CBSE Sample Papers for Class 11 Economics Set 7 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 11 Economics with Solutions Set 7 are designed as per the revised syllabus.

CBSE Sample Papers for Class 11 Economics Set 7 with Solutions

Time Allowed : 3 hours
Maximum Marks : 80

General Instructions:

All questions are compulsory.
Marks for questions are indicated against each question.
Q. No. 1 to 10 and 18 to 27 are Objective Type Questions / Multiple Choice Questions carrying 1 mark each.
Q. No. 11 to 12 and 28 to 29 are Short Answer Type Questions 1 carrying 3 marks each.
Q. No. 13 to 15 and 30 to 32 are Short Answer Type Questions II carrying 4 marks each.
Q. No. 16 to 17 and 33 to 34 are Long Answer Type Questions carrying 6 marks each.

Section – A

Question 1.
Material welfare oriented definition of economics was given by: [1]
(A) Adam Smith
(B) Robinson
(C) Marshall
(D) None of the above
Answer:
(C) Marshall

Explanation:
According to Marshall, “Economics is a study of mankind in the ordinary business of life. It examines that part of individual as social actions, which is most closely connected with the attainment and the use of material requisites of well-being”.

Question 2.
Which of these measures of central tendency is influenced by extreme items present in a series? [1]
(A) Median
(B) Mode
(C) Mean
(D) None of these
OR
The algebraic sum of deviation of a set of n values from AM is:
(A) n
(B) 0
(C) 1
(D) ∝
Answer:
Option (C) is correct.

Explanation:
Mean is based on all the observations so it is effected by the extreme values.

Option (B) is correct.

Explanation:
Mean is based on all the values and so is centrally located as per the value, thus the sum of deviation from mean is zero.

Question 3.
Identify the correct pair of items from the following Columns I and II: [1]

Column I	Column II
A. L₁	1. Lower Class Limit
B. Q₂	2. Upper Quartile
C. Q₃	3. Median
D. Q₂	4. Lower Quartile

(A) A – 1
(B) B-2
(C) C-3
(D) D-4
Answer:
(A) A – 1

Question 4.
Read the following Assertion (A) and Reason (R) and choose the correct alternative: [1]
Assertion (A): Mode of a series 2,4, 2, 5,6, 2, 3,8, 9, 2, 5,10 is 2.
Reason (R): Mode of a set of observation is that value which occurs the greatest number of times, i.e., with the highest frequency in a series.
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.
(A) A – 1
(B) B – 2
(C) C – 3
(D) D-4
Answer:
Option (A) is correct.

Explanation:
As 2 is repeated the most number of times, it is the mode of the series.

Question 5.
Identify the correct pair of terms and definitions from the following Columns I and II: [1]

Column I	Column II
A. Scatter Diagram	1. Influenced by the size of extreme values
B. Good statistical average	2. Not be rigidly defined
C. Perfect negative correlation	3. (+)1
D. Mean	4. Based on all values

(A) A – 1
(B) B – 2
(C) C – 3
(D) D – 4
Answer:
(D) D – 4

Question 6.
C.F. word is used to denote: [1]
(A) Common frequency
(B) Cumulative frequency
(C) Normal value
(D) Frequency
Answer:
(B) Cumulative frequency

Read the following passage and answer questions 7 to 10 that follows:

Alok and Shyam went to their teacher and asked help for understanding statistics in a proper way. While inquiring with them their teacher Mrs. Tiwari understood that she needs to start with the basics with them. She told them Statistics is a mathematical tool used by us to analyse any sort of a data. For example, with the help of statistics we can calculate the average height of the students in your class, or average marks that the students might have got in statistics or any other subject. Shyam asked, “Can we calculate the interest of a person using statistics?” Mrs. Tiwari said, “We can only calculate the things that can be expressed in quantitative form, that is in terms of numbers then we can use statistics, or else statistics is of no use.” Alok asked, “Can I find an average of my height and weight using statistics?” Mrs. Tiwari smiled and then answer, “No Alok. The data needs to be homogeneous. You cannot find the relation between the data which is not related to each other.”

Alok thought for a while and then again said, “But what is BMI Index then, ma’am? It is calculated with the help of height and weight of a person.” Mrs. Tiwari said, “That is an excellent question Alok. Body Mass Index is the ratio between the two, but not an average. When we talk of statistics it is not only related to only average, but we can also analyse trends, measure relations and see the depth of the data.”
They both thanked their teacher and went back.

