ICSE Class 10 Economics Board Exam Question Paper 2018 with Solutions

ICSE Class 10 Economics Board Exam Question Paper with Solutions

SECTION A (40 Marks)

Attempt all questions from this section

Question 1

(a) Give two reasons as to why the division of labour is an advantage to the producer? [2 Marks]

Answer:
1. The division of labour increases the efficiency of labour, leading to an increase in the quantity of output.
2. It also results in an improvement in the quality of the produced goods and services.

Teacher's Note:
a) Specialisation allows workers to gain expertise in a specific task, reducing time wastage and production costs.
b) Students must clearly distinguish between advantages to the producer versus advantages to the worker.

(b) Define the term consumer awareness. [2 Marks]

Answer:
Consumer awareness means a consumer must be aware about the availability of various goods and services such that he is able to take wise decisions. This will reduce the incidence of consumer exploitation by sellers in the marketplace.

Teacher's Note:
a) Consumer awareness empowers individuals to know their rights and responsibilities.
b) Ensure keywords like informed decisions and protection against exploitation are included in your definition.

(c) Why do small farmers suffer during inflation? [2 Marks]

Answer:
1. Small farmers suffer during inflation because the major portion of their produce is not marketed but instead is kept for self-consumption.
2. They also purchase essential inputs such as seeds, fertilisers and insecticides at higher prices during inflation.

Teacher's Note:
a) Unlike large commercial farmers who benefit from high market prices, subsistence farmers have little surplus to sell.
b) Rising input costs severely squeeze the purchasing power of small agriculturists.

(d) Which are the sources of public revenue? [2 Marks]

Answer:
1. Tax revenue: A tax is a compulsory payment imposed on individuals or companies by the government to meet expenditures.
2. Administrative revenue or Non-tax revenue: It is collected in order to provide administrative services to the people.

Teacher's Note:
a) Public revenue is broadly categorized into tax and non-tax revenues.
b) Note the typo in the original question text ("thence sources") which has been answered as sources of public revenue.

(e) Define the term labour as a factor of production. [2 Marks]

Answer:
Labour refers to any physical or mental effort exerted by human beings in exchange for an economic reward (wage or salary) with the objective of producing goods and services.

Teacher's Note:
a) Labour includes both manual work and intellectual effort.
b) Any work done purely out of love, affection, or charity without economic remuneration is not considered labour in economics.

Question 2

(a) Explain any one factor that affects the supply of a commodity. [2 Marks]

Answer:
Price of the product: When there is an increase in the price of the product and if it is more than the marginal cost of production, it enables a firm to earn more profit by selling at a higher price. Hence, there is an increase in the supply of a product.

Teacher's Note:
a) Price and supply are directly related according to the law of supply.
b) Students can alternatively explain other factors such as cost of production, state policy, or technology.

(b) What do you understand by the term 'near money'? [2 Marks]

Answer:
Near money means highly liquid assets which can easily be converted into cash at short notice, such as bank deposits and treasury bills. It does not serve as a medium of exchange in our daily purchases of goods and services.

Teacher's Note:
a) Near money assets are highly liquid substitutes for money but lack general acceptability as a medium of exchange.
b) Examples include time deposits, savings deposits, and bills of exchange.

(c) A list of goods are given below. State whether it is fixed capital or circulating capital: [2 Marks]
(i) Machines
(ii) Raw material
(iii) Fuel
(iv) Office furniture

Answer:
(i) Machines - Fixed capital
(ii) Raw material - Circulating capital
(iii) Fuel - Circulating capital
(iv) Office furniture - Fixed capital

Teacher's Note:
a) Fixed capital refers to durable goods used repeatedly in production over a long period.
b) Circulating capital (or working capital) consists of goods used up or transformed entirely during a single production process.

(d) With the help of an example explain the term productive debt. [2 Marks]

Answer:
A debt is called productive if the loan is financed for projects which bring revenue to the government, such as irrigation and power projects. For example, a government loan taken to construct a multi-purpose dam generates income through electricity sales and irrigation fees.

Teacher's Note:
a) Productive loans generate sufficient income to cover their own servicing and repayment without burdening taxpayers.
b) Always provide an economic example such as railways or power plants to secure full marks.

(e) Explain any two characteristics of capital. [2 Marks]

Answer:
1. Capital is man-made: It is created by man and is not a gift of nature. It is the mixed result of past labour of workers on natural resources.
2. Capital is durable: Capital goods such as machinery, plants and factory buildings are durable goods which might last for a few years, while others may last for decades.

Teacher's Note:
a) Unlike land which is a free gift of nature, capital is a produced means of production.
b) Students must mention both the man-made nature and durability aspects clearly.

