Economics (49) - HSC Board Exam 2025 Solution
Q. 1. (A) Give economic terms (5 Marks)
(i) A desire which is backed by willingness to purchase and ability to pay.
Answer: Demand
(ii) Deposits that are withdrawable on demand.
Answer: Demand Deposits
(iii) Wear and tear of capital assets, due to their use in the process of production.
Answer: Depreciation
(iv) Elasticity resulting from a proportionate percentage change in the quantity demanded due to a proportionate percentage change in price.
Answer: Price Elasticity of Demand
(v) The difference between the value of a country's exports and imports for a given period.
Answer: Balance of Trade
Q. 1. (B) Complete the correlation (5 Marks)
(i) Internal Trade : Home Trade :: International Trade : ______
Answer: Foreign Trade (or External Trade)
(ii) Discriminated prices : ______ :: Single price : Perfect competition
Answer: Monopoly
(iii) ______ : Central Bank :: SBI : Commercial Bank
Answer: Reserve Bank of India (RBI)
(iv) Output method : ______ :: Income method : Factor cost method
Answer: Product method (or Inventory method)
(v) The period of Inflation: Surplus Budget :: The Period of Depression : ______
Answer: Deficit Budget
Q. 1. (C) Find the odd word (5 Marks)
(i) Durable Goods: Furniture, Cupboard, Washing Machine, Fish.
Answer: Fish (Perishable good, others are durable goods)
(ii) Cost Concepts: Total cost, Average cost, Marginal cost, Selling cost.
Answer: Selling cost (The others are concepts related to production costs, while selling cost is related to marketing/sales in imperfect competition)
(iii) Legal Monopoly: Patent, OPEC, Copyright, Trademark.
Answer: OPEC (It is an example of a voluntary monopoly/Cartel, while the others are legal monopolies granted by law)
(iv) Theory of Economic Welfare: Theory of Income and Employment, Efficiency in production, Efficiency in Consumption, Overall Economic Efficiency.
Answer: Theory of Income and Employment (This belongs to Macroeconomics, while others are parts of Welfare Economics in Microeconomics)
(v) Exceptions to the Law of Demand: Giffen's paradox, Prestige goods, Price illusion, Supply of labour.
Answer: Supply of labour (This is an exception to the Law of Supply, while the others are exceptions to the Law of Demand)
Q. 1. (D) Complete the following statements (5 Marks)
(i) The terms of Micro Economics and Macro Economics were coined by Norwegian Economist ______.
Answer: (d) Ragnar Frisch
(ii) When the supply curve is sloping upward, then its slope is ______.
Answer: (a) Positive
(iii) The Price Index number is used ______.
Answer: (a) to measure the general changes in the prices of goods.
(iv) Development financial institutions were established to ______.
Answer: (b) develop industry, agriculture and other key sectors.
(v) Obligatory functions of the govt. is ______.
Answer: (c) Maintaining internal law and order.
Q. 2. (A) Identify and explain the following concepts (Any THREE) (6 Marks)
(i) Abhijeet sold 15 chairs for ₹ 3000, for each chair he earned ₹ 200.
Concept: Total Revenue.
Explanation: Total revenue is the total income of a firm obtained by selling a given quantity of a commodity at a given price. Here, total revenue = Quantity × Price per unit = 15 × 200 = ₹3000.
Explanation: Total revenue is the total income of a firm obtained by selling a given quantity of a commodity at a given price. Here, total revenue = Quantity × Price per unit = 15 × 200 = ₹3000.
(ii) Rajaram produced 25 quintals of wheat in his field, from it he kept aside 2 quintals of wheat for his own family use.
Concept: Production for Self-consumption.
Explanation: It refers to that part of current year's production which is not sold in the market but retained by the producer for meeting their own family's needs. This is not included in National Income measurement in some contexts unless imputed.
Explanation: It refers to that part of current year's production which is not sold in the market but retained by the producer for meeting their own family's needs. This is not included in National Income measurement in some contexts unless imputed.
