CBSE Past Year Paper Solution - 2018 (Set - 3) | Economics for Grade 12 PDF Download

 Page 1


  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
    1 
CBSE 
Class XII Economics 
All India Board Paper Set 3 – 2018 Solution 
 
SECTION A 
Answer 1 
The correct answer is option (d).  
TC = TFC + TVC 
TC = 30 + AVC×Q 
TC = 30 + 3×100 
TC = Rs 330 
 
Answer 2 
The correct answer is option (a).  
When Average product is maximum, the Marginal product is equal to Average product.  
 
Answer 3 
Example of Positive Economics which is based on facts and purely objective: Lower income 
taxes result in lower unemployment.  
 
Answer 4 
Fixed cost is the cost which is incurred on buying fixed factors of production. It does not vary 
with the level of output.  
 
Answer 5 
The central problem of “choice of technique” is related to the allocation of resources to 
production techniques which have to be employed during the production of goods and 
services. The production of goods and services can take place in two ways –labour-
intensive technique and capital intensive technique. The labour-intensive technique 
involves more of labour and less of capital in the output, while it is reverse for the capital 
intensive technique.  
(OR) 
The central problem for whom to produce is the problem of allocation of resources. This 
relates to the distribution of national products among the various individuals. It is true 
that sharing of national product is directly influenced by the income of an individual. 
People having higher income will definitely possess higher purchasing capacities. 
Therefore, for proper and equal distribution of goods and services, there should be 
equality of income among all the people of the society. Thus, we can observe that every 
economy faces the problem of allocating its national resources to the production of 
different goods and services and of distributing the produced goods and services among 
the individuals within the economy. 
 
Page 2


  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
    1 
CBSE 
Class XII Economics 
All India Board Paper Set 3 – 2018 Solution 
 
SECTION A 
Answer 1 
The correct answer is option (d).  
TC = TFC + TVC 
TC = 30 + AVC×Q 
TC = 30 + 3×100 
TC = Rs 330 
 
Answer 2 
The correct answer is option (a).  
When Average product is maximum, the Marginal product is equal to Average product.  
 
Answer 3 
Example of Positive Economics which is based on facts and purely objective: Lower income 
taxes result in lower unemployment.  
 
Answer 4 
Fixed cost is the cost which is incurred on buying fixed factors of production. It does not vary 
with the level of output.  
 
Answer 5 
The central problem of “choice of technique” is related to the allocation of resources to 
production techniques which have to be employed during the production of goods and 
services. The production of goods and services can take place in two ways –labour-
intensive technique and capital intensive technique. The labour-intensive technique 
involves more of labour and less of capital in the output, while it is reverse for the capital 
intensive technique.  
(OR) 
The central problem for whom to produce is the problem of allocation of resources. This 
relates to the distribution of national products among the various individuals. It is true 
that sharing of national product is directly influenced by the income of an individual. 
People having higher income will definitely possess higher purchasing capacities. 
Therefore, for proper and equal distribution of goods and services, there should be 
equality of income among all the people of the society. Thus, we can observe that every 
economy faces the problem of allocating its national resources to the production of 
different goods and services and of distributing the produced goods and services among 
the individuals within the economy. 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
Answer 6 
When a large change in the price does not bring so much change in the demand, the 
demand is said to be inelastic. In this situation, percentage change in demand is lesser 
than the percentage change in price.  
 
Inelastic demand Perfectly inelastic demand 
When a large change in the price does not 
bring so much change in the demand, the 
demand is said to be inelastic. 
When quantity demanded does not change 
at all as a result of change in price of the 
commodity, demand of that commodity is 
said to be perfectly inelastic.  
 
The slope of the inelastic demand curve is 
steep.  
 
The demand curve is parallel to Y-axis.  
Elasticity of demand is less than one. Elasticity of demand is zero. 
 
 
Answer 7 
Given that  
 
Price (P) Quantity (Q) 
P0= 4 Q0= 100 
P1= 5 Q1= 120 
 
QQ
10
100
Q
0
E=
s
PP
10
100
P
0
120 100
100
100
 E =
s
54
100
4
E
s
0.8
1
?
?
?
?
?
?
?
?
?
?
?
?
 
 
Therefore, elasticity of supply is inelastic.  
 
 
 
Page 3


  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
    1 
CBSE 
Class XII Economics 
All India Board Paper Set 3 – 2018 Solution 
 
SECTION A 
Answer 1 
The correct answer is option (d).  
TC = TFC + TVC 
TC = 30 + AVC×Q 
TC = 30 + 3×100 
TC = Rs 330 
 
Answer 2 
The correct answer is option (a).  
When Average product is maximum, the Marginal product is equal to Average product.  
 
