Hints/Solutions to Studymate Practice Boards Paper Economics (Class XII)

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Eleanore Rebecca Collins
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1 Hints/Solutions to Studymate ractice oards aper Economics (lass XII) ode No / GENERAL INSTRUTIONS FOR ORRETION The marking scheme carries only suggested value points for the answers These are only guidelines and do not constitute the complete answers Students can have their own expression and if the expression is correct, marks should be awarded accordingly eople examine each part of a question carefully and allocate the marks allotted for the part as given in the "Marking Scheme' below Total marks for any answer may be put in a circle on the left side where the answer ends For mere arithmetical errors, there should be minimal deduction Only ½ mark should be deducted for such an error Where only two/three or a 'given' number of examples/factors/points are expected, only the first two/three or expected number should be read The rest are irrelevant and must not be examined There should be no effort at 'moderation' of the marks by the evaluating teachers The actual total marks obtained by the candidate may be of no concern to the evaluators 6 Higher order thinking ability questions are for assessing a student's understanding/analytical ability 7 In case of a numerical question, no marks should be awarded if only the final answer has been given, even if it is correct [9]

2 False T will increase at a decreasing rate (b) Average cost will fall (c) be constant ositive statement (a) The demand of mobile Samsung J7 will fall, hence demand curve of Samsung J7 shifts towards left as they are substitutes (b) The demand of Samsung J7 may increase, as people may prefer to consume more of Samsung J7 instead of Moto G+ Thus, demand curve shifts rightwards (c) There will be downward movement on the same demand curve, ie, expansion in demand 6 "Integrated hild Development rogramme Series (IDS)" is leading to increase in healthy and education levels of the country, and thus leads to productivity of human resources The will shift rightwards as the economy is able to increase production of both the goods OR ommodity A ommodity MRT = Loss of output Gain of output : : : : : : Table [] Diagram 7 Equilibrium for two commodity is MU MU = = MU If price of cake falls MU m MU < Since per rupee utility for cake will be more than per rupee utility for urger, consumer will buy more of cake and less of burger Explanation [] MU of cake will begin to fall end MU of burger will begin to rise onsumer will keep on buying more cakes till MU MU = []

3 8 When tonnes of onions will be imported supply curve will shift rightwards Due to rightward shift, excess supply will be created in the market This will result in competition among the producers rice will begins to fall Due to fall in price, there will be contraction along the supply curve and expansion along the demand curve Explanation [] rice will continue to fall till excess supply becomes zero When there is an increase in supply demand remaining unchanged the supply curve shifts towards right from SS to S S as seen in figure onclusion: (i) Market Equilibrium shifts from E to E (ii) Equilibrium price falls from O to O onclusion (iii) Equilibrium quantity rises from OQ to OQ rice (in Rs) Y Increase in Supply D S S S E X O Q Q Quantity demanded and supplied (in units) E OR F D S Diagram (a) It is monopolistic competition Any two features: Features [½ =] (i) Differentiated products (ii) Selling cost (iii) Free entry and exit of firms (b) Oligopoly Any two features: Features [½ =] (i) Interdependence between firms (ii) Indeterminateness of demand curve (iii) Non-price competition (iv) Group behaviour (v) Entry barriers 9 (a) Es( Y) = Es ( x) Formula %change inquantity supplied ofx = = 6 E s of commodity X = %change inprice ofx Es( Y) = Es( x) = = %change inquantity supplied ofy E s ( Y)= %change inprice of Y %fall inquantity supplied ofy = 8 % fall in quantity supplied of Y = 8 = []

