UP Board Class 12 Economics Question Paper 2024 (Code 329 FJ) with Solutions

Alfred Marshall authored Principles of Economics (first published in 1890), a landmark text that formalized many microeconomic ideas.

By contrast, Adam Smith wrote The Wealth of Nations (1776), and Lionel Robbins wrote An Essay on the Nature and Significance of Economic Science (1932).

Marshall’s book introduced and popularized core concepts such as elasticity of demand, consumer surplus, and partial equilibrium analysis, shaping modern microeconomics.
Quick Tip: Remember authors by their signature works: Marshall—Principles of Economics; Smith—Wealth of Nations; Robbins—definition of economics and Essay on… Economic Science.

Positive economics deals with "what is"—objective, testable statements about facts and cause–effect relationships (e.g., if price rises, quantity demanded falls).

Normative economics deals with "what ought to be"—value-laden judgments and policy prescriptions based on goals or ethics (e.g., the government ought to subsidize education).

Since the phrase asks about what should happen, it belongs to the domain of normative economics.
Quick Tip: Think: \(\textbf{Positive = Is (testable facts)}\); \textbf{Normative = Ought (value judgments)}\).

In modern economics at the Class 12 level, the factors of production are taken as four: Land, Labour, Capital, and Enterprise (also called Organisation).

Land includes all natural resources; Labour denotes human effort (physical and mental); Capital means man-made productive assets; and Enterprise coordinates the other three and undertakes risk.

While some discussions add “technology” as a separate input, the standard school framework recognizes these four core factors.
Quick Tip: Remember L-L-C-E: Land, Labour, Capital, Enterprise—\textbf{four}\) factors in the modern framework.

In basic economics, desire is the mere willingness or wish to have a commodity.

A want is a broader term for human needs/wishes and may be non-specific.

Demand is an effective desire: desire backed by the ability and willingness to pay at a given price and time.

Since the question mentions only the willingness to obtain (without ability to pay), it corresponds to desire, not demand.
Quick Tip: Remember: Desire (wish) \(\rightarrow\) Demand (desire + ability + willingness to pay).

Total Product (TP) is the integral/sum of marginal products, and the slope of the TP curve at any input level equals Marginal Product (MP).

If MP is increasing, the slope of TP is rising—hence TP increases at an increasing rate (the TP curve is convex up).

If MP were constant, TP would rise at a constant rate; if MP were decreasing but positive, TP would rise at a diminishing rate.
Quick Tip: MP is the slope of TP. Rising MP \(\Rightarrow\) steeper TP \(\Rightarrow\) TP increases at an increasing rate.

India’s current Finance Minister is Nirmala Sitharaman. She has held the Finance portfolio since 2019 and continues in office in the present Union Council of Ministers.

Note that Narendra Modi is the Prime Minister, Amit Shah is the Home Minister, and Smriti Irani has handled other ministries (e.g., Women and Child Development, Minority Affairs), not Finance.
Quick Tip: For cabinet-based GK, pair names with their signature portfolios: PM—Narendra Modi; Home—Amit Shah; Finance—Nirmala Sitharaman.

The Reserve Bank of India (RBI), India’s central bank, is headquartered in Mumbai.

RBI was originally set up in 1935 (initially in Kolkata), and later shifted its central office to Mumbai, which is India’s leading financial hub.

Hence, among the given options, Mumbai is correct.
Quick Tip: Remember: RBI—Mumbai; SEBI—Mumbai; Ministry of Finance—New Delhi.

Recent population estimates show that India has surpassed China to become the world’s most populous country.

The United States (“America”) and Indonesia are populous but rank well below India and China.

Therefore, the correct option is India.
Quick Tip: Remember the top two by population: \textbf{India}\) \(\rightarrow\) 1st, \textbf{China}\) \(\rightarrow\) 2nd (current estimates).

Gross vs. Net: “Net” means we deduct depreciation (consumption of fixed capital) from the “gross” measure.

Domestic vs. National: “Domestic” counts production within the domestic territory, irrespective of who owns the factors (residents or non-residents); “National” reassigns income by residency.

