ICSE Class 10 Economics Sample Paper 2023 with Solutions

SECTION A

(Attempt all questions from this Section.)

Question 1 [16 Marks]
Choose the correct answers to the questions from the given options.
(Do not copy the question, write the correct answers only.)

(i) Labour earns __________ as a factor of production. [1 Mark]
(a) interest
(b) wages
(c) rent
(d) interest

Answer: (b) wages

Labour receives wages as a reward for its contribution to production.

Teacher's Note:
a) Remind students that each factor of production has a distinct reward - land earns rent, labour earns wages, capital earns interest, and entrepreneurship earns profit.
b) Note that option (a) and option (d) are identical in the paper due to a printing error, but the correct economic reward for labour is wages.

(ii) When the percentage change in quantity demanded is equal to percentage change in price then it is called as __________ demand. [1 Mark]
(a) Unit elastic
(b) Relatively elastic
(c) Relatively inelastic
(d) Unique elastic

Answer: (a) Unit elastic

Unit elastic demand occurs when the coefficient of price elasticity of demand is equal to one.

Teacher's Note:
a) Unitary elasticity means percentage change in quantity demanded exactly equals percentage change in price.
b) Students must memorize the numerical values associated with different degrees of price elasticity of demand.

(iii) The concentration of cotton textile industries in Maharashtra and Gujarat are due to __________ based division of labour. [1 Mark]
(a) territorial
(b) process
(c) product
(d) technological

Answer: (a) territorial

Territorial or geographical division of labour occurs when specific industries concentrate in particular regions due to favourable natural conditions.

Teacher's Note:
a) Territorial division of labour refers to localization of industries based on regional advantages like raw materials and climate.
b) Gujarat and Maharashtra have humid climates and raw cotton availability, making them hubs for cotton textiles.

(iv) When the government borrows money to builds dams and canal for the development of the country it is called as __________ debt. [1 Mark]
(a) productive
(b) unproductive
(c) gross
(d) developmental

Answer: (a) productive

Productive debt is utilized for creation of durable assets and capital goods that generate income.

Teacher's Note:
a) Productive loans help in economic development and generate revenue to repay the principal and interest.
b) Students often confuse productive debt with developmental debt, but loans for infrastructure assets are specifically classified as productive debt.

(v) When the rate of inflation is between 20 to 100 percent per annum then it is called as __________ inflation. [1 Mark]
(a) running
(b) walking
(c) galloping
(d) mild

Answer: (c) galloping

Galloping inflation is a very rapid inflation where prices rise by double or triple digits annually, between 20 percent and 100 percent.

Teacher's Note:
a) Creeping or mild is 1-3 percent, walking is 3-10 percent, running is 10-20 percent, and galloping is 20-100 percent.
b) Hyperinflation exceeds 100 percent per annum.

(vi) GST is an example of __________ tax. [1 Mark]
(a) goods
(b) services
(c) social
(d) indirect

Answer: (d) indirect

Goods and Services Tax is levied on the supply of goods and services, making it a comprehensive indirect tax.

Teacher's Note:
a) An indirect tax is one whose incidence and impact can be shifted to another person.
b) GST replaced multiple indirect taxes in India with a unified tax structure.

(vii) The sum total of all debts is called as __________ debt. [1 Mark]
(a) net
(b) gross
(c) public
(d) private

Answer: (c) public

Public debt refers to the total borrowings of the government from internal and external sources.

Teacher's Note:
a) Public debt is the aggregate borrowing of central, state, and local governments.
b) Ensure students do not confuse public debt with national debt in broader contexts, though public debt is the standard term for government borrowings.

(viii) Cash deposited by customers in commercial banks are also known as __________ [1 Mark]
(a) Saving deposit
(b) Derivative deposit
(c) Secondary deposit
(d) Total deposit

Answer: (c) Secondary deposit

Deposits created through loans or cash deposited by customers are derivative or secondary deposits.

Teacher's Note:
a) Primary deposits are cash deposits made directly by customers, while secondary deposits arise from loans granted by banks.
b) The official key lists secondary deposit as the accepted term for derivative or customer-initiated bank deposits in credit creation contexts.

