SET - I

ECONOMICS CLASS XII

(i)
(ii)
(iii)
(iv)

Question No. 1-4 are MCQs. Please write the answer choosing the option and not the
number.
Question No. 5 and 6 are three marker questions, answer them in only 40 words.
Question No. 7 and 8 are four marker questions, limit your answer to 50-60 words only.
Question No. 9 and 10 are six marker questions, limit them to 70 words only.

(v)
(vi)

Question No. 7 is a value-based question

Draw diagrams wherever required to specify your answers.

1. Which of the following is not a micro-economic study?

1
a. Determination of price of a
b. Determination of production of the
commodity.
manufacturing sector.
c. Determination of wage-rate of a
d. Determination of cost of a product.
computer engineers.
2. Economic slowdown in some parts of the world adversely affected demand for Indian exports. How
will this affect the Production Possibilities Frontier for India?
1
a. PPF will shift to the right
b. PPF will shift to the left
c. PPF will remain constant
d. New PPF will be created
3. When Total Utility is constant Marginal Utility is.
1
a. Maximum
b. Zero
c. Negative
d. Positive
4. The shape of Indifference curve is downward sloping because:
1
a. Marginal Rate of Substitute
b. Marginal Rate of Transformation
c. Increasing MRS
d. Decreasing MRS
5. What will be the impact of large scale outflow of foreign capital on Production Possibilities curve on
the economy and why?
3
6. What happens to the Budget set if both the prices as well as the income of the consumer double?
Prove it mathematically.
3
7. A consumer consumes only Goods X and Y and is in equilibrium. Suppose the price of X falls. Explain
the reaction of the given consumer through the UTILITY analysis.
4
8. Prove diagrammatically that:
4
a. No two Indifference Curve can intersect each other.
b. Higher Indifference Curve shows higher level of satisfaction.
OR
Why is Indifference curve (a) downward sloping and (b) convex?
9. (a) What is a budget line? What does the point on it indicate in terms of prices?
(b) A consumer consumes only two goods X and Y. Her money income is
X and Y are .4 and 2 respectively. Answer the following question:

24 and the price of goods

(i) Can the consumer afford a bundle 4X and 5Y? Explain.

(ii) What will be the MRSxy when the consumer is in equilibrium? Explain.
6
10. Although water is useful, but it is cheap. On the contrary a diamond is not of much use but is very
expensive. Give an economic reason for this paradox?
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SET - II

ECONOMICS - CLASS XII

(i)
(ii)
(iii)
(iv)

Question No. 1-4 are MCQs. Please write the answer choosing the option and not the
number.
Question No. 5 and 6 are three marker questions, answer them in only 40 words.
Question No. 7 and 8 are four marker questions, limit your answer to 50-60 words only.
Question No. 9 and 10 are six marker questions, limit them to 70 words only.

(v)
(vi)

Question No. 7 is a value-based question

Draw diagrams wherever required to specify your answers.

1. Macroeconomics deals with the behavior of aggregates like:

1
a. GDP
b. Employment
c. Inflation
d. all the above
2. In consumer behavior theory, consumer takes decision with respect to:
1
a. expenditure
b. income spending
c. adjust purchase due to change in price
d. both (a) and (b)
3. A country has two alternatives of production as 50X + 100 Y or 54X + 98 Y, from the given
resources available. If the country chooses the second alternative, what is the MARGINAL
Opportunity Cost of producing X.
1
a. 3Y
b. 6Y
c. 4Y
d. 2Y.
4. If the Marginal Rate of Substitution is constant throughout, the Indifference Curve will be: 1
a. Parallel to the x-axis
b. Downward sloping concave shape
c. Downward sloping convex shape
d. Downward sloping straight line
5. A consumer consumes only two Goods A and B and is in equilibrium. Show that when price of
Good B falls, demand for B rises. Answer this question with the help of UTILITY analysis.
3
6. What will be the impact of recently launched Clean India Mission (Swachh Bharat Mission) on
the Production Possibilities cure of the economy and why?
3
7. A consumer consumes only Good X and Y both priced Rs.3 per unit. If the consumer chooses a
combination of these two goods with Marginal Rate of Substitute equal to 3, is the consumer in
equilibrium? Give reasons. What will a rational consumer do in this situation? Explain.
4
8. How is the consumers equilibrium determined in two good case using the CARDINAL
approach?
4
9. Given that a consumer has Rs.24 to spend on two goods. Crayons and paints. The price of
crayons is Rs.2 and that of paints is Rs.3, answer the following questions:
6
a. How many crayons can the consumer buy if she spends all her income on crayons?
b. Draw the consumers Budget Line.
c. What is the slope of the Budget Line assuming that paints is taken on the X-axis? Give
reasons.
d. What must be the MRS for the consumer to be in equilibrium?
10. Why is it that on one hand coal is found in plenty, yet it is scare, while on the other a rotten
vegetable is rare but not scare?
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MARKING SCHEME
Q.No.
1.
2.
3.
4.
5.

