ICSE Class 10 Economics Sample Paper 2025 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) The __________ has to decide the reward for each factor of production. [1 Mark]
(a) Organiser
(b) Worker
(c) Consumer
(d) Entrepreneur

Answer: (d) Entrepreneur

The entrepreneur is the ultimate risk-bearer and decision-maker who allocates rewards to land, labour, and capital.

Teacher's Note:
a) Remember that the entrepreneur combines all factors of production and pays rent, wages, and interest, keeping the residual profit.
b) Students often confuse the organiser with the entrepreneur; in modern economics, they are usually the same entity.

(ii) Capital expenditure is __________ in nature. [1 Mark]
(a) Recurring
(b) Non recurring
(c) Positive
(d) Persuasive

Answer: (b) Non recurring

Capital expenditure creates durable assets and is incurred infrequently, making it non-recurring.

Teacher's Note:
a) Capital expenditures involve long-term investments in fixed assets like machinery, buildings, and infrastructure.
b) Contrast this with revenue expenditure, which is recurring in nature for day-to-day operations.

(iii) As a result of rise in consumer's income, the demand curve for coarse-grain (inferior good) will: [1 Mark]
(a) Move upward along the same demand curve
(b) Move downward along the same demand curve
(c) The demand curve will shift to the right
(d) The demand curve will shift to the left

Answer: (d) The demand curve will shift to the left

An increase in income causes consumers to substitute inferior goods with superior goods, reducing demand at every price.

Teacher's Note:
a) Inferior goods have a negative income elasticity of demand.
b) Make sure to distinguish between a change in quantity demanded (movement) and a change in demand (shift due to factors other than price).

(iv) If you make investments in insurances or mutual funds, then it will be called as __________ type of capital. [1 Mark]
(a) Investment
(b) Financial
(c) Physical
(d) Profitable

Answer: (b) Financial

Investments in financial instruments like shares, bonds, mutual funds, and insurance policies represent financial capital.

Teacher's Note:
a) Financial capital refers to monetary funds and paper claims used to acquire real physical capital.
b) Physical capital consists of tangible assets like factories, tools, and machinery.

(v) Assertion (A): Central bank as a banker to the government, works as a custodian of foreign exchange reserves.
Reason (R): The Central bank acts as a Clearing house for the transfer and settlement of mutual claims of commercial banks. [1 Mark]
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true and R is not the correct explanation of A
(c) A is true but R is false
(d) A is false but R is true

Answer: (b) Both A and R are true and R is not the correct explanation of A

Both statements describe correct functions of the central bank, but clearing house operations do not explain why it holds foreign exchange reserves.

Teacher's Note:
a) The central bank manages the nation's foreign exchange reserves as the banker to the government and monetary authority.
b) The clearing house function stems from its role as banker to the commercial banks.

(vi) Study the relationship in the first pair of words and complete the second pair.
1. Creeping inflation: The rate of inflation is 1% to 2% per annum
2. Running inflation: The rate of inflation is __________ per annum. [1 Mark]
(a) 3% to 6%
(b) 20% to 100%
(c) 30% to 40%
(d) 10% to 20%

Answer: (d) 10% to 20%

Running inflation typically manifests as a rapid price rise, generally ranging between 10% to 20% per annum (or double-digit inflation).

Teacher's Note:
a) Classifications of inflation include creeping (1-2%), walking (3-7%), running (10-20%), and galloping or hyperinflation (above 20% to astronomical levels).
b) Memorize the standard percentage ranges associated with each type of inflation.

(vii) 'Money helps to express the monetary value of goods and services in the market'.
On the basis of the given statement, Identify the function performed by money. [1 Mark]
(a) Medium of exchange
(b) Store of value
(c) Measure of value
(d) Transfer of value

Answer: (c) Measure of value

Money serves as a common unit of account, allowing the value of all diverse goods and services to be expressed in terms of a single price unit.

Teacher's Note:
a) As a measure of value, money eliminates the cumbersome need for expressing exchange ratios for every pair of goods as in a barter system.
b) Do not confuse this with medium of exchange, which is the actual act of purchasing or selling.

