ICSE Class 10 Economics Board Exam Question Paper 2012 with Solutions

ICSE Class 10 Economics Board Exam Question Paper with Solutions

SECTION A (40 Marks)

Attempt all questions from this Section

Question 1

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

Answer:
1. Land differs in fertility and productivity from one region to another.
2. Its geographical and climatic conditions also vary across different locations.

Teacher's Note:
a) Heterogeneous means that no two pieces of land are identical in terms of quality and location.
b) Students must mention both fertility differences and geographical variations to score full marks.

(b) What is meant by efficiency of labour? Give one reason for low efficiency of labour in India. [2 Marks]

Answer:
1. Efficiency of labour refers to the productive capacity or output per worker per unit of time.
2. One reason for low efficiency of labour in India is poor health and malnutrition among workers.

Teacher's Note:
a) Efficiency determines the quality and speed of work performed by the labour force.
b) Other acceptable reasons include adverse climate, lack of proper education, or outdated training facilities.

(c) Mention two important characteristics of Capital as a factor of production. [2 Marks]

Answer:
1. Capital is a man-made factor of production.
2. It is highly mobile in nature compared to land.

Teacher's Note:
a) Capital is derived from savings and investment of past production.
b) Ensure both points are stated clearly without mixing them up with land or labour.

(d) State two qualities of a successful entrepreneur. [2 Marks]

Answer:
1. Ability to take calculated risks.
2. Strong leadership and decision-making skills.

Teacher's Note:
a) An entrepreneur acts as the organizer and risk-bearer in production.
b) Other valid qualities include innovation and organizational vision.

(e) Mention two factors which gave birth to the Consumer Movement. [2 Marks]

Answer:
1. Rampant adulteration and sale of sub-standard goods by manufacturers.
2. Widespread use of unfair trade practices like false advertising and misleading weights and measures.

Teacher's Note:
a) The consumer movement emerged to protect consumers against exploitation by producers and traders.
b) High prices and artificial shortages are also acceptable contributing factors.

Question 2

(a) What are inferior goods? Give an example. [2 Marks]

Answer:
1. Inferior goods are those goods whose demand decreases as the income of the consumer increases.
2. Example: Coarse grain like jowar or bajra (or toned milk).

Teacher's Note:
a) These goods have a negative income elasticity of demand.
b) Always provide a clear everyday example to secure full credit.

(b) Mention two reasons behind the leftward shift of a supply curve. [2 Marks]

Answer:
1. Increase in the cost of production (or rise in factor prices).
2. Imposition of higher taxes or reduction in subsidies by the government.

Teacher's Note:
a) A leftward shift indicates a decrease in supply at every given price.
b) Technological regression or adverse weather conditions for agricultural goods are also valid reasons.

(c) What is meant by Price Elasticity of Demand? When will the Demand Curve be parallel to X-axis? [2 Marks]

Answer:
1. Price elasticity of demand measures the degree of responsiveness of demand for a commodity to a change in its price.
2. The demand curve will be parallel to the X-axis when demand is perfectly elastic.

Teacher's Note:
a) Perfectly elastic demand implies elasticity is infinity.
b) Ensure the definition clearly connects percentage change in quantity demanded with percentage change in price.

(d) Draw:
(i) Unitary Elastic Supply curve
(ii) Perfectly Inelastic supply curve [2 Marks]

Answer:
1. Unitary Elastic Supply curve: A straight upward sloping supply curve passing through the origin.
2. Perfectly Inelastic supply curve: A vertical straight line parallel to the Y-axis.

[Figure: Two separate diagrams. (i) A linear upward-sloping supply curve starting from the intersection of axes, showing proportionate change. (ii) A vertical straight line parallel to the Y-axis representing zero elasticity.]

Teacher's Note:
a) Proper labeling of axes (Price on Y-axis, Quantity on X-axis) is essential.
b) A unitary elastic curve must originate from the origin point \( (0,0) \).

(e) What is the R T I Act? When was it enacted? [2 Marks]

Answer:
1. The Right to Information (RTI) Act is a legislation that empowers citizens to secure access to information under the control of public authorities, promoting transparency and accountability.
2. It was enacted in the year 2005.

Teacher's Note:
a) The Act was passed by the Parliament of India on 15 June 2005 and came fully into force on 12 October 2005.
b) Mentioning both the definition and the exact year of enactment is required for full marks.

