HBSE Class 12 Economics Half Yearly 2025–26 – Complete Solution
Subject: Economics | Class: XII | Medium: English
This page provides the question-wise solution of the supplied HBSE Class 12 Economics Half-Yearly Assessment 2025–26 paper, according to the marks and instructions printed on the paper.
Instructions
- All questions are compulsory.
- Marks of each question are indicated against it.
- Tick the correct option in the MCQ.
- Answers should be according to the marks allotted.
Questions 1–10: Objective Type
Q1. Which is included in the scope of micro economics? [1]
Microeconomics studies individual units such as consumers, firms and individual commodity prices.
Q2. Equilibrium point is that point at which: [1]
Q3. All factors in long run are: [1]
In the long run, all factors of production are variable.
Q4. Which pair is an example of substitute goods? [1]
Q5. Which of the following are external economies? [1]
Q6. As production increases, the distance between AC and AVC will: [1]
AC = AVC + AFC. Since AFC falls as output increases, the difference between AC and AVC decreases.
Q7. The word “Economics” has been derived from ______ language. [1]
Q8. The price of a commodity prevailing in a very short period is called ______ Price. [1]
Q9. In which type of economy are economic activities governed by market forces but regulated by the government? [1]
Q10. Assertion–Reason [1]
Q11. Give scarcity definition of Economics. [3]
According to the scarcity definition of economics, human wants are unlimited whereas resources available to satisfy these wants are limited and have alternative uses. Therefore, economics studies how scarce resources are allocated among their alternative uses.
Main points: unlimited wants, scarce resources, alternative uses and the need for choice/allocation.
Q12. Define Budget Line with diagram. [3]
A budget line shows all possible combinations of two goods that a consumer can purchase with given income and given prices of the two goods.
Equation: PxX + PyY = M
Good Y ││ │ │ │ │_____\________ Good X O
Q13. Fill the following table. [4]
| Production (Units) | TC (₹) | AFC (₹) | MC (₹) |
|---|---|---|---|
| 0 | 40 | — | — |
| 1 | 60 | 40 | 20 |
| 2 | 78 | 20 | 18 |
| 3 | 97 | 13.33 | 19 |
| 4 | 124 | 10 | 27 |
Formulas: AFC = TFC / Output; MC = Change in TC / Change in Output. Here TFC = ₹40 because TC at zero output is ₹40.
Q14. Define AR and MR. What is their relationship? [4]
Marginal Revenue (MR): Addition to total revenue from selling one additional unit. MR = ΔTR/ΔQ.
Relationship: Under perfect competition, AR = MR = Price. Under imperfect competition, generally MR < AR.
Q15. What is equilibrium price? How is it determined? [4]
Equilibrium price is the price at which quantity demanded equals quantity supplied.
Qd = Qs
It is determined by the interaction of demand and supply. If demand exceeds supply, price tends to rise; if supply exceeds demand, price tends to fall. When demand equals supply, equilibrium is established.
Q16. Price Elasticity of Demand [6]
Price elasticity of demand measures the degree of responsiveness of quantity demanded to a change in price, other things remaining constant.
Formula: Ed = Percentage change in quantity demanded / Percentage change in price.
Four factors:
- Availability of substitutes: More close substitutes make demand more elastic.
- Nature of commodity: Necessities generally have relatively inelastic demand; luxuries tend to be more elastic.
- Proportion of income spent: Goods taking a large share of income generally have more elastic demand.
- Time period: Demand is generally more elastic in the long run.
OR: Increase in demand means an increase in quantity demanded at the same price due to factors other than the commodity’s own price. Causes include increase in income, rise in price of substitutes, fall in price of complements, increase in population, favourable tastes and expectations of future price rise. Decrease in demand shifts the demand curve leftward.
Q17. Law of Diminishing Returns [6]
| Units of Variable Factor | Total Product | Marginal Product |
|---|---|---|
| 1 | 10 | 10 |
| 2 | 24 | 14 |
| 3 | 42 | 18 |
| 4 | 56 | 14 |
| 5 | 65 | 9 |
| 6 | 70 | 5 |
OR — Supply
Supply refers to the quantity of a commodity that a seller is willing and able to offer for sale at different prices during a given period, other things remaining constant.
Law of Supply: Other things remaining constant, price and quantity supplied have a direct relationship: Price ↑ → Supply ↑; Price ↓ → Supply ↓.
| Price (₹ per unit) | Quantity Supplied (Units) |
|---|---|
| 8 | 200 |
| 10 | 300 |
| 12 | 400 |
| 14 | 500 |
Quick Answer Key
| Q. | Answer |
|---|---|
| 1 | D — Price determination of a commodity |
| 2 | B — Demand = Supply |
| 3 | B — Not fixed factors |
| 4 | C — Pepsi-Cola and Coca-Cola |
| 5 | B — Risk-bearing economies |
| 6 | B — Decrease |
| 7 | Greek |
| 8 | Market Price |
| 9 | Mixed Economy |
| 10 | C |
HBSE Class 12 Economics
50 Most Important Questions with Solutions — Half-Yearly
Revision 2026
English Medium • Based on the supplied Half-Yearly paper + BSEH 2025–26 syllabus
Important: These are high-priority revision questions, not a guarantee of the exact questions in the examination.
