ICSE Class 10 Economics Board Exam Question Paper 2014 with Solutions

ICSE Board Class 10 Economics Board Exam Question Paper with Solutions

SECTION A (40 Marks)

Attempt all questions from this section.

Question 1
State whether the following statements are true or false. Give reasons.

a) Briefly explain two methods that increase land productivity. [2 Marks]

Answer:
1. Use of better quality seeds and fertilizers: High yielding variety (HYV) seeds and chemical fertilizers enhance soil nutrients and increase agricultural output per acre.
2. Proper irrigation facilities: Timely and adequate supply of water through canals, tube wells, and drip irrigation reduces dependence on monsoon and allows multiple cropping.

Teacher's Note:
a) Land productivity refers to the output obtained per unit of land.
b) Students should clearly state two distinct methods without mixing them up with labour productivity.

b) What is meant by price elasticity of demand? [2 Marks]

Answer:
Price elasticity of demand is the degree of responsiveness of demand for a commodity to a change in its price. It is measured as the percentage change in quantity demanded divided by the percentage change in price.

Teacher's Note:
a) Always include both the conceptual definition and the proportional/percentage relationship.
b) Ensure the inverse relationship between price and quantity is implied in the definition.

c) Distinguish between sunk capital and floating capital. [2 Marks]

Answer:
1. Sunk capital refers to capital goods that have a single, specialized use and cannot be easily transferred to other industries (e.g., blast furnace).
2. Floating capital refers to capital that is fluid and can be easily transferred or used for multiple alternative purposes in different industries (e.g., money or raw materials).

Teacher's Note:
a) Present differences clearly based on versatility or transferability of use.
b) Give relevant examples for both types to secure full marks.

d) Give two reasons for consumer exploitation in India. [2 Marks]

Answer:
1. Widespread illiteracy and ignorance: Consumers are often unaware of their rights, fair prices, and product standards.
2. Lack of market information: Consumers do not have complete information regarding the quality, pricing, and hidden costs of goods and services.

Teacher's Note:
a) Focus on socio-economic causes like lack of awareness and poor enforcement of laws.
b) Avoid writing general statements without clear economic or social backing.

e) Distinguish between an entrepreneur and an organiser. [2 Marks]

Answer:
1. An entrepreneur is the ultimate risk-bearer and innovator who takes crucial decisions regarding the business.
2. An organiser is generally a manager or agent who coordinates and manages the day-to-day factors of production without bearing the ultimate financial risk.

Teacher's Note:
a) Emphasize risk-bearing as the key distinguishing factor between the two.
b) An organiser works for a salary/reward whereas an entrepreneur earns profit.

Question 2

a) State two factors affecting the market demand of a commodity. [2 Marks]

Answer:
1. Price of the commodity: Inverse relationship exists between the price of a commodity and its market demand.
2. Income of the consumers: A rise in consumer income generally increases the demand for normal goods.

Teacher's Note:
a) Mention any two valid determinants like population, tastes and preferences, or related goods.
b) Keep the statements crisp and precise.

b) Mention two factors that determine the supply of labour. [2 Marks]

Answer:
1. Real wage rate: Higher wage rates generally act as an incentive for workers to supply more labour hours.
2. Cost of living: Higher cost of living or inflation often forces more family members to enter the workforce, increasing labour supply.

Teacher's Note:
a) Other acceptable factors include working conditions, size of population, and leisure preferences.
b) Distinguish clearly between demand for labour and supply of labour factors.

c) What is meant by demand pull inflation? [2 Marks]

Answer:
Demand pull inflation refers to the rise in general price levels caused by an excess of aggregate demand over aggregate supply in an economy, often described as 'too much money chasing too few goods'.

Teacher's Note:
a) The classic phrase 'too much money chasing too few goods' is very effective in exams.
b) State clearly that it arises from excess demand.

d) Progressive taxation is suitable for the Indian economy. Give reasons to support your answer. [2 Marks]

Answer:
Yes, progressive taxation is suitable for India because it helps reduce income inequalities by taxing the rich at a higher rate than the poor, thereby promoting social justice and economic equality.

Teacher's Note:
a) Focus on equity and reduction of income disparity in a developing country like India.
b) Ensure the statement directly answers why it is suitable.

e) Distinguish between a tax and a fee. [2 Marks]

Answer:
1. A tax is a compulsory payment made to the government without any direct quid pro quo (direct benefit in return).
2. A fee is a payment made in exchange for a specific service rendered by the government or its agencies (e.g., passport fee, court fee).

Teacher's Note:
a) Direct benefit (quid pro quo) is the core distinction between a tax and a fee.
b) Give examples for better clarity.