Question 3

(a) Mention two merits of direct tax. [2 Marks]

Answer:
1. Equity: Direct taxes are progressive in nature, reducing income inequalities.
2. Certainty: The taxpayer knows exactly how much tax is to be paid and the government knows its exact revenue.

Teacher's Note:
a) Direct taxes are levied directly on the income or wealth of individuals.
b) Other merits include economy and elasticity.

(b) What is public expenditure? [2 Marks]

Answer:
1. Public expenditure refers to the expenditure incurred by public authorities (central, state, and local governments) for the maintenance of government and the welfare of the society.

Teacher's Note:
a) It plays a major role in economic development and social justice.
b) Must include reference to government spending for public welfare.

(c) What is meant by productive and unproductive debt? [2 Marks]

Answer:
1. Productive debt: Loans raised by the government which are invested in capital-generating assets like railways, power plants, and irrigation projects.
2. Unproductive debt: Loans raised by the government for war, famine relief, or consumption purposes which do not create any productive assets.

Teacher's Note:
a) Productive debts generate their own revenue to pay off interest and principal.
b) Unproductive debts have to be repaid through fresh taxation.

(d) State two differences between progressive and proportional taxation. [2 Marks]

Answer:
1. In a progressive tax system, the rate of tax increases as the income of the taxpayer increases, whereas in a proportional tax system, a constant tax rate is applied to all income levels.
2. Progressive taxation helps in reducing income inequality, whereas proportional taxation does not affect income distribution.

Answer:
1. Consumers should approach Consumer Dispute Redressal Forums (Consumer Courts - District Forum, State Commission, or National Commission depending on the claim value).
2. Two consumer rights: Right to safety and Right to be informed.

Teacher's Note:
a) Mentioning appropriate judicial bodies (District Forum/Commission) is vital.
b) Other valid rights include Right to choose, Right to be heard, Right to seek redressal, and Right to consumer education.

Question 4

(a) State two primary functions of money. [2 Marks]

Answer:
1. Medium of exchange.
2. Measure of value (or Unit of account).

Teacher's Note:
a) Primary functions are the most essential and basic functions performed by money in any economy.
b) Do not confuse them with secondary or contingent functions.

(b) What is meant by double co-incidence of wants? [2 Marks]

Answer:
1. It is a situation where two persons desire to exchange each other's goods without the use of money, meaning what one person wants to sell is exactly what the other person wants to buy.

Teacher's Note:
a) This was the major drawback of the barter system.
b) The absence of double coincidence of wants makes trade difficult without money.

(c) Mention two advantages of a bank account. [2 Marks]

Answer:
1. It provides safety and security for surplus funds.
2. It earns interest on the deposits made.

Teacher's Note:
a) Bank accounts also facilitate making payments through cheques, drafts, and digital transfers.
b) Mentioning safety and interest generation covers core advantages.

(d) Briefly explain Creeping and Hyper inflation. [2 Marks]

Answer:
1. Creeping inflation: A slow and mild rise in prices, usually at a rate of less than 3 percent per annum, which is considered beneficial for economic growth.
2. Hyper inflation: An extreme and rapid rise in price levels, often running into hundreds or thousands of percent per annum, rendering the currency almost worthless.

Teacher's Note:
a) Creeping inflation stimulates economic activity.
b) Hyper inflation destabilizes the entire economy and ruins the monetary system.

(e) Which section of society gains due to inflation? Why? [2 Marks]

Answer:
1. Businessmen, traders, and debtors gain due to inflation.
2. They gain because the value of money falls, making the real burden of repayment smaller for debtors, while business profits rise due to higher selling prices.

Teacher's Note:
a) Fixed-income earners and creditors lose, whereas borrowers and business classes gain during inflation.
b) A brief reason explaining the fall in real value of debt is necessary for full marks.

SECTION B (40 Marks)

Attempt any four questions from this Section

Question 5

(a) Explain five reasons for the low rate of capital formation in India. [5 Marks]

Answer:
1. Low per capita income: Due to low levels of income, the capacity to save is very limited for the majority of the population.
2. Widespread poverty: A large section of the population lives below the poverty line, leaving no surplus for savings or investment.
3. Defective banking and financial habits: Inadequate banking penetration in rural areas hampers mobilization of small savings.
4. Strong social customs and extravagant expenditure: People spend huge amounts on social ceremonies like marriages and religious functions rather than investing.
5. High inflation: Rising price levels erode purchasing power and reduce real savings in the economy.

