NCERT Solutions
Class 12 Economics
11 chapters · 22 important questions
Introduction to Microeconomics
Introduces economic problems, central problems of an economy, and the difference between microeconomics and macroeconomics. The concept of PPC (Production Possibility Curve) is central.
Key Topics
Important Questions
What is opportunity cost? Explain using a Production Possibility Curve.
State two differences between microeconomics and macroeconomics.
Consumer Equilibrium and Demand
Covers utility analysis (total and marginal utility), consumer equilibrium under utility approach and indifference curve approach, and the law of demand. Price, income, and cross elasticity of demand are key.
Key Topics
Important Questions
State and explain the Law of Diminishing Marginal Utility. What are its exceptions?
What is Price Elasticity of Demand? Calculate it using the percentage method given: price changes from ₹10 to ₹12 and demand falls from 100 to 80 units.
Production and Costs
Covers the production function, Law of Variable Proportions, returns to scale, and various cost concepts (TC, TVC, TFC, AC, MC). The U-shape of AC and its relationship with MC are important.
Key Topics
Important Questions
Explain the relationship between Average Cost (AC) and Marginal Cost (MC) with a diagram.
Complete the following table and calculate MC: [TP given at different levels of labour]
The Theory of Firm under Perfect Competition
Covers the features of perfect competition, revenue concepts (AR, MR, TR), and the conditions for profit maximisation (MR = MC). Short-run and long-run equilibrium of a firm are key.
Key Topics
Important Questions
What are the conditions for profit maximisation of a firm? Explain with a diagram.
A firm's fixed cost is ₹500 and variable cost is ₹30 per unit. At what price will the firm shut down if market price is ₹25?
Market Equilibrium
Covers how market price is determined by the intersection of demand and supply. The effect of changes in demand and supply on equilibrium price and quantity, and government intervention through price ceiling and price floor.
Key Topics
Important Questions
Explain the effect of simultaneous increase in demand and supply on equilibrium price and quantity.
What is a price ceiling? Give one example and explain its consequences.
Non-competitive Markets — Monopoly and Monopolistic Competition
Covers the features of monopoly and monopolistic competition, price determination in these markets, and the concept of price discrimination. Oligopoly and kinked demand curve are also covered.
Key Topics
Important Questions
What is price discrimination? Under what conditions can a monopolist practise price discrimination?
Distinguish between monopoly and monopolistic competition.
National Income Accounting
Covers macroeconomic concepts: GDP, NNP, GNP, personal income, and disposable income. The three methods of measuring national income — product, income, expenditure — are central. Double counting and how to avoid it are important.
Key Topics
Important Questions
Calculate NNP_FC from the following data: GDP_MP = ₹5,000 crore, Depreciation = ₹200 crore, NFIA = ₹100 crore, Net Indirect Taxes = ₹300 crore.
Distinguish between final goods and intermediate goods. Why should only final goods be included in GDP?
Money and Banking
Covers the meaning and functions of money, the money supply (M1, M3), credit creation by commercial banks, and the role of the Reserve Bank of India. Monetary policy instruments are important.
Key Topics
Important Questions
Explain the process of money creation (credit multiplication) by commercial banks with a numerical example.
The LRR is 20%. A deposit of ₹5,000 crore is made. What is the maximum deposit creation?
Determination of Income and Employment
Covers the Keynesian theory of income determination, aggregate demand, aggregate supply, and equilibrium. The investment multiplier, deflationary gap, and inflationary gap are key topics for the board exam.
Key Topics
Important Questions
Explain the concept of investment multiplier with a numerical example. What is the value of K when MPC = 0.8?
An economy is in a state of deflationary gap. What corrective measures can the government take through its fiscal policy?
Government Budget and the Economy
Covers the meaning and objectives of a government budget, types of receipts (revenue and capital) and expenditure, and different types of budget deficit. The concept of fiscal deficit and its implications are important.
Key Topics
Important Questions
Distinguish between Revenue Deficit and Fiscal Deficit. Calculate Fiscal Deficit given: Total Expenditure ₹8,000 crore, Revenue Receipts ₹4,500 crore, Capital Receipts excluding borrowings ₹1,500 crore.
What are the objectives of a government budget?
Open Economy Macroeconomics — Balance of Payments
Covers the Balance of Payments (current account and capital account), exchange rate determination (demand and supply of foreign exchange), and fixed vs flexible exchange rate systems.
Key Topics
Important Questions
What is the Balance of Payments? Distinguish between the current account and capital account.
Explain how exchange rate is determined in a free-float system using demand and supply of foreign exchange.