(iii) Rani collected the data of India's National Income for the purpose of study.
Concept: Primary Data.
Explanation: Primary data refers to original data collected by the investigator himself/herself for a specific purpose of study for the first time.
Explanation: Primary data refers to original data collected by the investigator himself/herself for a specific purpose of study for the first time.
(iv) Amar demanded milk, sugar and tea powder jointly to satisfy his want of the tea.
Concept: Joint Demand (or Complementary Demand).
Explanation: When two or more goods are demanded jointly to satisfy a single want, it is known as joint or complementary demand.
Explanation: When two or more goods are demanded jointly to satisfy a single want, it is known as joint or complementary demand.
(v) Sunita madam satisfied her want to write on the blackboard by using a chalk.
Concept: Utility.
Explanation: Utility is the capacity of a commodity to satisfy a human want. Here, the chalk possesses the utility to satisfy the want of writing.
Explanation: Utility is the capacity of a commodity to satisfy a human want. Here, the chalk possesses the utility to satisfy the want of writing.
Q. 2. (B) Distinguish between (Any THREE) (6 Marks)
(i) Micro Economics and Macro Economics.
Micro Economics:
- Studies individual economic units like a consumer, a firm, etc.
- It uses the slicing method.
- Main theory is Price Theory.
- Studies the economy as a whole, like national income, total employment.
- It uses the lumping method.
- Main theory is Theory of Income and Employment.
(ii) Perfectly elastic demand and Perfectly inelastic demand.
Perfectly Elastic Demand:
- When a slight or zero change in price brings about an infinite change in quantity demanded.
- Ed = ∞.
- Demand curve is a horizontal line parallel to the X-axis.
- When a percentage change in price has no effect on the quantity demanded.
- Ed = 0.
- Demand curve is a vertical line parallel to the Y-axis.
(iii) Quantity index number and Value index number.
Quantity Index Number:
- It measures changes in the volume or physical quantity of goods produced or consumed over a period.
- Formula: \(\frac{\sum q_1}{\sum q_0} \times 100\).
- It measures changes in the value of goods (Price × Quantity) over a period. It combines changes in both price and quantity.
- Formula: \(\frac{\sum p_1q_1}{\sum p_0q_0} \times 100\).
(iv) Internal debt and External debt.
Internal Debt:
- Raised by the government from sources within the country (e.g., citizens, banks within the country).
- Paid in domestic currency.
- Raised by the government from sources outside the country (e.g., IMF, World Bank, foreign governments).
- Paid in foreign currency.
(v) Expansion of supply and Increase in supply.
Expansion of Supply:
- Rise in quantity supplied due to a rise in price, other factors remaining constant.
- Movement is upward along the same supply curve.
- Rise in supply due to favorable changes in other factors (like tech, cost), while price remains constant.
- The supply curve shifts to the right.
Q. 3. Answer the following (Any THREE) (12 Marks)
(i) Explain any four features of micro economics.
1. Study of Individual Units: Microeconomics focuses on small, individual units such as individual consumer, individual producer, firm, etc.
2. Price Theory: It deals with the determination of prices of goods and services as well as factors of production. Hence, it is known as Price Theory.
3. Slicing Method: It splits the whole economy into small individual units and then studies each unit separately in detail.
4. Based on Certain Assumptions: It is based on the assumption of 'Ceteris Paribus' (other things remaining constant), such as full employment, laissez-faire policy, etc.
2. Price Theory: It deals with the determination of prices of goods and services as well as factors of production. Hence, it is known as Price Theory.
3. Slicing Method: It splits the whole economy into small individual units and then studies each unit separately in detail.
4. Based on Certain Assumptions: It is based on the assumption of 'Ceteris Paribus' (other things remaining constant), such as full employment, laissez-faire policy, etc.
(ii) Explain the functions of Commercial Banks.
Commercial banks perform two main types of functions:
1. Accepting Deposits: Banks accept deposits from the public in various forms like Saving Deposits, Current Deposits, and Fixed Deposits.
