ICSE Economics 2011 Paper Solved Class-10 Previous Year Questions

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Previous Year Questions ICSE Economics 2011 Paper Solved Class-10

Section – A [40 Marks] (Attempt all questions from this Section)

Question 1 :-

(a) A farmer in Punjab transports wheat from the farm to a flour mill. Is this activity considered as production? Why? [2]

(b) The demand curve can slope upwards from left to right. Give one argument in support of this statement. [2]

(c) Improved technology affects the productivity of land. Explain this statement with the help of suitable examples. [2]

(d) Explain how income effect is responsible for the negative slope of a demand curve. [2]

(e) State two important contingent functions of money. [2]

Answer 1 :-

(a) If a farmer transports wheat from the farm to a flour mill then it will be considered as production because if anything is transported from a place, where its price is low, to another place where its price is high, then this change of place shall be called a production.

(b) Under exceptional conditions, the demand curve can slope upwards from left to right, as in case of Griffin goods. Sir Robert Griffin observed that sometimes people buy less quantity of a commodity at lower price and more quantity at a higher price and they exhibit an exception to the law of demand.

(c) New inventions, modem and scientific method of production like using high yielding varieties of seeds, manure etc. have increased the productivity of land. Use of modem machines in mining have also increased the production of various minerals in India.

(d) A fall in the price of goods indirectly leads to an increase in the consumer’s real income. Thus, the consumer can buy more quantity of the same commodity, that is why income effect is responsible for the negative slope of demand curve.

(e) Two contingent functions of money:

1. Liquidity: Money is the most liquid asset which can be converted into other assets quickly. Money is also helpful to avail the opportunity of investment into business by which an investor can get good amount of profit.
2. Basis of credit: The progress of business activity is fully linked with the credit system of the country. The entire strength of the credit system is based upon money. It is the changes in the quantity of money that brings about the changes in supply of credit in the country. Money supply affects the credit system of the country.

Question 2 :- (ICSE Economics 2011 Paper )

(a) State two limitations of division of labour. [2]

(b) Study the graph and identify the supply curve S₁ and S₃ with respect to its time element. [2]

(c) State two agency functions of Commercial Banks. [2]

(d) Briefly explain two methods of advancing loans by Commercial Banks. [2]

(e) Distinguish between internal and external debt. [2]

Answer 2 :-

(a) Two limitations of division of labour are:

1. Nature of the Product—The nature of the good that is being produced also limits the extent of division of labour, e.g. if the production of a good requires creative effort (a sculpture or a painting), it is difficult to introduce division of labour in the production process.
2. Size of the market—Division of labour increases total output by increasing the efficiency of labour. However, if the increased output cannot be marketed (i.e. if there is insufficient demand for the commodity in the market) the division of labour will not be profitable for the producers.

(b) S₁ is a perfectly inelastic supply curve ex. price changes supply does not change. Since, price changes with time, along S₁ supply curve, supply remains unchanged, in comparison to time, whereas, S₃ is a relatively elastic supply curve. It means supply changes more than the changes in price. Now, as price changes with time, along S₃, supply also changes with time.

(c)

Two agency functions of a Commercial Bank—

1. Collection and Making payments for credit Instruments—The bank collects the payment of the bills of exchange, promissory notes, cheques, etc. on behalf of its customers.
2. Collection of Dividend—The bank collects the dividends, and interests on shares and debentures as per instructions of its customers.

(d)

The two methods adopted by commercial banks to advance loans to the general public are as under—

1. Overdraft—The overdraft facility is allowed to the depositor maintaining a current account with the bank. According to this facility a borrower is allowed to withdraw more amount than what he has deposited. The excess amount so withdrawn has to be repaid to the bank in a short period and that too with interest. The rate of interest is usually charged more than that charged in case of loans.
2. Discounting of Bills of Exchange—The banks provide financial help to the merchants and exporters by way of discounting their bills of exchange. However, these merchants and exporters must be the customers of that bank. In such facility, the bank pays the amount of bill presented by the customer, after deducting the.usual hank discount. This way, the customer gets the amount of the bill before the date of its maturity. As such, the bank assists its customers to a great extent by accepting their bills and providing them with liquid assets. Usually a bill matures after 90 days or so and then the bank presents it to the acceptor and receives full amount of the bill.

