ICSE Class 10 Economics Board Exam Question Paper 2013 with Solutions

ICSE Board Class 10 Economics Board Exam Question Paper with Solutions

SECTION A

Question 1

State whether the following statements are true or false. Give reasons. [Note: Although the general instruction says state true or false, the sub-parts are direct questions and are answered accordingly.]

a) State two advantages of opening a bank account. [2 Marks]

Answer:
Two advantages of opening a bank account are:
1. Safety of funds: Money deposited in a bank is safe from theft, loss, or fire at home.
2. Earning interest: Depositors earn interest on the surplus money kept in savings or fixed deposit accounts.

Teacher's Note:
a) Mention clear economic or personal benefits of banking services to score full marks.
b) Avoid vague points like getting a debit card without linking it to the safety or utility aspect.

b) What is the difference between impact of taxation and incidence of taxation? [2 Marks]

Answer:
Impact of taxation refers to the initial burden or the immediate resting place of a tax on the person who pays it first. Incidence of taxation refers to the ultimate or final money burden of the tax on the person who ultimately bears it, meaning it cannot be shifted further.

Teacher's Note:
a) Emphasize that impact is initial and temporary, whereas incidence is final and cannot be shifted.
b) Students often confuse the two; use a clear example like indirect taxes where impact is on the seller and incidence is on the consumer.

c) Define cost-push inflation. State two factors causing it. [2 Marks]

Answer:
Cost-push inflation refers to a situation where the general price level rises due to an increase in the cost of production, such as wages or raw materials.
Two factors causing it are:
1. Increase in wages (wage-push inflation).
2. Increase in the prices of raw materials, such as crude oil.

Teacher's Note:
a) Ensure the definition clearly highlights cost increases originating from the supply side.
b) Mention supply-side bottlenecks or indirect tax hikes as alternative valid causes.

d) The bus fare between two cities is reduced. How will this affect the demand curve for bus travel between the two cities? [2 Marks]

Answer:
When the bus fare between two cities is reduced, there will be an downward movement (expansion or extension of demand) along the same demand curve for bus travel, leading to an increase in the quantity demanded of bus travel.

Teacher's Note:
a) Remind students to distinguish between change in quantity demanded (movement along the curve due to price change) and change in demand (shift of the curve).
b) A common mistake is writing "shift of the demand curve to the right," which is incorrect because price is an internal factor.

e) Distinguish between real capital and debt capital with the help of suitable examples. [2 Marks]

Answer:
Real capital consists of physical and tangible goods used in the production of other goods and services, such as machinery, factory buildings, and tools. Debt capital refers to the borrowed funds or financial liabilities raised by a business through loans, debentures, or bonds to finance its operations.

Teacher's Note:
a) Real capital is physical/productive assets, while debt capital is financial liability.
b) Providing distinct examples for both categories is essential for securing full marks.

Question 2

a) State Distinguish between simple division of labour and complex division of labour? [2 Marks]

Answer:
In simple division of labour, workers perform similar traditional tasks based on their general skills or tribal/community roles without deep specialization. In complex division of labour, the production process is broken down into a large number of distinct, specialized sub-tasks performed by different workers based on their specific skills and training.

Teacher's Note:
a) Simple division relates to primitive or craft-based societies; complex division is typical of modern, mechanized industries.
b) Keep the distinction clear by mentioning the degree of specialization and task complexity.

b) What is meant by expenditure tax? Give an example. [2 Marks]

Answer:
An expenditure tax is a direct tax levied on the total consumption expenditure incurred by an individual or household from their income during a financial year. An example is a luxury expenditure tax levied on high-end hotel stays or entertainment.

Teacher's Note:
a) Explain that it encourages savings by taxing spending rather than income.
b) Ensure the example clearly distinguishes between general income tax and specific expenditure-based levies.

c) How does money solve the problem of lack a common measure of value that existed under the barter system? [2 Marks]

Answer:
Under the barter system, there was no common unit to measure and compare the values of different goods and services, making exchange extremely difficult. Money serves as a common unit of account and common measure of value, expressing the prices of all goods and services in a single, uniform monetary unit.

