Economics solved paper 2025 - World Of AI Learning

1.
(क) Who said that economics is the science of wealth?
(i) Marshall
(ii) Robbins
(iii) Adam Smith
(iv) Keynes
Answer: (iii) Adam Smith

(ख) What is the central problem of economics?
(i) What to produce
(ii) How to produce
(iii) How to distribute the produced goods
(iv) All of the above
Answer: (iv) All of the above

(ग) What is the formula for marginal utility?
(i) ΔTU/ΔQ
(ii) ΔMU/ΔQ
(iii) ΔQ/ΔTU
(iv) ΔQ/ΔMU
Answer: (i) ΔTU/ΔQ

(घ) Demand is related to –
(i) Desire for a commodity
(ii) A specific price
(iii) Willingness to spend resources
(iv) All of the above
Answer: (iv) All of the above

(ङ) Read the following two statements and choose the correct option:

Assertion (A): The study of human economic activities is economics.
Reason (R): An economic activity is one that involves the utilization of limited resources to satisfy needs.

(i) Both A and R are correct, and R correctly explains A.
(ii) Both A and R are correct, but R does not correctly explain A.
(iii) A is correct, but R is incorrect.
(iv) Both A and R are incorrect.
Answer: (i) Both A and R are correct, and R correctly explains A.

2. What is real economics?
Answer: Real economics is the branch of economics that involves the scientific study of economic events and processes. It analyzes facts, causes, and effects to understand the actual state of the economy.

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3. Define a capitalist economy.
Answer: A capitalist economy is an economic system in which the means of production are privately owned, and economic activities are conducted with the aim of making a profit. The market plays a dominant role, and resource allocation is determined by demand and supply.

4. What is total utility?
Answer: Total utility (TU) is the total satisfaction or utility derived by a consumer from consuming different quantities of a commodity. It is expressed as: TU = \\sum MU

5. What is a centrally planned economy? Explain.
Answer: A centrally planned economy is an economic system in which all economic decisions are made by the government. Policies related to production, distribution, and exchange are determined by the government. In this type of economy, resources are utilized for social welfare. The former Soviet Union is an example of a centrally planned economy.

6. What are the factors affecting the market demand for a commodity?
Answer: The market demand for a commodity is influenced by the following factors:

Price: An increase in price decreases demand, while a decrease in price increases demand.
Consumer income: Higher income leads to an increase in the demand for expensive goods.
Substitutes and complementary goods: A decrease in the price of substitutes may reduce demand for a commodity.
Future expectations: If consumers expect prices to rise in the future, current demand increases.
Population: An increase in population leads to higher demand.

7. What is meant by the short run and the long run?
Answer:

Short run: The time period in which some factors of production (such as capital and machinery) remain fixed.
Long run: The time period in which all factors of production can be changed, and production conditions can be fully adjusted.

8. What is a price line? Explain with a diagram.
Answer: A price line (Budget Line) represents the consumer’s budget constraint, showing the maximum possible combination of two goods that can be purchased with a given income.

Diagram:
(A simple graph can be drawn where the X-axis represents one commodity, the Y-axis represents another commodity, and the budget line slopes downward.)

9. Explain the characteristics of an indifference curve with a diagram.
Answer: An indifference curve represents different combinations of two goods that provide the same level of satisfaction to a consumer. Its characteristics are:

Negative slope: It slopes downward from left to right.
Convex to the origin: It is convex due to diminishing marginal rate of substitution.
Same level of satisfaction: Every point on the curve represents the same level of satisfaction.

Diagram:
(A simple indifference curve graph can be drawn showing combinations of two goods.)

10. What is the Law of Variable Proportions? Explain.
Answer: The Law of Variable Proportions states that when one factor of production is increased while keeping other factors constant, total output initially increases at an increasing rate, then at a decreasing rate, and finally starts declining. This occurs in three phases:

Increasing returns stage
Diminishing returns stage
Negative returns stage

11. Explain perfectly elastic demand.
Answer: When the price elasticity of demand is infinite, demand is said to be perfectly elastic. This means that even a slight change in price results in an infinite change in demand.

Diagram:
(A horizontal demand curve can be drawn to represent perfect elasticity.)

What do you understand by changes in the budget set?
Answer: The budget set represents the various combinations of goods that a consumer can buy based on income and prices. It changes due to:

Change in income: An increase in income expands the budget set.
Change in prices: A decrease in the prices of goods increases the budget set.

12. The following table shows the total cost schedule of a firm:

(i) What is the total fixed cost of this firm?
Answer: When output is zero, the total cost is ₹40. So, the total fixed cost (TFC) = ₹40.

(ii) Calculate the firm’s AFC, AVC, AC, and MC.
Answer:
(A table should be drawn showing calculations using the formulas: AFC = TFC/Q, AVC = TVC/Q, AC = TC/Q, and MC = ΔTC/ΔQ.)

13. What do you understand by the supply schedule and supply curve?
Answer:

Supply Schedule: A table showing the quantity of a commodity supplied at different prices.
Supply Curve: A graph that represents the positive relationship between price and quantity supplied.

Diagram:
(A simple upward-sloping supply curve can be drawn.)

14. Explain why a seller in perfect competition is a price taker, while a monopolist is a price maker.
Answer:

Perfect competition: There are many sellers in the market, and each seller has an insignificant effect on the market price. Hence, they must accept the market-determined price.
Monopoly: There is only one seller who has complete control over the market and can set the price for the product.