(e)

Internal debt and external debt:

Internal debt means the government’s borrowings within the country. Individuals, banks, business firms and others are the various internal sources from which the government borrows. The various instruments of internal debt include market loans, bonds, treasury bills, ways and means and advances.
External debt means the government’s borrowings from abroad. External debts are multilateral borrowings, bilateral borrowings, loans from the World Bank and the Asian Development Bank. It helps for various developmental programmes.

Question 3 :- (ICSE Economics 2011 Paper )

(a) Identify the forms of capital given below. Give reasons for your answer.

1. Steel
2. Government Bonds.     [2]

(b) Mention any two sources of non-tax revenue of the Central Government in India. [2]

(c) State two ways by which the central bank of the country acts as a Banker’s Bank. [2]

(d) How does an improvement in production technology, influence the supply curve of a firm? [2]

(e) Give the expanded form of COPRA and RTI. [2]

Answer 3 :-

(a)

1. Government Bonds is a debt capital which represents the invested funds which yield income. All investments made in shares, stocks, Government securities, etc. which help the investors to earn income are called debt capital.
2. Steel is concrete capital. It includes all that property, which is in the hands of both producers and consumers and has money value.

(b) Non-tax sources of revenue of Central Government are as follows:

1. Gifts and Grants: They are contributions made by individuals, private organisations and foreign governments to the government.
2. Commercial revenues: They are the prices received by the government for services or goods supplied by it.

(c)

1. Banker’s Bank: The central bank is the bank for all the commercial banks in the country. The relations of central bank with other banks are similar to those of a bank with its Customers. As a matter of legal obligation, the commercial banks have to keep certain portion of their deposits with the central bank as cash reserves. These cash reserves enable the central bank to exercise control of the issue of credits by the commercial banks, thereby keeping the entire credit-system elastic. The central hank also allows the facility of short-term loans and discounting of the bills to the commercial banks and it also advises the other banks related to their business like fixation of rate of interests on deposits and loan etc.
2. Banker to the Government: The central bank makes and receives payments on behalf of the Government whenever it becomes necessary. It also floats public debt and manages it for a shorter or longer period as the case may be, for the Government. It supplies foreign exchange to the Government for repaying external debt or making other payments.

(d) If some improved or better technology is used for the production of a commodity, it reduces its cost of production and increases the supply. Therefore, improvement in technology shifts the supply curve to the right as shown in the fig.

(e)
COPRA—Consumer Protection Act
RTI—Right to Information

Question 4 :- (ICSE Economics 2011 Paper )

(a) Study the statements given below and state whether demand will be elastic or inelastic citing reasons for your answer.

1. Demand for cigarettes by a habitual smoker.
2. A consumer postpones the purchase of a refrigerator till the off-season sale.  [2]

(b) State two differences between a tax and a fee. [2]

(c) State two ways in which Recurring Deposits differ from Fixed Deposits. [2]

(d) In what type of tax, shifting of the tax burden is possible? Explain using an example. [2]

(e) What is meant by progressive tax? Give an example. [2]

Answer 4 :-
(a)

1. If a consumer can postpone the purchase of a refrigerator till the off season sale its demand will be elastic.
2. Demand for cigarettes by a habitual smoker generally have inelastic demand because these will be consumed irrespective of price variations. These addictive commodities can also be called conventional necessities.

(b) Difference between a tax and a fee:

Fees	Tax
Fees is a payment paid by those, who are benefitted from the special services rendered by the Government.	Taxes are compulsory contributions, imposed by the Government on its citizen without any other direct benefit.
Fee is bilateral in nature.	Tax is unilateral in nature.

(c) 

Recurring Deposits	Fixed Deposits
In case of such deposits, an accountholder has to deposit certain fixed amount every month for a specified period.	In such deposits, the deposits amount can be withdrawn only after the period of time agreed upon by the bank and the depositor.
Rate of interest paid by the bank is higher than the savings account but less than the fixed deposit account.	The interest rate are higher in case of such deposits. The longer the period, higher is the interest rate.

