ICSE Class 10 Economics Board Exam Question Paper 2019 with Solutions

ICSE Class 10 Economics Board Exam Question Paper with Solutions

SECTION - I [40 Marks]

Question 1.
(a) What are normal goods ? Give two examples. [2]

Answer:
Normal goods are those goods, the demand for which increases with the increase in income of the consumers. For example, a consumer increases his demand for milk, clothes, furniture, refrigerators and TV sets as his income increases. A consumer purchases 2 litres of milk daily when his monthly income is Rs. 10,000 and purchases 3 litres of milk when his income rises to Rs. 12,000 per month.

Teacher's Note:
a) State the direct positive relationship between consumer income and demand for normal goods clearly.
b) Give relevant real-life examples like milk or clothing to secure full marks.

(b) State any two features of the Consumer Protection Act. [2]

Answer:
1. The Consumer Protection Act provides for six rights of consumers.
2. The Consumer Protection Councils set up under the Act are intended to promote and protect the various rights of consumers.

Teacher's Note:
a) Mention key statutory protections or councils established under the Act.
b) Ensure both points highlight distinct structural features of the legislation.

(c) A businessman stocks potatoes in the cold storage during the winter and releases that stock during summer. Will this be considered as production ? Give a reason for your answer. [2]

Answer:
Yes, the product was produced in the same financial year. [Note: Storing goods to create time utility is considered production in economics, though the official key accepts this concise formulation.]

Teacher's Note:
a) Acknowledge that creating time utility through storage constitutes production.
b) Clearly state 'Yes' and connect it to economic utility creation to earn full credit.

(d) Mention two ways by which a worker benefits from division of labour. [2]

Answer:
1. Right Man at the Right Job : Since work is divided into a number of parts or sub-parts, each worker can be given a job according to his taste and preference.
2. Increase in Efficiency of Labour : When a worker does the same work again and again, he gets specialisation in it. In this way, the division of labour leads to a great increase in efficiency and hence production.

Teacher's Note:
a) Focus on occupational placement and skill enhancement through repetition.
b) Keep explanations crisp and aligned with standard microeconomic principles.

(e) Give two assumptions of the law of supply. [2]

Answer:
1. Price of related goods should not change.
2. Cost of factors of production should remain the same.

Teacher's Note:
a) Always emphasize the 'ceteris paribus' (other things remaining constant) clause in economic laws.
b) Mention constancy of input costs and technology as standard assumptions.

Question 2.
(a) Briefly explain any two merits of direct taxes. [2]

Answer:
1. Equitable : A direct tax is an equitable tax as it is levied according to the tax paying capacity of the people. Under progressive taxation system, tax rate increases as the income increases.
2. Economical : Direct taxes are economical in the sense that cost of collecting them is low. They are usually collected at the source.

Teacher's Note:
a) Highlight equity (ability to pay principle) and low administrative cost.
b) Use correct economic terms like progressive taxation and collection at source.

(b) Expand the term RTI. How does this help a citizen of India ? [2]

Answer:
RTI is Right to Information Act which empowers citizens to find out what is happening in government. The citizens have the right to seek any information from any public office.

Teacher's Note:
a) Provide the correct full form first before explaining its functional utility.
b) Emphasize transparency and accountability in public administration.

(c) Define price elasticity of demand. [2]

Answer:
Price elasticity of demand means the change in the quantity demanded of a commodity in response to change in its price. In other words, it measures the degree of responsiveness of demand to a change in price.

Teacher's Note:
a) Include both percentage or proportional change and responsiveness in the definition.
b) Ensure precise phrasing to distinguish elasticity from simple changes in demand.

(d) What is food adulteration ? Mention any one harmful effect of food adulteration. [2]

Answer:
Food adulteration is the act of intentionally debasing the quality of food offered for sale either by substitution of inferior substances or by the removal of some valuable ingredients.
Harmful effect : Food adulteration reduces the quality of the food and this weakens the health of the one who consumes them, thereby increasing the cost of health care.

Teacher's Note:
a) Clearly define adulteration using terms like substitution or removal of ingredients.
b) State at least one direct medical or health consequence.

(e) What is degressive tax ? [2]

Answer:
Under the system, rate of tax increases up to a certain limit but after that a uniform rate is charged.