(ix) If __________ is used again and again, its value depreciates gradually. [1 Mark]
(a) capital
(b) cotton
(c) raw material
(d) electricity

Answer: (a) capital

Fixed capital assets suffer wear and tear with repeated use over time, leading to depreciation.

Teacher's Note:
a) Capital goods like machinery and plant depreciate through continuous usage in production.
b) Raw materials are single-use producer goods and get exhausted in one production cycle rather than depreciating gradually.

(x) __________ represents downward movement along the same supply curve. [1 Mark]
(a) Increase in supply
(b) Decrease in supply
(c) Contraction of supply
(d) Extension of supply

Answer: (c) Contraction of supply

A fall in quantity supplied due to a fall in price results in a downward movement along the same supply curve, known as contraction of supply.

Teacher's Note:
a) Contraction of supply is caused by a decrease in the commodity's own price.
b) Shift in supply curve represents increase or decrease in supply, whereas movement along the curve represents extension or contraction.

(xi) License fee is an example of __________ [1 Mark]
(a) Citizen's revenue
(b) Administrative revenue
(c) Tax revenue
(d) Commercial revenue

Answer: (b) Administrative revenue

License fees are charged by the government for granting permissions or legal rights as part of its administrative functions.

Teacher's Note:
a) Administrative revenues include fees, fines, penalties, and license fees collected without any direct quid pro quo service.
b) Fees differ from taxes because fees are paid specifically for a service or permission rendered by the government.

(xii) __________ should have the quality of farsightedness. [1 Mark]
(a) Labour
(b) Entrepreneur
(c) Landlord
(d) Capitalist

Answer: (b) Entrepreneur

An entrepreneur must possess farsightedness to anticipate future market demand and bear business uncertainties.

Teacher's Note:
a) Entrepreneurship involves risk-taking and decision-making, which require vision and anticipation of future trends.
b) Farsightedness helps the entrepreneur organize other factors of production efficiently for future profitability.

(xiii) Act of buying and selling of government securities by the central bank from and to the public is known as: [1 Mark]
(a) Bank rate
(b) Minimum reserve ratio
(c) CRR
(d) Open market operation

Answer: (d) Open market operation

Open market operations refer to the central bank buying and selling government securities in the open market to control money supply.

Teacher's Note:
a) Selling securities reduces money supply, while buying securities increases money supply in the economy.
b) This is a quantitative instrument of monetary policy.

(xiv) __________ spoils the nature and quality of food items. [1 Mark]
(a) Illiteracy
(b) Lack of information
(c) Food adulteration
(d) Artificial scarcity

Answer: (c) Food adulteration

Food adulteration involves mixing or substituting inferior substances, which degrades the nature and quality of food items.

Teacher's Note:
a) Food adulteration poses serious health hazards to consumers.
b) Consumer awareness and stringent laws are required to prevent this exploitation practice.

(xv) The study of the nature and principles of government's revenue and its expenditure is known as: [1 Mark]
(a) Public debt
(b) Public expenditure
(c) Financial administration
(d) Public finance

Answer: (d) Public finance

Public finance is the branch of economics that evaluates government revenue, public expenditure, public debt, and financial administration.

Teacher's Note:
a) Public finance deals with the financial activities of the government sector.
b) It encompasses taxation, public spending, budgeting, and debt management.

(xvi) Which function of money facilitates future payments? [1 Mark]
(a) Standard of deferred payment
(b) Transfer of value
(c) Measure of value
(d) Unit of value

Answer: (a) Standard of deferred payment

Money serves as a standard of deferred payment, enabling future contracts, loans, and credit transactions.

Teacher's Note:
a) Deferred payments refer to transactions where payment is postponed to a future date.
b) This is a secondary function of money that makes credit systems and borrowing possible.

Question 2

(i) Define the term inflation. [2 Marks]

Answer:
1. Inflation is a sustained and appreciable rise in the general price level of goods and services in an economy over a period of time.
2. It leads to a continuous fall in the purchasing power of money.

Teacher's Note:
a) Students must emphasize that inflation refers to a general rise in price level, not just the price of a single commodity.
b) Mentioning the decline in purchasing power completes the definition.

