ICSE Class 10 Economics Board Exam Question Paper 2016 with Solutions

ICSE Board Class X Economics Board Exam Question Paper with Solutions

SECTION A

Question 1

a) Define a direct tax. Give two examples. [2 Marks]

Answer:
A tax is a compulsory payment imposed on persons or companies by the government to meet the expenditure incurred on providing common benefits to the people. Income tax and wealth tax are examples of direct tax.

Teacher's Note:
a) Ensure you mention that the burden of a direct tax cannot be shifted to another person.
b) Give correct examples like income tax or corporate tax to secure full marks.

b) State any two differences between an entrepreneur and other factors of production. [2 Marks]

Answer:
1. An entrepreneur is a person who carries the risk of business and coordinates the activities of all the other factors of production.
2. An entrepreneur earns profit with his innovative ideas, efficiencies and willingness to take risks. Hence, an entrepreneur is the only factor of production which earns a profit, whereas other factors earn fixed returns like wages, rent, or interest.

Teacher's Note:
a) Highlight that risk-bearing is the exclusive function of the entrepreneur.
b) Do not confuse the reward of an entrepreneur with the fixed contractual payments of other factors.

c) How does money help in maximising utility? [2 Marks]

Answer:
Money enables consumers in making payments for goods and services of their needs. It provides freedom of choice of consumption. On the basis of prices of various goods and services, consumers are able to allocate their income in such a way so that they can derive maximum utility from their consumption.

Teacher's Note:
a) Explain how a common measure of value helps in comparing prices and making rational choices.
b) Mention consumer equilibrium and utility maximisation clearly.

d) Explain two rights of a consumer. [2 Marks]

Answer:
1. Right to be informed: Adequate and accurate information about the quality, quantity, purity, standard and price of goods and services must be provided to consumers. This information helps consumers while making the decision to buy and use a product.
2. Right to seek redressal: Consumers have been given the right to redress their grievances relating to the performance, grade and quality of goods and services. The Consumer Protection Act has duly provided for a fair settlement of genuine grievances of consumers at the district, state and national levels.

Teacher's Note:
a) Name the rights precisely as defined under consumer protection laws.
b) Briefly state the practical benefit of each right for full clarity.

e) Mention one way by which the Government can reduce the inequalities of income and wealth in an economy. [2 Marks]

Answer:
Revenue policy is one of the measures undertaken by the government to reduce income inequality in an economy. The progressive and proportional system of taxation helps in reducing the gap between the rich and the poor.

Teacher's Note:
a) Clearly state progressive taxation as a primary fiscal instrument.
b) Mention how higher taxes on the rich and welfare spending for the poor achieve this objective.

Question 2

a) What is meant by contraction in demand? [2 Marks]

Answer:
Other things being the same, when the demand for a product falls as a result of rise in its price, it is termed contraction in demand. There will be an upward movement along the same demand curve.

Teacher's Note:
a) Emphasize that contraction happens due to a rise in price, keeping other factors constant.
b) Clarify that it is represented by an upward movement on the same demand curve, not a shift.

b) Mention two ways by which producers benefit from division of labour. [2 Marks]

Answer:
1. Division of labour increases the efficiency of labour. The worker becomes more specialised if he/she is entrusted with only a part of the work in the process of production.
2. When the efficiency of labour increases, it increases the quantity and quality of production. Hence, the producer gets an opportunity to raise his/her income, thus improving the standard of living and reducing production costs.

Teacher's Note:
a) Focus on gains in productivity and cost reduction for the producer.
b) Mention specialisation as the root cause of efficiency gains.

c) Mention the degree of price elasticity of demand for the following goods:
(i) cosmetics (ii) medicine (iii) school uniform (iv) air conditioners [2 Marks]

Answer:
(i) Cosmetics: Relatively elastic demand
(ii) Medicine: Perfectly inelastic demand
(iii) School uniform: Relatively inelastic demand
(iv) Air conditioners: Relatively elastic demand

Teacher's Note:
a) Categorize goods based on their necessity and availability of substitutes.
b) Write the exact technical terms for price elasticity as expected by examiners.

d) Explain briefly two factors affecting the productivity of land. [2 Marks]

Answer:
1. The use of high-yielding variety of seeds, adequate amount of chemicals, biofertilisers and pesticides, and improved agricultural implements such as power tillers or tractors helps increase the yield of crops per hectare.
2. The productivity of land is largely affected by its natural qualities. In agriculture, some properties of the soil would be more suitable for the cultivation of wheat than for the cultivation of rice. Cultivation in suitable soil helps increase land productivity.