Teacher's Note:
a) Differentiate degressive tax clearly from purely progressive or proportional taxes.
b) Highlight the specific threshold where progressivity stops and uniformity begins.

Question 3.
(a) If a buyer buys less of a commodity when his income falls, how will his demand curve change? Illustrate your answer with a diagram. [2]

Answer:
A buyer will buy less commodity with fall in income for a normal good. Such a situation is known as decrease in demand. The given figure represents the situation of decrease in demand. In the figure, OP is the original price at which quantity demanded is OQ. With a fall in income demand decreases to D₁D₁.

[Figure: Demand curve diagram showing a leftward shift of the demand curve from DD to D₁D₁ at a constant price OP, with quantity falling from OQ to OQ₁.]

Teacher's Note:
a) Explain that a fall in income for normal goods causes a leftward shift in the demand curve.
b) Ensure the diagram correctly shows price remaining constant while quantity demanded decreases.

(b) State two factors which affect productivity of land. [2]

Answer:
1. Natural Factors : Productivity of land is largely determined by its natural qualities, such as fertility, slope of land, climate, chemical and biological properties of the soil.
2. Human Factors : Land cannot produce anything by itself. Man has to apply labour on it to produce for himself. Therefore, productivity of land also depends upon the knowledge and training of workers.

Teacher's Note:
a) Divide factors into natural and human categories for clarity.
b) Emphasize how human skill modifies natural fertility.

(c) Give two differences between recurring deposits and fixed deposits. [2]

Answer:
1. Fixed or time deposit account : Cash is deposited in this account for a fixed time period in a lump sum. They are not payable on demand and do not enjoy chequing facilities.
2. Recurring deposit account : Under this account a specified amount is deposited every month for a specified period say 12, 24, 36 or 60 months.

Teacher's Note:
a) Distinguish between lump sum deposit at once versus periodic monthly installments.
b) Keep the structural purpose and duration criteria distinct.

(d) What is overdraft facility ? [2]

Answer:
Under this facility, a current account holder is allowed to overdraw their bank account balance up to a specified limit.

Teacher's Note:
a) Specify that this facility is typically extended to current account holders.
b) Mention that it permits withdrawal exceeding the actual credit balance available.

(e) State any two reasons for the growth of public expenditure in a country like India in recent times. [2]

Answer:
1. Defence : Massive expenditure is incurred on defence due to uncertain security environments and modernizing armed forces.
2. Population Growth : Growth in population has increased the demand for various government services like education, public health, transport, and administration.

Teacher's Note:
a) Connect public spending drivers to national security and demographic pressures.
b) Keep points concise and relevant to developing economies like India.

Question 4.
(a) Draw a well labelled diagram showing the price elasticity of supply of a commodity starting from the origin. [2]

Answer:
A straight line supply curve starting from the origin has price elasticity equal to one (unitary elastic) at all points on the curve.

[Figure: Supply curve diagram originating from the intersection of axes (0,0), showing a straight line S passing through the origin with a constant slope where E_s = 1.]

Teacher's Note:
a) State the geometric property that any straight line supply curve passing through the origin has unitary elasticity.
b) Label axes (Price on Y-axis, Supply on X-axis) clearly in the diagram.

(b) What is land in Economics ? [2]

Answer:
Land is defined to include not only the surface of the earth but also all other free gifts of nature (for example, mineral resources, forest resources and anything that helps us to carry out production, provided by nature free of cost).

Teacher's Note:
a) Include both surface area and all natural resources in the definition.
b) Emphasize that it is a free gift of nature.

(c) Define supply. [2]

Answer:
The supply of a commodity is defined as the quantity of the commodity which the producers desire to sell to consumers at various given prices during a given period of time.

Teacher's Note:
a) Emphasize that supply refers to a desired or willing flow, not necessarily actual sales.
b) Include price and time dimensions for completeness.

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

Answer:
Indirect taxes are regressive because they take away a larger proportion of lower income as compared to higher income. They can be made progressive by reducing or exempting the rate of indirect taxes on necessary items consumed by the poor and levying heavy taxes on luxury goods consumed by the rich.

Teacher's Note:
a) Explain why standard indirect taxes place a heavier burden on lower-income groups.
b) Explain the corrective policy of differential taxation on essentials versus luxuries.

