percentage change in quantity demanded. (Ed = 1). The demand curve is a rectangular hyperbola.

Relatively Elastic Demand: When a percentage change in price leads to a more than proportionate change in quantity demanded. (Ed > 1). The demand curve is flatter.
ii. Output method and Income method of measuring national income
Output Method (Product Method): Measures National Income by estimating the total value of final goods and services produced in the country during a year. It approaches NI from the production side.

Income Method: Measures National Income by summing up the factor incomes (Rent, Wages, Interest, Profit) earned by the owners of factors of production. It approaches NI from the distribution side.
iii. Demand deposit and Time deposit
Demand Deposit: Deposits that are repayable on demand (e.g., Savings A/c, Current A/c). They carry low or no interest rates and allow easy withdrawal via cheques/ATMs.

Time Deposit: Deposits that are repayable after a certain fixed period (e.g., Fixed Deposit, Recurring Deposit). They carry higher interest rates and cannot be withdrawn by cheque before maturity without penalty.
iv. Simple Index number and Weighted index number
Simple Index Number: An index number where equal importance (weight) is assigned to all commodities. It is easier to calculate but less accurate.

Weighted Index Number: An index number where weights are assigned to various commodities according to their relative importance. It is more complex but more accurate and realistic.
v. 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 source of supply. Stock can exceed supply.

Supply: It is that part of the stock which is offered for sale at a specific price during a specific period. Supply cannot exceed stock.

Q.3. Answer the following (Any THREE): [12]

i. Explain any four points of importance of Micro economics.
1. Price Determination: Explains how prices of different products and factors of production are determined.
2. Free Market Economy: Helps in understanding the working of a free market economy where decisions are made by individuals.
3. Foreign Trade: Helps explain gains from trade, BOP disequilibrium, and exchange rate determination.
4. Model Building: Helps in building simple models to understand complex economic situations using various terminologies and tools.
ii. Explain the Ratio or percentage method of measuring price elasticity of demand.
This method was developed by Prof. Marshall. Price elasticity is measured as the ratio of percentage change in quantity demanded to percentage change in price.
Formula: \( Ed = \frac{\% \Delta Q}{\% \Delta P} \)
Where \( \Delta Q \) is change in quantity and \( \Delta P \) is change in price.
Based on the result, it can be elastic (>1), inelastic (<1), or unitary (=1).
iii. Explain any four features of national income.
1. Macroeconomic Concept: It represents the income of the economy as a whole, not an individual.
2. Value of Final Goods: Only the value of final goods and services is included to avoid double counting.
3. Flow Concept: It is a flow of goods and services produced over a period of time (usually a year).
4. Net Aggregate Value: It includes net aggregate value of goods and services, deducting depreciation.
iv. Explain any four problems faced by the money market in India.
1. Dual Structure: Presence of both organized and unorganized sectors leads to lack of coordination.
2. Lack of Uniformity in Rates: Interest rates vary across different sectors and institutions.
3. Shortage of Funds: Inadequate savings and high demand for cash lead to a shortage of funds.
4. Seasonal Fluctuations: Demand for money fluctuates heavily with the agricultural season (busy/slack seasons).
v. Explain any four exceptions of the law of Diminishing marginal utility.
1. Hobbies: For collectors (stamps, coins), MU increases with every addition.
2. Miser: A miser gets more satisfaction with every additional rupee acquired.
3. Addictions: For a drunkard, the level of intoxication and utility increases with every unit consumed.
4. Power: A person's desire for power increases as they acquire more of it.

Q.4. State with reasons whether you agree or disagree with the following statements (Any THREE): [12]

i. There are no exceptions to the law of supply.
I Disagree.
Reason: There are exceptions like:
  • Supply of Labor: After a certain wage level, the supply curve of labor bends backward (workers prefer leisure over work).
  • Agricultural Goods: Supply depends on weather, not just price.
  • Urgent need for cash: Sellers may sell more even at lower prices.
  • Perishable goods: Cannot be stored, so sold at any price.
ii. Balance of Trade and Balance of Payment are two different concepts.
I Agree.
Reason:
  • Balance of Trade (BOT): Includes only visible trade (import and export of goods). It is a narrow concept.
  • Balance of Payment (BOP): Includes visible trade, invisible trade (services), and capital transfers. It is a broader concept representing the systematic record of all economic transactions.
iii. Index numbers are very significant / important in economics.
I Agree.
Reason:
  • They help in framing suitable economic policies.
  • They are useful to study trends and tendencies in the economy (inflation, production).
  • They help in measuring the purchasing power of money (Real wages).
  • They are used as economic barometers.
iv. There are no theoretical difficulties in the measurement of National Income.
I Disagree.
Reason: There are several theoretical difficulties, such as:
  • Transfer Payments: Pension, unemployment allowance etc., are not income earned for productive services.
  • Illegal Income: Income from gambling, smuggling is not accounted for.
  • Unpaid Services: Services of housewives or self-service are excluded.
  • Income of Foreign Firms: Treatment of profits earned by foreign companies.
v. Macro economics is different from Micro economics.
I Agree.
Reason:
  • Micro Economics: Studies individual units (individual consumer, firm). It uses the Slicing Method and Partial Equilibrium.
  • Macro Economics: Studies the economy as a whole (National Income, Aggregate Demand). It uses the Lumping Method and General Equilibrium.