Half-Yearly focus: The BSEH 2025–26 month-wise plan places Microeconomics topics through August and the
Half-Yearly examination in September. The supplied paper also covers these Microeconomics units: Microeconomics,
Consumer Behaviour & Demand Analysis, Production Function & Costs, Profit Maximisation & Supply Curve, and Market
Equilibrium.
1. What is microeconomics?
Solution: Microeconomics studies individual economic units such as a consumer, a firm, an industry and the price of an
individual commodity.
2. Distinguish between microeconomics and macroeconomics.
Solution: Microeconomics studies individual units and individual markets, while macroeconomics studies aggregates
such as national income, employment, general price level and the economy as a whole.
3. What is positive economics?
Solution: Positive economics deals with statements that can be tested or verified with facts. Example: A rise in price
generally reduces quantity demanded, other things remaining constant.
4. What is normative economics?
Solution: Normative economics deals with value judgments about what ought to be. Example: The government should
reduce inequality.
5. What is a centrally planned economy?
Solution: An economy in which major economic decisions regarding production, allocation and distribution are taken by
the government or a central authority.
6. What is a market economy?
Solution: An economy in which major economic decisions are mainly guided by market forces of demand and supply.
7. State the central problems of an economy.
Solution: The central problems are: what to produce, how to produce, and for whom to produce. They arise because
resources are scarce and have alternative uses.
8. What is opportunity cost?
Solution: Opportunity cost is the value of the next best alternative foregone when a choice is made.
9. What is a budget set?
Solution: A budget set consists of all combinations of two goods that a consumer can afford with given income and
prices.
10. Define budget line and write its equation.
Solution: A budget line shows all combinations of two goods that exactly exhaust the consumer’s income. Equation: PxX
+ PyY = M.
11. What happens to the budget line when consumer income rises, prices remaining constant?
Solution: The budget line shifts parallel outward because the consumer can purchase more of both goods.
12. What happens when the price of one good falls?
HBSE Class 12 Economics — 50 Important Questions
the good whose price has fallen.
13. What is consumer preference?
Solution: Consumer preference indicates the consumer’s ranking of different bundles of goods according to the
satisfaction they provide.
14. What is an indifference curve?
Solution: An indifference curve shows combinations of two goods that provide the consumer the same level of
satisfaction.
15. State two properties of an indifference curve.
Solution: It slopes downward and is generally convex to the origin. Two indifference curves do not intersect.
16. Why is an indifference curve downward sloping?
Solution: To maintain the same satisfaction, an increase in one good must be compensated by a decrease in the other
good, assuming both are desirable.
17. What is an indifference map?
Solution: An indifference map is a set of indifference curves showing different levels of consumer satisfaction. A higher
indifference curve represents a higher level of satisfaction, subject to usual assumptions.
18. Define marginal rate of substitution (MRS).
Solution: MRS is the amount of one good a consumer is willing to give up to obtain one additional unit of another good
while remaining on the same indifference curve. MRSxy = ∆Y/∆X in absolute terms.
19. Why does MRS diminish?
Solution: As the consumer obtains more of X and less of Y, the willingness to sacrifice Y for additional X generally falls.
This gives the indifference curve its convex shape.
20. What is consumer equilibrium?
Solution: Consumer equilibrium is the position where the consumer obtains maximum satisfaction from given income
and prices. With an indifference-curve approach, equilibrium occurs where the budget line is tangent to the highest
attainable indifference curve: MRSxy = Px/Py.
21. Define demand.
Solution: Demand is the quantity of a commodity that a consumer is willing and able to buy at different prices during a
given period, other things remaining constant.
22. What is a demand schedule?
Solution: A demand schedule is a table showing different quantities demanded at different prices of a commodity, other
things remaining constant.
23. State the law of demand.
Solution: Other things remaining constant, quantity demanded varies inversely with price: price rises → quantity
demanded falls; price falls → quantity demanded rises.
24. Why does the demand curve generally slope downward?
Solution: Because of substitution effect, income effect and diminishing marginal utility. A lower price makes the
commodity relatively cheaper and increases purchasing power.
25. What are determinants of demand?
Solution: Price of the commodity, income, prices of related goods, tastes and preferences, expectations,
population/number of buyers and other relevant factors.
26. Distinguish between movement and shift in demand curve.
Solution: A change in quantity demanded due to the commodity’s own price causes movement along the same demand
curve. A change due to other determinants shifts the entire demand curve.
27. What is increase in demand?
Solution: An increase in demand means more quantity is demanded at the same price due to factors other than the
commodity’s own price. The demand curve shifts rightward.
