ICSE Class 10 Economic Applications Board Exam Question Paper 2025 with Solutions

ICSE Class 10 Economic Applications Board Exam Question Paper with Solutions

SECTION - A

Question 1 [20 Marks]
Choose the correct answers to the questions from the given options.
(Do not copy the questions, write the correct answers only.)

(i) Assertion (A): Festivals have a major economic impact on local and regional economies by increasing business activity specially in areas such as retail, tourism and entertainment.
Reason (R): Festivals stimulate increased consumer spending in sectors like retail, hospitality and transportation, thereby boosting local business and creating job opportunities. [1 Mark]
(A) (A) is true and (R) is false.
(B) (A) is false and (R) is true.
(C) Both (A) and (R) are true and (R) is the correct explanation of (A).
(D) Both (A) and (R) are true and (R) is not the correct explanation of (A).

Answer: (C) Both (A) and (R) are true and (R) is the correct explanation of (A).

Festivals drive economic growth by increasing commercial activities across multiple service and retail sectors due to higher consumer spending.

Teacher's Note:
a) Understand how seasonal events boost local demand.
b) Ensure that reason correctly explains the economic linkage mentioned in the assertion.

(ii) An inferior good for which demand falls with a fall in price is called: [1 Mark]
(A) Normal good
(B) Giffen good
(C) Complementary good
(D) Substitute good

Answer: (B) Giffen good

Giffen goods violate the law of demand where a decrease in price leads to a decrease in demand due to a strong negative income effect.

Teacher's Note:
a) Differentiate clearly between standard inferior goods and Giffen goods.
b) Do not confuse Giffen goods with normal or luxury items.

(iii) If price of x increases, the demand for y too increases. How are x and y related? [1 Mark]
(A) as complementary goods
(B) as inferior goods
(C) as substitute goods
(D) as unrelated goods

Answer: (C) as substitute goods

When two goods are substitutes, an increase in the price of one leads consumers to buy more of the alternative good.

Teacher's Note:
a) Remember that substitute goods have a positive cross-price elasticity of demand.
b) Complementary goods show an inverse relationship in cross-price changes.

(iv) Observe the image given below and identify the Division of labour: [1 Mark]
[Figure: Workers performing different stages of textile production in a factory setup]
(A) Horizontal Division of labour
(B) Simple Division of labour
(C) Vertical Division of labour
(D) Partial Division of labour

Answer: (C) Vertical Division of labour

The image depicts different stages of a manufacturing process being split among workers, representing vertical division of labour.

Teacher's Note:
a) Distinguish between horizontal and vertical divisions of labour in production.
b) Look closely at the sequential processes shown in pictorial questions.

(v) The phenomenon of increasing share of urban population to the total population of a country is known as: [1 Mark]
(A) Migration
(B) Urbanisation
(C) Industrialisation
(D) Civilisation

Answer: (B) Urbanisation

Urbanisation refers to the proportional increase of people living in urban areas relative to rural regions.

Teacher's Note:
a) Do not confuse migration with urbanisation, though migration is a cause of urbanisation.
b) Focus on the demographic definition involving population shares.

(vi) Match the following: [1 Mark]

(A) 1-S, 2-Q, 3-P, 4-R
(B) 1-Q, 2-R, 3-S, 4-P
(C) 1-R, 2-P, 3-Q, 4-S
(D) 1-R, 2-S, 3-Q, 4-P

Answer: (D) 1-R, 2-S, 3-Q, 4-P

Fashion industry uniqueness aligns with monopolistic competition, defense sole buying with monopsony, ticket concessions with monopoly price discrimination, and uniform quoting with perfect competition.

Teacher's Note:
a) Analyze each market characteristic carefully before matching.
b) Price discrimination is a key trait of a monopoly market.

(vii) Contribution of _________ capital towards the increase in national output of any country is important. [1 Mark]
(A) Money
(B) Real
(C) Fixed
(D) Sunk

Answer: (B) Real

Real capital consisting of physical assets like machinery and factories directly drives the productive capacity and national output.

Teacher's Note:
a) Remember that real capital represents tangible productive assets.
b) Money capital is merely a claim over resources rather than a direct factor of production.