Therefore, Net Domestic Product (NDP) is computed from the domestic aggregate:
\(\quad NDP = GDP - Depreciation.\)

Options (2) and (4) add depreciation, which would give a gross figure, not net. Option (3) uses national rather than domestic (that would be NNP at market price if matched with other valuation details).
Quick Tip: To get a net measure, always subtract depreciation; to switch between \textbf{domestic}\) and \textbf{national}\), adjust for net factor income from abroad (NFIA).

The Great Depression began with the Wall Street Crash of October 1929 and then spread worldwide, causing severe declines in output, trade, employment, and prices.

Although the depression persisted through the early 1930s (many countries bottomed out around 1932--33), among the given options the onset period is best captured by 1929--1930.

Therefore, option (4) correctly indicates the time when the global depression started.
Quick Tip: Link the \textbf{Great Depression}\) to the \textbf{1929}\) stock market crash; recovery in many economies came only after 1933.

Concept: Total utility (TU) is the sum of satisfaction from all units consumed, while marginal utility (MU) is the increment: \(MU_n = TU_n - TU_{n-1}\).

Law: As consumption of a good rises, MU typically falls after a point (diminishing MU) due to saturation of wants.

Implications: Consumers allocate income so that the ratio of MU to price is equalized across goods (utility maximization rule). When TU is maximum, MU becomes zero; if further units reduce satisfaction, MU turns negative and TU falls.

Use: MU underpins downward-sloping demand and the idea of consumer equilibrium.
Quick Tip: Remember: TU peaks where MU = 0; before that MU \(>\) 0, after that MU \(<\) 0.

Measures: Total Revenue (TR) \(= P \times Q\). Average Revenue (AR) \(= TR/Q\); in single-price markets, AR equals price. Marginal Revenue (MR) \(= \Delta TR/\Delta Q\), the extra revenue from an additional unit.

Market structure link: Under perfect competition, \(P\) is constant, so AR \(=\) MR \(=\) P and the TR curve is a straight line. Under monopoly/monopolistic competition, price must fall to sell more, so MR lies below AR and both slope downward.

Decision use: Profit-maximizing output occurs where \(MR = MC\), not where TR is highest.
Quick Tip: Think “P\(\times\)Q”: TR drives the rest; AR is price; MR is the slope of TR.

Modern view: A market is a system of interactions—institutions, rules, and communication channels—linking potential buyers and sellers. It may be local, national, or global and can be physical (bazaar) or virtual (e-commerce, stock exchanges).

Core elements: (i) a commodity/service, (ii) parties willing to trade, (iii) a mechanism for information and payment, and (iv) rules enabling contracts.

Economic role: Markets allocate resources by signaling scarcity through prices; competitive markets foster efficiency, while market failures (externalities, market power, information asymmetry) may justify policy intervention.
Quick Tip: Market \(\neq\) place; it’s the process where price is formed by demand and supply.

Definitions: Total Product (TP) is the total output produced; Marginal Product (MP) is the additional output from one more unit of input; Average Product (AP) is \(TP\) per unit of the input.

Relationships: When MP exceeds AP, AP rises; when MP is below AP, AP falls; MP intersects AP at AP’s maximum—parallel to the logic of averages and marginals.

Use: AP gauges labour productivity and helps firms assess efficiency at different employment levels. In the short run, AP first increases due to specialization and then declines because of diminishing returns as fixed inputs become binding.
Quick Tip: Remember: AP peaks where MP = AP; before that MP \(>\) AP, after that MP \(<\) AP.

Concept: In macroeconomics, full employment corresponds to potential output or the level of real GDP where labour markets clear given normal frictions.

Components: Frictional unemployment (job search/mobility) and structural unemployment (skill/location mismatch) may persist; what disappears is cyclical unemployment caused by deficient demand.

Policy link: Demand management (fiscal/monetary policy) aims to close recessionary gaps and return the economy to full employment. Exceeding it can create inflationary pressure as actual output surpasses capacity.

Indicators: NAIRU/“natural rate” is often used to approximate full-employment unemployment.
Quick Tip: Full employment \(\neq\) zero unemployment; it excludes only the cyclical, demand-deficient part.

Keynes’s idea: Employment depends on aggregate demand (AD). The intersection of the AD function with the aggregate supply (AS) function gives the point of effective demand.

