CBSE Past Year Paper Solution - 2019 (Set - 1) | Economics Class 12 - Commerce PDF Download

 Page 1


  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    1 
CBSE 
Class XII Economics 
All India Set 1 – 2019 Solution 
 
 
SECTION A 
 
Answer 1 
The Correct option is C. As by increasing its selling by one more unit i.e. 21, he earns and 
additional of Rs 70. Thus the value of Total Revenue earned by selling total 21 units will be 
770.  
 
Answer 2 
The correct option is D. The change in actual output of Goods X and Y over the two 
periods would be represented by movement from A1 to A2 
OR 
The Marginal Rate of Transformation (MRT) is constant. The Production Possibility Curve, 
so formed, would be a straight line to the origin.  
 
Answer 3 
Under imperfect competition, Average Revenue (AR) remains above Marginal Revenue 
(MR). 
OR 
‘‘For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be 
equal and beyond that level of output Marginal Cost must be rising.’’  
 
Answer 4 
The correct option is C. If the supply curve is a straight line parallel to the vertical axis 
(Y-axis), supply of the good is called as Perfectly Inelastic supply curve. 
 
Answer 5 
 
Positive Economics Normative Economics 
Meaning  It studies what was, what is 
and what would be under 
given set of situations. 
It describes what ought to be. 
Scope It is based on set of collected 
facts. 
It is based on individual 
opinions. 
Examples  The rate of unemployment in 
the economy is 3.6 %. 
The Government should 
generate more employment 
opportunities. 
 
  
Page 2


  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    1 
CBSE 
Class XII Economics 
All India Set 1 – 2019 Solution 
 
 
SECTION A 
 
Answer 1 
The Correct option is C. As by increasing its selling by one more unit i.e. 21, he earns and 
additional of Rs 70. Thus the value of Total Revenue earned by selling total 21 units will be 
770.  
 
Answer 2 
The correct option is D. The change in actual output of Goods X and Y over the two 
periods would be represented by movement from A1 to A2 
OR 
The Marginal Rate of Transformation (MRT) is constant. The Production Possibility Curve, 
so formed, would be a straight line to the origin.  
 
Answer 3 
Under imperfect competition, Average Revenue (AR) remains above Marginal Revenue 
(MR). 
OR 
‘‘For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be 
equal and beyond that level of output Marginal Cost must be rising.’’  
 
Answer 4 
The correct option is C. If the supply curve is a straight line parallel to the vertical axis 
(Y-axis), supply of the good is called as Perfectly Inelastic supply curve. 
 
Answer 5 
 
Positive Economics Normative Economics 
Meaning  It studies what was, what is 
and what would be under 
given set of situations. 
It describes what ought to be. 
Scope It is based on set of collected 
facts. 
It is based on individual 
opinions. 
Examples  The rate of unemployment in 
the economy is 3.6 %. 
The Government should 
generate more employment 
opportunities. 
 
  
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
     
Answer 6 
According to the law of Diminishing Marginal Utility, as we consume more and more units 
of a good, the utility derived from each successive unit goes on decreasing. This law shows 
the relationship between utility derived and the quantity consumed of a good. 
 
Following are some of the assumptions of the Law of Diminishing Marginal Utility: 
1. It assumes that utility can be measured cardinally and can be expressed in quantitative 
terms such as 1, 2, 3 etc. 
2. Quality of the good consumed is assumed to be uniform. 
3. Marginal utility of money remains constant 
4. The consumption process of the good is continuous and there is no time lag between 
consumption of the goods 
5. The consumer must consume a reasonable quantity of the good for the law to hold true.  
 