2. Advancing Loans: Banks lend money to businessmen and individuals through Cash Credits, Overdrafts, and Loans (short, medium, long term).
3. Ancillary Functions: Transfer of funds, collection of cheques, locker facilities, etc.
4. Credit Creation: Commercial banks create credit by using primary deposits to grant loans, which generates secondary deposits.
1. Accepting Deposits: Banks accept deposits from the public in various forms like Saving Deposits, Current Deposits, and Fixed Deposits.
2. Advancing Loans: Banks lend money to businessmen and individuals through Cash Credits, Overdrafts, and Loans (short, medium, long term).
3. Ancillary Functions: Transfer of funds, collection of cheques, locker facilities, etc.
4. Credit Creation: Commercial banks create credit by using primary deposits to grant loans, which generates secondary deposits.
(iii) Explain the classification of market on the basis of time.
1. Very Short Period Market: Supply is fixed and cannot be changed. Price is determined by demand. E.g., market for perishable goods like vegetables.
2. Short Period Market: Supply can be increased slightly by changing variable factors (like labor), but fixed capital remains constant.
3. Long Period Market: Supply can be fully adjusted to demand by changing all factors of production. Firms can enter or exit.
4. Very Long Period Market: Secular period where significant structural changes occur in production technology and population.
2. Short Period Market: Supply can be increased slightly by changing variable factors (like labor), but fixed capital remains constant.
3. Long Period Market: Supply can be fully adjusted to demand by changing all factors of production. Firms can enter or exit.
4. Very Long Period Market: Secular period where significant structural changes occur in production technology and population.
(iv) Calculate price index number from the following data:
| Commodity | A | B | C | D |
|---|---|---|---|---|
| Price in 2005(₹) | 6 | 16 | 24 | 4 |
| Price in 2010(₹) | 8 | 18 | 28 | 6 |
Solution:
Let Base Year be 2005 (Price \(P_0\)) and Current Year be 2010 (Price \(P_1\)).
\(\sum P_0 = 6 + 16 + 24 + 4 = 50\)
\(\sum P_1 = 8 + 18 + 28 + 6 = 60\)
Price Index Number \( = \frac{\sum P_1}{\sum P_0} \times 100\)
\( = \frac{60}{50} \times 100\)
\( = 1.2 \times 100\)
Price Index Number = 120
Let Base Year be 2005 (Price \(P_0\)) and Current Year be 2010 (Price \(P_1\)).
\(\sum P_0 = 6 + 16 + 24 + 4 = 50\)
\(\sum P_1 = 8 + 18 + 28 + 6 = 60\)
Price Index Number \( = \frac{\sum P_1}{\sum P_0} \times 100\)
\( = \frac{60}{50} \times 100\)
\( = 1.2 \times 100\)
Price Index Number = 120
(v) Explain any four points of the role of foreign trade in India.
1. To earn Foreign Exchange: Foreign trade helps India earn valuable foreign exchange which is used for importing capital goods and technology.
2. Encourages Investment: It encourages producers to invest more to meet international demand, leading to economic growth.
3. Division of Labour and Specialization: It leads to specialization in the production of goods where India has a comparative advantage (e.g., textiles, software).
4. Availability of Choice: Consumers get access to a wide variety of high-quality international goods, improving the standard of living.
2. Encourages Investment: It encourages producers to invest more to meet international demand, leading to economic growth.
3. Division of Labour and Specialization: It leads to specialization in the production of goods where India has a comparative advantage (e.g., textiles, software).
4. Availability of Choice: Consumers get access to a wide variety of high-quality international goods, improving the standard of living.
Q. 4. State with reasons whether you agree or disagree with the following statements (Any THREE) (12 Marks)
(i) Demand Curve slopes downward from the left to the right.
I Agree with this statement.
Reasons:
1. Law of Diminishing Marginal Utility: As a consumer buys more units, the utility derived from each successive unit diminishes. He will buy more only if the price falls.