Mechanism: When AD \(>\) AS at a given income, firms expand output and jobs; when AD \(<\) AS, they cut production, lowering income. Equilibrium income occurs where planned spending equals planned output.

Policy: During recessions, raising effective demand via public expenditure, tax cuts, or monetary easing can restore employment.

Contrast: Mere desire to buy is not effective; it must be supported by income/credit and willingness to spend.
Quick Tip: Think “demand that works”: effective demand pins down equilibrium income where AD = AS.

Scope: Unlike microeconomics (individual units), macroeconomics aggregates variables to explain overall performance. Core areas include measurement of national income (GDP/GNP), money and banking, determination of income and employment, inflation/deflation, balance of payments, and economic growth.

Tools: Models of AD–AS, IS–LM, Phillips curve, and growth frameworks (Solow, endogenous growth) guide policy.

Policy focus: Governments use taxation/spending (fiscal policy) and money/interest rate control (monetary policy) to stabilize fluctuations, close output gaps, and achieve full employment with price stability.
Quick Tip: Macro = big picture: totals and averages for the entire economy (income, output, prices, jobs).

Distinction: Intermediate goods are purchased for use as inputs (e.g., flour used by a bakery), whereas final goods are ready for consumption or investment (bread bought by a household; an oven bought by a bakery).

Accounting rule: National income/GDP includes only final goods’ value, or alternatively sums value added at each stage, to prevent counting the same value multiple times.

Examples: A car sold to a consumer is final; tyres sold to the car company are intermediate, but the tyre sold as a replacement to a household is final.
Quick Tip: GDP counts final goods (or value added), never adds intermediate values repeatedly.

Idea: Total Utility (TU) is the cumulative satisfaction from all units consumed; Marginal Utility (MU) is the additional satisfaction from the last unit: \(MU_n=TU_n-TU_{n-1}\). As more units are consumed, MU generally diminishes. When MU is positive, TU rises; when MU falls to zero, TU reaches its maximum; when MU becomes negative, TU declines.

Example (table):

\quad Quantity: 1,\;2,\;3,\;4,\;5,\;6

\quad TU: \;10,\;18,\;24,\;28,\;30,\;29

\quad MU: \;10,\;8,\;6,\;4,\;2,\;-1

Here MU shrinks with each unit; at the 5th unit MU \(=0\) and TU peaks at \(30\); the 6th unit yields MU \(<0\), so TU falls.

Diagram (verbal): The TU curve starts from the origin, increases at a diminishing rate, becomes flat at its peak (where MU curve cuts the quantity axis at MU\(=0\)), and then bends downward if consumption continues. The MU curve slopes downward, crossing zero at TU’s maximum.
Quick Tip: Where TU is maximum, MU = 0; before that MU \(>\) 0 (TU rising), after that MU \(<\) 0 (TU falling).

A budget line shows all bundles of two goods a consumer can buy given money income and prices. Algebraically: \(P_XX+P_YY=M\), with slope \(-\dfrac{P_X}{P_Y}\), \(X\)-intercept \(M/P_X\) and \(Y\)-intercept \(M/P_Y\). Points on the line are affordable with full income spent; inside are affordable with savings; outside are unaffordable.

Example: If income \(M=600\), \(P_X=60\) (pens) and \(P_Y=30\) (notebooks), intercepts are \(600/60=10\) pens and \(600/30=20\) notebooks. Any combination on the straight line between \((10,0)\) and \((0,20)\) is just affordable; e.g., \((5,10)\) satisfies \(60(5)+30(10)=600\).

Diagram (verbal): Plot pens on the \(X\)-axis and notebooks on the \(Y\)-axis; draw a straight downward line joining \((10,0)\) and \((0,20)\). A rise in income shifts the line parallel outward; a fall in income shifts it inward. A price change pivots the line around the other intercept.
Quick Tip: Remember: slope of budget line \(= -P_X/P_Y\); income shifts parallel, price changes pivot.

Fixed Cost (TFC): Costs that do not vary with output in the short run—rent of factory, insurance, salaries of permanent staff, depreciation. Even when output is zero, TFC is incurred; hence TFC is a horizontal line with respect to output.

