ECONOMICS

BOARD’S QUESTION PAPER (MARCH 2022)

Time : 3 Hours ] [ Total Marks : 80

Note :   (i) All questions are compulsory.

 (ii) Draw neat tables/diagrams wherever necessary.
(iii) Figures to the right indicate full marks.
 (iv) Write answers to all main questions on a new page.

Q. 1. (A) Complete the correlations : (5) [20]

(1) Macroeconomics : : : Microeconomics : Price theory.
(2) Direct demand : Food and Mobiles : : : Land and Labour.
(3) Perfectly elastic demand : Ed = ¥ : : : Ed = 1.
(4) Output method : Product method : : : Factor cost method.
(5) 
Personal income tax : : : Goods and Services Tax
(GST) : Indirect tax.
Q. 1. (B) Give economic terms :  (5)
(1) Additional utility derived by a consumer from an additional unit
consumed.
(2) Price being constant, demand falls due to unfavourable change in
other factors.
(3) Revenue per unit of output sold.
(4) Period in which all factors of production are variable.
(5) The gross market value of all final goods and services produced
within the domestic territory of a country during a period of a year.
Q. 1. (C) Complete the following statements :  (5)
(1) Whole economy is studied in .
(a) Microeconomics (b) Macroeconomics
(c) Econometrics (d) Natural Sciences
(2) When percentage change in quantity demanded is less than
percentage change in price, the demand curve is .
(a) flatter
(b) steeper
(c) rectangular hyperbola (d) horizontal
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [ECONOMICS] 1
 (3) The cost incurred by the firm to promote sales .
(a) Total cost
(b) Average cost
(c) Marginal cost (d) selling cost
(4) Budget that consists of revenue receipts and revenue expenditure
.
(a) capital budget (b) government budget
(c) revenue budget (d) family budget
(5) Purchase of goods and services from one country and selling them
to another country is .
(a) entrepot trade (b) import trade
(c) export trade (d) national trade
Q. 1. (D) Assertion and Reasoning questions :  (5)
(1) Assertion (A) : Marginal utility (MU) goes on diminishing.
Reasoning (R) : Total utility (TU) increases at diminishing rate.

Options :


(a) Assertion (A) is true but Reasoning (R) is false.
(b) Assertion (A) is false but Reasoning (R) is true.
(c) Both statements A and R are true and R is the correct explanation
of A.
(d) 
Both statements A and R are true and R is not the correct
explanation of A.
(2) Assertion (A) : With rising price, supply of a commodity falls.
Reasoning (R) : Seller earns more profit at higher price.

Options :


(a) Assertion (A) is true but Reasoning (R) is false.
(b) Assertion (A) is false but Reasoning (R) is true.
(c) Both statements A and R are true and R is the correct explanation
of A.
(d) 
Both statements A and R are true and R is not the correct
explanation of A.
(3) Assertion (A) : Index number considers all factors.
Reasoning (R) : Index number is based on samples.

Options :


(a) Assertion (A) is true but Reasoning (R) is false.
(b) Assertion (A) is false but Reasoning (R) is true.
(c) Both statements A and R are true and R is the correct explanation
of A.
(d) 
Both statements A and R are true and R is not the correct
explanation of A.

2 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [ECONOMICS.]

 (4) Assertion (A) : Money market economises use of cash.
Reasoning (R) : Money market does not deal with financial

instruments that are close substitutes of money.
Options :


(a) Assertion (A) is true but Reasoning (R) is false.
(b) Assertion (A) is false but Reasoning (R) is true.
(c) Both statements A and R are true and R is the correct explanation
of A.
(d) 
Both statements A and R are true and R is not the correct
explanation of A.
Assertion (A) : International trade leads to division of labour and
(5) 
specialisation.
Reasoning (R) : India’s national trade is not increasing.

Options :


(a) Assertion (A) is true but Reasoning (R) is false.
(b) Assertion (A) is false but Reasoning (R) is true.
(c) Both statements A and R are true and R is the correct explanation
of A.
(d) 
Both statements A and R are true and R is not the correct
explanation of A.
Q. 2. (A) Identify and explain the following concepts : (Any THREE) (6) [12]
(1) Asha collected the information about the income of a particular firm.
(2) Ramesh’s demand for salt remained unchanged in spite of a 10% rise
in its price.
(3) Out of 4000 kgs of rice, the farmer offered to sell 1000 kgs of rice
in the market at ` 40 per kg.
(4) Shobha collected data regarding the money value of all final goods
and services produced in the country for the financial year 2019-20.
(5) Lucy deposited a lumpsum amount of ` 1,00,000 in the Bank of
India for the period of one year.
Q. 2. (B) Distinguish between : (Any THREE)  (6)
(1) Slicing Method and Lumping Method.
(2) Joint/Complementary Demand and Competitive Demand.
(3) Total Revenue and Marginal Revenue.
(4) Price Index Number and Quantity Index Number.
(5) Internal Debt and External Debt.
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [ECONOMICS] 3
Q. 3. Answer the following : (Any THREE)[12]
(1) Explain the scope of macroeconomics.
(2) Explain any four features of monopoly.
(3) Elaborate any four features of utility.
(4) Write any four practical difficulties in national income estimation.
(5) Explain the ratio method of measuring price elasticity of demand.
Q. 4. State with reasons whether you agree or disagree with the following
statements : (Any THREE)  [12]
(1) There are no exceptions to the Law of Diminishing Marginal Utility.
(2) Supply curve of labour is backward bending.
(3) Price under perfect competition is decided by the interaction between
demand and supply.
(4) Capital market plays an important role in India.
(5) Balance of Payment is same as Balance of Trade.
Q. 5. Study the following table, figure, passage and answer the questions given
below it : (Any TWO)  [8]

(1) Components ` Crores

Consumption (C) 800

Investment (I) 700

Government Expenditure (G) 400

Net Export (X  M) –150

Depreciation (D) 100

Questions :
(i) 
Calculate GDP (Gross Domestic Product) on the basis of above
table. (2)
(ii) Calculate NDP (Net Domestic Product) on the basis of above table.
 (2)

(2) 
Identify the price elasticity of demand from the following
diagrams : (4)
(i) Y (ii) Y

D
P1
Price

Price

D D
P P

P2
D
O B X O X
Quantity demanded Quantity demanded

4 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [ECONOMICS.]

 (iii) Y
D (iv) Y
D
P
P

Price
Price
P1
P1
D
D
O Q Q1 X
O Q Q1 X
Quantity demanded
Quantity demanded

(3)
Commercial banks act as intermediaries in the country’s financial system
to bring the savers and investors together. They are profit seeking financial
institutions. Due to bank nationalisation in 1969, there was increase in loan
disbursement in urban and rural areas. Agriculture and retail traders started
getting more loans. Those sectors which were not getting loans before 1969,
started getting loans in post nationalisation period. After nationalisation of banks,
branch expansion took place. There has been diversification in the functions
of banks. Commercial banks are providing different types of services like safe
deposit lockers, demat facility, internet banking, mobile banking, etc.
Questions :
  (i) Write any two benefits of bank nationalisation. (1)
 (ii) Write various services provided by banks. (1)
(iii) Write your opinion about the above passage. (2)
Q. 6. Answer the following questions in detail : (Any TWO)  [16]
(1) Explain the concepts of variations and changes in demand with the help
of diagrams.
(2) Explain the meaning of Index number. Explain various steps involved in
the construction of index number.
(3) Explain various sources of public revenue.
__________

BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [ECONOMICS] 5

 SOLUTION : BOARD’S QUESTION PAPER (MARCH 2022)

Q. 1. (A)
(1) Income theory / Theory of Income and Employment

(2) Indirect / Derived demand

(3) Unitary elastic demand

(4) Income method

(5) Direct tax

Q. 1. (B)

(1) Marginal utility.

(2) Decrease in demand.
(3) Average Revenue (AR).
(4) Long period.
(5) Gross Domestic Product (GDP).

Q. 1. (C)


(1) Macroeconomics (2) steeper (3) selling cost (4) revenue budget
(5) Entrepot trade

Q. 1. (D)
(1) (c) Both (A) and (R) are true and (R) is the correct explanation of (A).
(2) (b) (A) is false, but (R) is true.
(3) (b) (A) is false, but (R) is true.
(4) (a) (A) is true, but (R) is false.
(5) (a) (A) is true, but (R) is false.

