12th Economics Question Paper 2024 Maharashtra Board Pdf

Maharashtra State Board Class 12th Economics Question Paper 2024 with Solutions Answers Pdf Download.

Class 12 Economics Question Paper 2024 Maharashtra State Board with Solutions

Time : 3 Hrs.
Max. Marks: 80
Notes:
(1) All questions are compulsory.
(2) Draw neat tables/ diagrams wherever necessary.
(3) Figures to the right indicate full marks.
(4) Write answers to all main questions on new pages.

Question 1.
[A] Choose the correct option: (5) [20]
(i) Method adopted in micro economic analysis. (c)
(a) Lumping method
(b) Aggregative method
(c) Slicing method
(d) Inclusive method Options:
(a) a, c, d
(c) Only c
(b) b, c, d
(d) Only a
Answer:
(c) Only c

(ii) Factors which are working in unorganised money market. (d)
(a) Money lenders
(b) Commercial bank
(c) Hundi
(d) Chit funds Options:
(a) a, b, c
(c) b, d
(b) b, c
(d) a, c, d
Answer:
(d) a, c, d

(iii) Optional functions of Government. (a)
(a) Protection from external attack
(b) Provision of education and health services
(c) Provision of social security measures
(d) Collection of tax Options:
(a) b, c
(c) b, c, d
(b) a, b, c
(d) All of the above
Answer:
(a) b, c

(iv) Statements that highlight the significance of index numbers. (b)
(a) Index numbers are useful for making future predictions.
(b) Index numbers help in the measurement of inflation.
(c) Index numbers help to frame suitable policies.
(d) Index numbers can be misused.
Options:
(a) b, c, d
(c) a, b, d
(b) a, b, c
(d) a, c, d
Answer:
(b) a, b, c

(v) Blood bank is an example of …………. . (d)
(a) Place utility
(b) Knowledge utility
(c) Service utility
(d) Time utility.
Options:
(a) a, b, c
(c) a, b, d
(b) b, c, d
(d) Only d
Answer:
(d) Only d

[B] Find the odd word out: (5)
(i) Types of demand:
Direct demand, Indirect demand, Composite demand, Market demand.
(ii) Features of National Income:
Financial year, Money value, Static concept, Flow concept.
(iii) Types of budget:
Deficit budget, Zero budget, Balanced budget, Surplus budget.
(iv) Legal monopoly:
Patent, OPEC, Copyright, Trade mark.
(v) Financial Assets:
Bonds, Land, Govt. Securities, Derivatives.
Answer:
(i) Market demand.
(ii) Static concept
(iii) Zero budget
(iv) OPEC
(v) Land

[C] Give economic term : (5)
(i) More quantity is demanded due to changes in the favourable factors determining demand other than price.
(ii) Deposits that are withdrawable on demand.
(iii) Charging different prices to different consumers for the same product or services.
(iv) Net addition made to total cost by producing one more unit of output.
(v) Degree of responsiveness of quantity demanded to change in income only.
Answer:
(i) Increase in demand
(ii) Demand deposits
(iii) Discriminating monopoly
(iv) Marginal cost
(v) Income elasticity of demand

[D] Complete the correlation : (5)
(i) General equilibrium: Macro Economics : __________ : Micro Economics.
(ii) Output method: __________ :: Income method : Factor cost method.
(iii) Form utility: Furniture:: __________ : Doctor.
(iv) Perfectly elastic demand: Ed = ∞ :: __________ : Ed = 0
(v) __________ : Change in supply :: Other factors constant : Variation of supply.
Answer:
(i) Partial equilibrium
(ii) Product/Inventory Method
(iii) Service utility
(iv) Perfectly inelastic demand
(v) Price constant

Question 2.
[A] Identify and explain the following concepts (Any THREE): (6)[12]
(i) Manisha satisfied her want of writing an essay by using pen and notebook.
Answer:
Utility
Explanation:
Utility is a want satisfying power of a commodity. In the other words, it is the capacity of commodity to satisfy human wants. The given example explains that, Manisha’s want of writing an essay can be satisfied with the help of pen and note-book.

