CBSE Sample Papers for Class 11

Economics Set 2 with Solutions

Time : 3 Hours
Maximum Marks : 80

General Instructions:

1. This question paper contains two sections:

Section A – Statistics for Economics Section B – Introductory Micro Economics
2. This paper contains 20 Multiple Choice Questions type questions of 1 mark
each.
3. This paper contains 4 Short Answer Questions type questions of 3 marks each
to he answered in 60 to 80 words.
4. This paper contains 6 Short Answer Questions type questions of 4 marks each
to he answered in 80 to 100 words.
5. This paper contains 4 Long Answer Questions type questions of 6 marks each
to he answered in 100 to 150 words.

Section – A

Question 1.
Read the following Assertion (A) and Reason (R) and choose the correct alternative:
[1]
Assertion (A): Diagrammatic representation of data makes the data very simple and
intelligible.
Reason (R): It helps in the proper analysis of the data and helps in the comparative
study of the data.
Alternative:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct
explanation of Assertion (A)
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct
explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Question 2.
Airways publish data regarding progress of airways. What type of data is this for an
investigator? [1]
(A) Primary
(B) Secondary
(C) Tertiary
(D) None of these
Question 3.
Wealth oriented definition of Economics was given by: [1]
(A) Adam Smith
(B) Marshall
(C) Robinson
(D) None of the these

Question 4.
There are two statements given below, marked as Statement (I) and Statement (II).
Read the statements and choose the correct option: [1]
Statement -I: Microeconomics studies the economic behaviour of individual
economic units.
Statement – II: Estimation of national income can be learning in microeconomics
studies.
(A) Only I is true
(B) Only II is true
(C) Both I & II are true
(D) Both I & II are false.

Question 5.
Statistics is a science as well as ………………….. . [1]
(A) Art
(B) Philosophy
(C) Psychology
(D) Mathematics

Question 6.
Identify the following diagram:
(A) Pie Diagrams
(B) Deviation Bar Diagram
(C) Percentage Bar Diagram
(D) Sub-divide Bar Diagram

Question 7.
Identify the correct pair of terms with their common symbols from the following
Columns I and II: [1]

Column I Column II

A. Frequency of the given variables 1. A

B. Assumed Mean 2. f

C. Deviations from the assumed mean 3. d

D. Mean 4. d’
(A) A – 1
(B) B – 2
(C) C – 3
(D) D – 4

Question 8.
Which of the following statements is true about the significance of Economics: [1]
(A) Economics helps in the study of the laws of motion.

(B) Economics helps in the study of man and environment.

(C) Economics helps in saving the mankind.
(D) Economics helps in solving the problem of distribution.

Question 9.
There are two statements given below, marked as Statement (I) and Statement (II).
Read the statements and choose the correct option: [1]
Statement (I) – Consumer Price Index is used in calculating purchasing power of
money.
Statement (II) – CPI also known as cost of living index:
(A) Statement I is true and statement II is false
(B) Statement I is false and statement II is true
(C) Both statements I and II are true
(D) Both statements I and II are false

Question 10.
With the help of an ogive curve, we find: [1]
(A) Arithmetic Mean
(B) Median
(C) Mode
(D) All of these

Question 11.
Distinguish between random sampling and systematic sampling. Give suitable
examples. [3]

Question 12.
Calculate median from the following series: [3]
OR
If the arithmetic mean of the data given below is 28, then find out the missing
frequency:

X Frequency (f)

0-10 12

10 – 20 18

20 – 30 27

30 – 40 f

40 – 50 17

50 – 60 6

Σf = 80 + f

Question 13.
Explain any three merits of a statistical table. [4]
OR
Explain the definition of Economics given by Robbins?
Question 14.
Calculate the median from the following data: [4]

Marks No. of students

More than 0 50

More than 10 42

More than 20 38

More than 30 28

More than 40 16

More than 50 3

Question 15.
“Different index numbers are constructed to fulfill different objectives and before
setting to construct a particular index number, one must clearly define one’s object of
study.”
Elaborate the problems which are faced in construction of Index number of prices. [4]
OR
Statistics are figures, but all figures are not statistics’. Justify the statement.
Question 16.
(a) Why do we need an index number? [3]
(b) What are the desirable properties of the base period? [3]
OR
(a) Discuss the characteristics and limitations of Index Numbers.
(b) What is meant by Consumer Price Index? Explain any two uses of CPI. [3]
Question 17.
(a) The following table shows the estimated sector real growth rates (percentage
change over the previous year)
in GDP at factor cost. [3]

Year Agriculture and Allied Sectors Industry Servic

1994 – 95 5.0 9.2 7.0

1995 – 96 0.9 11.8 10.3

1996 – 97 9.6 6.0 7.1

1997 – 98 1.9 5.9 9.0

1998 – 99 7.2 4.0 8.3

1999 – 2000 0.8 6.9 8.2

Represent the data as multiple series graph.