Let us understand the law with the help of the following schedule: 
  
Units of Oranges Total Utility (in utils) 
TU 
Marginal Utility (in utils) 
MU= TUn-TUn-1 
1 20 20 – 0 = 20 
2 36 36 – 20 = 16 
3 46 46 – 36 = 10 
4 50 50 – 46 = 4 
5 50 50 – 50 = 0 (point of satiety) 
6 44 44 – 50 = -6 
7 40 40 – 44 = -4 
8 38 38 – 48 = -2 
 
In that above schedule we see, that as the consumption of oranges increase the MU goes 
on declining. When the consumer is consuming one orange the utility derived is 20, with 
the next orange consumed, and the utility derived decreases to 16. This continues till the 
consumer reaches the 5
th
 unit of orange where the MU derived is zero. This is called the 
point of satiety. Beyond the 5
th
 unit any further consumption of orange will give the 
consumer negative utility.  
Thus indicating that with every successive unit of a good, MU goes on diminishing. 
OR 
The law of demand states the inverse relationship between price and quantity demanded, 
keeping other factors constant (ceteris paribus).  It simply means that keeping other 
factors constant, an increase in price of commodity results in a fall in demand for that 
commodity and vice versa.  
The law of demand is based on the following assumptions: 
1. Price of substitute goods remain constant 
2. Price of complementary goods remain constant 
Page 3


  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    1 
CBSE 
Class XII Economics 
All India Set 1 – 2019 Solution 
 
 
SECTION A 
 
Answer 1 
The Correct option is C. As by increasing its selling by one more unit i.e. 21, he earns and 
additional of Rs 70. Thus the value of Total Revenue earned by selling total 21 units will be 
770.  
 
Answer 2 
The correct option is D. The change in actual output of Goods X and Y over the two 
periods would be represented by movement from A1 to A2 
OR 
The Marginal Rate of Transformation (MRT) is constant. The Production Possibility Curve, 
so formed, would be a straight line to the origin.  
 
Answer 3 
Under imperfect competition, Average Revenue (AR) remains above Marginal Revenue 
(MR). 
OR 
‘‘For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be 
equal and beyond that level of output Marginal Cost must be rising.’’  
 
Answer 4 
The correct option is C. If the supply curve is a straight line parallel to the vertical axis 
(Y-axis), supply of the good is called as Perfectly Inelastic supply curve. 
 
Answer 5 
 
Positive Economics Normative Economics 
Meaning  It studies what was, what is 
and what would be under 
given set of situations. 
It describes what ought to be. 
Scope It is based on set of collected 
facts. 
It is based on individual 
opinions. 
Examples  The rate of unemployment in 
the economy is 3.6 %. 
The Government should 
generate more employment 
opportunities. 
 
  
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
     
Answer 6 
According to the law of Diminishing Marginal Utility, as we consume more and more units 
of a good, the utility derived from each successive unit goes on decreasing. This law shows 
the relationship between utility derived and the quantity consumed of a good. 
 
Following are some of the assumptions of the Law of Diminishing Marginal Utility: 
1. It assumes that utility can be measured cardinally and can be expressed in quantitative 
terms such as 1, 2, 3 etc. 
2. Quality of the good consumed is assumed to be uniform. 
3. Marginal utility of money remains constant 
4. The consumption process of the good is continuous and there is no time lag between 
consumption of the goods 
5. The consumer must consume a reasonable quantity of the good for the law to hold true.  
 
Let us understand the law with the help of the following schedule: 
  
Units of Oranges Total Utility (in utils) 
TU 
Marginal Utility (in utils) 
MU= TUn-TUn-1 
1 20 20 – 0 = 20 
2 36 36 – 20 = 16 
3 46 46 – 36 = 10 
4 50 50 – 46 = 4 
5 50 50 – 50 = 0 (point of satiety) 
6 44 44 – 50 = -6 
7 40 40 – 44 = -4 
8 38 38 – 48 = -2 
 
