Maharashtra State Board Class 12th Economics Sample Paper Set 2 with Solutions Answers Pdf Download.
Maharashtra Board Class 12 Economics Model Paper Set 2 with Solutions
Question 1.
Complete the following statements by choosing the correct alternatives:
1A. Choose the correct option:
(i) “Definition – Public finance is one of those subjects which are on the borderline between economics and politics.” …………… given by (3)
(a) Adam Smith
(b) Alfred Marshall
(c) Prof. Hugh Dalton
(d) Prof. Findlay Shirras
Options:
(1) only (a)
(2) only (b)
(3) only (c)
(4) only (d)
Answer:
(3) only (c)
(ii) Non-tax sources of revenue: (4)
(a) Direct and Indirect Tax
(b) Direct Tax and Fees
(c) Fees
(d) Special levies
Options:
(1) (b) and (c)
(2) (a) and (c)
(3) (a), (b), (c) and (d)
(4) (c) and (d)
Answer:
(4) (c) and (d)
(iii) Statements that apply to weighted index numbers. (1)
(a) Every commodity is given equal importance.
(b) It assigns suitable ‘weights’ to various commodities.
(c) In most of the cases, quantities are used as weights.
(d) Lasspeyre’s and Paasche’s method is used in the . calculation of weighted index numbers.
Options:
(1) (b), (c) and (d)
(2) (a), (c) and (d)
(3) (a), (b) and (d)
(4) (a), (b), (c) and (d)
Answer:
(1) (b), (c) and (d)
(iv) A B (2)
| A | B |
| A. Time utility | (a) Transport |
| B. Place utility | (b) Blood bank |
| C. Service utility | (c) Mobile phone |
| D. Knowledge utility | (d) Doctor |
Options:
(1) A.(d), B.(b), C.(a), D.(c)
(2) A.(b), B.(a), C.(d), D.(c)
(3) A.(a), B.(b), C.(c), D.(d)
(4) A.(b), B.(c), C.(d), D.(a)
Answer:
(2) A.(b), B.(a), C.(d), D.(c)
(v) Concepts studied under Micro-economics. (4)
(a) National Income
(b) General price level
(c) Factor pricing
(d) Product pricing
Options:
(1) (b) and (c)
(2) (b), (c) and (d)
(3) (a), (b) and (c)
(4) (c) and (d)
Answer:
(4) (c) and (d)
1B. Complete the correlation:
(i) Micro economics: Tree:: Macro-economics: _____________
(ii) Perfectly elastic demand: Ed = ∞ :: _____________ : Ed = 0
(iii) Expansion of supply : Price rises :: Contraction of supply: _____________
(iv) Price Taker: _____________ :: Price Marker: Monopoly
(v) Price Index : Inflation :: _____________ : Agricultural production
Answer:
(i) Forest
(ii) Perfectly inelastic demand
(iii) Price falls
(iv) Perfect competition
(v) Quantity index
1C. Complete the following statements:
(i) Individual investors have lost confidence in the capital market due to _____________ (d)
(a) lack of financial instruments.
(b) high transaction costs.
(c) low returns.
(d) financial scams.
Answer:
(d) financial scams
(ii) NDP is obtained by _____________ . (b)
(a) deducting depreciation from GNP
(b) deducting depreciation from GDP
(c) including depreciation in GDP
(d) including depreciation in GNP
Answer:
(b) deducting depreciation from GDP
(iii) An upwards movement along the same supply curve shows _____________ (c)
(a) contraction of supply
(b) decrease in supply
(c) expansion of supply
(d) increase in supply
Answer:
(c) expansion of supply
(iv) Price elasticity of demand on a linear demand curve at the Y-axis is equal to _____________ (c)
(a) zero
(b) one
(c) infinity
(d) greater than one
Answer:
(c) infinity
(v) In the law of diminishing marginal utility, Alfred Marshall assumes that marginal utility of money _____________ (b)
(a) increases
(b) remains constant
(c) decreases
(d) rises and then falls
Answer:
(b) remains constant
1D. Find the odd one out:
(i) Selling Cost: Free gifts, advertisement hoardings, window displays, patents.
Answer:
Patents
(ii) Features of Monopoly: Price maker, entry barriers, many sellers, lack of substitutes.
Answer:
Many sellers
(iii) Legal Monopoly: Patent, OPEC, copyright, trade mark.
Answer:
OPEC
(iv) Unregulated Financial Intermediates: Mutual fund, Nidhi, chit fund, loan companies.
Answer:
Mutual Fund
(v) Quantitative Tools: Bank rate, open market operations, foreign exchange rate, variable reserve ratios.