6.

7.

b.determination of the production in the manufacturing sector

c. PPF remains constant
a. zero
b. Decreasing MRS
Inward shift in the PPF.
Large scale outflow of foreign capital from the economy will reduce
resources and thus production potential of the country will fall. Fall in the
potential in turn will shift the PP- curve downward.
The budget line is originally P1 X1 + P2 X2 = M. if the price and income
double it becomes:
2P1 *X1 + 2P2 *X2 = 2M
2(P1*X1 + P2*X2) = 2M
It will remain the same as P1 *X1 + P2 *X2 = M
Let the constant, the consumer will be in Eq. when: MUx / Px = MUy / Py.
Now, suppose price of good X, i.e Px falls. The situation changes. The
consumer is no longer respective prices of the two goods be Px and Py.
Other things remains
in Eq. the above equality turns into an inequality: MUx / Px > MUy / Py. It

Markers
1
1
1
1
3

means that per rupee MU from consumption of X is

greater than from the consumption of Y. this induces
the consumer to buy more of X and less of Y. The
consumer transfers expenditure from Y to X.
8.

TO BE SHOWN DIAGRAMMATICALLY

4
OR

9.

10.

An Indifference curve is:

a. Downward sloping curve due to the amount of good Y the consumer
is willing to give up for a successive unit of good X. It is determined
by the preference of the choice of the consumer.
b. Convex: it indicates the decline in the MRS. It means the consumer
is willing to sacrifice less and less amount of Good Y for every
successive unit of good x.
a. BL consist of all bundles of goods which cost exactly equal to the
consumers income and are therefore attainable. The point on the
BL Indicates the amount of good attainable by the consumer.
b. Income of the consumer = 24, Px = 4 nd Py = 2
(i)
P1 *X1 + P2 * X2 = M
4 *4 + 5 *2
= 26 > 26
NOT AFFORDABLE.
(ii)
MRS xy = Px / Py
MRS xy = 4/5
Resources has :
a. Alternative uses.
b. Scarcity
c. Availability of resources.

Q. No.
1.
2.
3.
4.
5.

d. All the above

d.both a and b
e. 2Y
d.constant straight line.
Let the constant, the consumer will be in Eq. when: MUx / Px = MUy / Py.
Now, suppose price of good X, i.e Px falls. The situation changes. The
consumer is no longer respective prices of the two goods be Px and Py. Other
things remains in Eq. the above equality turns into an inequality: MUx / Px >
MUy / Py. It means that per rupee MU from consumption

Markers
1
1
1
1

of X is greater than from the consumption of Y. this

induces the consumer to buy more of X and less of Y.
The consumer transfers expenditure from Y to X.
6.

7.

8.

9.

10.

Cleanliness reduces chances of people falling ill and thus can ensure better
health. This in turn will reduce forced absenteeism from work, raise
efficiency level and thus raise countrys production potential. Rise in this
potential shifts PP curve to the right.
Given Px = 3, Py = 3 and MRS = 3. A consumer is said to be in equilibrium
when:
MRS xy = Px/ Py
Substituting the values we find: 3 > 3/3.
Therefore, consumer is not in equilibrium.
Here, when MRS xy > Px / Py means that consumer is willing to pay more for
one more unit of X as compared to what market demands.
The consumer will buy more units of X.
As a result MRS will fall due to the Law of Diminishing Marginal
Utility.
This will continue till MRSxy = Px/ Py till consumer is in equilibrium.
Utility analysis of consumers equilibrium foe two commodity cases with
example.
Condition of consumers equilibrium :
a. MUx / Px = MUy / Py = Mum
b. P1X1 + P2X2 = M
VERBAL DESCRIPTION OF THE EXAMPLE.
Income of the consumer = 24, Px (crayons) = 2 , Py (paint) = 3
a. M / Px = 24 / 2 = 12 units of crayons.
b. Drawing consumers BL. A straight line joining the X-axis and Y-axis at
12units and 8 units respectively.
c. Slope of the BL = Px / Py = 2 /3 = .66
d. MRSxy = Px / Py = 2/3 = 0.66
Coal is found in plenty but scarce because its demand is also high.
Scarcity means that availability is less than sufficient to satisfy all wants and
desires. On the other hand a rotten vegetable is rare but also not scare
because there is no demand or want for a rotten vegetable.
Scarcity is a means of demand and supply, which makes the demand high or
low.

2
2
1 *4 =
6