In that above schedule we see, that as the consumption of oranges increase the MU goes 
on declining. When the consumer is consuming one orange the utility derived is 20, with 
the next orange consumed, and the utility derived decreases to 16. This continues till the 
consumer reaches the 5
th
 unit of orange where the MU derived is zero. This is called the 
point of satiety. Beyond the 5
th
 unit any further consumption of orange will give the 
consumer negative utility.  
Thus indicating that with every successive unit of a good, MU goes on diminishing. 
OR 
The law of demand states the inverse relationship between price and quantity demanded, 
keeping other factors constant (ceteris paribus).  It simply means that keeping other 
factors constant, an increase in price of commodity results in a fall in demand for that 
commodity and vice versa.  
The law of demand is based on the following assumptions: 
1. Price of substitute goods remain constant 
2. Price of complementary goods remain constant 
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    3 
3. Income of the consumer remains the same 
4. Tastes and preferences of the consumer remain the same 
Let us understand the law with the help of the following schedule: 
  
Price(in Rs) Quantity demanded (in units) 
50 10 
40 20 
30 30 
20 40 
10 50 
 
The table clearly shows that more and more units of the commodity is demanded, when 
price of the commodity falls.  
For instance at price of Rs 50 only 10 units is demanded however when the price falls to 
40, now 20 units are demanded and this continues with the fall in the price. 
Thus showing the inverse relationship between price and demand for a commodity.  
 
Answer 7 
 
With no change in demand, an increase in input price (factors of production) increases the 
cost of production and there by reduces supply.  
In the figure we see that, with an increase in price from OP to OP1 the supply curve shifts 
to the left from SS to S1S1 and supply falls from OQ to OQ1 with demand unchanged.  
Initial equilibrium is established at point E where DD and SS intersect each other. 
However with fall in supply and demand unchanged, the new supply curve S1S1 intersects 
DD at point E1 which is the new equilibrium at OP1 price and OQ1 quantity. This new 
equilibrium indicates that price has increased and quantity has fallen. 
 
Answer 8 
(a) We are given: 
Price elasticity of demand for Good X is (–) 0·2 
Increase in the price of good is 5% 
? d
Percentage change in quantity
E
Percentage change in price
 
Page 4


  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    1 
CBSE 
Class XII Economics 
All India Set 1 – 2019 Solution 
 
 
SECTION A 
 
Answer 1 
The Correct option is C. As by increasing its selling by one more unit i.e. 21, he earns and 
additional of Rs 70. Thus the value of Total Revenue earned by selling total 21 units will be 
770.  
 
Answer 2 
The correct option is D. The change in actual output of Goods X and Y over the two 
periods would be represented by movement from A1 to A2 
OR 
The Marginal Rate of Transformation (MRT) is constant. The Production Possibility Curve, 
so formed, would be a straight line to the origin.  
 
Answer 3 
Under imperfect competition, Average Revenue (AR) remains above Marginal Revenue 
(MR). 
OR 
‘‘For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be 
equal and beyond that level of output Marginal Cost must be rising.’’  
 
Answer 4 
The correct option is C. If the supply curve is a straight line parallel to the vertical axis 
(Y-axis), supply of the good is called as Perfectly Inelastic supply curve. 
 
Answer 5 
 
Positive Economics Normative Economics 
Meaning  It studies what was, what is 
and what would be under 
given set of situations. 
It describes what ought to be. 
Scope It is based on set of collected 
facts. 
It is based on individual 
opinions. 
Examples  The rate of unemployment in 
the economy is 3.6 %. 
The Government should 
generate more employment 
opportunities. 
 
  
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
     
Answer 6 
According to the law of Diminishing Marginal Utility, as we consume more and more units 
of a good, the utility derived from each successive unit goes on decreasing. This law shows 
the relationship between utility derived and the quantity consumed of a good. 
 
Following are some of the assumptions of the Law of Diminishing Marginal Utility: 
1. It assumes that utility can be measured cardinally and can be expressed in quantitative 
terms such as 1, 2, 3 etc. 
2. Quality of the good consumed is assumed to be uniform. 
3. Marginal utility of money remains constant 
4. The consumption process of the good is continuous and there is no time lag between 
consumption of the goods 
5. The consumer must consume a reasonable quantity of the good for the law to hold true.  
 
