1.These guidelines are for your ready reference and aiming to ensure consistency in assessment.

2. These are not intended to be followed word by word. Diversity, originality and individual
contribution should be encouraged.
3. Economics is as scoring as any other subject. Make it true.
4. Average marking is gross injustice to good students. Please avoid it.
Section A MCQs
Q1.
i) Adam Smith
ii) ERRATA: Award ONE marks irrespective of option chosen
iii) Rise in demand
iv) Economic activities
v) Positive
vi) Inversely
vii) Positive
viii) Increasing cost
ix) Govt Revenue & Expenditure policy
x) Marginal utility
xi) Business cycle
xii) Less than unit
xiii) 2.5%
xiv) Product of price & quantity
xv) Large
Section B Short Answer Question
Q2 Micro Economics

i) Note: Definition and freehand sketch is at most that is required. NO explanation is need to award full
marks.
Law of Demand states that there is a negative/inverse relationship between the price of a product and its
demand by consumers, provided all other factors remains the same. As the price of a product decreases,
its demand increases, and as price of the product increases, its demand decreases, ceteris paribus. Law of
demand refers the movement along the demand curve. Law of demand holds provided all other factors
that affects demand of the good other than price of that good remains constant. The other factors are
income of the consumer, price of substitutes and compliments, tastes, habits, preferences, expectations
about future price etc.

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ii) Note: Definitions of Economics given by Adam Smith and Marshall are only required. NO explanation
is required. Reward maximum marks on this basis.
Adam Smith:
Adam Smith, father of Economics, defines Economics in his book “ A Treaty into the nature
and causes of Wealth of Nations” as “ Economics is concerned with the generation of the
wealth of nations. Economics is not to be concerned only with the production of wealth
but also the distribution of wealth.” He regarded economics as ‘science of wealth’. To
him, wealth may be defined as those goods and services which command value-in- exchange.
Marshall’s Definition :
Professor Alfred Marshall in his book ‘Principles of Economics’ defines Economics as;
“ Economics is a study of mankind in the ordinary business of life; it examines that part of
individual and social action which is most closely connected with the attainment and with the use
of the material requisites of well-being.”

iii) Note: As this is part of short-answer question, diagram is not expected from students. Half marks
should be given to description of law and half to its assumptions.
Law of Diminishing Marginal Utility
Law of Diminishing Marginal Utility refers a common observation that as we consume more
and more units of a good, each successive unit gives less satisfaction than the previous unit.
Law of Diminishing Marginal Utility states that all else equal, as consumption of a good
increases, the marginal utility derived from each additional unit declines. In simple terms, the
law of diminishing marginal utility means that the more of a good that we use or consume,
the less satisfaction we get from each additional unit. The law of diminishing marginal utility
directly relates to the concept of diminishing prices. As the utility of a product decreases,
consumers are only willing to pay smaller dollar amounts for more of the product.
Assumptions:
 The goods being consumed are identical.
 The units are consumed quickly with few breaks in between.
 Units are not too big or too small.
 The consumer's taste is constant.
 There is no change in the price of the goods or of their substitutes.
 The unit can be measured.
 The consumer is making rational decisions about consumption.

iv) Note: Any FIVE Characteristics are enough to grant students maximum marks. No diagram is
required.
Characteristics of Perfectly Competitive Market
1. All firms sell an identical product, the products are homogeneous.
2. All firms are price takers, they cannot influence the market price of their products.
3. Market share has no influence on prices.
4. Large number of buyers are available to buy the product, and large number of sellers are
available to sell the product.
5. There is no transaction cost.
6. No restriction on buyers and sellers; free entry and exit

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 7. Perfect mobility of factors of production
8. Perfect knowledge of participants about market.

v) Note: Diagrams are required for this question. Only two to three differences with diagrams are
sufficient to grant full marks.
Change in Quantity demanded and Change in Demand
Change in Quantity Demanded Change in Demand
It refers to expansion or contraction of It refers to increase or decrease in demand
demand due to change in the price of the due to change in any factor other than the
product, keeping all other factors constant. price of the product.
It is movement along the curve as price of It is shift of the demand curve either left or
the good increases or decreases. right due to change of any factors other than
the price of the good.
Only change in the price of the good is Change in consumer income, prices of
related to it. substitutes and complements, tastes, habits,
preferences, expectation of future price of
the good etc are related to it.
It refers to law of demand It refers to ceteris paribus part of the law of
demand.

Q3 Macro Economics
i) Note: Any one definition of National Income with atleast three one-sentence points about importance
is sufficient to award maximum marks.
National income refers the market value of all final goods and services produced by a country during a
financial year. Thus, it is the net result of all economic activities of any country during a period of one
year and is valued in terms of money.
According to Marshall: “The labor and capital of a country acting on its natural resources produce
annually a certain net aggregate of commodities, material and immaterial including services of all kinds.
This is the true net annual income or revenue of the country or national dividend.”

