CBSE Past Year Paper March - 2015(Foreign(SET -1)), Marking Scheme, Class 12 | Additional Study Material for Commerce PDF Download

 Page 1


Pg. 1 
 
SENIOR  SCHOOL  CERTIFICATE  EXAMINATION 
MARCH-2015 
MARKING SCHEME – ECONOMICS (FOREIGN) 
(SET-I) 
Expected Answers / Value Points 
 
GENERAL INSTRUCTIONS : 
1. Please  examine  each  part  of  a  question  carefully  and  allocate  the  marks  
allotted  for  the  part  as  given  in  the  marking  scheme  below.  TOTAL  MARKS  
FOR  ANY  ANSWER  MAY  BE  PUT  IN  A  CIRCLE  ON  THE  LEFT  SIDE  WHERE  THE  
ANSWER  ENDS. 
2. Expected suggested answers have been given in the Marking Scheme. To evaluate 
the answers the value points indicated in the marking scheme be followed.  
3. For questions asking the candidate to explain or define, the detailed explanations 
and definitions have been indicated alongwith the value points.   
4. For mere arithmetical errors, there should be minimal deduction. Only ½ mark be 
deducted for such an error. 
5. Wherever  only  two / three  or  a  “given”  number  of  examples / factors / points   
are   expected   only   the   first  two / three  or  expected  number  should  be  
read.  The rest are irrelevant and must not be examined. 
6. There  should  be  no  effort  at  “moderation”  of  the  marks  by  the  evaluating  
teachers.  The  actual  total  marks  obtained  by  the  candidate  may  be  of  no  
concern  to  the  evaluators. 
7. Higher order thinking ability questions are assessing student’s understanding / 
analytical ability. 
General  Note  : In  case  of  numerical  question  no  mark  is  to  be  given  if  only  
the  final  answer  is  given. 
 
C1 Expected Answer / Value Points 
Distribution 
of Marks 
1 Utility refers to satisfaction from the consumption of goods.   1 
2 (a) Substitutes  1 
3 (b)  Does not shift  1 
 
 
 
 
 
 
 
Page 2


Pg. 1 
 
SENIOR  SCHOOL  CERTIFICATE  EXAMINATION 
MARCH-2015 
MARKING SCHEME – ECONOMICS (FOREIGN) 
(SET-I) 
Expected Answers / Value Points 
 
GENERAL INSTRUCTIONS : 
1. Please  examine  each  part  of  a  question  carefully  and  allocate  the  marks  
allotted  for  the  part  as  given  in  the  marking  scheme  below.  TOTAL  MARKS  
FOR  ANY  ANSWER  MAY  BE  PUT  IN  A  CIRCLE  ON  THE  LEFT  SIDE  WHERE  THE  
ANSWER  ENDS. 
2. Expected suggested answers have been given in the Marking Scheme. To evaluate 
the answers the value points indicated in the marking scheme be followed.  
3. For questions asking the candidate to explain or define, the detailed explanations 
and definitions have been indicated alongwith the value points.   
4. For mere arithmetical errors, there should be minimal deduction. Only ½ mark be 
deducted for such an error. 
5. Wherever  only  two / three  or  a  “given”  number  of  examples / factors / points   
are   expected   only   the   first  two / three  or  expected  number  should  be  
read.  The rest are irrelevant and must not be examined. 
6. There  should  be  no  effort  at  “moderation”  of  the  marks  by  the  evaluating  
teachers.  The  actual  total  marks  obtained  by  the  candidate  may  be  of  no  
concern  to  the  evaluators. 
7. Higher order thinking ability questions are assessing student’s understanding / 
analytical ability. 
General  Note  : In  case  of  numerical  question  no  mark  is  to  be  given  if  only  
the  final  answer  is  given. 
 
C1 Expected Answer / Value Points 
Distribution 
of Marks 
1 Utility refers to satisfaction from the consumption of goods.   1 
2 (a) Substitutes  1 
3 (b)  Does not shift  1 
 
 
 
 
 
 
 
Pg. 2 
 
 
4 Good X 
(Units) 
Good Y 
(Units) 
MRT 
0 4 - 
1 3 1Y:1X 
2 2 1Y:1X 
3 1 1Y:1X 
4 0 1Y:1X 
Since MRT is constant, the PP curve will be downward sloping straight line.  
(Diagram not required) 
 
 
 
 
 
1½  
1½ 
 
5 Education raises efficiency by making a worker a skilled worker. This will 
increase production potential shifting the PP curve upwards.  
(Diagram not required) 
OR 
Inflow of foreign capital into the country means increase in resources. This 
will raise production potential of the country leading to upward shift of PP 
curve. 
(Diagram not required) 
 
3 
 
 
 
 
3 
6 The measure of price elasticity of demand has a minus sign because there is 
inverse relation between price and demand, while the measure of price 
elasticity of supply has plus sign because there is direct relation between 
price and supply of a good. 
 
