CLASS XII

There will be two papers in the subject:

Paper I - Theory: 3 hours ……80 marks Paper II- Project Work ……20 marks

Note: The syllabus is intended to reflect a study of the theory of Economics with specific reference to the
Indian Economy. Therefore, examples and specific references to the Indian Economy must be made wherever
relevant.

PAPER - I (THEORY) – 80 Marks

S. No. UNIT TOTAL

(i) Demand

(ii) Elasticity of Demand 16 Marks

(iii) Supply

(iv) Market Mechanism

(v) Concepts of Production 12 Marks

(vi) Cost and Revenue

(vii) Main Market Forms and Equilibrium of a Firm 12 Marks

MACROECONOMICS (40 Marks)

2. Theory of Income and Employment 8 Marks

3. Money and Banking 8 Marks

4. Balance of Payments and Exchange Rate 6 Marks

5. Public Finance 6 Marks

6. National Income 12 Marks

TOTAL 80 Marks

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1. Micro Economic Theory Difference between stock (intended supply)
(i) Demand: meaning, factors affecting demand; and supply (actual supply) with the help of
Demand function; Law of Demand; relevant examples. A supply function should
derivation of demand curve; movement and be specified and explained. Law of Supply:
shift of the demand curve; exceptions to the Meaning, supply schedule and supply curve.
Law of Demand. Derivation of market supply curve from
individual supply curve. Movement and shift
Law of Diminishing Marginal Utility, Law of of the supply curve, exceptions to the Law of
Equimarginal Utility, consumer’s Supply. Elasticity of Supply: Meaning,
equilibrium through utility approach degrees of elasticity of supply and
(Cardinal) and indifference curve analysis measurement of elasticity of supply by
(Ordinal). percentage method and geometric method.
The concept of demand: meaning, types of (iv) Market Mechanism: Equilibrium and
demand. A demand function to be specified disequilibrium; Equilibrium price and effect
incorporating the determinants of demand. of changes in demand and supply on the
Diagrams should be used in explaining the equilibrium price. Simple applications of
Law of Demand, reasons for downward slope tools of demand and supply.
of demand curve, its derivation using demand
schedule. Derivation of market demand curve A basic understanding of the concept of
from individual demand curve. equilibrium. The effects of changes in
demand and supply - both along the curves
(a) Cardinal Utility Analysis: meaning of and shift of the curves to be explained. Basic
utility, total utility, marginal utility, understanding of Price control, rationing,
relationship of TU and MU, Law of Price ceiling and Floor price with the help of
Diminishing Marginal Utility (schedule and demand and supply curves.
diagram, Only assumptions to be taught,
criticisms not required), Consumer’s (v) Concept of production and production
equilibrium – one commodity (schedule and function: (short run and long run production
diagram), Law of Equimarginal Utility function), returns to a factor, returns to scale
(statement, schedule) and conditions of (meaning only) total, average and marginal
consumer’s equilibrium using marginal physical products; Law of Variable
utility; (b) Ordinal Utility Analysis: Proportions and its three stages.
Indifference Curve – its meaning and A production function (concept only). Law of
properties (including MRS and DMRS), Variable Proportions: statement,
indifference map, consumer’s budget line, assumptions, schedule (for the purpose of
Consumer’s equilibrium – condition (to be understanding and not for testing), diagram
explained with the help of a diagram). and explanation to the three stages.
(ii) Elasticity of demand: meaning, types of (vi) Cost and revenue: Basic concepts of cost;
elasticity of demand, measurement of fixed cost, variable cost, total cost, marginal
elasticity of demand; factors affecting cost and average cost – their relationships;
elasticity of demand. opportunity cost; short run and long run cost
Various methods of measurement of the curves. Revenue: meaning; average revenue,
elasticity of demand: point method - marginal revenue and total revenue and their
percentage method, expenditure method and relationships under perfect competition and
geometric method. (Numericals required on imperfect competition, Producer’s
percentage method only). The cross and equilibrium.
income elasticity of demand must be Basic concepts – private cost, economic cost,
explained. Degrees of elasticity of demand to social cost, money cost, real cost, explicit
be explained. Use diagrams wherever cost, implicit cost.
necessary.
Cost concepts – Fixed cost, variable cost,
(iii) Supply: meaning; difference between stock total cost, marginal cost, average cost with
and supply; determinants of supply; Law of schedule and diagram; relationship between
Supply; movement and shift of the supply average cost, marginal cost, total cost (only
curve; elasticity of supply