Question 7.
Which of the following is not the use of statistics? [1]
(A) Calculating the average of the data.
(B) Calculating the trend of the data.
(C) Both (i) and (ii)
(D) Neither (i) nor (ii)
Answer:
(D) Neither (i) nor (ii)

Question 8.
What can’t statistics be used for? [1]
(A) Non-numerical data.
(B) Quantifiable data
(C) Related data
(D) None of the above
Answer:
(A) Non-numerical data.

Question 9.
In statistics the data needs to be ___________ (related/not-related) to each other. [1]
Answer:
related

Question 10.
___________ (Statistics/Economics) it is not only related to only average, but we can also analyse trends. [1]
Answer:
Statistics

Question 11.
Write any three uses of Index Number especially in Economics. [3]
Answer:
Uses of Index Number:

Index Numbers are helpful in measuring the purchasing power i.e., value of the money.
These numbers are used to measure level of economic activities like import, export, production, population, etc.
These numbers are helpful in evaluating economic policy, e.g., index number helps in knowing the effect of export policy on export.

Question 12.
Show that the sum of deviation of the value of variables from their arithmetic mean is equal to zero. [3]
OR
Calculate the Correlation Coefficient between the heights of fathers in inches (X) and their sons (Y): [3]

Answer:
In order to show this, we take an example:

X	dx = (X’ – X) X = 6
2	– 4
4	-2
6	0
8	+2
10	+4
ΣX = 30, N = 5	Σdx = 0

x̄ = \(\frac{\sum X}{N}\) = \(\frac{30}{5}\) = 6
This shows that the sum of deviations of the values of the variables from their arithmetic mean is equal to zero.

Question 13.
Prepare a bivariate frequency distribution for the marks by 24 examiners in Statistics and Accountancy: [4]

OR
Draw the less than and more than ogive from the data given below: [4]

Weekly Wages (₹)	Number of Workers
020	10
2040	20
4060	40
6080	20
80100	10

Answer:
The bivariate frequency array for the given data is shown below:

The ‘less than’ and ‘more than’ ogives of the given data are shown below:

Question 14.
Find out the Median of the data given below by arranging them in ascending order: [4]

Answer:
On arranging the data in ascending order, we get

Class Interval	Frequency (f)	Cumulative Frequency (cf)
150	8	8
152	6	14
156	7	21
160	5	26
161	3	29
	N = Σf = 29

= Size of \(\left(\frac{29+1}{2}\right)^{\text {th }}\) item
= Size of 15^th item and it lies in cf 21
Hence, M = 156

Question 15.
The average marks of 200 students in a class are 54. But while calculating it, the marks of a student were written 53 instead of 73. Find out the corrected arithmetic mean. [4]
Answer:
Incorrect ΣX = N × X
= 200 × X = 10,800
Correct ΣX = 10,800 – 53 + 73 = 10,820
x̄ = \(\frac{\sum X}{N}\)
= \(\frac{10,820}{200}\)
= 54.1

Question 16.
Calculate Mean and Mode from the following data: [6]

Answer:

Question 17.
Calculate Karl Pearson’s Coefficient of Correlation from the following data: [6]

OR
Construct index number of 2012 from the given data by the Simple Aggregative Method and the Simple Average of Relative Method: [6]

Answer:

r = \(\frac{\Sigma x y}{\sqrt{\Sigma x^2 \Sigma y^2}}\) = \(\frac{-1854}{\sqrt{3123 \sqrt{1142}}}\)
= \(\frac{-1854}{55.8 \times 33.8}\) = \(\frac{-1854}{1888}\) = – 0.98

Section – B

Question 18.
Read the following Assertion (A) and Reason (R) and choose the correct alternative: [1]
Assertion (A): Average Cost will rise only when Marginal Cost rises.
Reason (R): Rise in AC takes place when MC is greater than AC and not necessarily when MC rises.
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.
OR
Read the following Assertion (A) and Reason (R) and choose the correct alternative: [1]
Assertion (A): When 5 units of a good are sold at ?20, total revenue is ?100.
Reason (R): Total revenue is the revenue earned by the firm from the total amount of product sold by it.
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:
(D) Assertion (A) is false but Reason (R) is true.

Explanation:
Rise in AC takes place when MC is greater than AC and not necessarily when MC rises.

