CBSE Class 12th : Economics Model Practice Paper

(Set-2)

Q.1 Name two central problems facing an economy.
Ans: Two problems are:
1) What to produce
2) How to produce 

Q.2 Define the term utility.
Ans: Utility is the satisfaction derived from the consumption of a good.

Q.3 What do you men by demand schedule?
Ans: A demand schedule refers to a tabular statement containing different quantities of a commodity that would be demanded at different prices

Q.4 What is a cartel?
Ans: A cartel is a business combination under which firm coordinates their output and pricing policy

Q.5 What are the characteristics of PPC?
Ans: Production Possibility Curve has two basic properties: -
(1) It slopes downwards.
Production possibility curve slopes downwards from left to right. It is because in a situation of full employment of the resources  production of one good can be increased by decreasing the production of other good only. More of one good will means less of the other. So it has  downward slope.

(2) It is concave to the origin.
Production Possibility Curve is concave to the origin which shows the operation of the law of increasing marginal opportunity cost. Opportunity cost of producing cloth is the quantity of wheat, which may be sacrificed. As the shifting of resources is done from one good to another good the rate of sacrifice increases and it leads to the fact that PPC is concave to the origin 

Q.6 What is budget line? Give an example.
Ans: The budget line represents all the commodities which a consumer can purchase with his entire money income. Let us have two commodities x and y their respective prices are Rs P1 and Rs P2 the consumer entire income is Rs 100. Then, the budget line can be written as follows:
 P1x + P2Y =100