3 
7 This feature ensures that firms in a perfectly competitive market earn just 
the normal profit in the long run. New firms enter when the existing firms 
are earning above normal profit. This raises industry’s output, brings down 
market price and brings profit back to the normal. Existing firms start 
leaving when facing loss. This lowers industry’s output, raises market price, 
wipes out losses till firms are earning just the normal profit.    
 
3 
8 
 
 
 
 
 
 
 
 
 
 
 
Maximum price ceiling refers to imposition of upper limit on the price of a 
good by the government. For example OP is price ceiling while OP
1
 is 
equilibrium price. Producers are not allowed to sell good at a price greater 
than OP. The ceiling is normally imposed on goods needed by masses, like 
wheat, rice, sugar etc. 
 
 
 
 
 
 
 
1 
 
 
2 
 
 
Page 3


Pg. 1 
 
SENIOR  SCHOOL  CERTIFICATE  EXAMINATION 
MARCH-2015 
MARKING SCHEME – ECONOMICS (FOREIGN) 
(SET-I) 
Expected Answers / Value Points 
 
GENERAL INSTRUCTIONS : 
1. Please  examine  each  part  of  a  question  carefully  and  allocate  the  marks  
allotted  for  the  part  as  given  in  the  marking  scheme  below.  TOTAL  MARKS  
FOR  ANY  ANSWER  MAY  BE  PUT  IN  A  CIRCLE  ON  THE  LEFT  SIDE  WHERE  THE  
ANSWER  ENDS. 
2. Expected suggested answers have been given in the Marking Scheme. To evaluate 
the answers the value points indicated in the marking scheme be followed.  
3. For questions asking the candidate to explain or define, the detailed explanations 
and definitions have been indicated alongwith the value points.   
4. For mere arithmetical errors, there should be minimal deduction. Only ½ mark be 
deducted for such an error. 
5. Wherever  only  two / three  or  a  “given”  number  of  examples / factors / points   
are   expected   only   the   first  two / three  or  expected  number  should  be  
read.  The rest are irrelevant and must not be examined. 
6. There  should  be  no  effort  at  “moderation”  of  the  marks  by  the  evaluating  
teachers.  The  actual  total  marks  obtained  by  the  candidate  may  be  of  no  
concern  to  the  evaluators. 
7. Higher order thinking ability questions are assessing student’s understanding / 
analytical ability. 
General  Note  : In  case  of  numerical  question  no  mark  is  to  be  given  if  only  
the  final  answer  is  given. 
 
C1 Expected Answer / Value Points 
Distribution 
of Marks 
1 Utility refers to satisfaction from the consumption of goods.   1 
2 (a) Substitutes  1 
3 (b)  Does not shift  1 
 
 
 
 
 
 
 
Pg. 2 
 
 
4 Good X 
(Units) 
Good Y 
(Units) 
MRT 
0 4 - 
1 3 1Y:1X 
2 2 1Y:1X 
3 1 1Y:1X 
4 0 1Y:1X 
Since MRT is constant, the PP curve will be downward sloping straight line.  
(Diagram not required) 
 
 
 
 
 
1½  
1½ 
 
5 Education raises efficiency by making a worker a skilled worker. This will 
increase production potential shifting the PP curve upwards.  
(Diagram not required) 
OR 
Inflow of foreign capital into the country means increase in resources. This 
will raise production potential of the country leading to upward shift of PP 
curve. 
(Diagram not required) 
 
3 
 
 
 
 
3 
6 The measure of price elasticity of demand has a minus sign because there is 
inverse relation between price and demand, while the measure of price 
elasticity of supply has plus sign because there is direct relation between 
price and supply of a good. 
 
3 
7 This feature ensures that firms in a perfectly competitive market earn just 
the normal profit in the long run. New firms enter when the existing firms 
are earning above normal profit. This raises industry’s output, brings down 
market price and brings profit back to the normal. Existing firms start 
leaving when facing loss. This lowers industry’s output, raises market price, 
wipes out losses till firms are earning just the normal profit.    
 