(ii) Raghu’s father invested his money in a market for long term funds both equity and debt raised within and outside the country.
Answer:
Capital Market
Explanation:
Capital market is a market for long-term funds both equity and debt raised within and outside the country.

Hence, this relates to ‘long-term funds’ as Raghu’s father regularly invests his money in long-term funds both equity and debt raised within and outside the country.

(iii) Due to mandatory use of masks during corona epidemic the demand for mask producing labour has increased.
Answer:
Labour Demand
Explanation:
Thisconceptillustratesthedirect relationship between product demand and Labour demand. Specifically, the mandatory mask policies during the COVID-19 epidemic led to a surge in demand for masks. To meet this increased demand, manufacturers required more labour, thus boosting the need for workers skilled in mask production. Essentially, it highlights how changes in demand for a product can directly impact employment Levels within the relevant industry.

(iv) Maharashtra purchased wheat from Punjab.
Answer:
Internal/Home/Domestic trade
Explanation:
Internal trade is also known as home trade or domestic trade. This trade is within the country. It is between two or more states of the country.

(v) Jagruti receives monthly pension of ₹ 5,000 from the state government.
Answer:
Transfer payment
Explanation:
Pension is a part of money income earned by an employee during his service period. Such income is paid by Government to an employee after his retirement so as to make employee survive during his retirement period.

[B] Distinguish between (Any THREE): (6)
(i) Recurring deposits and Fixed deposits
Answer:
Recurring deposits and Fixed deposits.

Recurring Deposits	Fixed Deposits
(i) In case of recurring deposits, an account holder has to deposit a certain fixed amount at regular intervals for a specified period.	(i) In fixed deposits, the lumpsum amount is deposited by a customer for a specified period of time.
(ii) The rate of interest paid by the bank is higher than the savings account but less than the fixed deposit account.	(ii) The interest rate is higher in the case of fixed deposits.

(ii) Total utility and Marginal utility
Answer:

Total Utility	Marginal Utility
(i) Total Utility (TU) refers to the aggregate of utility derived by the consumer from all units of a commodity consumed.	(i) Marginal Utility (MU) refers to the additional utility derived by the consumer on consumption of an additional unit of the commodity, consumed.
(ii) TUn = MU1 + MU2 + MU3 + … + MUn TUn = ∑MUn	(ii) MUn = TUn – TU(n-1)
(iii) TU initially increases at diminishing rate	(iii) MUgoesondiminishing continuously
(iv) At the point of satiety, TU is maximum	(iv) At the point of satiety, MU is zero.

(iii) Perfectly elastic demand and Perfectly inelastic demand
Answer:
Perfectly elastic demand Perfectly inelastic demand

(iv) Price Index and Quantity Index
Answer:
Price Index and Quantity Index

Price Index Number	Quality Index Number
(i) Price index measures the general changes in prices of goods.	(i) Quantity index measures changes in the level of output or physical volume of production in economy.
(ii) It compares the level of prices between two different time periods.	(ii) It compares the level of output between two different time periods.
(iii) Price Index Number: P01 = SSpp01 × 100	(iii) Quantity Index Number Q01 = SSpp01 × 100

(v) Internal debt and External debt
Answer:
Internal debt and External debt.

Internal Debt	External Debt
(i) When the government borrows from its citizens, Central Bank, Financial institutions, business houses, etc. within the country.	(i) When the government borrows from foreign governments, foreign banks or institutions, and international organisations, outside the country, monetary fund, World Bank etc.
(ii) It is voluntary or compulsory in nature.	(ii) It is voluntary in nature.
(iii) It involves the use of domestic currency.	(iii) It involves the use of foreign currency.
(iv) It is less complex for management.	(iv) It is more complex for management.