(ii) Explain any two factors affecting productivity of land. [2 Marks]

Answer:
1. Natural factors: Fertility of the soil, favourable climate, and topography greatly influence land productivity.
2. Capital investment: Use of better irrigation facilities, fertilizers, and modern agricultural equipment enhances land productivity.

Teacher's Note:
a) Productivity of land is not constant and can be improved through human effort and capital.
b) Any two valid factors such as location, human skill, or management should be awarded full marks.

(iii) What is the impact of inflation on farmers? [2 Marks]

Answer:
1. Generally, landowning farmers benefit during inflation because the prices of agricultural produce rise faster than their costs.
2. However, tenant farmers and marginal farmers may suffer due to higher input costs and fixed rents.

Teacher's Note:
a) Distinguish between landowning farmers (who are generally gainers) and marginal or landless farmers (who are losers during inflation).
b) Clear differentiation ensures maximum credit.

(iv) What is demonetisation? [2 Marks]

Answer:
1. Demonetisation is the act of stripping a currency unit of its status as legal tender by the central bank or government.
2. It involves withdrawing existing high-denomination currency notes from circulation, often to curb black money and corruption.

Teacher's Note:
a) Mention the withdrawal of legal tender status clearly.
b) Mentioning the objective of tackling black money adds completeness to the answer.

Question 3

(i) Define the term demand. [2 Marks]

Answer:
1. Demand in economics refers to the desire for a commodity backed by the willingness to pay for it and the ability (purchasing power) to pay at a given price during a given period of time.

Teacher's Note:
a) All three elements - desire, willingness to pay, and purchasing power - must be present for effective demand.
b) Time and price reference are essential components of the definition.

(ii) Mention any two assumptions to the law of supply. [2 Marks]

Answer:
1. No change in the cost of production of the commodity.
2. No change in the state of technology used in production.

Teacher's Note:
a) Other assumptions include constant prices of related goods, no change in government policy, and normal weather conditions.
b) Any two valid assumptions framed under ceteris paribus should be accepted.

(iii) What is the meaning of consumer exploitation? [2 Marks]

Answer:
1. Consumer exploitation refers to the unfair trade practices by producers or traders where consumers are cheated, charged excessive prices, or sold substandard and adulterated goods.
2. It violates consumer rights and results in monetary or physical loss to the consumer.

Teacher's Note:
a) Explain unfair practices such as underweight goods, high pricing, and misleading advertisements.
b) Keep the explanation concise and direct for 2 marks.

(iv) Why do labourers have less bargaining power? [2 Marks]

Answer:
1. Labourers are often unorganized, especially in developing economies, which weakens their collective bargaining position.
2. Labour cannot be stored, creating urgency for employment to sustain livelihoods, forcing workers to accept lower wages.

Teacher's Note:
a) Highlight perishability of labour and lack of strong trade unions as key reasons.
b) High unemployment and surplus labour also contribute to lower bargaining power.

Question 4

(i) How is an entrepreneur defined in economics? [2 Marks]

Answer:
1. An entrepreneur is the fourth factor of production who coordinates and organizes land, labour, and capital.
2. They are the risk-bearer and decision-maker who drives business innovation and enterprise.

Teacher's Note:
a) Highlight the role of risk-taking and organization.
b) Mentioning innovation as emphasized by Schumpeter adds value.

(ii) Differentiate between land and capital. [2 Marks]

Answer:

Teacher's Note:
a) Presenting the difference in a clear tabular format ensures full credit.
b) Mentioning permanence of land versus depreciation of capital is also acceptable.

(iii) Explain any one primary functions of money. [2 Marks]

Answer:
1. Medium of exchange: Money acts as an intermediary in the exchange of goods and services, overcoming the major drawback of the barter system (lack of double coincidence of wants).

Teacher's Note:
a) Primary functions include medium of exchange and measure of value (unit of account).
b) Explaining how it overcomes barter difficulties earns full marks.

(iv) Define an oligopoly market. [2 Marks]

Answer:
1. Oligopoly is a market structure in which there are a few large firms dominating the industry.
2. There is a high degree of mutual interdependence among firms, and entry barriers exist for new firms.