(b) Distinguish between a Bar diagram and a Histogram. [3]

Section – B

Question 18.
Identify the complimentary goods from following: [1]
(A) Tea and Coffee
(B) Butter and margarine
(C) Computer hardware and software
(D) Milk and cold drinks
Answer:
Option (C) is correct.
Explanation: Computer hardware and software are paired demand. Demand for
hardware will also create demand for software. Complementary goods are positively
related with each other. Rise in quantity demanded of one good also brings the
increment in quantity demanded of paired goods.

Question 19.
Identify the false statement regarding price elasticity of demand: [1]
(A) Estimation of price elasticity of demand is useful for trade union.
(B) Giffen goods have a positive price elasticity of demand.
(C) Necessities and medical treatments tend to be inelastic.
(D) Price elasticity is the ratio between income and quantity demanded.
Answer:
Option (D) is correct.
Explanation: Price elasticity of demand is the ratio between percentage change in
quantity demanded of a product to the percentage change in price of commodity.

Question 20.
“There are legal barriers to the entry of new firm”. [1]
Identify the above form of market.
(A) Perfectly competitive markets
(B) Monopoly markets
(C) Monopolistic form of market
(D) Oligopoly markets
Answer:
Option (B) is correct.
Explanation: Monopoly is a form of market in which single seller is found in the
market because there are legal barriers to the entry of new firm.

Question 21.
Identify the under – utilisation of resources in production possibility curve [1]

(A) Point – A
(B) Point – B
(C) Point – F
(D) Point – G
Answer:
Option (C) is correct.
Explanation: At point F, the resources are underutilised or inefficiently utilized.
Question 22.
Which of the following is cause of an increase in quantity demanded: [1]
(A) Decrease in the price of the product
(B) Increase in consumer’s income
(C) Increase in price of substitute goods
(D) All of these
Answer:
Option (D) is correct.
Explanation: Increase in quantity demanded will be due to:

1. Decrease in the price of the product

2. Rise in income
3. Increase in price of substitute goods
4. Decrease in price of complementary goods.

Question 23.
There are two statements given below, marked as Assertion (A) and Reason (R).
Read the statements and choose
the correct option: [1]
Assertion (A): MC should cut MR from below.
Reason (R): After equilibrium point MC should be greater than MR or MC is rising.
Alternatives
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct
explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct
explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Answer:
Option (B) is correct.
Explanation: MC should cut the MR from below at the point of equilibrium as beyond
that point MR will be less than MC and so the producer will incur losses after this
point.

Question 24.
There are two statements given below, marked as Statement (I) and Statement (II).
Read the statements and choose the correct option: [1]
Statement – I: Explicit and implicit are examples of selling cost of goods and
services.
Statement – II: Imputed interest on self-finance is implicit cost.
Alternatives
(A) Statement I is true and Statement II is false
(B) Statement I is false and Statement II is true
(C) Both statements I and II are true
(D) Both statements I and II are false
Answer:
Option (B) is correct.
Explanation: Both implicit and explicit cost refers to the expenditure occurred by the
producer for the production of goods and services. Imputed interest on self-finance is
implicit cost because owner actually does not pay but it is a cost.

Question 25.
Which of the following statement is incorrect regarding law of demand? [1]
(A) Price and quantity demanded have inverse relation.
(B) A consumer buy less of a commodity when his tastes shifts against the
commodity.
(C) When price of a commodity increases, the demand of inferior goods decreases.
(D) None of the above
Answer:
Option (C) is correct.
Explanation: Giffen goods are the exceptions of law of demand. When income of a
consumer increases, the demand of inferior goods decreases

Question 26.
There are two statements given below, marked as Statement (I) and Statement (II).
Read the statements and choose the correct option: [1]
Statement -1: An economy can never operate outside the PPF with the given
resources and technology. Statement – II: The PPF represents the concepts of
scarcity.
Alternatives
(A) Statement I is true and Statement II is false
(B) Statement I is false and Statement II is true
(C) Both statements I and II are true
(D) Both statements I and II are false
Answer:
Option (C) is correct.
Explanation: Both the statements are correct. Production possibility frontier
diagrammatically represents the different combination of production when available
resources are limited or scarce, as all points outside the PPF are unattainable.