3 
8 
 
 
 
 
 
 
 
 
 
 
 
Maximum price ceiling refers to imposition of upper limit on the price of a 
good by the government. For example OP is price ceiling while OP
1
 is 
equilibrium price. Producers are not allowed to sell good at a price greater 
than OP. The ceiling is normally imposed on goods needed by masses, like 
wheat, rice, sugar etc. 
 
 
 
 
 
 
 
1 
 
 
2 
 
 
Pg. 3 
 
 
For blind Candidates Only : 
Maximum price ceiling refers to imposition of upper limit on the price of a 
good by the government while minimum price ceiling refers to imposition of 
a lower limit on the price of a good by government. 
 
 
3  
9 Price Exp. Demand 
4 400 100 
5 400 80 
 
 
 
 
 
 
  
  
  
        
 
   
 
   
 
  
                
 
1½  
 
1 
1 
½  
10 Supply refers to the quantity of a good the producers are willing to produce 
at a price during a period of time.  
Technological progress, by raising productivity, brings down per unit cost. 
Price remaining unchanged, profit increases. This induces producers to 
supply more. 
OR 
“Change in supply” refers to increase / decrease in supply due to a change 
in any factor other than the own price of the good. 
Imposition of tax raises cost. Price remaining unchanged, profit falls. So 
producers supply less.   
1 
3 
 
 
1 
3 
11 Let the two goods be X and Y. Given Px =1 , Py = 1 and MRS = 2, the 
consumer is said to be in equilibrium when  
MRS = 
 
 
 
 
 
Substituting values we find that  
2 > 
 
 
 or MRS > 
 
 
 
 
 
MRS > 
 
 
 
 
 means that consumer is willing to pay more for one more unit of X 
as compared to what the market demands.  
- The consumer will buy more and more of X.  
- As a result MRS will fall due to the Law of Diminishing Marginal 
Utility.  
- This will continue till MRS =  
 
 
 
 
 and consumer is in equilibrium. 
(Diagram not required) 
 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
3 
 
 
 
 
 
 
Page 4


Pg. 1 
 
SENIOR  SCHOOL  CERTIFICATE  EXAMINATION 
MARCH-2015 
MARKING SCHEME – ECONOMICS (FOREIGN) 
(SET-I) 
Expected Answers / Value Points 
 
GENERAL INSTRUCTIONS : 
1. Please  examine  each  part  of  a  question  carefully  and  allocate  the  marks  
allotted  for  the  part  as  given  in  the  marking  scheme  below.  TOTAL  MARKS  
FOR  ANY  ANSWER  MAY  BE  PUT  IN  A  CIRCLE  ON  THE  LEFT  SIDE  WHERE  THE  
ANSWER  ENDS. 
2. Expected suggested answers have been given in the Marking Scheme. To evaluate 
the answers the value points indicated in the marking scheme be followed.  
3. For questions asking the candidate to explain or define, the detailed explanations 
and definitions have been indicated alongwith the value points.   
4. For mere arithmetical errors, there should be minimal deduction. Only ½ mark be 
deducted for such an error. 
5. Wherever  only  two / three  or  a  “given”  number  of  examples / factors / points   
are   expected   only   the   first  two / three  or  expected  number  should  be  
read.  The rest are irrelevant and must not be examined. 
6. There  should  be  no  effort  at  “moderation”  of  the  marks  by  the  evaluating  
teachers.  The  actual  total  marks  obtained  by  the  candidate  may  be  of  no  
concern  to  the  evaluators. 
7. Higher order thinking ability questions are assessing student’s understanding / 
analytical ability. 
General  Note  : In  case  of  numerical  question  no  mark  is  to  be  given  if  only  
the  final  answer  is  given. 
 
