ICSE Class 10 Economics Board Exam Question Paper 2017 with Solutions

ICSE Class 10 Economics Board Exam Question Paper 2017 with Solutions

SECTION A (40 Marks)

Attempt all questions from this section

Question 1
(a) How does land differ from other factors of production with respect to its supply? [2 Marks]

Answer:
The supply of land is fixed. It is a gift of nature and it is impossible to increase the supply of land. Other factors of production can be increased in supply to a greater or lesser extent. Hence, land differs from other factors of production with respect to its supply.

Teacher's Note:
a) Land is uniquely characterized by its fixed total supply from the perspective of the entire economy.
b) Students must mention that land is a free gift of nature whose supply is inelastic.

Question 1
(b) What is meant by cost push inflation? [2 Marks]

Answer:
An increase in the general price level of an economy with an increase in the average cost of production is called cost-push inflation. Cost-push factors are increase in the wage rate, increase in the prices of raw materials etc. Producers increase the prices of goods and services in order to maintain the profit rates after an increase in the cost of production.

Teacher's Note:
a) Cost-push inflation is driven by supply-side shocks and rising costs of inputs.
b) Clearly state the link between rising production costs and higher final product prices.

Question 1
(c) With the help of a diagram define perfectly elastic demand. [2 Marks]

Answer:
The demand curve is parallel to the x-axis. A small change in the price causes an infinitely large change in the amount demanded. The demand curve indicates perfectly elastic demand for the commodity.

[Figure: A rectangular coordinate system showing Price on the y-axis and Quantity on the x-axis. A horizontal demand line labeled D runs parallel to the x-axis at a constant price level labeled P, intersecting the y-axis at point P.]

Teacher's Note:
a) Perfectly elastic demand has an elasticity coefficient equal to infinity (Ed = ∞).
b) Ensure the demand curve is drawn completely horizontal and parallel to the horizontal axis.

Question 1
(d) Identify the type of division of labour in an automobile industry. Explain. [2 Marks]

Answer:
Complex division of labour is followed in the automobile industry. This is because different workers are engaged in the production of different parts of automobiles. One group may be concerned with the manufacture of engines, another group may be manufacturing chassis and still another may fit the wheels.

Teacher's Note:
a) Complex division of labour involves breaking down production into distinct sub-processes handled by specialized workers.
b) Mentioning the specific industry example from the text secures full credit.

Question 1
(e) With suitable examples differentiate between complementary goods and substitute goods. [2 Marks]

Answer:
Substitute goods are goods which can be used in place of one another for satisfaction of a particular want. Demand for a commodity varies directly with the price of a substitute good, say coffee and tea.
Complementary goods are goods which are used together to satisfy a particular want. Demand for a commodity varies inversely with the price of a complementary good, say computer hardware and software.

Teacher's Note:
a) Substitute goods have a positive cross-price elasticity of demand, while complementary goods have a negative cross-price elasticity.
b) Always provide real-world examples for both categories as demanded by the question.

Question 2
(a) Why is supply directly proportional to price? [2 Marks]

Answer:
Supply is directly proportional to price, because with an increase in the prices of raw materials, the firm earns lower profits than before. So, the firm is willing to supply less of that commodity at the prevailing price, and conversely, higher prices increase profitability and encourage higher supply.

Teacher's Note:
a) The law of supply states a direct relationship between price and quantity supplied, assuming other factors remain constant.
b) Explain the profit motive of producers clearly to justify the direct proportion.

Question 2
(b) Explain briefly any one determinant of an exceptional demand curve. [2 Marks]

Answer:
Bandwagon effect is an exception to the law of demand as the price and demand do not move in opposite directions. Bandwagon effect means that a consumer’s demand for a commodity gets influenced by the taste and preference of the social class to which the consumer belongs. For example, a businessman may increase the demand for golf balls in order to show that he is a successful businessman.

Teacher's Note:
a) Exceptional demand curves slope upward from left to right, violating the law of demand.
b) Mentioning Giffen goods, status symbols (Veblen effect), or bandwagon effect are acceptable determinants.

Question 2
(c) What is meant by unproductive public debt? [2 Marks]

Answer:
A debt is called unproductive if the loan is financed for war and other relief operations in case of emergency. Unproductive public loans are a net burden on the community. The government will have to resort to additional taxation for their servicing and repayment.

