CBSE Class 12 Economics Quick Revision Questions

Quick Revision Question and Answers for Low Achievers 

Question. What is opportunity cost?
Answer: Opportunity cost refers to the cost of the next best alternative foregone.

Question. Define Marginal rate of transformation.
Answer: It is the amount of one good that must be given to produce one additional unit of a second good. It is also known as marginal opportunity cost.

Question. Give two examples of Micro economic variables/ studies.
Answer: a. Individual demand
b. Individual savings

Question. Why does an economic problem arise?
Answer: It is due to unlimited wants and limited resources.

Question. What is meant by inferior goods in economics?
Answer: Inferior goods refer to those goods whose demand decreases with rise in income of the consumer.

Question. Define budget line.
Answer: Budget line shows all combinations of two goods that a consumer can buy with his income at a given price.

Question. What is a demand schedule?
Answer: It is a tabular representation of different quantities demanded at different levels of prices 8. Define normal goods.
Normal goods are those goods whose demand rises with increase in income of consumer.

Question. Define indifference curve.
Answer: It shows the various combinations of two goods which provide same level of satisfaction to the consumer.

Question. Define price elasticity of demand.
Answer: Price elasticity of demand refers to the degree of responsiveness of the quantity demanded to changes in price.
Ed = ΔQ/ΔP X P/Q

Question. Define production function.
Answer: It refers to the functional relationship between inputs and outputs.

Question. Define Marginal physical product.
Answer: It refers to the addition made to the total product

Question. Define revenue.
Answer: It refers to total money income from the sale of output

Question. Define marginal revenue.
Answer: It refers to the addition made to the total revenue.

Question. Why is the ATC greater than AVC
Answer: ATC is greater than AVC because ATC includes AVC and AFC

Question. Define fixed cost.
Answer: Fixed costs refer to cost which remains constant as output changes. For e.g.: rent

Question. Define equilibrium price.
Answer: Equilibrium price refers to a price at which market demand and market supply are equal.

Question. In which market form the products are differentiated.
Answer: Monopolistic competition

Question. In which market form a firm is a price taker?
Answer: Perfect competition

Question. Why is demand curve under oligopoly indeterminate (uncertain)?
Answer: Demand curve is indeterminate because of price war between the sellers.

Question. Define Macro Economics?
Answer: Macro economics studies the economy as a whole.

Question. What is an Economic Territory?
Answer: It refers to the area of a country where there is free movement of goods, human resources and capital.

Question. Who is a normal resident?
Answer: A persons or an institution who lives in a country and whose centre of interest lies in that country is called a normal resident of that country.

Question. Is transfer income included in national income? Why?
Answer: No, because transfer income does not result in the production of goods and services.

Question. What is meant by Cash Reserve Ratio (CRR)?
Answer: It is the percentage of net deposits of the commercial bank which are maintained by the RBI

Question. What is meant by Bank rate?
Answer: It is the rate at which the central bank lends money to the commercial bank.

Question. What is meant by double coincidence of wants?
Answer: It means that one person‘s desire to buy and sell must coincide with the other person‘s desire to buy and sell.

Question. What is legal tender money?
Answer: Money that is declared legally as a medium of exchange by the government is called legal tender money.

Question. Define involuntary unemployment.
Answer: Involuntary unemployment refers to a situation in which people who are willing to work are unable to get work

Question. What is the relationship between MPC and MPS?
Answer: MPC + MPS = 1

Question. What is meant by excess demand (inflationary gap)?
Answer: Excess demand occurs when AD is greater than AS at the level of full employment equilibrium

Question. What is deficient demand (deflationary gap)?
Answer: Deficient demand arise when AD is less than AS at the level of full employment equilibrium

Question. What is meant by autonomous investment?
Answer: Investment which is made without depending on the profit of the enterprise.

Question. Define multiplier.
Answer: Multiplier is the ratio of change in income to the change in investment 
Multiplier (k) = ΔY/ΔI

Question. Define government budget.
Answer: Government budget shows the estimated receipts and estimated expenditure of the government for one year.

Question. Define revenue deficit in government budget.
Answer: When the revenue expenditure of the government is greater than the revenue receipts it is called revenue deficit Revenue expenditure > Revenue receipts

Question. What is primary deficit?
Answer: Primary deficit is the difference between fiscal deficit and interest payments made by the government Primary deficit = Fiscal deficit – Interest payments

Question. What is fiscal deficit?
Answer: When the total government expenditure is greater than total government receipts excluding borrowing it is known as fiscal deficit.
Fiscal deficit = Total Government Expenditure – Total Government Receipt (excluding borrowings)

Question. What is meant by foreign exchange rate?
Answer: Foreign exchange rate refers to the rate at which one currency is exchanged for another currency

Question. Name the two accounts in the balance of payments
Answer: a. Current account: It shows the imports and exports of goods and services and transfer payments
b. Capital Account: It shows the assets and liabilities of the government

Question. Why a production possibility curve is concave?
Answer: It is due to increasing marginal opportunity cost.

