Ralli International School

Class -XII
ECONOMICS: Unit I (Introduction)

Q1. What is likely to be the impact of Make in India appeal to the

foreign investors by the Prime Minister of India, on the production
possibilities frontier of India? Explain.
Q2. What is likely to be the impact of efforts towards reducing
unemployment on the production potential of the economy? Explain.
Q3. Giving reason comment on the shape of Production Possibilities
Curve based on the following table:
Good
(Units)
0
1
2
3
4

X Good Y (units)
10
9
7
4
0

Q4. a) The government has started

promoting foreign capital .What is its
economic value in the context of
PPC?
b) How is production possibility curve
affected by unemployment in the

economy? Explain.
Q5. Explain the meaning of opportunity cost with the help of
production possibility
schedule.
Q6. A shift from steam engines to diesel and electric engines has
increased carrying capacity of the Indian Railways both for the
passenger traffic and the goods traffic. How would you reflect this
change using the concept of PPC?
Q7. What is meant by economics? What are the central problems of
an economy? Explain.
Q8. What is meant by production possibility curve? Explain it.
Or
Show with the help of PPC, growth of resources, under utilization of
resources, efficient utilization of resources.
Q9. Why PPC curve is sloping down wards & why is it concave?

Q10. Define opportunity cost & marginal opportunity cost. Explain

with the help of an example.
Q11. Read the following statement carefully. Write True or False
with a reason.
1. Lack of scarcity implies lack of economic problem.
2. If there was no choice in resources allocation, microeconomics
would not have existed.
3. Central problems of an economy are found only in those economies
which are not governed or regulated by the government.
Q12. Citizens of a country produce two goods, garlic and wool,
according to the following production possibility schedule:
Garlic(uni
ts)
Wool
(units)

150

300

450

600

750

900

450

375

300

225

150

75

Find the opportunity cost of producing additional garlic. Is it constant

or increasing? Draw a suitable diagram.

Ralli International School

Class -XII
Economics: Unit II (Consumer's Equilibrium & Demand)
Q1. A consumer consumes only two goods X and Y, both priced at Rs
2 per unit. If the consumer chooses a combination of the two goods
with Marginal Rate of Substitution equal to 2, is the consumer in
equilibrium? Why or why not? What will a rational consumer do in this
situation? Explain.
Q2. A consumer consumes only two goods X and Y whose prices are
Rs 5 and Rs 4 respectively. If the consumer chooses a combination of
the two goods with marginal utility of X equal to 4 and that of Y equal
to 5, is the consumer in equilibrium? Why or not? What will a rational
consumer do in this situation? Use utility analysis.
Q3. A consumer consumes only two goods X and Y and is in
equilibrium. Price of X falls. Explain the reaction of the consumer
through the Utility Analysis.
Q4. A 5 percent fall in the price of good raises its demand from 300
units to 318 units. Calculate its price elasticity of demand
Q5. Explain the concept of "Marginal rate of substitution with the
help of numerical example .Also explain its behavior along an
indifference curve.
Q6. Define an indifference map. Why does an indifference curve to
the right show more utility? Explain.
Q7. Given the price of a good, how will a customer decide as to how
much quantity of that good to be buy ?Use utility analysis.
Q8. What is meant by a) Marginal utility b) Consumer equilibrium c)
Law of diminishing marginal utility?
Q9. What is meant by a) Indifference curve b) Budget Set c) Budget
Length d) Indifference Map
Q10. How equilibrium is attained through Indifference curve?
Q11. Distinguish between
i) Expansion of demand & increase in demand

ii) Contraction of demand & decrease in demand

iii) Normal goods & inferior goods
iv) Cardinal utility and Ordinal utility
Q12. State the factors that cause a right ward shift of demand curve
of a commodity?
Q13. How do change in the income of the household affect the
demand for a commodity that is bought .
Q14. Why more is purchased at lower price? Explain.
Q15. Briefly explain the nature of relationship between demand for a
commodity by a house hold & price of related goods.
a. What is the relation between change in price of a good & the
change in demand of its complementary goods & explain with an
example?
b. What is the relation between change in the price of a good & the
change in the demand of its substitute goods? Explain with the help
of an example.
Q16. Define market demand? State Law of demand & assumptions
behind it?
Q17. Distinguish between elastic & inelastic demand. When is
elasticity of demand said to be in unity?
Q18. Explain the expenditure method of measuring price elasticity of
demand of a commodity & when the demand is said to be inelastic.
Q19. A consumer buys 10 units of a commodity at a price of Rs10 per
unit. He incurs an expenditure of Rs200 on buying 20 units. Calculate
price elasticity of demand by the percentage method. Comment upon
the shape of demand curve based on this information.
Q20. Consumer spends Rs. 250 on a good when its price is Rs. 5 per
unit. When the price rises to Rs. 6 per unit, he spends Rs. 240.
Calculate the price elasticity by percentage method.
Q21. When prize of a good is Rs. 13 per unit, the consumer buys 11
units of that good. When price rises to Rs. 15 per unit, the consumer
continues to buy 11 units. Calculate price elasticity of demand.

