ICSE Class 10 Economic Applications Board Exam Question Paper 2020 with Solutions

ICSE Class 10 Economics Applications Board Exam Question Paper with Solutions

PART I (40 Marks)

Attempt all questions from this Part

Question 1

(a) Mention one important difference between land and capital. [2 Marks]

Answer:
Land is a free gift of nature and has a fixed supply, whereas capital is a man-made factor of production whose supply can be increased or decreased according to requirements.

Teacher's Note:
a) Emphasize the natural versus man-made distinction as the primary basis of difference.
b) Students must mention that land is fixed in supply while capital is reproducible.

(b) In which form of market is the seller a price maker? Justify your answer. [2 Marks]

Answer:
In a monopoly market, the seller is a price maker. This is because there is a single seller with no close substitutes for the product, giving the firm complete control over the supply and price.

Teacher's Note:
a) Identify monopoly correctly as the market structure where the firm is a price maker.
b) Mention lack of substitutes and absolute control over supply as the justification.

(c) What is meant by an overdraft facility? [2 Marks]

Answer:
An overdraft facility is a credit facility provided by a commercial bank to current account holders, allowing them to withdraw money in excess of the actual balance in their account up to an agreed sanctioned limit.

Teacher's Note:
a) Clarify that this facility is typically extended to current account holders (businessmen).
b) Ensure students state that interest is charged only on the exact amount overdrawn.

(d) State two positive roles played by Public Sector Undertakings in India. [2 Marks]

Answer:
1. Capital Formation: PSUs help in rapid capital formation by undertaking heavy and basic industries which require massive investment.
2. Generation of Employment: They create huge employment opportunities, both direct and indirect, helping to reduce unemployment in the country.

Teacher's Note:
a) List any two distinct economic contributions like balanced regional development, infrastructure growth, or price control.
b) Keep explanations concise and specific to secure full credit.

(e) Draw a neat diagram to show a relatively elastic supply curve. [2 Marks]

Answer:
[Figure: A supply graph with Quantity supplied on the X-axis and Price on the Y-axis. The upward-sloping supply curve starts from the Y-axis (or intercepts it) and is relatively flat, indicating that a small percentage change in price leads to a greater percentage change in quantity supplied, where elasticity of supply is greater than one (Es > 1).]

Teacher's Note:
a) Ensure axes are correctly labeled (Price on Y-axis, Quantity on X-axis) and the supply curve has a positive slope.
b) A relatively elastic supply curve should be flatter, showing that proportionate change in quantity is greater than proportionate change in price.

Question 2

(a) Construction of dams has negative impacts on the ecosystem. Give two reasons to justify the statement. [2 Marks]

Answer:
1. Displacement of flora and fauna: Large scale submergence of land destroys forests and aquatic biodiversity.
2. Deforestation and soil erosion: Construction activities lead to massive felling of trees, habitat destruction, and ecological imbalance.

Teacher's Note:
a) Accept valid ecological points such as disruption of aquatic ecosystems, seismic hazards, or displacement of indigenous populations.
b) Clearly state two distinct points.

(b) What is meant by labour in economics? [2 Marks]

Answer:
In economics, labour refers to any physical or mental exertion undergone partly or wholly with a view to earning some economic reward or income, other than purely pleasure or sport.

Teacher's Note:
a) Emphasize that labour includes both physical and mental effort.
b) The crucial economic criterion is that the effort must be undertaken for an economic reward (income).

(c) A consumer purchased 60 units of a good at Rs. 7 per unit. But when price rises to Rs. 12 per unit, demand contracts to 40 units. Calculate the price elasticity of demand. [2 Marks]

Answer:
Given:
Initial Price (P) = Rs. 7
New Price (P1) = Rs. 12
Change in Price (delta P) = 12 - 7 = 5
Initial Quantity (Q) = 60 units
New Quantity (Q1) = 40 units
Change in Quantity (delta Q) = 40 - 60 = -20
Formula: Ed = (delta Q / delta P) × (P / Q)
Ed = (-20 / 5) × (7 / 60) = -4 × (7 / 60) = -28 / 60 = -0.47

Teacher's Note:
a) Always state the formula clearly before substituting values.
b) The negative sign indicates the inverse relationship between price and demand; mentioning 0.47 or -0.47 is acceptable.