Answer:
Foreign exchange rate
Question 2.
A. Identify & Explain the Concepts from the given illustrations: (Any 3)
(i) Nilesh purchased ornaments for his sister.
(ii) Kavita consumed five units of oranges one after the other.
(iii) Viru kept aside 100 kgs. out of 500 kgs. of wheat produced in his farm for his family.
(iv) Sara makes a monthly contribution to a fund jointly created by her friends. The collected fund is then given to a chosen member through a lucky draw.
(v) Maharashtra purchased wheat from Punjab.
Answer:
(i) Concept—Possession Utility
Explanation—Possession utility arises when the ownership of goods is transferred from one person to another.
(ii) Concept—Continuity
Explanation—Continuity is an assumption to the law of diminishing marginal utility where it is assumed that different units of a commodity are consumed in quick succession without any lapse of time.
(iii) Concept—Self Consumption
Explanation—Self Consumption refers to that part of the total production of a producer which he uses for his own consumption. This part is not supplied in the market.
(iv) Concept—Chit fund
Explanation—Chit fund is an unregulated non¬banking intermediary in which members make regular contributions to the fund. Bids/draws are mainly based on some criteria mutually agreed upon by members. Accordingly, the collected fund is given to the chosen member.
(v) Concept—Internal Trade
Explanation—The buying and selling of goods and services within the boundaries of a nation are referred to as Internal Trade’ or ‘Domestic Trade’ or ‘Home Trade’
2B. Distinguish between: (Any 3)
(i) Expansion of demand & Contraction of demand
(ii) Perfectly elastic demand & Perfectly inelastic demand
(iii) Simple Index Numbers & Weighted Index Numbers
(iv) Internal Debt & External Debt
(v) Organised sector and Unorganised sector of money market.
Answer:
(i) Distinguish between Expansion of Demand and Contraction of Demand
(ii) Distinguish between Perfectly Elastic Demand and Perfectly Inelastic Demand
(iii) Distinguish between Simple Index Numbers and Weighted Index Numbers
| Simple Index Numbers | Weighted Index Numbers |
| Simple index numbers is a method of constructing an index number in which every commodity is given equal importance. | Weighted index numbers is a method of constructing an index number in which suitable weights are assigned to various commodities. |
| This method can be applied to determine the price index number, quantity index number, and value index number. | This method can be applied to determine price index numbers and the special-purpose index numbers. |
| It is the easiest method for constructing index numbers. | It is relatively complex as compared to simple index numbers. |
(iv) Distinguish between Internal Debt and External Debt
| Internal Debt | External Debt |
| When a government borrows from its citizens, banks, Central Bank, financial institution, business houses, etc. within the country, it is known as internal debt. | When a government borrows from foreign governments, foreign bank institutions, international organization like the International Monetary Fund. World Bank, etc, it is known as external debt. |
| It is voluntary or compulsory in nature. | It is voluntary in nature. |
| It involves the use of domestic currency. | It involves the use of foreign currency. |
| It is less complex for management. | It is more complex for management. |
(v) Distinguish between Organised sector and Unorganised sector of money market
| Organised Sector of the Money Market | Unorganised Sector of the Money Market |
| The organised sector includes: (i) Reserve Bank of India (RBI) (ii) Commercial Banks (iii) Co-operative Banks (iv) Development of Financial Institutions (v) Discount and Finance House of India |
The unorganised sector includes: (i) Money lenders (ii) Indigenous bankers (iii) Unregulated non-banking financial institutions |
| This sector comes under the purview of RBI. | This sector not come under the control of RBI. |
| The interest rates are low and borrowers are not exploited. | The interest rates very high and borrowers are exploited. |
| It mainly operates in urban, semi-urban, and certain rural areas. | It mainly operates in rural areas of remote regions where the organized sector is not developed. |
Question 3.
Answer the following questions in brief: (Any 3)
(i) Explain the importance of Macro-economics.
(ii) Explain the determinants of supply.
(iii) Explain the significance of index numbers in economics.
(iv) Explain the problems faced by the money market in India.
(v) Explain the recent trends in India’s exports.
Answer:
(i) The importance of Macro-economics is explained as follows—
(a) Functioning of an Economy—Macro-economic analysis gives us an idea of the functioning of an economic system. It helps us to understand the behaviour pattern of aggregative variables in a large and complex economic system.
(b) Economic Fluctuations—Macro-economics helps to analyse the cause of fluctuations in income, output and employment and makes an attempt to control them or reduce this severity.