(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Explanation:
TR = ₹20 × 5 = ₹100.

Question 19.
Identify the phase in which TP increases at an increasing rate and MP also increases. [1]
(A) Increasing returns to a factor.
(B) Diminishing returns to a factor.
(C) Negative returns to a factor.
(D) None of these
Answer:
(A) Increasing returns to a factor.

Explanation:
In case of Increasing returns to a factor, TP increases at an increasing rate and MP also increases.
In case of Diminishing returns to a factor, TP increases at a decreasing rate and MP starts to fall.
In case of Negative returns to a factor, TP starts to decline and MP is negative.

Question 20.
Identify the correct pair of items from the following Columns I and II [1]

Column I	Column II
A. Total Product	1. Total input produced by a firm during a given period of time with given number of outputs.
B. Total Physical Product	2. Total output produced by a firm during a given period of time with given number of inputs.
C. Average Product	3. The change in Total Product resulting from the use of one more (or one less) unit of the variable input, keeping all other inputs constant.
D. Marginal Product	4. Output per unit of a variable input.

(A) A – 1
(B) B – 2
(C) C – 3
(D) D – 4
Answer:
(B) B – 2

Question 21.
Identify the two cost curves which start from the same point on the Y-axis. [1]
(A) WC and TFC
(B) TFC and WC
(C) TFC and TC
(D) TFC and AFC
Answer:
(C) TFC and TC

Explanation:
As even at 0 level of output, the firm incurs fixed cost but no variable cost, so at 0 level of output, the total fixed cost and the total cost will be equal making their curve start from the same point.

Question 22.
Market demand curve is obtained by _________ summation of the individual demand curves. [1]
(A) Vertical
(B) Horizontal
(C) Both (A) and (B)
(D) None of these
Answer:
(B) Horizontal

Explanation:
Market demand curve is a curve showing different quantities of a commodity that all the buyers in the market are ready to buy at different possible prices of a commodity at a point of time. It is derived as a horizontal summation of individual

Question 23.
Area under MC curve is equal to ___________ . [1]
(A) TFC
(B) WC
(C) TC
(D) AC
Answer:
(B) WC

Read the following passage and answer Questions 24 to 27 that follows on the basis of the same: [1]

Rationing of good is a means by which government ensures equitable distribution of resources by putting a restraint on the purchase of the commodity in the market for the rich people. Rationing is the controlled distribution of scarce resources, goods, or services and it controls the size of the ration, one’s allotted portion of the resources being distributed on a particular day or at a particular time. In economics, rationing is an artificial restriction of demand and is done to keep price below the equilibrium (market-clearing) price determined by the process of supply and demand in an unfettered market. Thus, rationing can be complementary to price controls which can be explained through indifference curve approach.

There are two kinds of rationing done by the government to reduce consumption – price rationing and non-price rationing. By rationing, we mean exercise tax and by non-price rationing, we mean all types of control on the quantity consumed. Non-price rationing could be done by giving away of coupons that would enable low-income families to obtain some good at affordable prices, which could not be possible if the prices were to increase alone. With coupon scheme, it would develop a black market for coupons, which would paradoxically increase the utility for those who are in need of that commodity by collection of more of these coupons from those who are not in need. This ensures greater marginal utility for those people who are in need of the commodity and will provide exchange of money to those who sell these coupons. For this, it is necessary for the government to encourage trading of the coupons.

The major importance of introducing rationing is to keep the price of important commodity under control, as for a necessary commodity, there will be an excessive demand in the market which will drive their price up in the market and high prices leads to reduction of consumption and utility for those who could not afford it. This ensures that the resources are planned in favour of the poor people of the country and restricting the rich people to ensure excessive purchase of limited resources of the country. This ensures development and equality of welfare and utility between the rich and the poor people. Rationing of the good is done by the government and not the private sector. There is the same limit put on every person on the budget spending to which people could buy the commodities and within the limit, one could buy any amount of the commodity.

Question 24.
____________ (Marginal Utility/Total Utility) means the utility derived from the total number of product consumed. [1]
Answer:
Total Utility

Question 25.
The Marginal Utility of a person ____________ . [1]
(A) Diminishes.
(B) Increases.
(C) First diminishes and then increases.
(D) First increases and then decreases.
Answer:
(A) Diminishes.

Explanation:
As per the law of diminishing marginal utility the marginal utility of the commodity always decreases.