Q. 2. (A)
(1) (A) Identified concept : Study of individual economic unit.
(B) Explanation of concept : The study of a particular economic unit by isolating
it from the other forces of economy is known as the study of individual
economic unit. For example, microeconomics deals with the study of individual
economic units such as individual firm, individual price, etc.
(2) (A) Identified concept : Perfectly inelastic demand.
(B) Explanation of concept : When the proportionate change in the price of a
commodity brings no (zero) proportionate change in its quantity demanded,
the demand is said to be perfectly inelastic.
6 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]
 (3) (A) Identified concept : Supply.
(B) Explanation of concept : Supply refers to the quantity of a commodity offered
for sale at a given price and at a given point of time.
(4) (A) Identified concept : Measure of national income by product method.
(B) Explanation of concept : Measurement of national income by summing the
monetary values of all final goods and services produced in a particular
financial year is a measure of national income by product method.
(5) (A) Identified concept : Fixed deposit.
(B) Explanation of concept : A fixed deposit is a type of time deposit in which
the saver deposits a certain amount in the form of a deposit in a commercial
bank for a fixed period of time and he can withdraw the amount from the
deposit after a specified period.
Q. 2. (B)

(1) Slicing Method Lumping Method

(1) Meaning
Slicing method is a method used by Lumping method is a method used by
microeconomics, in which the entire macroeconomics, in which the entire
economy is divided into small units for an economy is considered into big lumps (or
intensive study. sectors) for aggregative study.
(2) Nature
Slicing method is used to study the micro Lumping method is used to study the
quantities of economic variables. macro quantities of economic variables.

(2) Joint/Complementary Demand Competitive Demand

(1) Meaning
Two or more commodities that Commodities that are substitutes for each
are demanded together to satisfy a single other are said to have competitive demand.
want are said to have joint/complementary
demand.
(2) Example
Demand for needle and thread is joint/ Demand for tea and coffee is competitive
complementary demand. demand.

BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 7

 (3) Total Revenue Marginal Revenue
(1) Meaning
The total sales proceeds of a firm by selling The net addition made to Total Revenue
a commodity at a given price is called Total by selling one more unit of output is called
Revenue (TR). Marginal Revenue (MR).
(2) Formula
TR  P  Q MRn  TRn  TRn – 1

(4) Price index number Quantity index number

(1) Meaning
Price index number is a type of index Quantity index number is a type of index
number derived by multiplying the ratio of number derived by multiplying the ratio of
sum of the prices of various commodities sum of the quantities of the various goods
in the current year and sum of the prices in the current year and sum of the quantities
of various commodities in the base year of various goods in the base year by 100.
by 100.
(2) Formula

Price Index Number Quantity Index Number

 p1  q1
P01  100 Q01   100
 p0  q0

(5) Internal Debt External Debt

(1) Meaning
Debt raised on the basis of financial Debt raised on the basis of financial
resources within the economy is called resources outside the economy is called
internal debt. external debt.
(2) Nature
Internal debt is repaid using domestic External debt is repaid using foreign
currency. It is less complicated to manage. currency. It is more complex to manage.

Q. 3. (1) The scope of macroeconomics is as follows :

(a) Theory of Income and Employment : Macroeconomics explains how the level
of national income and employment is determined. It also examines the causes for
fluctuations in national income and employment. To understand the determination
of the level of national income and employment, it also studies the consumption
function, investment function and trade (busienss) cycles. Macroeconomics
8 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]
 studies the interrelationship between the level of output, national income and the
employment level and suggests policies to solve the problems related to these
macro variables.
(b) Theory of General Price Level and Inflation : Macroeconomics shows how the
general price level is determined and further explains what causes fluctuations in
it. The theory of general price level studies the causes and effects of inflation and
depression and suggests economic policies to tackle these problems.
(c) Theory of Growth and Development : Macroeconomics studies the causes of
underdevelopment and poverty in poor countries as well as developing countries
and suggests theories and strategies for accelerating growth and development in
them. It also explains how the higher rate of growth with stability can be achieved.
(d) Macro Theory of Distribution : Macroeconomics deals with determination of
relative shares of various social classes in the total national income. Macro theory
of distribution deals with the relative shares of rent, wages, interest and profit in
the total national income.
(2) The following are the important features of monopoly :
(a) Single seller : In a monopoly market, there is a single seller (monopolist). The
monopolist has no rivals and therefore, he faces no competition.
(b) No close substitute : There are no close substitutes for the commodity sold in the
monopoly market. Therefore, buyers in a monopoly market have no choice. They
have to either buy a product from a monopolist or go without it. The cross elasticity
of demand for a commodity sold by monopolist is zero.
(c) Barriers to entry : Under monopoly, the entry of rival firms is restricted due to
natural, legal or technological barriers. Thus, rival firms are not allowed to enter
in a monopoly market.
(d) Complete control over the market supply : The monopolist has complete hold
over the market supply as he is a sole producer of the commodity.
(e) Price maker : The firm / monopolist in a monopoly market is a price maker and
not a price taker. Monopolist can set any price of a commodity as he has complete
control over the market supply of the product.
(f) Price discrimination : Being a single seller and price maker, monopolist can
charge consumerwise, placewise, timewise and usewise different prices for the
same product. Price discrimination is an important feature of monopoly market. For
example, Indian Railways provides railway tickets at concessional rates to students
and senior citizens.
(g) No distinction between firm and industry : As monopolist is the only seller in
the monopoly market, a monopolist’s firm itself is an industry in a monopoly
market.
(Note : Write any four points in the answer.)
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 9
 (3) The following are the important features or characteristics of utility :
(a) Relative concept : Utility changes from time to time and from place to place. For
example, woollen clothes possess more utility during winter and less utility during
summer. Similarly, they possess more utility in Kashmir and less utility in Mumbai.
(b) Subjective concept : Utility gets influenced by a person’s likes, dislikes, habits,
preferences, etc. Therefore, utility changes from person to person. For example, a
non-vegetarian finds utility in mutton, but the vegetarian does not get utility from
it.
(c) 
Ethically neutral concept : The concept of utility is morally and ethically
colourless. Utility never takes into account the concepts such as good or bad, moral
or immoral, etc. For example, in economics, both milk as well as wine possess
utility.
(d) Utility differs from usefulness : A commodity possessing utility may not always
possess usefulness. Utility and usefulness are totally different concepts. For
example, a harmful product like poison possesses utility but it does not possess
usefulness.
(e) Utility differs from pleasure : A commodity possessing utility may not always
provide pleasure to the consumer. Thus, utility and pleasure are totally different
concepts. For example, injection possesses utility, but its consumption does not
give pleasure to the patient.
(f) 
Utility differs from satisfaction : Utility and satisfaction are totally different
concepts. Utility is the starting point of consumption, whereas satisfaction is derived
after consumption. For example, for a thirsty person, a glass of water has utility.
When he drinks that glass of water, he derives satisfaction from it.
(g) Measurement of utility is hypothetical : Utility is a psychological concept. It has
no physical existence. Therefore, it cannot be measured in numbers. Therefore,
only hypothetical measurement of utility is possible.
(h) Utility is multipurpose : A particular commodity can satisfy many wants of a
particular individual or more than one individual at a time. For example, one
individual can make use of electricity for operating washing machine, another
individual can make use of electricity to operate air conditioning unit.
(i) Depends upon the intensity of want : Utility has direct relation to intensity of
want. Individual finds more utility in a commodity if his want is more intense and
vice versa. For example, hungry individual finds more utility in food than a person
who is not so hungry.
(j) It is the basis of demand : Utility forms the basis for demand. Generally, an
individual demands a commodity when it has utility for him. Unless a commodity
provides utility, it is not demanded.
(Note : Write any four points in the answer.)
10 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]
 (4) Practical difficulties in measuring national income are also known as statistical
difficulties in measuring national income. The practical difficulties in measuring
national income are as follows :
(a) 
Problem of double counting : The greatest difficulty in calculating national
income is of double counting. It arises from the failure to distinguish properly,
between a final and an intermediate product. For example, flour used by a bakery
is an intermediate product and that by a household is a final product. Therefore,
sometimes the flour used by a bakery is taken wrongly as a final product. This
results in the problem of double counting. Double counting leads to overestimation
of national income.
(b) Existence of non-monetised sector : In a developing country like India, especially
in rural areas, there exists the non-monetised sector. In India, agriculture, still
being in the nature of subsistence farming, a major part of production is consumed
at the farm itself and a very small part produced is exchanged for other goods and
services. Thus, exchange activities are carried out without the use of money.
Therefore, they are not calculated in national income.
(c) Inadequate and unreliable data : In a developing country like India, no permanent
machinery exists for the collection of data. Therefore, adequate and correct data
on production and cost data relating to crops, fisheries, animal husbandry, forestry,
construction workers, small enterprises, etc. is not available. Besides this, data on
unearned incomes, consumption and investment expenditure of rural and urban
population is also not available. This does not reveal the actual size of national
income and it leads to underestimation of national income.
(d) Depreciation : Depreciation refers to wear and tear of capital assets, due to their
use in the process of production. There are no uniform, common or accepted
standard rates of depreciation applicable to the various capital assets. Thus, it is
difficult to make correct deductions for depreciation due to an element of
subjectivity.
(e) 
Capital gains or losses : Capital gains or capital losses, which accrue to the
property owners by increase or decrease in the market value of their capital assets
or changes in demand, are not included in the national income because these
changes do not result from current economic activities.
(f) Illiteracy and ignorance : Due to illiteracy and ignorance, small producers do not
keep an account of their production. So they cannot give information about the
quantity or value of their output. This distorts the estimation of national income.
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 11
 (g) 
Difficulties in the classification of working population : In India, working
population is not clearly defined. For instance, farmers in India are not engaged in
agriculture all round the year. Obviously, in the off season, they engage themselves
in alternative occupations. In such a case, it is very difficult to identify their
incomes from a particular occupation. This leads to underestimation of national
income.
(h) Valuation of inventories : Raw materials, intermediate goods, semi-finished and
finished products in the stock of the producers are known as inventories. Valuation
of inventories requires careful assessment. Any mistake in measuring the value of
inventory, distorts the value of the final production of the producer which in turn
distorts the estimation of national income.
(Note : Write any four points in the answer.)
(5)
(a) Ratio method of measuring price elasticity of demand is developed by
Dr. Alfred Marshall. This method is also known as arithmetic method or percentage
method or proportional method of measuring elasticity of demand.
(b) In this method, the price elasticity of demand is measured by dividing the percentage
change in the quantity demanded of a commodity by the percentage change in its
price.
(c) The formula used for the measurement of the price elasticity of demand is as
follows :
Q P
Ed   Where,
Q P
  