(viii) Identify the type of market structure represented by the visuals. [1 Mark]
[Figure: Collage showing telecom brands (Vodafone, Idea, Jio, Airtel) under Major Indian Companies, and automotive giants (Toyota, Renault, Honda, Hyundai, Maruti Suzuki) under Major Multi-National Companies]
(a) Monopoly
(b) Perfect market
(c) Government market
(d) Oligopoly market

Answer: (d) Oligopoly market

The telecom and automotive sectors feature a few large firms dominating the market, which is characteristic of an oligopoly.

Teacher's Note:
a) An oligopoly is marked by interdependence among firms and high barriers to entry.
b) Visual clues involving a handful of competing brand giants typically point to oligopolistic competition.

(ix) Ms. Sakshi, who teaches economics, discussed the 'minimum percentage of total deposits that commercial banks must maintain with the Central Bank according to current regulations'. Select the correct term that defines this concept from the following choices. [1 Mark]
(a) Cash reserve ratio
(b) Repo rate
(c) Bank rate
(d) Statutory liquidity ratio

Answer: (a) Cash reserve ratio

Cash Reserve Ratio (CRR) is the fraction of total deposits that commercial banks are legally mandated to keep with the central bank.

Teacher's Note:
a) CRR is a quantitative credit control instrument used to regulate money supply in the economy.
b) Statutory Liquidity Ratio (SLR), by contrast, is kept by the banks themselves in specified liquid assets.

(x) Which factor out of the following serves as the primary source of consumption? [1 Mark]
(a) Land
(b) Labour
(c) Capital
(d) Entrepreneur

Answer: (b) Labour

Labour earns wages and salaries, which constitute the primary income source for households to finance daily consumption.

Teacher's Note:
a) Human effort (labour) is the most widespread factor of production generating consumable incomes for the masses.
b) While land and capital also earn rent and interest, labour income forms the bulk of purchasing power in an economy.

(xi) Statement 1: The Bank Rate policy of the central bank is a traditional method of credit control.
Statement 2: The method used by the central bank to influence the total volume in the banking system is a quantitative method of credit control. [1 Mark]
(a) Statement 1 is true and Statement 2 is false
(b) Statement 1 is false and Statement 2 is true
(c) Both Statements 1 and 2 are true.
(d) Both Statements 1 and 2 are false.

Answer: (c) Both Statements 1 and 2 are true.

Bank rate is a classic quantitative credit control tool aimed at influencing overall liquidity and credit volume in the banking system.

Teacher's Note:
a) Quantitative methods affect total money volume, whereas qualitative methods regulate credit for specific sectors.
b) Both statements correctly reflect central banking theory.

(xii) Identify the factor that affects market demand from the options below: [1 Mark]
(a) Price of jointly produced goods
(b) Consumer Credit Facility
(c) Income of the consumer
(d) Government policy

Answer: (c) Income of the consumer

Consumer income is a fundamental determinant that shifts market demand by altering purchasing power.

Teacher's Note:
a) Individual and market demand are both influenced by consumer income, tastes, and prices of related goods.
b) Government policy and credit facilities also influence demand, but consumer income is the standard primary determinant taught in introductory demand analysis.

(xiii) In perfect competition the sellers are selling __________ products. [1 Mark]
(a) Identical
(b) Different
(c) Unique
(d) Inexpensive

Answer: (a) Identical

Homogeneous or identical products are a core characteristic of perfect competition, making firms price takers.

Teacher's Note:
a) Identical products mean buyers have no preference for one seller over another based on product differentiation.
b) Product differentiation is instead a hallmark of monopolistic competition.

(xiv) During barter exchange the rate of exchange was arbitrarily fixed.
This resulted from __________. [1 Mark]
(a) Lack of common measure of Value
(b) Lack of divisibility
(c) Problem of storing wealth
(d) Problem of deferred payment

Answer: (a) Lack of common measure of Value

Without a common unit of account, determining exact exchange values in barter was subjective and led to arbitrary rates.