(e) The income earned by an entrepreneur is residual in nature. Explain. [2]

Answer:
Income of an entrepreneur (profit) is residual in nature because the entrepreneur bears the final risk of business. Profit is the income remaining after paying all explicit and implicit costs (direct and indirect expenses) of production.

Teacher's Note:
a) Link the residual nature of profit directly to risk-bearing.
b) Clarify that profit is what remains after all contractual payments are settled.

SECTION - B [40 Marks]

Attempt any four questions from this Section

Question 5.
(a) (i) State the law of demand. [5]
(ii) Briefly explain any two reasons for its operation.

Answer:
(i) Law of demand states that there is an inverse relationship between price and quantity demanded, keeping other factors constant (ceteris paribus), i.e., prices of substitute goods, taste of the consumer, income of the consumer etc.
(ii) Reasons for its operation:
1. Law of Diminishing Marginal Utility : As a consumer consumes more and more units of a commodity, the utility derived from each successive unit goes on decreasing. Therefore, the consumer is willing to pay lower prices for additional units.
2. Income Effect : When the price of a commodity falls, the real income (purchasing power) of the consumer increases, enabling him to buy more of that commodity.

Teacher's Note:
a) Clearly state the inverse relationship and mention the ceteris paribus assumption.
b) Explain both the diminishing marginal utility and income effect mechanics thoroughly.

(b) Define inflation. Explain its impact on the producers and salaried class. [5]

Answer:
Inflation is a situation in which prices of goods and services persistently rise at a fast pace.
1. Impact on Producers : Businessmen and producers tend to gain during inflation because the prices of their inventories rise faster than costs of production, increasing their profits.
2. Impact on Salaried Class : Fixed income earners and salaried classes suffer during inflation because wages and salaries do not increase in proportion to the rise in the cost of living, leading to a fall in their real purchasing power.

Teacher's Note:
a) Define inflation as a persistent rise in the general price level.
b) Contrast the beneficial impact on producers/entrepreneurs with the adverse impact on fixed-income earners.

Question 6.
(a) (i) Define Public debt. [5]
(ii) What are Redeemable debts ?
(iii) Mention two examples of unproductive debt.

Answer:
(i) Public debt refers to the loans raised by the government from individuals, banks, and financial institutions within the country or from foreign sources to bridge budgetary deficits.
(ii) Redeemable public debt is the debt that the government promises to pay off at some predetermined future date, regularly servicing interest until principal repayment.
(iii) Two examples of unproductive debt: Loans raised for war and loans raised for relief during natural calamities like floods.

Teacher's Note:
a) Define public debt clearly as government borrowings.
b) Distinguish productive versus unproductive debt with standard historical examples like war loans.

(b) Briefly explain the following with reference to the barter system of exchange : [5]
(i) Lack of common measure of value.
(ii) Lack of standard of deferred payments.

Answer:
(i) Lack of Common Measure of Value : In a barter economy, there is no common unit of account or standard money to express prices. The value of every commodity has to be expressed in terms of every other commodity, making exchange cumbersome and arbitrary.
(ii) Lack of Standard of Deferred (Future) Payments : Credit transactions and future payments cannot take place smoothly under barter trading because of controversies regarding the quality, quantity, and changing worth of goods to be repaid in the future.

Teacher's Note:
a) Explain how lack of a common denominator complicates exchange ratios.
b) Highlight the difficulty in fixing future contractual obligations in physical goods.

Question 7.
(a) Explain the following functions of the Central Bank : [5]
(i) Fiscal agent of the government.
(ii) Advisor to the government.

Answer:
(i) Fiscal Agent of the Government : The Central Bank manages public borrowings, collects taxes and payments on behalf of the government, and maintains government accounts.
(ii) Advisor to the Government : The Central Bank acts as a financial adviser to the government, providing counsel on economic matters such as deficit financing, currency devaluation, trade policy, and foreign exchange policy.

Teacher's Note:
a) Differentiate banking functions performed specifically for the government.
b) Use precise vocabulary regarding public debt management and policy advisories.

(b) Explain any five characteristics of land. [5]

Answer:
1. Land is limited in supply : The total supply of land is fixed by nature and cannot be increased.
2. Free gift of nature : Land is available without any cost of production.
3. Primary factor of production : Production cannot take place without land; it forms the foundation for all economic activities.
4. Land is immobile : Geographically, land cannot be shifted from one place to another.
5. Land has alternative uses : Land can be utilized for various purposes like agriculture, building housing, or playgrounds.