Variable Cost (TVC): Costs that change directly with output—wages of casual labour, raw materials, power, packaging. TVC is zero at zero output and typically rises at a decreasing then increasing rate due to returns to the variable factor.

Total Cost (TC): Sum of fixed and variable costs: \(TC = TFC + TVC\). Average and marginal counterparts are \(AFC=TFC/Q\) (always falling), \(AVC=TVC/Q\), \(ATC=TC/Q\), and \(MC=\Delta TC/\Delta Q\). In the short run, \(AVC\), \(ATC\), and \(MC\) are typically U-shaped, with \(MC\) cutting \(AVC\) and \(ATC\) at their minimum points.
Quick Tip: Short run identity: \(TC=TFC+TVC\). \(AFC\) falls forever; \(MC\) meets \(AVC\) and \(ATC\) at their minima.

Meaning: Money is anything that is generally accepted as a medium of exchange and performs standard monetary functions. Modern money includes currency, demand deposits, and near-money instruments.

Functions: (i) Medium of exchange—eliminates double coincidence of wants, enabling specialization and trade. (ii) Measure of value/unit of account—expresses prices and accounts in a common metric. (iii) Standard of deferred payments—contracts, loans, and credit are denominated in money. (iv) Store of value—transfers purchasing power across time (subject to inflation risk). (v) Transfer of value—facilitates remittances and payments across space.

Good money requires acceptability, divisibility, portability, durability, uniformity, and limited supply under credible authority (central bank). In modern economies, central banks manage money supply and payment systems to promote price stability and growth.
Quick Tip: Four core functions to remember: exchange, account, deferred payments, and store of value.

Meaning: National Income is the money value of all final goods and services produced by the residents of a country during an accounting year; equivalently, it is the sum of factor incomes (wages, rent, interest, profit) accruing to residents—i.e., Net National Income at factor cost/National Income.

Difficulties (underdeveloped economies): (i) Large non-monetized sector—subsistence farming, barter, and home production are hard to value. (ii) Informality and multiple occupations—poor records and overlap of activities. (iii) Data deficiencies—weak statistical machinery, infrequent surveys, and underreporting. (iv) Quality/price issues—lack of reliable price indices, regional price dispersion. (v) Valuation problems—imputing rents for owner-occupied housing and services of self-employed. (vi) Double counting risk—distinguishing intermediate from final output. (vii) Illegal/unreported activity and political/administrative constraints. These factors lead to understatement and delays in national income estimates.
Quick Tip: Two-step memory: define NI as residents’ final output/incomes; then list hurdles—non-monetized sector, informality, weak data, pricing, valuation, and double counting.

Meaning: The foreign exchange rate is the price of one currency in terms of another (e.g., ₹ per US
(). It determines how domestic prices translate into foreign prices and vice versa, affecting trade, capital flows, and macroeconomic stability.

Types: (i) Fixed (pegged)—the central bank commits to a parity (often to a major currency or basket) and intervenes to maintain it. (ii) Flexible/Floating—market forces of demand and supply determine the rate; the central bank does not target a specific level. (iii) Managed float (dirty float)—rate largely market-determined but the central bank occasionally intervenes to smooth volatility. (iv) Dual/multiple rates—different rates for distinct transactions (now uncommon).

Related distinctions: Spot vs forward rates (immediate vs future delivery) and nominal vs real exchange rate (inflation-adjusted).
Quick Tip: Remember the trio: fixed, floating, and managed float—plus spot/forward as transaction timings.

An indifference curve (IC) is the locus of combinations of two goods that give the consumer the same level of satisfaction; the consumer is “indifferent” among all bundles on a single IC. The higher an IC, the greater the utility it represents (assuming “more is better”).

Assumptions: Rational consumer; monotonic preferences (non-satiation); goods are divisible; and ordinal utility.

