ICSE Economics 2010 Paper Solved Class-10 Previous Year Questions
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ICSE Economics 2010 Paper Solved Class-10 Previous Year Questions
Answers to this Paper must he written on the paper provided separately.
- Answers to this Paper must be written on the paper provided separately.
- You will not be allowed to write during the first 15 minutes.
- This time is to be spent in reading the Question Paper.
- The time given at the head of this Paper is the time allowed for writing the answers.
- Section I is compulsory. Attempt any four questions from Section II.
- The intended marks for questions or parts of questions are given in brackets [ ].
Previous Year Questions ICSE Economics 2010 Paper Solved Class-10
Section – A [40 Marks] (Attempt all questions from this Section)
Question 1 :-
(a) Explain two primary functions of money. 
(b) What kind of division of labour do we see in the automobile industry? 
(c) Distinguish between sunk and floating capital. Give an example of each. 
(d) Explain the effect of inflation on fixed income groups and borrowers. 
(e) Which is the only factor of production that earns profits? Why? 
The two primary functions of money are as follow:
- Measure of Value: The Money acts as a measure of value. The value of each good or service is measured in terms of money (called price). Money also serves as a unit of account.
- Medium of Exchange: It serves as a medium of exchange and facilitates the buying and selling of goods and services.
We see automobile industry in incomplete process of complex division of labour. In this kind of system the work is divided into different processes and sub-processes in such a way that only a part or a component of a commodity is produced.
Floating Capital: Floating Capital is that category of capital, in which all items can be put to alternate uses. For example: money, fuels etc.
Sunk Capital: Sunk capital can be used to produce only one type of commodity or service. For example, an ice factory.
Fixed income group class is worst affected by inflation because the purchasing power of their fixed income goes on decreasing with rising prices.
Borrower gains in inflation because the value of money was high when they borrowed but came down when they repaid their debts. But if debtor take loans during inflationary period the position is reversed.
(e) Entrepreneur is the only factor of production that earns profit because in the entire business sphere no other factor of production shares the loss incurred by the entrepreneur. Entrepreneur is one, who performs all the functions associated with entrepreneurship (including risk bearing).
Question 2 :- (ICSE Economics 2010 Paper )
(a) What is meant by bank rate? 
(b) State two sources of Government income or revenue. 
(c) All capital is wealth but all wealth is not capital.
Explain why all wealth is not capital. 
(d) State whether each of the following is a direct or an indirect tax:
- Wealth tax
- Excise duty 
- Sales tax
- Income tax
(e) State two differences between fixed deposits and savings deposits. 
Answer 2 :-
(a) Bank rate is the rate at which the central bank provides credit to commercial banks. An increase or decrease in the bank rate leads to an increase or decrease in the market rate of interest, thereby the cost of credit changes in the market. During inflation, an increase in the bank rate increases the cost of capital which reduces the flow of credit.
Two sources of Government income or revenue are:
- Administrative Revenue: Fees, fines, penalties etc.
- Taxes: Direct as well as Indirect.
(c) Wealth is anything which has utility, scarcity and is transferable. Capital is a produced means of production. It is first produced by man and then used for the other production of more goods. Since capital goods have all the features of wealth so all capital is wealth. But only that part of wealth is capital which is used in further production of goods.
example: Furniture in our house is our wealth but not capital but a car owned by a taxi-driver is his wealth as well as capital.
- Wealth Tax: Direct Tax
- Excise Duty: Indirect Tax
- Sales Tax: Indirect Tax
- Income Tax: Direct Tax
Two differences between fixed deposits and savings deposits.
- The rate of interest paid on fixed deposit is the highest whereas a nominal interest is paid on a savings deposit.
- In a fixed deposit money is deposited in a lump sum for a fixed period of time and cannot be withdrawn before the expiry of the time period.
In a savings deposit money can be deposited any number of times and can also be easily withdrawn with the help of cheques.
Question 3 :-
(a) Division of labour is not an unmixed blessing. Give one reason. 
(b) Is the expenditure incurred by the state on defence regarded as productive or unproductive? Give one reason. 
(c) Why is the central bank referred to as the “lender of the last resort”? 
(d) What is the significance of the period 1966-69 with respect to economic planning in India?** 
(e) What kind of goods are X and Y if a rise in the price of X, increases the demand for Y? Give an example of such goods. 