Teacher's Note:
a) Unproductive public debt does not result in the creation of any productive assets or income-generating capacity.
b) Differentiate clearly between productive debt (invested in infrastructure) and unproductive debt (spent on wars or consumption).

Question 2
(d) Mention one contingent function of money. [2 Marks]

Answer:
Assisting the operation of a credit system is one of the contingent functions of money. With the gradual expansion of trade and commerce, the credit system has become important. However, money forms the basis of such credit operations performed by the business units in an economy.

Teacher's Note:
a) Contingent functions are secondary functions performed by money under specific modern economic conditions.
b) Other valid points include measurement of national income, distribution of national income, and basis of credit.

Question 2
(e) Explain briefly the impact of cost of production on elasticity of supply. [2 Marks]

Answer:
If the cost of production increases, then there is an adverse impact on supply. If the cost of production increases rapidly with output, supply becomes less elastic because producers find it difficult to expand output easily.

Teacher's Note:
a) Higher production costs reduce the responsiveness of suppliers to price changes.
b) Ensure the link between cost constraints and supply elasticity is clearly stated.

Question 3
(a) How does proportional tax differ from progressive tax? [2 Marks]

Answer:
In proportional tax, the tax rate is constant irrespective of an increase in the income. All tax payers pay an equal proportion of their income in the form of taxes.
In progressive tax, the tax rate increases with the increase in income. There is different rate of tax at every income slab.

Teacher's Note:
a) Proportional tax applies a flat percentage, whereas progressive tax applies a rising percentage as income increases.
b) Use clear comparative definitions to secure full marks.

Question 3
(b) Capital depreciates. Explain [2 Marks]

Answer:
When a machine is used again and again to generate income, it gradually depreciates with use. This is how capital depreciates over a period of time, and it may not be suitable for further use due to wear and tear.

Teacher's Note:
a) Capital depreciation refers to the loss in value of fixed assets due to constant use, obsolescence, or efflux of time.
b) Emphasize the continuous usage factor leading to the reduction in the productive capacity of capital goods.

Question 3
(c) What is meant by double coincidence of wants? How does money overcome this problem? [2 Marks]

Answer:
A person with a particular good has to find a person who has the good of his wants and he should also possess the good wanted by the other person. This is known as the double coincidence of wants. Money acts as an intermediate in the exchange process, serving as a medium of exchange to eliminate this difficulty.

Teacher's Note:
a) Double coincidence of wants is the major limitation of the primitive barter system.
b) Explain how the introduction of money separates the act of purchase from the act of sale.

Question 3
(d) Explain COPRA. What is its objective? [2 Marks]

Answer:
COPRA stands for Consumer Protection Act, 1986. Consumer grievances and complaints against traders are checked at three levels namely District Forum, State Consumer Commission, and National Consumer Commission. Its main objective is to provide speedy and inexpensive redressal to the grievances of consumers.

Teacher's Note:
a) COPRA established a quasi-judicial three-tier machinery for consumer dispute resolution.
b) Mention both the expansion/definition of COPRA and its primary objective to get full credit.

Question 3
(e) Indirect taxes sometimes helps in social reforms. Explain. [2 Marks]

Answer:
Indirect taxes levied on cigarette and other harmful substances will decrease the demand for such goods. This helps in protecting the health of the people in an economy. Hence, it is true that indirect taxes help in social reforms.

Teacher's Note:
a) Imposing heavy indirect taxes on socially harmful goods (sin taxes) discourages their consumption.
b) Give specific examples like alcohol or tobacco to illustrate the social reform aspect.

Question 4
(a) Distinguish between fixed capital and floating capital. [2 Marks]

Answer:
Fixed capital is employed for once at the initial stage of the production process which is not used up within a single period of production, for example, machinery. On the other hand, floating capital is the capital which can be used in alternative lines of production, for example, steel, wood, raw materials etc.

Teacher's Note:
a) Fixed capital remains durable over multiple production cycles, whereas floating (circulating) capital gets consumed in a single production cycle.
b) Provide distinct examples for each to make the distinction clear.

Question 4
(b) How does money act as a standard of deferred payment? [2 Marks]

Answer:
Deferred payments refer to payments which are made in the future. Money has made deferred payments easier. When money is borrowed, the principal and interest amounts have to be returned to the lender in monetary terms, overcoming the problem of fluctuations in the value of goods used in barter.

Teacher's Note:
a) Money serves as a standard unit for future transactions, credit agreements, and long-term contracts.
b) Mention future payments and loans clearly in the answer.