(d) Entrepreneurship is not labour even though there are human factors associated with the same business. Explain. [2 Marks]

Answer:
Entrepreneurship is considered a separate factor of production because an entrepreneur bears the ultimate risk and uncertainty of the business and coordinates all other factors, whereas labour works under direction for a fixed wage and does not bear business risks.

Teacher's Note:
a) Highlight the core distinction: risk-bearing and decision-making function versus wage-earning execution.
b) Students should not confuse the human effort of an entrepreneur with ordinary labour.

(e) Complete the following hypothetical individual supply schedule: [2 Marks]

Answer:
(i) 21 kgs (or any logical decreasing quantity corresponding to the fall in price)
(ii) 14 kgs (or any logical decreasing quantity less than 18)

Teacher's Note:
a) Apply the law of supply: as price falls from 40 to 25, quantity supplied must fall.
b) Any sensible numbers maintaining a positive relationship between price and quantity supplied are accepted.

Question 3

(a) Differentiate between walking inflation and running inflation. [2 Marks]

Answer:
Walking inflation is a mild form of inflation where prices rise at a slow rate of about 2 to 3 percent annually, serving as a warning signal. Running inflation is a much faster and more rapid rise in prices, usually ranging between 10 to 20 percent annually, which can destabilize the economy if unchecked.

Teacher's Note:
a) Differentiate based on the speed and percentage rate of price rise.
b) Highlight the economic impact or severity of each type.

(b) Explain horizontal division of labour with an example. [2 Marks]

Answer:
Horizontal division of labour occurs when the production process is divided into distinct, separate stages or trades, and different workers specialize in different operations. Example: In a shoe factory, one worker cuts leather, another stitches the upper part, and a third fixes the sole.

Teacher's Note:
a) Define horizontal division as specialization by different processes in the creation of a single product.
b) Ensure a clear industrial or manufacturing example is provided.

(c) State two ways in which the Government can play an important role in the rapid agricultural development of a country. [2 Marks]

Answer:
1. Provision of cheap institutional credit through cooperative societies and rural banks.
2. Investment in agricultural infrastructure such as irrigation projects, rural electrification, and storage facilities.

Teacher's Note:
a) Give clear government intervention measures like subsidies on fertilizers or Minimum Support Prices (MSP).
b) Keep points concise and directly linked to agricultural productivity.

(d) How is circulating capital different from fixed capital? [2 Marks]

Answer:
Fixed capital refers to durable producer goods used in production over multiple periods (such as machinery and factory buildings), whereas circulating capital consists of single-use producer goods that are used up completely in a single production cycle (such as raw materials and cash).

Teacher's Note:
a) Contrast based on durability and single-use versus repeated use.
b) Provide examples for clarity in both categories.

(e) What is joint demand? Give an example. [2 Marks]

Answer:
Joint demand refers to when two or more goods are demanded together to satisfy a single want because they are complementary to each other. Example: Cars and petrol, or ink and fountain pens.

Teacher's Note:
a) Explain that complementary goods exhibit joint demand.
b) A standard example must be included to score full marks.

Question 4

Define the following terms:

(a) Regressive Taxation [2 Marks]

Answer:
A regressive tax is one in which the rate of taxation decreases as the income of the taxpayer increases, placing a heavier relative burden on poorer sections of society than on the rich.

Teacher's Note:
a) Define clearly by highlighting the inverse relationship between tax rate and income level.
b) Note that indirect taxes often tend to be regressive in nature.

(b) Monopsony [2 Marks]

Answer:
Monopsony is a market structure in which there is a single buyer for a particular product or service, giving the buyer market power to dictate purchase terms and prices to multiple sellers.

Teacher's Note:
a) Distinguish monopoly (single seller) from monopsony (single buyer).
b) Mention the unique market power held by the single buyer.

(c) Migration [2 Marks]

Answer:
Migration refers to the movement of people from one place or region to another, either within a country (internal migration) or across international borders (external migration), usually for permanent or semi-permanent settlement.