** Answer has not given due to out of present syllabus.
Answer 3 :-
(a) Division of labour is not an unmixed blessing because inspire of many advantages, there are certain disadvantages of specialization of labour like social evils of factory system, class-conflicts among workers etc.
(b) The expenditure incurred by the state on defence regarded as unproductive because these expenditures do not add to the productive efficiency of the economy directly as they are in nature of consumption.
(c) As a lender of last resort, central bank gives financial accommodation to commercial banks by rediscounting their eligible bills at the time of emergencies. It means central bank saves commercial banks from financial crises by providing two types of loans:
- Rediscounting eligible securities and exchange bills of commercial banks.
- By providing loans against their securities.
(e) X and Y are substitute goods. Example: Coke and Pepsi.
A rise in the price of coke will cause an increase in the demand for Pepsi and vice-versa is also true.
Question 4 :- (ICSE Economics 2010 Paper )
(a) Price of a good falls from Rs. 20 per unit to Rs. 16 per unit. As a result, its demand rises from 80 units to 100 units. What can you say about the elasticity of demand by the Total Expenditure Method? 
(b) State two failures of the Ninth Five Year plan. ** 
(c) What is a degressive tax? Give an example 
(d) Briefly explain two exceptions to the law of demand. 
(e) Prepare an imaginary individual supply schedule and draw an individual supply curve based on it. 
Answer 4 :-
Here total expenditure remains constant, Elasticity of demand is equal to units, i.e. ep = 1
(c) Regressive tax system: The rate of the tax increases up to a certain limit but after that a uniform rate is charged. It is a mixture of proportional and progressive tax system.
(d) Two exceptions of law of demand:
- Ignorance: Sometimes people buy more of a commodity at a higher price merely because they consider the commodity to be superior. If the price is low, people think the commodity to be of poor quality and may not like to buy it.
- Change in fashion or taste: The law does not apply if there is a change in fashion or taste. If a commodity, goes out of fashion, it may not be demanded even at a lower price.
Individual Supply Schedule for Apples
|Price (Rs./kg)||Qty. Supplied (Kgs)|
Previous Year Questions ICSE Economics 2010 Paper Solved Class-10
Section – B [40 Marks] (Attempt any four from this Section)
Question 5 :-
(a) Explain any three factors that affect productivity of land. State two characteristics of land that make it different from other factors of production. 
(b) Define Human Capital.
Discuss any four important causes of low efficiency of Indian labour. 
Answer 5 :-
(a) Factors Affecting Productivity of Land:
- Proper Use of Land: proper utilization Productivity of land’ is directly related to its . For example, a piece of land situated in the heart of city is more suitable for construction of a house or a market place. If this piece of ‘land’ is put for farming or agricultural use, its productivity will almost be negligible.
- Improvements done on Land: The permanent improvement done on land, like construction of irrigation channels, hedging of fields or the construction of dams, etc., have positive effects on productivity of land. (any three)
- Location of Land: The location of ‘land’ affects its productivity to a great extent. For example, the location of land near the market or bus station will result in economy of transportation charges and overall productivity from this point of view will naturally be higher.
- Fertility of Land: The productivity of land is depends by its natural qualities and its fertility. A flat and levelled land is comparatively more productive than an undulating one The rich soil is more fertile and productive.
Two main characteristics of land which distinguish it from other factors of production:
- Land is Immobile: Land cannot physically move from one place to another whereas capital, labour and entrepreneur are all mobile factors of production.
- Effect of Laws of Returns: Since land is a fixed factor of production, the laws of returns are more effectively applicable on it. Use of capital and labour etc can be varied overtime.
(b) Human Capital: Those hidden qualities in a person which earn him an income and cannot be transferred from one place to another is called human capital
Causes of Low Efficiency of Indian Labour:
- Wages not determined by efficiency: Workers have the incentive to become more efficient only if higher efficiency leads to higher income. This is, in many cases, not true in India. Sometimes, the employers are to blame for this. They do not give to the efficient workers the higher incomes that they deserve.
- Inadequate Training facilities: There is also dearth of training facilities for the workers in India. Even the workers who wish to receive special training (or the employers who wish to send their workers to such training programmes) cannot do so in view of the limited facilities.
- Climate: The hot and humid climate of most of the states of India is a factor that deprives the people of the capacity to work hard and the ability to display Iiigh efficiency.