Answer 3 
Example of Positive Economics which is based on facts and purely objective: Lower income 
taxes result in lower unemployment.  
 
Answer 4 
Fixed cost is the cost which is incurred on buying fixed factors of production. It does not vary 
with the level of output.  
 
Answer 5 
The central problem of “choice of technique” is related to the allocation of resources to 
production techniques which have to be employed during the production of goods and 
services. The production of goods and services can take place in two ways –labour-
intensive technique and capital intensive technique. The labour-intensive technique 
involves more of labour and less of capital in the output, while it is reverse for the capital 
intensive technique.  
(OR) 
The central problem for whom to produce is the problem of allocation of resources. This 
relates to the distribution of national products among the various individuals. It is true 
that sharing of national product is directly influenced by the income of an individual. 
People having higher income will definitely possess higher purchasing capacities. 
Therefore, for proper and equal distribution of goods and services, there should be 
equality of income among all the people of the society. Thus, we can observe that every 
economy faces the problem of allocating its national resources to the production of 
different goods and services and of distributing the produced goods and services among 
the individuals within the economy. 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
Answer 6 
When a large change in the price does not bring so much change in the demand, the 
demand is said to be inelastic. In this situation, percentage change in demand is lesser 
than the percentage change in price.  
 
Inelastic demand Perfectly inelastic demand 
When a large change in the price does not 
bring so much change in the demand, the 
demand is said to be inelastic. 
When quantity demanded does not change 
at all as a result of change in price of the 
commodity, demand of that commodity is 
said to be perfectly inelastic.  
 
The slope of the inelastic demand curve is 
steep.  
 
The demand curve is parallel to Y-axis.  
Elasticity of demand is less than one. Elasticity of demand is zero. 
 
 
Answer 7 
Given that  
 
Price (P) Quantity (Q) 
P0= 4 Q0= 100 
P1= 5 Q1= 120 
 
QQ
10
100
Q
0
E=
s
PP
10
100
P
0
120 100
100
100
 E =
s
54
100
4
E
s
0.8
1
?
?
?
?
?
?
?
?
?
?
?
?
 
 
Therefore, elasticity of supply is inelastic.  
 
 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
Answer 8 
Price ceiling is the maximum price of a good which sellers can expect from buyers. This 
price is fixed by the government and is lower than the equilibrium market price of a good. 
Hence, the price ceiling leads to excess of demand and contract of supply.  
 
Implications of price ceiling: 
i. Price ceiling enables the availability of basic goods at reasonable prices to the poor. 
This enables to increase the welfare of the people. 
ii. When there is a fall in the price level, the demand for a good increases more than the 
supply of the good. Hence, it creates an excess demand for the good. 
iii. A consumer receives only a limited quantity of goods because the fixed quota system 
is followed. So, the consumer would not be able to satisfy his/her needs.  
iv. Goods which are available at ration shops are mostly of a low quality. 
 
Answer 9 
Given the price of the good, a consumer will decide the amount of goods to buy. So, the 
consumer compares the price of the good with its utility. A rational consumer will be at 
equilibrium only when the marginal utility is equal to the price paid for the good.  
MUX = PX 
The marginal utility is greater than the price paid for the good, i.e. MUX > PX implies that 
the consumer is not in equilibrium and buys more of a good. While the marginal utility is 
lesser than the price paid for the good, i.e. MUX < PX implies that the consumer is not in 
equilibrium and buys less of that good. 
 
Page 4


  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
    1 
CBSE 
Class XII Economics 
All India Board Paper Set 3 – 2018 Solution 
 
SECTION A 
Answer 1 
The correct answer is option (d).  
TC = TFC + TVC 
TC = 30 + AVC×Q 
TC = 30 + 3×100 
TC = Rs 330 
 
Answer 2 
The correct answer is option (a).  
When Average product is maximum, the Marginal product is equal to Average product.  
 
Answer 3 
Example of Positive Economics which is based on facts and purely objective: Lower income 
taxes result in lower unemployment.  
 
Answer 4 
Fixed cost is the cost which is incurred on buying fixed factors of production. It does not vary 
with the level of output.  
 
Answer 5 
The central problem of “choice of technique” is related to the allocation of resources to 
production techniques which have to be employed during the production of goods and 
services. The production of goods and services can take place in two ways –labour-
intensive technique and capital intensive technique. The labour-intensive technique 
involves more of labour and less of capital in the output, while it is reverse for the capital 
intensive technique.  
(OR) 
The central problem for whom to produce is the problem of allocation of resources. This 
relates to the distribution of national products among the various individuals. It is true 
that sharing of national product is directly influenced by the income of an individual. 
People having higher income will definitely possess higher purchasing capacities. 
Therefore, for proper and equal distribution of goods and services, there should be 
equality of income among all the people of the society. Thus, we can observe that every 
economy faces the problem of allocating its national resources to the production of 
different goods and services and of distributing the produced goods and services among 
the individuals within the economy. 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
Answer 6 
When a large change in the price does not bring so much change in the demand, the 
demand is said to be inelastic. In this situation, percentage change in demand is lesser 
than the percentage change in price.  
 