2. Income Effect: When price falls, real income increases, allowing consumers to buy more.
3. Substitution Effect: When a commodity becomes cheaper, it is substituted for relatively expensive goods.
4. New Consumers: A fall in price attracts new consumers who could not afford it earlier.
Reasons:
1. Law of Diminishing Marginal Utility: As a consumer buys more units, the utility derived from each successive unit diminishes. He will buy more only if the price falls.
2. Income Effect: When price falls, real income increases, allowing consumers to buy more.
3. Substitution Effect: When a commodity becomes cheaper, it is substituted for relatively expensive goods.
4. New Consumers: A fall in price attracts new consumers who could not afford it earlier.
(ii) There are no limitations to the Index numbers.
I Disagree with this statement.
Reasons:
1. Sampling Errors: Index numbers are based on samples, which may not be perfectly representative of the whole population.
2. Bias in Data Collection: Errors can occur during the collection of data regarding prices and quantities.
3. Choice of Base Year: If the base year is not normal (e.g., a war year), the comparison becomes misleading.
4. Changes in Quality: Index numbers often fail to account for changes in the quality of products over time.
Reasons:
1. Sampling Errors: Index numbers are based on samples, which may not be perfectly representative of the whole population.
2. Bias in Data Collection: Errors can occur during the collection of data regarding prices and quantities.
3. Choice of Base Year: If the base year is not normal (e.g., a war year), the comparison becomes misleading.
4. Changes in Quality: Index numbers often fail to account for changes in the quality of products over time.
(iii) Elasticity of demand depends upon several factors.
I Agree with this statement.
Reasons:
1. Nature of Commodity: Necessities (inelastic) vs. Luxuries (elastic).
2. Availability of Substitutes: Goods with close substitutes have elastic demand; those without are inelastic.
3. Number of Uses: A commodity with multiple uses (e.g., electricity) has elastic demand.
4. Habits: Habitual goods (e.g., tobacco) have inelastic demand.
Reasons:
1. Nature of Commodity: Necessities (inelastic) vs. Luxuries (elastic).
2. Availability of Substitutes: Goods with close substitutes have elastic demand; those without are inelastic.
3. Number of Uses: A commodity with multiple uses (e.g., electricity) has elastic demand.
4. Habits: Habitual goods (e.g., tobacco) have inelastic demand.
(iv) There are some exceptions to the law of supply.
I Agree with this statement.
Reasons:
1. Supply of Labour: At very high wage rates, the supply of labor curve bends backward as workers prefer leisure over work.
2. Agricultural Goods: Supply depends on weather conditions, not just price.
3. Perishable Goods: Sellers may sell at lower prices to avoid spoilage, defying the direct relationship.
4. Urgent Need for Cash: Sellers may sell more even at lower prices if they desperately need cash.
Reasons:
1. Supply of Labour: At very high wage rates, the supply of labor curve bends backward as workers prefer leisure over work.
2. Agricultural Goods: Supply depends on weather conditions, not just price.
3. Perishable Goods: Sellers may sell at lower prices to avoid spoilage, defying the direct relationship.
4. Urgent Need for Cash: Sellers may sell more even at lower prices if they desperately need cash.
(v) Capital market plays very important role in Indian economy.
I Agree with this statement.
Reasons:
1. Mobilization of Savings: It mobilizes long-term savings from the public and channels them into productive investments.
2. Capital Formation: It facilitates capital formation which is crucial for economic development.
3. Industrial Growth: It provides long-term funds required for industrial expansion and modernization.
4. Infrastructure Development: It helps fund large infrastructure projects like roads, railways, and power plants.
Reasons:
1. Mobilization of Savings: It mobilizes long-term savings from the public and channels them into productive investments.