(viii) As a result of a 5% increase in price, the demand for commodity X increases by 12%. The price elasticity of demand (e_d) for the commodity will be: [1 Mark]
(A) e_d < 1
(B) e_d > 1
(C) e_d = 1
(D) e_d = \infty

Answer: (B) e_d > 1

Elasticity = Percentage change in demand (12%) / Percentage change in price (5%) = 2.4, which is greater than 1.

Teacher's Note:
a) Apply the standard formula for price elasticity of demand.
b) Values greater than 1 indicate elastic demand.

(ix) Name the function of an entrepreneur as shown in the picture given below. [1 Mark]
[Figure: An entrepreneur standing in front of employees, delegating work tasks]
(A) Innovation
(B) Planning
(C) Delegation
(D) Risk bearing

Answer: (C) Delegation

Delegating tasks to subordinates is clearly illustrated by the central figure distributing responsibilities among employees.

Teacher's Note:
a) Identify entrepreneurial functions through visual cues in diagrams.
b) Delegation helps manage large-scale business operations efficiently.

(x) Due to cyclonic effect in an area, the sea level covers a number of rice fields in that area. This reduces productivity of land. How will this affect the supply curve of rice of that region? [1 Mark]
(A) Downward movement along the supply curve
(B) Supply curve shifts to the leftward side
(C) Upward movement along the supply curve
(D) Supply curve shifts to the rightward side

Answer: (B) Supply curve shifts to the leftward side

Loss of fertile land due to natural disasters reduces overall production capacity, causing a leftward shift in supply.

Teacher's Note:
a) Differentiate between shifts in supply and movements along the supply curve.
b) Natural factors affecting productivity cause shifts in the supply curve.

(xi) Assertion (A): Indirect taxes can be made progressive.
Reason (R): More excise duty imposed on producing luxury items and exempting taxes on necessary items. [1 Mark]
(A) (A) is true and (R) is false.
(B) (A) is false and (R) is true.
(C) Both (A) and (R) are true and (R) is the correct explanation of (A).
(D) Both (A) and (R) are true and (R) is not the correct explanation of (A).

Answer: (C) Both (A) and (R) are true and (R) is the correct explanation of (A).

By taxing luxury goods heavily and exempting necessities, indirect tax structures can be made progressive in practice.

Teacher's Note:
a) Understand exceptions to the regressive nature of indirect taxes.
b) Luxury taxation makes tax systems socially equitable.

(xii) Which of the following is an impact of a decrease in Cash Reserve Ratio on loanable funds? [1 Mark]
(A) Loanable funds will increase
(B) Loanable funds will decrease
(C) Loanable funds remain unchanged
(D) Banks will impose restrictions on loans

Answer: (A) Loanable funds will increase

Lowering the Cash Reserve Ratio releases more funds with commercial banks, expanding their capacity to grant loans.

Teacher's Note:
a) Connect reserve requirements directly with credit creation capacity.
b) A decrease in reserves increases liquidity in the banking system.

(xiii) Which of the following is not a private sector enterprise? [1 Mark]
(A) Tata Industrial Group
(B) Steel Authority of India
(C) Hindustan Unilever
(D) Bharti Airtel

Answer: (B) Steel Authority of India

Steel Authority of India Limited (SAIL) is a Public Sector Undertaking (PSU) owned by the Government of India.

Teacher's Note:
a) Memorize major examples of public and private enterprises in India.
b) Government-owned corporations fall under the public sector.

(xiv) Assertion (A): The policy of converting public ownership of an asset to private ownership is Privatisation.
Reason (R): There is no sale of shares of Public Sector Undertaking. [1 Mark]
(A) (A) is true and (R) is false.
(B) (A) is false and (R) is true.
(C) Both (A) and (R) are true and (R) is the correct explanation of (A).
(D) Both (A) and (R) are true and (R) is not the correct explanation of (A).

Answer: (A) (A) is true and (R) is false.

Privatisation involves transferring ownership through the sale of shares or assets, making the reason factually incorrect.

Teacher's Note:
a) Define privatisation clearly as a transfer of ownership and control.
b) Sale of PSU shares is the primary mechanism of privatisation.