Question 4
(c) Define public expenditure. [2 Marks]

Answer:
Public expenditure is the expenditure incurred by the government of any nation for its own maintenance, for the protection of citizens, and for promoting economic and social welfare.

Teacher's Note:
a) Public expenditure covers all spending undertaken by central, state, and local government bodies.
b) Emphasize that the primary objective of public expenditure is public welfare and infrastructural development.

Question 4
(d) What is meant by consumer awareness? [2 Marks]

Answer:
Consumer awareness refers to measures taken to make the consumer aware of his rights and responsibilities in order to prevent his exploitation by sellers in the market.

Teacher's Note:
a) Consumer awareness empowers buyers to make informed choices and seek legal redress against unfair trade practices.
b) Key elements include knowledge of consumer rights, product standards, and grievance machinery.

Question 4
(e) Mention one difference between demand deposits and time deposits. [2 Marks]

Answer:
Time deposits are fixed term deposits with a fixed maturity period which cannot be payable on demand. On the other hand, demand deposits are deposits which can be withdrawn on demand by the account holder.

Teacher's Note:
a) Demand deposits provide liquidity and check-writing facilities, while time deposits earn higher interest due to lock-in periods.
b) Emphasize the withdrawal condition (on demand versus maturity) to score full marks.

SECTION B (40 Marks)

Attempt any four questions from this Section

Question 5
(a) Define labour. Suggest three methods to improve the efficiency of Indian labour. [5 Marks]

Answer:
Labour means any physical or mental effort exerted by human beings for the purpose of producing goods or services to earn income.
Three methods to improve the efficiency of Indian labour:
1. Better conditions of work: A healthy and conducive work environment increases the level of efficiency. Facilities available in the workplace determine the labour efficiency to a great extent.
2. Adequate training facility: Proper training facilities for labourers in India will improve efficiency of labour. This will increase the quantity of output produced by labour with better quality.
3. Attitude of labourers: Attitude of the ability and willingness of labourers to work and to learn skills depend on the health of a worker, on the wage rate and the standard of living. Improvement in the standard of living leads to an improvement in health through better nourishment.

Teacher's Note:
a) Labour in economics includes both physical and intellectual exertion directed towards economic rewards.
b) Ensure all three methods are clearly enumerated and briefly explained with appropriate headings.

Question 5
(b) What is meant by capital formation? Explain three causes of low capital formation in India. [5 Marks]

Answer:
Capital formation means the creation of capital. A net addition to the stock of capital goods in an economy during a particular period of time is called capital formation.
Reasons for the low rate of capital formation in India:
1. Lack of ability to save: Due to poverty, poor people are unable to save more than a negligible part of their earnings. Hence, low rate of savings leads to low rate of capital formation in the Indian economy.
2. Lack of willingness to save: In certain parts of the country, there still exists a traditional economic system. Even people who have the ability to save money are sometimes not willing to save and spend all their income on day-to-day consumption.
3. Insufficient mobilisation of savings: People are not mobilising savings for capital formation properly. Most of their savings are kept in the form of gold and cash at home due to poor banking knowledge and network.

Teacher's Note:
a) Capital formation involves three stages: generation of savings, mobilization of savings, and investment.
b) Clearly distinguish between the ability to save and the willingness to save when explaining the causes.

Question 6
(a) Mention an important difference between a Commercial Bank and the Central Bank. Explain briefly three methods adopted by Commercial Banks to advance credit to borrowers. [5 Marks]

Answer:
The central bank is the apex financial institution of the country that controls the entire banking system, whereas a commercial bank is a financial institution that deals with the general public for accepting deposits and advancing loans under the control of the central bank.
Methods adopted by commercial banks to advance credit:
1. Ordinary loans: Commercial banks advance lump sum loans for purchasing consumer durables, building houses, etc., against personal or collateral security.
2. Cash credit: Commercial banks allow the borrower to withdraw up to a certain amount on a given security which constitutes stocks of goods and bills receivable. Interest is paid only on the actual amount withdrawn.
3. Overdraft facilities: Under overdraft facilities, an account holder is permitted to withdraw money in excess of the amount deposited in their current account up to a specified limit.

Teacher's Note:
a) The central bank does not deal directly with the general public, whereas commercial banks do.
b) Describe cash credit and overdraft accurately as they are key banking credit instruments.