Question 27.
Identify the correctly matched examples from Column I to that of Column II [1]

Column I Column II

A. Characteristic of PPC 1. All the resources are fully and efficiently employed.
B Assumption of PPC 2. No change in technology.

C. Property of PPC 3. Upward rising.

D. Definition of PPC 4. Device used to solve the problem of the economy

(A) A – 1
(B) B – 2
(C) C – 3
(D) D – 4
Answer:
Option (B) is correct.

Question 28.
Comment on the statement – “There is perfect knowledge of everything in a perfectly
competitive market – both
buyer and seller have perfect knowledge about market of goods and inputs used in
production.” [3]
Answer:
In a perfectly competitive market, the number of buyers and sellers is very large and
all the buyers and sellers have perfect knowledge about the market. As a result no
individual buyer or seller can influence the price in the market. In a perfect
competition, the products are homogeneous and carry the same price. By
implication, this means the cost of the inputs used by the producers will be same. As
a result of this, all sellers have perfect knowledge about the inputs used in the
production.

Question 29.
“In the long run a perfect competitive firm can never earn super-normal profits.”
Justify. [3]
OR
Explain the effects of ‘maximum price ceiling’ on the market of a good. Use diagram.
Answer:
Under perfect competition, there is freedom of entry to firms into industry. When
there are abnormal profits, new firms will enter as they will be attracted by the profits.
This will increase supply in the market leading the price to fall. This process will
continue till abnormal profits are wiped out.
OR
Ceiling means maximum limit. Price ceiling means maximum price of a commodity
that the sellers can charge from the buyers. Often the government fixes this price
much below the equilibrium market price of a commodity so that it becomes within
the reach of the poorer sections of the society.
When government fixes price of OP1, demand for bajra extends from OL to OL2 – On
the other hand, supply contracts from OL to OL1. Consequently, a gap emerges
between market demand and market supply. It is a situation when MD > MS. It is
called a situation of excess demand. In the diagram, excess demand = ab =
L1L2 (OL2 – OL1). Excess demand for bajra would have its own implications.
Significantly, people fail to buy bajra to the extent they wish to buy. Accordingly, a
situation of partial hunger may continue to exist.

Question 30.
Price elasticity of demand of a good is -1. At a price of ₹10 per unit its demand is 500
units. At what price will its demand increase by 20 percent? [4]
Answer:
Price Elasticity of Demand (Ed) = (-) ΔQΔP×PQ
Given, Ed = (-)1, P = ₹10, Q = 500, P1 = ?, Q1 = Increase by 20%
Q = 500, Q1 = 20% of 500 or 100 + 500 = 600
∴ ΔQ = 600 – 500 = 100
Now – (1) = 100ΔP×10500
(-) 500 × ΔP = 1,000 or
ΔP = (-) 2
New price = P + ΔP = (-) 2 + 10 = ₹8
Question 31.
Calculate Average Variable Cost at each level of output: [4]

Output (Units) Marginal Cost (₹)

1 24
2 20

3 16

4 12

5 18

6 30

OR
Distinguish between positive economics and normative economics. Give an example
of each.
Answer:
Calculation of AVC

Output (Units) MC TVC AVC

1 24 24 24

2 20 44 22

3 16 60 20

4 12 72 18
5 18 90 18

6 30 120 20

By adding successive units of MC, we get TVC

OR
Positive economics is the branch of economics that concerns the description and
explanation of economic phenomena. It focuses on facts and cause and effect
behavioural relationships and includes the development and testing of economic
theories. Positive economics is objective and facts based. Whereas, normative
economics is a part of economics that expresses value or normative judgments
about economic fairness or what the outcome of the economy or goals of public
policy ought to be. Normative economics is subjective and value based. For
example, the statement, “government- provided healthcare increases public
expenditures” is a positive economic statement and the statement, “government
should provide basic healthcare to all citizens” is a normative economic statement.