(xv) Mr. Krishnan purchases 1 litre of milk per day when it is priced at Rs. 35 per litre. On arrival of his guests, he purchases 8 litres of milk. Choose the correct impact on demand: [1 Mark]
(A) Increase in demand
(B) Increase in quantity demanded
(C) Decrease in demand
(D) Decrease in quantity demanded

Answer: (A) Increase in demand

Buying more milk at the same price due to a change in conditions (arrival of guests) represents a shift in demand, which is an increase in demand.

Teacher's Note:
a) Distinguish between change in demand (shift) and change in quantity demanded (movement).
b) Non-price factors altering purchase volumes cause shifts in demand.

(xvi) Selling costs are absent in a monopoly market because: [1 Mark]
(A) there are many sellers.
(B) all goods are close substitutes.
(C) all goods are differentiated.
(D) there is only one seller.

Answer: (D) there is only one seller.

Since a monopolist faces no market competition and is the sole supplier, advertising and selling costs are unnecessary.

Teacher's Note:
a) Understand why selling costs are exclusive to monopolistic competition and oligopoly.
b) Monopolies do not need brand promotion to attract buyers.

(xvii) Observe the relationship of the first pair of words and complete the second pair.
2-3% per annum is Creeping Inflation, 10-20% per annum is _________ [1 Mark]
(A) Walking Inflation
(B) Running Inflation
(C) Hyper Inflation
(D) Galloping Inflation

Answer: (D) Galloping Inflation

Inflation ranging between 10% and 20% or up to double digits is categorized as galloping inflation.

Teacher's Note:
a) Memorize classifications of inflation rates accurately.
b) Hyperinflation represents extremely rapid price increases exceeding double or triple digits.

(xviii) Any medium of exchange, enforced by law is known as: [1 Mark]
(A) Legal Tender Money
(B) Credit Money
(C) Fiduciary Money
(D) Full bodied Money

Answer: (A) Legal Tender Money

Legal tender money is backed by legal authority and must be accepted in debt settlements.

Teacher's Note:
a) Know the legal definition of fiat and legal tender money.
b) Refusal to accept legal tender is punishable by law.

(xix) Desire to acquire some goods without the ability to purchase these goods: [1 Mark]
(A) Demand
(B) Supply
(C) Want
(D) Price

Answer: (C) Want

In economics, a mere wish or desire without purchasing power is simply a want, not effective demand.

Teacher's Note:
a) Differentiate between want, need, and economic demand.
b) Demand requires both desire and the ability and willingness to pay.

(xx) Name an instrument of state intervention. [1 Mark]
(A) Monetary Policy
(B) Agricultural Policy
(C) Industrial Policy
(D) Trade Policy

Answer: (A) Monetary Policy

Monetary policy is a core macroeconomic instrument used by the central authority to regulate the economy.

Teacher's Note:
a) Recognize broad policy tools of government intervention.
b) Fiscal and monetary policies are primary intervention tools.

Question 2 [2 Marks]
(i) Calculate elasticity of demand on the basis of the following data: [2 Marks]

Answer:
Initial Price \( P_{1} = 4 \), New Price \( P_{2} = 6 \)
Initial Quantity \( Q_{1} = 10 \), New Quantity \( Q_{2} = 15 \)
\( \Delta P = P_{2} - P_{1} = 6 - 4 = 2 \)
\( \Delta Q = Q_{2} - Q_{1} = 15 - 10 = 5 \)
\( e_{d} = \frac{\Delta Q}{\Delta P} \times \frac{P_{1}}{Q_{1}} = \frac{5}{2} \times \frac{4}{10} = \frac{20}{20} = 1 \).

Teacher's Note:
a) State the percentage method or point elasticity formula clearly.
b) Watch out for signs; elasticity is typically expressed in absolute magnitude.

(ii) 'Land is heterogeneous in nature.' Explain. [2 Marks]

Answer:
1. Land differs in terms of quality, fertility, texture, and geographical location from place to place.
2. Unlike manufactured capital units, no two plots of land possess identical productive capacities.

Teacher's Note:
a) Emphasize that natural resources are not uniform.
b) Mention geographical and climatic variations.

(iii) Technical advancement leads to cost saving. With the help of a diagram, explain the effect of technical advancement on the supply curve. [2 Marks]

Answer:
1. Technical advancement lowers the cost of production, making production more profitable.
2. This causes a rightward shift in the supply curve, indicating higher supply at each price level.
[Figure: Upward sloping supply curve shifting rightward from SS to S₁S₁ on a Price-Quantity graph]

Teacher's Note:
a) Explain cost reduction as the driving force behind increased supply.
b) Label axes and curves properly in the supply diagram.