Teacher's Note:
a) Define population movement across geographical boundaries.
b) Mention both internal and international aspects briefly.

(d) Money [2 Marks]

Answer:
Money is anything that is generally accepted as a medium of exchange, a standard of value, a store of value, and a standard for deferred payments.

Teacher's Note:
a) Define money through its primary functions as stated in monetary economics.
b) General acceptability is the core defining characteristic.

(e) Perfectly inelastic demand [2 Marks]

Answer:
Perfectly inelastic demand is a situation where a change in price causes no change whatsoever in the quantity demanded of a commodity (Ed = 0).

Teacher's Note:
a) State that demand remains constant irrespective of price fluctuations.
b) Mention that the demand curve is a vertical straight line parallel to the Y-axis.

PART II (60 Marks)

Attempt any four questions from this Part

Question 5

(a) Define capital formation. Explain three important factors affecting the rate of capital formation. [7 Marks]

Answer:
Capital formation refers to the net addition to the existing stock of capital goods (such as machinery, equipment, buildings) in an economy during a given period of time.
Factors affecting the rate of capital formation:
1. Capacity to Save: The level of income and savings in an economy directly determines how much capital can be formed; higher income leads to higher savings and investment.
2. Willingness to Save: Depends on psychological factors, future expectations, and rate of interest; if people are willing to save more, capital formation increases.
3. Availability of Financial Institutions: A well-developed banking and financial system mobilizes small savings and channels them into productive investments, accelerating capital formation.

Teacher's Note:
a) Break the answer into the definition followed by three clear headings and explanations.
b) The three stages of capital formation are creation of savings, mobilization of savings, and investment of savings.

(b) Discuss any four negative impacts of industrialization. [8 Marks]

Answer:
1. Environmental Pollution: Industrial growth leads to severe air, water, and noise pollution, damaging ecosystems and human health.
2. Urbanization and Slums: Migration of rural workers to industrial centers creates congested cities, shortage of housing, and growth of unhygienic slums.
3. Exploitation of Labour: Rapid industrialization historically led to long working hours, unsafe working conditions, and exploitation of workers before stringent labour laws.
4. Depletion of Natural Resources: Heavy industries consume large amounts of raw materials, minerals, and fossil fuels, leading to rapid depletion of non-renewable natural resources.

Teacher's Note:
a) Provide four distinct, well-elaborated negative consequences.
b) Ensure each point includes a heading and descriptive explanation to earn full marks.

Question 6

(a) What is a Central Bank? Explain the following functions of a Central Bank: (i) Issuing paper notes (ii) Acting as a banker to the Government (iii) Lender of the Last resort [7 Marks]

Answer:
A Central Bank is the apex financial institution of a country that regulates, controls, and supervises the entire banking and monetary system.
(i) Issuing paper notes: The Central Bank has the monopoly of note issue (currency authority) in the country, ensuring uniformity and stability in the monetary system.
(ii) Acting as a banker to the Government: It manages government accounts, buys and sells government securities, provides short-term loans (ways and means advances), and acts as a financial advisor to the government.
(iii) Lender of the Last resort: When commercial banks face a financial crisis and fail to secure funds from anywhere else, they approach the Central Bank as the ultimate lender to save them from collapse.

Teacher's Note:
a) Define the Central Bank clearly as the apex monetary authority.
b) Address each sub-function separately with appropriate technical terms like monopoly of note issue and emergency financial support.

(b) (i) Prepare a hypothetical individual demand schedule. (ii) Draw the individual demand curve based on the schedule. (iii) Explain any two determinants of demand other than price. [8 Marks]

Answer:
(i) Hypothetical Individual Demand Schedule:
Price (Rs.) | Quantity Demanded (units)
10 | 1
8 | 2
6 | 3
4 | 4
(ii) [Figure: An individual demand curve graph showing Price on the vertical Y-axis (from 2 to 10) and Quantity Demanded on the horizontal X-axis (from 1 to 4). Points corresponding to the schedule are plotted, and a downward-sloping demand curve (DD) is drawn from left to right.]
(iii) Determinants of demand other than price:
1. Income of the Consumer: A rise in consumer income increases the demand for normal goods and decreases the demand for inferior goods.
2. Tastes and Preferences: Favorable changes in fashion, habits, or preferences increase the demand for a commodity, while unfavorable changes reduce it.