Inelastic demand Perfectly inelastic demand 
When a large change in the price does not 
bring so much change in the demand, the 
demand is said to be inelastic. 
When quantity demanded does not change 
at all as a result of change in price of the 
commodity, demand of that commodity is 
said to be perfectly inelastic.  
 
The slope of the inelastic demand curve is 
steep.  
 
The demand curve is parallel to Y-axis.  
Elasticity of demand is less than one. Elasticity of demand is zero. 
 
 
Answer 7 
Given that  
 
Price (P) Quantity (Q) 
P0= 4 Q0= 100 
P1= 5 Q1= 120 
 
QQ
10
100
Q
0
E=
s
PP
10
100
P
0
120 100
100
100
 E =
s
54
100
4
E
s
0.8
1
?
?
?
?
?
?
?
?
?
?
?
?
 
 
Therefore, elasticity of supply is inelastic.  
 
 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
Answer 8 
Price ceiling is the maximum price of a good which sellers can expect from buyers. This 
price is fixed by the government and is lower than the equilibrium market price of a good. 
Hence, the price ceiling leads to excess of demand and contract of supply.  
 
Implications of price ceiling: 
i. Price ceiling enables the availability of basic goods at reasonable prices to the poor. 
This enables to increase the welfare of the people. 
ii. When there is a fall in the price level, the demand for a good increases more than the 
supply of the good. Hence, it creates an excess demand for the good. 
iii. A consumer receives only a limited quantity of goods because the fixed quota system 
is followed. So, the consumer would not be able to satisfy his/her needs.  
iv. Goods which are available at ration shops are mostly of a low quality. 
 
Answer 9 
Given the price of the good, a consumer will decide the amount of goods to buy. So, the 
consumer compares the price of the good with its utility. A rational consumer will be at 
equilibrium only when the marginal utility is equal to the price paid for the good.  
MUX = PX 
The marginal utility is greater than the price paid for the good, i.e. MUX > PX implies that 
the consumer is not in equilibrium and buys more of a good. While the marginal utility is 
lesser than the price paid for the good, i.e. MUX < PX implies that the consumer is not in 
equilibrium and buys less of that good. 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
 
In the diagram, OP is the price of the good given on the Y-axis and OQ is the utility given on 
the X-axis. The marginal utility curve MUX slopes downwards because the marginal utility 
diminishes with every additional consumption of X. The consumer reaches equilibrium at 
Point E, where the marginal utility is equal to the price paid for the good. 
(OR) 
 
An indifference curve shows all the combinations which create the same level of 
satisfaction. We can present an indifference curve with high or low level of satisfaction, 
i.e. to the right and above another show a higher level of satisfaction to the consumer. 
Here, IC3 shows higher level of satisfaction than IC2.  
 
 
Properties of indifference curves (ICs) 
i. Indifference curves slope downwards or negative slope: The indifference curves 
slope downwards, left to right, because an increase in the amount of Good X along the 
indifference curve is associated with a decrease in the amount of Good Y, as the 
preferences are monotonic.  
ii. Slope of indifference curves represents marginal rate of substitution: Marginal 
rate of substitution (MRS) is the rate at which a consumer is willing to substitute one 
commodity for another commodity.  
Page 5


  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
    1 
CBSE 
Class XII Economics 
All India Board Paper Set 3 – 2018 Solution 
 
SECTION A 
Answer 1 
The correct answer is option (d).  
TC = TFC + TVC 
TC = 30 + AVC×Q 
TC = 30 + 3×100 
TC = Rs 330 
 
Answer 2 
The correct answer is option (a).  
When Average product is maximum, the Marginal product is equal to Average product.  
 
Answer 3 
Example of Positive Economics which is based on facts and purely objective: Lower income 
taxes result in lower unemployment.  
 
Answer 4 
Fixed cost is the cost which is incurred on buying fixed factors of production. It does not vary 
with the level of output.  
 