(iv) 'The Indian Railways said that there is no proposal yet to restore concessions offered to certain categories of people in ticket fares after the stoppage was closed due to Coronavirus Pandemic.' - Economic Times, August 06, 2021
(a) The Indian Railways is an example of which form of market?
(b) State the feature of market highlighted in the above extract. [2 Marks]

Answer:
(a) Monopoly Market.
(b) Price Discrimination.

Teacher's Note:
a) Identify sole-supplier public utilities as monopolies.
b) Price discrimination refers to charging different prices to different consumer groups for the same service.

(v) Prepare a hypothetical individual demand schedule. [2 Marks]

Answer:

Teacher's Note:
a) Ensure the schedule reflects the inverse relationship between price and quantity demanded.
b) Keep figures realistic and consistent.

Question 3 [10 Marks]
(i) State any two differences between land and labour. [2 Marks]

Answer:

Teacher's Note:
a) Choose clear distinguishing features such as mobility and durability.
b) Present points in a structured tabular format for clarity.

(ii) How do commercial banks utilise their surplus fund? [2 Marks]

Answer:
1. Commercial banks utilize surplus funds to grant various types of loans and advances to the public and businesses.
2. They also invest a portion of their surplus in government securities and approved financial instruments to earn interest.

Teacher's Note:
a) Focus on asset management by commercial banks.
b) Lending and investing are primary sources of bank earnings.

(iii) What is meant by Capital Formation? [2 Marks]

Answer:
Capital formation refers to the net addition to the existing stock of capital goods (such as machinery, equipment, and factories) in a country during a given period of time.

Teacher's Note:
a) Define capital formation as investment in productive assets.
b) Mention that it involves savings translated into real investments.

(iv) State any two merits of direct taxes. [2 Marks]

Answer:
1. Equity: Direct taxes are based on the principle of ability to pay, placing a heavier burden on higher-income groups.
2. Certainty: The taxpayer knows exactly how much is due, and the government can estimate its revenue collection with accuracy.

Teacher's Note:
a) Highlight equity and certainty as key advantages of direct taxation.
b) Explain how progressivity promotes social justice.

(v) Mention any two adverse impacts of construction of dwelling units on the ecosystem. [2 Marks]

Answer:
1. It leads to a massive increase in waste generation and pollution.
2. It places an excessive burden on existing natural resources like water and energy.

Teacher's Note:
a) Link urban housing expansion with environmental degradation.
b) Focus on resource depletion and ecological disruption.

SECTION - B

Question 4 [15 Marks]
(i) (a) Who is an entrepreneur?
(b) Explain any three roles of an entrepreneur as a factor of production in ensuring economic development. [7 Marks]

Answer:
(a) An entrepreneur is an innovator and risk-bearer who organizes other factors of production (land, labour, capital) to produce goods and services for a profit.
(b) 1. Creates Large-Scale Employment Opportunities: Entrepreneurs establish new businesses that create direct and indirect jobs, helping reduce unemployment.
2. Balanced Regional Development: Setting up industries in backward areas promotes infrastructure development and reduces regional disparities.
3. Increase in National Income: Production and export expansion through entrepreneurial ventures boost domestic output and overall economic growth.

Teacher's Note:
a) Define entrepreneurship clearly as the organizing and risk-taking factor.
b) List socio-economic contributions like employment generation and regional balance.

(ii) (a) State the Law of Supply.
(b) Complete the following market supply schedule and give a graphical representation of the same. [8 Marks]

(c) State one point of difference between stock and supply.

Answer:
(a) The law of supply states that, other things remaining constant, when the price of a commodity rises, its quantity supplied increases, and when the price falls, the quantity supplied decreases.
(b) Completed Market Supply Schedule:

[Figure: Graphical representation showing individual supply curves S_A, S_B and market supply curve S_M sloping upwards]
(c) Stock is the total quantity of a commodity available with the producer at a particular point of time, whereas supply is the portion of stock that the producer is willing to offer for sale at various given prices during a given period of time.

Teacher's Note:
a) Ensure market supply is calculated correctly by summing individual quantities at each price row.
b) Clearly distinguish stock as a static concept and supply as a flow concept.