Question 6
(b) Define the term ‘Entrepreneur’. Discuss three ways by which an entrepreneur promotes economic growth. [5 Marks]

Answer:
An entrepreneur is a person who bears the risks of business and coordinates the activities of all the other factors of production (land, labour, and capital).
Ways by which an entrepreneur promotes economic growth:
1. Innovative power towards industrialisation: When entrepreneurs introduce cost-reducing or demand-creating innovations in various industries, industrial production becomes profitable and accelerates economic development.
2. Generation of higher employment: Innovations result in higher profits for entrepreneurs, who use the earned income for productive investments, thereby generating diverse employment opportunities in the economy.
3. Ability to predict future market and business conditions: Entrepreneurs make complete analysis of market conditions at regular intervals, enabling firms to take precautionary actions against business fluctuations and maintain economic stability.

Teacher's Note:
a) The entrepreneur is regarded as the fourth factor of production and the driving force of enterprise.
b) Structure the answer with a clear definition followed by the three distinct economic roles.

Question 7
(a) With the help of suitable diagram explain the meaning of rightward shift in the demand curve. Explain briefly any two of its determinants. [5 Marks]

Answer:
Change in demand means a shift in the demand curve. An increase in demand or a rightward shift in the demand curve is caused by a change in factors other than the price of the good. For example, if there is an increase in the price of a substitute good, say coffee, then the demand curve for tea shifts to the right, showing that consumers buy more tea at the same price.
[Figure: A Cartesian coordinate system with Price on the y-axis and Quantity on the x-axis. Two parallel downward sloping demand curves D1 and D2 are drawn, with an arrow pointing rightwards from D1 to D2 indicating an increase in demand at constant price P1.]
Two determinants of demand causing a rightward shift:
1. Increase in price of related commodity (substitute): If the price of a substitute good rises, consumers switch to the given commodity, shifting its demand curve to the right.

2. Increase in income of the consumer: With an increase in income, the purchasing power of consumers rises, leading to an increase in demand for normal goods at any given price.

Teacher's Note:
a) A rightward shift implies an increase in demand at every given price level.
b) Ensure the diagram correctly labels axes, curves, and the shift direction.

Question 7
(b) Name the institution which enjoys the monopoly of note issue. Explain the following functions of this institution: (i) Bankers Bank (ii) Banker to the Government [5 Marks]

Answer:
The Central Bank (e.g., Reserve Bank of India) enjoys the monopoly of note issue.
1. Bankers Bank: The central bank acts as a banker's bank by holding a portion of commercial bank reserves (cash reserve ratio), acting as a clearing house for settlement of inter-bank accounts, and functioning as a lender of the last resort during financial emergencies.
2. Banker to the Government: The central bank acts as a banker, agent, and financial advisor to the government. It manages government accounts, buys and sells government securities, and provides short-term loans (ways and means advances) to the government.

Teacher's Note:
a) Note issue is an exclusive monopoly function vested solely in the central bank.
b) Clearly segregate the sub-functions under Bankers Bank and Banker to the Government.

Question 8
(a) State the law of supply. Explain any three factors other than price which determine supply in the market. [5 Marks]

Answer:
The law of supply states that other factors remaining constant (ceteris paribus), the quantity supplied of a good increases with an increase in its price and decreases with a decrease in its price.
Three factors other than price which determine market supply:
1. Number of firms: If the number of firms selling the same product in the market increases, market supply increases at any given price.
2. Prices of the factors of production: If input prices (wages, raw material costs) increase, the profit margin declines, causing producers to reduce supply.
3. Technological condition: Technological improvements enhance productivity and efficiency, enabling firms to increase supply at the existing price level.

Teacher's Note:
a) State the ceteris paribus assumption clearly when enunciating the law of supply.
b) List and explain non-price determinants precisely.

Question 8
(b) Explain the meaning of the following terms: (i) Impact (ii) Shifting (iii) Incidence. To which tax are these terms relevant? Explain any one merit and two demerits of this tax. [5 Marks]

Answer:
1. Impact: The initial burden of a tax on the person or institution upon whom it is formally imposed.
2. Shifting: The process by which the tax burden is transferred from the initial taxpayer to someone else.
3. Incidence: The final resting place or ultimate burden of the tax on the person who cannot shift it further.
These terms are relevant to Indirect Taxes.
Merit of indirect taxes: Broad coverage, as everyone contributes to state revenue through consumption irrespective of income level.
Demerits of indirect taxes:
1. Regressive nature / Uncertainty: They are often uncertain in revenue yield and can disproportionately burden poorer sections.
2. Discourage savings: By increasing commodity prices, they leave less disposable income for savings.