Question 3

a) Give two reasons for an increase in public expenditure in recent times. [2 Marks]

Answer:
1. Increase in defense expenditure: Escalating geopolitical tensions and modernization of defense equipment have driven up government spending.
2. Welfare activities: Modern governments operate as welfare states, necessitating higher spending on education, healthcare, and poverty alleviation schemes.

Teacher's Note:
a) Other valid points include population growth, urbanization, and debt servicing.
b) Present the reasons logically with clear sub-headings or points.

b) Distinguish between limited legal tender and unlimited legal tender. [2 Marks]

Answer:
1. Limited legal tender refers to money that can be accepted up to a certain maximum legal limit in discharge of a debt (e.g., small coins).
2. Unlimited legal tender refers to money that must be accepted up to any amount by law in payment of a debt (e.g., currency notes issued by the central bank).

Teacher's Note:
a) Emphasize the legal limit up to which acceptance is binding.
b) Provide correct examples such as coins for limited and paper notes for unlimited.

c) Define simple division of labour. [2 Marks]

Answer:
Simple division of labour refers to the division of production into distinct occupations or trades based on natural characteristics, gender, age, or general skills, where workers produce an entire commodity themselves rather than splitting the manufacturing process into minute steps.

Teacher's Note:
a) Differentiate it clearly from complex division of labour where production is broken into sub-tasks.
b) Keep the definition concise and precise.

d) Give the full form of COPRA. How does it benefit consumers? [2 Marks]

Answer:
1. Full form: Consumer Protection Act.
2. Benefit: It provides a simple, inexpensive, and speedy quasi-judicial mechanism (District Forums, State Commissions, National Commission) for consumers to seek redressal against unfair trade practices and exploitation.

Teacher's Note:
a) Ensure the spelling of COPRA's full form is accurate.
b) Mention speedy and inexpensive redressal as key consumer benefits.

e) Discuss any two contingent functions of money. [2 Marks]

Answer:
1. Basis of credit: Money serves as the foundation for the credit system, enabling commercial banks to create credit based on cash reserves.
2. Measurement of national income: Money facilitates the aggregation and measurement of total output, income, and expenditure of a country (National Income).

Teacher's Note:
a) Other contingent functions include distribution of national income and increasing productivity of capital.
b) Distinguish primary, secondary, and contingent functions clearly.

Question 4

a) Explain the function of the central bank as a 'Banker' to the government. [2 Marks]

Answer:
The central bank acts as a banker, agent, and adviser to the government. It manages government accounts, accepts receipts, makes payments, provides short-term loans (ways and means advances) during deficits, and manages the public debt.

Teacher's Note:
a) Mention accounts, loans, and financial advice.
b) Keep the answer focused strictly on the government relationship.

b) Mention any two sources of external debt. [2 Marks]

Answer:
1. International financial institutions such as the World Bank (IBRD) and the International Monetary Fund (IMF).
2. Foreign governments (bilateral loans and assistance) and international capital markets through foreign bonds.

Teacher's Note:
a) Differentiate external debt from internal debt sources (like commercial banks or public borrowing within the country).
b) Use standard international bodies as examples.

c) State two differences between tax on income and tax on commodity. [2 Marks]

Answer:
1. Incidence: Tax on income is a direct tax where the burden cannot be shifted to others, whereas tax on commodity is an indirect tax where the burden can be shifted.
2. Nature: Income tax is progressive in nature based on earnings, while commodity taxes are generally proportional or regressive, levied uniformly on goods.

Teacher's Note:
a) Highlight direct vs indirect tax characteristics.
b) Shiftability of burden is the core difference.

d) Draw a supply curve. [2 Marks]

Answer:
[Figure: A standard 2D Cartesian graph with Quantity Supplied on the X-axis and Price on the Y-axis. An upward-sloping straight or curved line labelled 'SS' is drawn, starting from left to right, showing a direct positive relationship between price and quantity supplied.]

Answer:
A supply curve is a graphical representation of the law of supply, sloping upward from left to right, indicating that higher prices lead to a higher quantity supplied.

Teacher's Note:
a) Axes must be properly labeled (Price on Y-axis, Quantity on X-axis).
b) The positive slope must be clearly visible.

e) Briefly explain any one exception to the law of demand. [2 Marks]

Answer:
Giffen goods: These are inferior goods for which an increase in price leads to an increase in demand, because consumers spend a large portion of their income on them and cut down consumption of superior goods when their price rises.

Teacher's Note:
a) Other acceptable exceptions include articles of snob appeal (Veblen effect) or emergencies/speculation.
b) Define Giffen goods clearly as a special category of inferior goods.

SECTION II (40 Marks)

Attempt any four questions from this section.