(d) Shifting of tax burden is possible in case of indirect tax. The tax is paid by some other person and the final incidence is borne by some other person e.g. excise duty and sale tax etc.

(e) Progressive tax: A tax is called progressive when the rate of taxation increases as the tax payer’s income increases. Example: Income tax

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Previous Year Questions ICSE Economics 2011 Paper Solved Class-10

Section – B [40 Marks] (Attempt any four from this Section)

Question 5 :-

(a) Explain five ways by which entrepreneurs can promote the economic development of a country. [5]

(b)

1. What is demand?
2. With the help of a hypothetical table draw the demand curve of a commodity.
3. Explain the diagram along side: [5]

Answer 5 :-

(a) Five ways by which entrepreneur can promote the economic development of a country:

1. Entrepreneurship begets and also injects entrepreneurship by starting a chain reaction when the entrepreneur continuously tries to improve the quality of existing goods and services and add new ones e.g. when computers came into the market there was continuous improvement in the models.
2. By harnessing the entrepreneurial talent a society comes out of traditional lethargy to modern industrial culture.
3. What to produce, how much to produce and how efficiently it is to be produced depends on the class of entrepreneur who commands it that is why entrepreneur can promote the economic development of a country.
4. A capable entrepreneur can assess the risk in advance and plan accordingly. He is the one who brings all the factors of production to one platform which can promote economic development of a country.
5. The industrial health of a nation depends on the level of entrepreneurship existing in it, economic development of the economy depends on entrepreneurial talent existing in the nation.

(b)

1. Demand for commodity refers to the amount of that commodity that will be purchased at a particular price during a particular period of time .

2. The following is an imaginary demand schedule for T.V in Agra market:

Demand Schedule for T.V

Price ( Rs.’000)	Quantity Demanded (’000)
4	20
5	16
6	12
7	9
8	8

In the diagram price is shown on Y axis and qty. demanded is shown on X axis. DD represents demand curve, which shows that as the price increases demand decreases and vice-versa.

3. This diagram shows increase and decrease of demand.
At price P the original demand curve is DD; keeping the price fixed. As the other factors determining demand changes, demand curve shifts. For example, if the income rises then at the same price demand will rise and demand curves will shift to the right to D₁D₁ position. Again, if income falls then demand will less at the same price, hence demand curve shifts to the left to D₂D₂ position.

Question 6 :- (ICSE Economics 2011 Paper )

(a) Explain the process of capital formation. State two reasons why capital formation is important for economic growth. [5]

(b) Distinguish between supply and stock. Explain four factors that influence the supply of a commodity. [5]

Answer 6 :-

(a) A change in the stock of capital in any economy during any particular time period is called capital formation. The process of capital formation consists of the following steps:

1. Mobilization of Savings: If savings are kept in the form of idle cash at home, they will not lead to capital formation. In this case, the rate of investment in the country will be low, even though the rate of saving is high. The savings must be mobilized from the savers. In a modem society, financial and other institutions as well as the capital markets perform this function. People may keep their savings in the banks or other financial institutions. They can also buy shares or bonds issued by companies.
2. Investment of Mobilized Savings: Even mobilization of savings is not sufficient for a high rate of capital formation. The mobilized savings must be actually used by producers for the purpose of investment. For instance, the money kept by the people in the banks must be lent out by the banks to the producers who can use the money.
3. Creation of Sayings: It is the first step in the process of capital formation. It is savings which are transformed into capital. If there is no saving, there cannot be any capital formation, even if all other conditions are favourable for capital formation. Savings are done by households and it depends on their income and willingness to save.

Capital formation is important for economic growth because:

(i) Capital formation enhances file production, without it production is not possible.
(ii) Capital formation leads to development of human capital like education, health etc. which leads to economic growth.