Let us understand the law with the help of the following schedule: 
  
Units of Oranges Total Utility (in utils) 
TU 
Marginal Utility (in utils) 
MU= TUn-TUn-1 
1 20 20 – 0 = 20 
2 36 36 – 20 = 16 
3 46 46 – 36 = 10 
4 50 50 – 46 = 4 
5 50 50 – 50 = 0 (point of satiety) 
6 44 44 – 50 = -6 
7 40 40 – 44 = -4 
8 38 38 – 48 = -2 
 
In that above schedule we see, that as the consumption of oranges increase the MU goes 
on declining. When the consumer is consuming one orange the utility derived is 20, with 
the next orange consumed, and the utility derived decreases to 16. This continues till the 
consumer reaches the 5
th
 unit of orange where the MU derived is zero. This is called the 
point of satiety. Beyond the 5
th
 unit any further consumption of orange will give the 
consumer negative utility.  
Thus indicating that with every successive unit of a good, MU goes on diminishing. 
OR 
The law of demand states the inverse relationship between price and quantity demanded, 
keeping other factors constant (ceteris paribus).  It simply means that keeping other 
factors constant, an increase in price of commodity results in a fall in demand for that 
commodity and vice versa.  
The law of demand is based on the following assumptions: 
1. Price of substitute goods remain constant 
2. Price of complementary goods remain constant 
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    3 
3. Income of the consumer remains the same 
4. Tastes and preferences of the consumer remain the same 
Let us understand the law with the help of the following schedule: 
  
Price(in Rs) Quantity demanded (in units) 
50 10 
40 20 
30 30 
20 40 
10 50 
 
The table clearly shows that more and more units of the commodity is demanded, when 
price of the commodity falls.  
For instance at price of Rs 50 only 10 units is demanded however when the price falls to 
40, now 20 units are demanded and this continues with the fall in the price. 
Thus showing the inverse relationship between price and demand for a commodity.  
 
Answer 7 
 
With no change in demand, an increase in input price (factors of production) increases the 
cost of production and there by reduces supply.  
In the figure we see that, with an increase in price from OP to OP1 the supply curve shifts 
to the left from SS to S1S1 and supply falls from OQ to OQ1 with demand unchanged.  
Initial equilibrium is established at point E where DD and SS intersect each other. 
However with fall in supply and demand unchanged, the new supply curve S1S1 intersects 
DD at point E1 which is the new equilibrium at OP1 price and OQ1 quantity. This new 
equilibrium indicates that price has increased and quantity has fallen. 
 
Answer 8 
(a) We are given: 
Price elasticity of demand for Good X is (–) 0·2 
Increase in the price of good is 5% 
? d
Percentage change in quantity
E
Percentage change in price
 
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    4 
??
Percentage change in quantity
0.2
5%
 
Fall in the quantity demanded is 1% 
 
(b) Coefficients of price elasticity of demand in ascending order: (–) 0·2, (–) 1·1 and (–) 
3·1 (-) sign indicates the inverse relationship between price and demand.  
OR 
 
 
In the given figure, initially at price 20, quantity demanded is 100 units of the good. With 
the change in the tastes and preferences of the consumer in favour of the commodity, the 
demand curve shifts to the right from DD to D1D1 which is the new demand curve. With 
price constant, the quantity demanded is increased from 100 to 150 units.  
 
Answer 9 
(a) False. AC curve always lies above AVC 
(b) False. AP and MP are ‘inverse’ U shaped curves. 
(c) False. Only under perfect competition AR=MR in imperfect competition, AR lies above 
MR. 
(d) True. It shows that the difference between TC and TVC is equal to TFC which is 
constant. 
 