C1 Expected Answer / Value Points 
Distribution 
of Marks 
1 Utility refers to satisfaction from the consumption of goods.   1 
2 (a) Substitutes  1 
3 (b)  Does not shift  1 
 
 
 
 
 
 
 
Pg. 2 
 
 
4 Good X 
(Units) 
Good Y 
(Units) 
MRT 
0 4 - 
1 3 1Y:1X 
2 2 1Y:1X 
3 1 1Y:1X 
4 0 1Y:1X 
Since MRT is constant, the PP curve will be downward sloping straight line.  
(Diagram not required) 
 
 
 
 
 
1½  
1½ 
 
5 Education raises efficiency by making a worker a skilled worker. This will 
increase production potential shifting the PP curve upwards.  
(Diagram not required) 
OR 
Inflow of foreign capital into the country means increase in resources. This 
will raise production potential of the country leading to upward shift of PP 
curve. 
(Diagram not required) 
 
3 
 
 
 
 
3 
6 The measure of price elasticity of demand has a minus sign because there is 
inverse relation between price and demand, while the measure of price 
elasticity of supply has plus sign because there is direct relation between 
price and supply of a good. 
 
3 
7 This feature ensures that firms in a perfectly competitive market earn just 
the normal profit in the long run. New firms enter when the existing firms 
are earning above normal profit. This raises industry’s output, brings down 
market price and brings profit back to the normal. Existing firms start 
leaving when facing loss. This lowers industry’s output, raises market price, 
wipes out losses till firms are earning just the normal profit.    
 
3 
8 
 
 
 
 
 
 
 
 
 
 
 
Maximum price ceiling refers to imposition of upper limit on the price of a 
good by the government. For example OP is price ceiling while OP
1
 is 
equilibrium price. Producers are not allowed to sell good at a price greater 
than OP. The ceiling is normally imposed on goods needed by masses, like 
wheat, rice, sugar etc. 
 
 
 
 
 
 
 
1 
 
 
2 
 
 
Pg. 3 
 
 
For blind Candidates Only : 
Maximum price ceiling refers to imposition of upper limit on the price of a 
good by the government while minimum price ceiling refers to imposition of 
a lower limit on the price of a good by government. 
 
 
3  
9 Price Exp. Demand 
4 400 100 
5 400 80 
 
 
 
 
 
 
  
  
  
        
 
   
 
   
 
  
                
 
1½  
 
1 
1 
½  
10 Supply refers to the quantity of a good the producers are willing to produce 
at a price during a period of time.  
Technological progress, by raising productivity, brings down per unit cost. 
Price remaining unchanged, profit increases. This induces producers to 
supply more. 
OR 
“Change in supply” refers to increase / decrease in supply due to a change 
in any factor other than the own price of the good. 
Imposition of tax raises cost. Price remaining unchanged, profit falls. So 
producers supply less.   
1 
3 
 
 
1 
3 
11 Let the two goods be X and Y. Given Px =1 , Py = 1 and MRS = 2, the 
consumer is said to be in equilibrium when  
MRS = 
 
 
 
 
 
Substituting values we find that  
2 > 
 
 
 or MRS > 
 
 
 
 
 
MRS > 
 
 
 
 
 means that consumer is willing to pay more for one more unit of X 
as compared to what the market demands.  
- The consumer will buy more and more of X.  
- As a result MRS will fall due to the Law of Diminishing Marginal 
Utility.  
- This will continue till MRS =  
 
 
 
 
 and consumer is in equilibrium. 
(Diagram not required) 
 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
3 
 
 
 
 
 
 
Pg. 4 
 
OR 
Given  
 
  = 2 ,  
 
 = 1 and   
 
=4 ,   
 
  , the consumer will be in 
equilibrium when  
  
 
 
 
 
  
 
 
 
 
Substituting values, we find that consumer is not in equilibrium because : 
    
 
 
  <   
 
 
   Or   
  
 
 
 
 
  
 
 
 
 
Since per rupee   
 
 is lower as compared to per rupee   
 
 , the 
consumer will buy less of X  and more of Y. As a result   
 
 will rise and 
  
 
 will fall till  
  
 
 
 
     
  
 
 
 
 are equal again and the consumer is in 
equilibrium.  
(Diagram not required) 
 
 
 
 
 
 
 
3 
 
 
3 
12 
The Phases are : 
Phase : I TP rises at  increasing rate i.e. upto A  
Phase : II TP rises at decreasing rate  i.e.  between A and B. 
Phase : III TP falls i.e. after B.  
Reasons : 
Phase I : Initially variable input is too small as compared to the fixed input, 
As production starts there is efficient use of the fixed input leading to rise  
in productivity of the variable input on account of division of labour. As a 
result TP rises at increasing rate. 
Phase II : After a level of output, pressure on fixed input leads to fall in 
productivity of the variable input. As a result TP continues to rise but at a 
decreasing rate. 
Phase III : The amount of variable input becomes too large in comparison to 
the fixed input causing decline in TP.  
 