Teacher's Note:
a) The absence of a common denominator created the coincidence of wants and valuation hurdles.
b) Rates varied based on immediate urgency rather than objective worth.

(xv) Indian farmers are an example of __________ type of labour. [1 Mark]
(a) Process based
(b) Monopoly based
(c) Product based
(d) Complex based

Answer: (c) Product based

Farmers are classified under product-based labour as their output results directly in agricultural goods and commodities.

Teacher's Note:
a) Labour can be categorized based on the nature of tasks or output generated.
b) Agricultural producers are standard examples of product-oriented workers.

(xvi) "Does a shirt priced at Rs. 300 exemplify the store of value function of money? Select the appropriate option: [1 Mark]
(a) True
(b) False

Answer: (b) False

Pricing a shirt at Rs. 300 exemplifies money as a measure of value (unit of account), not as a store of value.

Teacher's Note:
a) Store of value refers to holding purchasing power over time, whereas pricing indicates valuation.
b) Read money functions carefully to avoid confusing pricing with saving.

Question 2

(i) Give any two examples of direct tax. [2 Marks]

Answer:
1. Income Tax.
2. Corporate Tax.

Teacher's Note:
a) Direct taxes are levied directly on income or wealth, and their burden cannot be shifted to others.
b) Other valid examples include wealth tax or capital gains tax.

(ii) Examine the above image. State and explain the source of revenue generated by the government. [2 Marks]

[Figure: Traffic police officers checking documents and inspecting a motorcycle rider on a roadway]

Answer:
1. The image depicts traffic checks and documentation verification, which generate non-tax revenue for the government.
2. Sources include fees, fines, and penalties collected from citizens for administrative services or regulatory infractions.

Teacher's Note:
a) Non-tax revenue is earned through administrative functions rather than compulsory taxation.
b) Connect visual regulatory enforcement directly to administrative fines and license fees.

(iii) 'Specialization of labour helps the producers in their productive activities and is also beneficial to the workers'. Justify the statement with two suitable reasons. [2 Marks]

Answer:
1. For producers: Division of labour reduces cost of production and ensures quick, efficient production through specialized skill application.
2. For workers: It saves time in switching tasks and allows workers to master specific jobs, making them right persons at the right jobs.

Teacher's Note:
a) Specialization increases overall productivity and output quality.
b) Ensure both perspectives (producer and worker) are explicitly addressed to secure full marks.

(iv) By giving valid reasons explain, which of the following will be included in commercial revenue of the Government.
(a) Mr. Shah paying License fee for registration of his motor vehicle.
(b) Irrigation charges paid by Mr. Shah as a farmer. [2 Marks]

Answer:
1. Option (b) is included in commercial revenue.
2. Reason: Irrigation charges are prices paid for commercial services and goods supplied by the government, whereas license fees are administrative revenue.

Teacher's Note:
a) Commercial revenue arises from the sale of goods and services produced by government-owned enterprises or utilities.
b) Administrative revenue arises from the state's sovereign authority (fees, fines).

Question 3

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

Answer:
1. Demand refers to the willingness of a consumer to buy a commodity, backed by sufficient purchasing power.
2. It must be expressed at a given price and during a given period of time.

Teacher's Note:
a) Desire alone is not demand unless supported by ability and willingness to pay.
b) Mentioning price and time horizon is essential for a complete definition.

(ii) In the realm of economic development, how does the role of entrepreneurs impact the overall growth and stability of a nation? [2 Marks]

Answer:
1. Entrepreneurs increase employment opportunities by setting up new ventures and industries.
2. They help in capital formation by mobilizing savings and investing in productive ventures.

Teacher's Note:
a) Entrepreneurship drives innovation and economic dynamism.
b) Economic stability is reinforced through balanced regional development and wealth creation.

(iii) Analyse the images below and identify the factors of production and explain any one characteristic of the same. [2 Marks]

[Figure: Construction excavator machine working on land, alongside Indian currency notes (Rupee notes)]

Answer:
1. Factor of Production identified: Capital.
2. Characteristic: Capital is a man-made (artificial) passive factor of production that aids further production.