2. Capital Formation: It facilitates capital formation which is crucial for economic development.
3. Industrial Growth: It provides long-term funds required for industrial expansion and modernization.
4. Infrastructure Development: It helps fund large infrastructure projects like roads, railways, and power plants.
Q. 5. Study the following table, figure, passage and answer the questions given below it (Any TWO) (8 Marks)
(i) Observe the given table and answer the questions:
| Price Per Kg in ₹ | Quantity demanded | Market Demand (in Kg) (A+B+C) | ||
|---|---|---|---|---|
| Consumer A | Consumer B | Consumer C | ||
| 35 | 5 | 10 | 15 | 30 |
| 30 | 10 | 15 | 20 | 45 |
| 25 | 15 | 20 | 25 | 60 |
| 20 | 20 | 25 | 30 | 75 |
(a) Complete market demand schedule: (The filled values 30, 45, 60, 75 are shown in the table above).
(b) Draw market demand curve: (Student is expected to plot Price on Y-axis and Market Demand on X-axis. The curve will slope downwards from left to right, indicating an inverse relationship between price and quantity demanded).
(b) Draw market demand curve: (Student is expected to plot Price on Y-axis and Market Demand on X-axis. The curve will slope downwards from left to right, indicating an inverse relationship between price and quantity demanded).
(ii) Observe the following diagram of non-linear demand curve and answer the questions given below.
Answers:
(1) If EB = EA (Ed = 1) = Unitary Elastic Demand
(2) If EB > EA (Ed > 1) = Relatively Elastic Demand
(3) If EB < EA (Ed < 1) = Relatively Inelastic Demand
(4) The 'x' axis represents Quantity Demanded of commodity and 'y' axis represents Price of commodity.
(1) If EB = EA (Ed = 1) = Unitary Elastic Demand
(2) If EB > EA (Ed > 1) = Relatively Elastic Demand
(3) If EB < EA (Ed < 1) = Relatively Inelastic Demand
(4) The 'x' axis represents Quantity Demanded of commodity and 'y' axis represents Price of commodity.
(iii) Regulated Market Passage Questions:
(1) Which act regulates the market?
Ans: The Bombay Agricultural Product Market Act-1939.
(2) What are the poor standards in primary and secondary markets?
Ans: The poor standards include cash transactions, short weights, excessive market charges, unauthorized deductions, and the absence of machinery to settle disputes.
(3) Give your opinion with reference to above passage.
Ans: In my opinion, regulated markets are absolutely essential for the welfare of farmers. They protect producers from exploitation, malpractices, and ensure they receive fair prices for their produce, which encourages agricultural development.
Ans: The Bombay Agricultural Product Market Act-1939.
(2) What are the poor standards in primary and secondary markets?
Ans: The poor standards include cash transactions, short weights, excessive market charges, unauthorized deductions, and the absence of machinery to settle disputes.
(3) Give your opinion with reference to above passage.
Ans: In my opinion, regulated markets are absolutely essential for the welfare of farmers. They protect producers from exploitation, malpractices, and ensure they receive fair prices for their produce, which encourages agricultural development.
Q. 6. Answer the following questions in detail (Any TWO) (16 Marks)
(i) State and explain the law of diminishing marginal utility with its assumptions.
Statement of the 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."
Simply put, as a consumer consumes more and more units of a commodity, the Marginal Utility (MU) derived from each successive unit goes on diminishing.
Assumptions:
1. Rationality: The consumer is assumed to be rational and aims to maximize satisfaction.
2. Cardinal Measurement: Utility can be measured in numbers (cardinally), allowing comparison.
3. Homogeneity: All units of the commodity consumed are identical in size, shape, color, and taste.
4. Continuity: Consumption must be continuous without any time gap.
5. Reasonability: The size of the unit must be reasonable (neither too big nor too small, e.g., a cup of tea, not a spoon).
6. Constancy: Income, taste, habits, and price of the commodity remain constant.
7. Divisibility: The law assumes the commodity is divisible into small units.
8. Single Want: The commodity is used to satisfy a single want at a time.
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."
Simply put, as a consumer consumes more and more units of a commodity, the Marginal Utility (MU) derived from each successive unit goes on diminishing.