Question 3

(a) How is land different from labour? [2 Marks]

Answer:
1. Land is limited in supply: Supply of land is fixed as it is given by nature, whereas other factors of production can be increased in supply to a greater or lesser extent.
2. Gifts of nature: Land is a gift of nature which does not have any cost of production and is readily available for any use, whereas labour is a human factor available at an economic cost (wages).

Teacher's Note:
a) Contrast the passive, fixed nature of land with the active, mobile nature of labour.
b) Presenting the answer in points ensures clear comparative evaluation.

(b) Draw a diagram showing a perfectly elastic demand curve [2 Marks]

Answer:
A perfectly elastic demand curve is a horizontal straight line parallel to the X-axis, indicating that a slight change in price causes an infinite change in demand (Ed = infinity).

[Figure: A line graph with Y-axis representing Price and X-axis representing Quantity. A horizontal demand line labeled D and Ed = infinity runs parallel to the X-axis at a constant price level P.]

Teacher's Note:
a) Ensure axes (Price and Quantity) and the horizontal demand curve are clearly labeled with \( E_d = \infty \).
b) Perfectly elastic demand is a theoretical extreme market condition.

(c) With help of an example explain the term complementary goods. [2 Marks]

Answer:
Complementary goods are goods which are used jointly to satisfy a particular want. For example, the demand for computer hardware and software is created jointly; a rise in the price of one leads to a fall in the demand for the other.

Teacher's Note:
a) Complementary goods have joint demand.
b) Classic examples include car and petrol, or pen and ink.

(d) Name any two sources of external debt for India. [2 Marks]

Answer:
1. International Monetary Fund (IMF)
2. World Bank (International Bank for Reconstruction and Development)

Teacher's Note:
a) External debt refers to borrowings from sources outside the geographical boundaries of the country.
b) Other valid examples include foreign governments and international commercial banks.

(e) Differentiate between creeping and running inflation. [2 Marks]

Answer:
1. Creeping inflation is inflation where the price level increases at a very slow rate of 2 to 2.5% per annum.
2. Running inflation is inflation where the price level increases much faster, typically at a double-digit rate per annum.

Teacher's Note:
a) Creeping inflation is considered mild and even beneficial for economic growth, whereas running inflation can destabilize the economy.
b) Note: The official key states "at the rate of 10% per month" for running inflation due to an error in the original board key text; running inflation is conventionally measured annually (double-digit per annum). .

Question 4

(a) Mention two ways by which efficiency of labour can be improved. [2 Marks]

Answer:
1. Improve educational facilities: Literacy is the first priority to improve the efficiency of labour. Adequate provisions for imparting training to workers will improve productivity.
2. Improved working conditions: Attention must be given to working conditions in factories. More hygienic and congenial conditions of work help in achieving higher levels of efficiency.

Teacher's Note:
a) Labour efficiency depends heavily on education, training, and working environment.
b) Mentioning clear headings with brief explanations is recommended.

(b) What does the term 'nationalisation of banks' mean? [2 Marks]

Answer:
Nationalisation means the taking over of commercial banks by the government. These banks work according to national priorities rather than the profit motive of private entrepreneurs.

Teacher's Note:
a) Bank nationalisation in India aimed to channel credit to priority sectors such as agriculture and small-scale industries.
b) Mentioning state ownership and social welfare orientation is essential.

(c) Why is India considered to be in a virtual debt trap? [2 Marks]

Answer:
Heavy borrowings to meet interest charges and expenditure on salaries, pensions, and day-to-day administrative work have put India into a virtual debt trap. In this case, fresh loans are raised merely to service past debt liabilities.

Teacher's Note:
a) A debt trap occurs when a government has to borrow continuously just to pay interest on existing loans.
b) Emphasize that borrowing for unproductive consumption expenditure aggravates the debt burden.

(d) Give any two reasons for giving the monopoly right of note issue to the Central Bank. [2 Marks]

Answer:
1. It leads to uniformity in note circulation across the country.
2. It ensures public faith and confidence in the currency and monetary system.

Teacher's Note:
a) Centralizing currency issuance helps the central bank effectively control the money supply.
b) Multiple issuers would create chaos and destroy public trust in currency value.

(e) Mention any two duties of a consumer. [2 Marks]

Answer:
1. Consumer awareness: A consumer must be aware regarding the availability of various goods and services such that buying decisions are informed.
2. Look for quality marks: A consumer must always purchase goods and services with concerned quality certification marks such as ISI in electrical goods and AGMARK in agricultural goods.