Teacher's Note:
a) The excavator and currency represent capital assets and financial backing.
b) Ensure both identification and characteristic explanation are clearly stated.

(iv) How is fixed deposit different from saving deposit? [2 Marks]

Answer:
1. Fixed deposits are non-chequable deposits locked for a specific period, whereas savings deposits are chequable and meant for regular transactions.
2. Fixed deposits earn a higher rate of interest compared to savings deposits due to the locking period.

Teacher's Note:
a) Use a comparative or point-wise format for differentiation questions.
b) Highlight liquidity and interest rate differentials.

Question 4

(i) Justify the following statement with two valid arguments.
'In a perfect competition market structure, an individual firm does not have any role in determining price'. [2 Marks]

Answer:
1. There is a large number of buyers and sellers, making any single seller's share negligible.
2. Products are homogeneous, so no buyer is willing to pay a higher price to any individual firm, making each firm a price taker.

Teacher's Note:
a) Price is determined solely by industry-wide market forces of total demand and total supply.
b) Emphasize the terms "price taker" and "homogeneous product".

(ii) Explain the term elasticity of demand. [2 Marks]

Answer:
1. Elasticity of demand measures the degree of responsiveness of quantity demanded of a good to a change in its price.
2. It is expressed as the ratio of percentage change in demand to percentage change in price.

Teacher's Note:
a) Mention the formula or proportional relationship for clarity.
b) Highlight that it quantifies consumer sensitivity to price movements.

(iii) Ram an employee and Shyam an elderly citizen was travelling by train from Delhi to Chennai separately. However, the cost of their tickets is different. Give reasons for the railways charging different prices to different customers. [2 Marks]

Answer:
1. The railways operate as a monopoly market structure.
2. Because they practice price discrimination based on consumer categories (such as concessions for senior citizens), they charge different prices to different customers for the same service.

Teacher's Note:
a) Price discrimination is feasible and profitable when a monopolist can divide the market.
b) Social welfare considerations often prompt concessions for senior citizens.

(iv) Under what conditions does the supply of good exhibit unitary elasticity? [2 Marks]

Answer:
1. The supply of a good exhibits unitary elasticity when the percentage change in quantity supplied is exactly equal to the percentage change in price.
2. Geometrically, a straight-line supply curve with unitary elasticity passes through the origin.

Teacher's Note:
a) Elasticity of supply (Es) equals 1.
b) Mentioning the percentage proportionality condition is essential.

SECTION B

(Attempt any four questions from this Section.)

Question 5

(i) With the help of a graph explain the increase in demand concept. [5 Marks]

Answer:
1. Increase in demand refers to a rise in the quantity demanded of a commodity at the same given price, caused by favourable changes in factors other than price (such as consumer income, tastes, or rise in price of substitutes).
2. In this condition, the entire demand curve shifts to the right.

[Figure: Line graph showing Price on the vertical Y-axis and Quantity Demanded on the horizontal X-axis. Initial demand curve D0D0 with price P and quantity Q. An upward/rightward shift to D1D1 shows an increase in quantity demanded to Q1 at the same price P, with dashed arrows indicating the rightward shift from Q to Q1.]

3. Explanation of graph: When price remains constant at P, demand rises from Q to Q1, shifting the demand curve rightward from D0 to D1.

Teacher's Note:
a) Clearly distinguish between extension of demand (movement along curve due to price) and increase in demand (shift of curve due to other factors).
b) Ensure axes, labels, and the shift direction are accurately drawn in the graph.

(ii) Explain any five demerits of direct tax. [5 Marks]

Answer:
1. Unpopular: Direct taxes are directly paid by individuals, making them widely unpopular and resented.
2. Inconvenience: Filing returns and compliance procedures involve significant administrative inconvenience and paperwork for taxpayers.
3. Possibility of evasion: High tax rates often incentivize tax evasion and black money generation through dishonest reporting.
4. Uneconomical: The cost of collecting and administering direct taxes can sometimes be high for the government machinery.
5. Arbitrary and narrow in scope: Tax slabs and exemptions can sometimes be arbitrary, and direct taxes often cover only a narrow segment of the population in developing economies.