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 concepts of long run and short run cost (ii) Banks: functions of commercial bank; high
curves, derivations not required). powered money, credit creation by
Opportunity cost – meaning only. Difference commercial banks; Central Bank: functions.
between accounting cost and opportunity Basic understanding of the functions of
cost. commercial banks, credit creation process
Revenue – Average revenue, marginal with limitation. The regulatory role of the
revenue, total revenue – concepts and Central Bank, its functions and the way it
relationships under perfect competition and controls the flow of credit needs to be
imperfect competition. Producer’s explained. A brief mention may be made of
equilibrium (Profit maximization goal) – quantitative CRR, SLR, Bank Rate policy
meaning; conditions: (a) TR and TC (repo rate and reverse repo rate) and Open
approach along with diagram (b) MR and Market Operations) and qualitative methods.
MC approach along with diagram.
4. Balance of Payment and Exchange Rate
(vii) Main market forms: perfect competition,
Balance of Payment – meaning, components;
monopolistic competition, oligopoly,
foreign exchange – meaning, determination of
monopoly, monopsony; characteristics of the
exchange rate (Flexible).
various market forms; equilibrium of a firm
in perfect competition under short run and Balance of Payment - Meaning and components;
long run. Causes of disequilibrium and how the
disequilibrium can be corrected; Foreign
Features of perfect competition, monopolistic
Exchange Rate – meaning, meaning of fixed and
competition, oligopoly, monopoly and
flexible exchange rate, determination of exchange
monopsony (meaning only). Equilibrium of a
rate in a free market. Concepts of depreciation,
firm in perfect competition under short run
appreciation, devaluation and revaluation
(explanation and diagram, shut down point
(meaning only).
and break-even point) and long run (diagram
not required). 5. Public Finance
2. Theory of Income and Employment (i) Fiscal Policy: meaning and instruments of
fiscal policy.
Basic concepts and determination of Income and
Employment Meaning and instruments of fiscal policy –
Public Revenue: Meaning, taxes (Meaning
The concept of demand (exante) and effective and types), difference between direct and
(expost) demand. Aggregate demand and its indirect taxes; Public Expenditure: Meaning
components, propensity to consume and and importance; Public Debt: Meaning and
propensity to save (average and marginal), redemption; Deficit Financing: meaning.
equilibrium output; investment multiplier (its
(ii) Government Budget: meaning, types and
meaning and mechanism with the help of a
components.
diagram). Simple numerical based on the above.
Meaning of full employment. Problems of excess Meaning and types of Government budget –
demand and deficient demand; measures to union, state; components – revenue and
correct them. capital. Concept of deficit budget: revenue
deficit, fiscal deficit, primary deficit – their
3. Money and Banking meaning and implications.
(i) Money: meaning, functions of money, supply 6. National Income
of money.
(i) Circular flow of Income.
Meaning, kinds of money, functions of money
(primary, secondary and contingent) to be A simple model explaining the circular flow
explained; supply of money (only meaning of of income with two, three and four sector
M 0, M 1 , M 2 , M 3 & M 4 ). Inflation: meaning, models with leakages and injections.
demand pull and cost push (diagrams not (ii) Concepts and definition of NY, GNP, GDP,
required) NNP, private income, personal income,
personal disposable income, National

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 Disposable Income and per capita income;
A list of suggested Projects is given below:
relationship between the income concepts.
1. Study a Public Sector Enterprise with reference
A brief understanding of the mentioned to its relevance to the Indian Economy and its
national income aggregates is needed. The future prospects. Analyse the trend of its growth
concepts of GNP and NNP should be for the last ten years.
explained both at factor cost and market
prices, real GDP and nominal GDP, 2. Conduct a Socio-Economic survey of a locality
National Disposable Income (Gross and (minimum sample size should be 30 households)
Net), GDP and Welfare, GDP as an indicator with reference to:
of Economic welfare. (a) Demographic features.
(iii) Methods of measuring National Income: (b) Consumption Pattern – Expenditure on
product or value-added method; income necessities, comforts and luxuries.
method and expenditure method with simple (c) Occupational structure.
numericals based on them. 3. Compare the contribution made by different
Simple numericals based on all the methods sectors of the economy towards GDP growth
to be covered for better understanding of the during the planning period.
concept. Precautions and difficulties of 4. Prepare a report on the competition in the
measuring National Income for each method. Aviation Sector in India with reference to:
(a) Performance of the Public Sector and Private
PAPER II – PROJECT WORK – 20 Marks Sector.
Candidates will be expected to have completed two (b) Operational strategies adopted by budget/low
projects from any topic covered in Theory. cost carriers.
The project work will be assessed by the teacher 5. Make a comparative analysis of lending
and a Visiting Examiner appointed locally and performance of five Commercial Banks in the
approved by CISCE. past six years with reference to the changing
CRR and SLR.
Mark allocation for each Project [10 marks]: 6. Many thinkers believe that we are rapidly
Overall format 1 mark depleting our natural resources. Assume that
there are only two inputs (labour and natural
Content 4 marks
resources) producing two goods (wheat and
Findings 2 marks gasoline) with no improvement in technology
Viva-voce based on the Project 3 marks over time. Show what would happen to the
Production Possibility Curve over time as natural
resources are exhausted. How would invention
and technological improvement modify your
answer? On the basis of this example, explain
why it is said “economic growth is a race
between depletion and invention.”
7. Make a comparative study of the allocation of
financial resources of the Central Government
Budget on Agriculture, Defence, Industry and
Education in the last ten years. Prepare a report
on your observations.
8. Prepare a trend Analysis of Growth and
Productivity of any one industry such as:
Textile / Automobiles / Electronic and
Tele-communication, etc. in India for the past ten
years.

NOTE: No question paper for Project Work will be