Teacher's Note:
a) Emphasize money's function as a unit of account / common measure of value.
b) Mention how it eliminates the need to remember multiple exchange ratios between every pair of commodities.

d) How does the nature of a good affect its elasticity of demand? [2 Marks]

Answer:
The nature of a good significantly influences its price elasticity of demand:
1. Necessities (such as salt, rice, and basic medicines) have inelastic demand because consumers must buy them regardless of price changes.
2. Luxuries (such as air conditioners and designer clothes) have elastic demand because their consumption can be easily postponed or reduced if their prices rise.

Teacher's Note:
a) Clearly categorize goods into necessities, comforts, and luxuries.
b) Students must explicitly state whether the demand is elastic or inelastic for each category.

e) Mention two agency function of a Commercial bank. [2 Marks]

Answer:
Two agency functions of a commercial bank are:
1. Collecting and paying funds: Collecting cheques, dividends, interest, and paying insurance premiums, subscriptions, and utility bills on behalf of customers.
2. Acting as trustee and executor: Managing the estates and wills of customers as per their instructions.

Teacher's Note:
a) Agency functions are services performed by banks as agents of their customers.
b) Do not confuse agency functions with general utility functions (like locker facilities) or core banking functions (accepting deposits).

Question 3

a) Mention two causes of low efficiency of labour in India. [2 Marks]

Answer:
Two causes of low efficiency of labour in India are:
1. Unfavourable climatic conditions: Hot and humid climate in most parts of India leads to fatigue and lowers worker productivity.
2. Poor health and malnutrition: Inadequate nutrition and lack of proper healthcare facilities result in low physical stamina and frequent absenteeism.

Teacher's Note:
a) Other valid causes include low levels of education and training, outdated technology, and poor working conditions.
b) Ensure economic terminology like stamina, climate, and skill level are properly articulated.

b) Mention any two forms of consumer exploitation. [2 Marks]

Answer:
Two forms of consumer exploitation are:
1. Adulteration: Mixing inferior, harmful, or impure substances into food items or medicines.
2. Overcharging: Charging prices higher than the Maximum Retail Price (MRP) printed on goods.

Teacher's Note:
a) Other forms include supplying sub-standard goods, false weights and measures, and misleading advertisements.
b) Keep answers concise and specific to everyday consumer experiences.

c) Define public debt. [2 Marks]

Answer:
Public debt refers to the total borrowings of the government (central, state, and local bodies) from domestic sources (citizens, commercial banks, central bank) and foreign sources (foreign governments, international financial institutions like the IMF and World Bank).

Teacher's Note:
a) Emphasize that public debt includes both internal and external borrowings.
b) Mention that it is resorted to when public expenditure exceeds public revenue.

d) Indirect taxes are regressive in nature. How can they be made progressive? [2 Marks]

Answer:
Indirect taxes are regressive because they take a larger percentage of income from poor people than from rich people. They can be made progressive by exempting essential commodities consumed mainly by the poor and imposing heavy indirect taxes (luxury taxes) on luxury goods and high-end services consumed exclusively by the rich.

Teacher's Note:
a) Explain the core contradiction where flat-rate indirect taxes burden the poor more.
b) Highlight the distinction between taxing necessities (regressive effect) versus luxury goods (progressive effect).

e) Distinguish between demand deposits and fixed deposits. [2 Marks]

Answer:
Demand deposits (current and savings account deposits) can be withdrawn by the depositor on demand at any time without prior notice. Fixed deposits (time deposits) are deposited for a specified fixed period and cannot be withdrawn before maturity without paying a penalty or losing interest.

Teacher's Note:
a) Focus on liquidity and the maturity period as the core differentiating factors.
b) Mention that demand deposits generally carry little or no interest, whereas fixed deposits offer higher rates of interest.

Question 4

a) Indicate the degree of elasticity of a supply curve parallel to the X-axis. [2 Marks]

Answer:
A supply curve parallel to the X-axis represents perfectly elastic supply, where the degree of elasticity of supply is infinity (\( E_s = \infty \)).

Teacher's Note:
a) Explain that an infinite elasticity means producers are willing to supply any quantity at a given constant price.
b) Students must clearly state both the descriptive term (perfectly elastic) and the numerical value (infinity).

b) Distinguish between creeping inflation and running inflation. [2 Marks]

Answer:
Creeping inflation is a very slow and mild rise in the general price level, typically at an annual rate of less than 3 percent. Running inflation is a much faster and noticeable rise in prices, usually ranging between 8 percent to 10 percent or more per annum, which can destabilize the economy if unchecked.