Question 5 [15 Marks]
(i) (a) What is Elasticity of Supply?
(b) Explain graphically the following:
1. Relatively Elastic Supply
2. Unitary Elastic Supply
3. Perfectly Elastic Supply [7 Marks]

Answer:
(a) Elasticity of supply measures the responsiveness of change in quantity supplied of a commodity to a change in its price.
(b) 1. Relatively Elastic Supply (E_s > 1): Percentage change in quantity supplied is greater than percentage change in price. The supply curve originates from the Y-axis.
[Figure: Upward sloping supply curve starting from Y-axis showing elastic supply]
2. Unitary Elastic Supply (E_s = 1): Percentage change in quantity supplied equals percentage change in price. The supply curve originates from the origin.
[Figure: Upward sloping supply curve passing through the origin]
3. Perfectly Elastic Supply (E_s = \infty): Infinite change in supply occurs at a given price. The supply curve is a horizontal straight line parallel to the X-axis.
[Figure: Horizontal straight line parallel to X-axis]

Teacher's Note:
a) Define supply elasticity precisely using percentage formulas.
b) Draw correct graphical intercepts for each degree of elasticity.

(ii) (a) State the concept depicted in the image above. Define the market to which it belongs.
(b) Explain briefly the concept identified by you in (a). [8 Marks]

[Figure: Logos of major fast-food restaurant chains including McDonald's, Burger King, KFC, Pizza Hut, Jollibee and Chowking]

Answer:
(a) The concept depicted is Product Differentiation, and it belongs to a Monopolistic Competition market.
(b) Product differentiation means that firms produce goods that are close substitutes but differ in brand, size, design, colour, shape, or quality. This gives each firm a degree of monopoly power over its own product, allowing it to influence its own price.

Teacher's Note:
a) Identify brand diversity as a hallmark of monopolistic competition.
b) Explain how differentiation creates brand loyalty and independent pricing power.

Question 6 [15 Marks]
(i) (a) Which of the following is not associated with Fiscal policy?
1. Public revenue
2. Public expenditure
3. Public debt
4. Open market operations
(b) "Public Sector Units made a commendable contribution to the Indian economy in the early phase of planned development." In this context explain briefly any three contributions of PSUs to the Indian economy. [7 Marks]

Answer:
(a) 4. Open market operations (Associated with Monetary Policy, not Fiscal Policy).
(b) 1. Promotion of Welfare: PSUs were established to foster socialist ideals, generate social benefits, and promote welfare rather than profit maximization alone.
2. Balanced Regional Growth: PSUs were set up in backward regions to build infrastructure and create employment opportunities outside developed urban clusters.
3. Capital Formation: PSUs served as major tools for massive capital investments in heavy industries and infrastructure during early planning phases.

Teacher's Note:
a) Separate fiscal policy tools (budget, revenue, expenditure) from monetary policy tools.
b) Emphasize the developmental role of PSUs in post-independence India.

(ii) Distinguish between Contraction of Demand and Decrease in Demand. [8 Marks]

Answer:

Teacher's Note:
a) Clearly separate price-induced movements from non-price-induced shifts.
b) Use tabular comparison for clarity and completeness.

Question 7 [15 Marks]
(i) (a) Which type of tax is indicated in the above graph?
(b) State any three points of distinction between Progressive Taxation and Degressive Taxation. [7 Marks]

[Figure: Line graph showing a flat horizontal tax rate of 20% across varying income levels from 10,000 to 1,00,000]

Answer:
(a) Proportional Tax.
(b)

Teacher's Note:
a) Identify proportional taxes by their constant tax rates across income slabs.
b) Differentiate degressive taxation as a milder form of progression capped at higher income brackets.

(ii) Read the extract and answer the questions that follow:
India and Taiwan are reportedly close to finalising a deal for the far eastern country to host as many as one lakh Indian workers. This comes close on the heels of another reported move that Israel is considering bringing in a large number of Indian workers too. (Source: Moneycontrol.com, November 13, 2023)
(a) Which characteristic of labour has been highlighted through the above news report?
(b) What is meant by Efficiency of Labour?
(c) Explain any two advantages of division of labour. [8 Marks]

Answer:
(a) Geographic mobility of labour.
(b) Efficiency of labour refers to the productive capacity and capability of a worker to produce a greater quantity and superior quality of output in a given time.
(c) 1. Increased Productivity: Division of labour allows workers to specialize in specific tasks, making them more skilled and efficient.
2. Cost Reduction: Specialization reduces time wastage and material loss, lowering overall production costs.

