Category: ICSE

Solving ICSE Class 10 Home Science Previous Year Question Papers ICSE Class 10 Home Science Question Paper 2019 is the best way to boost your preparation for the board exams.

ICSE Class 10 Home Science Question Paper 2019 Solved

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

Question 1.
(a) What is the difference between related and contrasting colour schemes ? [2]
Answer:
Related colour schemes : These are composed of one or several neighbouring hues which generally provide an effect of unity and harmony. These schemes are based on hues that are far apart on the colour wheel.

Contrasting colour schemes: In this the arrangement is made by using complementary colours.

(b) State the utility of local lighting. [2]
Answer:
Local lighting: In this extra fixtures are often placed in task areas and the necessary illuminance depends on the character of the task that is being performed. It is designed to provide a relatively high level of illumination over a small area, with a surrounding area of lower intensity.

(c) Mention two sources of light commonly used in the house. [2]
Answer:
Sources of light: Two major sources of light are as follow:
1. Natural light or Sunlight.

2. Artificial light.

• Natural light’s main source is sun and the light of sun varies with climate. Most commonly day light is admitted through windows.
• Artificial light includes candle, Lantern and ofcourse electricity. In our homes incandescent bulbs and fluorescent tubes are sources of artificial light.

(d) Which kind of materials should be used for kitchen counters ? [2]
Answer:

• The materials used in the kitchen counters should be heat resistant.
• Should be resistant to acid.
• Should be easy to clean.

(e) What is meant by ‘crossing of a cheque ? [2]
Answer:
Crossing of a cheque: It is a process of drawing two parallel lines on a cheque with or without certain words. It’s main purpose is to protect the drawer against loss by theft or forgery. Crossing of a cheque also ensures that payment is made to the authorised person only.

Question 2.
(a) State any two differences between growth and development. [2]
Answer:

Growth	Development
Growth is measurable.	Development is not measurable. It can be felt and observed only.
It stops after a certain age.	It continues till death.

Growth and development are related to each other. When a body grows in size, there is an increase in his capacity to do work. But sometimes development takes place without growth. e.g., if the physical growth is stunned, the person may have better mental, social and other developments.

(b) Define ‘cognitive development’. [2]
Answer:
Cognitive development: It is basically the development of the brain of a child. It develops the ability of the brain to think and find answer or we can say solution of problems. This type of development is very necessary for the child.

(c) Name the male and female sex hormones secreted during adolescence. [2]
Answer:
Male sex hormone is Testosterone.
Female sex hormones are Oestrogen and Progesterone.

(d) What do we mean by ‘binge eating disorder’? [2]
Answer:
Binge eating disorder: This disorder is also known as obesity. When we consume large amount of food specially fats we feel out of control and becomes powerless. This disorder generally happened in early childhood or late adolescence.

(e) State any two characteristics of a balanced diet. [2]
Answer:
Characteristics of a balanced diet:

• A proper balanced diet provides us complete nutrients which our body needs for proper growth and development.
• If we take a proper balanced diet, it prevents us from so many diseases. Some diseases are happened just due to the deficiency of nutrients.

Question 3.
(a) Explain the term ‘shelf life’ of food products. [2]
Answer:
Shelf life of food products : It is the time period during which the food product will remain safe, retain desired flavour, remain fresh or it can retains an acceptable quality from a safety point.
Or
It is the length of time that a commodity may be stored without becoming unfit for use, consumption or sale.

(b) Name the sweat glands present in the human body. [2]
Answer:
Sweat glands : These are a type of exocrine glands that produce and secrete substances. These are found throughout the skin.
In human body, Eccrine and Apocrine glands are two types of glands. Eccrine sweat glands are distributed all over the human body. While Apocrine sweat glands are mostly limited to the axilla (armpits) and perianal areas in humans.

(c) State the difference between perishable and non-perishable food. [2]
Answer:
Perishable food: Food which cannot be stored for more than 2-3 days under normal temperature conditions such as fish, milk, milk products etc.
Non-perishable food: Food which can be stored for a long time, such as cereals, sugar, coffee, salt etc.

(d) Why should cotton clothes be starched ? [2]
Answer:
Starching process makes the fabric stiffen and it gives a feel which make it attractive. It also helps to keep clothes clean and fresh for a longer time.

Starch adds crispness and structure, providing body to cotton and linen items. It also creates a higher resistance to wrinkling and soiling. Using starch will also ease ironing. Durable synthetics can be “starched,” but cannot be treated with grocery spray starch.

(e) Define Optical brighteners. [2]
Answer:
Optical brighteners are generally used for white clothes. Because white clothes gradually lose their whiteness with regular use. Sometime white clothes turns yellow. Optical brightener basically are the agents which are colourless dyes, they attached themselves with the clothes fabrics and make them brighter when light reflect on them.

Question 4.
(a) Define the term‘Food adulteration’. [2]
Answer:
Food adulteration: To get the extra margin of profit the traders reduce the quantity of the pure goods and add the similar goods in it which is cheap and of low quality. This removal of quality product and addition of the low quality good is known as food adulteration. It is done mainly by intentionally.

(b) State two advantages of consumer education. [2]
Answer:
Advantages of consumer education :

• It helps the consumer to develop the ability to decide and choose things intelligently.
• It helps him to always demand safe, reliable and good quality products at a reasonable price.
• To make consumer alert, well informed and vigilant against corrupt practices in the market.
• To make suitable action when faced with a problem.

(c) State any two primary functions of a bank. [2]
Answer:
Functions of a bank : Bank is an institution which accepts deposits from the public and in return advances loans by creating credit. Banks perform so many functions and provide varieties of services to the society. Following are the functions :

• It receives deposits from the public for the purpose of making investments and granting loans.
• The bank also lends out the money which it gets from the deposits of the public.
• Bank also grant loans for a specific time period.

(d) What do you mean by a current account ? [2]
Answer:
Current account: An account in which money may be deposited and withdrawn at any time is called current account. Generally, it is operated by the Business houses. Under this account, the depositor can with drawn money by cheque at any time during the working hours of the bank. There are no restrictions to limit the number of withdrawals but minimum credit balance has to be maintained as per the rules of the bank. The bank does not pay any interest on such deposits.

(e) Name any two standardization marks. [2]
Answer:
Two standardization marks are ISI and Agmark.

(Section – B (60 Marks)
(Attempt any four questions from this section)

Question 5.
Interior decoration expresses the personality of a home maker. In the above context discuss the following :
(a) Five types of kitchens. [5]
Answer:
Types of Kitchens: Generally kitchens have two styles: one is – Indian Type or Sitting Kitchen and the second one is – Foreign or Standing Kitchen.

Indian Style Kitchen or Sitting Kitchen: These type of kitchens are generally used in the villages of India. In such types of kitchens, the cooking of food, serving of food, cleaning of utensils etc., are carried out in sitting positions. Here, racks and almirahs are of low height.

Types of Foreign Kitchen or Standing Type Kitchen:

1. Strip kitchen
2. Two wall kitchen
3. L-shaped kitchen
4. U-shaped kitchen

1. Strip kitchen : Generally found in the small houses where there is a little space for a kitchen. It is one wall with the components placed in a row fashion.

2. Two wall kitchen : This is more workable kitchen. It resembles with the strip kitchen, the difference between both is that it is on both sides of the wall, facing each other.

3. L-shaped kitchen : This type is known as a good type of kitchen. This leaves two wall empty for windows and doors. The free comers can be utilised for keeping storage or dining area.

4. U-shaped kitchen : This type of kitchen provides good continuous space for working whereas in the U-shape the continuity is broken up.

(b) Light and colour used in decorating a living room. [5]
Answer:
In a living room or family room we should use general lighting for entering and watching television, task lighting for reading and accent lighting to highlight, art work. Bright light over the front and rear entrances are necessary.

Colours change as light change. Artificial light softens colours. Colours that appear attractive under light might not be pleasing in the day light.

(c) Factors affecting the selection of carpets for a room. [5]
Answer:
Factors affecting the selection of carpets for a room :

• Size of the carpet-strip or broad loom.
• Colour according to furnishing used- large room dark and in small room the colour should blend with the wall to show space.
• Plain or patterned depending on upholstery.
• Care and maintenance needed.
• Durability.
• Stain proof.
• Cost depending on budget.

Question 6.
‘Budgeting helps in efficient management of money.’ In this context explain:
(a) Steps in making a budget. [5]
Answer:
Steps in preparing budget : For making budget a success, we should include some steps. These steps include fundamental decisions which make budgeting a complicated procedure, but gives a realistic picture of the entire planning for the family’s money resources and planned expenditures.

Following are the steps for preparing budget:

• List commodities and services required by family members throughout the proposed budget period.
• Estimate the cost of desired items.
• Estimate total expected income.
• Bring expected incgme and expenditures into balance.
• Check plans to see that they have a reasonable chance of success and possibilities of saving for future.

(b) Importance of a saving account. [5]
Answer:
Importance of a Saving Account : A Saving Account is one of the most popular bank accounts that a person can invest in. It is the account that can be used for many different purposes.
1. Safe avenue for funds : The funds kept in a Saving Account stay there unless they are withdrawn or paid out. Another point to be considered is that Saving Accounts are insured up to 1 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

2. Provides special value added services: Many banks nowadays provide value added services and benefits with a Savings Account. Many banks provide some basic form of accident or medical insurance, foreign travel insurance, and other types of insurance covers for opening the bank account.

3. Place to collect funds and make payments: A Saving Account is an excellent place to collect funds from different sources.

4. Income generating account: Unlike a current account, a savings bank earns interest. The balance earned in a Saving Account helps to improve the individual’s income.

5. Can help to plan your child’s financial future : By opening a Kids Saving Account, you can help your child understand the basics of how to operate a bank account. These valuable financial lessons can help your child manage their finances and learn the value, of money.

(c) Operating a savings bank account. [5]
Answer:
Operating the Bank Account : Operation of the bank account means depositing the money into it or withdrawing from it through cheques, withdrawal forms or ATM machines. As soon as the bank agrees to open the account, it will supply the following books to its account holder:

1. Paying-in-slip Book
2. Cheque Book
3. Pass Book
4. ATM Card.

1. Paying-in-slip Book: This book contains a number of printed slips with perforated counterfoils. This slip is used while depositing cash or cheque in the bank. The depositor fills in all the particulars, e.g., the name of the customer, account number, date, amount in words and figures, and hands over this slip to the cashier along with cash or cheque. The cashier checks the details and counts the money. He then puts the stamp on the paying-in-slip and the counterfoil and initials them.

2. Cheque Book: This book contains a number of printed blank cheque forms (usually ten or more) with their counterfoils serially numbered. The holder of a current account or savings account can withdraw money through cheque.

3. Pass Book: Along with a cheque book and the paying-in-slip book, the depositor is issued a Pass Book. The Pass Book is a copy (with details of transactions) of the Customer’s account in the bank’s Ledger as on a particular date. It shows credit for deposits and debit for with drawals and the balance.

4. ATM Card: It is a plastic smart card with a chip that contains a unique card number and some security information. Using an ATM, customers can access their bank accounts in order to make cash withdrawals and check their account balances.

Question 7.
‘Changes occurring during adolescent years are dramatic’. In this context discuss:
(a) The pubertal changes seen during adolescence. [5]
Answer:
The onset of puberty brings many physical changes in adolescence. The hormonal changes stimulate the growth in size and shape, the development of secondary sex characters and the feeling of nature sexuality. The timing of such changes varies among the individuals.
Here are some changes occur during adolescence :

In Boys:

• Change in voice.
• Appearance of hair on face, armpit and genital areas.
• Development of muscles.
• Increase in height.
• Skin becomes oily.
• Opposite sex desire.
• Broadening of shoulders.

In Girls:

• Enlargement of breasts.
• Broadening of hips.
• Skin becomes oily.
• Appearance of hair on armpit and genital areas.
• Beginning of menstruation.
• Opposite sex desire.

(b) Impact of early maturation in girls. [5]
Answer:
Impact of early maturation in girls: The age at which most girls get their periods has become younger. But more dramatic changes have occurred in the younger ages at which girls enter puberty and start to develop physiological changes like developing of breast, broadening of hips etc.

Girls who experience puberty earlier than their peers are at risk for mental health problems as teenagers because there’s such a mismatch between how they look and their emotional and cognitive maturity. More recent studies show that early maturation among girls may place them at a higher risk for anxiety, depression, early sexual exploration, dys functional responses to stress and problems in school. Early maturing girls may experience more difficulties because of the pressure. They feel in relation to male one are more likely to become involved in deviant activities such as drug or alcohol abuse.

(c) Emotional concerns of the adolescent. [5]
Answer:
Emotional concerns of the adolescent: Adolescents usually have number of emotion problems. They must learn to control and express emotions in socially approved manners. Further, they should develop the ability to be free from emotional involvements in various situations as much as possible. When someone criticizes adolescents they are easily hurt. They should learn to accept criticism without being hurt.
If the emotions cannot be controlled they lead some major problems. .

Following are few emotional problems :

• Eating disorder – fear of becoming overweight.
• Feelings of helplessness and low self-esteem.
• Jealously.
• Experiment with sex and drugs, (drug abuse)
• Loneliness.
• Social acceptance: If we neglect a child, the child feel frustrated, dejected and neglected. This is the major problem for the adolescent.

Question 8.
‘Meal planning helps to achieve nutritional adequacy.’ In this context explain:
(a) Classification of fruits and vegetables into their subgroups and their nutritional contribution. [5]
Answer:
Group IV. ‘Fruits and Vegetables’
1. Fruits: Fruits like ripe mangoes, papaya and peaches are particularly rich in carotene. Oranges and all other citrus fruits are rich source of Vitamin C. Fresh fruit juice is known for healthy teeth and gums, healing wounds and clean complexion. Indian gooseberry (Amla) and Guava are very rich sources of Vitamin C. They are also cheapest among the fruits. Bananas are rich sources of carbohydrates. Fruits provide fruit sugar lactose. They also provide roughage necessary for regulation of the body processes. Fruits like apple and plums contain high amounts of pectin and are used for making jams and jellies. Apples, bananas and grapes are poor sources of Vitamin C.

2. Vegetables: Vegetables vary in appearance, taste, flavour and nutrient content. Different vegetables grow in different climatic conditions. Green leafy vegetables are rich in Calcium, Iron and Vitamin A. Because of high fibre content they are known to have mild laxative effect. Root vegetables are rich in carbohydrates and carotene content. Vegetables eaten as salads are also rich in Vitamin C.

Fruits and Vegetables	Nutrients Supplied
Fruits: Mango, Guava, Tomato, Papaya, Orange, Sweet lime, Watermelon	Carotenoids, Vitamin-C, Fibre
Vegetables (Green Leafy): Amaranth, Spinach, Gogu, Drumstick leaves, Coriander leaves, Mustard leaves, Fenugreek leaves	Invisible Fats, Carotenoids, Vitamin-B2, Folic Acid, Calcium, Iron, Fibre
Other Vegetables: Carrots, Brinjal, Lady finger, Capsicum, Beans, Onion, Drumstick, Potatoes, Cauliflower	Carotenoids, Folic Acid, Calcium, Fibre

(b) Importance of a balanced diet. [5]
Answer:
Importance of a balanced diet: A healthy diet is one that helps to maintain or improve the general health. It is important for lowering many chronic health risks such as obesity, heart diseases, diabetes, hypertension and cancer. As we know, a healthy diet involves consuming appropriate amount of essential nutrients and an adequate amount of water.

A balanced diet has a major role in achieving long healthy life:

• It helps in controlling body weight (obesity), heart rate and BP (Blood Pressure).
• It also increases in exercise capacity and muscle performance.
• It improves blood sugar level, lower harmful cholesterol and triglycerides and also increases the HDL cholesterol.
• It produces mental and physical relaxation.

(c) Advantages and disadvantages of using convenient foods. [5]
Answer:
Advantages and disadvantages of using convenient foods : Convenient food is the another category of food in which the food may be semi-processed and then stored. This increases their shelf-life and ease of preparation.
Advantages of convenient foods :

• Preparation time is reduced to a great extent.
• No storing, buying or planning of ingredients.
• Can hardly get any leftovers.
• Could have a variety of items especially for inexperienced cooks.
• Faster presentation and easy cleaning up.
• Less spoilage and waste occur with packaged convenience foods.
• Transportation of packaged foods is cheaper especially in concentrated form.
• Cost efficient for mass production and distribution.

Disadvantages of convenient foods :

• May be less meat, fish, or cheese than you would include in homemade versions.
• Cooking time is sometimes increased for thawing or longer baking time.
• Harder to control fat, salt and sugar levels.
• Cost per serving may be higher than homemade.
• Convenient foods are typically high in calories, fat, saturated fat, sugar, salt, and transfats.
• They tend to lack freshness in fruits and vegetables.

Question 9.
‘Proper information about the purchase, storage and preservation of food is essential.’ In the above context discuss :
(a) Storage of milk to maintain its quality. [5]
Answer:
Storage of milk : Milk comes under the category of perishable foods. Perishable foods are those food items requiring refrigeration and special handling. For storage of milk to maintain its quality we should do the following things:

• Select milk according to quality needed, i.e., Tonned Milk and Full Cream Milk.
• Check colour and taste of milk. Generally milk has slightly sweet taste, stale milk has sour taste and an unpleasant smell.
• Boiled milk should be kept in a cool place. If there is no refrigerator, boil milk after every 5-6 hours to keep it free from germs.
• Never mix old milk with fresh milk.
• Keep away from strong smelling foods, e.g., onions, guava etc. as it easily absorbs the smell.

(b) Use of salt in food preservation. [5]
Answer:
Use of salt in food preservations: Salt is perhaps most well known as a food preservative and flavouring agent. It has been used to preserve food for many thousands of years and is the most common seasoning. The reason why salt is such an effective preservative is that it draws moisture out of food. Dry foods are less likely to spoil as moisture is a key requirement for organisms that want to spoil the food. But salt also plays other, lesser-known roles in the food we eat as an essential nutrient, providing flavour and texture, and enhancing colour. For these reasons, salt is used in food production, which is why the sodium content of processed foods is so high.
Salt has been used as a preservative for ages, and works to preserve food in two ways :

Salt dries food: Salt draws water out of food and dehydrates it. All living things require water and cannot grow in the absence of water, including the bacteria which can cause food poisoning. Salt is used to preserve beef jerky by keeping it dry, and it prevents butter from spoiling by drawing water out, leaving just the fat.

Salt kills microbes: In very high salt solutions, many microbes will rupture due to the difference in pressure between the outside and inside of the organism. High salt can also be toxic to internal processes of microbes, affecting DNA and enzymes. Solutions high in sugar also have the same effects on microbes, which is why it is used as a preservative of foods such as jams and jellies.

(c) Need for consumer education to make wise purchases. [5]
Answer:
Need for consumer education : Consumer education means to educate the consumers as to what, how much, where, when and how to buy and how to use what they have bought. It develops critical awareness and living skills which are oriented towards building a better future for all. Consumer education assists the buyer in wise selection of goods to meet family requirements.

As we know, today’s market is a complex system because it is flooded with a variety of products that may confuse the buyer as to what they should buy. As they have limited knowledge, everyone can confuse them easily. Therefore, there is a need for consumer education.