(i) Q  Change in the quantity demanded, i.e. Q1 Q. (New demand 
Original demand)
  (ii) Q Original demand
(iii)  P Change in the price, i.e. P1  P. (New price  Original price) and
  (iv) POriginal price.
(d) Ratio method can be explained with the help of the following example :

Price and Demand of a Commodity Original New Change

Demand (per day in units) 10 (Q) 9 (Q1) 01(Q) Q1  Q
Price (`) 20 (P) 25 (P1) 05 (P) P1  P

  
Ed 
 Q    P
Q P
1 20
  Ed  
10 5
  Ed  0.4
  Ed   <  1.
As the numerical value of the elasticity of demand is less than one, the demand
is relatively inelastic in this example.

12 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]

Q. 4. (1) I agree with this statement.
Reasons :
There are no real exceptions to the Law of Diminishing Marginal Utility (DMU).
In the following some cases, it is considered that the Law of DMU is not valid :
(a) Hobbies : It is said that in case of certain hobbies such as collection of stamps,
rare coins, etc. an individual derives more and more utility from every additional
stamp or coin. It is also said that people who are fond of music derive more and
more marginal utility from every additional listening of music. It is also said that
people who are fond of reading books derive more and more utility from every
additional reading of book. But in fact as per the assumptions of homogeneity and
continuity of the law of DMU, if an individual is asked to collect same type of
stamp or coin continuously or to listen same song continuously or to read the same
book continuously, the marginal utility will fall and the law will become applicable.
(b) Misers : It is said that for a miser, the marginal utility of money increases with
every increase in the stock of money. But the miser’s behaviour is irrational. Thus,
he violates the rationality assumption of the law. Therefore, misers are not real
exception to the law.
(c) Addictions : It is said that a drunkard derives more and more marginal utility from
consumption of every additional unit of liquor. But the drunkard’s behaviour is
irrational. Thus, he violates the rationality assumption of the law. Therefore,
drunkards or addicts are not real exception to the law.
(d) Power : It is said that a person derives more and more marginal utility from every
additional acquisition of power. But a person’s lust for power is irrational. Thus,
he violates the rationality assumption of the law. So, power is not a real exception
to the law.
(e) Money : It is said that a person derives more and more marginal utility with every
additional unit of money. But in fact, the marginal utility of money also diminishes
as its stock increases. For example, a poor person will get more marginal utility
from a 5-rupee note, but a rich person will get less marginal utility from the same
5-rupee note.
Thus, in fact, there are no real exceptions to the law of DMU. It has universal
applicability.
(Note : Write any three points in the answer.)
(2) I agree with this statement.
Reasons :
(a) In the initial stages, labour supply increases as wage rate increases. However, at a
later stage, workers would prefer leisure to work.
(b) Therefore, in the initial stages, the labour supply curve slopes upwards from the
left to the right. However, in the later stage, the labour supply curve bends
backward.
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 13
 Y

Wage rate (Price)

S
W2
W1 A
W S

O N N2 N 1 X
Working hours (labour supply)
(c) From the diagram, it can be seen that in the initial stages, as wage rate rises from
OW to OW1, the supply of labour also rises from ON to ON1. However, when the
wage rate further rises from OW1 to OW2, the supply of labour do not rise further;
rather, it is reduced from ON1 to ON2.
(d) Thus, after the wage level OW1, the supply curve bends backwards from the point
A towards Y-axis indicating that at higher prices, fewer labour hours are supplied.
 Therefore, the backward bending supply curve shows the inverse relationship
between supply of labour and wage rate.
(3) I agree with this statement.
Reasons :
(a) The price of the product in perfect competition is determined by the interaction of
market demand and market supply forces. This price is called an equilibrium price.
According to Dr. Alfred Marshall, market demand and market supply are like two
blades of a pair of scissors. Just as cutting cloth is not possible with the use of
only one blade, equilibrium price of a commodity cannot be determined either by
the force of market demand or by market supply alone.
(b) The equilibrium price determination under perfect competition is explained in the
following schedule :
Price per kg of Quantity Quantity Relation
Apples (in `) Demanded (in kg) Supplied (in kg) Between DD and SS
100 5000 1000 DD > SS
200 4000 2000 DD > SS
300 3000 3000 DD = SS
400 2000 4000 DD < SS
500 1000 5000 DD < SS
 
(i) From the schedule, it can be seen that when the price of the commodity is low,
the quantity demanded is more and quantity supplied is less. For example, at
price of apples ` 100 per kg, quantity demanded (5000) > quantity supplied
(1000). Similarly, at price of apples ` 200 per kg, quantity demanded (4000)
> quantity supplied (2000.) In this condition excess market demand, the price
14 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]
 of the commodity starts rising. Due to a rise in the price, the market demand
starts contracting and market supply starts expanding. In this way, the process
of equilibrium in market demand and market supply gets initiated.
 (ii) From the schedule, it can be seen that when the price of the commodity is
high, the quantity demanded is less and quantity supplied is more. For example,
at price of apples ` 400 per kg, quantity demanded (2000) < quantity supplied
(4000). Similarly, at price of apples ` 500 per kg, quantity demanded (1000)
< quantity supplied (5000.) In this condition of excess market supply, the
price of the commodity starts falling. Due to a fall in the price, the market
demand starts expanding and market supply starts contracting. In this way, the
process of equilibrium in market demand and market supply gets initiated.
(iii) From the schedule, it can be seen that at a particular price, the market demand
and market supply are equal to each other. For example, at price of apples
` 300 per kg, quantity demanded (3000)  quantity supplied (3000.) This is
called an equilibrium price. An equilibrium price is the price at which quantity
demanded is equal to the quantity supplied. In this way, an equilibrium price
is determined in perfect competition. This equilibrium price is accepted by all
buyers as well as sellers.
(c) The equilibrium price determination under perfect competition is explained in the
following diagram :
Y D S
500 D<S
Price (`) per kg

400
E
300 D=S

200

100 D>S
S D
O 1000 2000 3000 4000 5000 X
Marker Demand and Market Supply
 (i) In the diagram, Y-axis represents the price of apples and the X-axis represents
the market demand and market supply of apples. In the diagram, DD is a
downward sloping demand curve indicating the inverse relationship between
the price and quantity demanded. SS is an upward sloping supply curve
indicating the direct relationship between the price and the quantity supplied.
(ii) From the diagram, it can be seen that both the curves intersect each other at
point E which is the equilibrium point. In this example, the equilibrium price
is ` 300 and equilibrium quantity is 3000 kgs.
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 15
 (4) 
I agree with this statement.
Reasons :
The role of the capital market in India is explained in the following points :
(a) Mobilisation of long-term savings : Industrial organisations and the government
need a large amount of funds for investment and as financial resources. Availability
of financial resources is insufficient to meet the demand for these funds. In such
a case, the sale of securities by the capital market helps to bring together the
long-term savings of different sections of the population.
(b) 
Provision of equity capital : The capital market provides equity capital to
entrepreneurs. Entrepreneurs use the share capital to buy assets for the firm/
industry and to fund business operations.
(c) Operational efficiency : Capital market reduces the cost of transactions and
simplifies the transaction process. Capital market helps financial transactions to
achieve operational efficiency by reducing the time taken to buy and sell stocks.
(d) Quick valuation : Capital market helps to determine the fair and quick value of
equities (shares) and debt (bonds and debentures).
(e) Integration : The capital market coordinates by consolidating the real and financial
sector, equities and debt instruments, public sector and private sector, domestic and
external funds, etc.
(Note : Write any three points in the answer.)