Teacher's Note:
a) Impact is where the tax strikes, while incidence is where the tax settles.
b) Explicitly identify the tax type (indirect tax) before discussing its merits and demerits.

Question 9
(a) Mention one way by which consumers are exploited in the market. Explain clearly three reasons as to why consumers are exploited. [5 Marks]

Answer:
Sale of adulterated goods, i.e., addition of inferior or harmful substances to the product being sold, is one of the ways to exploit consumers in the market.
Three reasons for the exploitation of consumers in India:
1. Lack of consumer awareness: Consumers buy a wide range of goods without taking adequate initiatives to know their rights and responsibilities.
2. Illiteracy and ignorance: Due to widespread illiteracy, consumers do not challenge substandard quality, incorrect weights, or unfair pricing by sellers.
3. Lack of proper organization: Consumers are unorganized and scattered, which prevents them from building collective bargaining power against monopolistic traders.

Teacher's Note:
a) Consumer exploitation takes forms such as underweight measures, adulteration, and misleading advertisements.
b) Structure the answer by first giving an example of exploitation followed by three structural causes.

Question 9
(b) Public expenditure in India has increased over the years. Explain four principle reasons for its increase. [5 Marks]

Answer:
Four principal reasons for the increase in public expenditure in India:
1. Expansion of administrative machinery: The government has to spend heavily on civil administration, defense, maintenance of law and order, and welfare administration to meet the needs of a growing democratic nation.
2. Huge interest payments: A significant portion of public expenditure goes towards servicing huge public debts and interest payments on past borrowings.
3. Infrastructural development: Government incurs massive expenditure on building economic infrastructure such as power, transport, irrigation systems, and communication networks to boost industrial growth.
4. Welfare activities and social overheads: Increased spending on public health, education, poverty alleviation programmes, and social security benefits to achieve a welfare state.

Teacher's Note:
a) Public expenditure has shown a secular upward trend in developing countries like India.
b) Provide clear headings for each of the four reasons to ensure complete scoring.

Question 10
(a) (i) What is meant by the term Inflation? What is its impact on debtors? (ii) Explain the following: 1. Creeping inflation 2. Walking inflation 3. Hyper inflation [5 Marks]

Answer:
(i) Inflation is defined as a sustained and appreciable increase in the general price level of goods and services in an economy over a period of time.
Impact on debtors: Debtors are gainers during inflation. When prices rise, the real value of money falls, meaning debtors repay their loans with money that has lower purchasing power than when it was borrowed.
(ii) Explanation of types of inflation:
1. Creeping inflation: A very slow and mild rise in prices, usually at a rate of 2 to 2.5 percent per annum, which is considered harmless or even beneficial for economic growth.
2. Walking inflation: A moderate price rise where the general price level increases at the rate of 5 to 6 percent per annum, serving as a warning sign of overheating.
3. Hyperinflation: An extreme and uncontrollable form of inflation where prices increase at the rate of 200 percent or more per month, leading to a total collapse of the monetary system.

Teacher's Note:
a) Emphasize that inflation is a continuous rise in price levels, not a one-time price jump.
b) Clearly distinguish the percentage ranges for creeping, walking, and hyperinflation.

Question 10
(b) With the help of a suitable example explain the meaning of geographical or territorial division of labour. Discuss any three advantages of division of labour. [5 Marks]

Answer:
Geographical or territorial division of labour refers to the specialization of different regions in the production of specific goods based on natural endowments, climate, soil, and resources. For example, Kashmir specializes in carpet weaving and apple production due to its specific geographical conditions.
Three advantages of division of labour:
1. Increases the efficiency of labour: Workers become specialists when repeatedly assigned a specific task, leading to higher speed, skill, and productivity.
2. Rise in profits and cost reduction: Large-scale production through division of labour reduces the average cost of production, leading to higher profitability for producers.
3. Feasibility of large-scale production: Division of labour makes large-scale industrial organization possible by organizing specialized workers and machinery efficiently.

Teacher's Note:
a) Territorial division of labour highlights regional specialization based on comparative advantages.
b) Provide the geographical example clearly and list three concrete benefits of division of labour.