An educate consumer can:

• develop the ability to decide and choose things intelligently.
• always demand safe, reliable and good quality products at a reasonable price.
• take suitable action when faced with a problem.

At times even an experienced consumer find it difficult to select the best option. The right selection provides immense satisfaction. However, while selecting if certain considerations are kept in mind, one can be assured the purchase of right kind of commodity. The consumer education programme should be aimed at developing an awareness about consumer rights and responsibilities consumer choice and product evaluation.

Question 10.
Explain the following:
(a) Steps and precautions involved in the household method of laundering coloured cotton. [5]
Answer:
Steps and precautions involved in the household methods of laundering coloured cotton : Cotton is available in low-cost range also.’ Its maintenance is costly, as it has to be repeatedly washed and finished. As we know cotton clothes catch the soil or dirt very easily so such clothes require frequent laundering.

Steps:
1. Preparation : Preparation is the first step of laundering process. In this we examine the garments for tears, holes, stains or foreign particles.

2. Steeping: In steeping, firstly sort out white and coloured cotton garments. The white cotton clothes can be kept soaking overnight, if these are very dirty.
If less dirty, they can be soaked for an hour.
For coloured garments, soaking should be avoided. If required, they should be soaked in tap water for not more than 15 minutes to half an hour.

3. Washing: As we know, cotton clothes are strong fabrics and become more stronger when wet. When these are very much dirty, they should be washed with scrubbing on board. Friction or rubbing or scrubbing methods clean them quickly.

4. Rinsing: Cotton clothes should be rinse two or three times in clean tap water. It is very important.

5. Starching and Blueing: These two process should always be performed equally at the same time as it saves time. These are carried to clean the clothes, and make them smooth and bright.

6. Drying: Drying varies depending upon the type of cloth. As shirts and kurtas should be dried on hangers, trousers are hung folded on the clothes line, salwar and pajamas should be spread full width and sarees, bed sheets should be hung after straightening their edges.

7. Ironing: As we are talking about cotton clothes, these should be ironed when damp. If they become fully dry, sprinkle water on them to moisten to get good results of ironing. For starched clothes, it is preferable to iron them when still damp.

Extra tips for cotton garments:

• When it comes to bleach, avoid using more than the recommended amount with cotton, as it can damage the fibers of your favourites. If your garment has had a finish applied to it, then avoid using bleach altogether.
• Because cotton items tend to wrinkle and shrink easily, they are usually combined with other fibers. Because of this mix, no cotton garment is created equal so check the fabric care instructions on the tags before washing.
• Cotton is a durable, soft fiber, and most clothes today are made from it. Unfortunately, it does have one serious drawback: It tends to shrink when washed and dried.

(b) Importance of labels on a packed product. [5]
Answer:
Importance of labels on packed products : A label is expected to provide information about the product. It assists consumer in making a wise selection of the commodity. Inadequate or incomplete information may be provided in the label to mislead the consumer. Products with inadequate labelling should not be purchased. It is the duty of the consumer to read the labels carefully and satisfy before purchase.

Following are the information printed on a label:

• Name of Product
• Brand Name
• Trade mark
• Manufacture’s Name and Address
• Standardization Marks
• Ingredients
• Manufacture and Expiry Date
• Batch Number
• Licence Number
• Warning, if any
• Maximum Retail Price (MRP)
• Direction of use/storage
• Net weight of the content

(c) Fixed Deposit Account and its features. [5]
Answer:
Fixed Deposit Account: Fixed deposits are investment instruments offered by banks and non-banking financial companies, where you can deposit money for a higher rate of interest than savings accounts. We can deposit a lump sum of money in fixed deposits for a specific period, ranging from 7 days to 10 years. Once the money is invested with a reliable financier, it starts earning an interest based on the duration of the deposit. Usually, the defining criteria for FD is that the money cannot be withdrawn before maturity, but you may withdraw them after paying a penalty.

Features of Fixed Deposits :

• Fixed deposits enable investors to earn higher interest on their surplus funds.
• You can deposit money in a fixed deposit account only once, but to deposit more money, you need to create another account.
• Though liquidity in fixed deposits is lesser, you can look for higher rates of interests, which are higher in case of company fixed deposits.
• Fixed deposits can be easily renewed.
• Tax is deducted at source, from interest on Fixed Deposits as applicable, as per the Income Tax Act, 1961.

Solving ICSE Class 10 Home Science Previous Year Question Papers ICSE Class 10 Home Science Question Paper 2021 Semester 1 is the best way to boost your preparation for the board exams.

ICSE Class 10 Home Science Question Paper 2021 Solved Semester 1

Maximum marks: 50
Time allowed: 1 hour.

General Instructions:

• You will not be allowed to write during the first 10 minutes.
• This time is to be spent in reading the question paper.
• All Questions are Compulsory.
• The mark intended for each question are given in brackets [ ]
• Select the correct option for each of the following questions.

Question 1.
……………………… of a kitchen should be eastern or north eastern. [ l ]
(a) Walls
(b) Ceilings
(c) Aspect
(d) Ventilation
Answer:
(c) Aspect

Question 2.
Deficit budget implies ……………………… . [ 1 ]
(a) Income and expenditure are same
(b) Expenditure exceeds income
(c) Income is more than expenditure
(d) No income only expenditure
Answer:
(b) Expenditure exceeds income

Question 3.
Budget is not complete until it is ……………… . [ 1 ]
(a) Stabilized
(b) Balanced
(c) Assessed
(d) Steady
Answer:
(b) Balanced

Question 4.
A ……………………… is a significant change or an event in the development. [1]
(a) Growth
(b) Milestone
(c) Maturity
(d) Progress
Answer:
(b) Milestone

Question 5.
The best quality of carpets is made by ……………….. . [1]
(a) Bonding of fibers
(b) Tufting of fibers
(c) Piling of fibres
(d) Weaving of fibres
Answer:
(d) Weaving of fibres

Question 6.
The age between ………………….. years is termed as late childhood. [ 1 ]
(a) 2 to 3 years
(b) 4 to 5 years
(c) 6 to 7 years
(d) 7 to 11 years
Answer:
(d) 7 to 11 years

Question 7.
A collection of food that share similar properties is called …………………. . [1]
(a) Diet planning
(b) Food laws
(c) Food groups
(d) Balanced diet
Answer:
(d) Balanced diet

Question 8.
Fats and ……………………. rich food have satiety value. [1]
(a) Folic Acid
(b) Calcium
(c) Energy
(d) Protein
Answer:
(c) Energy

Question 9.
Fabrics for furnishing should not be selected on the basis of: [1]
(a) Style
(b) Durability
(c) Colour
(d) High cost
Answer:
(b) Durability

Question 10.
…………………….. should be given to reinforce positive behaviour. [1]
(a) Punishment
(b) Reward
(c) Discipline
(d) Corporal punishment when required
Answer:
(b) Reward

Question 11.
Heavy pieces of furniture should not be dragged over the carpet. [1]
(a) True
(b) False
Answer:
(a) True

Question 12.
All nutrients required by the body must be present in an appropriate proportion. [ 1 ]
(a) True
(b) False
Answer:
(a) True

Question 13.
Possible income is not reserved for desirous expenditure. [1]
(a) True
(b) False
Answer:
(b) False

Question 14.
Learning disabilities, is a lifelong challenge. [ 1 ]
(a) True
(b) False
Answer:
(a) True

Question 15.
With improved methods of food preservation even the most perishable foods are available all over the country. [ 1 ]
(a) True
(b) False
Answer:
(a) True

Question 16.
Savings is: [1]
(a) Income + expenditure
(b) Income – expenditure
(c) Real budget – balanced budget
(d) Budget – Investment
Answer:
(b) Income – expenditure

Question 17.
Which is not included in the balanced diet ? [ 1 ]
(a) Pulses
(b) Fruits and vegetables
(c) Junk food
(d) Meat and eggs
Answer:
(c) Jurikfood

Question 18.
A kitchen should: [1]
(a) Be dark and dingy
(b) Be well ventilated and airy
(c) Be having plenty of doors
(d) Be having slippery floor
Answer:
(b) Be well ventilated and airy

Question 19.
Light coloured upholstery fabrics should be avoided as they ……………………. [1]
(a) Show stains
(b) Looks fresh for a long time
(c) Are long lasting
(d) They make a big room look small
Answer:
(a) Show stains

Question 20.
Unpleasant emotions of 11 year old child are: [1]
(a) Affection and joy
(b) Jealousy and happiness
(c) Curiosity and anger
(d) Amusement and pleasure
Answer:
(c) Curiosity and anger

Question 21.
Compulsory savings are : [1]
(a) Post Office
(b) Banking
(c) Pension scheme
(d) Unit Trust of India
Answer:
(c) Pension scheme

Question 22.
Which of these is not a common trait amongst the gang age? [1]
(a) Using secret signals
(b) Wanting to be with the family members
(c) Using various decoration to identify members
(d) Engaging in forbidden activities
Answer:
(b) Wanting to be with the family members

Question 23.
The appropriate role of a parent should be: [ 1 ]
(a) Strict with children
(b) Listen and discuss problems patiently
(c) Comparing with other children
(d) Giving in to all the demands of the child
Answer:
(b) Listen and discuss problems patiently

Question 24.
Name any one of the following which is not a part of effective management during meal planning : [1]
(a) Time
(b) Energy
(c) Money
(d) Transport
Answer:
(d) Transport

Question 25.
The kind of kitchen found in small houses with little space is: [1]
(a) L Shaped Kitchen
(b) U Shaped Kitchen
(c) Island shaped
(d) Strip kitchen
Answer:
(d) Strip kitchen

Question 26.
In the word ‘dyslexia’, dys means : [1]
(a) Malfunctioning
(b) Ailment
(c) Breakdown
(d) Malady
Answer:
(a) Malfunctioning

Question 27.
Anil, a young boy, no focus on studies, very talkative and have trouble in following instructions. He is most likely suffering from: [1]
(a) Dyslexia
(b) ADHD
(c) Dysgraphia
(d) Dyscalculia
Answer:
(b) ADHD

Question 28.
A type of rug placed in front of the dressing table is
(a) Carpet
(b) Scatter rug
(c) Mattress
(d) Area rug
Answer:
(d) Area rug

Question 29.
Name the sources of food provided from Group III. [1]
(a) Red gram and lentil
(b) Potatoes and jowar
(c) Curd and egg
(d) Spinach and cauliflower
Answer:
(c) Curd and egg

Question 30.
Which of the following is not the characteristic of growth ? [ 1 ]
(a) Growth related to maturity
(b) Growth depends on heredity
(c) It shows qualitative in nature
(d) It shows external changes
Answer:
(c) It shows qualitative in nature

Question 31.
Name a criteria on which meal planning does not depend upon: [1]
(a) Budget of the family
(b) Religion tradition and customs
(c) Likes and dislikes
(d) Education of the family members
Answer:
(d) Education of the family members

Question 32.
The traits of a child to be bullied are : [1]
(a) Physically stronger, breaking rules
(b) Shy, sensitive and passive
(c) Dominating, getting angry
(d) Having positive self-concept, no empathy
Answer:
(b) Shy, sensitive and passive

Question 33.
Learning disabled children cannot be corrected with : [1]
(a) Supportive strategies
(b) Medical intervention
(c) Diagnosis by special educator
(d) Strict discipline
Answer:
(d) Strict discipline

Question 34.
Kitchen floor should not be: [1]
(a) Easy to clean and maintain
(b) Practical and durable
(c) Comfortable
(d) Polished and slippery
Answer:
(d) Polished and slippery

Question 35.
Low budget carpets do not include : [ 1 ]
(a) Jute carpets
(b) Cotton rugs
(c) Chattais
(d) Wool carpets
Answer:
(d) Wool carpets

Question 36.
Choose the correct pair: [ 1 ]
(a) Satiety value – Carbohydrates
(b) Seasonal food – expensive
(c) Suitable combination – Rice and dal
(d) Left over food – discarded
Answer:
(c) Suitable combination – Rice and dal

Question 37.
Choose the correct pair: [ 1 ]
(a) Meat, egg, fish – Carbohydrates, water
(b) Ladies finger and cauliflower – carotenoids, fiber
(c) Ghee, sugar – fiber, Vitamin C
(d) Bajra, Potatoes – Vitamin E, Protein
Answer:
(b) Ladies finger and cauliflower – carotenoids, fiber

Question 38.
Choose the correct pair : [ 1 ]
(a) Permissive parenting – High in demandingness
(b) Authoritarian parenting – high in responsiveness
(c) Rejecting parenting – low in responsiveness
(d) Authoritative parenting – low in demandingness
Answer:
(c) Rejecting parenting – low in responsiveness

Question 39.
Choose the correct pair : [1]
(a) Composition of the family – standard of living increases
(b) Family lifecycle — Beginning family
(c) Budget – needs of the family
(d) Place of stay – traditional values
Answer:
(b) Family lifecycle – Beginning family

Question 40.
Choose the correct pair : [ 1 ]
(a) Size of the kitchen – light colours
(b) Windows – circulation of air
(c) Ceiling – wallpaper
(d) Storage – chopping of vegetables
Answer:
(b) Windows – circulation of air

Question 41.
Choose the correct pair : [1]
(a) Rooms with low ceilings – Plain curtains
(b) Small rooms – curtains with diagonal lines
(c) Rooms with too many windows – single coloured curtains
(d) Rooms with pictures and decorative items – patterned curtain
Answer:
(c) Rooms with too many windows – single coloured curtains

Question 42.
Choose the correct pair : [1]
(a) Sprouting – Dhokla
(b) Fermentation – Idli
(c) Raw food – Salad
(d) Cooked food – Juice
Answer:
(b) Fermentation – Idli

Question 43.
Choose the correct pair : [1]
(a) Social development – running, skipping
(b) Language development – height, weight
(c) Emotional development – affection, jealousy
(d) Motor development – making friends, community work
Answer:
(c) Emotional development – affection, jealousy

Question 44.
Choose the correct pair : [ 1 ]
(a) Middle childhood – Milk teeth begin to fall off
(b) Middle childhood – Boys and girls have same interest
(c) Middle childhood – Boys grows faster than girls
(d) Middle childhood – Annual increase in height is “6 to 7”
Answer :
(a) Middle childhood – Milk teeth begin to fall off

Question 45.
Choose the correct pair : [1]
(a) Dyslexia – Reading disorder
(b) ADHD – Written disability
(c) Dyscalculia – Hyperactive disorder
(d) Dysgraphia – weakness in understanding and meaning of numbers
Answer:
(a) Dyslexia – Reading disorder

Question 46.
Identify the type of kitchen in the following picture and choose the correct answer: [1]

(a) U-shaped
(b) Traditional type
(c) Pull man kitchen
(d) L-shaped
Answer:
(d) L-shaped

Question 47.
Identify the food group. [1]

(a) Group V
(b) Group II
(e) Group IV
(d) Group III
Answer:
(c) Group IV

Question 48.
Identify the work center: [1]

(a) Storage center
(b) Serving center
(c) Cooking center
(d) Sink center
Answer:
(d) Sink center

Question 49.
Identify one characteristic, the group of children in this picture do not possess : [1]

(a) A bond of friendship
(b) Socializing
(c) Establishing positive concepts
(d) Anger and unhealthy competition
Answer:
(d) Anger and unhealthy competition

Question 50.
Choose the function the carpet does not perform. [1]

(a) It adds beauty and style
(b) It provides warmth and comfort
(c) It improves indoor air quality
(d) Increases the size of the room
Answer:
(d) Increases the size of the room

Solving ICSE Class 10 Economic Applications Previous Year Question Papers ICSE Class 10 Economic Applications Question Paper 2016 is the best way to boost your preparation for the board exams.

ICSE Class 10 Economic Applications Question Paper 2016 Solved

Part – I (40 Marks)
(Attempt all questions from this Part)

Question 1.
(a) What is meant by labour in economics? [2]
(b) Construct an imaginary individual supply schedule. [2]
(c) What are complementary goods? Explain its impact on demand. [2]
(d) State two qualities of a successful entrepreneur. [2]
(e) Explain any one disadvantage of division of labour. [2]
Answer:
(a) By ‘labour,’ we mean the capacity to exert physical or mental effort for the purpose of producing a good or a service.

(b)

Price of Sugar (Per unit) ₹	Supply (Per day) (kg)
1	30
8	35
9	38
10	40

(c) Complementary goods are those goods which are jointly demanded. For e.g., Motor Car & petrol. If price of car increases, demand for petrol decreases and vice-versa.

(d) The Entrepreneur must have the following qualitites :

1. Negotiating skill
2. Innovative ability

(e) The disadvantage is as follows :
Monotony : Division of labour makes work monotonous for the workers. A labour is denied all the stages of production processes, rather he is just involved with one process which leads him to monotony.

Question 2.
(a) What do you understand by bank rate? [2]
(b) Classify the following intofixed and working capital. Give Reasons: [2]
(i) A television set in a hotel room.
(ii) Iron-ore in a steel plant.
(c) Identify the market forms for the items given below: [2]
(i) A single seller
(ii) Homogeneous goods
(iii) Product Differentiation
(iv) A single buyer
(d) Define Real Capital. Give two examples. [2]
(e) When is the demand for a good said to be perfectly inelastic? [2]
Answer:
(a) The bank rate is that discount rate at which the central bank of any country rediscounts any bill of exchange submitted by any commercial bank to take loans from the central bank.

(b)

1. Fixed Capital: As it will be used over many periods and will not get destroyed on being used once or twice.
2. Working Capital: As they will get exhausted and converted into finished goods.

(c)

1. Monopoly
2. Perfect competition
3. Monopolistic competition
4. Monopsony

(d) Real Capital refers to the physical stock of goods which are used as inputs in the production process.
Example : Raw materials, Machinery.

(e) When there is no change in quantity demanded due to a change in its own price, then the demand for the product is said to be perfectly inelastic in nature Ed = 0.

Question 3.
(a) Briefly explain why direct taxes foster civic consciousness among people. [2]
(b) What is the impact of division of labour on cost of production? [2]
(c) The price of a commodity rises from ₹ 20.00 to ₹ 40.00. Consequently its supply increases from 100 units to 400 units. Calculate the price elasticity of supply. [2]
(d) State two agency functions of a Commercial bank. [2]
(e) Give two reasons in favour of privatisation of Public Sector Enterprises. [2]
Answer:
(a) Direct taxes foster civic consciousness among people as the payer of income tax will surely be conscious of the tax when a slice of his income is taken away as tax. He will then keep a watch on the Government’s activities so that the Government does not squander away the money.

(b) Since division of labour increases total output, even with an unchanged number of labourers, the average cost of production for commodity falls. This is a social advantage. Society can produce goods by incurring lower average cost of production.

(c) Original Price = P = ₹ 20
Change in Price = ∆P = 40 – 20 = ₹ 20
Original Quantity = Q = 100 units
Change in Quantity = ∆Q = 400 – 100 = 300 units
E_s = \(\frac{\frac{\Delta Q}{Q} \times 100}{\frac{\Delta P}{P} \times 100}=\frac{\frac{300}{100} \times 100}{\frac{20}{20} \times 100}\)
E_s = 3

(d) The two functions are:

1. Commercial banks may make various payments on behalf of their customers. E.g., Life Insurance Premium.
2. It also collects various types of payments on behalf of their customers, e.g., Pension payments.