Q22. A consumer consumes only two goods X and Y. At a consumption

level of these two goods, he finds that the ratio of marginal utility to
price in case of X is higher than in case of Y. Explain the reaction of
the consumer.
Q23. In an indifference map, higher IC indicates:
(a) Lower level of satisfaction
(b) Same level of satisfaction
(c) Higher level of satisfaction
(d) either same or higher level of
satisfaction.
Q24. In given figure, the slope of the demand curve is:
(a) negative
(b) Positive
(c) Constant
(d) Both a & C
Y
D
Price

X
Quantity (Units)

Q25. Given below is the utility schedule of a consumer for commodityX. The price of the commodity is Rs. 6 per unit. How many units
should the consumer purchase to maximize satisfaction? (Assume
that utility is expressed in utils and 1 util = Rs.1). Give reason for your
answer.
Consumption
Total Utility
Marginal Utility
(Units)
(Units)
(Units)
1
10
10
2
18
8
3
25
7
4
31
6
5
34
3
6
34
0

Q26. Price elasticity of demand of two goods A and B is (-)3 and (-)4
respectively. Which of the two goods has higher elasticity and why?

Q27. What is the relation between Good-X and Good-Y in each case, If
with fall in the price of Good-X demand for Good-Y (i) rises, and (II)
falls? Give reason.
Q28. Distinguish between demand by an individual consumer and
market demand of a good. Also, state the factors leading to fall in
demand by an individual consumer.
Q29. Draw a downward sloping straight line demand curve touching
both the axes. Mark the price elasticity at different points of this
demand curve. Also explain briefly any three factors affecting price
elasticity of demand.

Ralli International School

Class -XII
ECONOMICS: Units III (Producer Behavior and Supply)
1. When Marginal product is less than average product
a. Marginal product rises
b. Average product rises
c. Marginal product falls
d. Average product falls
2. When total cost increases at a diminishing rate, marginal cost
a. Rises
b.
Falls
b. Reaches maximum
d. is constant
3. With the increase in taxes the supply of the commodity
a. Increases
b. Decreases
c.
Unaffected
d. None of these
4. Why is the short run MC curve U-Shaped?
5. Explain the relationship between TR & MR of a firm which can sell
any quantity of the good at a given price.
6. Upgradation of technology shifts the supply curve towards left.
Defute or refute.
7. Find the missing values from the following table:
Variable
0
1
2
3
4
Factor

TP (Units)
AP (Units)
MP (Units)

0
0
-

10
-

6
-

24
-

25
5
1

8. Why does MC Curve intersect AVC and AC Curves at their minimum

point?
9. Explain the law of variable proportions with the help of total and
marginal physical product curves.
10. Define price elasticity of supply. Draw a supply curve for each of
the following situations of elasticity of supply:
a)
Elasticity of supply > 1
b)
Elasticity of Supply < 1
c)
Elasticity of supply = 1
11. Explain the geometric method for measuring elasticity of supply.
12. Distinguish between extension of supply and increase in supply
with the help of diagram.
13. Why will a profit maximizing firm in a competitive market never
strike its equilibrium in a state when MC is falling? Explain your
answer using a suitable diagram.
14. With the help of the table given below, find producers equilibrium
using MR and MC approach. Give reason for your answer.
Output(units)
1
2
3
4
5
6

TR (Rs.)
20
40
60
80
100
120

AC(Rs.)
20
15
12
10
12
15

15. Total Product schedule of a firm at different levels of labour

employment is given below.

Calculate the firms total variable cost, average cost, average variable
cost and average fixed cost, if wage rate is Rs 100 per day and total
fixed cost is Rs 1,000.
Labour
1
2
3
4
5
6
7
8
9
10
Employment(Units)
Output(Units)
5
10 17 25 40 56 70 82 90 95
16. a)
MC.
b)

Diagrammatically, explain the relationship between AC and

Diagrammatically explain the relationship between TC & MC.