Teacher's Note:
a) Capital formation depends directly on savings, which in turn depend on the ability and willingness to save.
b) Students must explain all five points with adequate justification to secure full marks.

(b) What is meant by division of labour? Explain two advantages and two disadvantages of division of labour. [5 Marks]

Answer:
1. Meaning: Division of labour refers to the breakdown of the production process into smaller, distinct operations, with each task assigned to a specialized worker.
2. Advantages:
    a. Increase in productivity and output due to specialization and skill enhancement.
    b. Saves time and reduces fatigue as workers focus on specific operations.
3. Disadvantages:
    a. Monotony and boredom caused by performing the same repetitive task.
    b. Loss of craftsmanship and creative skill among workers.

Teacher's Note:
a) Division of labour was famously championed by Adam Smith in the context of pin manufacturing.
b) Clearly segregate advantages and disadvantages for clarity.

Question 6

(a) Define demand. Explain any four factors affecting the demand for a commodity. [5 Marks]

Answer:
1. Definition: Demand in economics refers to the desire for a commodity backed by the willingness and ability to pay for it at various given prices over a period of time.
2. Four factors affecting demand:
    a. Price of the commodity: Inverse relationship between price and quantity demanded.
    b. Income of the consumer: Direct relationship for normal goods.
    c. Prices of related goods: Substitutes and complementary goods affect demand shifts.
    d. Tastes and preferences of the consumer: Favorable changes increase demand.

Teacher's Note:
a) Effective demand requires three elements: desire, willingness to pay, and purchasing power.
b) Explaining four factors with brief descriptions is essential for full credit.

(b) Distinguish between contraction of supply and decrease in supply with the help of diagrams. [5 Marks]

Answer:
1. Contraction of supply: Caused by a fall in the price of the commodity, leading to a downward movement along the same supply curve.
2. Decrease in supply: Caused by unfavorable changes in non-price factors (like higher factor costs or taxes), leading to a leftward shift of the entire supply curve.
3. Distinction points:
    a. Movement: Contraction involves a movement along the curve; decrease involves a shift of the curve.
    b. Cause: Contraction is due to price fall; decrease is due to non-price factors.

[Figure: Two separate diagrams. (1) Contraction of supply showing a downward movement along the supply curve from point A to point B. (2) Decrease in supply showing a parallel leftward shift of the supply curve from S1 to S2.]

Teacher's Note:
a) Students must emphasize the distinction between movement along a curve and shift of a curve.
b) Neat diagrams with correctly labeled axes are mandatory.

Question 7

(a) Give five reasons for the growth of public expenditure in recent times. [5 Marks]

Answer:
1. Welfare state activities: Modern governments aim to provide social security, healthcare, and education.
2. Defense expenditure: Increasing costs of maintaining modern defense forces and acquiring sophisticated weapons.
3. Population growth: Rapid increase in population necessitates greater government spending on public utilities and infrastructure.
4. Urbanization: Expansion of cities requires heavy investment in sanitation, transport, water supply, and housing.
5. Inflation: Rising price levels increase the cost of government administration and public project execution.

Teacher's Note:
a) Public expenditure has shown a continuous upward trend globally.
b) Elaborate each point clearly to secure all 5 marks.

(b) What is a tax? Explain two merits and two demerits of progressive tax structure. [5 Marks]

Answer:
1. Definition: A tax is a compulsory financial charge imposed by the government on individuals or corporations to fund public expenditure and developmental activities.
2. Merits of progressive tax:
    a. Promotes economic equality by taking a higher percentage from the rich.
    b. Yields higher revenue for the government as incomes rise.
3. Demerits of progressive tax:
    a. Discourages savings and capital formation due to heavy taxation on higher incomes.
    b. Encourages tax evasion and dishonest declarations of income.

Teacher's Note:
a) A tax is a non-quid pro quo payment, meaning no direct service is promised in return for paying tax.
b) Both merits and demerits must be balanced clearly.