(e) The two reasons are as follows :

1. Reduction in unproductive expenditure of the Government.
2. Greater Flexibility in making production and investment decisions.

Question 4.
State whether the following statements are true or false. Give one reason for your answer.
(a) Construction of dams can have negative impacts on the ecosystem. [2]
(b) The demand for inferior goods rises when the income of a consumer increases. [2]
(c) A monopolist can sell the same product at different prices to different customers. [2]
(d) During inflation the debtors gain and creditors lose. [2]
(e) Labour is the beginning and end of production. [2]
Answer:
(a) True : Removal of forest cover, changing river course affecting acquatic life.
(b) False: If income increases demand for inferior goods falls (negative income effect).
(c) True : If the monopolist follows price differentiation, or price discrimination.
(d) True : It happens due to depreciation of interest rates in the economy.
(e) True : A minimum unit of labour is required even in the capital intensive technique of production.

Part – II (60 marks)
(Attempt any four questions from this part)

Question 5.
(a) What is demand? Explain how quantity demanded of a commodity X will be affected by: [7]
(i) An increase in the price of its substitutes.
(ii) Consumer credit facility.
(iii) Government policy.
(b) What do you understand by efficiency of labour? Discuss any two causes of low efficiency of labour and suggest one measure to improve it. [8]
Answer:
(a) By demand for a commodity we mean the desire for the commodity backed by the purchasing power of the commodity.

1. The demand for commodity X will increase as the price of its substitutes are increasing, the demand for its substitute will fall and consumers will demand more of commodity X.
2. The demand for commodity X will increase with a greater credit facility and will fall with less consumer credit facilities.
3. If the Government makes policy of providing subsidy the demand for that commodity will increase and vice-versa.

(b) By ‘efficiency of labour’ we mean the productive capacity or productivity of labour.
The two causes of low efficiency of labour are as follow:

1. Climate : The hot and humid climate of most of the states is a factor that deprives the capacity of the people to work hard and the ability to display high efficiency.
2. Wage Laws : The various wage laws enforced by the Government also do not link the wage rate to efficiency. While minimum wage laws can be detended on humanitarian grounds, there is no valid reason for the absence of a provision for rewarding more efficient workers with higher wages.

The one measure to improve is as follows :
Social Security: A social security network should be built up to protect the workers against the possibility of unemployment.

Question 6.
(a) With reference to land as a factor ofproduction: [7]
(i) Why is it considered a ‘passive’and an ‘indestructible’ factor of production ?
(ii) Mention two ways in which land is different from capital.
(iii) Discuss two important functions of land.
(b) What is meant by an Indirect tax? Give two examples. Explain briefly two merits and two demerits of Indirect tax. [8]
Answer:
(a) (i) Land is considered to be a passive factor of production. This is due to the fact that land cannot produce anything out of its own in the land-based production process.
Land is an indestructible factor of production in the sense that the human beings, through their own actions, cannot destroy this factor.

(ii)

1. Land is a natural gift whereas capital is produced by the human being.
2. The life of land is permanent whereas the life of capital is not permanent.

(iii) The two functions are as follow :

1. Determines agricultural production: The supply of land resources in a country determines the level of agricultural production of that country.
2. Supply of natural resources: Availability of total land area also determines the availability of natural resources in a country. Proper utilisation of these resources help in raising the total output of the country.

(b) When the burden of tax is shifted (i.e., if the impact and the incidence are on different persons) the tax is called indirect tax. Examples are :

1. VAT (Value Added Tax)
2. Service Tax

The two merits are as follow :

1. Broad Coverage: When a sales tax is imposed on a commodity, all buyers of the commodity ultimately have to pay a higher price (unless demand is perfectly elastic).
2. Not Popular : When a common man purchases a commodity in the market, he considers the tax- inclusive price to be the price of the commodity.

The two demerits are as follow :

1. Not always equitable : We have said that both the rich and the poor pay indirect taxes. As a result, the indirect taxes often tend to be regressive.
2. Uncertainty: The revenue will depend on the exact price and fall in quantity caused by the tax.

Question 7.
(a) Define Ecosystem. Explain any two impacts of each of the following on the ecosystem: [7]
(i) Industrialisation
(ii) Automobiles
(iii) Dwelling houses.
(b) (i) Define a monopolistically competitive market. Give two examples of this market structure. [8]
(ii) Explain two important features of this type of market. State one similarity and one difference between monopolistic competition and perfect competition.
Answer:
(a) Ecosystem means a system that results from the integration of all living and non-living factors of the environment. The two impacts are as follow :
(i) Industrialisation:
(a) Greater stress on forest and wetlands.
(b) Exposure of land and uncovered areas lead to soil erosion and silt run off.

(ii) Automobiles :
(a) Encroachment on croplands, grasslands, water lands and coastal plains.
(b) Damage to surface and groundwater resources.

(iii) Dwelling Houses:
(a) The acquatic ecosystem is affected badly due to the sewage system.
(b) The waterbodies are also affected through the sewage system.

(b) (i) A monopolistic competitive market refers to a market structure where adequate number of firms produce and sell substitute items and they compete with one another to grab the market share.
Example : 1. IT sector (WIPRO & INFOSYS)
2. Pen Market (Reynolds & Line)

(ii) The two important features are as follow:

1. The products sold by the sellers are differentiated, yet they are closed substitutes.
2. There are a large number of sellers and buyers in this form of market structure.

Similarity
In case of both Perfect Competition and Monopolistic Competition, there are large number of sellers and large number of buyers.

Difference
In case of perfect competition the products sold by the seller are homogeneous but in case of monopolistic competition it is differentiated products.

Question 8.
(a) Define money. Explain how money can: [7]
(i) Overcome the difficulties of double coincidence of wants.
(ii) Act as a store of value.
(iii) Help producers employ variousfactors of production.
(b) Explain clearly four ways by which the State can promote economic growth and development. [8]
Answer:
(a) Money is anything which is commonly used and generally accepted as a medium of exchange or a store of value.

1. Money acts as a medium of exchange. The major function of money is to facilitate the process of exchange by removing the defects of the barter system.
2. Wealth is usually kept in the form of money because money is the most liquid form of wealth. Since savings is usually done with a view to use the savings for purchasing some commodities or services, it is as if the values of commodities are being stored.
3. It helps the producers of the firm to make factor payments to the employed factors of production, hence money-prices of those factors help the producer in taking important production decisions.

(b) The four ways are as follows :

1. Increase in Public Expenditure : If public expenditure increases, it will lead to an increase in money supply which will in turn increase the per capita income over a period of time.
2. Export Incentives: If exporters are encouraged, the net factor income earned from abroad rises which will lead to an increase in Gross National Product (GNP).
3. Infrastructure Development : Public sector investment in the infrastructure sector like power transport and communication, heavy industries, education, etc. paves the way for agriculture and industrial development of a country.
4. Capital Formation : It is a process of addition to the stock of capital over a period of time. It improves domestic savings rate and overall efficiency of an individual.

Question 9.
(a) (i) What is the impact of the behaviour of cost of production on elasticity of supply? [7]
(ii) Draw and explain the following degrees of elasticity of supply.
(i) Ep = a
(ii) Ep = 0
(iii) Ep > 1
(b) What are Commercial Banks? Explain clearly three methods adopted by Commercial Banks to borrow money from the public. [8]
Answer:
(a) (i) When AC and MC rise supply becomes inelastic and when AC and MC fall supply becomes price elastic.

(ii) (i)

Perfectly elastic supply refers to a situation when price remains unaltered but quantity supplied changes continuously.

(ii)

Perfectly inelastic supply refers to a situation where at a given price quantity supplied remains unchanged.

(iii)

Elastic supply refers to a situation when a proportionate change in price level brings about more than proportionate change in quantity supplied.

(b) The commercial banks refer to such financial institutions whose main functions are to accept deposits from the public, lend money to public and business firms, allow depositors to draw cheques against their deposits and create credit money through such lending operation.
The three methods are as follow :

1. Savings Deposit: Commercial bank accepts deposits from the public, for which they give a nominal interest. They issue passbook and cheque book to customers, there is no limit in the number of deposit.
2. Fixed Deposit: A lump sum money is deposit for a fixed period before which the depositor cannot withdraw that money. Higher rate of interest is provided. No passbook or cheque book is given rather interest certificate is given every year.
3. Current Accosunt: This type of account is opened by business firms and no interest is offered on this type of deposit. Cheque book is given but instead of passbook, bank statement is given.

Question 10.
(a) Read the extract given below and answer the questions that follow:
Aug 17, 2015
Mumbai: Bankers today said, the sharp fall in inflation to 3.78% for July has raised hopes of another rate cut by RBI at September review of the policy.
“Obviously, if more and more and more positive news on inflation front comes, it’s a reasonable expectation to expect that rates will be cut at the September policy, ” reported Mr. Aditya Puri, the Managing Director of HDFC Bank. He said, the Governor of RBI, Mr. Raghuram Raj an had earlier said that RBI is actively looking at rate cut.
(i) Name the policy implemented by RBI to control and regulate money supply. [7]
(ii) Define creeping inflation. What is its impact on the economy?
(iii) Explain how the following measures are adopted by RBI to control inflation:

1. Change in Reserve Ratio
2. Credit Rationing.

(b) Explain four ways by which an entrepreneur can promote economic development. [8]
Answer:
(a)

1. Monetary Policy which is Quantitative Credit Control Policy.
2. When the price level increases at a very slow rate, say at the rate of only 2-2.5 percent per annum, it is called creeping inflation.
   It is a normal situation and its impact is not adverse.
3. 1. The RBI increases the Reserve Ratio so that more money has to be kept with the commerical banks and less amount can be granted as loans to the general public.
   2. The RBI will do rationing to the customers before granting loans and those who will have proper eligibility and networking system will be given loans.

(b) The four ways are as follow :
(i) New innovations and industrialisation :
Innovation means creation of new products in accordance with the changing preference pattern of the consumers both in the domestic and foreign market.

(ii) Infusing dynamism in the production system:
The entrepreneurs can make the production system most dynamic through their creative ideas. The creativity is the ability to devise and successfully implement some new ideas.

(iii) Recycling of profits productive investment :
A greater portion of profit is again re-invested by the entrepreneurs in productive activities or in new ventures. This helps in increasing the level of output, employment and income in the economy.

(iv) Efficient use of available resources :
The dexterity of the entrepreneurs in utilising the economic resources, results in maximum possible output in an economy.

Solving ICSE Class 10 Economic Applications Previous Year Question Papers ICSE Class 10 Economic Applications Question Paper 2017 is the best way to boost your preparation for the board exams.

ICSE Class 10 Economic Applications Question Paper 2017 Solved

PART – I (40 Marks)
(Attempt all questions from this Part)

Question 1.
(a) Demand is inversely related to price. Explain.  [2]
(b) State two ways in which the government can promote economic development.  [2]
(c) What is meant by Joint demand ? Give an example.  [2]
(d) Mention two adverse effects of mining on the environment.  [2]
(e) Draw and briefly explain a perfectly elastic supply curve.  [2]
Answer:
(a) It is the ‘Law of Demand’. It states that other things remaining constant, the amount demanded of commodity decreases with increase in price and increases with decrease in price. This can be explained with the following table and diagram:

Price	Qty. Demanded
5	10
4	20
3	30

(b) Ways in which the government can promote economic development are:

1. Increase in Public Expenditure : If public expenditure increases, it will lead to an increase in money supply which will in turn increase the per capita income over a period of time.
2. Export Incentives : If exports are encouraged, the net factor income earned from abroad rises which will lead to an increase in Gross National Product (GNP).
3. Infrastructure Development : Public sector investment in the infrastructure sector like power, transport and communication, heavy industries, education, etc. paves the way for agricultural and industrial development of a country.

(c) Joint Demand: When several items are demanded for one particular purpose such demand is known as Joint Demand. Demand for complementary goods is also known as Joint Demand. For example, for the construction of the houses, the demand for bricks, cement, masons, labourers, etc., will constitute a Joint Demand. The Joint Demand for coffee is denoted by the given line diagram.

(d)

1. Mining leads to the emission of dust, suspended particles and gases which causes air pollution.
2. It also leads to the degradation of soil quality, fertility and make it toxic.
3. Underground water is also contaminated due to the seepage and infiltration of leached drainage.

(e) Perfectly Elastic Supply : When there is an infinite supply at a particular price and the supply becomes zero with a slight fall in price, then the supply of such a commodity is said to be perfectly elastic. In such a case E_s = ∞ and the supply curve is a horizontal straight line parallel to the X-axis, as shown in fig.

Question 2.
(a) If the price of a commodity increases by 50% and its supply increases by 25% then calculate the price elasticity of supply following the percentage method. Identify the degree of price elasticity.   [2]
(b) State any two factors which determine capital formation in a country.  [2]
(c) What is meant by regressive taxation ?  [2]
(d) Define Monopoly. Give an example.   [2]
(e) What is meant by creeping inflation ?   [2]
Answer:
(a) Percentage change in price = 50%
Percentage change in supply = 25%
According to percentage method,
E_S = \(\frac{\% \text { change in supply }}{\% \text { change in price }}=\frac{25}{50}\) = 0.5 < 1
Here, elasticity of supply is 0.5 which is less than one. So, it is the case of less elastic supply.

(b)

1. Creation of savings
2. Mobilisation of savings
3. Investment of savings

(c) Regressive Tax : A tax will be regressive when the rates of tax decrease as the tax base (i.e., income) increases. Thus, it is direct opposite of progressive tax.

Under regressive taxation, the total amount of tax increases on a higher income in the absolute sense, but in the relative sense, the tax rate declines on a higher income. Hence, relatively, a heavier burden falls upon the poor than on the rich.

Ordinarily, taxes on necessaries are regressive in nature because they take away a larger proportion of lower income as compared to higher income. Therefore, regressive taxes are unjust and inequitable. They do not satisfy the canon of equity. They tend to promote inequalities of income in the society. Fig. shows the case of regressive taxation. Line PT moves downward to the right indicating that the rate of tax decreases as the tax base increases.

(d) The term monopoly is derived from two Greek words, namely, ‘Monos’ and ‘polus’. ‘Monos’ means single, and ‘polus’ means a seller. Thus, monopoly is a market structure in which there exists only a single seller of a product who is the sole producer of the product which has no close substitutes. For example, we get our electricity supply from one agency, that is, State Electricity Board like Punjab Electric Board in Punjab. Similarly, we travel by railway trains owned and run by the Government of India. All these are examples of monopoly.

(e) Creeping inflation occurs when there is a sustained rise in prices over time at a mild rate, say around 2 to 3 percent per year. It is also known as ‘mild inflation’. This type of inflation is not much of a problem. It is generally known as conducive to economic progress and growth. In this form the prices rise imperceptibly over a long period.

Question 3.
(a) Name the market in which there is a single buyer and many sellers. Give an example. [2]
(b) How does a Central Bank act as a custodian of foreign exchange reserve ? [2]
(c) Define division of labour. Explain one benefit of division of labour. [2]
(d) How does money act as a measure of value? [2]
(e) What is meant by a demand deposit ? [2]
Answer:
(a) Monopsony is a state of market where there are number of sellers and only one buyer. Railways is an example of such market. Various fan-manufacturing firms supply fans for coaches.

(b) As the custodian of foreign exchange reserves, the central bank performs several functions:

1. All the foreign exchange transactions of a country are routed through the central bank. The central bank controls both the receipts and payments of foreign exchange.
2. It tries to maintain stability of the exchange rate. For this purpose, it buys or sells foreign currencies in the market to minimise fluctuations in the foreign exchange rates.
3. It enforces exchange control regulations prescribed by the government from time to time.

(c) Division of labour means the allocation of different parts of the production process to different workers or to different groups of workers.
Benefit of Division of Labour :
Increase in the efficiency of labour : Division of labour increases the efficiency of labour. The worker becomes more specialised if a worker is entrusted with only a part of work in the process of production.

(d) The second fundamental function of money is that it acts as a common measure of value. Just as we use kilogram in measuring weight of a commodity and metre in measuring length of a commodity, similarly, for measuring value of a commodity we take money as a unit of account.

Money serves as a unit of measurement in terms of which the values of all goods and services are measured and expressed. For example, a shirt may cost ₹ 500, a chair ₹ 600, a book ₹ 80, a pen ₹ 15 and so on. When we express the value of a commodity in terms of money, it is known as price. Thus, money has provided a language of economic communication.

(e) Demand Deposits (also known as current deposits) are those deposits which can be withdrawn by the depositor at any time by means of cheques. No interest is paid on such deposits. Rather, the depositors have to pay something to the bank for the services rendered by it. These deposits are generally made by businessmen and industrialists who receive and make large payments. The accounts in which they are deposited are called Current Accounts.

Question 4.
State whether the following statements are true or false. Give reasons.
(a) Inflation has a favourable effect on producers. [2]
(b) In a perfectly competitive market producers are price makers. [2]
(c) When change in demand is greater than the change in price, it is a case of inelastic demand. [2]
(d) Savings is essential for capital formation. [2]
(e) An increase in the rate of tax with an increase in income is called proportional tax. [2]
Answer:
(a) True. During Inflation, the producers gain in the short period. Usually the cost of production does not rise as fast as the price of their product and so there is an artificial margin of profit.

(b) False. As there are a large number of buyers and sellers of the commodity so neither a single seller nor a single buyer can influence the market price. So producers are price-takers not price makers.

(c) False. When a large change in price does not bring so much change in the demand, the demand is said to be inelastic.

(d) True. The whole process of capital formation depends upon savings.

(e) False. Because in case of proportional tax rate of tax remains constant, though income increases.

Part – II (60 Marks)
(Attempt any four questions from this part)

Question 5.
(a) Define a Perfect market. Explain any four features of a Perfect market. [7]
(b) (i) What do you understand by supply ? How does it differ from stock ? [8]
(ii) What does the Law of Supply state ? List two assumptions of this Law.
(iii) Explain two factors affecting supply other than price.
Answer:
(a) Perfect Market : It is a market situation when there are large number of buyers and sellers and the product is homogeneous. All the buyers and sellers have perfect knowledge of market conditions. There is no restriction on the entry and exit of the firms.
“Perfect competition prevails when demand for the output of each producer is perfectly elastic.” – Robinsons

Features of Perfect Competition :

1. Large Number of Buyers and Sellers: There exists a large number of buyers and sellers. No individual buyer or seller can influence the demand of product in the market.
2. Homogeneous Product: All firms produce homogeneous product. All the sellers have to sell their products at a uniform price. If any of the sellers sells his product at higher price, his product would become out of market.
3. No Restriction on Entry and Exit : All the firms are free to enter and exit the market. There is a free mobility of sellers.
4. Perfect Knowledge of Market: All the sellers and buyers have perfect knowledge of market conditions. There is a free mobility of buyers and sellers in the market. Factors of production also have free mobility.
5. Absence of Selling and Transportation Costs : In the perfect competition, it is assumed that producers and sellers are closely situated and there are no selling and distribution costs.

(b) (i) Supply : Supply means an amount of a commodity which a producer is ready to sell at a particular price and at a particular time.
Supply is different from stock. Stock of a commodity is the total amount available with the producer whereas supply is only that part of it which the producers are willing to bring into the market.

(ii) “The law of supply states that other things being equal, the supply of a commodity increases with an increase in its price and decreases with a fall in price. ” The main assumptions of the law are as follows :

1. Price of other related goods should not change.
2. Technology of production should not change.
3. Cost of factors of production should remain the same.