Question 5

a) Define land. Explain four characteristics of land as a factor of production. [5 Marks]

Answer:
Definition: In economics, 'land' refers to all free gifts of nature that are available to mankind, including land surface, rivers, minerals, climate, and forests.
Characteristics:
1. Free gift of nature: Land is not man-made; it is a primary factor provided freely by nature.
2. Fixed supply: The total supply of land is inelastic and cannot be increased or decreased by human effort.
3. Land is immobile: Geographically, land cannot be transported from one place to another, though it has occupational mobility.
4. Indestructible and has original powers: Unlike man-made capital, land's original and inherent powers cannot be completely destroyed, though fertility can be exhausted and restored.

Teacher's Note:
a) Ensure the economic definition of land goes beyond mere soil to include all natural resources.
b) Explain each characteristic with a short subheading or sentence.

b) Define efficiency of labour. Explain four factors that influence the efficiency of labour. [5 Marks]

Answer:
Definition: Efficiency of labour refers to the productive capacity or capability of a worker to produce more and better quality output in a given unit of time.
Factors influencing efficiency:
1. Wages and standard of living: Adequate wages enable workers to afford better food, clothing, and housing, improving physical health and efficiency.
2. Working conditions: Clean, well-ventilated, safe, and comfortable working environments reduce fatigue and boost productivity.
3. Education and training: Skill development and technical training enhance a worker's proficiency and competence.
4. Climate and environment: Favorable climatic conditions promote good health and high energy levels among workers.

Teacher's Note:
a) Link efficiency directly to output per worker per hour.
b) List and explain four distinct factors clearly.

Question 6

a) Define capital formation. Explain three important stages of capital formation. [5 Marks]

Answer:
Definition: Capital formation refers to the net addition to the existing stock of capital goods in a country during a period of time.
Three important stages:
1. Creation of savings: The first stage is the generation of savings, which depends on the ability to save (income level) and the willingness to save (psychological and social factors).
2. Mobilization of savings: Savings must be channeled from households to productive sectors through financial institutions like commercial banks and capital markets.
3. Investment of savings: The mobilized savings are utilized by entrepreneurs to purchase capital goods like machinery, factories, and equipment, completing the process of capital formation.

Teacher's Note:
a) The three sequential stages are creation, mobilization, and investment of savings.
b) Students must explain each stage in correct chronological order.

b) Draw a demand curve with the help of a hypothetical individual demand schedule. [5 Marks]

Answer:
Hypothetical Individual Demand Schedule:
Price (Rs.) | Quantity Demanded (Units)
10 | 1
8 | 2
6 | 3
4 | 4
2 | 5

[Figure: A graph showing Price on the vertical Y-axis (from 0 to 10) and Quantity Demanded on the horizontal X-axis (from 0 to 5). Points corresponding to the schedule are plotted and joined to form a downward-sloping demand curve (DD) indicating negative slope.]

Answer:
The schedule shows the inverse relationship between price and quantity demanded. The accompanying demand curve slopes downwards from left to right, illustrating the law of demand.

Teacher's Note:
a) Both the demand schedule and the corresponding well-labelled diagram are required for full marks.
b) Ensure proper scaling and axis labels.

Question 7

a) Define supply. Explain three reasons for the rightward shift of the supply curve. [5 Marks]

Answer:
Definition: Supply refers to the quantity of a commodity that a firm is willing and able to offer for sale at various given prices during a given period of time.
Reasons for rightward shift (increase in supply):
1. Fall in input prices: A decrease in the cost of raw materials or labour reduces production costs, increasing profitability and supply.
2. Technological advancement: Improved production techniques increase efficiency and output levels at existing costs.
3. Fall in the price of substitute goods: If the price of a substitute good falls, producers shift resources towards producing the main commodity, increasing its supply.

Teacher's Note:
a) Distinguish clearly between expansion in supply (movement along the curve) and increase in supply (shift of the curve).
b) A rightward shift represents an increase in supply.

b) Define public debt. Explain four types of public debt. [5 Marks]

Answer:
Definition: Public debt refers to the total borrowings of the government (central and state governments) from domestic and external sources to finance budgetary deficits.
Types of public debt:
1. Internal and External debt: Internal debt is borrowed from individuals and institutions within the country, while external debt is borrowed from foreign governments or international organizations.
2. Productive and Unproductive debt: Productive debt is utilized to create capital assets that yield income (e.g., railways, power plants), whereas unproductive debt is used for consumption or war expenses that generate no direct financial return.
3. Redeemable and Irredeemable debt: Redeemable debt is backed by a promise to repay the principal amount on a specified future date, while irredeemable debt has no fixed date of repayment of principal (the government only pays regular interest).
4. Short-term and Long-term debt: Short-term debt matures within a year (e.g., treasury bills), while long-term debt has a maturity period extending beyond a year.

Teacher's Note:
a) Classification of public debt must cover at least four clear categories.
b) Provide clear distinctions for each paired type.

