ISC Economics 2012 Class-12 Previous Year Question Papers Solved for practice. Step by step Solutions with Questions of Part-1 and 2. By the practice of Economics 2012 Class-12 Solved Previous Year Question Paper you can get the idea of solving.

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## ISC Economics 2012 Class-12 Previous Year Question Papers Solved

Part-I

Part-II

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)

ISC Economics 2012 Class-12 Previous Year Question Papers Solved

Question 1.
Answer briefly each of the questions (i) to (xv).
(i) Name and explain the two main branches of economics.
(ii) State the law of equi marginal utility.
(iii) Explain with an example, what kind of a commodity will have an inverse relationship between income and demand.
(iv) Explain the meaning of indivisibility of a factor with an example.
(v) What will be the price elasticity of demand of the points A, B, L and K in the diagram given below:

(vi) State what causes a movement along the supply curve and show it diagrammatically.
(vii) Define marginal cost. With the help of an example, show how marginal cost can be obtained from the total cost.
(viii) Give the modem definition of economic rent.
(ix) Which revenue concept is also called price? Justify your answer by giving a reason.
(x) Distinguish between national income at current prices and national income at constant prices.
(xi) When does the equilibrium quantity in a market remain unchanged with a change in demand? Show it with the help of a diagram.
(xii) What is the significance of freedom of entry and exit of firms under perfect competition?
(xiii) Give one difference between a flexible exchange rate and a fixed exchange rate.
(xiv) What is meant by zero-base budget?
(xv) Explain two merits of direct tax.
(ii) Law of Equi-marginal utility states that the consumer in order to maximize his satisfaction should spend his money on two goods in such a manner that the ratio of marginal utility of a commodity to its price becomes equal to the ratio of marginal utility of other commodities to its price. Symbolically,
MUx / Px = MUy/Py = MUn/Pn

(iii) Inferior goods have an inverse relationship between their demand and income. For example, the demand for an inferior good like maize may decrease when income increases beyond a particular level because the consumers may substitute it by a superior-good like wheat or rice.

(v) At point ‘A’, the elasticity of demand will be,
The lower segment of the line/upper segment of line = AK/0 = ∞
At point ‘B’ = BK/AB > 1 i.e. ed > 1
At point ‘L’ = LK /AK < 1 i.e. ed < 1
At point ‘K’ = 0/AK = 0 i.e. ed = 0

(vi) Movement along the supply curve is caused due to change in the price of the commodity keeping other factors constant. If the price of that commodity rises, its quantity supply will also rise causing upward movement along the supply curve (i.e. extension of supply) as shown in fig. A. On the other hand, if the price of the commodity falls showing downward movement along the supply curve (i.e. contraction of supply) indicated by downward arrow in fig.B.

(vii) Marginal cost (MC) is an addition made to the total cost (TC) when output is change by one unit i.e.,
MC = ΔTC/Q
MC = TCn – TCn-1
For example, the marginal cost of 4th unit is the changed in the total cost when output is increased from three units to four units (i.e. 192 – 162 = 30), as shown in the table given below.

 Output Units TC (₹) MC 1 20 2 30 30 – 20 = 10 3 50 50 – 30 = 20 4 80 80 – 50 = 30

(ix) Average revenue is revenue earned per unit of the product sold.
$\mathrm{AR}=\frac{\mathrm{TR}}{\mathrm{Q}}$
But TR = P × Q
$\mathrm{AR}=\frac{\mathrm{P} \times \mathrm{Q}}{\mathrm{Q}}=\mathrm{P}$

(x)

 National Income at Current Price (Nominal GDP) National Price at Constant Price (Real GDP) Under this GDP is calculated at current prices prevailing in the market for example if we measure India’s National Income of at 2011-12 at the same year’s prices than it is national income at the current price. Under this GDP is calculated at a base year price. For example, if we measure India’s National income of 2009-10 at 2001-2002 prices than it is national income at a constant price. This may give a misleading picture of the economic growth of a country because of an increase in National Income maybe because of the increase in price rather than any physical output goods and services. On the other hand, this gives true picture of economic growth of a country as it is affected by the change in only the physical quantities. National Income at current price = P1 × Q1 Where P1 = Current Price and Q1 = Current Quantity National Income at Constant Price = P0 × Q1 Where P0 = Base year Price and Q1 = Current Quantity

(xi) The equilibrium quantity remains unchanged with a change in demand.
When supply curve is perfectly inelastic: When supply curve is perfectly inelastic, a change in demand (increase or decrease) brings about a change in equilibrium price, but the equilibrium quantity remains the same as illustrated in fig.

(xii) Freedom of entry and exit under perfect competition means that new firms are free to enter the industry and existing firms are free to leave the industry if they desire so. This condition ensures that all firms under Perfect competition end up earning only normal profits in the long run. The entry of new firms will increase the total supply by the industry, thus reducing the market price and wiping out supernormal profits. On the other hand, if existing firms are incurring losses, some of them would start leaving the industry, leading to a decrease in supply and a rise in price until the losses are wiped out.

(xiii) The fixed exchange rate is a rate that is fixed and determined by the government of a country and only the government can change it. It is independent of free-market forces of demand and supply. Whereas the flexible exchange rate is that rate which is determined by the demand and supply of different currencies in the foreign exchange market. The government does not intervene in the fixation of the exchange rate.

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