(iii) 1. Prices of Factors of Production :
The supply of a commodity is also influenced by the prices of factors used in the production of that commodity. A fall in the price of factors of production will reduce the cost of production which, in turn, will increase the production and supply due to rise in margin of profits. If, on the other hand, the price of factors of production rises, supply will decrease due to fall in margin of profits.

2. State of Technology :
If the producers make use of improved and advanced technology in their process of production, the costs of production will come down. Total supply, thus, will increase. But against it, supply of goods using old and inferior techniques of production will fall. That is why scientific discoveries and their applications to production of commodities are being made.

3. Goal of the Firms :
The supply of a commodity also depends upon the goal of firms. Their goal may be profit maximisation or sales maximisation. If their goal is to maximise profits, more quantity will be supplied at a high price. But if the firms want to maximise their sales (as they think that increased supply is a source of status and prestige in the market) more quantity will be supplied even at the same price.

Question 6.
(a) What is meant by urbanization ? Explain four impacts of urbanization on the environment. [7]
(b) With the help of appropriate diagram, explain the meaning of contraction in demand and extension in demand. [8]
Answer:
(a) Urbanization refers to the population shift from rural to urban areas, “the gradual increase in the proportion of people living in urban areas”, and the ways in which each society adapts to the change. It is predominantly the process by which towns and cities are formed and become larger as more people begin living and working in central areas. The United Nations projected that half of the world’s population would live in urban areas at the end of 2008. It is predicted that by 2050 about 64% of the developing world and 86% of the developed world will be urbanized.

Impacts of urbanization on the environment:

1. Deforestation: Large areas of forest are being cleared for the formation of towns and cities. It will have adverse impact on environment.
2. Increase in temperature : In cities, there is less vegetation and exposed soil, most of the sun’s energy is absorbed by buildings and asphalt leading to higher surface temperatures.
3. Decline in water quality: When rain occurs in these large cities, the rain filters down the pollutants such as CO₂ and other green house gases in the air onto the ground below. Then, those chemicals are washed directly into rivers, streams and oceans, causing a decline in water quality and damaging marine ecosystems.
4. Pollution: Vehicles, factories and industrial units in the urban areas leads to pollution of air, water and soil.

(b) Contraction in Demand
When demand falls due to rise in price, it is called contraction in demand. In the following example, when price is ₹ 5 per kg, quantity demanded is 10 kg. Now, as the price increases to ₹ 10 per kg, quantity demanded falls to 5 kg.

Price (₹)	Qty. Demanded (kg)
5	10
10	5

It may also be shown with the help of Fig. When the price is OP, OR quantity is demanded. When the price rises to OP₁, only OQ quantity is demanded. It means with a rise in the price of the commodity, less is demanded. Demand, in this case, has contracted from OR to OQ. In the diagram, there is an upward movement along the demand curve DD from point c to d.

Extension in Demand
Extension in demand refers to a situation where more quantity is demanded at a lower price. In the following example, when price of commodity is ₹ 10 per kg, demand is 5 kg, but when price falls to ₹ 5, quantity demanded increases to 10 kg.

Price (₹)	Qty. Demanded (kg)
10	5
5	10

This is also shown in fig. In the diagram, quantity demanded is shown along the X-axis and price on the Y-axis. When the price is OP, OQ quantity of the commodity is demanded. When the price of the commodity falls from OP to OP₁, OQ₁ quantity of the commodity is demanded. It means with a fall in the price of the commodity more is demanded. QQ₁ is the extension in demand. In the figure, there is a downward movement along the same demand curve DD from point a to b.

Question 7.
(a) Define land. State any three factors which determine the productivity of land. [7]
(b) What is meant by a Commercial Bank ? Explain how
Commercial banks provide credit facilities through the methods given below : [8]
(i) Cash Credit
(ii) Loan
(iii) Overdraft Facility
Answer:
(a) In economics the word ‘land’ is defined not only the surface of the earth but also other free gifts of nature, e.g., mineral resources, forest resources, anything that helps us to carry out the production of good and services but is provided by nature free of cost.

Factors which determine the productivity of land are :
1. Fertility of Land :
The productivity of land is determined 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. However, the agricultural productivity can be improved by proper and extensive use of manure and fertilizers along with adoption of mechanized methods.

2. Proper Use of Land :
The productivity of ‘land’ is directly related to its proper utilization. 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.

3. 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. Similarly, for better agricultural productivity, its location near water resources is desirable.

(b) A commercial bank is an institution that accepts deposits of money from the public, withdrawal by cheque, and uses the money so collected for lending to the household, the firm and the government.

Commercial banks provide credit facilities through the following methods :
(i) Cash Credit :
In cash credit, the bank advances a ‘cash loan’ a specified limit to the customer, against a bond or any other security. A borrower is required to open a current account and bank allows the borrower to withdraw upto the full amount of the loan. The interest is charged only on the amount actually utilized by the borrower and not on the loan sanctioned.

(ii) Loans :
A loan is a specified amount sanctioned to the credit of a borrower for a fixed period. However, before sanctioning the loan, the bank is required to ascertain and satisfy itself about the ability of the borrower to repay according to the soundness of his scheme or business, and the genuineness of his purpose.

Invariably, a loan is granted against some kind of security of assets or personal security of the borrower and the interest is charged on the full amount sanctioned as loan, irrespective of the fact, whether full amount or part of it has been used. In case of loans, the borrower is provided with the facility to repay the loan in installments or as a lump-sum.

(iii) Overdraft Facility:
The overdraft facility is allowed to the depositor maintaining a current account with the bank only. 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. However, the overdraft facility is given only against security of some assets or on personal security of the customer.

Question 8.
(a) What is meant by Monetary policy ? Explain the following: [7]
(i) Bank rate policy
(ii) Open market operations.
(b) What is meant by product differentiation ? To which market is it relevant ? Explain three features of this market. [8]
Answer:
(a) Monetary policy is the policy of the central bank to regulate the availibility, cost and use of money for achieving certain given objectives of economic policy.

(i) Bank Rate Policy:
The bank rate is the rate at. which the central bank gives loans to the commercial banks or re-discounts the approved bills of exchange and securities held by the commercial banks. Through changes in the bank rate, the central bank can influence the creation of credit by the commercial banks.

Bank credit these days is an important component of the supply of money in the economy. Changes in money supply affect aggregate demand and thereby output and prices. For example, when the central bank raises the bank rate, the cost of borrowings by the commercial banks from the central bank would rise. This would discourage the commercial banks to borrow from the central bank.

This would tend to contract bank credit and hence, would result in the reduction in demand and money expansion. This would reduce prices and check inflation in the economy. On other hand, a fall in the bank rate will cause the reduction in lending interest rates of the commercial banks.
Bank Rates In Our Country

Year/Month	Bank Rate (%)
2005	6.0
2011	6.0
2012 Feb	9.50
2012 April	9.0
2013	8.75
2014	9
2017	6.5

– [SOURCE : RBI’s Data Warehouse]

(ii) Open Market Operations : This refers to the purchases or sale of Government securities, public securities or trade bills, etc., in an open market by the ‘Central Bank’. It is the direct method of credit control but it is more effective when big and active market exists for purchase and sale of government securities for short as well as for long periods, e.g. USA and UK.

When the central bank sells securities, the buyers of these securities pay the central bank by drawing cheques from their accounts, thereby reducing the cash reserves of the commercial banks. This would limit the power of commercial banks to create credit, so they will have to reduce their advances and loans, on the other hand, purchase of government securities by the central bank from commercial banks results in an increase in cash reserves of the commercial banks. They can create more credit now. This generally takes place when an economy is in a slow down phase. It does this to slow down inflation.

(b) Product differentiation is a situation where different producers in the market try to differentiate their product (with respect to size, weight, ranking or offering gift etc.) with a view to attract the buyers and exercising partial control over price.
It is relevant to monopolistically competitive market. Features of Monopolistic Competition :
1. A Large Number of Sellers and Buyers :
In monopolistic competition, the number of sellers is sufficiently large but not as large as under perfect competition. The sellers are not mutually dependent upon one another. Each of them acts independently and produces an insignificant portion of the total output.

2. Free Entry and Exit of Firms :
Firms under monopolistic competition are free to enter or leave the industry at any time. New firms may start producing close substitutes of the product and supply the same in the market. Likewise, in the event of losses, the old firms may quit the industry. It is because of this characteristic, that firms are able to manage only normal profits.

3. Selling Costs :
Another important feature of monopolistic competition is that every firm tries to promote its sales through advertisement. Expenditures incurred on advertisement, etc., are known as selling cost. Selling costs are made to persuade buyers to buy a particular brand in preference to other brands of the product. Thus, selling costs tend to shift the firm’s demand curve to the right.

Question 9.
(a) Define money. Explain three contingent functions of money. [7]
(b) What is meant by privatization ? Explain briefly four problems of public sector undertakings in India. [8]
Answer:
(a) According to Dr. Kent, money is defined as “Anything which is commonly used and generally accepted as a medium of exchange or as a standard of value.”

Contingent functions of money :
(i) Assisting Production Decisions:
The main objective of a producer or manufacturer is to maximize his sales revenue or profit. Therefore, he wants to employ such an amount of factors of production (labour, capital and other materials) which help in achieving the goals of profit maximisation while employing any factor, the firm has to make payments to pay wages to the workers, interest to the owners of capital, etc. All such factor payments are made in terms of money. Therefore, money prices of these factors help a firm in taking important production decisions.

(ii) Assisting Consumption Decisions :
The main objective of a consumer is to maximize his utility through consumption of various goods. But the consumption of goods depends on the money- income of the consumer as well as the money-prices of the commodities to be consumed. The consumer has to pay a price for purchasing commodities for consumption. The money-income of the consumer and the money-prices of these commodities to be consumed also influence the consumption decisions of consumers.

(iii) Assisting Distribution of National Income :
The owners of various factors of production sell their factors at market prices. Therefore, the owners of labour-power earn money wages, owners of capital earn interest, owners of land earn rent and owners of an organisation earn profits. All these factor-incomes collectively constitute national income. Therefore, the distribution of national income among the owners of different factors is also determined by the money prices of such factors.

(b) Privatisation basically implies the process which leads to transfer of ownership of public sector enterprises from the government to the private sector. However, taken in a wider sense, privatisation also implies the process of granting autonomy to the public sector enterprises in decision-making and infusing the spirit of commercialisation in them.

Problems of Public Sector Undertakings in India :
1. Lack of proper planning:
Public sector undertakings spend too heavily on construction as well as designing. It is primarily because there is a lack of proper planning.
This lack of proper planning results in heavy drainage of funds and thus there is serious financial problem in the wake.

2. Unfavourable input-output ratio :
Public sector undertakings are heavily over-capitalised with the result that there is unfavourable input-output ratio. Inadequate planning, inordinate delays in construction etc., are the causes for over-capitalisation.

3. Cost of capital :
At present in public sector undertakings cost of capital does not include cost of raising capital of different types and this cost is not reckoned at market price. This results in underestimating the cost of the capital. Consequently, it leads to non-realistic fixing of prices and the underestimating market trends. Even it becomes difficult to estimate the extent of profits and losses as well.

4. Problem of pricing :
Another problem of a public sector undertaking is that of fixing the prices of the goods produced. As we know that unless pricing policy is sound even good concerns can run into losses. The public sector undertakings in India are facing serious financial problems as they are not following uniform pricing policy.

5. Problem of raising loans :
All public sector undertakings are run with the finance of the Government. Now this has in turn raised many problems. Sometimes Government may feel it difficult to finance public sector undertakings in such cases, if these undertakings depend on capital market, they bound to disturb financial structure of the market.

Question 10.
Read the extract and answer the following:
Labour refers to any physical and mental endeavour undertaken for the purpose of producing a good or a service. In India in 2012 there were 487 million workers, the second largest after China. About 94% of Indian labour is involved in the unorganised sector comprising semi-skilled and unskilled workers ranging from push cart vendors to home based diamond and gem polishing operators. The organised sector includes workers employed in the public sector and the private sector.

(i) Explain any four special characteristics of labour. [6]
(ii) With suitable examples explain three important classifications of labour. [6]
(iii) Define efficiency of labour. Briefly explain the impact of technology on efficiency of labour. [3]
Answer:
(i) Labour has some special characteristics which are not found in other factors of production. They are as follows.
1. Labour is Perishable :
If a worker does not work on a particular day, his labour for that day is wasted. Labour is, thus, perishable. Labour cannot be stored. The labourer has to sell his labour immediately irrespective of the prices (i.e., wages) paid to him. It is because of this feature that labour has a weak bargaining power.

2. Labour is an Active Factor of Production :
Land and capital are passive factors, but labour is an active factor of production. Without labour, other factors of production, viz., land and capital, cannot produce anything. Labour is a living organism. Hence, it requires sympathetic treatment.

3. Labour cannot be Separated from Labourer:
Land and capital can be separated from their owners but labour cannot be separated from a labourer. Labour and labourer are inseparable from each other. The labourer will have to present himself at a place where work is going on. For example, it is not possible for a teacher to teach in the school, while staying away at home. Therefore, the worker and his service go together. He cannot sell his labour like land and capital.

4. Labour is Mobile :
Labour alone is a factor which is mobile. It can move from one place to another and also from one occupation to another. Other factors of production such as land lacks mobility.

5. Labour Differs in Efficiency:
All labourers are not equally efficient. Some labourers are more efficient due to their ability, training and skill, whereas others are less efficient on account of their illiteracy, ignorance, etc.

(ii) On the basis of skill formation, labour can be grouped into three main categories :
1. Skilled Labour :
Skilled labourers are those who have specialised training for a particular profession and also have long practical experience of the job. These workers are highly paid. Doctors, engineers, lawyers, etc., fall under this category.

2. Semi-Skilled Labour :
Semi skilled workers are those who have only a part of a professional training of their trade but have sufficient experience in that line. The semi-skilled workers are paid comparatively less than the skilled workers.

3. Unskilled Labour :
Unskilled workers are mainly employed for carrying out such jobs which do not require any specialised professional skill. Labourers who are employed for construction of houses, coolies, etc., are some examples of unskilled workers. They are poorly paid as their number is quite large in less developed countries like India.

(iii) In simple words, efficiency of labour implies the quality and quantity of goods and services which can be produced within a given time period and under certain conditions. According to Dr. Saxena, “By efficiency of labour we mean the amount of work which a labourer can do within a given time.”

Technology has great impact on the efficiency of labour. With the modem and updated technology, the working efficiency of labour is more and the productive capacity increases. The outdated technology adversely affect the overall output (or the productive capacity); even though the worker himself may be highly efficient, but due to outdated technology, he will not be in a position to make use of his talent properly.

Solving ICSE Class 10 Economic Applications Previous Year Question Papers ICSE Class 10 Economic Applications Question Paper 2015 is the best way to boost your preparation for the board exams.

ICSE Class 10 Economic Applications Question Paper 2015 Solved

Part-1 (40 Marks)
(Attempt All questions from this Section)

Question 1.
Complete the following Individual Demand Schedule: [2]

Price in ₹	Quantity of sugar demanded in kgs
5	20
6
7
8
9

(b) Why is capital called a ‘produced means of production’? [2]
(c) State two assumptions of the Law of Supply. [2]
(d) What is difference between a loan and an overdraft? [2]
(e) State any two drawbacks of State enterprises. [2]
Answers:
(a) Individual Demand Schedule

Price in ₹	Quantity of sugar demanded in kgs
5	20
6	18
7	16
8	14
9	12

(b) Capital is called a ‘produced means of production’ because

1. It is produced, i.e. it is produced by human beings with the help of natural resources and is not a gift of nature.
2. It is a means of production, i.e. it is used as an input in producing other goods. It is not directly consumed.

(c) Assumptions of the law of supply:

1. Price of other related goods should not change.
2. Technology of production should not change.

(d) Differences between a loan and an overdraft:

1. Borrowers pay interest on the amount outstanding against the account for loans, whereas customers pay interest on the daily balance standing against the account for overdraft.
2. Loans against security are raised by the bank, whereas security is not required for overdraft facilities.

(e) Drawbacks of state enterprises:

1. Lack of incentive: Government servants do not have the same incentives as a person in a private enterprise.
2. Technical problems: Technical considerations are not given due weightage in the establishment of state enterprises. The choice of location is influenced less by technical considerations and more by political considerations.

Question 2.
(a) List two factors affecting the supply of labour. [2]
(b) If price of X increases, then demand for Y too increases. What is the relationship between goods X and Y? Give an example. [2]
(c) State two Primary functions of money. [2]
(d) What is meant by Monopsony? Give an example. [2]
(e) Define Fiscal Policy. [2]
Answers:
(a) Factors determining the supply of labour:

1. Population: The most important factor affecting the supply of labour in a country is its population. A larger population with necessary skills to perform physical or mental work will increase the supply of labour to the market.
2. Age structure: The total population of an economy is not considered under supply of labour. Supply of labour depends on the age structure of the population. Child labour is prohibited by law. Salaried people have to retire after attaining a certain age. Hence, only a certain age group of people is considered under supply of people.

(b) Goods X and Y are related goods/substitute goods which can be substituted for each other. Example: Tea and coffee – Increase in the price of coffee will increase the demand for tea, and consumers will shift from the consumption of coffee to the consumption of tea.

(c) Two primary functions of money:
Medium of exchange and measure of value are the two primary functions of money.

1. Money acts as a medium of exchange: The major function of money is to facilitate the process of exchange by removing the defects of the barter system.
2. Money is the measure of value: It is the monetary expression of the market value of goods and services.

(d) Monopsony
Monopsony refers to a market where there is a single buyer of a commodity or service but there are many sellers. It implies a situation in which there is a monopoly element in buying. An example of monopsony occurs when a certain individual only has liking for some commodity or when a single large firm is the sole buyer of some commodity.

(e) Fiscal policy
Fiscal policy refers to the revenue and expenditure policy of the government which helps to correct the situations of excess and deficient demand. It is also called the budgetary policy of the Government.

Question 3.
(a) State the market form of the following commodities:

1. Railways
2. Automobiles
3. Shampoos
4. Fighter Aircrafts [2]

(b) What is meant by shifting of tax burden? To which tax’is this relevant? [2]
(c) A consumer purchased 10 units of a commodity when its price was ₹ 5 per unit. He purchases 12 units of the commodity when price falls to ₹ 4 per unit. Calculate the price elasticity of demand for the commodity. [2]
(d) State two’active’factors of production. Give reasons to support your answer. [2]
(e) Differentiate between Floating and Sunk capital. Give an example for each. [2]
Answers:
(a) Form of market

1. Monopoly
2. Oligopoly
3. Monopolistic competition
4. Monopsony

(b) Shifting of tax burden
Tax imposes a burden on the taxpayer. Generally, the burden of tax falls on someone other than a person from whom the Government collects the tax. The impact of the tax falls on a person from whom the tax is first collected but not the burden of taxation. The burden of tax shifted to another person is called the incidence of taxation. Thus, the tax burden is shifted on the consumer. For example, in sales tax, the tax burden is shifted by the seller of the commodity to the buyer.