Teacher's Note:
a) Distinguish between natural factors (soil fertility) and man-made factors (capital, technology).
b) Give relevant agricultural examples for clarity.

e) A special virtue of indirect taxes is that, they sometimes help in social reforms. Explain. [2 Marks]

Answer:
Heavy indirect taxation on commodities such as wine and opium serves a great social purpose. It helps check their consumption and saves society from their harmful effects by making them expensive.

Teacher's Note:
a) Explain how high indirect taxes on harmful goods (sin goods) discourage consumption.
b) Connect fiscal policy directly with social welfare and public health.

Question 3

a) Define bank rate. [2 Marks]

Answer:
Bank rate is the rate at which the central bank provides credit to commercial banks. An increase or decrease in the bank rate leads to an increase or decrease in the market rate of interest, thereby the cost of credit changes in the market.

Teacher's Note:
a) State clearly that it is the discount rate charged by the central bank.
b) Mention its role in controlling credit during inflation or deflation.

b) Mention two causes of increase in public expenditure in recent times. [2 Marks]

Answer:
1. Public expenditure tends to increase with the expansion of administrative machinery, maximisation of social and economic welfare, and providing benefits such as old-age pension, sickness benefits, and free education.
2. Public expenditure tends to increase with the huge interest payments on market borrowings and national debt.

Teacher's Note:
a) Highlight administrative expansion and debt servicing as primary drivers.
b) Keep the points distinct and well-explained.

c) Complete the following demand schedule: [2 Marks]

Answer:
The completed demand schedule shows an inverse relationship between price and quantity demanded, increasing by 1 kg for every Rs. 50 decrease in price.

Teacher's Note:
a) Verify the inverse relationship reflecting the law of demand.
b) Ensure the table formatting matches the standard requested layout.

d) Draw a perfectly inelastic supply curve [2 Marks]

Answer:
A perfectly inelastic supply curve is represented by a vertical straight line parallel to the Y-axis, indicating that the quantity supplied remains constant regardless of changes in price (Es = 0).

[Figure: A vertical straight line parallel to the vertical price axis (Y-axis) labeled S with Es = 0, showing constant quantity supplied at varying price levels P1 and P2]

Teacher's Note:
a) State that elasticity of supply is zero (Es = 0).
b) Ensure the diagram clearly shows a vertical line parallel to the Y-axis with proper labeling.

e) Explain one cause for low capital formation in India [2 Marks]

Answer:
Because of poverty, poor people are unable to save more than a negligible part of their earnings. Hence, the low rate of savings leads to a low rate of capital formation in the Indian economy.

Teacher's Note:
a) Establish the link between low income, low savings, and low capital formation.
b) Mention the vicious circle of poverty as a core economic concept.

Question 4

a) What is the impact of the level of technology on supply? [2 Marks]

Answer:
If producers make use of improved and advanced technology in their process of production, their cost of production will reduce. This enables the firm to increase the supply at the current price level, shifting the supply curve to the right.

Teacher's Note:
a) Explain how better technology lowers cost and boosts efficiency.
b) State clearly that it results in an increase in supply.

b) Define creeping inflation. Why is it considered good for an economy? [2 Marks]

Answer:
Creeping inflation is inflation where the price level increases at a very slow rate of 2 to 2.5% per annum. This is regarded as safe and essential for growth because it stimulates economic activity and keeps the economy away from stagnation.

Answer:
1. Interest rate on demand deposits is very low, whereas fixed deposits carry a higher interest rate.
2. Demand deposits can be withdrawn at any time, whereas fixed deposits can be withdrawn only after the expiry of a specific lock-in period.

Teacher's Note:
a) Contrast liquidity and return between the two types of bank deposits.
b) Use clear comparative points.

d) What is meant by a degressive tax system? [2 Marks]

Answer:
Degressive tax means a tax system in which the rate of tax increases up to a certain limit, after which a uniform rate is charged. This system is a mixture of proportional tax and progressive tax.