(b) Supply means the quantity actually offered for sale at a certain price, but Stock means the total quantity which can he offered for sale if the conditions are favourable.
Factors affecting supply are as follows:

1. Input Prices: Input prices play a role in the supply of a commodity by a firm. A firm would like to produce arid supply more if input prices would be low due to the low cost of production and vice-versa.
2. Prices of related commodities: Related commodities refer to substitutes and compliments. If the prices of related goods especially substitutes rises then the producers will shift production to these goods and decrease the production of the existing good. The vice versa will happen when the prices of substitutes will decrease.
3. Goals of the firm: The goals of a firm also affect its supply of a commodity. If the goal of a firm is profit maximisation it would supply more at a higher price and vice-versa. However, if the goal of a firm is risk-minimisation the firm would produce and supply less so as to be on the safer side.
4. Price of the commodity: Price is an important factor affecting supply of a commodity. At a higher price the producers would like to supply more and at a lower price the producers would like to supply less.

Question 7 :- (ICSE Economics 2011 Paper )

(a) With respect to efficiency of labour answer the questions that follow:

1. On what basis can efficiency of labour be measured?
2. State two factors that influence the efficiency of labour.
3. Explain two measures for improving efficiency of labour in India. [5]

(b) What is meant by elasticity of supply? Using graphs explain any four types of elasticity of supply. [5]

Answer 7 :-

(a)

1. Efficiency of labour can be measured on the basis of:
   • the quantity of output produced by a worker.
   • time taken by a worker to produce that product
   • the quantity of the product produced by a worker.
2. Two factors that influence the efficiency of Labour:
   • Wages not determined by efficiency—Workers of India are not paid according to their efficiency. The employers do not give to the efficient workers the higher wages that they deserve.
   • Inadequate training facilities—There is lack of training facilities for the workers of India. In the absence of training facilities, the workers are not able to develop their skills thus leading to low efficiency.
3. Two measures for improving efficiency of labour in India:
   • Improved working conditions—Attention should be paid to the working conditions in the factories. More hygienic conditions and congenial conditions would help in achieving higher levels of efficiency.
     Adequate training Facilities—Adequate provisions for imparting training to the workers should be made.   (any two)
   • Productivity linked wage—Wages should be linked to productivity of the workers. Hence more efficient workers should be paid higher wages than compared to their less efficient counterparts.

(b) Elasticity of supply can be defined as a measure of the degree of responsiveness of supply to change in price.

Four types of elasticity of supply:

• Perfectly inelastic: The supply of a commodity is said to be perfectly inelastic when quantity supplied does not change at all in response to change in its price.
  In such a case, supply curve becomes vertical or parallel to Y-axis. The fig. (a) clearly indicates that supply remains fixed at OS, even when price rises to OP₁; or fall to OP₂. The numerical values of elasticity of supply in this case will be zero.

• Less Inelastic or Relatively Inelastic: When the percentage change in quantity supplied is less than the percentage change in price, supply will be relatively inelastic. The supply curve has a steep slope.
  Fig. (b) represents the slope of the curve SS is steep here which shows that change in supply (QQ₁) is less than change in price (PP₁). In this case, straight line supply curve SS originates from the X-axis.
• More than unit Elastic or Relatively Elastic: When percentage change in supply is greater than percentage change in price, supply is said to be relatively elastic (i.e., E_s >1).
  In Fig. (c) Supply curve SS reflects the ‘more than unit elastic’ supply. It clearly shows that percentage change in quantity supplied is greater than percentage change in price. This will be the case when any straight line supply curve originates from the Y-axis.

• Perfectly Elastic: The supply of a commodity will be perfectly elastic when its supply changes to any extent irrespective of any change in price. In fig. (d) supply curve is horizontal line in shape. It implies that a fixed price of OP, the quantity supplied may increase or decrease to any extent.

Question 8 :- (ICSE Economics 2011 Paper )

(a) Distinguish between qualitative and quantitative measures of credit control policy of the central bank. [5]
(b) What are the components of money supply? Explain three causes of inflation. State one fiscal measure to control inflation. [5]

Answer 8 :-

(a)

Quantitative measure	Qualitative measure
1. They are influence the total credit Without distinguish between essential and non-essential uses of credit.	Theyare discriminatory in nature in the sense that it distinguish between essential and non-­essential uses of credit.
2. They are indirect and impersonal.	They are direct.
3. They affect lenders.	They affect both lenders and borrowers.
4. Ex. (i) Bank Rate (ii) Cash Reserve Ratio.	Ex. (i) Margin Requirement (ii) Rationing of Credit.