(c) Price elasticity of demand for the commodity
e_p = % change in quantity demand/% change in its price
e_p = (ΔQ/Q)/(ΔP/P)
e_p = (12/10)/4/5)
e_p = (12/10) * (5/4)
e_p = 1.5

(d) Two active factors of production

Labour is an active factor of production and sets the whole productive process in operation.
Entrepreneur is an active factor of production because the entrepreneur takes up the risks and sets the entire productive machinery into motion.

(e) Floating and sunk capital

1. Floating capital is the capital which can be used in alternative lines of production. It is also called free capital. Examples: Steel, wood, raw materials
2. Sunk capital is one which can only be put to a single use. It is also known as specialised capital. It always remains in a fixed place. Example: Printing machine.

Question 4.
(a) State two advantages of opening a bank account. [2]
(b) ‘The role of the State is important in developing the economic infrastructure of a developing economy’. Give two reasons to support your answer. [2]
(c) State the impact of an increase in Cash reserve ratio on loanable funds. [2]
(d) Classify the following types of tax into direct and indirect taxes:
(i) Entertainment Tax
(ii) Income Tax
(iii) House Tax
(iv) Sales Tax [2]
(e) Which of the following is a function of a Commercial Bank? Give a reason to support your answer.
(i) Acting as a lender of last resort.
(ii) Deciding what is legal tender.
(iii) Determining monetary policy.
(iv) Providing cash credit facility. [2]
Answers :
(a) Advantages of opening a bank account

1. Interest income created: Users with small saving amounts earn interest on their savings when they deposit money in the bank. Hence, depositing money in the bank generates income for them rather than letting the money lie idle.
2. Mobilisation of small savings: Bank accounts help in mobilising the small savings of a vast segment of people. Further, these amounts are transferred for productive investment.

(b) Role of state

1. Providing rural infrastructure and extending credit to the poor at a low rate of interest as an effective instrument to remove poverty.
2. Development of infrastructure such as transport, irrigation system, power and electricity, and communication is required to promote agricultural and industrial development.

(c) Impact of increase in cash reserve ratio on loanable funds: During the inflationary situation, the Central Bank increases the cash reserve ratio and thereby the fund for providing loans with the commercial bank declines.

(d) Types of taxes:

1. Direct tax
2. Indirect tax
3. Direct tax
4. Indirect tax

(e) Function of commercial bank:

1. Acting as a lender of last resort: It is the function of the Central Bank. When a commercial bank fails to get financial accommodation from any other source, then it approaches the Central Bank as a last resort. The Central Bank advances a loan to such a bank against approved securities. Thus, the Central Bank acts as a ‘lender of the last resort’.
2. Deciding what is legal tender: It is the function of the Central Bank. The Central Bank of a country assumes supreme authority in issuing paper currency of definite denomination and value.
3. Determining monetary policy: It is the function of the Central Bank because the monetary authority of a country is the Central Bank which can determine monetary policy. Commercial banks act as channels through which the Government puts its monetary policies into practice.
4. Providing cash credit facility: In the process of accepting deposits and advancing loans, commercial banks are able to create credit. They are able to lend more funds than they have with them as cash deposits.

Part-II (60 Marks)
(Attempt any FOUR questions from this Section)

Question 5.
(a) What do you understand by division of labour?
Explain three ways by which division of labour is beneficial to producers. [7]
(b) State the Law of Demand. Explain three exceptions to this law. [8]
Answers:
(a) Division of labour: Division of labour means the allocation of different parts of the production process to different workers or to different groups of workers. Division of labour is beneficial to producers:

1. Increase in the efficiency of labour: Division of labour increases the efficiency of labour. The worker becomes more specialised if a worker is entrusted with only a part of work in the process of production.
2. Quality of production improves: The quantity and quality of output produced by a worker increase within a short period of time. The increase in the efficiency of labour leads not only to an increase in the quantity of output but also to an improvement in the quality of the produced goods and services.
3. Reduced average cost: Because division of labour increases the total output, even with an unchanged number of labourers, the average cost of producing a commodity falls. This is a social advantage. Society can produce goods by incurring lower average cost of production. Hence, producers get an opportunity to raise their income and the standard of living improves a lot.

(b) Law of demand: The law of demand states that other things remaining constant, the quantity demanded of a good increases with a fall in price and diminishes when price increases.

Exceptions to law of demand:

(i) Conspicuous consumption: Some person may consume a very expensive commodity just to show off and attract the attention of other people. In that case, its price and demand may move in the same
direction. Diamond ornaments are examples of such goods.

(ii) Bandwagon effect: The bandwagon effect is an exception to the law of demand. The consumer’s demand for a commodity gets influenced by the taste and preference of the social class to which the consumer belongs. If a businessman prefers to play golf as a fashionable game among successful businessman, then the price of a golf ball increases in the market. Here, the businessman may increase the demand for golf balls in order to show that he is a successful businessman.

(iii) Speculative activities: Goods which are objects of speculation may defy the law of demand. When the price of such a commodity rises, people may increase their purchase of that commodity in the expectation that the price would increase even further in the future. It happens in the share market.

Question 6.
(a) What is meant by migration? Explain three ways by which migration impacts the ecosystem. [7]
(b) (i) What is capital formation?
(ii) What are the three stages of capital formation?
(iii) Explain three reasons for the low rate of capital formation in India. [8]
Answers:
(a) Migration : Migration is defined as the movement of people from one place to another voluntarily or involuntarily. Some people may migrate from their place of origin because of natural disasters, and others may move to a new location for better jobs, education, health facilities or other social factors. Because of urbanisation, people migrate from rural areas to the cities. It has led to the following impacts on the ecosystem:

1. Diverting water for a construction project lowers the water level. This reduces the number of places where water birds nest and fish reproduce.
2. Adding fertilisers to a local field changes the make-up of the soil. This affects the kinds of plants which are grown in the field.
3. The shoreline of a lake is being developed for a new recreation area. This can affect the numbers and kinds of organisms which can live by the lakeshore.

(b) Capital formation:
Capital formation means the creation of capital. A change in the stock of any capital during a particular period of time is called capital formation. Three important stages of capital formation are creation of savings, mobilisation of savings and investment of mobilised savings.

Reasons for the slow rate of capital formation in India:

1. Lack of ability to save: Because of poverty, poor people are unable to save more than a negligible part of their earnings. Hence, a low rate of savings leads to a low rate of capital formation in the Indian economy.
2. Lack of willingness to save: In certain parts of the country, there still exists a feudal economic system. Even people who have the ability to save money are not willing to save and spend all their money on day- to-day consumption.
3. Insufficient mobilisation of savings: People are not mobilising the savings for capital formation. Most of their savings are kept in the form of gold and cash at home. These savings are not used productively because of poor banking knowledge and a poor banking network in underdeveloped states.

Question 7.
(a) Who is an entrepreneur? Explain any three functions of an entrepreneur. [7]
(b) With reference to the taxation policy:
(i) Mention three differences between direct taxes and indirect taxes.
(ii) Differentiate between progressive and regressive taxes giving an example for each. [8]
Answers:
(a) Entrepreneur: An entrepreneur is a person who carries the risk of business and coordinates the activities of all the other factors of production.

Functions of an entrepreneur:

(i) Planning of business activity: Before starting any business activity, the entrepreneur prepares the full- fledged strategy about the types of products to be produced, the sources from which the raw materials are to be collected and the type of technology to be introduced.

(ii) Organising business activity: Proper coordination among the available supply of labour, land and capital is necessary for the smooth progress of any production or business activity. An entrepreneur takes the responsibility of employing these factors in an appropriate proportion and maintaining proper coordination among them.

(iii) Decision making: Decisions about the types of products to be produced, what type of technology is to be adopted and the prices to be fixed for these products are taken by the entrepreneur. Future growth of any business organisation depends to a large extent on these decisions.

(b) Direct taxes and indirect taxes:

(i) Direct taxes: The tax burden cannot be shifted to any other individual or firm by the taxpayer. It is progressive because the tax rate increases with an increase in income slabs. The impact and incidence of tax fall on the same person.

(ii) Indirect taxes: The tax burden can be shifted by the taxpayer. It is regressive because the common people bear this tax burden. The producer bears the impact and incidence of tax on the consumer.

Progressive and regressive taxes:

(i) Progressive tax: When the percentage of income collected as tax increases with an increase in income, then it is called progressive income tax. Under this system, the tax liability increases in absolute terms and the proportion of income tax also increases. There is a different rate of tax at every income slab.
Example

Yearly income of an individual	Tax rate
Up to 1,60,000-
1,60,000 – 5,00,000	10%
5,00,000 – 8,00,000	20%
8,00,000 – above	30%

(ii) Regressive tax:
In regressive tax, the average tax rate decreases with an increase in income of an individual. The absolute amount of tax collection increases with the increase in income.
Example:

Income per month	₹ 1000	₹ 42000
Tax rate	10%	7.5%
Tax collection	₹ 100	₹ 150

Question 8.
(a) What do you understand by price elasticity of demand? With the help of diagrams explain the conditions when:
(i) E_p > 1
(ii) E_p < 1
(iii) E_p = 1 [7]
(b) With reference to the Central Bank of a country:
(i) State two reasons for the need of a Central Bank in a country.
(ii) List two ways in which a Central Bank acts as a Banker to the Government.
(iii) What is meant by open market operations? How does it act as a method to control credit? [8]
Answers :
(a) Price elasticity of demand:
Price elasticity of demand for a good is defined as the percentage change in demand for the good divided by the percentage change in its price. Price elasticity of demand is a pure number and it does not depend on the units in which the price of the good and the quantity of the good are measured. Price elasticity of demand is a negative number as the demand for a good is negatively related to the price of a good.

(i) At a particular price, the percentage change in demand for a good is greater than the percentage change in price, and the demand for the good is elastic at that price.
e_p > 1

(ii) At a particular price, the percentage change in demand for a good is less than the percentage change in price, and the demand for the good is inelastic at that price.
e_p < 1

(iii) At a particular price, the percentage change in demand for a good is equal to the percentage change in price, and the demand for the good is unitary elastic at that price.
e_p = 1

(b) With reference to the Central Bank of a country:

(i) Need of a Central Bank: A Central Bank is the apex bank which controls the entire banking system of a country. It has the sole authority to issue notes in that country. It also acts as a banker to the Government and controls the supply of money in the country.

(ii) Central Bank acts as a banker to the Government:
(a) The Government maintains an account with the Central Bank. All types of income of the Government are deposited into this account and all the expenses of the Government are also incurred from this account.
(b) It also advances short-term loans to the Government to meet the deficit in its budget.

(iii) Open market operations: Open market operations refer to the sale and purchase of Government securities and bonds by the Central Bank. While controlling inflation, the Central Bank sells Government securities to the public through the banks. This results in the transfer of a part of bank deposits to the Central Bank account and reduces credit creation capacity of commercial banks.

Question 9.
(a) What is Perfect Competition ?
Describe any three characteristics of Perfect Competition. [7]
(b) Give a reason for each of the following statements:
(i) The fixed income group is adversely affected during periods of inflation.
(ii) Selling costs are higher in Monopolistic Competition.
(iii) High rates of taxes reduce the savings capacity in an economy.
(iv) The demandfor newspaper is inelastic. [8]
Answers:
(a) Perfect competition: Perfect competition is a form of the market where there are a large number of buyers and sellers of a commodity. A homogeneous product is sold in the market. An individual firm has no control over the price; it is a price taker.

Characteristics of perfect competition:

(i) Large number of sellers and buyers: The number of firms selling a particular commodity is so large that any increase or decrease in supply by an individual firm hardly impacts the total supply. So, an individual firm fails to impact the price of the commodity in the market. It can sell any amount at the existing price of the commodity. Hence, a firm under perfect competition is a price taker. Even the number of buyers is large, and hence, an individual buyer is also unable to influence the price of the commodity.

(ii) Homogeneous products: All sellers sell identical units of a product. The existence of identical product implies the same price for the product in a competitive market. Hence, buyers have no reason to prefer the product of one seller compared to that of another.

(iii) Free entry and exit of firms: A firm can easily enter and exit any industry as there is no legal restriction. Whenever there are abnormal profits, new firms will enter the industry, and whenever there are losses, few existing firms will exit the industry. This situation is possible only in the long run.

(b) Reasons:

(i) Fixed income group is adversely affected during periods of inflation: The hardest hit is the people who receive fixed income. People who live on past savings, fixed interest or rent, pensions and salaries suffer during periods of rising price as their incomes remain fixed. The middle class who by hard work take care of their children’s education, livelihood in the times of sickness and old age, and accommodate day-to-day expenses find it difficult to survive the times of serious inflation.

(ii) Selling costs are higher in monopolistic competition: Each firm has to incur selling costs such as expenditure on advertisement to promote sales. This is because there is a large number of close substitutes in the market.

(iii) High rates of taxes reducing the savings capacity in an economy: If the investors, entrepreneurs and income earners in a society have to pay taxes at a higher rate for earning more, then such persons are discouraged to earn more. Hence, the process of generation of capital accumulation and savings would be affected badly as the rich people can save more.

(iv) The demand for newspaper is inelastic: Newspaper has only few uses. Its demand is likely to be inelastic. It is a situation where even substantial changes in price leave the demand unaffected, i.e., E_d < 1.

Question 10.
(a) Read the extract given below and answer the questions that follow: [7]
PTI Jun 15, 2014
NEW DELHI: The Finance Ministry has asked the Department of Disinvestment to complete the groundwork for sale of shares in state-owned companies soon after the budget to take advantage of the bull phase in the stock market.
The government is expected to retain the disinvestment target of ₹ 36,925 crore proposed in the interim budget for 2014-15.
(i) What is disinvestment?
(ii) How will privatisation lead to:
(1) Control of budgetary deficits
(2) Flow of funds to Public Exchequer.
(3) Greaterflexibility in decision making.

[b] [8]

(i) Indicate the degree of elasticity on the Supply curves given below:
(ii) Explain three determinants of Elasticity of Supply.
Answers:
(a) (i) Disinvestment: Privatisation of public sector undertakings by selling off part of the equity of public sector undertakings to the public is known as disinvestment.

(ii) (1) Control of budgetary deficits: The budgetary deficits in India are increasing considerably and further contribute to rising prices. To reduce budgetary deficits, the scope of the public sector should be contracted and that of the private sector should be expanded.

(2) Flow of funds to public exchequer: There will be reduction in burden on the public exchequer. Operation of public sector enterprises has been putting a large burden on the public exchequer because of huge losses incurred by several enterprises and a growing amount of subsidy payments. Privatisation would be helpful in reducing the burden on the Government.

(3) Greater flexibility in decision making: The policy of privatisation will be helpful in imparting greater flexibility in the decision-making process. Management would be free from any Government intervention. Timely and prudent decisions will improve the efficiency of business operation.

(b)

(i) Degree of elasticity on supply curves:
(1) E_p > 1
(2) E_p = 1

(ii) Determinants of elasticity of supply:

(1) Possibility of shift from one line of production to the other: If the producers can easily shift from the production of other products to the one whose price has increased, the supply would be more price elastic. For example, agricultural production is seasonal. So, the supply of most of the agricultural crops is inelastic. For industrial products, however, the supply is continuous. Here the supply of industrial products is supposed to be more elastic because producers can easily shift from one line of production to another or they can fully use the productive capacity of the machines.

(2) Supply of inputs: The price elasticity of supply of any commodity depends on the nature and supply of inputs required for the production of that commodity. If these inputs are easily available, then the supply of that commodity will be relatively elastic. Otherwise, its supply becomes relatively inelastic because of the non availability of inputs.

(3) Technological condition: If the production technology used in the production of any commodity is primitive, then the supply of that commodity is primitive and the supply of that commodity would be relatively inelastic. However, if modem technology is used in the production of a commodity, then the supply of such a commodity would be relatively elastic.

Solving ICSE Class 10 Economic Applications Previous Year Question Papers ICSE Class 10 Economic Applications Question Paper 2014 is the best way to boost your preparation for the board exams.

ICSE Class 10 Economic Applications Question Paper 2014 Solved

Section – A (40 Marks)
(Attempt All questions from this Section)

Question 1.
State whether the following statements are true or false. Give reasons.
(a) The price elasticity of demand for commodities having close substitutes is relatively high. [2]
(b) Rate of taxation depends upon the income groups in a progressive tax structure. [2]
(c) The price level in a perfectly competitive market is determined by an individual seller [2]
(d) Efficiency of labour is influenced by working conditions. [2]
(e) Supply and price are inversely proportional. [2]
Answers:
(a) True. The price of the commodity falls in relation to its substitute. Consumers can easily switch from one good to another even if there is only a small change in price and so its demand will increase.

(b) True. The rate of taxation increases with increase in income. It helps in reducing the income inequality among different sections of the people in a society. Since the rich pay a higher average tax rate than the poor, the gap between the rich and the poor is narrowed down.

(c) False. A large number of buyers and sellers exist in a competitive market. The demand of an individual buyer relative to the total market demand is very small. Similarly, the supply of an individual seller is very small relative to total market supply. Thus, no individual seller or buyer can influence the market price by changing their demand or supply condition. Sellers sell the product only at the market demand price.

(d) True. The poor and unhealthy working conditions in most of the Indian factories, particularly in the unorganised sector, aggravate the problem of inefficiency of workers. More hygienic and congenial conditions would help in achieving higher levels of efficiency.

(e) False. There is a direct relationship between the price of a commodity and its quantity supplied. If the price of the product becomes higher and is more than the marginal cost of production, then the firm can earn excess profits by selling its product at a higher price. Therefore, the supply of that commodity may also rise.

Question 2.
(a) Draw and briefly explain a perfectly inelastic supply curve. [2]
(b) How does the practice of shifting cultivation affect the environment? [2]
(c) In which form of market do producers and consumers have perfect knowledge about the market conditions? [2]
(d) State two measures taken by the Government to reduce income inequality in an economy. [2]
(e) Mention two features of monopoly. [2]
Answers:
(a) Supply is said to be perfectly inelastic when supply does not respond to change in the price of the commodity. Supply is constant even at a zero price. E_s = 0.

(b) The practice of shifting cultivation is an extravagant and unscientific form of land use. The effects of shifting cultivation are devastating and far-reaching in degrading the environment and ecology of the region. The previous 15-20 year cycle of shifting cultivation on a particular land has now reduced to 2-3 years. It resulted in large- scale deforestation, soil and nutrient loss and invasion by weeds and other harmful species. The indigenous biodiversity has been affected to a large extent.

(c) In a perfectly competitive market, all the buyers and sellers have perfect knowledge about the market condition. They have complete knowledge about the price and quality of the product, which has one price in the market.

(d) Revenue policy and public expenditure policy are two measures undertaken by the Government to reduce income inequality in an economy. The progressive and proportional system of taxation helps to reduce the gap between rich and poor. All the public expenditure incurred in the projects will benefit the middle classes and poor sections of an economy.

(e) Two features of monopoly are as follows:

1. One seller and a large number of buyers of the product
2. Restrictions on the entry of new firms

Question 3.
(a) How does the central bank act as a ‘lender of the last resort’? [2]
(b) The quantity of a commodity supplied increases by 25% when its price rises by 10%. Calculate price elasticity of supply. [2]
(c) State an adverse impact of urbanisation on the ecosystem. [2]
(d) An indirect tax is not always equitable. Give two reasons to support your answer. [2]
(e) State two characteristics of capital as a factor of production. [2]
Answers:
(a) When a commercial bank fails to get financial accommodation from any other source, it approaches the central bank as a last resort. The central bank advances loan to such a bank against approved securities. Thus, the central bank acts as a lender of the last resort.