Teacher's Note:
a) Emphasize the key characteristic of "few large sellers".
b) Mentioning interdependence or product differentiation completes the definition.

SECTION B

(Attempt any four questions from this Section.)

Question 5

(i) Explain five important features of perfect competition market. [5 Marks]

Answer:
1. Large number of buyers and sellers: There are so many buyers and sellers that an individual firm cannot influence the market price.
2. Homogeneous product: The goods produced by all firms in the industry are identical in quality, shape, and features.
3. Free entry and exit: Firms can enter or leave the industry freely in the long run, ensuring no abnormal profits exist in the long run.
4. Perfect mobility of factors of production: Factors of production can move freely from one job or region to another without restrictions.
5. Perfect knowledge: Both buyers and sellers have complete and perfect knowledge of market conditions and prices.

Teacher's Note:
a) All five points must be clearly stated and explained with brief descriptions.
b) Emphasize that under perfect competition, the firm is a price taker, not a price maker.

(ii) (a) What do you mean by law of demand? [2 Marks]

Answer:
1. The law of demand states that, other things remaining constant (ceteris paribus), there is an inverse relationship between the price of a commodity and its quantity demanded.
2. When price rises, demand falls, and when price falls, demand rises.

Teacher's Note:
a) Mentioning the inverse relationship and the ceteris paribus condition is mandatory.
b) Clear phrasing secures full marks.

(b) Discuss any three exceptions to law of demand. [3 Marks]

Answer:
1. Giffen goods: Inferior goods where a rise in price leads to an increase in demand due to a strong negative income effect overpowering the substitution effect.
2. Articles of snob appeal (Veblen goods): Prestige goods like diamonds and luxury cars where higher prices increase demand because they signal status.
3. Expected future shortages: If consumers expect prices to rise further in the future, they buy more even at current higher prices.

Teacher's Note:
a) Explain any three valid exceptions clearly with proper economic reasoning.
b) Veblen effect and Giffen goods are standard examples expected by examiners.

Question 6

(i) Explain five rights of a consumer. [5 Marks]

Answer:
1. Right to safety: Right to be protected against products, production processes, and services that are hazardous to health or life.
2. Right to be informed: Right to be informed about the quality, quantity, potency, purity, standard, and price of goods to protect against unfair trade practices.
3. Right to choose: Right to be assured, wherever possible, access to a variety of goods and services at competitive prices.
4. Right to be heard: Right to voice grievances and receive due consideration in appropriate forums.
5. Right to seek redressal: Right to seek legal remedies against unfair trade practices or exploitation, including compensation for damages.

Teacher's Note:
a) List and explain any five consumer rights as per consumer protection acts.
b) Accurate naming of the rights is crucial for securing maximum marks.

(ii) (a) Define capital formation. [2 Marks]

Answer:
1. Capital formation refers to the net addition to the existing stock of capital goods (like machinery, buildings, and equipment) in an economy over a period of time.
2. It involves saving and investment of current income.

Teacher's Note:
a) Highlight the creation of physical capital assets.
b) Mentioning savings leading to investment completes the concept.

(b) Explain any three characteristics of capital. [3 Marks]

Answer:
1. Man-made factor of production: Capital is not a gift of nature; it is created by human effort combining land and labour.
2. Highly mobile: Capital can be moved physically and geographically from one place or industry to another much easier than land.
3. Depreciable asset: Capital goods undergo wear and tear with continuous usage, requiring depreciation provisions.

Teacher's Note:
a) Any three clear characteristics of capital should be accepted.
b) Other valid points include capital being a passive factor and subject to time element.

Question 7

(i) Explain any five determinants of individual demand. [5 Marks]

Answer:
1. Price of the commodity: Inverse relationship between price and quantity demanded.
2. Income of the consumer: Direct relationship for normal goods and inverse relationship for inferior goods.
3. Prices of related goods: Includes substitutes (direct relation) and complementary goods (inverse relation).
4. Tastes and preferences of the consumer: Favourable changes in fashion and habits increase demand, while adverse changes decrease it.
5. Consumer expectations: Expectations of future price changes or shortages affect current demand.