17. On the basis of information given below, calculate AR and MR and

explain their mutual relationship.
Units of a
Good
TR (Rs)

10

10

18. Complete the following Table:

Price
Output
(Rs)
(Units)
7
__
__
1

__
2
3
__

Total Revenue
(Rs)
7
10
__
__

Marginal
Revenue
(Rs)
__
__
(-)1
(-)5

19. Complete the following table, on the assumption that for each
additional unit of the variable factor, marginal product decreases by 5
units of output.
Units of
Labour
__
__
__

TP

AP

MP

__
__
__

__
__
__

__
__
__

__

__

__

(-)5

20. Complete the following table:

Units of labour
1
2
3
4
5
6

Average Product
(Units)
8
10
__
9
__
7

Marginal Product
(Units)
__
__
10
__
4
__

Ralli International School

Class -XII
ECONOMICS:
Unit
IV
(Forms
of
Market
&
Price
Determinations)
1.The implication of the assumption of homogeneity of product is.
a. Price can be determined by the firm
b. Uniform price
c. Normal profits in the long run
d.Abnormal profits in
the long run
2.

The shape of the AR curve under monopoly is

a. Downward sloping
b. Upward sloping
c. Straight line
d. Concave to the origin

3.

When increased in demand = decrease in supply the equilibrium

quantity will: a. Increase
b. Decrease

c. Remain Same
d. May increase ,decrease or
remain same.
4. Why is a firm under perfect competition a price-Taker and not a
Price Maker?
5. Why are firms interdependent in oligopoly market?
6. Briefly explain the conditions of Perfect market with their
implications.
7.Explain the chain effects of an increase in supply of a commodity on
its equilibrium.
8.Explain the concept of price ceiling and price floor with the help of
diagram.
9. Why is the demand curve of a firm under monopolistic competition
more elastic than under monopoly? Explain.
10.What will be the effect on equilibrium price and quantity When
number of firms increases?
11. What is meant by price rigidity under oligopoly.
12. Suppose the demand and supply curves of a Commodity-X is
given by the following two equations simultaneously:
Qd = 200 p
Qs = 50 + 2p
i) Find the equilibrium price and equilibrium quantity.
ii) Suppose that the price of a factor of production producing the
commodity has
changed, resulting in the new supply curve given by the equation
Qs = 80 +2p
Analyse the new equilibrium price and new equilibrium quantity as
against the original equilibrium price and equilibrium quantity.
13. Explain black marketing as a direct consequence of price ceiling.
14. Explain the concept of buffer stock as a tool of price floor.
15. Explain the following terms:
a) Equilibrium point
b) Excess demand

Ralli International School

Class -XII
ECONOMICS: Unit V (National Income & Related Aggregates)
Q1. If the Nominal GDP is Rs 600 and Price Index (base =100) is 120,
calculate the Real GDP.

Q2. Calculate' Net Domestic Product at Market Price ' & 'Gross
National Disposable Income ':
(In Crores)
i. Private final consumption expenditure
400
ii. Opening stock
10
iii. Consumption of fixed capital
25
iv. Imports
15
v. Government final consumption expenditure
90
vi. Net current transfer to rest of the world
5
vii. Gross domestic fixed capital formation
80
viii. Closing stock
20
ix. Exports
10
x. Net factor income to abroad
(5)
Q3. Calculate Sales from the following data:
(i) Subsidies
(ii) Opening stock
(iii) Closing stock
(iv) Intermediate consumption
(v) Consumption of fixed capital
(vi) Profit
( vii) Net value added at factor cost

(In Crores)
200
100
600
3,000
700
750
2,000

Q4. Calculate Gross National Product at Market Price" from the

following Data:
(Rs. in crores)
(i) Compensation of employees
2,000
(ii) Interest
500
(iii) Rent
700
(iv) Profits
800
(v) Employer's contribution to social security schemes 200
(vi) Dividends
300
(vii) Consumption of fixed capital
100
(viii) Net indirect taxes
250
(ix) Net export
70
(x) Net Factor income to abroad
150
(xi) Mixed income of self-employed
1,500
Q5. Calculate "Gross National Disposable Income" from the following
data:
(Rs. in crores)
(i) Net domestic product at factor cost
3,000
( ii) Indirect taxes
300
(iii) Net current transfers from rest of the world
250

(iv) Current transfers from the government

(v) Net factor income to abroad
(vi) Consumpt.ion of fixed capital
(vii) Subsidies

100
150
200
100

Q6. Find Net Value Added at Market Price:

(i) Depreciation (Rs.)
(ii) Output sold (unit)
(iii) Price per unit of output (Rs.)
(iv) Closing stock (Rs.)
(v) Opening stock (Rs.)
(vi) Sales tax (Rs.)
(vii) Intermediate cost (Rs.)