(b) Price elasticity of supply:
E_s = Percentage change in quantity supplied/Percentage change in price
= 25%/10%

(c) Adverse impact of urbanisation on the ecosystem:
Temperature: Temperature increases severely due to factors such as paving over formerly vegetated land, increasing the number of residences and giant apartments and industries.

Air pollution: There is enormous growth of factories and automobiles due to urbanisation. Harmful emissions of gases and smoke from factories and vehicles cause air pollution. It contributes to allergies and respiratory problems, thereby becoming a huge health hazard.
Water issues: The water cycle changes as cities have more precipitation than surrounding areas. Dumping of sewage can lead to outbreaks of epidemics.

(d) An indirect tax is not always equitable :

1. Indirect taxation is inequitable because each individual pays the same rate on their purchases; the poor pay a larger proportion of their incomes.
2. Indirect taxes are levied on the commodities which only the rich people consume and by limited people. It brings in very less tax revenue for the Government Therefore, the Government has to impose taxes on a wide range of commodities.

(e) Characteristics of capital as a factor of production:

1. Capital is productive. Hence, production can be increased to a larger extent if workers work with capital.
2. Use of capital increases the productivity of labour. Hence, there will be an increase in the future earning of workers. This will lead to a higher standard of living.

Question 4.
(a) Suggest two measures to improve the efficiency of labour in India. [2]
(b) What is meant by product differentiation? [2]
(c) State the Law of Supply. Explain it with the help of a diagram. [2]
(d) How does money act as a standard of deferred payment? [2]
(e) State an important difference between demand deposits and time deposits. [2]
Answers:
(a) Two measures to improve the efficiency of labour in India are as follows :

1. Eradication of illiteracy is perhaps the first priority to improve the efficiency of labour.
2. Adequate provisions for imparting training to the workers are necessary to improve the efficiency of labour.

(b) Product differentiation is a situation when different producers under monopolistic competition try to differentiate their product in terms of its shape, size, packaging and trademark. It is done in order to attract buyers of rival firms in the market.

(c) The law of supply states that other things being equal, the quantity of a good supplied increases with an increase in price level and decreases with a decrease in price level of the good. The supply schedule and supply curve given below show the positive relationship between price and quantity supplied.

Price (in ₹)	Quantity supplied
5	100
10	200
15	300

(d) Deferred payments refer to those payments which are made in the future. Money has made deferred payments easier. When money is borrowed, the principal and interest amounts have to be returned to the lender. However, these transactions are not possible in terms of goods and services. Money performs this function more effectively.

(e) Demand deposits and time deposits:

1. Demand deposits can be withdrawn at any time, whereas the time deposits can be withdrawn only after the expiry of a specific period.
2. There is no interest rate on demand deposits, whereas the time deposits carry a higher interest rate.
3. Demand deposits are chequable and can be withdrawn through cheques, whereas time deposits are not chequable.

Part II (60 Marks)
(Attempt any FOUR questions from this Section)

Question 5.
(a) Define elasticity of supply. Explain any four of its determinants. [7]
(b) Define a tax. Explain the following with examples: [8]
(i) Regressive tax
(ii) Proportional tax
(iii) Degressive tax
Answers :
(a) Elasticity of supply is a measure of the degree of responsiveness of quantity supplied to change in the product’s own price.

Factors determining elasticity of supply are as follows:

1. Chances of shifting from production: The size or degree of response depends on how easily producers can shift the production of another product to the one whose price has increased. When the producers can easily shift from one production to another, it means the supply would be more price elastic.
2. Length of time: Producers cannot shift the production immediately due to a change in price of other products within the short duration. But it may be possible to do so over a period of time. Hence, supply tends to be relatively inelastic in the short run and relatively elastic in the long run.
3. Behaviour cost of production: Elasticity of supply is highly influenced by how the cost of production responds to output changes. If an increase in output by the firms in an industry causes only a slight increase in their cost per unit or leads to a decrease in cost per unit, supply will be fairly elastic. Otherwise, when an increase in supply leads to a large increase in the cost of production, supply would be relatively inelastic.
4. Risk-taking: The elasticity of supply is determined based on the willingness of entrepreneurs to take risk. Supply is more elastic when entrepreneurs are willing to take risk and inelastic when they hesitate to take risk.

(b) A tax is a compulsory payment imposed on persons or companies by the Government to meet the expenditure incurred on providing common benefits to the people.

(i) Regressive tax:
In regressive tax, the average tax rate decreases with an increase in income of an individual. The absolute amount of tax collection increases with the increase in income. Example:

Income per month	₹ 2000	₹ 4000
Tax rate	10%	7.5%
Tax collection	₹ 200	₹ 100

(ii) Proportional tax:
In proportional tax, the tax rate is constant irrespective of the increase in income. All tax payers pay an equal proportion of income in the form of taxes.

Income per month	₹ 2000	₹ 4000
Tax rate	10%	10%
Tax collection	₹ 200	₹ 100

(iii) Degressive tax:
Degressive tax means the rate of tax which increases up to a certain limit and later the uniform rate is charged. This system is a mixture of proportional tax and progressive tax. The absolute amount of tax collection falls with the increase in income.

Income per month	₹ 2000	₹ 4000
Tax rate	10%	2.5%
Tax collection	₹ 200	₹ 100

Question 6.
(a) What is meant by industrialisation? Explain four impacts of industrialisation on the environment. [7]
(b) Define joint demand. With the help of diagrams explain the difference between individual demand and market demand. [8]
Answers:
(a) Industrialisation means a process in which a change of series of systematic production takes place. It implies creation and growth of manufacturing units. The process of industrialisation was started during the second five-year plan in India. Due to the progress of industries such as iron and steel, chemical, coal, cement, thermal power etc., the renewable and non-renewable resources are slowly depleting. Impacts of industrialisation on the environment are:

(i) Global warming : The most serious consequence of industrial pollution is global warming. The emission of a variety of greenhouse gases such as CO₂, methane etc. has raised the temperature of the Earth, leading to global warming. Global warming causes various health hazards and diseases such as malaria, dengue, cholera etc. It also results in the melting of glaciers and snow-capped mountains, causing an increase in the water levels in seas and rivers, leading to the chances of flood.

(ii) Air pollution : Air pollution has also increased enormously with the increase in the number of industries and factories. Carbon dioxide, sulphur and nitrogen are the gases emitted from various industries. These gases lead to environment and health hazards such as acid rain and skin disorders in individuals.

(iii) Soil pollution : Due to various natural and artificial reasons, the soil loses its structure and fertility. Dumping of industrial wastes is the main factor which contributes to soil pollution. Industrial wastes contain chemicals which get accumulated on the top layer of the soil, leading to loss of fertility of the soil. There will be a change in the ecological balance of the environment because of fewer plants.

(iv) Water pollution : Water pollution has also increased enormously with the increase in the number of industries and factories. Dumping of industrial waste products into water resources and improper treatment of industrial wastes result in water pollution.

(b) Joint demand
When the demand for different Complementary goods is created at one time, it is termed joint demand. For example, the demand for computer hardware and software is created jointly.

The individual demand curve is a curve showing different quantities of the commodity which one particular buyer is willing to buy at different possible prices of the commodity at a point of time. ¡n the diagram given below, the quantity of commodity is given on the X-axis and the price on the Y-axis. DD is the demand curve representing the individual demand schedule. The demand curve slopes downwards from left to right, indicating an inverse relationship between the price and the quantity demanded. The market demand curve is the horizontal summation of the individual demand curves.

It indicates various quantities of the commodity which all consumers in the market are willing to buy at different possible prices of the commodity at a point of time. The diagram below shows that the market demand curve represents the market demand schedule assuming two consumers A and B in the market. The market demand curve also slopes downward indicating an inverse relationship between the price and quantity demanded.

Question 7.
(a) State one difference between an entrepreneur and other factors of production. Explain any four qualities in an individual to be a successful entrepreneur. [7]
(b) Define a commercial bank. Explain three ways by which commercial banks advance loans to the public. [8]
Answers:
(a) An entrepreneur and other factors of production :
In the production of goods, all other factors of production are employed by the entrepreneur. Land, labour and capital are the factors engaged by the entrepreneur on a contractual basis. Entrepreneurs make payments as rent for land, wages for labour and interest to capital. The income of entrepreneurs is residual in nature as their profit is generated after making payments out of their income to the other factors of production employed in the production process.

Four qualities of an individual to be a successful entrepreneur:

1. Organisational ability: A good organiser will always be a successful entrepreneur. There are certain people who are good at work but are poor organisers. In that case, they will not be a good entrepreneur.
2. Attitude of risk taking: An entrepreneur must carry the risk of the uncertainity of business as it is one of the main functions of an entrepreneur. Therefore, a person who has strong aversion to take risks will not be a good entrepreneur.
3. Ability to make quick decisions : An entrepreneur must make a proper analysis of risks and decision making must be prudent because reckless risk-taking may bring disaster to a business firm. Therefore, the ability to make quick decisions is another good quality of an entrepreneur.
4. Negotiating skills: An ideal entrepreneur must have good negotiating skills because successful running of a business firm requires negotiations on various issues with various parties such as clients, trade unions, the Government etc.

(b) Commercial bank : A commercial bank is defined as a financial institution which provides services such as accepting deposits, giving business loans, mortgage lending and basic investment products such as savings account and certificates of deposit.

Loans advanced by a commercial bank are

1. Ordinary loans : Commercial banks advance ordinary loans for purchasing consumer durables, building houses etc.
2. Cash credit: Commercial banks allow the borrower to withdraw up to a certain amount on a given security which constitutes stocks of goods and bills receivable from others. Interest will be paid by the borrower only on the actual amount withdrawn from the bank.
3. Overdraft facilities : Under the overdraft facilities, an account holder can withdraw money in excess of the amount deposited with the bank. But the borrower will pay interest on excess amount withdrawn from the bank.

Question 8.
(a) Define labour as a factor of production. Explain in brief three characteristics of labour. [7]
(b) With the help of an example explain the meaning of price discrimination. To which market is it relevant? Explain any two similarities between a perfect market and a monopolistically competitive market. [8]
Answers:
(a) Labour can be defined as the aggregate of all human physical and mental effort used in the creation of goods and services.

Three characteristics of labour are as follows:

1. Labour cannot be accumulated: Labour cannot be accumulated by a labourer, i.e. a capitalist can go on accumulating capital or a land owner can go on increasing the amount of land owned by him. It is a crucial difference between labour and other factors of production.
2. Labour is mobile: Labour can move from one place to another or from one use to another use. Generally, the mobility of labour depends on the education and skill of labourers, wage difference between different sectors, social customs etc.
3. Labour has alternative uses: It is possible for any labour to engage itself in different fields of work. For example, an unskilled worker can work as a coolie, hawker, peddler etc.

(b) Price discrimination
Price discrimination is a situation when a monopolist charges a different price from different buyers of the same commodity in order to maximise profit. For example, a monopoly surgeon may charge a low fee from poor patients and a high fee from rich patients.
Price discrimination is a situation prevalent in a monopoly market.

Similarities between a perfect market and a monopolistically competitive market

1. Both perfect market and monopolistically competitive market have a large number of sellers and buyers.
2. Level of profit in the long run in both the markets are AR = AC (implying normal profit), where AR = average revenue and AC = average cost.

Question 9.
(a) Define money. How does money perform its role as a
(i) Medium of exchange
(ii) Store of value [7]
(b) What are public sector undertakings? Explain four reasons for the privatisation of public sector undertakings. [8]
Answers:
(a) Money is defined as a thing which is commonly accepted as a medium of exchange. Money is an instrument which serves as a medium of exchange, a measure of value, a store of value and a standard for deferred payments.

(i) Medium of exchange : The introduction of money resulted in the end of a barter system where goods were exchanged according to needs. Now, money acts as an intermediate in the exchanging process, and thus, it is known as a medium of exchange. Anyone can exchange goods for money and buy commodities which are required by them.

For example, a fruit seller wants to sell his fruits in order to buy wheat. In the absence of money, he will have to look for some person who wants to sell wheat and buy fruits. This is not easy and always possible. However, with the availability of money as a medium of exchange, the fruit seller just has to find a buyer for his fruits. After fruits are exchanged for money, he can purchase wheat from the market.

(ii) Store of value: People keep their wealth in the form of money because money is the most liquid form of wealth. Savings in the form of money is maintained for purchasing commodities in the future. In this case, the value of commodities is being stored. Hence, money acts as a store of value.

(b) A public sector undertaking (PSU) is owned and controlled by the Government. The main aim of the sector is to maximise social welfare. It gives more stress to the production of capital goods. Nearly 26% of the national income comes from the public sector and 20% of the total working population is engaged in this sector. This sector enjoys monopoly form of market.

Reasons for the privatisation of PSUs

1. Lack of management: Effective managerial policies can change the total outcome of a nation. But India
   is lagging in this context. Most of the Government officers are inefficient to execute the work. Lack of efficient management has thrown most of the PSUs in darkness.
2. High construction cost: Most of the Government projects were unable to complete within the stipulated time, so the estimated expenditures had increased over the period.
   An excessive delay in the completion of work obstructs the work culture and running cost of construction cross the average limit.
3. Improper utilisation of capacity : Most of the resources were unused or mis-used which lead to heavy loss with no profit situation in PSUs.
4. Labour problem : Labour indiscipline and lack of completing the work on time are the main reasons behind a low level of profit. Frequent lock outs, strikes, labour unrest and overstaffing decline their efficient management.

Question 10.
Read the extract given below and answer the questions that follow.
TNN, 15th August 2013
Rising vegetable prices and the impact of a weak rupee pushed inflation to a five month high of 5.29% in July 2013. Posing yet another challenge for Asia’s third largest economy battling to defend the rupee and boost growth. Official data released on Wednesday showed inflation, as measured by the Wholesale Price Index, jumped to 5.79% in July from previous month 4.86%. Easing Wholesale Price Inflation had fuelled expectation of a moderation in tight monetary policy. but the slide of the rupee against the dollar has dashed those hopes for now
(i) What is meant by running inflation? [2]
(ii) Mention two fiscal measures to control inflation. [1]
(iii) Briefly explain the effect of a high level of inflation on the following:

1. Fixed income groups [2]
2. Producers [2]
3. Creditors and debtors [2]

(iv) Explain three monetary policies of the Reserve Bank of India to control credit. [6]
Answers :
(i) Running inflation : Running inflation is inflation where the general price level increases a bit faster and the rate of growth of price level is about 10 percent per annum. The inflation rate becomes double digit. Here, the price movements are compared with the trotting of a horse.

(ii) Two fiscal measures to control inflation are taxation and government expenditure.

(iii) 1. Fixed income groups : The hardest hit are people who receive a fixed income. People who live on past savings, fixed interest or rent, pensions, salaries etc. suffer during periods of rising price as their incomes remain fixed. The middle class who by their hard work take care of their children’s education, livelihood in times of sickness and old age, and accommodate day-to-day expenses find it difficult to survive in times of serious inflation.

2. Producers : When a price increases, producers gain on account of windfall profits because prices rise at a faster rate than the cost of production. Furthermore, there is a time-lag between the price rise and the increase in cost. Moreover, producers gain because the prices of their stock go up due to inflation. They also stand to gain being generally borrowers of money for business purposes.

3. Creditors and debtors : Debtors borrow from creditors to repay with interest at some future date. Changes in price level affect them differently at different time periods. During inflation, when the prices rise and the real value of money goes down, the debtors pay back less in real terms than what they had borrowed, and thus, to that extent, they are gainers. On the other hand, the creditors get less in terms of goods and services than what they had lent and lose to that extent.

(iv) Three monetary policies of the Reserve Bank of India to control credit:

1. Bank rate policy : Bank rate policy is used as the main instrument of monetary cpntrol during the period of inflation. When the central bank raises the bank rate, it is said to have adopted a dear money policy. The increase in bank rate increases the cost of borrowing which reduces commercial banks borrowing from the central bank. Consequently, the flow of money from commercial banks to the public gets reduced. Therefore, inflation is controlled to the extent it is caused by the bank credit.

2. Cash reserve ratio: When controlling inflation, the central bank raises the cash reserve ratio (CRR) which reduces the lending capacity of commercial banks. Consequently, the flow of money from commercial banks to the public decreases. In the process, it halts the rise in prices to the extent it is caused by bank credits to the public.

3. Open market operations : Open market operations refer to the sale and purchase of government securities and bonds by the central bank. When controlling inflation, the central bank sells Government securities to the public through banks. This results in the transfer of a part of bank deposits to the central bank account and reduces credit creation capacity of commercial banks.

Solving ICSE Class 10 Home Science Previous Year Question Papers ICSE Class 10 Home Science Question Paper 2022 Semester 2 is the best way to boost your preparation for the board exams.

ICSE Class 10 Home Science Question Paper 2022 Solved Semester 2

Maximum Marks: 50
Time allowed: 1½ hours

General Instructions:

• Answers to this Paper must be written on the paper provided separately.
• You will not be allowed to write during the first 10 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.
• Attempt all questions from Section A and any four questions from Section B.
• The marks intended for questions are given in brackets [].

[Section – A]
(Attempt all questions)

Question 1.
Choose the correct answers to the questions from the given options. (Do not copy the question. Write the correct answer only.) [10]
(i) Action of food enzymes are the major cause of:
(a) Contamination of food
(b) Deterioration of food
(c) Preservation of food
(d) Sanitation of food
Answer:
(b) Deterioration of food

(ii) Foods which undergo processing to increase their shelf life are called :
(a) Convenient foods
(b) Non perishable foods
(c) Perishable foods
(d) Semi perishable foods
Answer:
(a) Convenient foods

(iii) ………………… fabric gets stains if water is sprinkled on it during ironing.
(a) Colored Cotton
(b) Silk
(c) White Cotton
(d) Wool
Answer:
(b) Silk

(iv) Colorless fluorescent dyes which turn pale fabrics white making them look brighter are called …………………… .
(a) Bleach
(b) Blue
(c) Stifferning agents
(d) Optical Brighteners
Answer:
(d) Optical Brighteners

(v) One of the major social issues prevalent in our country is:
(a) Human capital
(b) Gender discrimination
(c) Morbidity
(d) Mortality
Answer:
(b) Gender discrimination

(vi) The impact of human activities on the environment and climatic change is called :
(a) Carbon footprint
(b) Child labour
(c) Feticide
(d) Population explosion
Answer:
(a) Carbon footprint

(vii) Scheme addressing the health care system at the primary, secondary and tertiary levels in our country is:
(a) Ujwala Yojna
(b) Ujwala Bharat
(c) Jan Dhan Yojna
(d) Ayushman Bharat
Answer:
(d) Ayushman Bharat

(viii) Pamphlets are used effectively for:
(a) Event announcement
(b) Flash mob
(c) Puppet shows
(d) Street plays
Answer:
(a) Event announcement

(ix) The following scheme aims to safeguard the health of women by providing fuel without any emissions :
(a) BPL
(b) LPG
(c) PMJAY
(d) PMUY
Answer:
(d) PMUY

(x) …………………… are visually appealing documents designed in a threefold format conveying information briefly and effectively.
(a) Flyers
(b) Leaflets
(c) Brochures
(d) Pamphlets
Answer:
(c) Brochures

[Section – B]
(Attempt any four questions from this Section.)