Salient features: (1) Downward sloping: To keep utility constant, an increase in one good must be offset by a decrease in the other (negative slope). (2) Convex to the origin: Diminishing Marginal Rate of Substitution (MRS) — as the consumer substitutes good \(X\) for \(Y\), the amount of \(Y\) they are willing to give up per extra unit of \(X\) falls. (3) Do not intersect: If two ICs crossed, it would violate transitivity and monotonicity (same bundle giving two different utility levels). (4) Higher ICs show higher satisfaction: Bundles on a higher curve have more of at least one good and not less of the other. (5) ICs are dense: Between any two ICs, there exists another IC, reflecting continuity of preferences. (6) MRS equals IC’s (absolute) slope: \(MRS_{XY}=\left|\frac{dY}{dX}\right|\), which typically diminishes along the curve.

Diagram (verbal): On a two-good plane (\(X\) on horizontal, \(Y\) on vertical), draw a family of smooth, downward-sloping, convex curves \(IC_1, IC_2, IC_3\) with \(IC_3\) farthest from the origin. The slope at any point equals the MRS.

Use: Together with the budget line, ICs determine consumer equilibrium where \(MRS_{XY}=\frac{P_X}{P_Y}\) at the tangency point.

Limitations: Ignores income effects across widely separated ICs; assumes stable preferences and continuous divisibility, which may not always hold.
Quick Tip: Indifference curves are downward sloping, convex, non-intersecting; higher IC \(\Rightarrow\) higher utility.

Use the arc (mid-point) elasticity formula to avoid base dependence:

\[ E_d=\dfrac{%\Delta Q}{%\Delta P}=\dfrac{\dfrac{Q_2-Q_1}{(Q_1+Q_2)/2}}{\dfrac{P_2-P_1}{(P_1+P_2)/2}}. \]

Given \(P_1=15\), \(P_2=10\), \(Q_1=40\), \(Q_2=50\).

Step 1: \(\Delta Q=50-40=10\), average quantity \(\bar Q=\dfrac{40+50}{2}=45 \Rightarrow %\Delta Q=\dfrac{10}{45}=0.2222\).

Step 2: \(\Delta P=10-15=-5\), average price \(\bar P=\dfrac{15+10}{2}=12.5 \Rightarrow %\Delta P=\dfrac{-5}{12.5}=-0.4\).

Step 3: \(E_d=\dfrac{0.2222}{-0.4}=-0.5555\ldots\); demand elasticity in absolute value \(|E_d|\approx 0.56\).

Interpretation: The demand is inelastic (less than 1 in absolute value): a 1% fall in price raises quantity demanded by only about 0.56%.

Why mid-point? Using averages treats the two observations symmetrically and is standard for discrete changes.

Graph (verbal): On a demand curve, mark points \((P_1=15, Q_1=40)\) and \((P_2=10, Q_2=50)\); arc elasticity is computed over the chord connecting these points.
Quick Tip: Arc elasticity: \(E_d=\dfrac{\Delta Q/\bar Q}{\Delta P/\bar P}\); take absolute value for magnitude.

Meaning: Perfect competition is a market structure in which numerous small buyers and sellers trade a homogeneous product under conditions of perfect knowledge and free entry and exit, so that no individual participant can influence price. Firms are price takers.

Features: (1) Large number of buyers and sellers: Each is too small relative to the market to affect price by individual action. (2) Homogeneous product: Buyers regard output units as identical; no brand or quality differentiation. (3) Free entry and exit: In the long run, firms can enter/leave without barriers, driving economic profit to zero. (4) Perfect information: Buyers and sellers know prices, technology, and costs; arbitrage eliminates price differences. (5) Perfect mobility of factors: Resources can move across firms/industries; no artificial restrictions. (6) No selling costs: Advertising is unnecessary because products are identical. (7) Single, uniform price: Determined by market demand and supply.

Firm’s demand and equilibrium: A firm faces a perfectly elastic (horizontal) demand at the market price: \(AR=MR=P\). Profit maximization occurs where \(MC=MR\); in the short run the firm may earn supernormal profits or losses; in the long run, entry/exit ensures \(P=min\,LAC\) (productive efficiency) and \(P=MC\) (allocative efficiency).

Implications: Perfect competition yields the benchmark of maximum total surplus with no deadweight loss under standard assumptions.

Limitations: Real markets rarely meet all conditions; however, agricultural commodities, foreign exchange, or stock exchange trading approximate some features.
Quick Tip: Under perfect competition: \(P=MR=AR\) and long-run \(P=min\,LAC\) with zero economic profit.