(5) I disagree with this statement.

Reasons :
(a) Balance of payment refers to a systematic record of all international economic
transactions of a particular country for a given period. On the other hand, balance
of trade refers to the difference between the value of country’s exports and imports
for a given period.
(b) Balance of trade gets included in balance of payment. Thus, it is a part of balance of
payment.
(c) Balance of payment is a broader concept. Balance of trade is a narrower concept.
  Thus, balance of payment is not same as balance of trade. Both of them are different
concepts.
16 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]
Q. 5. (1)
 
(i) GDP  CIG(X – M)
 800700400(  150)
 1900( 150)
 ` 1750 crores
(ii) NDP GDP  Depreciation (D)
1750  100
` 1650 crores
(2)   (i) The price elasticity of demand in diagram (i) is perfectly inelastic.
 (ii) The price elasticity of demand in diagram (ii) is perfectly elastic.
(iii) The price elasticity of demand in diagram (iii) is relatively inelastic.
 (iv) The price elasticity of demand in diagram (iv) is relatively elastic.
(3)   (i) Two benefits of bank nationalisation are :
(a) Increase in loan disbursement to urban and rural areas.
(b) Agriculture and retail traders started getting more loans.
 (ii) Various services provided by banks are :
(a) Safe deposit lockers
(b) Demat facility
(c) Internet banking
(d) Mobile banking, etc.
(iii) Commercial banks are profit seeking financial institutions. After nationalisation
of banks, various sectors in economy started getting more loans. It also
resulted in the diversification in the functions of banks.

Q. 6. (1)

(A) Variation in Demand : Variation in demand can be explained with the help of

the following points :
(a) Meaning : Other factors remaining constant, a rise or fall in demand due to the
change in the price of a commodity, is called variation in demand. Variation in
demand is of the following two types :
(i) Expansion of Demand : Other factors remaining constant, a rise in demand due
 
to fall in the price of a commodity, is called expansion of demand.
(ii) Contraction of Demand : Other factors remaining constant, a fall in demand due
to a rise in the price of a commodity, is called contraction of demand.
(b) Diagram : Variation in demand can be explained with the help of the following
diagram :
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 17
 Y

D e2
P2 Contraction

Price
P e
Expansion
P1 e1
D

O Q2 Q Q1 X
Demand
From the given diagram, it can be seen that, other things being equal, as price falls
from OP to OP1, demand rises from OQ to OQ1. This rise in demand is called
expansion of demand. In expansion of demand, the equilibrium point of price and
demand moves downwards from the left to the right (e to e1) on the same demand
curve.
On the other hand, as price rises from OP to OP2, demand falls from OQ to OQ2.
This fall in demand is called contraction of demand. In contraction of demand, the
equilibrium point of price and demand moves upwards from the right to the left (e
to e2) on the same demand curve.
(B) Change in Demand : Change in demand can be explained with the help of the
following points :
(a) Meaning : Price of a commodity in question remaining constant, a rise or fall in
demand due to the change in the other factors, is called change in demand. Change
in demand is of the following two types :
 (i) Increase in Demand : Price of a commodity in question remaining constant, a
rise in demand due to favourable changes in other factors, is called increase in
demand.
(ii) Decrease in Demand : Price of a commodity in question remaining constant, a
fall in the demand due to unfavourable changes in other factors is called decrease
in demand.
(b) Diagram : Change in demand can be explained with the help of the following
diagram :
Y Decrease Increase
D2 D D1

e2 e e1
Price

D2 D D1

O Q2 Q Q1 X
Demand
18 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]
 From the diagram, it can be seen that price remaining equal, i.e. OP, due to
favourable changes in other factors, demand rises from OQ to OQ1. This rise in
demand is called as increase in demand. In increase in demand, demand curve
shifts to the right side of the original demand curve (DD to D1D1) and the
equilibrium point of price and demand shifts from the left to the right (e to e1) on
the new demand curve.
On the other hand, price remaining equal, i.e. OP, due to unfavourable changes in
other factors, demand falls from OQ to OQ2. This fall in demand is called as
decrease in demand. In decrease in demand, demand curve shifts to the left side
of the original demand curve (DD to D2D2) and the equilibrium point of price and
demand shifts from the right to the left (e to e2) on the new demand curve.
(2)
(A) Meaning : According to Spiegel, “An index number is a statistical measure
designed to show changes in a variable or a group of related variables with
reference to time, geographical location and other characteristics such as income,
profession, etc.”
(B) Steps : The steps involved in the construction of index numbers are as follows :
(a) Deciding the purpose of index numbers : Deciding the purpose of index numbers
is the first important step in the construction of index numbers. The purpose of
constructing the index number, its scope as well as which variable is intended to
be measured should be clearly decided to achieve fruitful results. For example, if
the purpose of constructing index numbers is to find out the changes in the
wholesale prices of a particular commodity, then collecting data on the retail prices
of a particular commodity will not be fruitful.
(b) Selecting the base year : Base year is also called the reference year. It is the year
against which comparisons are made. The base year should be normal, i.e. it should
be free from natural calamities, warlike conditions, emergencies, etc. It should not
be too distant in the past.
(c) Selecting items : It is necessary to select a representative sample of the number
of items to be included in the construction of index numbers. The representative
sample should represent the tastes, habits and customs of the people. Similarly,
only standardised or graded items should be included to give better results. For
example, while measuring the trends in consumption pattern of poor people, the
data related to quantities of essential goods consumed by poor people over a period
of time is to be collected. The collection of data related to quantities of luxury
goods consumed by rich people will not be fruitful.
BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 19
 (d) Obtaining price quotations : Prices of the selected commodities may vary from
place to place and shop to shop in the same market. Therefore, while calculating
index numbers, it is desirable that price quotations should be obtained from an
unbiased price reporting agency. Proper selection of representative places and
persons is required to achieve accuracy in the construction of index numbers.
(e) Choosing suitable average : Construction of index numbers requires choice of a
suitable average. Generally, arithmetic mean is used in the construction of index
numbers as compared to other averages, it is simple to compute.
(f) Assigning proper weights : Weight refers to the relative importance of the different
items in the construction of an index number. Weights are of two types, viz.
(i) Quantity weights (q) and (ii) Value weights (p  q). Since all items are not of
equal importance, while constructing index numbers, specific weights are assigned
to various commodities for achieving better results.
(g) 
Selecting an appropriate formula : Various formulae are devised for the
construction of index numbers. According to the purpose of index number and
availability of data, a suitable formula is chosen for constructing index numbers.
(3)
(A) Tax Revenue : Tax sources of public revenue are as follows :
(a) Direct Tax : A tax which is levied on the income or property of an individual and
so in which, the impact and incidence of tax is on same head is called direct tax.
Income tax, property tax, etc. are the examples of direct tax.
(b) Indirect Tax : A tax which is levied on goods and services and so in which, the
impact of tax is on one person (seller) and the incidence of tax is on another person
(buyer) is called indirect tax. Goods and Services Tax (GST), custom duty, etc. are
the examples of indirect tax.
(B) Non-Tax Revenue : Non-tax sources of public revenue are as follows :
(a) Fees : Fee is paid by citizens in return for certain specific services rendered by the
government. For example, education fee, registration fee, etc.
(b) Prices of public goods and services : Modern governments sell various types of
commodities and services to the citizens. A price is a payment made by the citizens
to the government for the goods and services sold to them. For example, railway
fares, postal charges, etc.
(c) Special assessment : The payment made by the citizens of a particular locality in
exchange for certain special facilities given to them by the authorities is known as
‘special assessment’. For example, local bodies can levy a special charge on the
residents of a particular area where extra / special facilities of roads, energy, water
supply etc. are provided.
20 BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS]
 (d) Fines and penalties : The government imposes fines and penalties on those who
violate the laws of the country. The objective of the imposition of fines and
penalties is not to earn income, but to discourage the citizens from violating the
laws framed by the government. For example, fines for violating traffic rules.
However, the revenue from this source is comparatively limited.
(e) Gifts, grants and donations : The government may also earn some income in the
form of gifts by the citizens and others. The government may also receive grants
from the foreign governments and institutions for general and specific purposes.
Foreign aid has become an important source of development finance for a developing
country like India. However, this source of revenue is uncertain in nature.
(f) Special levies : The government levies duties on those commodities, the
consumption of which is harmful to the health and well-being of the citizens. Like
fines and penalties, the objective of special levies is not to earn income, but to
discourage citizens from the consumption of harmful commodities. For example,
duties levied on wine, opium and other intoxicants.
(g) B
 orrowings : The government borrows from the citizens in the form of deposits,
bonds, etc. Government also gets loans from foreign governments and international
organisations such as IMF, World Bank, etc. In modern times, loans are becoming
more and more popular source of revenue for the governments.
__________