 
 
 
 
 
 
 
 
 
 
½x3  
 
 
 
 
 
 
1x3 
 
 
 
 
 
 
1½  
 
 
 
 
 
 
 TP A 
B 
Page 5


Pg. 1 
 
SENIOR  SCHOOL  CERTIFICATE  EXAMINATION 
MARCH-2015 
MARKING SCHEME – ECONOMICS (FOREIGN) 
(SET-I) 
Expected Answers / Value Points 
 
GENERAL INSTRUCTIONS : 
1. Please  examine  each  part  of  a  question  carefully  and  allocate  the  marks  
allotted  for  the  part  as  given  in  the  marking  scheme  below.  TOTAL  MARKS  
FOR  ANY  ANSWER  MAY  BE  PUT  IN  A  CIRCLE  ON  THE  LEFT  SIDE  WHERE  THE  
ANSWER  ENDS. 
2. Expected suggested answers have been given in the Marking Scheme. To evaluate 
the answers the value points indicated in the marking scheme be followed.  
3. For questions asking the candidate to explain or define, the detailed explanations 
and definitions have been indicated alongwith the value points.   
4. For mere arithmetical errors, there should be minimal deduction. Only ½ mark be 
deducted for such an error. 
5. Wherever  only  two / three  or  a  “given”  number  of  examples / factors / points   
are   expected   only   the   first  two / three  or  expected  number  should  be  
read.  The rest are irrelevant and must not be examined. 
6. There  should  be  no  effort  at  “moderation”  of  the  marks  by  the  evaluating  
teachers.  The  actual  total  marks  obtained  by  the  candidate  may  be  of  no  
concern  to  the  evaluators. 
7. Higher order thinking ability questions are assessing student’s understanding / 
analytical ability. 
General  Note  : In  case  of  numerical  question  no  mark  is  to  be  given  if  only  
the  final  answer  is  given. 
 
C1 Expected Answer / Value Points 
Distribution 
of Marks 
1 Utility refers to satisfaction from the consumption of goods.   1 
2 (a) Substitutes  1 
3 (b)  Does not shift  1 
 
 
 
 
 
 
 
Pg. 2 
 
 
4 Good X 
(Units) 
Good Y 
(Units) 
MRT 
0 4 - 
1 3 1Y:1X 
2 2 1Y:1X 
3 1 1Y:1X 
4 0 1Y:1X 
Since MRT is constant, the PP curve will be downward sloping straight line.  
(Diagram not required) 
 
 
 
 
 
1½  
1½ 
 
5 Education raises efficiency by making a worker a skilled worker. This will 
increase production potential shifting the PP curve upwards.  
(Diagram not required) 
OR 
Inflow of foreign capital into the country means increase in resources. This 
will raise production potential of the country leading to upward shift of PP 
curve. 
(Diagram not required) 
 
3 
 
 
 
 
3 
6 The measure of price elasticity of demand has a minus sign because there is 
inverse relation between price and demand, while the measure of price 
elasticity of supply has plus sign because there is direct relation between 
price and supply of a good. 
 
3 
7 This feature ensures that firms in a perfectly competitive market earn just 
the normal profit in the long run. New firms enter when the existing firms 
are earning above normal profit. This raises industry’s output, brings down 
market price and brings profit back to the normal. Existing firms start 
leaving when facing loss. This lowers industry’s output, raises market price, 
wipes out losses till firms are earning just the normal profit.    
 
3 
8 
 
 
 
 
 
 
 
 
 
 
 
Maximum price ceiling refers to imposition of upper limit on the price of a 
good by the government. For example OP is price ceiling while OP
1
 is 
equilibrium price. Producers are not allowed to sell good at a price greater 
than OP. The ceiling is normally imposed on goods needed by masses, like 
wheat, rice, sugar etc. 
 
 
 
 
 
 
 
1 
 
 
2 
 
 
Pg. 3 
 
 
For blind Candidates Only : 
Maximum price ceiling refers to imposition of upper limit on the price of a 
good by the government while minimum price ceiling refers to imposition of 
a lower limit on the price of a good by government. 
 