Teacher's Note:
a) Consumers must exercise vigilance alongside enjoying statutory rights.
b) Insisting on cash memos and checking expiry dates are also key consumer duties.

SECTION B (40 Marks)

Attempt any four questions from this Section

Question 5

(a) Give any five differences between product and process based division of labour. [5 Marks]

Answer:

Teacher's Note:
a) Use a tabular format for distinction questions to ensure clarity and score maximum marks.
b) Ensure all five points cover definition, scale, terminology, and technique.

(b) Explain any five rights of the consumers as accepted by the Indian law. [5 Marks]

Answer:
1. Right to be informed: Adequate and accurate information about quality, quantity, purity, standard, and price of goods and services must be provided to consumers.
2. Right to seek redressal: Consumers have the right to seek redressal against unfair trade practices or exploitation, including replacement, repair, or compensation.
3. Right to safety: Every consumer has the right to be safeguarded against goods and services which are hazardous to life, health, or property.
4. Right to choose: Consumers have the right to choose from a variety of goods and services at competitive prices as per their own wishes and preferences.
5. Right to be heard: A consumer has the right to represent and be heard in appropriate forums established under consumer protection laws in case of exploitation.

Teacher's Note:
a) Mention specific rights under the Consumer Protection Act clearly.
b) Give real-world examples for each right, such as ISI certification for safety or consumer forums for redressal.

Question 6

(a) How do the manufacturers and traders exploit the consumers? [5 Marks]

Answer:
1. Sale of adulterated goods: Addition of inferior or harmful substances to the product being sold.
2. Sale of sub-standard goods: Sale of goods which do not conform to prescribed quality standards.
3. Use of false weights and measures: Leading to short-measurement and underweight commodities.
4. Supply of defective goods: Selling faulty or broken items that fail to perform as expected.
5. Misleading advertisements: Advertisements falsely claiming a product or service to be of superior quality, grade, or standard.

Teacher's Note:
a) Exploitation in the marketplace harms consumer health and financial interests.
b) Bullet points with explanatory sub-headings help structure the 5-mark answer effectively.

(b) Explain the role of an entrepreneur in the economic development of the country. [5 Marks]

Answer:
1. Innovative power towards industrialisation: Entrepreneurs introduce cost-reducing or demand-creating innovations, making the country self-sufficient in industrial goods.
2. Generation of higher employment: Profits earned from innovations are reinvested into new ventures, generating widespread employment opportunities.
3. Ability to predict future market conditions: Entrepreneurs analyze market trends and take precautionary actions against economic fluctuations, stabilizing the economy.
4. Capital formation: By mobilizing savings and investing in productive channels, entrepreneurs boost capital accumulation.
5. Balanced regional development: Entrepreneurs often set up industries in backward areas, promoting balanced economic growth across regions.

Teacher's Note:
a) The entrepreneur is often called the driving force or captain of industry in economic development.
b) Clearly explain how innovation leads to investment and employment generation.

Question 7

(a) How is a commercial bank different from a central bank? [5 Marks]

Answer:

Teacher's Note:
a) Contrast the regulatory, apex role of the central bank with the profit-driven intermediary role of commercial banks.
b) Presenting the comparison in a table is the standard convention for full marks.

(b) What are the merits of an indirect tax? [5 Marks]

Answer:
1. Broad coverage: All buyers of a commodity pay the tax irrespective of income level, widening the tax net and yielding more revenue.
2. Convenient: Indirect taxes are paid in small portions at regular intervals and included in the price of the commodity, causing no direct pinch.
3. Equity: Indirect taxes can be made equitable by imposing higher taxes on luxury goods consumed by the rich and lower taxes on essential commodities.
4. Elastic: Indirect taxes can be made elastic and productive when imposed on essential goods whose demand is inelastic, ensuring steady government revenue.
5. Difficult to evade: Since indirect taxes are included in commodity prices, evasion is difficult unless the person stops purchasing the taxed item.

Teacher's Note:
a) Indirect taxes are regressive by nature, but equity can be introduced by taxing luxury goods heavily.
b) Highlight convenience and broad coverage as key advantages over direct taxes.

Question 8

(a) With the help of a graph explain relatively inelastic demand for a commodity. [5 Marks]

Answer:
When a large change in price brings about a smaller proportionate change in demand, the demand is said to be relatively inelastic. In this situation, the percentage change in demand is less than the percentage change in price (Ed < 1). For example, a 10% fall in price may lead to a rise in demand by only 5%. The slope of a relatively inelastic demand curve is steep.

[Figure: A line graph with Y-axis representing Price and X-axis representing Quantity. A steep downward sloping demand curve labeled DD shows that a large drop in price (Delta P) results in a small increase in quantity demanded (Delta Q), with elasticity marked as Ed < 1.]