Teacher's Note:
a) Differentiate primarily based on the speed and percentage rate of price rise.
b) Creeping inflation is considered mild and beneficial for economic growth, whereas running inflation acts as a warning signal.

c) How does money act as standard of deferred payment? [2 Marks]

Answer:
Money serves as a standard of deferred payment because it acts as a convenient unit in terms of which future contracts, loans, and credit transactions are settled. Unlike goods in a barter system, money does not deteriorate in quality over time and possesses stable value, facilitating borrowing and lending.

Teacher's Note:
a) Highlight future payments, credit transactions, and loans.
b) Explain how the durable and standardized nature of money overcomes the barter difficulties of deferred payments.

d) Briefly explain the importance of public expenditure in the industrial development of developing countries. [2 Marks]

Answer:
Public expenditure plays a vital role in developing countries by building heavy and basic infrastructure (such as power, transport, and communication networks), providing subsidies, and investing in core industries that require massive capital outlays which private investors are reluctant or unable to undertake.

Teacher's Note:
a) Focus on infrastructure creation and capital formation in developing economies.
b) Mention how public investment crowds in private industrial growth.

e) Distinguish between statutory liquidity ratio and cash reserve ratio. [2 Marks]

Answer:
Cash Reserve Ratio (CRR) is the fraction of total demand and time deposits that commercial banks must keep in cash with the central bank. Statutory Liquidity Ratio (SLR) is the fraction of total demand and time deposits that commercial banks must maintain themselves in the form of specified liquid assets, such as government securities and gold.

Teacher's Note:
a) Distinguish based on where the reserve is kept (CRR with central bank; SLR with the commercial bank itself) and the form of asset.
b) Both are quantitative tools of credit control used by the central bank.

SECTION II

Question 5

a) What is meant by increase in demand? Discuss any four factors affecting price elasticity of demand. [5 Marks]

Answer:
Increase in demand refers to a rise in the quantity demanded of a commodity caused by changes in factors other than its own price (such as increase in consumer income, change in tastes, or rise in price of substitutes), resulting in an outward shift of the demand curve to the right.

Four factors affecting price elasticity of demand are:
1. Availability of substitutes: Goods with close substitutes (such as tea and coffee) have elastic demand, while goods without substitutes have inelastic demand.
2. Nature of the commodity: Necessities have inelastic demand, whereas luxury goods have elastic demand.
3. Number of uses: Goods that can be put to multiple uses (such as electricity or milk) have more elastic demand than goods with single uses.
4. Postponement of consumption: Goods whose consumption can be easily postponed (like buying a car or furniture) have elastic demand, whereas urgent needs have inelastic demand.

Teacher's Note:
a) Ensure clear distinction between "increase in demand" (shift) and "extension of demand" (movement).
b) Clearly explain each determinant of price elasticity with appropriate economic examples.

b) Define land. Explain the importance of land as a factor of production. [5 Marks]

Answer:
In economics, land refers to all free gifts of nature available to mankind, including the soil, rivers, mountains, minerals, forests, and climate.

Importance of land as a factor of production:
1. Primary source of all production: All material production ultimately originates from land; agricultural output depends directly on soil and climate, while industrial goods require raw materials derived from the earth.
2. Indispensable for agriculture and forestry: Land is the foundational base for growing food crops, cash crops, and forest products essential for human survival and industry.
3. Location for industries and factories: Manufacturing units, offices, and commercial spaces require land to set up physical infrastructure.
4. Source of mineral wealth: Underground resources such as coal, iron ore, crude oil, and natural gas provide essential fuel and raw materials for economic activity.
5. Basis of transport and communication: Roads, railways, airports, and communication towers are all established on land.

Teacher's Note:
a) Emphasize that in economics, land is a passive and fixed factor of production provided free by nature.
b) List at least four distinct points explaining its economic significance to secure full marks.