Teacher's Note:
a) Define degressive tax as a hybrid of progressive and proportional taxation.
b) Clarify that progression stops beyond a specified income threshold.

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

Answer:
Division of labour is a system whereby the operations necessary to make a finished product are so minutely divided that each worker performs one or at the most only a few operations based on their skill.

Teacher's Note:
a) Focus on the splitting of production tasks among different workers.
b) Emphasize specialisation as the key outcome.

SECTION B

Question 5

a) Define demand. Explain clearly two factors which determine demand. [5 Marks]

Answer:
Demand means the quantity of a commodity or service which the consumer is willing to buy at a given price and at a given time.
Two determinants of demand:
1. Price of the commodity: With constant money income of the consumer, an increase in the price of a commodity reduces the purchasing power of the consumer, and vice versa. Thus, the consumer purchases less of a commodity with an increase in its price.
2. Income of the consumer: Other things remaining constant, an increase in individual income increases the purchasing power of the consumer, enabling them to purchase more commodities.

Teacher's Note:
a) Ensure the definition covers desire, willingness to pay, and ability to pay at a given price and time.
b) Explain how price and income individually impact consumer demand.

b) Explain four important characteristics of labour as a factor of production. [5 Marks]

Answer:
1. Labour is perishable and cannot be stored: If a worker does not work on a particular day, their labour is wasted. The labourer has a weak bargaining power.
2. Labour is an active factor of production: Without labour, passive factors like land and capital cannot produce anything. Labour requires sympathetic treatment as a living organism.
3. Labour cannot be separated from the labourer: The worker must be present at the workplace where work is carried out. Labour cannot be sold separately like land and capital.
4. Labour can improve its efficiency: Efficiency can be enhanced by investing capital in workers' education, training, and health.

Teacher's Note:
a) List all four characteristics clearly with brief explanations.
b) Emphasize that labour is inseparable from the labourer.

Question 6

a) Define public expenditure. Explain two ways by which it promotes economic development. [5 Marks]

Answer:
Public expenditure is the expenditure incurred by the government of any nation for the welfare of the people, maintenance of law and order, and developmental activities.
Ways it promotes economic development:
1. Public expenditure on infrastructural development (like roadways, power, and irrigation) improves the production efficiency of industries and increases employment opportunities.
2. It encourages private enterprises by establishing state-owned financial and banking institutions to provide cheap credits and subsidies.

Teacher's Note:
a) Define public expenditure comprehensively.
b) Connect infrastructure and financial support directly to economic growth.

b) What is meant by efficiency of labour? Explain three causes of low efficiency of labour in India. [5 Marks]

Answer:
Efficiency of labour means the productive capacity of a worker. It indicates the ability of the worker to do more work or better work during a given period of time.
Causes of low efficiency of labour:
1. Lack of education and inadequate provisions for imparting training to workers.
2. Climatic differences: The hot and humid climate of most states of India deprives people of high physical stamina and hard work.
3. Unhealthy or uncongenial work environment: Poor facilities available in the workplace decrease the level of efficiency.

Teacher's Note:
a) Define labour efficiency clearly in terms of output per unit of time.
b) List valid socio-economic and environmental causes prevalent in developing nations.

Question 7

a) With the help of a diagram explain the meaning of increase in supply and decrease in supply. [5 Marks]

Answer:
1. Increase in supply: It is caused by technological advancement, a decrease in input prices, or a decrease in unit tax, keeping the price constant. This shifts the supply curve to the right (from SS to S1S1).
2. Decrease in supply: It is caused by an increase in input prices or an increase in unit tax, keeping the price constant. This shifts the supply curve to the left (from SS to S1S1).

[Figure: Two supply graphs with price on the vertical axis (Y) and quantity on the horizontal axis (X). The first graph shows a rightward shift of the supply curve from SS to S1S1 indicating an increase in supply. The second graph shows a leftward shift from SS to S1S1 indicating a decrease in supply.]

