ISC Economics 2011 Class-12 Previous Year Question Papers Solved

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ISC Economics 2011 Class-12 Previous Year Question Papers Solved

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Maximum Marks: 80
Time allowed: 3 hours

  • Candidates are allowed additional 15 minutes for only reading the paper.
  • They must NOT start writing during this time.
  • Answer Question 1 (Compulsory) from Part I and five questions from Part II.
  • The intended marks for questions or parts of questions are given in brackets [ ].

Part – I (20 Marks)
Answer all questions.

ISC Economics 2011 Class-12 Previous Year Question Papers Solved 

Question 1.
Answer briefly each of the questions (0 to (xv): [15 × 2]
(i) State any two assumptions of Law of the Diminishing Marginal Utility.
(ii) What is meant by macroeconomics?
(iii) If demand increases by 50% due to an increase in income by 75%, calculate the income elasticity of demand.
(iv) Draw the supply curve of a perishable commodity. Give a reason for the shape of the supply curve.
(v) What is meant by increasing returns to a variable factor?
(vi) What would be the elasticity of demand for a commodity when:
(a) Price and total expenditure move in the same direction?
(b) Price and total expenditure move in the opposite direction?
(vii) Identify the type of market which has a characteristic of perfect substitutes. Give one reason for your answer.
(viii) What is meant by supernormal profit?
(ix) How is personal income calculated from private income?
(x) What is the variable cost? Give two examples.
(xi) Differentiate between economic and non-economic services.
(xii) Is deficit financing inflationary? Justify your answer.
(xiii) What is a trade union?
(xiv) How can an increase in public expenditure create more employment in the country?
(xv) What is meant by an unfavourable balance of payment?
Answer 1:
(i) Two assumptions of Law of the Diminishing Marginal Utility are:
(a) Every unit of a commodity must be same in-all respects-in size, colour, quality, design etc. For example, if the quality of the second apple is superior to the first, the consumer may desire to mix utility from the second apple than from the first.
(b) The unit of the good must be standard, E.g. a cup of water, a bottle of cold drink, a pair of shoes, a full orange, a glass of lime juice. The units of the commodity should not be too small or too large. Otherwise, the law will not be applicable.

(ii) Macroeconomics is the study of the behaviour of the economy as a whole. Macroeconomics deals with national income, employment, savings, investment, exports and imports of a country etc.

(iii) \frac { 50 }{ 75 } = 0.67

(iv) Individual supply of schedule of Good X

supply curve of a perishable commodity
ISC Economics Question Paper 2011 Solved for Class 12 Q1.1
The positively sloping supply curve SS shows the direct relationship between the price and the quantity supplied.


(v) When a firm increases only one variable factor of production keeping other factors unchanged and if the rate of change of output becomes more than that of the variable factor, we call it increasing returns to the variable factor.

(vi) (a) Inelastic (ep < 1) (b) Elastic (ep > 1)

(vii) Perfectly competitive market. .

(viii) When revenue is more than costs (including normal profits) is what we call pure profits or economic profits in economics. Pure profit is also known as ‘super normal profit’.

(ix) Private income is the total of factor income from all sources and current transfers from the government and the rest of the world added to the private sector. Personal disposable income is that part of the personal income which is available to the individuals to be used the way they like for consumption and savings.

(x) Variable cost is that cost which is incurred on variable factors.
Example: expenditure on raw materials, wages and salaries paid to workers who are not permanent.

(xi) Economic services are services rendered to create earning and non-economic services are services which do not create earnings.

(xii) When the process of deficit financing is undertaken, the supply of money increases. In fact, the supply of cash money increases. In India, for example, if the Govt, decides to issue new money, it will print one rupee notes and/or issue small coins. This increases the cash money supply. If the Government decides to borrow from the Reserve Bank of India (which is India’s central bank) it transfers its securities to the Reserve Bank. On the weight of securities, the Reserve Bank issues currency notes of ₹ 2/- or higher denomination. This is how the Govt, gets the extra money. In both cases, the amount of cash money is the economy and, therefore, the total money supply (i.e. cash plus demand deposits in banks) increases. It means extra purchasing power in the hands of the general people. This may create excess demand conditions in the economy. So there will be upward pressure on the general price level.

(xiii) A trade union or labour union is an organization of workers that have bonded together to achieve common goals such as better working conditions. The trade union through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with employers.

(xiv) Public Expenditure increases the level of employment: Public expenditure leads to increase in the level of employment in the country; especially in the underdeveloped countries like India. For example, Rural Public Works Programmes have been launched to provide employment in rural areas like irrigation scheme, construction work and flood control etc. In this way through public expenditure, the government can create additional employment opportunities and increase the level of income also.

(xv) Usually, in the accounting sense, the total receipts in the balance of payments account must be equal to the total payments. Thus the balance of payment is always balanced. But this account may or may not be balanced. If total autonomous receipts exceed the total spendings of foreign exchange in a given year, there arises a ‘surplus’ in the transaction account of the balance of payments. On the other hand, if receipts fall short of spending, there occurs a ‘deficit’ in the autonomous account of the balance of payments. In both cases, the balance of payments is out of equilibrium, i.e., there will be an unfavourable balance of payment.

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