Question 6

a) Define supply. State the law of supply and explain it with the help of a diagram. [5 Marks]

Answer:
Supply refers to the various quantities of a commodity that producers are willing and able to offer for sale at various given prices during a specified period of time.
Law of Supply: The law of supply states that, other things remaining the same (ceteris paribus), as the price of a commodity rises, its quantity supplied increases, and as its price falls, its quantity supplied decreases, establishing a direct or positive relationship between price and quantity supplied.
[Figure: A standard upward-sloping supply curve SS on a Cartesian plane with Price on the Y-axis and Quantity Supplied on the X-axis, showing that as price increases from P to P1, quantity supplied increases from Q to Q1.]

Teacher's Note:
a) State the assumption of ceteris paribus (other things remaining constant) clearly in the law of supply.
b) Ensure the diagram correctly shows an upward-sloping supply curve from left to right.

b) Define a consumer. Explain the importance of educating consumers of their rights. [5 Marks]

Answer:
A consumer is a person who buys goods or services for personal use or consumption, or uses them with the approval of the buyer, but not for resale or commercial purpose.

Importance of educating consumers about their rights:
1. Prevention of exploitation: Awareness of rights prevents traders and manufacturers from cheating consumers through adulteration, overcharging, and false weights.
2. Right to seek redressal: Educated consumers know how and where to approach consumer forums and courts to claim compensation for defective goods or deficient services.
3. Encourages fair trade practices: Informed consumers compel businesses to maintain product quality, ethical advertising, and transparent pricing.
4. Safety and health protection: Knowledge about product safety standards helps consumers avoid hazardous and substandard goods.

Teacher's Note:
a) Provide the precise economic definition of a consumer under consumer protection guidelines.
b) List key consumer rights (such as the right to safety, information, choice, and redressal) to substantiate the explanation.

Question 7

a) Name the institution that enjoys the monopoly of note issue in India. Briefly explain two qualitative methods of credit control adopted by this institution. [5 Marks]

Answer:
The Reserve Bank of India (RBI) enjoys the monopoly of note issue in India.

Two qualitative methods of credit control adopted by the RBI are:
1. Margin requirements: The difference between the market value of the security offered by the borrower and the amount of loan granted by the bank. By raising margin requirements, the RBI discourages borrowing during inflation.
2. Moral suasion: Informal persuasion, advice, and appeals by the central bank to commercial banks to follow its general monetary policy and restrict or expand credit.

Teacher's Note:
a) Clearly name the Reserve Bank of India as the central banking authority.
b) Differentiate qualitative methods (selective credit control) from quantitative methods (overall volume control like CRR and bank rate).

b) Define labour. Explain four important characteristic features of labour. [5 Marks]

Answer:
In economics, labour refers to any physical or mental effort exerted by human beings with a view to earning economic reward (income).

Four characteristic features of labour:
1. Labour cannot be separated from the labourer: Unlike land or capital, labour is inseparable from the worker; the worker must be personally present to deliver the service.
2. Labour is perishable: Labour cannot be stored or accumulated for the future. If a worker remains idle on a particular day, that day's labour is lost forever.
3. Weak bargaining power: Labour generally has weak bargaining power compared to employers because workers are poor, unorganized, and cannot afford long unemployment.
4. Labour has elastic supply in the short run: The supply of labour cannot be increased or decreased immediately with changes in wage rates; it takes time to train or produce skilled workers.

Teacher's Note:
a) Emphasize that in economics, only effort done for income is termed labour.
b) Mention at least four distinct characteristics clearly with explanations.

Question 8

a) What is meant by food adulteration? Give an example. Mention two harmful effects of food adulteration. Name any one measure formulated to prevent the problem of food adulteration in India. [5 Marks]

Answer:
Food adulteration refers to the practice of adding, mixing, or removing inferior, harmful, or sub-standard substances to food items, which lowers their quality and nutritional value.
Example: Mixing chicory or tamarind seed powder into coffee powder.
Two harmful effects of food adulteration:
1. Causes serious health disorders, food poisoning, and chronic diseases such as cancer and liver damage.
2. Deprives the consumer of vital nutrients, leading to malnutrition.
Measure to prevent food adulteration: Enactment of the Food Safety and Standards Act (FSSA) or the Prevention of Food Adulteration (PFA) Act, establishing standards and enforcing strict penalties.