28. What is decrease in demand?
Solution: A decrease in demand means less quantity is demanded at the same price due to factors other than the
commodity’s own price. The demand curve shifts leftward.
29. What are normal goods?
Solution: Goods for which demand generally increases when consumer income increases, other things remaining
constant.
30. What are inferior goods?
Solution: Goods for which demand generally falls when consumer income rises, other things remaining constant.
31. What are substitute goods? Give an example.
Solution: Substitute goods can be used in place of each other. Example: Pepsi-Cola and Coca-Cola.
32. What are complementary goods? Give an example.
Solution: Complementary goods are jointly used goods. Example: car and petrol.
33. Define price elasticity of demand.
Solution: Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. Ed =
Percentage change in quantity demanded / Percentage change in price.
34. State the degrees of price elasticity of demand.
Solution: Perfectly inelastic (Ed = 0), relatively inelastic (Ed < 1), unitary elastic (Ed = 1), relatively elastic (Ed > 1), and
perfectly elastic (Ed = infinity).
35. Explain any four factors affecting price elasticity of demand.
Solution: Availability of substitutes, nature of commodity, proportion of income spent, and time period are major factors.
More substitutes, larger income share and longer adjustment time generally make demand more elastic.
36. Explain the total expenditure method of elasticity.
Solution: Total expenditure = Price × Quantity demanded. If price and total expenditure move in opposite directions,
demand is elastic; if total expenditure remains unchanged, elasticity is unitary; if they move in the same direction,
demand is inelastic.
37. Define production function.
Solution: A production function shows the maximum output that can be produced from given inputs with a given
technology during a given period.
38. Distinguish between short run and long run.
Solution: In the short run, at least one factor is fixed and others may be variable. In the long run, all factors are variable.
39. Define Total Product (TP), Average Product (AP) and Marginal Product (MP).
Solution: TP is total output. AP = TP / units of variable factor. MP is the change in TP due to one additional unit of the
variable factor: MP = ∆TP/∆L.
40. State the relationship between TP and MP.
Solution: When MP is positive, TP rises. When MP is zero, TP is maximum. When MP is negative, TP falls.
41. State the relationship between AP and MP.
Solution: When MP > AP, AP rises. When MP = AP, AP is maximum. When MP < AP, AP falls.
42. State the Law of Diminishing Marginal Product.
Solution: When more units of a variable factor are employed with other factors fixed, marginal product eventually
decreases after a point.
43. Why does the law of diminishing returns apply?
Solution: Because some factors are fixed in the short run. As the variable factor keeps increasing, the fixed factor
becomes relatively scarce and additional units become less productive after a point.
44. Define fixed cost and variable cost.
Solution: Fixed cost does not change with output in the short run, e.g. rent. Variable cost changes with output, e.g. raw
materials.
45. Define total cost, average cost and marginal cost.
Solution: TC = TFC + TVC. AC = TC/Q. MC = ∆TC/∆Q. Marginal cost is the addition to total cost from producing one
more unit.
46. Why does the difference between AC and AVC decrease as output increases?
Solution: AC = AVC + AFC. Since AFC continuously falls as output increases, the gap between AC and AVC decreases.
47. Define TR, AR and MR.
Solution: TR is total revenue = Price × Quantity. AR = TR/Q. MR = ∆TR/∆Q. Under perfect competition, AR = MR =
Price.
48. What is perfect competition? State its main features.
Solution: Perfect competition is a market structure with many buyers and sellers, homogeneous product, free entry and
exit, perfect knowledge and a firm that is a price taker.
49. State the conditions of profit maximisation.
Solution: The firm maximises profit where MR = MC and MC is rising at the point of intersection. Under perfect
competition, since MR = Price, the condition is P = MC, subject to the firm’s operating conditions.
50. Define supply and explain market equilibrium.
Solution: Supply is the quantity a seller is willing and able to offer at different prices during a given period. Market
equilibrium occurs where quantity demanded equals quantity supplied (Qd = Qs). If demand exceeds supply, price tends
to rise; if supply exceeds demand, price tends to fall. Equilibrium price is determined at the intersection of demand and
supply.
Last-Minute Formula Revision
Topic Formula / Key Point
Budget Line PxX + PyY = M
Consumer Equilibrium MRSxy = Px/Py
Average Product AP = TP / Variable Factor
Marginal Product MP = ∆TP / ∆Variable Factor
Total Cost TC = TFC + TVC
Average Cost AC = TC / Q
Average Fixed Cost AFC = TFC / Q
Average Variable Cost AVC = TVC / Q
Marginal Cost MC = ∆TC / ∆Q
Total Revenue TR = P × Q
Average Revenue AR = TR / Q = P
Marginal Revenue MR = ∆TR / ∆Q
Equilibrium Qd = Qs
Price Elasticity Ed = % change in Qd / % change in Price