(c) National Income—Study of mocro-economics has brought forward the immense importance of
the study of National Income and social accounts. Without a study of National Income, it is not possible to formulate correct economic policies.
(d) Economic Development—Advanced studies in macro-economics help to understand the problems of developing countries such as poverty, inequalities of income and wealth, difference in the standards of living of the people etc It suggests important steps to achieve economic development
(ii) Supply refers to the quantity of a commodity that a seller is willing and able to offer for sale at a given price, during a certain period of time.
The following are the determinants of Supply:
(a) Price of the Commodity—Other things remaining constant, at higher price, the producers prefer to increase their sales by increasing their supply and vice-versa. Thus, there is a direct relationship between price and quantity supplied.
(b) Price of related Goods—A rise in the prices of substitute goods will lead to a decrease in the supply of other goods and vice-versa. On the other hand, a rise in the price of complementary goods will lead to an increase in the supply of other goods.
(c) Cost of Production—If the price of inputs increases, the cost of production also increases, other things remaining the same. An increase in the cost of production decreases the profits of the supplier and, consequently, lesser quantity is supplied at the given price.
(d) State of Technology—Other things remaining the same, if the level of available technology appreciates.
(e) Government Policy—Other things remaining constant, if the government policies are more stringent and strict such as high rate of tax, the cost of production will rise. The high cost of production will discourage the producer and thereby, supply will decrease.
(iii) An index number is a statistical measure designed to show changes in a variable or group of related variables with reference to time geography location, and other characteristics such as income, profession, etc. Index numbers are indispensable tools of economic analysis.
The significance of index numbers is as follows:
(a) Framing Suitable Policies—Index numbers provide guidelines to policymakers in framing suitable economic policies such as agricultural policy, industrial policy, fixation of wages, and dearness allowances in accordance with the cost of living, etc.
(b) Studies Trends and Tendencies—Index numbers are widely used to measure changes in economic variables such as production, prices, exports, imports, etc. over a period of time.
(c) Forecasting aboutthe Future Economic Activity— Index numbers are useful for marking predictions for the future based on the analysis of the past and present trends in the economic activities. For example, based on the available data pertaining to imports and exports, future predictions can be made. Thus, forecasting guides in proper decision making.
(d) Measurement of Inflation—Index numbers are also used to measure changes in the price level from time to time. It enables the government to undertake appropriate anti-inflationary measures. There is legal provision to pay the D.A. (dearness allowance) to the employees in organised sector on the basis of changes in the Dearness Index.
(iv) Money market is a financial market wherein leading and borrowing of short-term funds take place. Indian money market is less developed in terms of volume and liquidity as compared to the.advanced countries.
The problems of the Indian Money Market can be explained as follows:
(a) Dual Structure of the Money Market—The presence of both, the organized an unorganised sectors in the money market leads to disintegration, lack of transparency, and increased volatility. The unorganised sector of the money lacks coordination and does not come under the direct control and supervision of the RBI.
(b) Lack of Uniformity in the Rates of Interest—The money market comprises of various entities such as commercial bank, co-operative banks, non-banking finance companies (NBFCs), development finance institutions, investment companies, etc. Money maket also comprises different categories of borrowers.
(c) Shortage of Funds—Money market faces a shortage of funds due to inadequate savings. The low per capita income (PCI), poor banking habits among the people, indulgence in wasteful consumption, inadequate banking facilities in the rural areas, etc. have also been responsible for the paucity of fund in the money market
(d) Seasonal Fluctuations—Demand for funds varies as per the seasons. During the peak season, from October to June, finance is required on a large scale for various purposes such as trading in agricultural produce, investment in business activities, etc. This results in wide fluctuations in the money market
(v) Export trade refers to the sale of goods and services by one country to another. In other words, it is the outflow of goods from a home country to a foreign country.
The recent trends in India’s exports are as follows:
(a) Engineering Goods—According to the Engineering Goods Exports Promotion Council (EGEPC) Report, the share of engineering goods was 25% in India’s total exports in 2017-18. Within this category, some of the prominent exported items are transport equipment including automobiles and auto components, machinery, and instruments. During the period 2010-11 to 2014-15, exports to transport equipment have grown from 16 billion dollars to 24.8 billion dollars.
(b) Petroleum Products—India’s petroleum capacity increased significantly since 2001-02, due to which India turned as a net exporter of petroleum refinery products. Petroleum products had a share of 4.3% in India’s total exports in 2000-01, which rose steadily to 20.1% in 2013-14.
(c) Chemicals and Chemical Products—An important export item that has performed reasonably well over the last few years is chemicals and chemical products. The share of this item was 10.4% in 2014-15.
