ISC Economics 2013 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 2013 Class-12 Solved Previous Year Question Paper you can get the idea of solving.

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## ISC Economics 2013 Class-12 Previous Year Question Papers Solved

Part-I

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 2013 Class-12 Previous Year Question Papers Solved

Question 1.
Answer briefly each of the following questions (i) to (xv).
(i) What does zero cross elasticity of demand between two goods imply? Give an example to explain.
(ii) Why is the marginal cost curve U shaped?
(iii) Differentiate between monopoly and monopsony. Give an example for each.
(iv) What is the market period? What is the shape of the supply curve in this period?
(v) Give two assumptions of the law of Variable Proportions.
(vi) Explain the meaning of price ceiling with the help of a diagram.
(vii) Why is the Central Bank considered to be the lender of the last resort?
(viii) What is the Vote-on-account budget?
(ix) Explain how taxation can be used to reduce inequality of income.
(x) What is meant by unlimited legal tender?
(xi) Distinguish between CRR and SLR.
(xii) Calculate the value of multiplier if MPC is equal to MPS.
(xiii) Define GNP at factor cost. How is it different from national income?
(xiv) Explain with the help of an example, how inflation affects the debtors.
(xv) How does an increase in the price of a commodity affect its quantity demanded? Show it with the help of a diagram.
(i) Zero cross elasticity of demand between goods implies that two goods are not related to each other. In other words, the change in the price of one commodity (Y) does not affect the demand for another commodity (X).
For example, a change in the price of sugar is not likely to influence the demand for a fan. So their cross elasticity of demand will be zero.

(ii) MC curve is ‘U’ shaped because of the law of variable proportions. As output increases, MC curve negatively slopes (due to increasing returns to the variable factor), reaches the minimum and then slopes positive or upwards due to decreasing returns to the variable factor.

(iii)

 Basis Monopoly Monopsony 1. Meaning It is a market structure in there exists only a single seller of a product who is the sole producer of the product which has no close substitutes. It is a market structure in which there exists only a single buyer of a product in the market. 2. Example Indian Railways which is owned by the Government of India. In a village one textile mill purchase cotton from the farmers of that village. So the textile mill is the monopsony firm which is the only buyer of cotton produced by the farmers of the village.

(v)

(a) The state of technology is given and remains unchanged.
(b) All the variable factors are equally efficient.

(vi) Price ceiling refers to fixing the maximum price of a commodity at a level lower the equilibrium price.
Let us clear this point by considering the commodity ‘wheat’ and its price determination in fig.
In the diagram, demand curve DD and supply curve SS of wheat intersect each other at point E and, as a result, the equilibrium price of OP is determined.
Suppose, the equilibrium price of OP is very high and many poor people are unable to afford wheat at this price.

As wheat is an essential commodity, the government interferes and fixes the maximum price (known as Price ceiling) at OP1 which is less than the equilibrium price OP.

(vii) Lender of the Last Resort:
The Central Bank acts as the lender of the last resort.
When commercial banks fail to meet their financial requirements from other sources, they can approach the Central Bank which provides them with loan and advances as lender of the last resort.
The Central Bank provides this facility to protect the interest of the depositors and to prevent possible failure of the bank.

(ix) By imposing direct taxes which are progressive in nature, rich people are subjected to a higher rate of taxation as compared to poor people. Higher taxes on luxuries and low taxes on essential commodities also helps in removing inequalities of income. Inequality of income can be further reduced by using the tax proceeds in providing social services which benefit poor people.

(x) Unlimited legal tender is the money, which a person has to accept without any maximum limit. In our country, currency notes of all denominations and coins of 50 paise and higher denominations are unlimited legal tender.

(xi) CRR is the certain percentage of deposits accepted by Commercial Banks which they are required by law to keep with Central Bank in the form of cash reserves. Whereas, Statutory Liquidity Ratio refers to a fixed percentage of the assets of the Commercial Bank which they are required by law to keep with themselves in the form of cash or other liquid assets.

(xii) We know,
MPC + MPS = 1 and K = $\frac { 1 }{ MPS }$
When MPC = MPS
MPS + MPS = 1
⇒ 2MPS = 1
⇒ MPS = $\frac { 1 }{ 2 }$
⇒ K = $\frac { 1 }{ MPS }$ = 2

(xiii) GNPFC is the sum total of factor income earned by normal residents of a country, inclusive of depreciation during an accounting year.
GNPFC = NNPFC + Depreciation Whereas, National Income (NNPFC) is the sum total of factor income earned by normal residents of a country during an accounting year.
NNP FC = NDP FC + Net factor income from abroad GNP FC includes depreciation but NNPFC (National Income) does not include depreciation.

(xv) Keeping other things constant an increase in the price of a commodity will inversely affect its quantity demanded. In other words, an increase in the price of say X commodity will reduce or decrease its quantity demanded. The adjacent diagram shows this relationship.

Part – II (60 Marks)