(Rs. in crores)
700
900
40
1,000
800
3,000
20,000

Q7. What do you understand by circular flow of production, income &

expenditure?
Q8. Distinguish between money flow & real flow of income. Why this
flow of income is called circular flow of income.
Q9. Find out (i) Gross National Product at Market Price and (ii) Net
Current Transfers to Abroad:
(Rs. In crores)
(i) Private final consumption expenditure.
(ii) Depreciation
(iii) Net national disposable income
(iv) Closing stock
(v) Government final consumption expenditure
(vi) Net indirect tax
50
(vii) Opening stock
20
(viii) Net domestic fixed capital formation
(ix) Net exports
(x) Net factor income to abroad

1000
100
1500
20
300
110
15
(-)10

Q10. Calculate (a) Net Domestic Product at Factor Cost and (b)
Private Income from following:
(Rs. crore)
(i) Domestic product accruing to government
300
(ii) Wages and salaries
1000
(iii) Net current transfers to abroad
(-)20
(iv) Rent
100

(v) Interest paid by the production units

(vi) National debt interest
30
(vii) Corporation tax
50
(viii) Current transfers by government
(ix) Contribution to social security schemes by employers
200
(x) Dividends
(xi) Undistributed profits
(xii) Net factor income to abroad
10

130

40
100
20

Q11. From the following data calculate national income by (a) Income
Method (b) Expenditure Method.
(Rs.
crore)
i) Private final consumption expenditure
2,000
ii) Net capital formation
400
iii) Change in stock
50
iv) Compensation of employees
1,900
v) Rent
200
vi) Interest
150
vii) Operating surplus
720
viii) Net indirect tax
400
ix) Employers contribution to social security scheme
100
x) Net factor income from abroad
-20
xi) Employee contribution to S.S scheme
100
xii) Net exports
20
xiii) Govt. final consumption expenditure
600
xiv) Consumption of fixed capital
100
Q12. Will the following be included in domestic factor income of India?
Give reasons for your answer.
i) Financial help given to flood victim.
ii) Profits earned by an Indian bank from branch abroad.
iii) Salaries paid to non resident Indian working in Indian embassy in
America.
iv) Festival gift by an employer to his employees.
v) Family members working free on the farm owed by the family.
vi) Payment of interest on borrowings by general government
Q13. What are the various methods of measuring national income ?
Write short note on it.

Q14. Explain how non-monetary exchanges are a limitation in taking

gross domestic product as an index of welfare.
Q15. Suppose in an imaginary economy GDP at Market Price in a
particular fiscal year was Rs.4,000 crores, National Income was
Rs.2,500 crores, Net Factor Income paid by the economy to Rest of
the World was Rs.400 crores and the value of Net Indirect Taxes is
Rs.450 Crores. Estimate the value of consumption of fixed capital for
the economy from the given data.
Q16. Compute (a) Domestic Income and (b) Net National Disposable
Income.
S.No. Items
Amount (in
Crores)
i)
Net Exports
155
ii)
Government final consumption
2500
expenditure
iii)
Subsidies
120
iv)
Gross domestic fixed capital
1190
formation
v)
Net factor income to abroad
125
vi)
Net decrease in inventories
100
vii)
Net Exports
(-) 420
viii)
Net Indirect Taxes
470
ix)
Net Current transfers from abroad
350
x)
Current replacement cost
145
xi)
Private final consumption
2200
expenditure

Ralli International School

Class -XII
ECONOMICS: Unit VI (Money and Banking)

Q1. Currency is issued by the central bank, yet we say that

commercial banks create money, explain .How is this money creation
by commercial banks likely to affect the national income? Explain.
Q2. What are time deposits?
Q3. Define money. Explain four important functions of money.
Q4. Explain supply of money and concepts related to it.
Q5. What are the functions of Central Bank.
Q6. Define LRR. What are its two components? .Explain.
Q.7 Money is also called a bearer of options or generalized purchasing
power. Why?
Q.8 What is meant by narrow and broad money? How are the
different?
Q.9 How does the central bank control the availability of the credit by:
a. Open market operations
b. legal reserve ratio
Q.10 What is meant by Bank rate? What will be the effect of change
in bank rate on money supply? Explain.

Class -XII
ECONOMICS:
Employment)

Ralli International School

Unit

VII

(Determination

Q1. Find Consumption Expenditure

National Income
Autonomous Consumption
Marginal propensity to consume

of

Income

and

from the following :

= Rs.5, 000
= Rs.1, 000
= 0.80

Q2. (a) In an economy the marginal propensity to consume is 0.75.