Question 3.
Answer the following (Any THREE): [12]
(i) Explain any four types of demand.
Answer:
In ordinary Language, demand means a desire.’Desire
means an urge to have something.’ In Economics, demand means a desire which is backed by willingness and ability to pay.
According to Benham, “The demand for anything at a given price is the amount of it, which will be bought per unit of time at that price.”

1. Direct demand : It is the demand by the consumer for goods which satisfy their wants directly. They serve direct consumption needs of the consumers. Thus, it is the demand for consumer goods. For example, demand for cloth, sugar, etc.
2. Indirect demand: Indirect demand is also known as derived demand. It refers to demand for goods which are needed for further production. It is the demand for producer’s goods.
   Hence, all factors of production have indirect or derived demand. For example, demand for workers in a sugar factory is derived or indirect demand.
3. Complementary/Joint demand : When two or more goods are demanded jointly to satisfy a single want, it is known as joint or complementary demand. For example, car and fuel etc.
4. Composite demand : The demand for a commodity which can be put to severaL uses is known as composite demand. For example, electricity is demanded for several uses such as light, fan, washing machine etc.
5. Competitive demand : It is demand for those goods which are substitute for each other. For example, tea or coffee, sugar or jaggery etc.

(ii) Explain any four problems of capitaL market in India.
Answer:
Capital market is a market for long-term funds both equity and debt raised within and outside the country. It is also an important constituent of the financial system. Development of an effective capital market is necessary for promoting more investments as well as achieving economic growth. The demand for long-term funds comes from agriculture, trade and industry. Problems of the Capital Market:
The problems faced by the Indian Capital Market are:

1. Financial Scams: Increasing number of financial frauds have resulted in irreparable loss for the capital market. Besides this, it has also lead to public distrust and loss of confidence among the individual investors.
2. Insider trading and price manipulation :
   Insider trading means buying or selling of a security by someone who has access to non-public information or ‘unpublished information’ for personal benefit. Price manipulation or price rigging on the other hand means to simply raise the prices of shares through buying and selling of shares within certain individuals themselves for personal gains. Such illegal practices have also affected the smooth functioning of capital market
3. Inadequate debt instruments: Debt instruments include bonds, debentures etc. There is not much trading in the debt securities due to narrow investor base, high cost of issuance, lack of accessibility to small and medium enterprises.
4. Decline in the volume of trade : Regional stock
   exchanges have witnessed a sharp decline in the volume of trade because investors prefer to trade in securities listed in premier stock exchanges like BSE, NSE etc.
5. Lack of informational efficiency : A market is said to be informationally efficient if a company’s stock prices incorporate all the available information into the current prices. However, the stock market in India lacks informational efficiency compared to advanced countries.

(iii) Explain any four features of utility.
Answer:
The features of utility are as follows:

1. Relative concept: Utility is related to time and place. It varies from time to time and place to place. For example, (i) woollen clothes have a greater utility in the winter, (ii) sand has greater utility at the construction site than at the sea * shore.
2. Subjective concept: It is a psychological concept. Utility differs from person to person. This is due to differences in taste, preferences, likes, dislikes, nature, habits, profession etc. For example, stethoscope has utility to a doctor but not to a layman.
3. Ethically neutral concept : The concept of utility has no ethical consideration. It is a morally colourless concept. The commodity should satisfy any want of a person without consideration of what is good or bad, desirable or undesirable. For example, a knife has utility to cut fruits and vegetables as well as it can be used to harm someone. Both wants are of different nature but are satisfied by the same commodity. Thus, utility is ethically neutral.
4. Utility differs from usefulness : Utility is the capacity of a commodity to satisfy human wants, whereas usefulness indicates value in use of the commodity. For example, milk has both utility as well as usefulness to a consumer, while liquor has utility only to an addict, but has no usefulness.
5. Utility differs from pleasure: A commodity may possess utility but it may not give any pleasure to the consumer. For example, injection for a patient has utility because it cures the ailment but it hardly gives any enjoyment or pleasure to him.
6. Utility differs from satisfaction : Utility is a cause of consumption, satisfaction is the end result of consumption. They are interrelated but still different concepts. For example, a thirsty person drinks a glass of water since water has the capacity to satisfy thirst. Utility of water is the cause of consumption and the satisfaction derived is the end result of consumption.