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Importance:
1. National Income indicates the status of the economy.
2. National Income statistics can help in formulating economic policies for economic
development.
3. It is used to timely identifying inflationary and deflationary trends and make policies to
manage them
4. It is used to make good budgets
5. It is used to measure and compare standard of living among nations

ii) Three differences on tabular form are sufficient to award maximum marks
Public Finance Private Finance
Public finance concentrates on government-led private finance centers on personal or corporate
financial activities. financial management,
It aims equitable resource distribution for societal It aims to optimize individual wealth or business
needs like infrastructure, healthcare, education profits.
and provision of public goods.
public finance prioritizes collective well-being. private finance revolves around individual or
corporate financial success.
Influenced by political considerations and public It is driven by market dynamics, risk tolerance,
policy goals. and individual financial goals.
It relies on taxation, government borrowing, and It involves personal savings, investments, loans,
non-tax revenue sources for funding. and other private financial instruments.

iii) Note: Just one sentence defining these four canons are sufficient to award maximum marks.
Canons of taxation
Canons of taxation are some basic qualities which a good tax system should possess. They are;
Equity: The taxes people have to pay should be proportional to their income.
Certainty: The tax that an individual must pay should be certain and not arbitrary.
Convenience: The tax system should be convenient for the taxpayers.
Economy: The tax system should be efficient and cost-effective.

iv) Note: Three differences in BoP and BoT are sufficient to award maximum marks.

Balance of Payment - BoP Balance of Trade - BoT

BoP is a financial statement that keeps track BoT is a financial statement that captures
of all the economic transactions by the the nation’s import and export of goods
nation with the rest of the world. with the rest of the world.
Transactions related to transfers, goods, Transactions related to goods are included
assets and services are included in BoP. in BoT.
It includes both visible and invisible and It includes only visible and tangible goods.
tangible and intangible goods and services
Capital and funds transfers are included in Capital and funds are not included in BoT.
Bop
The net effect of BoP is always zero, both The net effect of BoT can be either positive,

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 the receipts and payment sides tallies. negative, or zero, it is favourable,
unfavourable or balanced.
BoP includes BoT. It has Current Account BoT is a part of BoP It is a component of
and Capital Account. Current Account of BoP

v) Note: A simple definition of Money with name of functions of money with one-sentence description is
sufficient to award full marks.
Definition of Money.
Money is defined as any item or medium of exchange that symbolizes perceived value. As a
result, it is accepted by people for the payment of goods and services, as well as the
repayment of loans. Money makes the world go 'round. Economies rely on money to facilitate
transactions and to power financial growth.
Functions of Money:
1. Medium of Exchange: Money functions as medium of exchange. We do transactions
smoothly with money.
2. Measure of Value: Value of a product or service is determined on the basis of the money
needed for its possession
3. Standard of deferred payments: Money plays an important role in lending and borrowing.
Money is taken as a loan and repaid after a time-gap.
4. Store of Value: Money can store the purchasing power as current income can be saved
for future consumption.
Money can also functions as Basis of Credit, a Unit of account.

Section C Detailed Answer Question

Q4 Micro Economics
i)
The statement “ Economics is the Science of Scarcity and Choice” is the crux of Lionel Robbins
definition of economics as “the science which studies human behavior as a relationship between ends and
scarce means which have alternative uses. This definition emphasizes the role of scarcity and choice in
economic decision-making.

It is required that students should give the definition. Then mention the important points envisaged in the
statement that make this definition superior to all other definitions of economics.

ii) It is required that students should define the price elasticity of demand and give it a formula of it.
( either % change or proportionate change of values)

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Degrees of Price elasticity of Demand
Students should mention the five degrees of price elasticity of demand
Perfectly elastic demand, Elastic demand , unitary elastic demand, inelastic demand and
perfectly inelastic demand.

It is recommended that if students use above diagrams, or students use formula to calculate degrees of
elasticities in numerical values, then they are rewarded maximum marks

Q5 Macro Economics
i) If a student describes any five advantages and five disadvantages of IT, students should be awarded
maximum marks. Moreover, advantages and disadvantages are not confined to the ones mentioned below.
Advantages of International Trade.
 International trade encourages market competitiveness.
 International trade enables industries to achieve economies of scale as market size enlarge
from national borders to globally.
 Specialization; as international trade encourages countries to focus on production of those
goods and services they have competitive advantage resulting global production of each and
every good. It enlarges scope of trade.
 International trade benefits consumers a vast Variety of goods as the goods which are not
available to domestic country due to any reason would now available. It increases
affordability of good quality products at most competitive prices
 By exchanging goods, nations can consume more than before trade. It was Adam Smith who
first pointed out the advantages of trade in reaping the advantages of specialization and the

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 economic benefits flowing from it, viz., an improvement in production and productivity and,
hence, national wealth/ income of every participating country.
 A gain from trade, called ‘vent for surplus’, is achieved. International trade increases the level
of productive activity by stimulating efficient utilisation of resources. Countries may then
experience surplus produce. Smith then argued that trade was a means of disposing of surplus
produce for exports.
 International trade would make savings and capital accumulation easier and more rewarding.
 International trade ensures new knowledge, new ideas and cultures, new skills and
entrepreneurship and disseminate technical knowledge.
 Trade can boost productivity which, in turn, raises the incomes and standards of living even
of poor developing countries. The link between trade and productivity, being a potential one,
can be identified with exports and imports. This is what makes trade a powerful ‘engine of
growth’.
 As international trade increases the size of market, it creates employment opportunities and
thus reduce poverty and increase standard of living even of poor countries.

Disadvantages of International Trade.

 There is always a political risk involved with international trade.
 There can be severe exchange rate risks.
 International trade also presents cultural complications.
 It has a credit risk that must be specifically managed.
 Impediment in the Development of Domestic Industries; Infant Industry argument
 Difficulties in Times of Need, eg in war
 Economic Dependence:
 Widening Trade Gap
 Over Utilization of Natural Resources due to supplying to global market
 Shortage of Goods in Domestic Market:
 Political Dependence

ii) Concepts of National Income

Description of different concepts of National Income is required. Maximum marks should be awarded if
students employ equations to define following concepts of National Income.
GDP, GNP, NNP, NI, NI at MP, NI at FC, PI, PDI, PCI.

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