 
3  
9 Price Exp. Demand 
4 400 100 
5 400 80 
 
 
 
 
 
 
  
  
  
        
 
   
 
   
 
  
                
 
1½  
 
1 
1 
½  
10 Supply refers to the quantity of a good the producers are willing to produce 
at a price during a period of time.  
Technological progress, by raising productivity, brings down per unit cost. 
Price remaining unchanged, profit increases. This induces producers to 
supply more. 
OR 
“Change in supply” refers to increase / decrease in supply due to a change 
in any factor other than the own price of the good. 
Imposition of tax raises cost. Price remaining unchanged, profit falls. So 
producers supply less.   
1 
3 
 
 
1 
3 
11 Let the two goods be X and Y. Given Px =1 , Py = 1 and MRS = 2, the 
consumer is said to be in equilibrium when  
MRS = 
 
 
 
 
 
Substituting values we find that  
2 > 
 
 
 or MRS > 
 
 
 
 
 
MRS > 
 
 
 
 
 means that consumer is willing to pay more for one more unit of X 
as compared to what the market demands.  
- The consumer will buy more and more of X.  
- As a result MRS will fall due to the Law of Diminishing Marginal 
Utility.  
- This will continue till MRS =  
 
 
 
 
 and consumer is in equilibrium. 
(Diagram not required) 
 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
3 
 
 
 
 
 
 
Pg. 4 
 
OR 
Given  
 
  = 2 ,  
 
 = 1 and   
 
=4 ,   
 
  , the consumer will be in 
equilibrium when  
  
 
 
 
 
  
 
 
 
 
Substituting values, we find that consumer is not in equilibrium because : 
    
 
 
  <   
 
 
   Or   
  
 
 
 
 
  
 
 
 
 
Since per rupee   
 
 is lower as compared to per rupee   
 
 , the 
consumer will buy less of X  and more of Y. As a result   
 
 will rise and 
  
 
 will fall till  
  
 
 
 
     
  
 
 
 
 are equal again and the consumer is in 
equilibrium.  
(Diagram not required) 
 
 
 
 
 
 
 
3 
 
 
3 
12 
The Phases are : 
Phase : I TP rises at  increasing rate i.e. upto A  
Phase : II TP rises at decreasing rate  i.e.  between A and B. 
Phase : III TP falls i.e. after B.  
Reasons : 
Phase I : Initially variable input is too small as compared to the fixed input, 
As production starts there is efficient use of the fixed input leading to rise  
in productivity of the variable input on account of division of labour. As a 
result TP rises at increasing rate. 
Phase II : After a level of output, pressure on fixed input leads to fall in 
productivity of the variable input. As a result TP continues to rise but at a 
decreasing rate. 
Phase III : The amount of variable input becomes too large in comparison to 
the fixed input causing decline in TP.  
 
 
 
 
 
 
 
 
 
 
 
½x3  
 
 
 
 
 
 
1x3 
 
 
 
 
 
 
1½  
 
 
 
 
 
 
 TP A 
B 
Pg. 5 
 
 
For Blind Candidate Only 
 Variable input 
(Units) 
TP  
(Unit) 
MP                
(Unit) 
 
1 6 6  
2 20 14  
3 32 12  
4 40 8 
5 40 0 
6 37 -3 
 
Phases : 
(1) TP increases at increasing rate upto 2 units. 
(2) TP increases at decreasing rate upto 5 units. 
(3) TP falls from 6 unit onwards. 
Causes : 
Same as above  
 
 
 
 
 
 
1½  
 
 
½x3 
 
3 
13 The equilibrium conditions are : 
i) MC = MR and     (ii) MC > MR after equilibrium. 
Suppose MC > MR. In this situation it will be profitable for the firm to 
produce more or less depending upon relative changes in MC and MR till 
MC = MR. Suppose MC < MR. It will be profitable for the producer to 
produce more till MC = MR. 
MC = MR is a necessary  condition but not sufficient to ensure equilibrium. 
If after MC= MR output, MC<MR if more is produced, it will be profitable 
for the firm to produce more. If after MC= MR output MC > MR, it will not 
be profitable to produce more and the firm will be in equilibrium. 
(Diagram not required) 
 
 
 
3 
 
 
 
3 
14 - Given equilibrium, demand ‘decreases.’ 
- Price remaining unchanged, excess supply emerges. 
- Excess supply leads to competition among sellers causing price to fall. 
- Fall in price causes rise (expansion) in demand and fall (contraction) in 
supply. 
- The price continues to fall till the market is in equilibrium again at a lower 
price.  
(Diagram not required) 
 
 
 
 
 
 
 
 
6