(iv) Explain any four reasons for the growth of public expenditure.
Answer:
It is observed that there is a continuous growth in public expenditure in a developing country like India. The reasons for the growth of Public expenditure are:

1. Increase in, the Activities of the Government: The modern government performs many functions for the social and economic development of the country. These functions include spread of education, public health, public works, public recreation, social welfare schemes etc. It is observed that new functions are continuously being undertaken and old functions are being performed more efficiently on a large scale by the government. This leads to increase in public expenditure.
2. Rapid Increase in Population : Population of developing countries like India is increasing fast. In 2011 Census, it was 121.02 crores. As a result, the government has to incur greater expenditure to fulfil the needs of the increasing population.
3. Growing Urbanization : Spread of urbanization is a global phenomenon of the day. This leads to increase in the government expenditure on water supply, roads, energy, schools and colleges, public transport, sanitation etc.
4. Increasing Defence Expenditure : In modern times, defence expenditure of the government is increasing even in the peace time due to unstable and hostile international relationships.

(v) Explain any four features of macro economics.
Answer:
J. L Hansen – “Macro economics is that branch of economics which considers the relationship between large aggregates such as the volume of employ ment, total amount of savings, investment, national income etc.”

1. Study of Aggregates : Macro economics deals with the study of economy as a whole. It is concerned with the aggregate concepts such as national income, national output, national employment, general price level, business cycles etc.
2. Income Theory : Macro economics studies the concept of national income, its different elements, methods of measurement and social accounting. Macro economics deals with aggregate demand and aggregate supply. It explains the causes of fluctuations in the national income that lead to business cycles i.e. inflation and deflation.
3. General Equilibrium Analysis: Macro economics deals with the behaviour of large aggregates and their functional relationship. General Equilibrium deals with the behaviour of demand, supply and prices in the whole economy.
4. Interdependence : Macro analysis takes into account interdependence between aggregate economic variables, such as income, output, employment, investments, price level etc. For example, changes in the level of investment will finaLly result into changes in the levels of income, levels of output, employment and eventually the level of economic growth.

Question 4.
State with reasons whether you agree or disagree with the following statements (Any THREE): [12]
(i) Over the last 75 years, India’s foreigfi trade has undergone a complete change in terms of composition and direction.
Answer:
I Disagree with the given statement.
Explanation:
Over the last 70 years, India’s foreign trade has undergone a complete change in terms of composition and direction. The main features of the composition of India’s foreign trade are as follows:

1. Increasing share of Gross National Income : In 1990-91, the share of India’s foreign trade (import-export) in gross national income was 17.53%. It increased to 25% during 2006-07 and to 48.8% during 2016-17.
2. Increase in’volume and value of trade : Since 1990-91, the volume and value of India’s foreign trade has gone up. India now exports and imports goods which are several times more in value and volume.
3. Change in the composition of exports : Since independence, the composition of export trade of India has undergone a change. Prior to Independence, India used to export primary products like jute, cotton, tea, oil- seeds, leather, foodgrains, cashew nuts and mineral products. With the passage of time, manufactured items like readymade garments, gems and jewellery, electronic goods, especially computer hardware and software occupy a prime place in India’s exports.
4. Change in the composition of imports : Prior to independence, India used to import consumer goods like medicines, cloth, motor vehicles, electrical goods etc. A part from petrol and petroleum, India is now importing mainly capital goods like high-tech machinery chemicals, fertilizers, steel etc.
5. Oceanic trade : Most of India’s trade is by sea. India has trade relations with its neighbouring countries like Nepal, Afghanistan, Myanmar, Sri Lanka etc. The share of India’s oceanic trade is around 68%.
6. Development of new ports : For its foreign trade. India depended mostly on Mumbai, Kolkata and Chennai ports. Therefore, these ports were overburdened. Recently, India has developed new ports at Kandla, Cochin, Vishakhapatnam, Nhava Sheva etc. to reduce the burden on the exsiting ports.