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)

Solved Table:

Unit of Commodity Total Utility (TU) units Marginal Utility (MU) units
1 6 6
2 11 5
3 15 4
4 15 0
5 14 –1
1. Complete the above table. (2)
The missing values are filled in the table above:
  • At unit 1, MU = TU = 6.
  • At unit 2, TU = TU(1) + MU(2) = 6 + 5 = 11.
  • At unit 4, since TU is constant (15), MU = 0.
  • At unit 5, TU = TU(4) + MU(5) = 15 + (-1) = 14.
2. a. When total utility is Maximum, the marginal utility is – (1)
Answer: Zero (0)
b. When total utility falls, the marginal utility becomes – (1)
Answer: Negative

ii. In the following diagram AE is the linear demand curve... (4)

1. Demand at point ‘C’ is relatively elastic demand. (1)
False (At the geometric midpoint C, demand is Unitary Elastic, Ed = 1).
2. Demand at point ‘B’ is unitary elastic demand. (1)
False (At point B, which is above the midpoint, demand is Relatively Elastic, Ed > 1).
3. Demand at point ‘D’ is perfectly inelastic demand. (1)
False (At point D, below the midpoint, demand is Relatively Inelastic, Ed < 1. Perfectly inelastic is at point E on the X-axis).
4. Demand at point ‘A’ is perfectly elastic demand. (1)
True (At the Y-intercept, elasticity is infinite).

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

1. Explain the meaning of Index Number. (1)
Answer: Index Number is a statistical technique or tool used to measure changes in a variable or a group of related variables with reference to time, geographical location, and other characteristics.
2. To whom the Index Number is useful? (1)
Answer: Index numbers are useful for economists, farmers, traders, government, educationalists, and trade union leaders.
3. Express your opinion about the given passage. (2)
Answer: The passage highlights the multidisciplinary significance of Index Numbers. It emphasizes that Index Numbers are not just limited to Economics but are essential tools for planning and policy implementation in various fields like Sociology, Psychology, and History. It also outlines the scientific method of construction (using a base year) which ensures accuracy in comparison.

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

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

Statement: 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."

Explanation: There is an inverse relationship between price and quantity demanded. This can be explained with a demand schedule (table showing price vs quantity) and a downward sloping demand curve.

Exceptions to the Law of Demand:

  • Giffen Goods: Inferior goods where demand falls even when price falls (Giffen Paradox).
  • Prestige Goods: Rich people buy more expensive goods (diamonds, luxury cars) for status (Veblen effect).
  • Speculation: If people expect prices to rise further, they buy more even at high prices.
  • Habitual Goods: Price changes do not affect demand for addictions (tea, tobacco).
  • Ignorance: Consumers may buy more at high prices thinking expensive means better quality.
ii. Explain the meaning of Monopoly with its features.

Meaning: The term Monopoly is derived from Greek words 'Mono' (Single) and 'Poly' (Seller). It refers to a market structure where there is a single seller having complete control over the supply of the product which has no close substitutes.

Features:

  • Single Seller: There is only one seller/producer, but many buyers.
  • No Close Substitutes: Buyers have no choice; cross elasticity of demand is zero.
  • Barriers to Entry: Legal, natural, or technological barriers prevent competitors from entering the market.
  • Price Maker: The monopolist sets the price himself.
  • Price Discrimination: The firm can charge different prices to different consumers for the same product.
iii. Explain various reasons for the growth of public expenditure.

There has been a continuous growth in public expenditure due to:

  • Increase in the Activities of the Government: Shift from 'Police State' to 'Welfare State' involves education, health, and social security spending.
  • Rapid Increase in Population: Requires more spending on infrastructure and basic needs.
  • Growing Urbanization: Spread of urbanization requires expenditure on water, roads, energy, and transport.
  • Defense Expenditure: Unstable international relations force governments to spend heavily on defense.
  • Spread of Democracy: Democratic governments spend on elections and fulfilling public demands.
  • Inflation: Rising prices increase the monetary cost of government projects and services.
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