Teacher's Note:
a) Detail all five determinants with clear directional effects.
b) Make sure price of the commodity is mentioned first as the primary determinant.

(ii) Differentiate between increase in supply and decrease in supply. [5 Marks]

Answer:

Teacher's Note:
a) Distinguish clearly using shifts in the supply curve rather than movements along the curve.
b) Tabular presentation helps earn full credit.

Question 8

(i) Mention five points of difference between direct and indirect taxes. [5 Marks]

Answer:

Teacher's Note:
a) Provide exact contrasts across five distinct parameters.
b) Income tax and GST are classic examples to keep in mind.

(ii) Explain any five economic causes for the growth of public expenditure in India in recent time. [5 Marks]

Answer:
1. Rapid population growth: Growing population requires higher spending on public health, sanitation, education, and civic amenities.
2. Defense expenditure: Increasing geopolitical tensions and modernization of military equipment have escalated defense spending.
3. Infrastructure development: Heavy investment by the government in building roads, railways, power plants, and ports.
4. Poverty alleviation and welfare schemes: Government spending on subsidies, employment generation programmes, and social security measures.
5. Urbanization: Expansion of cities requires massive expenditure on urban infrastructure, housing, and public transport.

Teacher's Note:
a) Explain five economic or developmental causes clearly.
b) Highlight how modern welfare state responsibilities drive continuous growth in public spending.

Question 9

(i) Draw a graphical figure showing perfectly elastic supply. [5 Marks]

Answer:
1. Perfectly elastic supply is represented by a horizontal supply curve parallel to the X-axis (ES = infinity).
2. At a specific price OP, an infinite amount of the commodity is supplied, but even a slight drop in price reduces supply to zero.

[Figure: A rectangular cartesian graph with Quantity demanded/supplied on X-axis and Price on Y-axis. A horizontal straight supply line SS runs parallel to the X-axis at a constant price level OP, indicating elasticity equals infinity.]

Teacher's Note:
a) Label axes (Price on Y-axis, Quantity on X-axis) and the supply curve correctly.
b) Mentioning \( E_s = \infty \) is essential for full marks.

(ii) (a) Define a commercial bank. [5 Marks]

Answer:
1. A commercial bank is a financial institution that accepts deposits from the public, grants loans for profit, and provides various agency and utility services.
2. It operates to earn profit and plays a crucial role in credit creation within the economy.

Teacher's Note:
a) Include both deposit acceptance and lending functions in the definition.
b) Mentioning the profit motive distinguishes commercial banks from central banks.

(b) Explain any two types of deposits accepted by commercial banks. [5 Marks]

Answer:
1. Savings deposits: Deposits meant for individuals to encourage savings, offering moderate interest and allowing limited withdrawals.
2. Fixed deposits (Term deposits): Deposits accepted for a specific fixed period earning higher interest rates, which cannot be withdrawn before maturity without penalty.

Teacher's Note:
a) Other types include current account deposits and recurring deposits.
b) Explain any two clearly with their key features.

Question 10

(i) Explain any two quantitative method of controlling money supply of a central bank. [5 Marks]

Answer:
1. Bank Rate Policy: The rate at which the central bank discounts bills of exchange or lends to commercial banks. Raising the bank rate makes borrowing costly, curbing money supply.
2. Cash Reserve Ratio (CRR): The minimum percentage of total deposits that commercial banks must keep with the central bank. Raising CRR reduces lending capacity and controls inflation.

Teacher's Note:
a) Quantitative methods regulate the overall volume of money supply in the economy.
b) Other methods include Statutory Liquidity Ratio (SLR) and Open Market Operations (OMO).

(ii) Fill in the following market demand table: [5 Marks]

Answer:
(a) 13 - (3 + 6) = 4
(b) 16 - (5 + 7) = 4
(c) 5 + 6 + 8 = 19
(d) 22 - (6 + 7) = 9
(e) 7 + 8 + 9 = 24

Teacher's Note:
a) Market demand is the horizontal summation of individual demands at each price level.
b) Verify calculations carefully to ensure rows add up correctly.