(ii) Macro economics is different from micro economics.
Answer:
I Agree with the given statement.
Explanation:
The micro and macroeconomics are distinguished on the following grounds:

1. Scope : Microeconomics study individual units so its scope is narrow. Macroeconomics study aggregates concepts, so its scope is wider.
2. Method of study : The microeconomics follows slicing method as it studies individual unit. The
   macroeconomics follows lumping method as it studies economy as a whole.
3. Economic agents : In microeconomics, each individual economic agent thinks about its own interest and welfare. In macroeconomics, economic agents are different among individual economic agents and their goal is to get maximum welfare of a country.
4. Equilibrium: Microeconomics studies the partial equilibrium in the country. Macroeconomics studies the general equilibrium in the economy.
5. Domain : Microeconomics consists of theories like consumer’s behaviour, production, and cost, rent, wages, interest, etc. Macroeconomics comprises of theory of income, output, and employment, consumption function, investment function, inflation, etc.

(iii) Price maker is the only feature of monopoly market.
Answer:
I Disagree with the given statement.
Explanation:
The following are the main features of the monopoly market:

1. Single seller : In a monopoly, there is no competition as there is only one single producer or seller of the product. But, the number of buyers is large.
2. No close substitute : There are no close substitutes for the product of the monopolist. Therefore, the buyers have no choice. They have to either buy the product from the monopolist or go without it. The cross elasticity of demand for his product is either zero or negative.
3. Barriers to entry: Entry of the rivals is restricted due to legal, natural, and technological barriers which do not allow the competitors to enter the market.
4. Complete control over the market supply: The monopolist has a complete hold over the market. He is the sole producer or seller of the product.
5. Price maker : A monopolist can fix the price of his own product as he controls the whole market supply. A monopolist is a price maker.
6. Price discrimination : Monopolist being a price maker, he can charge different prices to different consumers for the same product, on the basis of time, place etc. Thus, price discrimination is an important feature of a monopoly market. For example, students and senior citizens are provided railway tickets at concessional rates.
7. No distinction between firm and industry : A monopolist is the sole seller and producer of the product. A monopoly firm itself is an industry.

(iv) There are many sources of non-tax revenue.
Answer:
I Agree with the given statement.
Explanation:
Public revenue received by the government administration, public enterprises, gifts and grants etc. are called as non-tax revenue. The sources of non tax revenue are:

1. Fees : A tax is paid compulsorily without any return service whereas, fee is paid in return for certain specific services rendered by the government. For example-education fee, registration fee, etc.
2. 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 examplerailway fares, postal charges etc.
3. 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 tax on the residents of a particular area where extra/special facilities of roads, energy, water supply etc. are provided.
4. 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.

(v) There are many types of index numbers.
Answer:
I Agree with the given statement.
Explanation:
An index number is a device to measure changes in economic variables (or groups of variables) over a period of time.
The types of index numbers are as follows:

1. Price Index Number : It measures the general changes in prices of goods. It compares the level of prices between two different time periods.
2. Quantity Index Number : It measures changes in the level of output or physical volume of production in the economy. E.g.: changes in agricultural and industrial production etc. over time. It is also called volume index number.
3. Value Index Number: The value of a commodity is the product of its price and quantity (px q). Value index number measures changes in the value of a variable in terms of rupee. It is a more informative index as it combines both, changes in the price as well as quantity.
4. Special Purpose Index Number : They are constructed with some specific purpose. E.g. : import-export index numbers, labour productivity index numbers, share price index numbers etc.