Assumptions:
1. Rationality: The consumer is assumed to be rational and aims to maximize satisfaction.
2. Cardinal Measurement: Utility can be measured in numbers (cardinally), allowing comparison.
3. Homogeneity: All units of the commodity consumed are identical in size, shape, color, and taste.
4. Continuity: Consumption must be continuous without any time gap.
5. Reasonability: The size of the unit must be reasonable (neither too big nor too small, e.g., a cup of tea, not a spoon).
6. Constancy: Income, taste, habits, and price of the commodity remain constant.
7. Divisibility: The law assumes the commodity is divisible into small units.
8. Single Want: The commodity is used to satisfy a single want at a time.
(ii) State the meaning of National Income and explain the features of National Income.
Meaning:
National Income is the total money value of all final goods and services produced in a country during a specific period, usually one year. According to the National Income Committee of India, "A national income estimate measures the volume of commodities and services turned out during a given period, counted without duplication."
Features of National Income:
1. Macroeconomic Concept: It studies the income of the whole economy, not an individual.
2. Value of Final Goods and Services: Only the value of final goods (ready for consumption) is included to avoid double counting. Intermediate goods are excluded.
3. Net Aggregate Value: It represents the net value, meaning depreciation costs are deducted from the gross value of production.
4. Net Income from Abroad: It includes net income earned from abroad (Exports - Imports + Net receipts).
5. Financial Year: In India, it is measured for a specific financial year, from 1st April to 31st March.
6. Flow Concept: It is a flow of goods and services produced over a period of time, not a stock concept.
7. Money Valuation: Goods and services are valued in terms of money; unpriced or non-monetary exchanges are generally ignored.
National Income is the total money value of all final goods and services produced in a country during a specific period, usually one year. According to the National Income Committee of India, "A national income estimate measures the volume of commodities and services turned out during a given period, counted without duplication."
Features of National Income:
1. Macroeconomic Concept: It studies the income of the whole economy, not an individual.
2. Value of Final Goods and Services: Only the value of final goods (ready for consumption) is included to avoid double counting. Intermediate goods are excluded.
3. Net Aggregate Value: It represents the net value, meaning depreciation costs are deducted from the gross value of production.
4. Net Income from Abroad: It includes net income earned from abroad (Exports - Imports + Net receipts).
5. Financial Year: In India, it is measured for a specific financial year, from 1st April to 31st March.
6. Flow Concept: It is a flow of goods and services produced over a period of time, not a stock concept.
7. Money Valuation: Goods and services are valued in terms of money; unpriced or non-monetary exchanges are generally ignored.
(iii) Explain various reasons for the growth of government's public expenditure.
1. Increase in the Activities of the Government: Modern governments perform compulsory functions (defense) and optional functions (education, health, social welfare). As these activities expand, expenditure grows.
2. Rapid Increase in Population: A growing population requires more investment in infrastructure, education, health, and food security, leading to higher spending.
3. Growing Urbanization: The shift of population to urban areas requires huge spending on urban infrastructure like water, electricity, roads, and transport.
4. Spread of Democracy: Democratic governments spend significantly on elections and fulfilling demands of various sections of society to remain in power.
5. Inflation: Rising prices increase the cost of goods and services purchased by the government, thereby increasing nominal expenditure.
6. Industrial Development: Government invests heavily in key industries and infrastructure to boost economic growth.
7. Disaster Management: Frequent natural calamities like floods, cyclones, and pandemics require massive emergency spending for relief and rehabilitation.
2. Rapid Increase in Population: A growing population requires more investment in infrastructure, education, health, and food security, leading to higher spending.
3. Growing Urbanization: The shift of population to urban areas requires huge spending on urban infrastructure like water, electricity, roads, and transport.
4. Spread of Democracy: Democratic governments spend significantly on elections and fulfilling demands of various sections of society to remain in power.
5. Inflation: Rising prices increase the cost of goods and services purchased by the government, thereby increasing nominal expenditure.
6. Industrial Development: Government invests heavily in key industries and infrastructure to boost economic growth.
7. Disaster Management: Frequent natural calamities like floods, cyclones, and pandemics require massive emergency spending for relief and rehabilitation.