A central bank is the apex monetary authority of a country responsible for issuing currency, regulating the banking system, managing foreign exchange and reserves, and conducting monetary policy to achieve macroeconomic objectives such as price stability, growth, and financial stability (e.g., RBI in India).

Key functions: (1) Note-issuing authority: Monopoly of currency issue provides control over money supply and seigniorage. (2) Banker to government: Maintains government deposits, manages public debt, and undertakes ways and means advances. (3) Banker’s bank \& lender of last resort: Holds cash reserves of banks, provides liquidity during stress, and settles interbank payments. (4) Monetary policy: Uses policy rate, reserve requirements (CRR/SLR), open market operations, and liquidity facilities to influence credit and interest rates. (5) Regulation and supervision: Licenses and oversees banks and key financial institutions, sets prudential norms, and promotes soundness. (6) Exchange management: Manages foreign exchange reserves, intervenes in forex market, and implements exchange control frameworks. (7) Payment and settlement systems: Develops and regulates secure, efficient payments infrastructure (RTGS, NEFT, fast payments). (8) Financial inclusion and development: Promotes credit to priority sectors, fosters innovation and financial literacy.

Objectives and trade-offs: Maintaining low and stable inflation while supporting growth and safeguarding financial stability often requires balancing instruments and clear communication (inflation targeting frameworks help anchor expectations).
Quick Tip: Think “issuer, banker, regulator, policy-maker, forex manager, and payments operator” — that’s the central bank.

Concept: Gross Value Added at market price (GVA\(_{mp}\)) for a sector is Value of Output \(-\) Intermediate Consumption. Economy-wide GVA\(_{mp}\) sums sectoral GVAs.

Sectoral calculations:

Primary: \(800-500=300\) lakh.

Secondary: \(700-300=400\) lakh.

Tertiary: \(500-200=300\) lakh.

Total GVA\(_{mp}\): \(300+400+300 = \boxed{1000\ lakh (Rs.)}\).

Notes: We assume all figures are at market price and produced during the accounting year; double counting is avoided by subtracting intermediate inputs. If one needed GDP at market price, and if there were only these three domestic sectors with no net product taxes/subsidies adjustments given, the total GVA\(_{mp\) would equal GDP\(_{mp}\). If data were at basic prices, we would add product taxes less subsidies to reach market prices.
Quick Tip: GVA = Output \(-\) Intermediate Consumption; sum across sectors for total.

Definitions: Consumption function \(C=a+bY\), where \(a\) is autonomous consumption and \(b\) is MPC (\(0
Relationships: (1) \(MPC=\dfrac{\Delta C}{\Delta Y}=b\) (constant in the linear case). (2) \(APC=\dfrac{C}{Y}=\dfrac{a}{Y}+b\). Since \(\dfrac{a}{Y}\) falls as income rises, APC decreases with income, approaching MPC from above: \(\lim_{Y\to\infty} APC = b = MPC\). (3) At very low \(Y\), \(APC\) can exceed 1 (because \(a\) is positive), while \(MPC\) remains between 0 and 1.

Example: Let \(C=50+0.8Y\). At \(Y=200\), \(C=210\), so \(APC=210/200=1.05\) and \(MPC=0.8\). At \(Y=500\), \(C=450\), so \(APC=0.90\); still above \(0.8\), but closer. At \(Y=1000\), \(C=850\), so \(APC=0.85\). Thus as \(Y\) rises, APC \(\downarrow\) toward MPC.

Diagram (verbal): Plot \(C\) on vertical axis, \(Y\) on horizontal. The \(45^\circ\) line is \(C=Y\). The consumption line with intercept \(a\) and slope \(b\) lies below/above the \(45^\circ\) line depending on \(Y\). The slope of the consumption line equals MPC. The ray from origin to any point on the consumption line has slope equal to APC. As you move rightward, this ray’s slope falls toward the constant slope of the line—visually showing \(APC \to MPC\).

Macro significance: Declining APC with income implies rising saving ratio, affecting multiplier size and growth dynamics.
Quick Tip: Linear case: \(APC=\dfrac{a}{Y}+MPC\); as \(Y\) rises, \(APC \downarrow\) and approaches \(MPC\).