Question 2.
(i) List any two reasons for drawing an outline of a woollen garment prior to laundering it. [2]
Answer:
For knitted woollens, tracing their outline on elasticity is important which further increases when it is wet. So, the knitted woollen fabrics invariably lose their shape. The tracing helps to restore the cloth to original shape.

(ii) Mention any two disadvantages of using soap for washing clothes. [2]
Answer:
(a) Soaps do not wash well in hard water and does not form much lather or foam.
(b) Soaps are not suitable for woollen clothes.

(iii) Explain any three criteria employed while washing clothes by kneading and squeezing method. [3]
Answer:
Kneading and squeezing method is for delicate fabrics like silk, wool, rayon, etc. This does not damage the fabric or change its shape because only gentle pressure is applied repeatedly with hands. While it is still in the soapy solution. While using this method dip the cloth in soap solution, take it out and squeeze.

(iv) State any three precautions taken while laundering coloured garments. [3]
Answer:
(a) A gentle or medium wash cycle should be perfect for coloured garments. .
(b) Coloured garments should be washed in cold water.
(c) If coloured garments are washed in a washing machine, remove the coloured garments from the machine as soon as the cycle finishes.

Question 3.
(i) Mention the method followed to wash the following fabrics: [2]
(a) Cotton
(b) Nylon
Answer:
(a) The white cotton clothes can be kept soaking overnight, if these are very dirty. If less dirty, they • can be soaked for an hour. For coloured garments, soaking should be avoided. If required, they should be soaked in tap water for not more than 15 minutes to half an hour.

(b) Nylon should be washed separately using cold water for best results. You should also check your clothing tags for specific directions. You can use regular laundry detergents on Nylon but never use chlorine bleach.

(ii) List two benefits of applying starch to cotton garments. [2]
Answer:
(a) Stains are easier to remove as starch helps prevent them from penetrating fabrics. The starch seals the individual fibres making it more difficult for stains to penetrate through the fabric.
(b) Regularly starching your clothing will also hold that pressed appearance longer.
(c) Clothes are more resistant to wear from rubbing.
(d) White clothes stay white for longer period.

(iii) State three advantages of using detergents for laundry. [3]
Answer:
(a) Detergent powders are effective in washing.
(b) Detergent powders are cost effective.
(c) Detergent powders can remove stains.
(d) Detergent powders do not have hard or harsh chemicals.

(iv) Mention three ways by which dirt can be harmful to a fabric. [3]
Answer:
(a) A fabric with dirt gives a bad look.
(b) Dirt can attract greasy particles, which harm the fabrics.
(c) Dirt is a source of germs which can cause bacterial and fungal diseases.

Question 4.
(i) State two major causes of food spoilage. [2]
Answer:
Various factors cause food spoilage, making items unsuitable for consumption. Light, Oxygen, heat, humidity, temperature and spoilage bacteria can all affect both safety and quality of perishable foods. When subject to these factors, foods will gradually deteriorate.

(ii) Define the term ‘semi-perishable’ food. [2]
Answer:
Semi-perishable foods are food products that do not require immediate refrigeration but that will spoil more quickly than non-perishable items. Semi-perishable foods do not have shelf lives as they spoil or get stale after a certain period, therefore, these foods need to be frozen.

(iii) Mention any three principles of food hygiene. [3]
Answer:
(a) Contamination is major principle of food hygiene. (Contamination means making the food dirty or poisonous). It is so important to avoid contamination in your food preparation and cooking.

(b) Separation of non-vegetarian items from vegetarian items. For example, raw meat can be packed in leak proof packets to avoid touching it with other vegetables.

(c) Cooking of food is also an important principle. While cooking, keep care of bacteria. Pesticides on vegetables can be harmful. Vegetables should be properly washed.

(iv) Mention any three precautions to be followed while storing fruits and vegetables. [3]
Answer:
(a) Certain-perishable fruits and vegetables (like strawberries, lettuce, herbs and mushrooms) keep best stored in the refrigerator at 40 °F or below.

(b) All produce that is purchased pre-cut or peeled should be refrigerated within two hours to maintain both quality and safety.

(c) Fruits that will not ripen after they are picked should be refrigerated to increase their storag e life. These include apples, cherries, grapefruit, grapes, oranges, pineapple, strawberries, tangerines and watermelon.

(d) Fruits that continue to ripen after they are picked should be kept at room temperature until fully ripe. These include bananas, kiwi, peaches, pears, plums and tomatoes.

Question 5.
(i) Why should foods with high sugar content be stored in air tight container ? [2]
Answer:
(a) Sugar has the ability to absorb moisture from the air which may harm the food. Keeping such food items in the air tight containers keep them clean and dry.
(b) Food items with sugar contents are safe from insects and ants when you put them in air tight containers.
(c) Such items can be preserved for more time.

(ii) State any two uses of spices during food preservation. [2]
Answer:
Spices have the potential to be used as preservatives in many foods namely in processed meat to replace chemical preservatives. Main chemical compounds in spices also confer other properties providing a variety of applications to spices, such as insecticidal, medicines, colorants, and natural flavouring. Spices provide beneficial effects, such as antioxidant activity levels that are comparable to regular chemical antioxidants used so they can be used as a natural alternative to synthetic preservatives.

(iii) State three benefits of hygienic storage of food. [3]
Answer:

1. The industry enjoys the good reputation.
2. Customers/consumers are satisfied.
3. There is less food wastage.
4. Preserved hygienic food has long perishable period, therefore, there are controlled running costs and higher profits.

(iv) Mention any three advantages of preservation to the food industry. [3]
Answer:
Preservation has many advantages to food industry.

1. Preservation increases shelf-life of the food.
2. It decreases decreased spoilage of the food items.
3. Seasonal food is available round the year.
4. Perishable foods can be transported to far-off distances from the site of production.

Question 6.
(i) State any two reasons for a plant or animal species getting extinct. [2]
Answer:
Plant species getting extinct:
(a) Due to cutting of plants and trees in the forests and other areas, the important species of plants are getting extinct.
(b) Due to climate changes with increase in temperatures, certain species of plants cannot grow resulting in extinction.
Animal species getting extinct:
(c) Due to loss of habitat, liveable spaces are shrinking. This is resulting in extinction of animal species.
(d) Climate change poses a constant danger to terrestrial animals. With the climate getting warmer and warmer year by year, some species are not able to adapt warm temperatures. This is resulting in loss of breeding and thus extinction of species.

(ii) Define the term ‘human trafficking’. [2]
Answer:
Human trafficking is an unlawful act of transportation, transfer or harbouring of people through force, fraud or deception, with the aim of exploiting them for profit. Men, women and children of all ages and from all backgrounds can become victims of this crime, which occurs in every region of the world.

(iii) Write a short note on Gender discrimination. [3]
Answer:
Gender discrimination describes the situation in which people are treated differently simply because they are male or female, rather than on the basis of their individual skills or capabilities.

(iv) Mention any three eligibility criteria for an Indian citizen to avail PMUY. [3]
Answer:
Eligibility criteria under Prime Minister Ujjwala Yojana:
(а) The applicant must be a woman above the age of 18.
(b) The applicant must have the BPL card and must be a rural resident.
(c) The applicant must have a savings bank account in any of the nationalised banks to receive the subsidy amount.
(d) The applicant must not already own an LPG connection.

Question 7.
(i) List any two factors to be considered while designing a poster. [2]
Answer:

• Poster should be readable from distance.
• Poster should contain contrast of colours.
• Images used in the poster should be big.

(ii) Mention any two venues for a street play. [2]
Answer:
Venues for street plays: Shopping centres, car parkings, street comers.

(iii) List any three benefits of communication aid. [3]
Answer:

1. Improves speaking and learning ability.
2. Provides a better understanding of letters and words.
3. Helps improve diction and the ability to pronounce words.
4. Gives confidence to an individual when they speak.

(iv) Name any three forms of puppets used for a puppet show. [3]
Answer:

1. Finger Puppets
2. Hand Puppets
3. Glove Puppets
4. Shadow Puppets.

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ICSE Class 10 Economic Applications Question Paper 2018 Solved

Part – I (40 Marks)
(Attempt all questions from this Part)

Question 1.
(a) List any two causes for the low efficiency of labour in India.  [2]
(b) Draw a neat labelled diagram of a demand curve. [2]
(c) Give any two reasons as to why a country needs a Central Bank. [2]
(d) Out of the-following capital used in the cotton textile industry, classify the following as fixed or circulating capital: [2]
(i) Cotton yams
(ii) Dyes
(iii) Power
(iv) Weaving machines
(e) What are progressive taxes ? Give an example. [2]
Answer:
(a)

1. Lack of skill.
2. Lack of regular training.

(b)

(c)

1. To control and regulate the monetary structure.
2. To stablise the banking system.

(d)

1. Circulating
2. Circulating
3. Circulating
4. Fixed

(e) A type of tax under which rate of tax changes with change in income. For example, income tax.

Question 2.
(a) ‘Capital is a passive factor of production.’ Justify the statement. [2]
(b) Which bank is referred to as a Banker’s Bank? Why is it called so ? [2]
(c) State any two differences between Monopolistic competition and Perfect competition. [2]
(d) Which section of the society gains during inflation ? Why ? [2]
(e) Explain two ways by which the government can reduce income inequalities in a developing economy. [2]
Answer:
(a) Capital is a passive factor of production as it need human factor to produce. For example, to run any machine labour is required.

(b) Central Bank (RBI in case of India).
Central Bank regulate and supervise the Commercial Banks. Being the apex bank, the Central Bank (RBI) acts as the banker to other banks.
As the banker to banks, the Central Bank functions in three capacities:

1. Custodian of Cash Reserves : All the commercial banks are required to keep a certain proportion of their deposits known as Cash Reserve Ratio or CRR with the Central Bank. In this way, Central Bank acts as a custodian of cash reserves of Commercial banks.
2. Lender of the Last Resort:
   • The Central Bank acts as the lender of the last resort.
   • When commercial banks fail to meet their financial requirements from other sources, they can approach the Central Bank which provide them loan and advances as lender of the last resort.
3. Clearing House : As Central Bank holds the cash reserves of all the commercial banks, it becomes easier and more convenient for it to act as their clearing house.

(c)

Basis	Perfect Competition	Monopolistic Competition
Nature of Product	The product is homogeneous, i.e., it is identical in all respects like size, shape, quality, etc.	The product is differentiated on the basis of brand, size, colour, shapes, etc.
Selling Cost	No need for selling cost as firms produce homogeneous products.	Selling costs are incurred because firms produce differentiated products.
Price	Firm is a price-taker.	Firm has partial control over price due to product differentiation.
Demand Curve	Demand curve is perfectly elastic as price remains the same at all levels of output.	Demand curve slopes downwards as more output can be sold only at less price.

(d) Inflation has a deep impact on the distribution of income and wealth in a country. It results in the redistribution of income and wealth because prices of all the factors of production do not increase in the same proportion. Generally, inflation always inflicts more injury on the fixed income groups like workers, teachers, pensioners, interest and rent earners etc.

Because their incomes do not increase as fast as the prices. On the other hand, flexible income groups such as businessmen, traders merchants etc. suffer less injury due to windfall profits that arise because prices rise faster than the cost of production.

(e)

1. By following progressive taxation system.
2. By increasing government expenditure in backward regions.

Question 3.
(a) Mention two ways in which an entrepreneur is different from labour. [2]
(b) Differentiate between current and savings deposits. [2]
(c) Briefly explain any two impacts of shifting cultivation on the ecosystem. [2]
(d) Name a market where selling cost is not required. Give a reason for your answer. [2]
(e) Given below is the market supply schedule of a commodity. The individual supply schedules of firms B and C are given,
prepare the individual schedule for Firm A : [2]

Answer:
(a)

1. Labour is a hired factor of production whereas entrepreneur hires other factors of production.
2. Labour earns wages whereas entrepreneur earns profits.

(b) Demand deposit or current accounts are generally held by business firms or institutions to carry out their day to day transactions without any limit on there transactions whereas saving deposits are generally held by common public with a limit on number of free withdrawals.

(c)

1. Forests are burnt leading to reduction in Forest area.
2. Area is cleared off, by removing the trees and vegetation.

(d) Under perfect competition, firms produce homogeneous products which are similar in size, colour, packing, quality, etc. So, firms need to spend money on product differentiation.

(e)

Question 4.
Define the following terms:
(a) Price elasticity of Demand [2]
(b) Proportional taxation [2]
(c) Capital formation [2]
(d) Labour [2]
(e) Inflation [2]
Answer:
(a) It is the degree of responsiveness of demand for a commodity with reference to change in price of the commodity.

(b) If the tax is imposed at the same rate on the persons of different income level, it is called proportional tax.

(c) It refers to the increase in the stock of real capital in an economy during an accounting period.

(d) The aggregate of all human physical and mental effort used in creation of goods & services.

(e) Inflation : Rapidly or persistent rise in price.

Part – II (60 Marks)
(Attempt any four questions from this part)

Question 5.
(a) (i) What is considered as capital in economics ? [7]
(ii) Discuss any three characteristics of capital.
(b) Explain how the following factors affect the supply of a commodity: [8]
(i) State of technology.
(ii) Price of factors ofproduction.
(iii) Goals of the firm.
(iv) Future price expectations.
Answer:
(a)

1. Capital include all goods or financial assets as well as tangible factors used in production or accumulating more wealth.
2. 1. Man-made Factor: Capital is not a gift of nature. So it is not a primary or natural factor, it is made by man in capital goods industry. It is secondary as well as an artificial factor of production.
   2. Productive Factor : Capital helps in increasing level of productivity and speed of production.
   3. Elastic Supply : Supply of capital depends upon capital formation process. Capital formation depends upon savings and investment. By accelerating capital formation, capital supply can be increased. But it is a long term process.

(b) (i) State of Technology : State of technology also affects supply of the commodity. Improvement in the technique of production reduces cost of production. Consequently, more of the commodity is supplied at its existing price.

(ii) Price of Factors of Production : Supply of a commodity is also affected by the price of factors used for the production of the commodity. If the factor price decreases, cost of production also reduces. Accordingly, more of the commodity is supplied at its existing price. Conversely, if the factor price increases cost of production also increases. In such a situation less of the commodity is supplied at its existing price.

(iii) Goals of the Firm: If goal of the firm is to maximise profits, more quantity of the commodity will be offered at a higher price. On the other hand, if goal of the firm is to maximise sales (or maximise output or employment) more will be supplied even at the same price.

(iv) Future Price Expectations: If the producer expects price of the commodity to rise in the near future, current supply of the commodity will reduce. If, on the other hand, fall in the price is expected, current supply will increase.

Question 6.
(a) (i) Name any two industries where division of labour is possible. [7]
(ii) Explain any three demerits of division of labour.
(b) Identify and define the degree of price elasticity of supply from the diagram for the supply curves S₁, S₂, S₃, S₄. [8]

Answer:
(a)

1. Two Industries where division of labour is possible are:
   • Food production
   • Motor factories
2. Demerits of Division of Labour are :
   • Increased dependence on machines: As division of labour increases there will be an increased use of machines. Almost all the workers work on different types of machines. It is very difficult for them to work without machines. Thus, division of labour increases the dependence on machines.
   • Monotony of work : The labours had to perform a similar work again and again which lead toboredom. The job becomes monotonous in nature. It causes a mental fatique which deteriorates the quality of work.
   • Lack of responsibility: Under division of labour production passes through several stages, so it seems difficult to fix responsibility.

(b)

1. Perfectly Inelastic Supply: When there is no change in quantity supplied in response to any price change, the supply is said to be perfectly or completely inelastic.
   Here, ∈_s = 0
2. Unit Elastic Supply : When proportionate change in supply equals the proportionate change in price, the supply is said to be unit elastic.
   Here, ∈_s = 1
3. Elastic Supply : When change in quantity supplied is more than proportionate change in own price, the supply is said to be elastic.
   Here, ∈_s > 1
4. Inelastic Supply : When the change in quantity supplied is less than proportionate change in own price, supply is said to be inelastic.
   Here, ∈_s < 1

Question 7.
(a) (i) What happens to the demand curve when there is an increase in demand ? [7]
(ii) Discuss three instances when demand will increase.
(b) Explain any four ways by which Public Sector Enterprises play a dominant role in an economy. [8]
Answer:
(a) (i) Whenever there is increase in demand, the demand curve shift towards left.

(ii) (a) Increase in price of substitute goods: Substitute goods are the goods which can be used in place of one another for example tea and coffee. When price of substitute good (say, coffee) rises, demand for the given commodity (say, tea) will rise.
(b) Decrease in price of complementary goods : When price of complementary good (petrol) falls, demand for the given commodity (car) rises.
(c) Increase in income (Normal Goods) : With increase in income, demand for normal good rises.

(b) 1. Development of infrastructure : Development of infrastructure comprising transport, power, communication, basic industries, etc. is a precondition of growth. Expenditure on the development of infrastructure is known as Social Overhead Costs. Pace of industrial development cannot be accelerated without their establishment. Their development requires huge capital investment, which cannot be mobilised by the private sector. Moreover, these projects do not promise high profits. The private entrepreneurs would therefore be reluctant to ‘ undertake them.

2. Development of backward areas : The goal of achieving a reduction in economic inequality between regions becomes easy to reach, if industries are setup in the backward areas. But the profit seeking private industrialists often are not enthusiastic enough to set up industry in the backward regions. The government, therefore, finds it necessary to start industrial production in these areas on its own.

3. Basic facilities : There are a large number of activities which are the primary responsibilities of the government. The government must spend on these. Providing health and education facilities for all is one example. Running proper schools and providing quality education, particularly elementary education, is the duty of the government. India’s size of illiterate population is one of the largest in the world.

4. Other problems: There are many other problems like malnourishment, high infant mortality rate, unsafe drinking water, lack of housing facilities, etc. which need special attention. These problems can be solved only with the help of government.

Question 8.
(a) Who controls the credit supply in an economy? What is this policy called ? Explain how thefollowing can control inflation in an economy. [7]
(i) Cash Reserve Ratio
(ii) Statutory Liquidity Ratio
(b) (i) Why can a monopolist charge different prices in different markets ? [8]
(ii) Explain any three features of monopoly.
Answer:
(a) Reserve Bank of India controls the credit supply in an economy. This policy is called Monetary Policy.

(i) Cash Reserve Ratio (CRR) : It refers to the minimum amount of funds that a commercial bank has to maintain with the Reserve Bank of India in the form of deposits. For example, suppose the total assets of a bank are worth ₹200 crores and the minimum cash reserve ratio is 10%.

Then the amount that the Commercial Bank has to maintain with RBI is ₹20 crores. An increase in CRR reduces the lending ability of the Commercial Banks. If this ratio rises to 20%, then the reserve with RBI increases to ₹40 crores.Thus, less money will be left with the commercial bank for lending. This will eventually lead to considerable decrease in the money supply.

(ii) Statutory Liquidity Ratio (SLR): SLR is concerned with maintaining the minimum reserve of assets with RBI, whereas the cash reserve ratio is concerned with maintaining cash balance (reserve) with RBI. So, SLR is defined as the minimum percentage of assets to be maintained in the form of either fixed or liquid assets with RBI. The flow of credit is reduced by increasing this liquidity ratio and vice-versa. A rise in SLR will restrict the banks to pump money in the economy, thereby contributing towards decrease in money supply.