(d) Gems and Jewellery—Gems and jewellery are one of the major contributors to export earnings in India, having a share of 13.3% in India’s merchandise export in 2014-15.
(e) Textiles and Readymade Garments—India is one of the leading exporting countries of textiles and readymade garments in the world. The share of textiles and garments in total exports of the country was 11.3% in 2014-15.
Question 4.
State with reasons whether you agree or disagree with the following statements: (Any 3)
(i) Macro-economics deals with the study of individual behaviour.
(ii) Demand curve slopes downward from left to right.
(iii) Price is the determinant of demand.
(iv) When price of Giffen goods fall the demand for it increases.
(v) Index numbers are free from limitations.
Answer:
(i) I disagree with the given statement
Reason:
It deals with total employment National Income, national output total investment, total consumption, total saving, general price level, interest rates, inflation, trade cycles, business fluctuations etc. Macro-economic does not deal with the study of individual behaviour. It deals with the whole economy.
(ii) I agree with the given statement
Reason:
The demand curve is the graphical representation of the relationship between the demand for a good and its price. This curve slopes downwards from left to right because of the negative relationship between the price of the commodity and its demand.
The following are the main reasons as to why the demand curve is downward sloping:
(a) Law of diminishing marginal utility: Due to this law, the consumer tends to buy more quantity of good when the price falls.
(b) Income effect: With a fall in price, the purchasing power of a person rises. As a result he demands more of a good.
(c) Substitution effect: With a rise in price the substitutes of goods become cheaper in comparison. As a result the person demands less of that good and more substitute goods.
(d) Multipurpose uses: The demand for goods having multipurpose uses rise with a fall in price and vice-versa.
(iii) No, I do not agree with the given statement This is because there are various factors that determine demand other than price.
Determinants of Demand:
The demand for goods is determined by the following factors:
(a) Price—Price determines the demand for a commodity to a large extent Consumers prefer to purchase a product in large quantities when price of a product is less and they purchase a product in small quantities when price of a product is high.
(b) Income—Income of a consumer decides purchasing power which in turn influences the demand for the product. Rise in income will lead to a rise in demand for the commodity and a fall in income will lead to a fall in demand for the commodity.
(c) Price of Substitute Goods—If a substitute good is available at a lower price then people will demand
cheaper substitute goods instead of costly goods. For example, if the price of sugar rises then.fiemand for jaggery will rise.
(d) Price of Complementary Goods—Change in the price of one commodity would also affect the demand for other commodity. For example, car and fuel. If the price of fuel rises, then demand for cars will fall.
(e) Nature of product—If a commodity is a necessity and its use is unavoidable, then its demand will continue to be the same irrespective of the corresponding price. For example, medicine to control blood pressure.
(iv) I Disagree with the given statement.
Reason:
When price of Giffen goods falls, its demand decreases. Inferior goods or low-quality goods are those goods the demand for which does not rise even if their price falls. At times, demand decreases when the price of such commodities falls. Sir Robert Giffen observed this behaviour in England in relation to decline in bread’s demand, People did not want to buy more breqd because of increase in their real income or purchasing power. They preferred to buy superior goods like meat. This is know as Giffen’s paradox.
(v) I Disagree with the given statement.
Reason:
Index numbers are generally based on samples. We cannot include all the items in the construction of the index numbers. Hence they are not free from sampling errors.
Question 5.
Study the following tqble/passage/figure and answer the questions given below: (Any 2)
(i) Observe the table and answer the questions given below—
(a) Draw the total utility curve and the marginal utility curve.
(b) (i) When the total utility is maximum, marginal utility is _____________ .
(ii) When total utility falls, marginal utility becomes _____________ .
(ii) Supply schedule of chocolates
(a) Complete the above supply schedule.
(b) Draw a diagram for the above supply schedule.
(c) State the relationship between price and quantity supplied.
(iii)
(a) Fill in the blanks in the above schedule.
(b) Derive the equilibrium price from the above schedule with the help of a suitable diagram.
Answer:
(i) Total Utility Curve and Marginal Utility Curve
(a) When Total Utility is maximum, marginal utility is zero.
(b) When Total Utility falls, marginal utility becomes negative.
(ii) (a)
| Price in (₹) | Quantity Supplied in Units |
| 10 | 200 |
| 15 | 250 |
| 20 | 300 |
| 25 | 350 |
| 30 | 400 |
| 35 | 450 |
| 40 | 500 |
(b)
(c) 1. There is direct relationship between price and quantity supplied.
2. The supply curve is positively sloped.
3. As the price increases, quantity supplied also increases.
4. At the lowest price 10, quantity supplied is less than 200, at the highest price 40 the quantity supplied is the highest 500.