Question 5.
Study the following table, figure, passage and answer the questions given below it (Any TWO): [8]
(i) Observe the following table and answer the questions given below it: (4)

Commodities	Prices in 2006 (in ₹) (Base Year) P0	Prices in 2019 (in ₹) (Current Year) P1
A	20	30
B	30	45
C	40	60
D	50	75
E	60	90

Questions:
(1) Write the formula for calculation of price index. (1)
(2) Find the value of □P₀ and □P₁. (1)
(3) Find the price index P0₀. (2)
(ii) Observe the given diagram and answer the following questions: (4)

(1) Rightward shift in demand curve ………………. (1)
(2) Leftward shift in demand curve ………………. (1)
(3) Price remains ………………. (1)
(4) Increase and decrease in demand comes under ………………. (1)
(iii) Read the given passage and answer the questions: (4)
In common language the term market means a specific place where buyers and sellers of a commodity meet and exchange their goods. But in Economics it is not necessarily a place but it is an arrangement through which buyers and sellers come in contact with each other directly or indirectly and exchange of goods takes place among them.

Market can be classified on the basis of place, time and competition. Market on the basis of competition is perfect competition and imperfect competition. Perfect competition is an imaginary concept of market and in reality, we observe various types of imperfect competition like monopoly, duopoly, oligopoly and monopolistic competition.

In practice monopolistic competition is used. In this market there are some features of perfect competition and monopoly acting together. The uniqueness of this market lies in the fact that a difference is made between cost of production and selling cost. Selling cost refers to the cost incurred by the firm to create more demand for its product and increase the volume of sale. It includes expenditure on advertisement, hoardings, window dispLay etc.
Questions:
(1) Explain the concept of Market from Economic sense. (1)
(2) Write the classification of Market. (1)
(3) Write your own opinion about selling cost (2)
Answer:

Commodities	Prices in 2006 (in ₹) (Base Year) P0	Prices in 2019 (in ₹) (Current Year) P1
A	20	30
B	30	45
C	40	60
D	50	75
E	60	90

(ii) (1) Rightward shift in demand curve increases in demand.
(2) Leftward shift in demand curve decreases in demand.
(3) Price remains constant.
(4) Increase and decrease in demand comes under change in demand.

(iii) (1) It is an arrangement through which buyers and sellers come in contact with each other directly or indirectly and exchange of goods and services takes place among them.

(2) Market can be classified on the basis of place, time and competition. Market on the basis of competition is divided into perfect competition and imperfect competition. Various types of imperfect competition like monopoly, duopoly, oligopoly and monopolistic competition on the basis of place it is divided into locaL national and International On the basis of time it is divided into very short period, short period, long period and very long period.

(3) In my opinion, selling costs are a vital aspect of a firm’s strategy to differentiate its product and stimulate demand. These costs, which encompass advertising and promotional activities, are essential in competitive markets to inform potential customers and persuade them to choose one product over another.

Question 6.
Answer the following questions in detail (Any TWO): [16]
(i) Explain the concept of price elasticity with its types.
(ii) Explain the concept of National income and explain the practical difficulties involved in the measurement of National income.
(iii) State and explain the law of supply with assumptions.
Answer:
(i) According to Prof Alfred Marshall, price elasticity of demand is a ratio of proportionate change in the quantity demanded of a commodity to a given proportionate change in its price.

Types of Price Elasticity of Demand:
(1) Perfectly Elastic Demand (Ed = oo) : When a slight or zero change in the price brings about an infinite change in the quantity demanded of that commodity, it is called perfectly elastic demand. It is only a theoretical concept. For example, 10% fall in price may lead to an infinite rise in demand. ^ _

(2) Perfectly inelastic demand (Ed = 0) : When a percentage change in price has no effect on the quantity demanded of a commodity it is called perfectly inelastic demand. For example, 20% fall in price will have no effect on quantity demanded.

(3) Unitary elastic demand (Ed = 1) : When a percentage change in price leads to a proportionate change in quantity demanded then demand is said to be unitary elastic. For example, 50% fall in price of a commodity leads to 50% rise in quantity demanded.

(4) Relatively elastic demand (Ed >1) : When a percentage change in price leads to more than proportionate change in quantity demanded, the demand is said to be relatively elastic. For example, 50% fall in price leads to 100% rise in quantity demanded.