Teacher's Note:
a) Ensure the demand schedule clearly reflects the inverse relationship between price and quantity.
b) Clearly label axes in the graph and provide two distinct non-price determinants with explanations.

Question 7

(a) What is privatization? Explain three arguments favouring privatization. [7 Marks]

Answer:
Privatization refers to the transfer of ownership, management, and control of public sector enterprises and state-owned assets to private individuals or business entities.
Arguments favouring privatization:
1. Improved Efficiency: Private management operates with a profit motive, leading to better operational efficiency, reduced wastage, and cost-effective production.
2. Reduction of Financial Burden: Transferring loss-making public enterprises to the private sector relieves the government of huge financial losses and budgetary deficits.
3. Encourages Competition: Privatization fosters a competitive market environment, which enhances product quality, technological upgradation, and benefits consumers.

Teacher's Note:
a) Define privatization as the shift from public to private ownership.
b) Give three solid economic arguments supporting the policy.

(b) What do you understand by Efficiency of Labour? Explain three factors affecting efficiency of labour. [8 Marks]

Answer:
Efficiency of labour refers to the productive capacity or capability of a worker to produce more and better quality work in a given period of time with minimum expenditure of energy.
Factors affecting efficiency of labour:
1. Wages and Incentives: Fair wages, bonuses, and social security benefits motivate workers to put in their best effort and enhance productivity.
2. Working Conditions: Safe, clean, and well-ventilated factories equipped with proper lighting and safety measures improve worker health and efficiency.
3. Education and Training: Proper technical training and skill development programs enable workers to operate machinery efficiently and reduce errors.

Teacher's Note:
a) Define efficiency of labour in terms of output per unit of effort or time.
b) Explain any three relevant factors like climate, machinery, or health.

Question 8

(a) What is a monopolistically competitive market? Explain the following features of this market: (i) Non-price competition (ii) Presence of Selling cost (iii) Price policy which is followed. [7 Marks]

Answer:
A monopolistically competitive market is a market structure with a large number of buyers and sellers producing differentiated products that are close substitutes for one another.
Features:
(i) Non-price competition: Firms compete through product differentiation, after-sales service, packaging, and gift schemes rather than cutting prices.
(ii) Presence of Selling cost: Heavy expenditure on advertising and sales promotion is incurred to persuade consumers to buy a specific brand over competitors.
(iii) Price policy which is followed: Each firm has some degree of control over its own price because of product differentiation, making the demand curve downward sloping and elastic.

Teacher's Note:
a) Highlight product differentiation as the defining feature of monopolistic competition.
b) Explain selling costs and non-price competition clearly as key characteristics of this market.

(b) Explain any four factors affecting productivity of land. [8 Marks]

Answer:
1. Natural Factors: Fertility of the soil, topography, and climatic conditions such as rainfall and temperature greatly influence land productivity.
2. Use of Technology: Application of modern agricultural techniques, tractors, high-yielding variety (HYV) seeds, and scientific fertilizers enhances land productivity.
3. Irrigation Facilities: Availability of a regular and dependable water supply through canals, tubewells, and dams increases crop yield per acre.
4. Human Effort and Skill: The hard work, knowledge, and agricultural skill of the farmers working on the land determine how efficiently it is utilized.

Teacher's Note:
a) Focus strictly on land productivity (yield per unit area) rather than general land characteristics.
b) Provide four distinct factors with clear explanations.

Question 9

(a) What are direct taxes? Explain how direct taxes: (i) are equitable (ii) increase civic sense (iii) are economical [7 Marks]

Answer:
Direct taxes are those taxes whose burden is borne by the person on whom they are legally imposed; the impact and incidence fall on the same person.
(i) Equitable: Direct taxes (like income tax) are progressive in nature, meaning the rich pay a higher percentage of their income, reducing economic inequality.
(ii) Increase civic sense: Since taxpayers feel the direct pinch of paying a portion of their income to the government, they take a keen interest in monitoring how public funds are spent.
(iii) Economical: The cost of collecting direct taxes is relatively low because collection methods are direct, and evasion is minimized through systematic auditing.