BOARD’S QUESTION PAPER – MARCH 2022 : STD. XII [SOLUTION : ECONOMICS] 21

 ECONOMICS

BOARD’S QUESTION PAPER (JULY 2022)

Time : 3 Hours ] [ Total Marks : 80

Note :   (i) All questions are compulsory.

 (ii) Draw neat tables/diagrams wherever necessary.
(iii) Figures to the right indicate full marks.
 (iv) Write answers to all main questions on a new page.

Q. 1. (A) Choose the correct option : (5) [20]

(1) The branch of economics that deals with the allocation of resources :
(a) Microeconomics (b) Macroeconomics
(c) Econometrics (d) Monetary Economics
Options : (1) a, b, c (2) a, b (3) only ‘a’ (4) None of these
(2) Classification of markets is done on the basis of place :
(a) Local market, National market, International market
(b) Very short period market, Local market, National market
(c) Short period market, National market, International market
(d) Local market, National market, Short period market.
Options : (1) a, b, c (2) b, c, d (3) only a (4) a, d
(3) Statements that are incorrect in relation to index numbers :
(a) Index number is a geographical tool.

(b) Index numbers measure changes in the air pressure.
(c) Index numbers measure relative changes in an economic variable.
(d) Index numbers are specialized averages.
Options : (1) c, d (2) a, b (3) b, c (4) a, b, c, d
(4) Non-tax sources of revenue :
(a) Direct and indirect tax (b) Direct tax and fees
(c) Fees (d) Special levy
Options : (1) b, c (2) a, c (3) a, b, c, d (4) c, d
(5) Methods of quantitative credit control :
(a) Bank rate
(b) Open market operation
(c) Cash reserve ratio (d) Credit rationing
Options : (1) a, b, c (2) b, c, d (3) a, b, d (4) a, c, d
22 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [ECONOMICS]
 (B) Complete the correlations :  (5)
(1) Microeconomics : : : Macroeconomics : Forest.
(2) Price and demand for normal-good : Inverse relationship : : Giffen
goods : .
(3) Perfect competition : : : Monopoly : Single seller.
Total Revenue
(4) Total revenue : : : Average revenue : .
Total Quantity
(5) Output method : : : Income method : Factor cost method.
(C) Find the odd word out :  (5)
(1) Types of elasticity of demand – Price elasticity, Income elasticity,
Less elastic, Cross elasticity.
(2) External debt – Foreign banks, World bank, International Monetary
Fund, Central bank.
(3) Organised sector – Money-lender, Commercial bank, Co-operative
bank, Reserve Bank of India.
(4) Transfer income – Pension, Unemployment allowance, Wages, Gifts.
(5) Types of foreign trade – Local trade, Import trade, Export trade,
Entrepot trade.
(D) Complete the following statements :  (5)
(1) The relationship between demand for a good and price is .
(a) direct
(b) inverse
(c) no effect (d) can be direct and inverse
(2) Demand curve is parallel to ‘X’-axis in case of .
(a) perfectly elastic demand (b) perfectly inelastic demand
(c) relatively elastic demand (d) relatively inelastic demand
(3) A rightward shift in supply curve shows :

(a) Contraction of supply (b) Decrease in supply
(c) Expansion of supply (d) Increase in supply
(4) Trade of goods and services within the geographical boundaries of
a nation :

(a) International trade (b) Internal trade
(c) Currency trade (d) Intercontinental trade
BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [ECONOMICS] 23
 (5) Stock exchange is an important constituent of the .
(a) capital market
(b) money market
(c) local market (d) international market

Q. 2. (A) Identify and explain the following concepts : (Any THREE) (6) [12]
(1) Salma purchased sweater for her father in winter season.
(2) Sanket’s demand for consumer goods increased by 20% due to an
increase in his income by 50%.
(3) 
Anita receives monthly pension of ` 15,000 from the State
Government.
(4) John produces 5 units of mobile in his factory at ` 50,000. When
he produced the 6th unit of mobile, his total cost was ` 58,000.
(5) Samir paid wages to workers in his factory and interest on his
bank loan.

(B) Distinguish between : (Any THREE)  (6)

(1) Individual demand and Market demand
(2) Slicing method and Lumping method
(3) Stock and Supply
(4) Simple index number and Weighted index number
(5) Direct tax and Indirect tax
Q. 3. Answer the following : (Any THREE)[12]
(1) Explain any four features of microeconomics.
(2) Explain any four points related to the significance of index number.
(3) Explain any four features of monopoly.
(4) Explain any four points related to the role of money market in India.
(5) Explain any four points related to the role of foreign trade.

Q. 4. 
State with reasons whether you agree or disagree with the following
statements :  (Any THREE) [12]
(1) Every desire of an individual is a demand.
(2) There is a direct relationship between price and quantity supplied.
(3) Commercial bank preforms various functions.
(4) Index numbers can be constructed without base year.
(5) Slope of relatively elastic demand curve is steeper.
24 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [ECONOMICS]
Q. 5. Study the following table, figure, passage and answer the questions given
below it : (Any TWO) [8]
(1) Price of Apple Demand Supply
[Per kg `] [Per kg] [Per kg]
100 50 10
200 20
30 30
400 20
500 50

Questions :
 (i) Complete the above table. (2)
(ii) 
Draw an equilibrium price determination diagram based on the
above table. (2)

(2) Following diagram is a linear demand curve. On the basis of the given

diagram, answer the following questions :  (4)

P1
Price

P2

P3

P4
O Quantity Demanded X

Questions :

(1) Demand at point ‘P2’ is relatively inelastic. Is this statement true or

false ?

(2) Identify the elasticity of demand at point ‘P’.

(3) What is denoted on ‘X’-axis in the above diagram ?

(4) Which method of measuring elasticity of demand is denoted in the

above diagram ?

BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [ECONOMICS] 25

 (3)    As per a survey conducted by Galaxy Enterprise, it was observed that
in Panji, there was an increase in the demand for biscuits. This was due to
the change in people’s taste and habits.
   Considering this an opportunity, the Galaxy Enterprise borrowed
capital from ‘Bank of India’, purchased wheat from the farmers and started
producing biscuits. The company had a competition from Andromeda
Foods Ltd., a producer of cream biscuits. One more research conducted by
the Galaxy Enterprise made them realise that with the rise in demand for
biscuits, the demand for tea also has increased.
   Galaxy Enterprise started a chain of tea shops in Panji with an intention
of creating competition to Andromeda.

 (i) Find out the examples of types of demand from the above passage.

(a) Direct demand (1)

(b) Indirect demand (1)

(ii) Give your opinion with reference to above passage. (2)

Q. 6. Answer the following questions in detail : (Any TWO)  [16]

(1) 
State and explain the Law of Diminishing Marginal Utility with
exceptions.

(2) 
Explain the concept of national income and explain the features of
national income.

(3) Explain various reasons for the growth of public expenditure.