Question. What is primary deficit?
Answer: Primary deficit= fiscal deficit – interest payment.

Question. What is revenue deficit?
Answer: When revenue expenditure is more than revenue receipts.

Question. A rise in the price of a goods, results in an increase in expenditure on it. Is its demand elastic or inelastic?
Answer: Inelastic because there is direct relation between price and expenditure.

Question. What is consumption function?
Answer: The relationship between income and consumption is called consumption function.

Question. What is saving function?
Answer: The relationship between income and saving is called saving function.

Question. What is Barter system?
Answer: Exchange of goods for goods is called barter system.

Question. Define APC?
Answer: APC= C/Y.The ratio of income to consumption is called APC.

Question. Define APS?
Answer: APS=S/Y .The ratio of income to saving is called APS.

Question. What is excess demand?
Answer: When AD>AS at the full employment level.

Question. What is deficient demand?
Answer: When AD<AS at the full employment level.

Question. A rise in the income of the consumer X leads t a fall in the demand for that good by the consumer .What is the good X called?
Answer: Normal good.

Question. When demand for good falls due to rise in its own price. What is the change in demand called?
Answer: Contraction of demand.

Question. What happens when demand and supply curve don‟t intersect each other?
Answer: Economically non –viable industry.

Question. What is abnormal profit?
Answer: It is the profit earned over and above normal profit.

Question. What is break- even price?
Answer: It is the price at which firms make zero normal profit.

Question. What is cartel?
Answer: It is a group of firms which jointly sets output and price so as to exercise monopoly control.

Question. What are patent rights?
Answer: It is an exclusive license or right granted to a company or an Individual to produce a particular product or use a particular technology.

Question. What are advertising costs/persuasive advertising?
Answer: When the expenditure incurred by a find to persuade the potential consumer to present their brands/products as different/ better compared to other brands/products is known as advertising costs/persuasive advertising.

Question. What is induced investment?
Answer: It is a kind of investment which is profit motive in nature.

Question. What is autonomous /public investment?
Answer: It is a kind of investment which is not profit motivated.

Question. What is linear consumption function?
Answer: It is a consumption function which is given on the basis of constant marginal propensity to consume.
C=c+bY
Where c =autonomous consumption
B=marginal propensity to consume.

Question. What is the relationship between APC and APS?
Answer: APC+APS=1.

Question. What is the relationship between MPC and MPS?
Answer: MPC+MPS=1.

Question. What is the relationship between multiplier and MPC?
Answer: The value of multiplier varies directly with MPC.
K=1/1-MPC.

Question. What is multiplier?
Answer: It is the no. by which change in investment must be multiple in order to determine the resulting change in income and output.

Question. What is fiscal deficit?
Answer: When TE(RE+CE)>TR(RR+CR)of the govt.,excluding borrowing. It is called fiscal deficit .

Question. What does fiscal deficit in govt. budget mean?
Answer: It means more borrowing on the part of the govt.

Question. What is deficit budget?
Answer: When expenditure of the govt. is more than its receipts, it is called deficit budget.

Question. What is surplus budget?
Answer: When receipts of the govt. are more than its receipts, it is called surplus budget.

Question. Why borrowing treated as capital receipts?
Answer: Because it increases the liability of the govt.

Question. Why payment of interest treated as revenue expenditure?
Answer: Because it does not cause any reduction in liability of govt.

Question. What is factor market?
Answer: It consists of factors of production namely land, labour, capital and organization.

Question. Define product market?
Answer: It consists of final goods and services.

Question. What is the alternative name of micro economics?
Answer: Price theory

Question. What is the alternative name of macro economics?
Answer: Income theory.

Question. Why is change in stock is considered a part of final expenditure?
Answer: Unsold stocks left with producers are assumed as purchased by the producers themselves.
That is why it is treated as investment expenditure by the producers.

Question. The balance of trade shows a deficit of Rs 300 crore.The values of exports are Rs 500 crore. What is the value of imports?
Answer: Since Balance of trade=Export-Import
300=500-Import
Import=300+500=800crore

Question. Why does an economic problem arises?
Answer: It arises due to
1) Scarcity of resources.
2) Alternative uses of resources.
3) Unlimited wants and limited resources.

Question. Define opportunity cost?
Answer: It is the cost of foregone alternative.

Question. What was rightward shift of PPC indicate?
Answer: It indicates growth of resources.

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