4 (b) (i) Demand curve is perfectly elastic rice will remain same Thus, slope = ( ) = ( ) = Q Q (ii) Demand curve is perfectly inelastic, it implies DQ = Slope = ( ) = ( ) = Q (a) False, in the short run factor ratio keeps on changing as variable factor is continuously increased with the given amount of fixed factor (b) False, when total revenue is constant, average revenue will decline as TR AR = output sold If TR is constant when more units of output are sold, AR will decline (c) False, producer will incur implicit cost as he will not be able to earn interest on it (d) False, AV is a U-shaped due to law of variable proportions In the beginning it falls due to increasing returns to variable factor and then it rises due to diminishing returns to variable factor (e) True, AF = TF Q TF is constant and it does not change with change in output When output decreases and TF is constant, AF will increase TF is spread amongst less units of output (f) True, Marginal cost is addition to total cost when one more unit of output is produced Addition to total cost can be only due to variable cost as fixed cost does not change (a) Q D = p Q s = 7 + p At equilibrium, Q D = Q S p = 7 + p 7 = p = p p = / = Equilibrium price = Rs p = 7 + p Q D = = 9 Q s = 7 + = 9 Equilibrium quantity = 9 units (b) New Q D = p Q S = 7 + p p = 7 + p = 7 = p 7 = p 6 = p p = 6/ = Rs New equilibrium price = Rs Q D = = units Q S = 7 + () = 7 + = units Equilibrium quantity rises to units Equilibrium price also rise from Rs to Rs (c) Imposition of tax of Rs per unit of salt will raise cost of producing salt S = 7 + (p ) Equilibrium will be where, Q D = p and Q S = 7 + (p ) will be equal p = 7 + (p ) []

5 p = 7 + p = p = p p = 66/ = Q D = p = = 98 Q S = 7 + (p ) = 7 + ( ) = 98 = = = 98 Equilibrium price will rise from to Equilibrium quantity will fall from to 98 x (a) Slope of budget line = MRE = = y Slope of I = MRS = onsumer equilibrium Explanation [] (i) MRS = x/y (ii) MRS must decline \ MRS =, x/y = Since MRS x/y \ onsumer is not in equilibrium If MRS XY > MRE it implies that the consumer is willing to sacrifice more unit of Y than what market requires This induces the consumer to buy more of X When he buys more of X, utility derived from X falls and he is willing to sacrifice less of Y Thus MRS xy starts declining He continues to consume more of X, till MRS XY = MRE = x / Y (b) (i) He will buy units where his TU will be maximum and MU will be zero (ii) onsumer will buy units of X as his rupee satisfaction derived from X is equal to x Explanation If MU x (money) > x, consumer keeps on consuming more units When he consumes more unit, the additional utility derived from consuming x keeps on falling He keeps on consuming till MU x (money) = x (a) (b) Units MU x (Utils) MU x /MU M x Total Gain 6 ombination A D E Units of Good X 8 6 Units of Good Y 7 OR MRS = Units sacrified/ Units gained Equilibrium is determined where MRS = rice of Good X/rice of Good Y = X Y 7 Table Formula alculation = = Thus, consumer will buy units of Good X and units of Good Y []

6 If MRS XY > MRE it implies that the consumer is willing to sacrifice more unit of Y than what market requires This induces the consumer to buy more of X When he buys more of X, utility derived from X falls and he is willing to sacrifice less of Y Thus MRSxy starts declining He continues to consume more of X, till MRS XY = MRE = x / Y If MRS XY < MRE, it implies consumer is willing to sacrifice less units of Y than what the market requires He decreases the consumption of X Due to this MRS XY began to rise, he continues to decrease the consumption of X till MRS XY = MRE Explanation [] (a) forfeitures False, money supply only includes time demand deposits of the people with the commercial banks Redistribution of income 6 Increase in margin requirements 7 (a) = I = M = /(MS) We know, M + MS = /MS + MS = MS + MS = MS = MS = / = 6 M = Thus, equilibrium level of income will be where, AD = AS + I = Y Y = + by + I Y = + Y + Y = 6 + Y Y = 6 6Y = 6 Y = 6 /6 = Rs crore No, the economy will not be at equilibrium at Rs crore Working (b) The stock of unplanned inventory will be = AS AD = = Rs crore 8 Given, = + 7Y S = + ( 7)Y = + Y Level of income where saving is zero O = + Y Y = Y = / = Rs 8 crore X Savings 6 8 Income S Y Diagram []

MS KENDRIYA VIDYALAYA SANGATHAN, KOLKATA REGION

MS KENDRIYA VIDYALAYA SANGATHAN, KOLKATA REGION 3 rd PRE-BOARD EXAMINATION 2016-17 MARKING SCHEME CLASS-XIIECONOMICS M. MARKS: 100 General Instruction: 1. Please examine each part of question carefully