__________

26 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [ECONOMICS]

 SOLUTION : BOARD’S QUESTION PAPER (JULY 2022)

Q. 1. (A)

(1) (3) Only ‘a’

(2) (3) Only ‘a’

(3) (2) a, b

(4) (4) c, d

(5) (1) a, b, c

Q. 1. (B)

(1) Tree

(2) Direct relationship

(3) Large number of sellers

(4) Price  Quantity

(5) Product/Inventory method

Q. 1. (C)
(1) Less elastic
(2) Central bank
(3) Money-lender
(4) Wages
(5) Local trade

Q. 1. (D)
(1) (b) inverse
(2) (a) perfectly elastic demand
(3) (d) Increase in supply
(4) (b) Internal trade
(5) (a) capital market

Q. 2. (A)
(1) (A) Identified concept : Time utility.
(B) Explanation of concept : Utility increased/derived by changing the time of
utilisation of a commodity is called time utility.
BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 27
 (2) (A) Identified concept : Income elasticity of demand.
(B) Explanation of concept : Income elasticity of demand can be defined as the
percentage change in the quantity demanded of a commodity in response to a
percentage change in the income of the consumer only.
(3) (A) Identified concept : Transfer income.
(B) Explanation of concept : If the expenditure incurred by another person/
organisation is received by an individual in the form of income without any
form of productive work, then such income is called ‘transfer income’.
(4) (A) Identified concept : Marginal cost.
(B) Explanation of concept : Marginal cost is the net addition made to total cost
by producing one more unit of output. It is calculated as follows :
MCn  TCn  TCn  1
(5) (A) Identified concept : Payment of factor price/reward.
(B) Explanation of concept : The factors of production, viz. land, labour, capital
and entrepreneur are essential for the production of goods. These factors of
production get rewards in the form of rent, wages, interest and profit,
respectively from the producer for participating in the production process.

Q. 2. (B)

(1) Individual Demand Market Demand

(1) Meaning
Individual demand is the demand by a Market demand is the total demand by
single consumer in a market for a given all consumers in a market for a given
commodity at a given price and time. commodity at a given price and time.
(2) Interrelation
Individual demand is always less than Market demand is always greater than
market demand. individual demand.

(2) Slicing Method Lumping Method

(1) Meaning
Slicing method is a method used by Lumping method is a method used by
microeconomics, in which the entire macroeconomics, in which the entire
economy is divided into small units for an economy is considered big lumps
intensive study. (or sectors) for aggregative study.
(2) Nature
Slicing method is used to study the micro Lumping method is used to study the macro
quantities of economic variables. quantities of economic variables.

28 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS]

 (3) Stock Supply
(1) Meaning
Stock refers to the entire quantity of a Supply refers to the quantity of a
commodity which exists with the seller at commodity offered for sale at a given price
a given point of time. and at a given point of time.
(2) Interrelationship
Stock can exceed supply or stock and Supply and stock can be same. But supply
supply can be same. can never exceed stock.

(4) Simple Index Number Weighted Index Number

(1) Meaning
Index numbers measured by giving equal Index numbers measured by giving suitable
importance (weight) to every commodity importance (weight) to every commodity are
are known as simple index numbers. known as weighted index numbers.
(2) Nature
The measurement of simple index number The measurement of weighted index
is comparatively simple. number is comparatively complex.

(5) Direct Tax Indirect Tax

(1) Meaning
A tax which is levied on the income or A tax which is levied on goods and services
property of an individual and so in which, and so in which, the impact of tax is on one
the impact and incidence of tax is on same person (seller) and the incidence of tax is on
head is called direct tax. another person (buyer) is called indirect tax.
(2) Examples
Income tax, property tax, etc. are the Goods and Services Tax, Customs Duty,
examples of direct tax. etc. are the examples of indirect tax.

Q. 3. (1) The following are the features of microeconomics :

(a) 
Study of individual units : Microeconomics is concerned with the study of
economic behaviour of small individual economic units of an economy. For example,
microeconomics studies the economic behaviour of particular household, particular
firm, price of a particular product, etc.
(b) Price theory : Microeconomics is primarily concerned with price determination of
goods and services as well as factors of production, viz., land, labour, capital and
entrepreneur. Therefore, microeconomics is also known as ‘Price Theory’.
BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 29
 (c) Partial equilibrium : Microeconomics isolates individual economic units from the
other forces of economy. It analyses the equilibrium positions of individual economic
units such as individual consumer, individual firm separately (independently).
Therefore, microeconomic analysis is a partial equilibrium analysis. Partial
equilibrium analysis is based on the assumption of ‘Ceteris Paribus’, i.e., other
things remaining the same. Thus, partial equilibrium neglects the interdependence
between economic variables of an economy.
(d) Based on certain assumptions : Microeconomics is based on certain assumptions
such as full employment, pure capitalism, laissez-faire policy, perfect competition,
etc. prevailing in an economy. But in reality, an economy with such conditions does
not exist. Most of the theories of microeconomics are based on the ‘Ceteris Paribus’
assumption, i.e., other things remaining the same.
(e) Slicing method : Microeconomics splits the entire economy into small individual
economic units. Then it studies the economic behaviour of each individual unit
separately in detail. Thus, microeconomics uses slicing method for its analysis.
(f) 
Use of marginalism principle : Consumers as well as producers take all
important economic decisions at the margin. Therefore, microeconomics uses
marginalism principle as a key tool of analysis.
(g) Analysis of market structures : Microeconomics studies market structures such
as perfect competition, monopoly, oligopoly, monopolistic competition, etc. It also
describes how the prices of goods and services are determined in these markets.
(h) Limited scope : Microeconomics does not deal with national economic problems
such as poverty, unemployment, inflation, depression, deficit in balance of payments,
etc. Therefore, microeconomics has limited scope.

(Note : Write any four points in the answer.)