Teacher's Note:
a) Clearly distinguish between a shift in supply and movement along the supply curve.
b) Ensure diagrams show correct directional shifts (right for increase, left for decrease).

b) What is meant by consumer awareness? Explain briefly four ways by which consumers are exploited [5 Marks]

Answer:
Consumer awareness means consumer consciousness towards their rights and duties in the marketplace, which helps reduce exploitation.
Ways in which consumers are exploited:
1. Sale of adulterated goods: Adding inferior substances to the product being sold.
2. Sale of sub-standard goods: Selling goods that do not conform to prescribed quality standards.
3. Use of false weights and measures leading to underweight purchases.
4. Misleading advertisements: Advertisements falsely claiming a product or service to be of superior quality or standard.

Teacher's Note:
a) Define consumer awareness as alertness regarding rights and standards.
b) Provide four distinct, realistic examples of market exploitation.

Question 8

a) Define money. Explain the primary functions of money. [5 Marks]

Answer:
Crowther defined money as anything that is generally accepted as a means of exchange and at the same time acts as a measure and store of value.
Primary functions of money:
1. Medium of exchange: Money facilitates the process of exchange by removing the defects of the barter system, acting as an intermediate so anyone can buy required commodities.
2. Measure of value: Money serves as a common unit of account, providing a monetary expression of the market value of goods and services.

Teacher's Note:
a) Quote a standard economic definition of money.
b) Clearly explain both primary functions with reference to overcoming barter difficulties.

b) Mention five differences between a direct tax and an indirect tax. [5 Marks]

Answer:

Teacher's Note:
a) Contrast shifting of burden, incidence, progression, and examples clearly in a tabular format.
b) Ensure all five points are accurate and distinct.

Question 9

a) Explain briefly the five agency functions of a commercial bank. [5 Marks]

Answer:
1. Collection and payment of funds: Collecting insurance premiums, dividends, and making regular utility payments on behalf of customers.
2. Transfer of funds: Helping in transferring funds from one place to another through cheques, drafts, and electronic transfers.
3. Trustee and executor: Preserving the wills of customers and executing them after their death.
4. Purchase and sale of securities: Undertaking transactions in shares, stocks, bonds, and debentures on behalf of customers.
5. Acting as correspondent and representative: Representing customers for business meetings, tax payments, and collecting dues.

Teacher's Note:
a) List five distinct agency functions offered by commercial banks.
b) Differentiate agency functions from general utility and central banking functions.

b) Define capital. Differentiate the following with examples:
(i) Real capital and debt capital
(ii) Money capital and sunk capital [5 Marks]

Answer:
Capital refers to reproducible or man-made durable goods used as inputs to produce other goods and services in the future.
(i) Real capital and debt capital:

(ii) Money capital and sunk capital:

Teacher's Note:
a) Define capital accurately before proceeding to classifications.
b) Present differences clearly in tabular form with relevant examples for each type.

Question 10

a) What is meant by price elasticity of supply? Explain three factors which determine elasticity of supply. [5 Marks]

Answer:
Price elasticity of supply is the percentage change in the quantity supplied with respect to the percentage change in the price of the commodity.
Es = Percentage change in quantity supplied / Percentage change in price
Factors determining elasticity of supply:
1. Chances of shifting from production: The degree of response depends on how easily producers can shift resources from producing another product to the one whose price has increased. Easy shifting makes supply more price elastic.
2. Length of time: In the short run, supply is relatively inelastic because production cannot be changed immediately. In the long run, supply becomes relatively elastic.
3. Risk-taking: Supply is more elastic when entrepreneurs are willing to take risks and expand output, and inelastic when they hesitate.

Teacher's Note:
a) State the formula and definition of price elasticity of supply clearly.
b) Explain determinant factors logically with reference to time and mobility of resources.

b) Explain the following:
(i) Internal debt and external debt
(ii) Productive debt and unproductive debt [5 Marks]

Answer:
(i) Internal debt and external debt:
Internal debt means the government's borrowings from within the country (from individuals, banks, and business firms through market loans and bonds). External debt means government borrowings from abroad (from foreign governments, World Bank, and IMF) used for developmental programs.
(ii) Productive and unproductive debt:
A debt is productive if the loan is financed for projects which bring revenue to the government (e.g., irrigation and power projects) and are self-liquidating. A debt is unproductive if the loan is financed for war, relief operations, or emergencies, which are a net burden requiring additional taxation for repayment.

Teacher's Note:
a) Clearly contrast internal vs external sources of government borrowing.
b) Distinguish productive (revenue-generating) debt from unproductive (consumption/emergency) debt.