Why is the demand curve of a firm downward-sloping under monopolistic competition? Explain.
Answer: Under monopolistic competition, firms sell differentiated products, so the demand curve is downward-sloping. If a firm increases its price, consumers may switch to substitutes, reducing demand. Hence, the demand curve has a negative slope.

15. Choose the correct option:

(a) The study of general price levels and employment is done in –
(i) Microeconomics
(ii) Macroeconomics
(iii) Both
(iv) None of these
Answer: (ii) Macroeconomics

(b) Which of the following are included in the concept of flow?
(i) Consumption
(ii) Investment
(iii) Income
(iv) All of the above
Answer: (iv) All of the above

(c) What are the difficulties of the barter system?
(i) Lack of double coincidence of wants
(ii) Difficulty in divisibility of goods
(iii) Absence of a universally accepted measure of value
(iv) All of the above
Answer: (iv) All of the above

(d) MPC is represented by –
(i) ΔC/ΔY
(ii) C/Y
(iii) S/Y
(iv) ΔS/ΔY
Answer: (i) ΔC/ΔY

(e) Read the following statements and choose the correct option:

Assertion (A): The income generated in the production process can be visualized as a circular flow.
Reason (R): A flow has neither a beginning nor an end.

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16. What is Macroeconomics?

Answer: Macroeconomics is a branch of economics that studies the overall economy, including factors such as total income, production, employment, inflation, and government policies.

17. What is a Closed Economy?

Answer: A closed economy is one that does not engage in trade with other countries. All economic activities occur domestically, and there is no import or export of goods and services.

18. What is the name of India\’s central bank?

Answer: The central bank of India is the Reserve Bank of India (RBI).

19. What are the primary functions of money?

Answer: The primary functions of money are:

Unit of Account: It is used to measure the value of goods and services.
Medium of Exchange: Money facilitates the buying and selling of goods and services.

20. Explain Marginal Propensity to Consume (MPC).

Answer: Marginal Propensity to Consume (MPC) measures the proportion of additional income that is spent on consumption. It is calculated using the formula: MPC = \\frac{\\Delta C}{\\Delta Y}

where ΔC is the change in consumption, and ΔY is the change in income.

21. What is the difference between Balance of Trade and Balance of Payments?

Answer:

Balance of Trade (BOT): It is the difference between a country’s total exports and total imports of goods.
Balance of Payments (BOP): It is a broader concept that includes the balance of trade as well as capital flows and service transactions.

22. Describe the functions of a commercial bank.

Answer: The functions of a commercial bank include:

Accepting deposits: Collecting funds from the public in various types of accounts.
Providing loans: Granting loans to individuals and businesses.
Cheque and draft facilities: Facilitating transactions through banking instruments.

23. Explain the role of the central bank as the government’s agent and advisor.

Answer: The central bank acts as the government\’s agent and economic advisor by managing public debt, formulating monetary policies, controlling foreign exchange reserves, and ensuring economic stability.

Describe the major functions of commercial banks.
Answer:

Primary functions: Accepting deposits, providing loans, and clearing cheques.
Secondary functions: Foreign exchange services, safe deposit lockers, and financial advisory.
Developmental functions: Providing financial support to industries and businesses.

24. Explain the concepts of stock and flow.

Answer:

Stock: A variable measured at a specific point in time, such as capital, assets, and debt.
Flow: A variable measured over a period of time, such as income, expenditure, and production.

25. Prove that MPC + MPS = 1.

Answer: The sum of the Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) is always equal to 1 because the part of income that is not consumed is saved. MPC + MPS = 1 MPC = \\frac{\\Delta C}{\\Delta Y}, \\quad MPS = \\frac{\\Delta S}{\\Delta Y}

Since all additional income is either consumed or saved, the equation holds true.

26. Briefly describe two methods of calculating national income.

Answer:

Production Method: National income is calculated by summing up the value of goods and services produced in different sectors.
Income Method: National income is computed by adding wages, rent, interest, and profits earned by factors of production.

Calculate Gross Domestic Product at Factor Cost (GDPFC) using the following data:

Answer: GDPFC = \\text{Market Price of Product} - \\text{Indirect Taxes} - \\text{Intermediate Consumption} = 700 - 40 - 250 = 410 \\text{ crore ₹}

27. Explain Keynes\’ Theory of Employment.

Answer: Keynes\’ Theory of Employment states that the level of employment is determined by aggregate demand. If aggregate demand is high, production increases, leading to higher employment. Conversely, if aggregate demand falls, production decreases, causing unemployment.

28. Read the following case study carefully and answer the questions below.

(i) What is the term used for the total value of visible exports and imports of a country?
Answer: It is called Balance of Trade (BOT).

(ii) What items are included in the Balance of Payments (BOP)?
Answer:

Visible items (Goods trade)
Invisible items (Services, remittances, etc.)
Capital transfers (Foreign investments, loans, etc.)

(iii) What is included under visible items?
Answer: Visible items include physical goods such as machines, textiles, cement, computers, etc.

(iv) Differentiate between Balance of Trade and Balance of Payments.
Answer:

Balance of Trade (BOT): Only includes exports and imports of goods.
Balance of Payments (BOP): Includes BOT along with capital transfers and services.

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