Teacher's Note:
a) Ensure all parts of the multi-part question (definition, example, effects, measure) are answered clearly.
b) Highlight statutory measures like Agmark, FSSAI standards, or food inspector checks.

b) Explain two methods adopted by Commercial banks to advance loans to the general public. [5 Marks]

Answer:
Two methods adopted by commercial banks to advance loans are:
1. Term Loans: A lump sum loan granted to borrowers for a fixed period against collateral security, where interest is charged on the entire sanctioned amount and repaid in installments or a lump sum.
2. Cash Credit: A credit facility granted to current account holders and businesses allowing them to withdraw funds up to a specified credit limit against the security of current assets or stock, with interest charged only on the amount actually withdrawn.

Teacher's Note:
a) Other methods include overdraft facilities and discounting of bills of exchange.
b) Clearly explain the operational mechanics of each lending method to secure full marks.

Question 9

a) Why is the income of an entrepreneur residual in nature? Discuss any three functions of an entrepreneur. [5 Marks]

Answer:
The income of an entrepreneur (profit) is residual in nature because the entrepreneur pays all other fixed contractual factors of production (rent to land, wages to labour, interest to capital) first out of total revenue. Whatever surplus or residue is left after meeting all these costs belongs entirely to the entrepreneur as profit.

Three functions of an entrepreneur:
1. Initiation and decision-making: Conceiving the business idea, planning the enterprise, and deciding the scale and location of production.
2. Risk-taking and uncertainty-bearing: Bearing the ultimate financial risk and uncertainties of the market, which is the primary justification for earning profit.
3. Coordination of factors of production: Bringing together land, labour, and capital in the right proportions to ensure smooth production.

Teacher's Note:
a) Explain the concept of residual reward clearly in relation to other factor payments.
b) Mention distinct entrepreneurial functions like risk-bearing and innovation.

b) Distinguish between:
(i) Voluntary debt and compulsory debt. (ii) Regressive tax and degressive tax [5 Marks]

Answer:
(i) Voluntary debt and compulsory debt:
Voluntary debt refers to government borrowings where citizens and financial institutions lend money to the government voluntarily by purchasing government bonds and securities. Compulsory debt refers to forced borrowings where the government legally compels individuals or institutions (such as compulsory deposits during emergencies) to lend money.

(ii) Regressive tax and degressive tax:
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 the poor. A degressive tax is one in which the tax rate increases up to a certain limit after which a uniform rate is charged on higher incomes.

Teacher's Note:
a) Structure the answer clearly into sub-headings (i) and (ii) as requested in the paper.
b) Ensure precise economic definitions for regressive and degressive tax structures.

Question 10

a) Define a tax. Explain briefly two merits and two demerits of direct taxes. [5 Marks]

Answer:
A tax is a compulsory financial charge or levy imposed by the government upon individuals or corporations to fund public expenditure and public services, without receiving a direct quid pro quo benefit.

Two merits of direct taxes:
1. Equity / Progressivity: Direct taxes can be levied based on the ability to pay, making them progressive and reducing income inequalities.
2. Certainty: The taxpayer knows exactly how much tax is due, and the government can accurately estimate its revenue collections.

Two demerits of direct taxes:
1. Inconvenience: Filing returns, maintaining accounts, and paying direct taxes involve cumbersome procedures and paperwork.
2. Evasion: High tax rates often encourage tax evasion through corruption and concealment of income, leading to a parallel economy.

Teacher's Note:
a) State Professor Seligman's or a standard economic definition of a tax.
b) Balance the answer by providing two clear merits and two demerits.

b) What is inflation? Discuss the effects of inflation on:
(i) Fixed income groups (ii) Producers. [5 Marks]

Answer:
Inflation refers to a sustained and appreciable rise in the general price level of goods and services in an economy over a period of time, leading to a fall in the purchasing power of money.

Effects of inflation on:
(i) Fixed income groups: Inflation affects fixed income earners (such as salaried employees, pensioners, and wage earners) adversely. Their nominal income remains constant while prices of goods rise, resulting in a severe decline in their real income and standard of living.
(ii) Producers: Producers generally benefit from inflation. As the prices of goods rise faster than the cost of production, their profit margins increase, encouraging them to expand production and investment.

Teacher's Note:
a) Define inflation accurately as a sustained increase in the general price level.
b) Clearly differentiate the contrasting impacts on fixed income earners (adversely affected) and producers/businessmen (benefited).