(5) Relatively inelastic demand (Ed < 1) : When a percentage change in price leads to less than proportionate change in the quantity demanded, demand is said to be relatively inelastic. For example, 50% fall in price leads to 25% rise in quantity demanded.

(ii) Modern economy is a money economy. Hence, national income of a country is expressed in terms of money. The total income of the nation is called national income. In real terms, national income is the flow of goods and services produced in an economy during a year. 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.” In practice, a number of difficulties arise in the collection of statistical data required for estimation of national income. Some of the practical difficulties are as follows:

1. 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 final product
2. Existence of non-monetized sector : In India, especially in rural areas, there exists the non-monetized sector. Agriculture, still being in the nature of subsistence farming, a major part of production is partly exchanged for other goods and services. It is excluded while counting national income.
3. inadequate and unreliable data: Adequate and correct data on production and cost data relating to crops, fisheries, animal husbandry, forestry, construction workers, small enterprises etc., are not available in a developing country. Besides this, data on unearned incomes, consumption and investment expenditure of rural and urban population are also not available. This does not reveal the actual size of national income.
4. Depreciation : Depreciation refers to wear and tear ofca pita l 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.
5. 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 charges in demand, are not included in the national income because these Changes do not result from current economic activities.
6. Illiteracy and ignorance : Due to ignorance and illiteracy, small producers do not keep an account of their production. So they cannot give information about the quantity or value of their output.
7. 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 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.
8. Valuation of inventories : Raw materials, intermediate goods, semi-finished and finished products in the stock of the producers are known as inventories. Any mistake in measuring the value of inventory, will distort the value of the final production of the producer. Therefore, valuation of inventories requires careful assessment.

(iii) The law of supply is also a fundamental principle of economictheory like lawof demand. It was introduced by Prof Alfred Marshall in his book, ‘Principles of Economics’ which was published in 1890. The law explains the functional relationship between price and quantity supplied.

Statement of the Law:
“Other things being constant, higher the price of a commodity, more is the quantity supplied and lower the price of a commodity less is the quantity supplied” In simple words, “other factors remaining constant, a rise in price results in a rise in the quantity supplied and vice-versa. Thus, there is a direct relationship between price and quantity supplied.

The law of supply is based on the following assumptions:

1. Constant cost of production : It is assumed that there is no change in the cost of production. A change in cost of production will affect the profits of the seller. Therefore less quantity will be supplied at the same price.
2. Constant technique of production : It is also assumed that technique of production does not change. Improved technique of production may lead to an increase in production. This in turn may lead to an increase in the supply at the same price.
3. No change in weather conditions: It is assumed that there is no change in the weather conditions. Natural calamities like floods, earthquakes etc. may decrease supply.
4. No change in Government policy : It is also assumed that government policies like taxation policy, trade-policy etc. remain unchanged.
5. No change in transport cost: It is assumed that there is no change in the condition of transport facilities and transport cost. For example, better transport facility increases supply at the same price.
6. Prices of other goods remain constant: Prices of other goods are assumed to remain constant. If they change, the law of supply may not hold true because producer may transfer resources to other products.
7. No future expectations: The law also assumes that the sellers do not expect future changes in the price of the product. Law of supply is explained with the help of the following schedule and diagram.

Supply Schedule

Price of commodity × (In ₹)	Supply of commodity × (in kgs.)
10	100
20	200
30	300
40	400
50	500

The table explains the direct relationship between price and quantity of commodity supplied When price rises from ₹ 10 to 20,-30, 40 and 50, the supply also rises from 100 to 200, 300, 400*and 500 units respectively. It means, when price rises supply also rises and when price falls supply also falls. Thus, there is direct relationship between price and quantity supplied.

In the figure, X axis represents quantity supplied and Y axis represents the price of the commodity. Supply curve ‘SS’ slopes upwards from left to right which has a positive slope. It indicates a direct relationship between price and quantity supplied.

Maharashtra Board Class 12 Economics Previous Year Question Papers