5. The supply curve moves upward from left to right.
(iii) (a)
(b)
Question 6.
Answer the following questions in detail: (Any 2)
(i) Explain the importance of elasticity of demand.
(ii) Explain the practical difficulties involved in the measurement of National Income.
(iii) Explain various reasons for the growth of public expenditure.
Answer:
(i)The concept of elasticity of demand is of great importance to producers, farmers, workers and the Government. Lord Keynes considered this concept to be the most important contribution of Alfred Marshall. Significance of the concept becomes clear from the following applications:
(a) Importance to a Producer—Every producer has to decide the price of his product at which he has to sell it. For this purpose, elasticity of demand becomes important. If the demand for a product is relatively inelastic, he wiLL fix up a higher price and vice-versa. The concept of elasticity of demand is also useful to a monopolist to practice price discrimination.
(b) Importance to Government—Taxation policy of the Government is based on the concept of elasticity of demand. Those commodities whose demand is relatively inelastic will be taxed more because it will not affect their demand much and vice-versa.
(c) Important in Factor Pricing—The concept of elasticity of demand is useful in determination of factor prices. The factor of production for which demand is relatively inelastic can command a higher price as compared to those having elastic demand. For example, workers can ask for higher wages, if the demand for the product produced by them is relatively inelastic.
(d) Importance in Foreign Trade—The concept of elasticity of demand is useful to determine terms and conditions in foreign trade. The countries exporting commodities for which demand is relatively inelastic and can raise their prices. For example, Organization of Petroleum Exporting Countries (OPEC) have increased the price of oil several times. The concept is also useful in formulating export and import policy of a country.
(e) Public Utilities—In case of public utilities like railways which have an inelastic demand, Government can either subsidise or nationalise them to avoid consumers exploitation.
(f) Proportion of Expenditure—If the proportion of expenditure in a person’s income is small, then demand for the product is relatively inelastic.
For example, newspapers. If the proportion of expenditure is large, then demand for the product is relatively elastic.
(ii) National Income is one of the important subject matter of macro-economics. 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.
The various practical or statistical difficulties in the measurement of National Income are as follows:
(a) Problem-related to Double Counting—One of the major problems involved in the estimation of National Income by the value-added method is the problem of doubLe counting. Double counting refers to a situation where the value of a good is taken into account (counted) more than once. Such a problem occurs because, for every producer the commodity he sells is the final commodity. Thus, if the value of the good is taken into account every single time, it leads to estimating the value of the product more than once.
(b) Estimation Regarding Depreciation—During the process of production, along with the raw materials and inputs, various fixed assets such as machinery, tools, etc. are also used. However, during the course of production, the fixed assets undergo wear and tear. This wear and tear reduce the value of the fixed assets of business entities. Since depreciation is based on various assumptions and is subjective in nature, it is difficult for an individual to correctly assess the deduction to be made for depreciation.
(c) Self-consumption—At times, the producer or firm keeps a certain portion of the output for self-consumption. Such a portion of production that is retained for self-consumption should be included in the estimation of income, but is difficult to calculate such consumption and production.
(d) Windfall Gains and Capital Gains—Windfall gains such as lotteries and capital gains are unearned income and are not included in the estimation of the National Income. However, these activities very much add to the national product.
(e) 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, the valuation of inventories requires careful assessment.
(f) 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 of value of their output.
(iii) Reasons for Growth in Public Expenditure:
It is observed that there is a continuous grdwth in public expenditure in a developing country like India.
Some of the important reasons are:
(a) Increase in the Activities of the Government—As mentioned earlier, 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.
(b) 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 fulfill the needs of the increasing population.
(c) 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.
(d) 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.
(e) Spread of Democracy—Majority of the countries in the world are democratic in nature. A democratic form of government is expensive due to regular elections and other such activities. This results in the increase in total expenditure of the government.
(f) Inflation—Just like a private individual the government has to buy goods and services from the market for the spread of economic and social development Normally, prices show a rising trend. Due to this, the government has to incur increasing costs.
(g) Industrial Development—Industrial development leads to an increase in production, employment and overall growth in the economy. Hence, the government makes huge efforts for implemdhting various schemes and programmes for industrial development.This results in increase in government expenditure.
(h) Disaster Management—Many natural and man¬made calamities like earthquakes, floods, cyclones, social unrest etc. are occurring more frequently. The government has to spend a huge amount for the disaster management which increases total expenditure. Modern governments are working for ‘welfare state’. Hence, there is a continuous increase in the public expenditure.