 

(b) Components of money supply are: M₁ M₂, M₃ and M₄
M₁ = C + DD + OD. Here is currency held by public, DD is demand deposits in banks and OD is other deposits in RBI.
M₂ = M₁ + Post office Deposits

M₃ = M₁ + Net Time Deposits

M₄ = M₁ + Total Deposits with Post offices.

Three causes of inflation are:

1. Increase in Public Expenditure: With the rise in national income and rapid growth of population an increase in public expenditure is unavoidable. Government spends on maintenance of law and order and defence due to expenditure on these activities, it results in price rise.
2. Upward revision of Administered Prices: There are number of important commodities for which price level is administered by the government. The government keeps on raising prices from time to time in order to cover the losses in the public sector which often arise due to inefficiency.
   One fiscal measure to control inflation is:
   (i) Increasing taxes: To reduce purchasing power with the public, rates of old taxes should be raised and new taxes should be imposed on public.
3. Erratic Agricultural Growth: The agriculture of India largely depends on mansoons and thus crop failures due to drought have been regular feature of agriculture in this country. In the years of scarcity of food grains net only price of food articles increases but the general price level also rises.

Question 9 :- (ICSE Economics 2011 Paper )

(a) Explain any five ways in which consumers are exploited in the market. [5]

(b) Briefly trace the growth of consumer awareness in India.  [5]

Answer 9 :-

Five ways in which consumers ate exploited in the market:

1. Changing over maximum retail price [MRPs].
2. Supply of products injurious to health.
3. Incomplete information on packaged goods, etc.
4. Misleading advertisements.
5. Under weights and false measures.

(b) Consumers unite themselves to overcome threats posed by business firms. The voices of consumers speak louder than the voice of a consumer about 500 consumer associations, are working in the field of consumer protection. Some of them are: Consumer Guidance Society of India, Mumbai, and Common Cause, New Delhi. These consumer associations reflect the growth of consumer awareness in India.
Many non Government organizations are stepping forward to give protection to consumers and to make them aware of their rights. For legal redressal under consumer protection act, a consumer must be aware of the provisions of the consumer protection act.
The Consumer Protection Act, 1986 has established a three-tier judicial machinery for redressal of consumer disputes. Various rights have been given to consumer, so that they become aware and avail them.

Question 10 :- (ICSE Economics 2011 Paper )

(a) How has public expenditure become an important tool for economic development in recent times? [5]

(b) Explain five differences between Direct tax and Indirect tax. [5]

Answer 10 :-

(a) In recent times public expenditure has become important because it promotes social welfare. In fact, modem government is making welfare states. Public expenditure, thus has become unavoidable for them.
Reasons for Increase in Public Expenditure:

1. Increase in Population: Government has to incur huge expenditure to meet the requirements of increasing population.
2. Expenditure on Internal and External Security: Central Govt has to incur huge expenditure on internal and external security.
3. Expenditure on Welfare State: Huge expenditure is incurred on welfare items like social insurance, free medical aid, free education etc.
4. Increase in Developmental Work: Central and State Governments have to incur heavy expenditure on development work.
5. Rise in Price-Level: Due to rise in price-level public expenditure has gone up. Individuals and Government have to pay more to buy goods at high prices.

(b)

Five differences between a direct tax and an indirect tax:

Direct Taxes	Indirect Taxes
1. They are directly paid to the Government by the people on whom they are imposed.	They are paid to the Government by one person but their burden is borne by another person.
2. They cannot be shifted i.e. impact and incidence is on the same person.	They can be shifted i.e. impact is on one person and incidence is on an another person.
3. Taxes imposed on production or income	Taxes imposed on consumption are indirect taxes.
4. It is progressive because the tax rate increases with an increase in income.	It is regressive because the common people bear this tax.
5. They generate social consciousness among people. Examples: Income Tax, Wealth tax.	They do not generate social consciousness as they are taxes in the dark. Examples: Sales Tax, Excise Duty.

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