Answer 5 
The central problem of “choice of technique” is related to the allocation of resources to 
production techniques which have to be employed during the production of goods and 
services. The production of goods and services can take place in two ways –labour-
intensive technique and capital intensive technique. The labour-intensive technique 
involves more of labour and less of capital in the output, while it is reverse for the capital 
intensive technique.  
(OR) 
The central problem for whom to produce is the problem of allocation of resources. This 
relates to the distribution of national products among the various individuals. It is true 
that sharing of national product is directly influenced by the income of an individual. 
People having higher income will definitely possess higher purchasing capacities. 
Therefore, for proper and equal distribution of goods and services, there should be 
equality of income among all the people of the society. Thus, we can observe that every 
economy faces the problem of allocating its national resources to the production of 
different goods and services and of distributing the produced goods and services among 
the individuals within the economy. 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
Answer 6 
When a large change in the price does not bring so much change in the demand, the 
demand is said to be inelastic. In this situation, percentage change in demand is lesser 
than the percentage change in price.  
 
Inelastic demand Perfectly inelastic demand 
When a large change in the price does not 
bring so much change in the demand, the 
demand is said to be inelastic. 
When quantity demanded does not change 
at all as a result of change in price of the 
commodity, demand of that commodity is 
said to be perfectly inelastic.  
 
The slope of the inelastic demand curve is 
steep.  
 
The demand curve is parallel to Y-axis.  
Elasticity of demand is less than one. Elasticity of demand is zero. 
 
 
Answer 7 
Given that  
 
Price (P) Quantity (Q) 
P0= 4 Q0= 100 
P1= 5 Q1= 120 
 
QQ
10
100
Q
0
E=
s
PP
10
100
P
0
120 100
100
100
 E =
s
54
100
4
E
s
0.8
1
?
?
?
?
?
?
?
?
?
?
?
?
 
 
Therefore, elasticity of supply is inelastic.  
 
 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
Answer 8 
Price ceiling is the maximum price of a good which sellers can expect from buyers. This 
price is fixed by the government and is lower than the equilibrium market price of a good. 
Hence, the price ceiling leads to excess of demand and contract of supply.  
 
Implications of price ceiling: 
i. Price ceiling enables the availability of basic goods at reasonable prices to the poor. 
This enables to increase the welfare of the people. 
ii. When there is a fall in the price level, the demand for a good increases more than the 
supply of the good. Hence, it creates an excess demand for the good. 
iii. A consumer receives only a limited quantity of goods because the fixed quota system 
is followed. So, the consumer would not be able to satisfy his/her needs.  
iv. Goods which are available at ration shops are mostly of a low quality. 
 
Answer 9 
Given the price of the good, a consumer will decide the amount of goods to buy. So, the 
consumer compares the price of the good with its utility. A rational consumer will be at 
equilibrium only when the marginal utility is equal to the price paid for the good.  
MUX = PX 
The marginal utility is greater than the price paid for the good, i.e. MUX > PX implies that 
the consumer is not in equilibrium and buys more of a good. While the marginal utility is 
lesser than the price paid for the good, i.e. MUX < PX implies that the consumer is not in 
equilibrium and buys less of that good. 
 
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
     
 
In the diagram, OP is the price of the good given on the Y-axis and OQ is the utility given on 
the X-axis. The marginal utility curve MUX slopes downwards because the marginal utility 
diminishes with every additional consumption of X. The consumer reaches equilibrium at 
Point E, where the marginal utility is equal to the price paid for the good. 
(OR) 
 
An indifference curve shows all the combinations which create the same level of 
satisfaction. We can present an indifference curve with high or low level of satisfaction, 
i.e. to the right and above another show a higher level of satisfaction to the consumer. 
Here, IC3 shows higher level of satisfaction than IC2.  
 
 
Properties of indifference curves (ICs) 
i. Indifference curves slope downwards or negative slope: The indifference curves 
slope downwards, left to right, because an increase in the amount of Good X along the 
indifference curve is associated with a decrease in the amount of Good Y, as the 
preferences are monotonic.  
ii. Slope of indifference curves represents marginal rate of substitution: Marginal 
rate of substitution (MRS) is the rate at which a consumer is willing to substitute one 
commodity for another commodity.  
  
 
CBSE XII  |  Economics 
All India Board Paper Set 3 – 2018 Solution 
 
    5 
 
Slope of indifference curve between A and B = 
Y
X
?
?
 = MRS 
MRS is the rate at which the output of Good Y is sacrificed for every additional unit of Good 
X. 
iii. In an indifference map, higher IC represents higher level of satisfaction: 
An indifference map refers to a set of indifference curves. An indifference curve which 
is to the right and above another shows a higher level of satisfaction to the consumer. 
Here, IC3 shows higher level of satisfaction than IC2. Thus, the indifference curve 
relates to a higher level of income of the consumer.  
 
 
Answer 10 
Characteristics of monopolistic competition: 
? Large number of sellers: There are large number of firms selling closely related but not 
homogeneous product. Each firm acts independently and has a limited share of the 
market. So an individual firm has limited control over the market price. Large number of 
firms leads to competition.