Question 32.
Explain the change that will take place in the market when market price of goods is
greater than its equilibrium price. Use diagram. [4]
Answer:

Given equilibrium price OP suppose market price is OP1, the changes that will take
place are :

1. There is excess supply equal to AB leading to competition among sellers.

2. This leads to fall in market price as a result of which demand starts rising and
supply starts falling.
3. The changes stop when D = S at E and equilibrium price is reached at OP.
Question 33.
(a) Distinguish between a centrally planned economy and a market economy.
(b) What do you understand by positive economic analysis?
(a) What do you mean by the production possibilities of an economy?
(b) Differentiate between Cardinal Utility and Ordinal Utility.
Answer:
(a) In a centrally planned economy, the government or the central authority plans all
the important activities in the economy. All important decisions regarding production,
exchange and consumption of goods and services are made by the government. The
central authority may try to achieve a particular allocation of resources and a
consequent distribution of the final combination of goods and services which is
thought to be desirable for society as a whole. In a market system, all goods or
services come with a price (which is mutually agreed upon by the buyer and the
sellers) at which the exchanges take place. The price reflects, on an average, the
society’s valuation of the goods or services in consideration. If the buyers demand
more of a certain good, the price of that good will rise. This will send a signal to the
producer of that good to increase production of goods. In this way, prices of goods
and services send important information to all the individuals across the market and
help in achieving coordination in a market system.

(b) Positive economics is the branch of economics that concerns the description and
explanation of economic phenomena. It focuses on facts and cause and effect
behavioural relationships and includes the development and testing of economic
theories. Positive economics is objective and fact based. For example, the
statement, “government-provided healthcare increases public expenditures” is a
positive economic statement.
OR
(a) The resources of an economy are limited in comparison to what the people in the
economy want to have. The scarce resources have alternative usages and every
society has to decide on how much of each of the resources to use in the production
of different goods and services. So, every society has to determine how to allocate
its scarce resources to different goods and services. An allocation of the scarce
resources of the economy gives rise to a particular combination of different goods
and services. Given the total amount of resources, it is possible to allocate the
resources in many different ways and, achieving different mixes of all possible goods
and services. The collection of all possible combinations of the goods and services
that can be produced from a given amount of resources and a given stock of
technological knowledge is called production possibilities of the economy.

(b)

Basis Cardinal Utility Ordinal Utility

 It means satisfaction that can be
It refers to satisfaction that can
Meaning measured in numbers such as 1, 2, 3,
measured in numbers.
etc.

Concept This concept was given by Marshall. This concept was given by J.R.

Realistic It is less realistic. It is more realistic.

This theory is explained with the This theory is explained throug

Analysis
marginal utility. indifference curve.

Cardinal utility measures satisfaction Ordinal utility measures satisfa

Measurement of Satisfaction
in terms of units. terms of ranks.

Cup of tea offers you greater

Example Cup of tea offers you 4 units of utility.
satisfaction than a cup of coffe

Question 34.
Read the passage given below and answer the questions that are followed: [6]
A price floor is the lowest legal price that can be paid in a market for goods and
services, labour, or financial capital. Perhaps the best-known example of a price floor
is the minimum wage, which is based on the normative view that
someone working full time ought to be able to afford a basic standard of living.
(a) Define Price Floor. What is the common purpose of fixation of floor price by the
government? Explain any
one likely consequence of this nature of intervention by the government. [3]
(b) Discuss “surplus amount of production as a direct consequence of price flooring”.
Answer:
Price Floor : A price floor is the lowest legal price of a commodity at which it can be
sold, and is fixed by the government. Price floors are used by the government to
prevent prices from being too low. The main reason for imposing the price floor
policy is the welfare of the producers/farmers. E.g.: minimum wages, minimum
support price.

Consequence:
Buffer Stock : In order to maintain the minimum support price, the government may
have to build buffer stocks to enable producers to dispose of their surplus stocks.
The government purchases the surplus stocks available with the farmers/producers.
These stocks are released in case the production of the supported commodity
suffers.

(b) The quantity actually brought and supplied will shrink as a direct consequence of
price flooring, as a result, a part of producer’s stock will remain unsold. As shown in
the figure the surplus of Q’Q” arises.
DD and SS are market demand and market supply curves intersecting at E. OQ
quantity (equilibrium quantity) would be offered for sale and demanded by the buyers
at OP price (equilibrium price) per unit. The industry is in equilibrium.

DD and SS are market demand and market supply curves intersecting at E. QQ

quantity (equilibrium quantity)
would be offered for sale and demanded by the buyers at OP price (equilibrium
price) per unit. The industry is in
equilibrium.