(2) The significance of index number in economics can be explained as follows :
(a) Helpful in framing suitable policies : Index numbers provide guidelines to policy
makers in framing suitable economic policies. Index numbers are helpful in
framing the economic policies such as agricultural policy and industrial policy.
Index numbers also help in the fixation of wages and dearness allowances in
accordance with the cost of living.
(b) Helpful in studying trends and tendencies : Index numbers are widely used to
measure changes in various economic variables such as production, prices, exports,
imports, etc. over a period of time. For example, by examining the index of
industrial production for the last five years, important conclusions about the trend
of industrial production, i.e. whether the industrial production shows an upward
tendency or a downward tendency can be drawn.
30 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS]
 (c) Helpful in forecasting future economic activity : Index numbers help in making
predictions on the basis of analysis of the past and present trends in the economic
activities. For example, by examining the data pertaining to exports of alphonso
mangoes from the year 2009 to 2014 and from the year 2014 to 2019, if it is
noticed that the export of alphonso mangoes has been increasing, it can be predicted
that an increase in export will continue in future.
(d) Helpful in measurement of inflation : Index numbers are also used to measure
changes in the price level from time to time. The measurement of inflation enables
the government to undertake appropriate anti-inflationary measures. For example,
there is a legal provision to pay the D.A. (dearness allowance) to the employees
in organised sector on the basis of changes in Dearness Index. Thus, with the help
of the Dearness Index, the government can increase the D.A. from time to time.
(e) Useful to present financial data in real terms : Rise in money supply over a
period of time leads to inflation in an economy. Inflation has its effects on various
economic variables such as total production, national income, price level, wage
level, etc. Index numbers can eliminate the effects of inflation by deflating the
values of these various economic variables on the basis of their constant prices.
Thus, index numbers can measure the changes in the values of various economic
variables in real terms.
(Note : Write any four points in the answer.)
(3) The following are the important features of monopoly :
(a) Single seller : In a monopoly market, there is a single seller (monopolist). The
monopolist has no rivals and therefore, he faces no competition.
(b) No close substitute : There are no close substitutes for the commodity sold in the
monopoly market. Therefore, buyers in a monopoly market have no choice. They
have to either buy a product from a monopolist or go without it. The cross elasticity
of demand for a commodity sold by monopolist is zero.
(c) Barriers to entry : Under monopoly, the entry of rival firms is restricted due to
natural, legal or technological barriers. Thus, rival firms are not allowed to enter in
a monopoly market.
(d) Complete control over the market supply : The monopolist has complete hold
over the market supply as he is a sole producer of the commodity.
(e) Price maker : The firm / monopolist in a monopoly market is a price maker and
not a price taker. Monopolist can set any price of a commodity as he has complete
control over the market supply of the product.
(f) Price discrimination : Being a single seller and price maker, monopolist can
charge consumer-wise, placewise, timewise and usewise different prices for the
same product. Price discrimination is an important feature of monopoly market. For
example, Indian Railways provides railway tickets at concessional rates to students
and senior citizens.
BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 31
 (g) No distinction between firm and industry : As monopolist is the only seller in the
monopoly market, a monopolist’s firm itself is an industry in a monopoly market.
(Note : Write any four points in the answer.)
(4) 
The role of money market in India can be explained with the help of the following
points :
(a) Meeting the short term requirements of the borrower : Due to the money market,
the short-term financial needs of the borrowers are met at realistic interest rates.
(b) Liquidity management : Money market facilitates better management of liquidity
and money in the economy by the monetary authorities. As a result, the country
enjoys economic stability and economic development.
(c) Portfolio management : Money market deals with different types of financial
instruments that are designed to suit the risk and return preferences of investors. This
enables the investors to manage portfolios to minimise the risks and to maximise the
returns.
(d) Equilibrating mechanism : Money market leads to rational allocation of financial
resources. The money market accelerates and mobilises savings in the investment
stream. The money market helps to strike a balance between the demand for and the
supply of short-term funds.
(e) Meeting the financial requirements of the government : Money market helps the
government to fulfil its short-term financial needs on the basis of the Treasury Bills.
(f) Implementation of monetary policy : The main objective of monetary policy
is to manage the quantity of money in the economy. In India, monetary policy is
implemented by the Reserve Bank of India. Monetary policy makes it possible
to meet the economic needs of different sectors of the economy and accelerate
economic growth. The money market guides the Reserve Bank of India in developing
appropriate interest rates policy. Thus, a fully developed money market in the
economy helps in the successful implementation of monetary policy.
(g) Economising the use of cash : The money market is not about the actual money
but about various financial instruments that are the close substitute to money. As a
result, the money market helps to use cash sparingly.
(h) Promoting the growth of commerce, industry and trade : Local traders as well
as international traders who are in the need of short-term funds have the facility to
discount bills of exchange in the money market. Money market provides working
capital for agro-industries and small scale industries. As a result, the money market
drives the growth of commerce, industry and trade in the country.
(Note : Write any four points in the answer.)
32 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS]
 (5) The role of foreign trade can be explained with the help of the following points :
(a) To earn foreign exchange : Foreign exchange is earned through foreign trade. The
foreign exchange received can be used for various productive activities. Foreign
trade promotes the production and market expansion of domestic goods and services.
(b) Encourages investment : Foreign trade provides an opportunity for producers to
sell goods and services in the domestic market as well as export to the world market.
As a result, the production of various goods and services in the country is boosted
and investment is encouraged.
(c) 
Division of labour and specialisation : Foreign trade leads to division and
specialisation of labour at the global level. For example, if workers in country
‘A’ are skilled in agricultural production and workers in country ‘B’ are skilled in
making electronic products, then country ‘A’ can export agricultural products to
country ‘B’ by acquiring specialisation in agricultural products. country ‘B’ can
export electronic products to country ‘A’ by acquiring specialisation in electronic
products.
(d) Optimum allocation and utilisation of resources : Due to foreign trade, each
country channelised the available resources to the production of the same goods
from which maximum benefit can be obtained at minimum production cost. For
example, if it would be possible to produce wheat at the lowest cost based on the
resources available in country ‘A’ and if it would be possible to produce medicines
at the lowest cost based on the production resources in country ‘B’, then country
‘A’ manufactures wheat and exports wheat to country ‘B’. Similarly, country ‘B’
manufactures drugs and exports drugs to country ‘A’. Thus, foreign trade leads to
optimum allocation and utilisation of resources internationally.
(e) Stability in price level : Foreign trade helps in balancing the demand for and supply
of goods and hence, brings stability in price level in the economy.
(f) 
Availability of multiple choices : Foreign trade provides multiple choices of
imported commodities. It thus creates competition in the market and hence, high
quality goods can be made available to the consumers at reasonable prices. Thus,
foreign trade helps in raising the standard of living.
(g) Brings reputation and helps earn goodwill : Exporting countries get reputation
and goodwill in the international market. For example, Japan and Switzerland have
gained a great deal of goodwill in the international market by exporting quality
electronic goods worldwide.
(Note : Write any four points in the answer.)

Q. 4. (1) I disagree with this statement.

Reasons :
(a) Desire refers to a mere wish or urge of a person to have a particular commodity.

BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 33
 (b) Desire has no relation with price, place and time.
(c) 
Desire that is backed by the ability to pay and the willingness to pay becomes
demand.
Thus, every desire of an individual is not a demand.
(2) I agree with this statement.
Reasons :
(a) The Law of Supply was propounded by Dr. Alfred Marshall. The Law of Supply
explains the direct relationship between the price and the supply.
(b) The Law of Supply is stated as follows : “Other things being constant, the higher
the price of a commodity, greater is the quantity supplied and lower the price of
a commodity, smaller is the quantity supplied.”
(c) The direct relationship between price and quantity supplied can be explained with
the help of the following individual supply schedule and individual supply curve.

Price (`) Quantity Supplied (kg)

10 100

20 200

30 300

Thus, there is a direct relationship between price and quantity supplied.

(3) I agree with this statement.

Reasons : Commercial bank performs the following functions :
(a) Accepting deposits : Deposits are the main source of funds for commercial banks.
Commercial banks accept the following types of deposits :
(A) Demand deposits : Demand deposits are deposits that are withdrawn on
demand. The following are the two types of demand deposits :
 (i) Current deposits : Current deposits are generally kept in current account
by businessmen, corporations and trusts. The accountholder can deposit
money in the current deposit account any number of times and withdraw
as many times as required. Current deposit accountholders are also given
the facility of overdraft, i.e., facility to withdraw in excess of the balance
in the account.
(ii) Savings deposits : Savings deposits are held mainly by salaried class and
small traders. The accountholder can deposit money in the savings deposit
account any number of times and withdraw money as and when required.
34 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS]
 (B) Term (time) deposits : Deposits held for a fixed period are called term deposits.
The following are the two types of term deposits :
 (i) Recurring deposits : Recurring deposits are regularly kept in the recurring
deposit account, especially by small savers. Recurring deposits encourage
regular savings.
(ii) Fixed deposits : Fixed deposits are kept by the saver for a fixed period.
The lumpsum amount deposited by the saver can be withdrawn after the
stipulated period. Interest is paid at the highest rate on fixed deposits.
(b) Providing loans and advances : Commercial banks use deposits accepted from
depositors to lend to needy people. Commercial banks provide short, medium and
long term loans to individuals and institutions for various purposes. The longer the
loan period, the higher is the loan rate. Apart from this, commercial banks also offer
cash credit, overdraft facility and also discount bills of exchange.
(c) Ancillary functions : Commercial banks provide various facilities like transfer of
funds, collection of money, making periodical payments on behalf of the customers,
safe deposit lockers, Demat facility, internet banking facility, mobile banking facility,
etc.
(d) Credit creation : Credit creation is an important function of commercial banks.
Commercial banks create credit on the basis of primary deposits. Commercial
banks use demand and term (time) deposits to lend after meeting the cash reserve
requirement. Commercial banks deposit the loan amount in the borrower’s account
when lending a loan. Thus, loans are made from primary deposits and secondary
deposits are made while lending loans. Thus, commercial banks create credit.
(Note : Write any three points in the answer.)
(4) I disagree with this statement.
Reasons :
(a) Index numbers measure the changes in an economic variable in present times with
reference to the year in the past. This year in the past is known as base year.
(b) For the calculation of index numbers, the normal year from the past is selected as
the base year. The base year should be normal, i.e., it should be free from natural
calamities, warlike conditions, emergencies, etc. Similarly, it should not be too
distant in the past.
(c) While preparing index numbers with reference to the base year, it is denoted by
the suffix ‘o’. The base year’s index of a selected variable is assumed as 100. The
index numbers are measured for the current year on the basis of the past year.
Thus, index numbers cannot be constructed without the base year.
BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 35
 (5) I disagree with this statement.
Reasons :
(a) When the proportionate change in the price of a commodity brings about greater than
proportionate change in its quantity demanded, the demand is said to be relatively
elastic.
(b)

(c) 
From the diagram, it can be seen that the original price of a commodity is OP and the
original demand of a commodity is OQ. When the price of a commodity falls from
OP to OP1 (by 25 per cent) the demand of a commodity rises from OQ to OQ1 (by
50 per cent). In the case of relatively elastic demand, the demand curve is a flatter
line. Its elasticity can be measured as follows :
Percentage change in Quantity Demanded 50
Ed   2
Percentage change in Price 25

The numerical value of relatively elastic demand is greater than one. (Ed > 1)
Thus, slope of relatively elastic demand curve is not steeper but flatter.