Answer 10 
(a) Non-Price Competition 
Under Oligopoly, firms are in a position to influence the prices. However with the fear 
of price war, they try and avoid price competition. They follow the policy of price 
rigidity, where the price remains the same irrespective of the change in demand or 
supply.  Firms use advertising, better services to customer etc. to compete with each 
other.  
(b) Few sellers 
Under oligopoly, there are few large sellers. Each firm produces a major part of the 
total output. They control both the prices and the quantity in the market. Each firms 
keeps a close watch on the activities of the rival firms as they are few sellers. 
Page 5


  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    1 
CBSE 
Class XII Economics 
All India Set 1 – 2019 Solution 
 
 
SECTION A 
 
Answer 1 
The Correct option is C. As by increasing its selling by one more unit i.e. 21, he earns and 
additional of Rs 70. Thus the value of Total Revenue earned by selling total 21 units will be 
770.  
 
Answer 2 
The correct option is D. The change in actual output of Goods X and Y over the two 
periods would be represented by movement from A1 to A2 
OR 
The Marginal Rate of Transformation (MRT) is constant. The Production Possibility Curve, 
so formed, would be a straight line to the origin.  
 
Answer 3 
Under imperfect competition, Average Revenue (AR) remains above Marginal Revenue 
(MR). 
OR 
‘‘For a firm to be in equilibrium, Marginal Revenue (MR) and Marginal Cost (MC) must be 
equal and beyond that level of output Marginal Cost must be rising.’’  
 
Answer 4 
The correct option is C. If the supply curve is a straight line parallel to the vertical axis 
(Y-axis), supply of the good is called as Perfectly Inelastic supply curve. 
 
Answer 5 
 
Positive Economics Normative Economics 
Meaning  It studies what was, what is 
and what would be under 
given set of situations. 
It describes what ought to be. 
Scope It is based on set of collected 
facts. 
It is based on individual 
opinions. 
Examples  The rate of unemployment in 
the economy is 3.6 %. 
The Government should 
generate more employment 
opportunities. 
 
  
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
     
Answer 6 
According to the law of Diminishing Marginal Utility, as we consume more and more units 
of a good, the utility derived from each successive unit goes on decreasing. This law shows 
the relationship between utility derived and the quantity consumed of a good. 
 
Following are some of the assumptions of the Law of Diminishing Marginal Utility: 
1. It assumes that utility can be measured cardinally and can be expressed in quantitative 
terms such as 1, 2, 3 etc. 
2. Quality of the good consumed is assumed to be uniform. 
3. Marginal utility of money remains constant 
4. The consumption process of the good is continuous and there is no time lag between 
consumption of the goods 
5. The consumer must consume a reasonable quantity of the good for the law to hold true.  
 
Let us understand the law with the help of the following schedule: 
  
Units of Oranges Total Utility (in utils) 
TU 
Marginal Utility (in utils) 
MU= TUn-TUn-1 
1 20 20 – 0 = 20 
2 36 36 – 20 = 16 
3 46 46 – 36 = 10 
4 50 50 – 46 = 4 
5 50 50 – 50 = 0 (point of satiety) 
6 44 44 – 50 = -6 
7 40 40 – 44 = -4 
8 38 38 – 48 = -2 
 
In that above schedule we see, that as the consumption of oranges increase the MU goes 
on declining. When the consumer is consuming one orange the utility derived is 20, with 
the next orange consumed, and the utility derived decreases to 16. This continues till the 
consumer reaches the 5
th
 unit of orange where the MU derived is zero. This is called the 
point of satiety. Beyond the 5
th
 unit any further consumption of orange will give the 
consumer negative utility.  
Thus indicating that with every successive unit of a good, MU goes on diminishing. 
OR 
The law of demand states the inverse relationship between price and quantity demanded, 
keeping other factors constant (ceteris paribus).  It simply means that keeping other 
factors constant, an increase in price of commodity results in a fall in demand for that 
commodity and vice versa.  
The law of demand is based on the following assumptions: 
1. Price of substitute goods remain constant 
2. Price of complementary goods remain constant 
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    3 
3. Income of the consumer remains the same 
4. Tastes and preferences of the consumer remain the same 
Let us understand the law with the help of the following schedule: 
  
Price(in Rs) Quantity demanded (in units) 
50 10 
40 20 
30 30 
20 40 
10 50 
 
The table clearly shows that more and more units of the commodity is demanded, when 
price of the commodity falls.  
For instance at price of Rs 50 only 10 units is demanded however when the price falls to 
40, now 20 units are demanded and this continues with the fall in the price. 
Thus showing the inverse relationship between price and demand for a commodity.  
 