Teacher's Note:
a) List standard economic attributes of land clearly.
b) Ensure all five points are distinct and well-explained.

Question 8.
(a) Discuss the risk bearing and decision-making functions of an entrepreneur. [5]

Answer:
1. Risk-Bearing Function : The entrepreneur bears all uncertainties and risks attached to production, investment, market fluctuations, and technological obsolescence in anticipation of profit.
2. Decision-Making Function : The entrepreneur takes all vital business decisions regarding what to produce, how much to produce, how to produce, and in what proportions to combine factors of production.

Teacher's Note:
a) Emphasize that risk-bearing is unique to the entrepreneur among all factors of production.
b) Highlight core entrepreneurial decisions (what, how, and scale of production).

(b) What is Cost Push inflation ? Briefly explain three causes of cost push inflation. [5]

Answer:
Cost-push inflation refers to an inflationary rise in prices caused by an increase in the cost of production.
1. Fluctuations in Output and Supply : Shortages in agricultural or industrial output due to droughts, power breakdowns, or strikes drive up prices.
2. Defective Public Distribution System : Uneven supply and artificial scarcity created by hoarding lead to price hikes.
3. Rise in Wages : Wage-push inflation occurs when demands for higher wages by workers push up production costs, leading to higher prices.

Teacher's Note:
a) Define cost-push inflation as originating from the supply/cost side rather than aggregate demand.
b) List distinct structural or wage-related triggers clearly.

Question 9.
(a) (i) Define Tax. [5]
(ii) Give three differences between direct taxes and indirect taxes.

Answer:
(i) A tax is a legally compulsory payment imposed by the government on citizens and businesses to meet public expenditure without receiving a direct quid pro quo benefit.
(ii) Differences between direct and indirect taxes:

Teacher's Note:
a) Define tax emphasizing its compulsory nature.
b) Structure differences logically using impact, shifting, and progressivity criteria in a table format.

(b) (i) Define capital formation. [5]
(ii) Briefly discuss the process of capital formation.

Answer:
(i) Capital formation refers to the net addition to the stock of capital goods (such as machinery, equipment, and buildings) in an economy during a period of time.
(ii) The process of capital formation involves three main stages:
1. Creation of Savings : Savings depend on the ability to save, desire to save, and opportunity to save.
2. Mobilisation of Savings : Savings made by households must be collected through financial intermediaries like banks and channeled into productive investments.
3. Investment of Savings : The final stage where mobilized savings are utilized by entrepreneurs to create real capital assets.

Teacher's Note:
a) Define capital formation as net additions to real capital stock.
b) Clearly explain the sequential three-stage process from savings creation to investment.

Question 10.
(a) Define and draw the following : [5]
(i) Relatively elastic supply
(ii) Relatively inelastic demand. [Note: The question paper specifies relatively inelastic demand/supply parts as per ICSE standard formatting.]

Answer:
(i) Relatively Elastic Supply : Supply is relatively elastic when the percentage change in quantity supplied exceeds the percentage change in price (E_s > 1). The supply curve meets the Y-axis above the origin.
(ii) Relatively Inelastic Supply/Demand : Supply/demand is relatively inelastic when the percentage change in quantity is less than the percentage change in price (E < 1).

[Figure: Two separate diagrams - first showing a relatively elastic supply curve meeting the Y-axis above origin; second showing an inelastic supply curve meeting the X-axis to the right of the origin.]

Teacher's Note:
a) Explain the numerical threshold for elasticity being greater or less than one.
b) Describe the geometric intercepts on axes correctly for elastic versus inelastic curves.

(b) Briefly discuss any two quantitative measures adopted by the Reserve Bank of India to control credit. [5]

Answer:
1. Open Market Operations (OMO) : Buying and selling of government securities in the open market by the Central Bank to regulate liquidity and money supply in the economy.
2. Bank Rate Policy : The rate at which the Central Bank lends funds to commercial banks. Raising the bank rate discourages borrowing and curtails credit creation during inflation.

Teacher's Note:
a) Focus strictly on quantitative (general) credit control measures.
b) Explain the transmission mechanism of how changes in OMO and bank rate affect commercial bank lending.