Question 8

a) Define a commercial bank. How do commercial banks mobilise deposits from the public. [5 Marks]

Answer:
Definition: A commercial bank is a financial institution that accepts deposits from the public, grants loans, and provides other financial services with the objective of earning profit.
Methods of mobilising deposits:
1. Current account deposits: Opened by businessmen for frequent transactions; no interest is paid, and sometimes incidental charges are levied.
2. Savings account deposits: Aimed at encouraging small savings by households, offering a modest rate of interest with certain restrictions on withdrawals.
3. Fixed (Time) term deposits: Lump-sum amounts deposited for a specific period, offering higher rates of interest depending on the duration.
4. Recurring deposits: Accounts where depositors deposit a fixed amount every month for a pre-determined period, earning compound interest.

Teacher's Note:
a) Define commercial bank emphasizing acceptance of deposits and lending.
b) Detail the four primary deposit accounts offered by banks.

b) Explain five advantages of division of labour. [5 Marks]

Answer:
1. Increase in productivity: Breaking down production into specialized tasks saves time and increases total output.
2. Improvement in skill and dexterity: Repetition of the same task makes workers highly skilled and proficient.
3. Time saving: Workers do not need to move from one tool or process to another, saving valuable production time.
4. Use of machinery: Division of labour facilitates the introduction and efficient use of specialized machinery and tools.
5. Production of quality goods: High skill levels and specialized focus result in superior quality output.

Teacher's Note:
a) List five distinct economic advantages clearly.
b) Keep explanations concise and focused on economic efficiency.

Question 9

a) Define inflation. Explain four causes of inflation. [5 Marks]

Answer:
Definition: Inflation is 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.
Causes of inflation:
1. Increase in money supply: Printing excess currency or rapid credit expansion increases aggregate demand and pushes up prices.
2. Increase in public expenditure: Heavy government spending on developmental and non-developmental activities boosts purchasing power and demand.
3. Increase in population: Rapid population growth creates higher demand for essential goods and services, often outstripping supply.
4. Increase in exports: When domestic production is exported in large quantities, domestic supply decreases, leading to price rises.

Teacher's Note:
a) Define inflation with emphasis on falling purchasing power.
b) Mention four clear demand-pull or cost-push causes.

b) What is meant by quantitative credit control? [5 Marks]

Answer:
Quantitative credit control refers to those methods used by the central bank to regulate the overall volume or quantity of credit in the entire banking system without targeting specific sectors.
Key instruments include:
1. Bank Rate Policy: The standard rate at which the central bank discounts eligible bills of exchange and lends to commercial banks.
2. Open Market Operations (OMO): The buying and selling of government securities by the central bank in the open market to absorb or inject liquidity.
3. Cash Reserve Ratio (CRR): The minimum percentage of total deposits that commercial banks are legally required to keep with the central bank.
4. Statutory Liquidity Ratio (SLR): The minimum percentage of liquid assets that commercial banks must maintain with themselves.

Teacher's Note:
a) Distinguish quantitative controls (overall volume) from qualitative controls (selective credit allocation).
b) List and briefly explain the major instruments.

Question 10

a) Explain five ways in which consumers are exploited in India. [5 Marks]

Answer:
1. Charging higher prices: Consumers are often charged prices above the Maximum Retail Price (MRP) or charged unfairly during shortages.
2. Adulteration and sub-standard quality: Harmful or inferior substances are mixed into food and consumer goods, endangering health.
3. False and misleading advertisements: Exaggerated claims are made regarding product quality, durability, or benefits to deceive buyers.
4. Use of defective weights and measures: Consumers are cheated through short measurements, under-weighing, or tampered scales.
5. Lack of after-sales service: Sellers often fail to provide promised maintenance, spare parts, or warranty support after purchase.

Teacher's Note:
a) Enumerate five practical examples of consumer exploitation prevalent in markets.
b) Ensure descriptions are realistic and align with consumer protection topics.

b) With the help of suitable diagrams explain the following degree of elasticity of supply.
\( E_p = \infty \)
\( E_p \gt 1 \) [5 Marks]

Answer:
1. Perfectly Elastic Supply (\( E_p = \infty \)):
[Figure: A graph showing Price on the Y-axis and Quantity on the X-axis. A horizontal supply line parallel to the X-axis is drawn at a given price level, indicating that an infinite quantity can be sold at that constant price.]
Explanation: A minor change in price causes an infinite change in quantity supplied.

2. Relatively Elastic Supply (\( E_p \gt 1 \)):
[Figure: A graph showing Price on the Y-axis and Quantity on the X-axis. An upward-sloping supply curve starts from the vertical Y-axis above the origin, indicating that the percentage change in quantity supplied is greater than the percentage change in price.]
Explanation: Supply is responsive to price changes; a small rise in price leads to a proportionately larger increase in supply.

Teacher's Note:
a) Both diagrams with correct axis labels and curve shapes are essential for full marks.
b) Clearly state the mathematical condition and meaning for each degree.