Teacher's Note:
a) List five distinct demerits clearly with brief explanations for each.
b) Direct taxes promote equity, but their subjective and evasive aspects form their primary drawbacks.

Question 6

(i) (a) Define a market. [2 Marks]
(b) Explain any three features of a monopolistic market. [3 Marks]

Answer:
(a) Market refers to the whole area where buyers and sellers of a commodity are in competition with each other to effect purchase and sale of the commodity.
(b) Features of a monopolistic market:
1. Large number of buyers and sellers: There are numerous independent firms competing in the market, but each has a fraction of market share.
2. Product differentiation: Firms sell products that are close substitutes but differentiated by brand, packaging, or quality.
3. Free entry and exit: New firms can enter and existing firms can leave the industry freely in the long run.

Teacher's Note:
a) Market in economics is not merely a geographical location, but a mechanism connecting buyers and sellers.
b) Other valid features include non-price competition and imperfect knowledge.

(ii) In the context of the sudden increase in consumer groups in India due to heightened awareness and instances of exploitation by private traders, what are the key duties and responsibilities that consumers should be mindful of to actively contribute to the consumer movement in the country? [5 Marks]

Answer:
1. Check expiry date: Consumers must verify manufacturing and expiry dates before purchasing perishable or packaged goods.
2. Ask for cash memo: Always obtain a proper cash memo/bill as legal proof of purchase for grievance redressal.
3. Check for standardisation marks: Look for quality certification marks like ISI, Agmark, or Hallmark.
4. Be aware of rights: Consumers must educate themselves regarding their consumer rights and responsibilities.
5. File complaints against exploitation: Consumers should report unfair trade practices and substandard goods to consumer forums.

Teacher's Note:
a) Consumer awareness is a vital pillar of market regulation and consumer protection.
b) Emphasize documentary evidence like cash memos and ISI marks.

Question 7

(i) (a) What is the meaning of inflation? [2 Marks]
(b) Examine any three adverse or evil effects of inflation on production. [3 Marks]

Answer:
(a) Inflation refers to a situation where prices of goods and services persistently rise at a fast pace, eroding the purchasing power of money.
(b) Adverse effects on production:
1. Misallocation of resources: Producers shift resources towards speculative and luxury goods where profits are higher during inflation, ignoring essential goods.
2. Reduction in saving: Rising prices reduce real disposable incomes, leading to a fall in domestic savings and capital formation.
3. Discourages foreign capital: Inflation creates economic instability and uncertainty, deterring foreign investors from investing in the country.

Teacher's Note:
a) Inflation distorts the price mechanism as a reliable economic signal.
b) Ensure you detail effects specifically on production rather than general societal impacts.

(ii) Differentiate between Commercial and Central Bank (five points). [5 Marks]

Answer:

Teacher's Note:
a) Present differences in a structured tabular format with clear comparison bases.
b) Cover institutional hierarchy, objectives, and statutory powers.

Question 8

(i) Differentiate between extension and contraction of demand. [5 Marks]

Answer:

Teacher's Note:
a) Emphasize that both concepts represent movements along the same demand curve caused exclusively by price changes.
b) Contrast this with shifts in demand curves.

(ii) (a) State the law of supply. [2 Marks]
(b) Explain any three factors affecting elasticity of supply. [3 Marks]

Answer:
(a) Law of supply: Other things remaining constant, an increase in the price of a commodity leads to an increase in its quantity supplied, and a decrease in price leads to a decrease in its quantity supplied, showing a direct relationship.
(b) Factors affecting elasticity of supply:
1. Nature of the commodity: Perishable goods have inelastic supply, whereas durable goods have elastic supply.
2. Cost of production: If cost rises rapidly with output, supply is inelastic; if cost rises slowly, supply is elastic.
3. Time element: Supply is more elastic in the long run as producers have time to adjust production capacity, and inelastic in the short run.