Question 26.
The marginal utility derived from a commodity keeps on ____________ (increasing/decreasing).
Answer:
decreasing

Question 27.
Rationing of goods by the government _______________ .
(A) Increases its utility.
(B) Decreases its utility.
(C) Has no effect on the utility.
(D) Utility first increases and then decreases.
Answer:
(C) Has no effect on the utility.

Question 28.
Explain any three characteristics of a perfectly competitive market? [3]
OR
Market for a good is in equilibrium. Demand for the good ‘Increases’. Explain the chain of effects of this change.
Answer:
Perfect Competition: This type of market structure refers to the market that consists of a large number of buyers and also a large number of sellers. No individual seller is able to influence the price of an existing product in the market. All sellers in a perfect competition produce homogenous outputs, i.e., the outputs of all the sellers are similar to each other and the products are uniformly priced.

Features of Perfectly Competitive Market:
1. Large number of buyers and sellers: There exist a large number of buyers and sellers in-a perfectly competitive market. The number of sellers is so large that no individual firm owns the control over the market price of a commodity. Due to the large number of sellers in the market, there exists a perfect and free competition. A firm acts as a price taker while the price is determined by the ‘invisible hands of market’, i.e., by ‘demand for’ and ‘supply of goods’ Thus, we can conclude that, under perfectly competitive market, an individual firm is a price taker and not a price maker.

2. Homogenous products: All the firms in a perfectly competitive market produce homogeneous products. This implies that the output of each firm is perfect substitute to others’ output in terms of quantity, quality, colour, size, features, etc. This indicates that the buyers are indifferent to the output of different firms. Due to the homogenous nature of products, existence of uniform price is guaranteed.

3. Free exit and entry of firms: In the long-run, there is free entry and exit of firms However, in the short run some fixed factors obstruct the free entry and exit of firms. This ensures that all the firms in the long-run earn normal profit or zero economic profit that measures the opportunity cost of the firms either to continue production or to shut down. if there are abnormal profits, new firms will enter the market and if there are abnormal losses, a few existing firms will exit the market.

4. Perfect knowledge among buyers and sellers: Both buyers and sellers are fully aware of the market conditions; such as price of a product at different places. The sellers are also aware of the prices at which the buyers are willing to buy the product. The implication of this feature is that if any individual firm is charging higher (or lower) price for a homogeneous product, the buyers will shift their purchase to other firms (or shift their purchase from the firm to other firms selling at lower price).

5. No transport costs: This feature means that all the firms have equal access to the market. The goods are produced and sold locally Therefore, there is no cost of transporting the product from one part of the market to other.

6. Perfect mobility of factors of production: There exists geographically and occupationally perfect mobility of factors of production. This implies that the factors of production can move from one place to other and can move from one job to another.

7. No promotional and selling costs: There are no advertisements and promotional costs incurred by the firms. The selling costs under perfectly competitive market are zero.

Commonly Made Error:
Most of the students did not write the ‘heading’ in the points thereby making the answer difficult to read.

Answering Tip:
While learning, give special emphasis of the ‘heading’. Points should start from the headings.

Effect of an increase in demand for a commodity on equilibrium price and equilibrium quantity is discussed with reference to Fig. given below:

In Fig. D₁D₁ is the initial demand curve crossing supply curve SS at point E, the point of initial equilibrium. Owing to increase in demand, demand curve shifts to the right, from D₁D₁ to D₂D₂. And at the existing price (OP₁), quantity rises from point E to point F. As an immediate impact of increase in demand, there is excess demand in the market, equal to EF (at the existing price). Due to the pressure of demand, price of the commodity tends to be higher than the equilibrium price. Owing to rising price, quantity demanded tends to contract. Contraction of demand occurs from point F towards point K. However, at rising price, quantity supplied tends to extend. The extension of supply occurs from point E towards point K. The process of extension of supply and contraction of demand (triggered by the rising price) continues till excess demand is fully tackled and the market clears itself once again. K is the point of new equilibrium, where quantity supplied is equal to quantity demanded. Corresponding to the new equilibrium, quantity demanded/supplied is equal to OQ₂, and equilibrium price is OP₂.

Thus, the net effect of increase in demand is:
(i) Increase in equilibrium price from OP₁ to OP₂, and
(ii) Increase in equilibrium quantity from OQ₁ to OQ₂.