Investment expenditure in the economy increases by 75 crore.
(a) Calculate the total increase in national income.
(b) If the value of marginal propensity to consume is 0.8, calculate the
value of multiplier.
(c) If the value of marginal propensity to save is 0.25, calculate the
value of multiplier.
(d) If increase in investment is Rs. 125 crore & increase in national
income is Rs. 500 crore, calculate marginal propensity to save.
Q3. What is meant by Investment multiplier or output multiplier &
how does it work?
Q4. When will the situation of Excess demand & Deficient demand
arise in an economy & what are the remedies to control them?
Q5. Explain with the help of diagram that the equilibrium level of
income is not necessary at full employment level.
Q6. What is meant by aggregate demand & explain its components?
Q7. Explain briefly the meaning of involuntary unemployment & full
employment?

Q8. Distinguish between average propensity to save & average

propensity to consume. Draw a propensity to save curve & from it
draw the propensity to consume curve.
Q.9 What are the features of APS? Explain it with help of schedule.
Q.10. Explain the concept of deficient demand with the help of
schedule and diagram. Also suggest the measures to be taken by
government to correct this situation.
Q11. Derive a straight line saving curve using the following
consumption function:
C = 20 + 0.6Y.
Presuming the income levels to be 100, 200 and 300 crores. Also
calculate that level of income where consumption is equal to income.
Q12. Explain how the economy achieves equilibrium level of income
using Savings-Investment (S-I) approach.
Q13. If in an economy saving function is given by S = (-) 50 + 0.2 Y
and Y = Rs.2000 crores ; consumption expenditure for the economy
would be Rs.1,650 crores and the autonomous investment is Rs.50
crores and the marginal propensity to consume is 0.8. True or False?
Justify your answer with proper calculations.
Q14. Economists are generally concerned about the rising Marginal
Propensity to Save (MPS) in an economy. Explain why?

Ralli International School

Class -XII
ECONOMICS: Unit VIII (Government Budget and the Economy)
Q.1 Differentiate between direct tax and indirect tax with examples.
Q.2. Define balanced, Surplus and deficit Budgets.
Q.3. Differentiate between revenue receipts and capital receipts. Give
examples.
Q.4. What are the sources of financing deficit?
Q.5. Define fiscal deficit. What are its implications?
Q.6 Explain the objectives of government budget?
Q.7. Is fiscal deficit advantageous or disadvantageous for a country?
Explain.
Q.8. Can there be a fiscal deficit without revenue deficit? Comment.
Q.9 What are the different source of capital receipts? Explain.
Q.10. What are the different sources of capital receipts? Explain.
Q,11Governments across nations are too much worried about the
term fiscal deficit. Do you think that fiscal deficit is necessarily
inflationary in nature? Support your answer with valid reasons.

Q.12 The government budget of a hypothetical economy presents the

following information,which of the following value represents
Budgetary Deficit. (all fig. in Rs.crores)
A. Revenue Expenditure = 25,000
B. Capital Receipts
= 30,000
C. Capital Expenditure
= 35,000
D. Revenue Receipts
= 20,000
E. Interest Payments
= 10,000
F. Borrowings
= 20,000
i) Rs.12,000
ii) Rs.10,000

iii) Rs.20,000
iv) None of the above.

Ralli International School

Class -XII
ECONOMICS: Unit IX (Balance of Payments)

Q1 . When price of a foreign currency falls, the demand of that foreign

currency rises. Explain, why?
Q2. What is balance of payment account? Distinguish between
current account & capital account of balance of payment account.
Q3. Explain the determination of equilibrium exchange rate using
diagram.
Q4 . What is meant by i) Fixed rate ii) Flexible rate iii) Managed
floating systems.
Q5. What are the components of Balance of payment A/c?
Q6. Explain the components of capital account.
Q.7 Balance of payment account always balances. Explain.
Q.8 Why do we demand foreign exchange?
Q.9 What is meant by deficit in balance of payment account? How can
it be corrected.
Q.10 Is improvement in exchange rate of the countrys currency
always beneficial for BOP? Comment.

Q.12 Devaluation and Depreciation of currency are one and the same
thing. Do you agree? How do they affect the exports of a country?
Q13. What is meant by official reserve transactions? Discuss their
importance in Balance of Payments.
Q14. What impact will fall on the expenditure of an American citizen
who comes to India for Medical treatment if foreign rate is increased?