Q. 5. (1) (i) Price of Apple Demand Supply

[Per kg `] [Per kg] [Per kg]

100 50 10

200 40 20

300 30 30

400 20 40

500 10 50

36 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS]

 (ii) Y
D S
500

400

Price
300 E

200

100
S D

O 10 20 30 40 50 X
Q
Quantity Demanded and Supplied

(2) (1) Demand at point ‘P2’ is relatively inelastic. – False

(2) The elasticity of demand at point ‘P’ is perfectly elastic. (Ed  )

(3) Quantity demanded is denoted on ‘X’-axis in the above diagram.

(4) Point or Geometric method of measuring elasticity of demand is denoted in the

above diagram.

(3)  (i) (a) Direct demand – Demand for biscuits and tea

(b) Indirect demand – Demand for wheat and capital

(ii) From the given passage, it can be derived that taste and habits determine
demand. It also shows that supplementary goods have complementary or joint
demand.

Q. 6. (1) (A) Statement and Explanation of the Law of Diminishing Marginal Utility

(DMU) : The Law of DMU can be explained with the help of the following
points :
(a) The Law of DMU was first proposed by Prof. Gossen. However, this law was
further explained by Dr. Alfred Marshall in his famous book, ‘Principles of
Economics’ in 1890.
(b) Statement of the Law : According to Dr. Alfred Marshall, “Other things
being equal, the additional benefit which a person derives from the increase in
the stock of a thing diminishes with every increase in the stock that he already
has.”
(c) The Law of DMU can be explained with the help of the following schedule :
Unit of a Commodity MU
1 08
2 06
3 04
4 02
5 00
6  02

BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 37

 (d) From the schedule, it can be seen that as the stock of a commodity increases from 1
to 6, the marginal utility diminishes from 8 to  02.

(e) The Law of DMU can be explained with the help of the following diagram :

(f) In the diagram, the Y-axis represents the marginal utility and the X-axis represents
the units of consumption of a commodity. It can be seen that, the consumer derives
the maximum marginal utility from the first unit of the consumption. As consumer
keeps consuming the further units, the marginal utility keeps falling.
(g) On the consumption of the 5th unit, the marginal utility becomes zero. Therefore on
the consumption of 5th unit, the marginal utility curve touches the X-axis.
(h) On the consumption of the 6th unit, the marginal utility becomes negative. This
means consumption at this point results in disutility.
From beginning to end, the marginal utility curve slopes downwards from the left to the
right.
(B) Exceptions to the Law of Diminishing Marginal Utility (DMU) : There are no
real exceptions to the Law of DMU. In the following some cases, it is considered
that the Law of DMU is not valid :
(a) Hobbies : It is said that in case of certain hobbies such as collection of stamps, rare
coins, etc., an individual derives more and more utility from every additional stamp
or coin. It is also said that people who are fond of music derive more and more
utility from every additional listening of music. It is also said that people who are
fond of reading books derive more and more utility from every additional reading of
book. But in fact as per the assumptions of homogeneity and continuity of the Law
of DMU, if an individual is asked to collect same type of stamp or coin continuously
or to listen same song continuously or to read the same book continuously, the
marginal utility will fall and the law will become applicable.
38 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS]
 (b) Misers : It is said that for a miser, the marginal utility of money increases with
every increase in the stock of money. But the miser’s behaviour is irrational. Thus,
he violates the rationality assumption of the law. Therefore, misers are not real
exception to the law.
(c) Addictions : It is said that a drunkard derives more and more marginal utility from
consumption of every additional unit of liquor. But the drunkard’s behaviour is
irrational. Thus, he violates the rationality assumption of the law. Therefore, the
drunkards are not real exception to the law.
(d) Power : It is said that a person derives more and more utility from every additional
acquisition of power. But a person’s lust for power is irrational. Thus, he violates
the rationality assumption of the law. So, power is not a real exception to the law.
(e) Money : It is said that a person derives more and more marginal utility with every
additional unit of money. But in fact, the marginal utility of money also diminishes
as its stock increases. For example, a poor person will get more marginal utility from
a 5-rupee note, but a rich person will get less marginal utility from the same 5-rupee
note.
Thus, in fact, there are no real exceptions to the Law of DMU. It has universal applicability.
Q. 6. (2) (A) 
Meaning of national income : The meaning of national income can be
explained with the help of the following points :
(a) The total income of the nation is called national income. In real terms, national
income is the flow of all goods and services produced in an economy during a year.
According to NIC “A national estimate measures the volume of commodities and
services turned out during a given period counted without duplication.”
(b) According to Prof. A. C. Pigou : “National dividend is that part of objective income
of the community including of course income derived from abroad which can be
measured in money.”
(c) According to Prof. Irving Fisher : “National dividend or income consists solely
of services as received by ultimate consumers, whether from their material or from
their human environments.”
(d) From the above definitions, it is clear that national income is a composite measure of
all economic activities such as production, distribution, exchange and consumption.
It is also an objective indicator of economic welfare of the people in a country.
(B) Features of national income : The features of national income are as follows :
(a) Macroeconomic concept : National income represents income of the economy
as a whole rather than that of an individual. Therefore, national income is a
macroeconomic concept.
(b) Inclusion of value of only final goods and services : In order to avoid double
counting, the value of only final goods and services produced in the economy are
BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 39
 considered while calculating national income. While calculating national income,
the value of intermediate goods or raw materials is not considered. For example,
while estimating the value of sugar, the value of sugar cane is not separately taken
into account, as it is already included in the price of the sugar.
(c) Inclusion of net aggregate value : National income includes net value of goods
and services produced and does not include depreciation cost (i.e. wear and tear of
capital assets).
(d) Inclusion of net income from abroad : National income includes net income
from abroad, i.e. difference between export value and import value (X M) and
difference between receipts from abroad and payments made abroad (R P).
(e) Expressed with reference to financial year : National income is always expressed
with reference to a specific time period. In India, it is calculated for every financial
year, i.e. from 1st April to 31st March.
(f) Flow concept : National income is a flow concept. It shows flow of goods and
services produced in the economy during a financial year.
(g) Expressed in monetary terms : National income is always expressed in monetary
terms. It represents only those goods and services which are exchanged for money.
(3) The reasons for the growth of public expenditure are as follows :
(a) Increase in the activities of the Government : For the economic and social
development of the country, the modern government is continuously spending a large
amount on activities like dissemination of education, provision of health facilities,
provision of recreational services, implementation of social welfare schemes. The
government is adopting new optional functions and performing traditional obligatory
functions more efficiently. The government has to spend a lot to carry out all these
functions. As a result, public expenditure is rising.
(b) Rapid increase in population : As India is a developing country, population
growth in India is accelerating. According to the 2011 census, India’s population
was 121.02 crore. Public expenditure is increasing as the government has to spend
heavily to meet the various needs of the growing population.
(c) Growing urbanisation : In modern times, the pace of urbanisation is increasing
in many countries of the world. In newly emerging and developed urban areas, the
government has to provide water supply, electricity supply, transportation facilities,
sanitation facilities, recreational facilities. For providing these various facilities, the
government has to incur continuous expenditure and as a result, public expenditure
is increasing.
(d) 
Increasing defence expenditure : In modern times, unstable and hostile
international relations have increased. Many countries around the world are
increasing defence spending to cope with potential foreign aggression and war. As
a result, public expenditure is rising.
40 BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS]
(e) Spread of democracy : Most of the countries of the world have adopted the system
of democracy. In a democratic system, the process of forming a government is
carried out by holding general elections after a certain period of time. In a country
like India, which is large in size and population, huge expenses have to be incurred
for elections. As a result, public expenditure is rising.
(f) Inflation : Just as a person spends money on purchasing various goods and services
to meet his personal needs, the government spends money on purchasing various
goods and services to meet the needs of the society. Prices of most goods and services
continue to rise over time. As a result, public expenditure is rising.
(g) Industrial Development : In order to achieve the objectives of increase in
production, increase in employment and overall growth in the economy, large scale
industrial development is required in the country. As a result, in developing countries
like India, a large amount of money is being spent on industrial development schemes
to boost industrial development. As a result, public expenditure is rising.
(h) Disaster Management : The modern government is spending heavily on managing
natural disasters like floods, earthquakes, hurricanes and man-made disasters like
social unrest, riots, wars, etc. As a result, public expenditure is rising.
__________

BOARD’S QUESTION PAPER – JULY 2022 : STD. XII [SOLUTION : ECONOMICS] 41