Answer 7 
 
With no change in demand, an increase in input price (factors of production) increases the 
cost of production and there by reduces supply.  
In the figure we see that, with an increase in price from OP to OP1 the supply curve shifts 
to the left from SS to S1S1 and supply falls from OQ to OQ1 with demand unchanged.  
Initial equilibrium is established at point E where DD and SS intersect each other. 
However with fall in supply and demand unchanged, the new supply curve S1S1 intersects 
DD at point E1 which is the new equilibrium at OP1 price and OQ1 quantity. This new 
equilibrium indicates that price has increased and quantity has fallen. 
 
Answer 8 
(a) We are given: 
Price elasticity of demand for Good X is (–) 0·2 
Increase in the price of good is 5% 
? d
Percentage change in quantity
E
Percentage change in price
 
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    4 
??
Percentage change in quantity
0.2
5%
 
Fall in the quantity demanded is 1% 
 
(b) Coefficients of price elasticity of demand in ascending order: (–) 0·2, (–) 1·1 and (–) 
3·1 (-) sign indicates the inverse relationship between price and demand.  
OR 
 
 
In the given figure, initially at price 20, quantity demanded is 100 units of the good. With 
the change in the tastes and preferences of the consumer in favour of the commodity, the 
demand curve shifts to the right from DD to D1D1 which is the new demand curve. With 
price constant, the quantity demanded is increased from 100 to 150 units.  
 
Answer 9 
(a) False. AC curve always lies above AVC 
(b) False. AP and MP are ‘inverse’ U shaped curves. 
(c) False. Only under perfect competition AR=MR in imperfect competition, AR lies above 
MR. 
(d) True. It shows that the difference between TC and TVC is equal to TFC which is 
constant. 
 
Answer 10 
(a) Non-Price Competition 
Under Oligopoly, firms are in a position to influence the prices. However with the fear 
of price war, they try and avoid price competition. They follow the policy of price 
rigidity, where the price remains the same irrespective of the change in demand or 
supply.  Firms use advertising, better services to customer etc. to compete with each 
other.  
(b) Few sellers 
Under oligopoly, there are few large sellers. Each firm produces a major part of the 
total output. They control both the prices and the quantity in the market. Each firms 
keeps a close watch on the activities of the rival firms as they are few sellers. 
  
 
CBSE XII  |  Economics 
Board Paper 2019 – All India - Set 1 Solution    
 
    5 
Answer 11 
(a) In this phase, every additional variable factor increases the total output. Total Product 
(TP) increases at an increasing rate and the Marginal Product also increases and reaches a 
maximum point which marks the end of this phase. 
(b) Reasons for the decreasing returns to a variable factor are: 
1. Over use of fixed factor- As more and more units of the variable factor is employed 
combined with the fixed factor, the fixed factor gets over utilised, it suffers from wear 
and tear and loses its efficiency. 
2. Imperfect substitutes- factors of productions are imperfect substitutes for each other. 
More and more units of labour cannot be used for capital. Hence there occurs 
diminishing returns if only variable factor is increased to increase output. 
 
Answer 12 
(a) 
 
 
 
 
 
 
 
 
 
 
 
Each point on the indifference curve (a, b, c...) shows the combination of good X and good 
Y. As we move along the curve to the right, the slope of IC or MRS decreases. This is 
because as the consumer consumes more and more of good, MU falls and the MU of the 
sacrificed good rises.  Thus as we move down the IC, MRS diminishes. 
 
(b) 
 
 
 
 
 
 
 
 
 
 
 
Higher indifference curve (IC) to the right and above the other indicates higher level of 
satisfaction. In the figure we can see that IC5 indicates highest level of satisfaction and IC1 
indicates the lowest level of satisfaction 
OR