Teacher's Note:
a) Ensure the graph correctly depicts a steep downward-sloping demand curve where percentage change in quantity is smaller than percentage change in price.
b) Inelastic demand is typical for essential commodities like food, medicine, and salt.

(b) Discuss any five advantages of having a bank account. [5 Marks]

Answer:
1. Encourages savings: People keep savings in the bank, developing the habit of saving in place of hoarding cash.
2. Mobilisation of savings for investment: Banks collect scattered savings from depositors and channel them into productive investments.
3. Loans advanced by commercial banks: Banks provide credit facilities and overdraft facilities to individuals and businesses against approved securities.
4. Raises the rate of economic growth: Loans given for productive activities increase the national income and accelerate economic growth.
5. Assisting foreign trade: Banks extend credit facilities and letters of credit to exporters and importers on easy terms, promoting international trade.

Teacher's Note:
a) Bank accounts provide safety, liquidity, and earning potential through interest.
b) Clearly explain how deposit mobilization fuels investment and economic development.

Question 9

(a) Explain any five characteristics of tax. [5 Marks]

Answer:
1. Compulsory payment: A tax is a compulsory payment imposed by the government, and refusal to pay is punishable by law.
2. General welfare: Tax revenue collected is utilized for common public benefits and welfare rather than individual direct services.
3. No direct quid pro quo (exchange relationship): A taxpayer does not receive a direct proportional service or benefit in exchange for the tax paid.
4. Regular and periodic payment: Taxes are paid periodically (e.g., annually, monthly) as per statutory laws.
5. Establishment of social justice: Progressive taxation helps reduce income inequalities by heavily taxing higher income groups.

Teacher's Note:
a) Distinguish a tax from fees, fines, and commercial prices.
b) Emphasize the compulsory nature and lack of direct exchange benefit.

(b)
(i) What is meant by the term demand pull inflation? [2 Marks]
(ii) Discuss any three causes of demand pull inflation. [3 Marks]

Answer:
(i) Demand pull inflation means inflation generated by the pressure of excess demand in the economy. When aggregate demand exceeds aggregate supply at full employment, the general price level tends to rise.
(ii) Causes of demand pull inflation:
1. Poor performance of farm sector: Low agricultural production creates shortages of food grains, driving up prices.
2. Industrial disputes: Strikes, lockouts, or trade union demands curtail industrial production, reducing the supply of goods and services.
3. Natural calamities: Droughts or floods adversely affect agricultural output and raw material supplies, creating inflationary pressures.

Teacher's Note:
a) Demand pull inflation is often summarized as "too much money chasing too few goods".
b) Clearly separate sub-part (i) definitions from sub-part (ii) causes to ensure proper marking.

Question 10

(a)
(i) Define the term demand. [2 Marks]
(ii) Explain any three factors that affect the demand for a commodity. [2 Marks]
(iii) Why articles of distinction or the Veblen effect are an exception to the law of demand? [1 Mark]

Answer:
(i) Demand means the quantity of a commodity or service which a consumer is willing and able to buy at various given prices during a given period of time.
(ii) Three determinants of demand:
1. Price of the commodity: An increase in price reduces purchasing power, leading to lower demand, and vice versa.
2. Income of the consumer: Higher individual income increases purchasing power, raising demand for normal goods.
3. Climatic conditions: Seasonal changes alter demand, such as increased demand for woollen clothes in winter.
(iii) Veblen effect: Status symbols and luxury items (like diamonds or rare paintings) are purchased more at higher prices because rich consumers consider high price as an indicator of prestige and superior quality, violating the law of demand.

Teacher's Note:
a) Ensure all three sub-parts (definition, determinants, and exception) are answered concisely.
b) Veblen goods represent a classic psychological exception to downward sloping demand curves.

(b) Discuss any five reasons for growth of public expenditure in India. [5 Marks]

Answer:
1. Expansion of administrative machinery: Growing population and territory require larger administrative setups, increasing public expenditure.
2. Welfare state commitments: Government spending on social welfare, free education, health, and old-age pensions has expanded significantly.
3. Huge interest payments: Past borrowings result in heavy debt-servicing obligations, forming a major chunk of government expenditure.
4. Defense requirements: Modernizing and maintaining defense forces to safeguard national security demands rising budgetary allocations.
5. Prevention of monopolies and public sector investment: Government expenditure is required to establish public sector enterprises and prevent monopolistic exploitation.

Teacher's Note:
a) Public expenditure in developing economies like India shows an upward secular trend.
b) List key expenditure heads such as defense, interest payments, and welfare schemes clearly.