Question 29.
Explain the meaning and need for ‘price ceiling’. [3]
Answer:
Price ceiling: It refers to the 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 so that the essential commodities are within the reach of the poorer sections of the society. When ceiling price is lower than the equilibrium price, there is likely to be excess demand in market and vice-versa. [3]

Commonly Made Error:
Many students get confused between the concepts of price ceiling and price floor and give incorrect answers.

Answering Tip:
Students must keep in mind that while ceiling is overhead, price ceiling denotes maximum price and floor is at the bottom, so price floor denotes the minimum price.

Question 30.
As a result of 10 percent rise in price of commodity X, its demand falls from 200 units to 190 units. Calculate its price elasticity of demand. [4]
Answer:

Question 31.
Calculate average variable cost at each level of output: [4]

Output (Units)	Marginal Cost (₹)
1	15
2	12
3	9
4	14
5	21
6	31

Answer:

Question 32.
Giving reason, comment on the shape of Production Possibility Curve based on the following schedule : [4]

Goods X (Units)	Goods Y (Units)
0	10
1	9
2	7
3	4
4	0

OR
What do you mean the production possibilities of an economy? [4]
Answer:

Goods X (Units)	Goods Y (Units)
0	10
1	9
2	7
3	4
4	0

It is concave in accordance with the pattern in the table. It shows that Marginal Opportunity Cost tends to rise. With every increase in the quantity of X, we have to sacrifice more of Y and Marginal Opportunity Cost tends to rise because of the Law of Diminishing Returns. [4]

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 the production possibilities of the economy.

Question 33.
Explain how the following factors affect the supply of a commodity: [6]
(i) State of technology.
(ii) Price of factors of production.
(iii) Goals of the firm.
OR
Write a note on elasticity of supply and its types. [6]
Answer:
(i) State of Technology: Technological changes influence the supply of a commodity. Advanced and improved technology reduces the cost of production, which raises the profit margin. It induces the seller to increase the supply. However, technological degradation or complex and out-dated technology will increase the cost of production and it will lead to decrease in supply.

(ii) Price of factors of Production: When the amount payable to factors of production and cost of inputs increases, the cost of production also increases. This decreases the profitability. As a result, seller reduces the supply of the commodity. On the other hand, decrease in prices of factors of production or inputs, increases the supply due to fall in cost of production and subsequent rise in profit margin.

(iii) Goals of the firm: Generally, supply of a commodity increases only at higher prices as it fulfills the objective of profit maximization. However, with change in trend, some firms are willing to supply more even at those prices, which do not maximise their profits. The objective of such firms is to capture extensive markets and to enhance their status and prestige.

Elasticity of Supply: It is a measure of degree of responsiveness of supply to the change in price
Es = \(\frac{\text { Proportional change in supply }}{\text { Proportional change in price }} \text {. }\)

Types of Elasticity of supply:
(i) Completely (Perfectly) Inelastic Supply: In this case the quantity supplied does not react to the changes in the price. The increase or decrease in the price does not change the quantity supplied.

(ii) Completely (Perfectly) Elastic Supply: When a minute change in price results in infinite change in the quantity supplied then it is a case of completely elastic supply. For instance, when there is marginal rise in the price, then the quantity supplied rises infinitely.

(iii) Unitary Elastic Supply: When the proportionate change in quantity supplied is equal to the proportionate change in the price of the commodity then we call it as unitary or unit elasticity of supply.

(iv) Relatively Inelastic Supply: When the percentage change in quantity supplied is less then the proportionate change in price than it is a case of relatively inelastic supply. es = 1

(v) Relatively Elastic supply: When the percentage change in quantity supplied exceeds the percentage change in price, then it is the case of relatively elastic supply.

Question 34.
Explain the relationship between: [6]
(i) Price of other goods and demand for the given goods.
(ii) Income of the buyers and demand for goods.
Answer:
(i) Related goods are of two types, Substitute goods and Complementary goods.
(a) In case of substitute goods: When price of one commodity falls, demand for other commodity declines, e.g., decrease in the price of coffee will decrease the demand for tea.
(b) In case of complementary goods: When price of one commodity falls, demand for other commodity rises, e.g., decrease in the price of petrol will increase the demand for car.

(ii) Change in the income of buyers also influences his demand for different goods. The demand for normal goods like full cream milk tends to increase with increase in income and vice-versa. On the other hand, the demand for inferior goods like coarse grain tends to decrease with increase in income and vice-versa.