Teacher's Note:
a) Always include the "other things remaining constant" (ceteris paribus) clause in the law of supply.
b) Explain supply elasticity determinants clearly with economic reasoning.

Question 9

(i) The following table shows the demand schedule for 3 consumers in a market.
Based on the above hypothetical schedule answer the following questions [5 Marks]

(a) What is the demand of Consumer 3 priced at Rs 10 (i) [1 Mark]
(b) What is the demand of Consumer 2 priced at Rs 8 (ii) [1 Mark]
(c) Calculate the total market demand priced at Rs 4 (iii) [1 Mark]
(d) From the above given table examine the relationship between price and demand. [1 Mark]
(e) Mention any one exception to the law of demand. [1 Mark]

Answer:
(a) (i) 3 kgs [Since Market Demand = C1 + C2 + C3; 6 = 1 + 2 + C3 => C3 = 3]
(b) (ii) 3 kgs [9 = 2 + C2 + 4 => C2 = 3]
(c) (iii) 15 kgs [At Rs 5: C1=4, C2=5, C3=6; Market Demand = 4 + 5 + 6 = 15 kgs]
(d) Demand and price have an inverse relationship (as price falls from Rs 10 to Rs 5, market demand rises from 6 kgs to 15 kgs).
(e) Giffen goods (or Veblen goods / Ignorance).

Teacher's Note:
a) Market demand is derived as the horizontal summation of individual consumer demands at each price level.
b) Verify arithmetic calculations carefully before writing final answers.

(ii) With the help of a graph explain a perfectly inelastic demand curve. [5 Marks]

Answer:
1. Perfectly inelastic demand occurs when a change in price causes no change at all in the quantity demanded of the commodity (Elasticity Ed = 0).
2. Consumers buy the exact same quantity regardless of how high or low the price goes.

[Figure: Line graph with Price on vertical Y-axis and Quantity on horizontal X-axis. A vertical straight-line demand curve parallel to the Y-axis, labeled Perfectly Inelastic Demand Curve (Ed = 0).]

3. Explanation of graph: The demand curve is a vertical straight line parallel to the Y-axis, indicating that quantity demanded remains fixed at Q regardless of price variations.

Teacher's Note:
a) Examples include life-saving drugs where demand does not drop even if prices spike.
b) Ensure the vertical nature of the curve is clearly illustrated and labeled.

Question 10

(i) Explain the determinants of supply? [5 Marks]

Answer:
1. Price of the commodity: Higher price encourages producers to supply more due to profit incentives, and vice versa.
2. Prices of factors of production: Increase in input costs (wages, raw materials) reduces profitability and decreases supply.
3. State of technology: Technological advancements improve productivity and increase supply.
4. Goals of the firm: If the goal is profit maximization, supply depends on price; if sales maximization, supply may be higher.
5. Government policy: Taxes increase costs and reduce supply, whereas subsidies lower costs and increase supply.

Teacher's Note:
a) List and explain any five key determinants of supply clearly.
b) Differentiate between determinants that shift supply versus price movements along the curve.

(ii) Read the extract and answer the following questions.
Shruti and her friends have an idea to start selling makeup kits. They already have saved money for the merchandise, models and displays. Since they all own the company, they will work for free.
(a) Name the factor of production which is not mentioned. [1 Mark]
(b) Explain any four characteristics of the above (a) factor of production. [4 Marks]

Answer:
(a) Land.
(b) Characteristics of land:
1. Free gift of nature: Land is provided freely by nature without any human effort.
2. Fixed supply: The total supply of land is inelastic and cannot be increased or decreased by human agency.
3. Land is immobile: Geographically, land cannot be moved from one place to another.
4. Land has indestructible powers: Original and inherent properties of land cannot be permanently destroyed through use.

Teacher's Note:
a) Capital (money saved), labour (working for free), and entrepreneurship (starting the idea) are mentioned; land (physical workspace/location) is missing.
b) List standard economic characteristics of land as a factor of production.