(Download) CBSE Class-12 Marking Scheme (Economics)
Section A: Microeconomics
2. - Give subsidies to reduce price. - Undertake health
campaigns to promote the positive effects of milk consumption.
4. If the river Kosi causes widespread floods in Bihar, it will
lead to destruction of resources in Bihar. This will shift the PPC leftward.
5. The central problems of an economy are:
(i) What to produce and in what quantity?
(ii) How to produce?
(iii) For whom to produce?
6. (a) False: Average product rises as long as marginal
product is greater than average product. Here marginal product could be rising
or falling. (1½)
(b) False: Total cost rises at a diminishing rate when marginal cost falls and
total cost rises at an increasing rate when marginal cost increases. (1½)
7. 'Price ceiling' is the maximum price that sellers can
legally charge for a product or a service. Since this price is below
equilibrium price, there is excess demand in the market. With shortages, sellers
tend to hoard the product. It could also lead to black marketing.
‘Price floor’ is the minimum price fixed by the government at
which sellers can legally sell their product. Since this price is above
equilibrium price, there is excess supply in the market. Since there is surplus,
sellers can attempt to sell their product at a price below the floor price.
8. Freedom of entry and exit of firms under perfect
competition means that there are no costs or barriers a firm faces to enter or
exit the market. The implication of this is that in the long run each firm earns
only normal profit. Suppose in the short run, existing firms are earning super
normal profits, new firms enter the industry as they are attracted by profits.
This raises the market supply and reduces the market price. As firms accept the
lower market price, profits reduces. This process continues till profits reduce
to normal levels in the long run. The opposite occurs if firms are earning
losses as firms leave the industry. This reduces
market supply and raises market price till losses get wiped out and firms earn
only normal profit in the long run.
9. Yes, the same good can be inferior for one person and
normal for another. Whether a good is normal or inferior is determined by the
income level of the consumer. A good which is a normal good for a consumer with
a lower income, may become an inferior good for a consumer with higher income.
For example, coarse cloth may be a normal good for a low
income consumer, but for a high income consumer it may be an inferior good as
she can afford a better quality cloth.
Thus, when a consumer moves to a higher income level, she may
consider coarse cloth as being below their income status, and has the ability to
buy more expensive fine cloth, thus considering coarse cloth as being inferior.
10. An indifference curve is convex to the origin due to
diminishing marginal rate of substitution (MRS). Diminishing MRS means that the
number of units of 'Good Y' that a consumer wants to substitute for one extra
unit of 'Good X' goes on decreasing as the consumption of Good X increases. As
consumption of Good X increases, the willingness to pay for it diminishes (due
to the law of diminishing marginal utility). This payment is in terms of the
units of Good Y sacrificed. Thus, MRS diminishes along an indifference curve,
which makes it convex to the origin.