- Poor Working Conditions: The poor and unhealthy working conditions in
most of the Indian factories (specially in the unorganised sector) aggravates the problem of inefficiency of Indian workers. (any three)
Question 6 :- (ICSE Economics 2010 Paper )
(a) With the help of suitable diagrams, distinguish between increase in demand and extension in demand. 
(b) What is meant by supply of a commodity? Explain any four factors that determine the supply of a commodity. 
Answer 6 :-
Differences between extension in demand and increase in demand:
(b) Meaning of Supply: Supply is the quantity of goods offered for sale in a market, at given time, at given price.
Factors which determine the supply of commodity:
- State of Technology: Technique of production determines productivity, quality of the product and the cost of production. Producers use better technology to reduce the cost of production and increase productivity for increasing the supply. Out-dated technology blocks the supply of goods and results in more wear and tear during the production process.
- Price of the Commodity: There is a positive relation between the price of the commodity and quantity supplied. The higher the price, the more will be the supply of the commodity. Producers are benefitted by higher prices and produce more to gain from rising prices. This relation between price and supply is given in the law of supply.
- Prices of Factors of Production: Higher prices of factors of production increase the cost of production and dampen the sales and production. Cheaper factors of production increase the supply and demand for the commodity produced by such factors.
- Government Policy: Government policies also influence the Supply of a product.
For example, government may impose sales tax on the sales value of a product sold by the seller. The seller has to pay his tax to the govt. To keep the profit margin as before, the seller may sell the same quantity at a higher price than before or the seller would supply a lesser quantity at the same price. If the government gives a subsidy to the seller on the sales value of the product, the seller can now sell the same quantity at a lower price than before or he can supply more at the old price level.
Question 7 :- (ICSE Economics 2010 Paper )
(a) Distinguish between Funded and Unfunded debt. Discuss three purposes of public debt. 
(b) Define inflation. Explain any four factors that cause demand pull inflation. 
Answer 7 :-
(a) When the government makes arrangement for a separate fund for meeting the debt obligations, it is called funded debt. The funded debt is also called long-term public debt.
On the other hand, while taking loan if the government does not create any separate fund for the repayment of the principal sum along with interest, it is called unfunded debt or floating debt. The unfunded debts are short term debts. Three purposes of Public debt:
- Controlling Inflation: Public debt is used, side by side with taxes, as an instrument of Inflation control. At times of inflation, government tries to reduce the purchasing power of consumers, so that the pressure of excess demand may be reduced. Like taxes, public debt also takes money away from people’s hand.
- Development Financing: In a developing economy like India, the government often has to play a leading role in economic development. For raising the necessary funds, the government takes recourse to borrowing from the public. In India, public debt has been a major source of financing the development finance.
- Covering the gap between the expenditure and tax revenue: If the government’s revenue from taxes and other sources’ falls short of expenditure, public borrowings become a necessity. The excess of government’s expenditure: over its revenue creates a deficit in the government budget. The growing deficit in the government budget has been the principal reason for public borrowings in India.
(b) Inflation: Inflation is a rise in price levels with additional characteristics. It is incompletely anticipated, it does not increase to further rises, it does not increase employment and real output.
Four factors that cause demand-pull Inflation:
- Black Money: It is created through tax evasion and is responsible for price rise. It is spent on non-productive activities like buying real estate in urban areas, gold smuggling, luxurious items etc.
- Deficit Financing: Deficit financing increases the money supply in public
hands, therefore increasing the demand of goods and services.
- Increase in Population: Increase in population refers to increased demand of consumer goods, which puts a pressure on existing supply of goods and services thus resulting in inflation.
- High Rate of Investment: The heavy investment made by the Government as well as private industrialists have resulted in continuous increase in the prices of capital goods and other items of production.
Question 8 :- (ICSE Economics 2010 Paper )
(a) How does the Government use its instruments of taxation and public expenditure during inflation? Support your answer with reasons. 
- Define price elasticity of demand. 
- Draw two demand curves to show relatively price elastic demand and perfectly price inelastic demand. 
- Explain the importance of elasticity of demand to the producer and the Government. 
Answer 8 :-
(a) Inflation is a state in which the value of money is falling i.e. price are rising. It is a fall in the external value of money as measured by foreign exchange rates, by the price of gold or indicated by excess demand for gold or foreign exchange at official rates.
- Public Expenditure: Public expenditure is most important component of aggregate demand. In order to control inflation it is essential that the government expenditure must be reduced. However, part of the government expenditure is of essential nature and hence, cannot be reduced. Therefore, what is important is that unproductive expenditure of the government, which is non-essential in nature, must be reduced. For example expenditure on defence arid unproductive works should be reduced.