Teacher's Note:
a) Define direct tax correctly using the concepts of impact and incidence.
b) Explain each sub-point in accordance with Adam Smith's canons of taxation.

(b) What are Commercial Banks? Name any two Commercial Banks of India. Examples of the difference between Cash Credit and Bank Loans lent by the Commercial Banks. [8 Marks]

Answer:
Commercial Banks are financial institutions that accept deposits from the general public and grant loans for the purpose of earning a profit.
Two Commercial Banks of India: State Bank of India (SBI) and HDFC Bank.
Difference between Cash Credit and Bank Loans:
1. Purpose and Nature: Cash Credit is a credit facility given against current assets or security up to a sanctioned limit where the borrower withdraws money as needed; a Bank Loan is a lump sum amount sanctioned for a specific purpose for a fixed period.
2. Interest Payment: In Cash Credit, interest is charged only on the amount actually withdrawn/utilized; in a Bank Loan, interest is charged on the entire amount sanctioned from day one.

Teacher's Note:
a) Define commercial banks through deposit acceptance and lending functions.
b) Clearly tabulate or contrast Cash Credit and Bank Loans based on utilization and interest calculation.

Question 10

(a) Read the extract given below and answer the questions that follow:

NDTV Profit, May 01, 2019
State Bank of India, the country’s largest lender, has reduced interest rate on savings bank accounts with balance of Rs. 1 lakh or more from today. The State Bank of India customers with Rs. 1 lakh or more in their savings account will earn an interest of 3.25 percent.
Meanwhile, customers with less than Rs. 1 lakh in their savings bank accounts will continue to earn interest at the rate of 3.50 percent.
The move to reduce interest rate on deposits of more than Rs. 1 lakh comes as the State Bank of India is linking the interest rate to the RBI’s repo or short-term lending rate. The interest rate on savings bank account may move up or down depending on what stance the Reserve Bank of India takes at the bi-monthly monetary policy meeting.

(i) What is monetary policy? [2 Marks]

Answer:
Monetary policy is the policy adopted by the Central Bank of a country to control and regulate the money supply, credit availability, and interest rates in order to achieve economic stability and growth.

Teacher's Note:
a) Define monetary policy as the Central Bank's tool for credit and money supply control.
b) Mention macroeconomic objectives like controlling inflation or stabilizing currency.

(ii) What is Bank Rate? What is the effect of a reduction in Bank Rate? [4 Marks]

Answer:
Bank Rate is the standard rate at which the Central Bank is prepared to buy or rediscount bills of exchange or lend financial accommodation to commercial banks.
Effect of a reduction in Bank Rate: A reduction in the bank rate lowers the borrowing cost for commercial banks, leading them to reduce their lending rates for the public, which encourages borrowing, increases investment, and expands money supply in the economy.

Teacher's Note:
a) Define bank rate accurately as the Central Bank's lending rate to commercial banks.
b) Explain the chain reaction of rate reduction on public lending and economic activity.

(iii) Will a reduction in the interest rate on savings account encourage or discourage savings? [1 Mark]

Answer:
It will discourage savings.

Teacher's Note:
a) Lower returns on deposits make saving less attractive.
b) State the direct answer clearly without ambiguity.

(b) Several causes have been identified by researchers for the poor performance of the public sector enterprises in India. Identify and explain four such causes. [8 Marks]

Answer:
1. Bureaucratic Control and Red Tapism: Excessive political interference and bureaucratic red tape lead to delayed decision-making and operational inefficiency.
2. Overstaffing and Labour Inefficiency: PSUs often suffer from excess employment, leading to high wage bills, low productivity, and lack of discipline.
3. Price Policy Constraints: Public enterprises are often forced to sell goods at subsidized rates for social welfare, resulting in heavy operational losses.
4. Underutilization of Capacity: Poor planning and management often lead to failure in utilizing installed plant capacity fully, resulting in wastage of scarce resources.

Teacher's Note:
a) Provide four distinct reasons for public sector failure.
b) Each point should be accompanied by a descriptive heading for clarity and completeness.