Teacher's Note:
a) Relate international migration of workers to labour mobility.
b) Highlight specialization as the primary driver of efficiency and cost savings.

Question 8 [15 Marks]
(i) (a) State any one difference between Savings Account and Current Account.
(b) State how money acts as:
1. Medium of Exchange
2. Transfer of Value
3. Maximisation of Utility [7 Marks]

Answer:
(a) Savings accounts are meant for individual savers and earn nominal interest, whereas current accounts are meant for businesses and do not earn interest (often charging incidental fees).
(b) 1. Medium of Exchange: Money eliminates the double coincidence of wants by acting as an universally accepted medium for buying and selling goods.
2. Transfer of Value: Money allows purchasing power and wealth to be easily stored and transferred across time and space.
3. Maximisation of Utility: Consumers equate marginal utility per rupee spent across commodities using money as a common denominator to maximize satisfaction.

Teacher's Note:
a) Contrast retail savings with commercial current account features.
b) Detail fundamental monetary functions clearly.

(ii) (a) What is meant by 'land use pattern'?
(b) Identify the agricultural practice shown in the image below. Explain any three adverse effects of it on ecosystem. [8 Marks]

[Figure: Photograph showing shifting cultivation / slash and burn agriculture with smoke rising from cleared forest land]

Answer:
(a) Land use pattern refers to the allocation and distribution of total land area under various uses such as agriculture, forests, pastures, and human settlements.
(b) The practice shown is Shifting Cultivation (Slash and Burn agriculture).
Adverse effects:
1. Air Pollution: Burning vegetation releases massive quantities of harmful greenhouse gases into the atmosphere.
2. Deforestation: Clearing large tracts of forests leads to widespread loss of tree cover and biodiversity.
3. Soil Erosion: Exposed topsoil gets easily eroded by heavy rains, triggering landslides and degrading soil fertility.

Teacher's Note:
a) Define land use as sectoral allocation of geographical area.
b) Identify slash-and-burn visuals and connect them to ecological hazards.

Question 9 [15 Marks]
(i) Read the extract given below and answer the questions:
The objective of the Reserve Bank of India on Occasional Papers is to publish high quality research produced by the staff of the Reserve Bank of India on a broad array of issues of interest to a large audience including academics and policy makers. The papers selected for publications are subject to intense review by internal and external referees. (Source - Reserve Bank of India, 2003)
(a) State the type of Credit control method described in the above extract.
(b) Define Central Bank.
(c) Why is Central Bank referred to as a Banker's Bank?
(d) State any one difference between the Central Bank and Commercial Bank. [7 Marks]

Answer:
(a) Qualitative credit control method (advisory / publication-based research guidance, though general central bank functions apply).
(b) A Central Bank is the apex financial institution of a country responsible for regulating the monetary and banking system.
(c) It holds a portion of commercial bank reserves, provides clearinghouse facilities, and regulates their operations.
(d) The Central Bank does not deal directly with the general public, whereas commercial banks deal directly with retail customers.

Teacher's Note:
a) Understand central banking roles as apex regulatory bodies.
b) Distinguish clearly between public-facing commercial banks and apex central banks.

(ii) (a) What is meant by Qualitative Method of Credit Control?
(b) State any two differences between Quantitative and Qualitative Credit Control Policy.
(c) Explain the following credit control instruments:
1. Regulation of margin requirements
2. Credit Rationing [8 Marks]

Answer:
(a) Qualitative credit control methods regulate the direction and selective allocation of credit rather than its overall volume.
(b)

(c) 1. Regulation of Margin Requirements: The margin is the difference between the market value of the security offered and the loan amount granted. Raising margins restricts credit, while lowering them expands it.
2. Credit Rationing: The central bank fixes maximum ceilings on loans and advances for specific commercial bank activities to restrict lending in certain sectors.

Teacher's Note:
a) Differentiate quantitative (overall volume) from qualitative (selective direction) monetary controls.
b) Explain selective instruments like margin adjustments and rationing clearly.