- Taxation: The government may impose new taxes and raise the tax rate of existing taxes. This will reduce disposable income of individuals and thereby reduce the purchasing power with the individual and will lead to fall in consumption expenditure. At the same time, the tax system should be so evolved as to promote saving habits among the people and also provide incentives for undertaking productive investment.
- Price elasticity of demand is the responsiveness of change in quantity demanded in response to a given percentage change in the price of the commodity.
It can be expressed as follows:
- Relatively price elastic demand (Ed > 1)
Elasticity of Demand useful to:
- The Government: The concept of elasticity of demand helps the government in fixing the rates of indirect taxes like sales tax.
- To the Producer: It helps him to take his decisions on the basis of the nature of elasticity of demand for his product. He will decide to. (1) Fix a higher price, and (2) Sell lesser quantity if the demand for his product is inelastic. Otherwise, if the demand is elastic, he may decide to (1) Fix a lower price, and (2) Sell larger quantity.
Question 9 :-
(a) Explain how the Commercial Banks provide credit facilities through the measures given below:
Discounting bills of exchange. 
(b) Discuss the need for economic planning in India. ** 
Answer 9 :-
- Discounting bills of exchange: This is another particular type of lending by modem banks. Through this method, a holder of a bill of exchange can get it discounted by the bank. In a bill Of exchange, the debtor accepts the bill drawn upon him by the creditor and agrees to pay the amount mentioned on maturity. After making some marginal deductions, the bank pays the value of the bill to the holder. When bill of exchange matures, the bank gets its payments from the party which had accepted the bill.
- Cash Credit: It is a type of loan which is given to the borrower against his current assets such as shares, stocks, bonds etc. Such loans are not based on personal security. They have to credit the account in the name of the borrowers and allow them a certain limit to withdraw money. The interest is charged on the amount withdrawn by the borrower and not on the entire amount of the loan sanctioned.
Question 10 :- (ICSE Economics 2010 Paper )
(a) State three posited and two negative effects of privatization of banks in India. 
(b) Discuss the importance of capital in the modem system of production. 
(a) Three positive aspects of the privatization of commercial banks in India:
- This process would help public sector banks to take proper credit decisions (or lending operations) in an independent manner. They can have greater flexibility [ in choosing sectors with higher returns and better recoverability.
- When banks will be in private hands they will open up branches in different areas with better facilities to earn profits and to serve people better than their competitors.
- A competitive environment will be created in the banking sector because these banks will face many other private sector commercial banks. Hence, each public sector bank, which has been privatised, will try hard to survive and evolve new 1 methods to improve their efficiency. As a result, their competitive strength will increase and they would be able to render better quality service.
Two negative aspects-of the privatization of commercial banks in India.
- Small Profits: Different nationalised commercial banks suffered huge losses over the years because of the poor recovery of loans and the growing volume of their non-performing assets.
- Despite the huge growth in deposit mobilization, the credit-deposit ratio indicated a declining trend. This implies that the nationalized banks have paid greater attention to deposit mobilization than to credit deployment.
(b) Capital is defined as “All those man-made goods which are used in further production of wealth.” Thus, capital is a man-made resource of production.
- Economic Development: The most important function of capital is to promote the economic development of a country. Economic development can not take place without capital formation. For this purpose, adequate funds are very essential.
- Provision for Subsistence: When the producer invests capital, he gets a return on it only when he dispose off the products, but the workers have to subsist during this period, for which the wages are paid from the capital money. Thus, when money from consumers reaches the producer, it is again accumulated as capital money.
Two functions of capital are:
- It expands employment: Since capital expands production, it also expands employment. Thus, if we are to reduce the volume of unemployment in the country, we must pay attention to capital formation in a country.
- Provision for Appliances: Capital is used to provide tools and implements for use by the workers, when they are needed. It is clear that these things are essential for production, without their aid, large-scale production is impossible.
- It helps in the process of division of labour: Capital makes the system of division of labour more redefine is only when there is an abundance of capital that is possible to assemble a large number of workers at one place. Only then cap the work be divided into many small parts, and a particular worker can be entrusted with a particularly small part of the work.
- Provision for Raw Materials: A part of the capital is used for arrangement of raw materials for production purposes. Every concern must have on hand a sufficient supply of raw-materials of good quality and in adequate quantity.
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