Question 8

(a) Define money. Explain various stages in the evolution of money. [5 Marks]

Answer:
1. Definition: Money is anything that is generally accepted as a medium of exchange, a measure of value, a store of value, and a standard of deferred payment.
2. Stages in evolution:
    a. Commodity money: Valuable goods like skins, salt, and shells used as medium of exchange.
    b. Metallic money: Use of metals like gold and silver in standardized coin forms.
    c. Paper money: Currency notes issued by the monetary authority backed by reserves.
    d. Bank money (Credit money): Cheques, drafts, and demand deposits.
    e. Plastic money / Digital money: Credit cards, debit cards, and electronic fund transfers.

Teacher's Note:
a) The evolution reflects mankind's effort to overcome the drawbacks of earlier exchange systems.
b) Chronological progression of stages must be maintained.

(b) Explain five measures adopted by the Central Bank to control inflation. [5 Marks]

Answer:
1. Bank Rate Policy: Raising the bank rate makes borrowing costly for commercial banks, curtailing credit creation.
2. Open Market Operations (OMO): Selling government securities to the public and commercial banks to absorb excess liquidity.
3. Cash Reserve Ratio (CRR): Increasing the CRR compels commercial banks to keep a larger share of deposits with the central bank, reducing lending capacity.
4. Statutory Liquidity Ratio (SLR): Raising SLR restricts the funds available with banks for commercial lending.
5. Qualitative credit controls: Imposing tighter margin requirements and consumer credit regulations to curb speculative spending.

Teacher's Note:
a) These measures form part of the monetary policy of the central bank.
b) Clearly distinguish between quantitative and qualitative methods if required, ensuring all 5 measures are explained.

Question 9

(a) Give five ways by which the consumers are exploited? [5 Marks]

Answer:
1. Under-weighing and under-measuring goods by dishonest traders.
2. Adulteration of food products and sale of sub-standard or duplicate goods.
3. Charging exorbitant (excessive) prices higher than the Maximum Retail Price (MRP).
4. False and misleading advertisements making fake claims about product quality.
5. Supply of defective or unsafe home appliances and electronic goods causing hazards.

Teacher's Note:
a) Consumer exploitation occurs due to lack of information, ignorance, and limited market mobility.
b) Provide five distinct points with clear explanations.

(b) Explain the following rights given to consumers:
(i) Right to be informed.
(ii) Right to choose. [5 Marks]

Answer:
1. Right to be informed:
    a. Consumers have the right to be informed about the quality, quantity, potency, purity, standard, and price of goods or services.
    b. It protects consumers against fraudulent advertising and enables them to make informed choices.
2. Right to choose:
    a. Consumers have the right to access a variety of goods and services at competitive prices.
    b. It ensures that monopolistic practices are curtailed and consumers cannot be forced to buy a particular product.

Teacher's Note:
a) These rights are enshrined under the Consumer Protection Act.
b) Both sub-parts must be explained with sub-points to earn full credit.

Question 10

(a) Explain five circumstances under which the law of demand does not operate. [5 Marks]

Answer:
1. Giffen goods: Inferior goods where a rise in price leads to an increase in demand (Giffen paradox).
2. Articles of snob appeal (Veblen goods): Luxury and prestige goods (like diamonds or luxury cars) whose demand increases with higher prices because they display wealth.
3. Ignorance: Consumers sometimes judge quality by price, assuming expensive goods are better.
4. Emergencies: During wars or famines, people hoard commodities regardless of rising prices out of fear of scarcity.
5. Expectations of future price changes: If consumers expect prices to rise further in the future, they buy more even at current higher prices.

Teacher's Note:
a) Exceptions to the law of demand show a direct relationship between price and quantity demanded (upward-sloping demand curve).
b) Clearly explain all five exceptions.

(b) State five differences between the Central Bank and a Commercial Bank. [5 Marks]

Answer:
1. Apex status: Central bank is the apex monetary institution of the country, whereas commercial banks are ordinary banking institutions operating under it.
2. Currency issue: Central bank has the monopoly right of note issue, whereas commercial banks cannot issue currency notes.
3. Profit motive: Central bank aims at economic stability and public welfare, whereas commercial banks aim primarily at profit-making.
4. Government banking: Central bank acts as banker, agent, and adviser to the government, whereas commercial banks serve general public customers.
5. Control of credit: Central bank regulates and controls the total credit supply in the economy, whereas commercial banks create credit.

Teacher's Note:
a) A tabular or structured distinction is best suited for this question.
b) Ensure all five points clearly highlight the fundamental functional differences.