(b) (i) A monopolist can charge different prices in different markets due to product differentiation which leads to lack of perfect knowledge.

Buyers and sellers do not have perfect knowledge about the market conditions. Selling costs create artificial superiority in the minds of the consumers and it becomes very difficult for a consumer to evaluate different products available in the market. As a result, a particular product (although highly priced) is preferred by the consumers even if other less priced products are of same quality.

(ii) 1. One seller but large number of buyers : In the monopoly market, there is only one seller but large number of buyers. This single seller may be in the form of an individual owner or a partnership or a joint stock company. Being the only seller, a monopolist faces no competition from other firms. Not only that there is no difference between firm and industry in this form of market structure. Because of this the market demand curve is also the demand curve for monopolist.

But the number of buyers is large in this market. An individual buyer has no influence on the market price. The buyers have no option but to purchase the commodity from the monopolist or go without the product.

2. No close substitute :
In the monopoly market, monopolist produces goods that have no close substitutes. This is an essential condition for a firm to be called monopolistic. The goods which can be easily used for each other and are available at nearly the same price are called close substitutes. If there are some other firms which are producing close substitutes for the product in question there will be competition between them and then the firm cannot be said to have monopoly. Due to this particular feature, cross elasticity of demand between the product of the monopolist and the product of any other producer must be nil or very small.

3. Strong barriers to the entry of new firm :
Another important feature of the monopoly market is that there are barriers or restrictions on the entry of new firms on the market. The barriers which prevent the firms to enter the industry may be economic in nature or else of institutional and ‘ artificial in nature. These restrictions may take several forms such as patent rights, copy rights, government laws and economies of scale.

Question 9.
(a) What is privatization ? Explain the following arguments favouring privatization : [7]
(i) Greater flexibility in decision making.
(ii) Better utilization of resources.
(iii) Greater employment opportunities.
(b) Explain clearly four differences between a Central Bank and a Commercial Bank. [8]
Answer:
(a) Privatisation is the general process of involving the private sector in the ownership or operation of a state owned enterprises.

1. Greater Flexibility in decision making : Private sector is owned and controlled by private individual or individuals. All the major economic decision
   i. e. how to produce, what to produce, for whom to produce are taken by the individual keeping in mind the profit factor.
2. Better utilisation of resources: Under private sector resources are fully and efficiently utilised keeping in mind cost and profits.
3. Greater employment opportunities : Private sector in most of the developing nations has grown at a very fast rate. In last few decades more than 40% of the work force of developing nation is working for private sector.

(b)

Central Bank	Commercial Bank
(i) Central Bank functions as the apex bank of the country. It is a bank of all the banks.	(i) Commercial banks functions according to the rules and regulations stipulated by the central bank.
(ii) The Central Bank design and controls all instruments of monetary policy of the country.	(ii) Commercial banks only executes the monetary policy as directed by the central bank.
(iii) Central Bank is the sole authority of note issuing.	(iii) Commercial banks contribute to the flow of money only by a way of credit creation.
(iv) Central Bank does not deal directly with the general public.	(iv) Commercial banks deal directly with the public.
(v) Central Bank does not accept any deposits or advance loans.	(v) Commercial banks accept deposits and advance loans.
(vi) The Central Bank focuses on social welfare.	(vi) The Commercial bank focuses on profit maximisation.

Question 10.
Read the extract and answer the following:
Post: GauravAkrani
Indirect taxes have become an important source of development funds in developing countries. Many developing economies that have adopted economic planning use indirect taxes as important source of funds. These taxes are found to be better suited in developing countries because they have much wider coverage as compared to direct taxes. Both rich and poor pay indirect taxes in the form of commodity price.
(i) What are indirect taxes ?  [2]
(ii) Mention three important differences between direct and indirect taxes. [3]
(iii) Classify the following into direct and indirect taxes. [2]

1. Custom duty
2. Professional tax
3. Income tax
4. Entertainment tax

(iv) Give two reasons why indirect taxes are important in developing countries. [4]
(v) Explain clearly how indirect taxes can be both regressive and progressive. [4]
Answer:
(i) Indirect taxes are the taxes which are imposed on goods and services. There taxes affect the income and property of individuals and companies through their consumption expenditure.

(ii)

Direct Taxes	Indirect Taxes
1. They are directly paid to the government by the person on whom it is imposed. 2.  They cannot be shifted on to others. 3. They are generally progressive. The rate of tax increases with the increase in income. 4. Examples : Income Tax, Wealth Tax, Corporation Tax etc.	1.   They are paid to the government by one person but their burden is borne by another person. 2.   They can be shifted on to others. 3.   They are generally regressive. The rate of tax decreases as income increases. 4.  Examples : Sales Tax, Excise Duty, Custom Duty etc.

(iii)

1. Indirect tax
2. Direct tax
3. Direct tax
4. Indirect tax

(iv)

1. Indirect taxes are important source of revenue for the government.
2. They have a broad coverage.

(v) 1. Progressive Tax : If the rate of tax changes with the change in income, it is called Progressive tax. Hence, the rich should pay more and the poor should pay less. The Progressive tax is very popular in developing countries.
Table below shows progressive tax.

Income (₹)	Progressive Tax
	Percent (Rate)	Amount (₹)
1,000	10	100
2,000	15	300
3,000	25	750

As shown in table person with income of ₹ 1,000 pays 10% tax and the persons with income of ₹ 2,000 and ₹ 3,000 pay 15% and 25% taxes respectively. Tax rate increases with the increase in income.

The progressive tax has the qualities of flexibility, economy, more income earning, reduce income inequality, based on ability to pay. However, this tax has demerits like tendency of evasion, conceal income, arbitrariness, adverse effects on saving and investment.

2. Regressive Tax : If high rate of tax is levied to the poor and low rate is levied to the rich it is called regressive tax.
Table below shows regressive tax.

Income (₹)	Progressive Tax
	Percent (Rate)	Amount (₹)
1,000	10	100
2,000	8	160
3,000	6	180

As shown in table tax rate decreases with increase in income. A person with income of ₹ 1,000 pay 10% tax, and the persons with income of ₹ 2,000 and ₹ 3,000 pay 8% and 6% taxes respectively.

This tax is quite opposite of progressive tax. The tax rate decreases with increase in income. Hence, this tax takes decreasing proportion of increasing income. For example, the tax levied on necessary goods is regressive. It taxes more percentage of low income. This tax, therefore, increases income inequality. This tax system makes injustice. So, this tax is impracticable and inappropriate in poor countries.

Solving ICSE Class 10 Economic Applications Previous Year Question Papers ICSE Class 10 Economic Applications Question Paper 2013 is the best way to boost your preparation for the board exams.

ICSE Class 10 Economic Applications Question Paper 2013 Solved

Section – A (40 Marks)
(Attempt All questions from this Section)

Question 1.
(a) With the help of a diagram show how a market demand curve can be obtained from individual demand curves. [10]
(b) Which section of society is worst affected during inflation ? Briefly explain.
(c) Mention one way be which Government policy can ensure social justice.
(d) There are no substitute goods in a Monopoly market. Give a reason to support your answer.
(e) Briefly explain the impact of constructing dams on the ecosystem.
Answers:
(a) The following diagram clearly shows how a market demand curve can be obtained by the horizontal summation of individual demand curves.

INDIVIDUAL AND MARKET DEMAND SCHEDULES

Price of rice (₹/Kg)	Demand of Consumer B (Kg/month)	Demand of Consumer B (Kg/month)	Marker-Demand (kg/month) A+B
50	2	4	6
40	4	6	10
30	6	8	14
20	8	10	18
10	10	12	22

(b) Inflation makes the rich richer and the poor poorer. It hits hard the interests of consumers, creditors, small investors, labourers and the middle class. But the worst affected are the wage and salaried class or the fixed income group, because their income does not rise in the same proportion in which the cost of living rises. Thus, inflation increases the economic burden on this section of the society.

(c) The government in a welfare state like ours, can ensure social justice, with the help of Fiscal Policy. The state can reduce income inequality and achieve the goal of equity through the system of progressive taxation, subsidies and concessions to lower income and middle-income groups.

(d) There are no close substitutes of the product sold by a monopolist. A pure monopoly will exist only when there are no close substitutes of the product sold by the single seller. Thus, the cross-elasticity of demand for the monopolists product is negligible or zero.

(e) The following are two major impacts of constructing dams on the ecosystem.

1. Soil erosion: Dams hold back the sediment load in a river flow leading to erosion of the river banks. This lowering of the riverbed threatens vegetation and river wildlife.
2. Extinction of species : Large dams often interfere with the lifecycles of many fish and other marine creatures sometimes even forcing species to extinction.

Question 2.
(a) Briefly explain why labour is considered to be the means and end of production. [10]
(b) Distinguish between Joint demand and Composite demand.
(c) State two reasons for low capital formation in a developing economy.
(d) State one difference between Monopsony and Monopolistic competition.
(e) Classify the following capital goods :
(i) Machines
(ii) Cotton yam
(iii) Oil mill
(iv) Bridge
Answers:
(a) A labourer is both a means of production and the end of it. Labour on one hand is the active factor of production, without whose efforts, production cannot take place.
On the other hand, labourers are also consumers of the produced goods. The demand for goods largely depends upon the level of wages in the country.

(b) When a commodity is jointly demanded along with some other commodity, the demand for it is called joint demand. For example, car and petrol, pen and ink are jointly demanded to satisfy a particular want.
The demand for a commodity which can be put to several uses is known as composite demand. For example, the demand for electricity is composite demand as it used by farmers, households, factories, etc.

(c) Two reasons for low capital formation in a developing economy

1. Low level of savings due to low level of income which in turn is due to low levels of productivity in the agricultural and industrial sectors.
2. Lack of an efficient entrepreneurial class in developing economies.

(d) Monopsony refers to a market where there is a single buyer of a commodity or service, but many sellers in the market.
Monopolistic competition on the other hand, is a market situation where there is a large number of buyers and sellers selling closely related goods.

(e)

1. Machines – Fixed capital
2. Cotton yam – Circulating capital
3. Oil mill – Sunk capital
4. Bridge – Social capital

Question 3.
(a) Indicate the degree of elasticity of demand of the following demand curves: [10]
(b) What is meant by land use pattern?
(c) What are indirect taxes ? Give an example.
(d) Define money. How does it act as a ‘measure of value ’?
(e) What is meant by an overdraft facility?
Answers:
(a) The given figure represents perfectly elastic demand curve and the value of elasticity of demand on such a demand curve is infinity.

The given figure represents relatively inelastic demand curve and the value of elasticity of demand on such a demand curve is less than one.

(b) Land use pattern involves management and modification of natural environment into built environment such as fields pastures and settlements. It refers to the arrangements, activities and inputs people undertake in a certain land cover type to produce, change or maintain it.

(c) Indirect tax, is a tax which is imposed on one person but paid partly or wholly by another. Thus, the impact and the incidence of an indirect tax are on different persons. Example- Import duty as the impact is on the importer who pays the duty to the government but the incidence is on the buyer of goods as the importer realises the tax from the buyer.

(d) Money is anything which is universally accepted as a medium of exchange, measure of value, store of value and standard of deferred payments and has divisibility and transferability. Money is the means of valuation and of payment; as both the unit of account and the generally accepted medium of exchange.
For measuring value of any commodity, money serves as an unit of account. When we express the value of a commodity in terms of money, it is known as price.

(e) Overdraft facility is available to a customer having a current account in a commercial bank. Under this the borrower or customer is allowed to overdraw his current account balance for a temporary period. The bank usually deducts a certain amount as overdraft charges.

Question 4.
(a) The price of milk rises from ₹ 26.00 to ₹ 30.00 per litre and its demand falls from four litres per day to two litres per day. Calculate the elasticity of demand for milk. [10]
(b) Differentiate between an entrepreneur and labour on the basis of:
(i) Nature of work
(ii) Nature of risk involved.
(c) Distinguish between the fiscal and monetary policy of the Government.
(d) What are Public Sector Units ? Mention one problem faced by Public Sector Units in India.
(e) What is meant by Bank Rate? How does it help in controlling the flow of credit in the economy ?
Answers:

(b) (i) Nature of work : An entrepreneur specialises in the task of organisation. He organises production takes important decisions regarding production, hires or purchases factors of production and bears the risks of business.
Labour, on the other hand, includes all human efforts undertaken with a view to earn income. It actively takes part in the production process.

(ii) Nature of risk involved : An entrepreneur has to bear all risks of business and thus his income in the form of profit is uncertain. Labourers are not involved with the risks of business and are sure to get wages.

(c) Fiscal policy means the use of taxation expenditure and borrowing by the government. Its main instruments are taxation policy and expenditure policy. Monetary policy refers to credit control measures adopted by the central bank of a country. The major instruments arc bank rate, open market operations cash reserve ratio, and statutory liquidity ratio.

(d) Public Sector Units are enterprises owned and managed by the government.
One problem faced by Public sector units in India is—

Lack of incentive : Government servants do not find incentive as promotion is awarded based on seniority and not merit. There is lack of responsibility and accountability in these enterprises.

(e) Bank rate is the rate at which the central bank gives credit to member commercial banks against approved securities or eligible bills of exchange. If the bank rate is increased the cost of borrowing by commercial banks increases, thereby increasing their lending rates. This discourages borrowing by the public and volume of credit contract. Vice versa happens if bank rate is decreased. During inflation the cost of capital is increased by increasing the bank rate.

Section – B (60 Marks)|
(Attempt any FOUR questions from this Section)

Question 5.
(a) Define capital and explain three important functions of capital.
(b) ‘Land is the original source of all material wealth ’. In this context, explain four determinants that influence the productivity of land. [7 + 8]
Answers:
(a) Capital refers to all man-made goods used in the production of other goods and services. It is a produced means of production.

Three important functions of capital are –

1. Important factor of production : Capital is an important factor of production. It is the life blood of modem business. Before starting a business and throughout its lifetime capital is needed invarious forms for purchasing machinery, raw materials, etc.
2. Payment of wages : Capital, particularly money capital helps in providing subsistence to workers engaged in the production process. Labourers are rewarded for their mental and physical labour in the form of wages.
3. Capital formation: Capital formation means increase in the stock of real capital in an economy. More capital means more production of goods to be used for further production of goods in the economy.

(b) The following are four determinants that influence productivity of land –

1. Natural factors : Productivity of land largely depends on natural factors such as fertility, slope of land, climate and chemical and biological properties of the soil.
2. Human factor : Land cannot produce anything by itself unless human efforts are put into it. Thus, productivity depends on knowledge and training of the farmers.
3. Organisation : Productivity of land is determined by how labour and capital are organised. Trained workers, modem implements, scientific methods, good seeds, modem methods of irrigation etc., can increase the productivity of land.
4. Improvements on land: Land development measures like provision of well or tube-well irrigation, proper drainage system, fencing, etc., can substantially increase productivity of land.

Question 6.
(a) Explain the following functions of the Central Bank of a country: [8 + 7]
(i) Acting as a ‘Banker to the Government ’.
(ii) Fixation of margin requirement on secured loans
(iii) Developmental Functions.
(b) What is meant by Ecosystem ? Explain three adverse effects of mining on the ecosystem.
Answers:
(a) (i) Banker to the government: The central bank acts as a bankers to the government in the following ways:

• It receives deposits from the government and collects cheques and drafts deposited in the government account.
• It makes purchases and sales of government securities.
• It makes payments on behalf of the government.
• It advances short term loans to the government to meet its budget deficit.
• It provides cash to the government as required for payment of salaries and wages to their staff.
• It manages account of the government banks across all in the country.

(ii) Fixation of margin requirement : A margin is the difference between the amount of loan and the market value of the security offered by the borrower. By changing the margin requirement, the central bank can encourage as discourage borrowings by the public. Higher margin requirements discourage borrowings for speculative activities.

(iii) Developmental functions : The Central Bank undertakes several developmental and promotional activities, particularly in underdeveloped economics. Some of them are as follows –

1. It helps in development and expansion of money and capital markets.
2. It adopts suitable measures to maintain internal price stability by controlling inflationary tendencies.
3. It helps in maintaining exchange rate stability.
4. It helps to develop an integrated commercial banking system.
5. It takes steps to provide cheap finance to agriculture and industry.

(b) Ecosystem refers to a group of living and non-living things, which are interdependent and found in a particular type of environment.

• The adverse effects of mining on the ecosystem are as follows-
  1. Physical effects : Soil compaction is one of the most severe effects of mining on the ecosystem. It is a result of large machinery moving across the landscape. Compaction minimises the potential for plant establishment, lowering overall fertility of the soil and increasing water movement through the soil and landscape.
  2. Chemical effects : Mining operations often contaminate the soil with toxic heavy metals and acids. Acids can lower the pH of the soil, preventing plants and soil micro-organisms from thriving.
  3. Other effects : Continuous mining activities can lead to reshaping topography, generation of large quantities of debris, disruption of surface and groundwater circulation soil erosion, land slides and land degradation.

Question 7.
(a) ‘Efficient labour force is an important economic ingredient In this context, define efficiency of labour. Explain three factors that determine the efficiency of labour.
(b) Define a Commercial Bank. Explain three methods adopted by Commercial Banks to mobilise funds from the public. [8 + 7]
Answers:
(a) Efficiency of labour implies the productive capacity of a labourer. It indicates the ability of a worker to do more or better work or both as compared to other, during a given time period.

Three factors that determine the efficiency of labour are-

1. Education and Training : The efficiency of labour depends on the level of his general and technical education and training. General education makes a labourer more responsible and technical education and training makes him skilled in specialised jobs. Thus, an educated and trained labourer is likely to be more efficient.
2. Climatic conditions : Hot and tropical climate like that of India reduces the working capacity of labourers. Whereas in countries with cooler and more pleasant climatic conditions, workers can work for longer duration thereby increased efficiency of labour.
3. Working conditions : Better and healthy working conditions improve the efficiency of labour. Provision of adequate fresh air, light, safe drinking water, etc., boosts up the efficiency of labour. Whereas unhealthy working conditions reduces the efficiency of labour.

(b) According to the Banking Regulation Act, 1949, a commercial bank is a banking company which accepts deposits from the public for the purpose of lending or investment, repayable on demand or otherwise and withdrawable by cheque, draft or otherwise. It deals directly with the public.

The following are three ways by which Commercial Banks mobilise funds from the public :

1. Demand Deposits : The banks accept demand or current deposits mainly from businessmen and industrialists. These deposits can be withdrawn by cheques any time, and no interest paid on such deposits. Rather, customers have to pay certain charges to the bank for the services rendered.
2. Savings Deposits : These deposits are meant to mobilise the small savings of households or small investors. These are payable on demand and also with drawable by cheque, but with certain restrictions. A low rate of interest is paid on them.
3. Fixed Deposits : These deposits are fixed for a certain time period and can be withdrawn only after the maturity period. These deposits carry the highest rate of interest. The longer the period, the higher the rate of interest.

Question 8.
(a) Define Privatisation. Discuss two arguments each in favour and against privatisation.
(b) Read the following extract and answer the questions that follow: [8 + 7]

Economic Times, September 4th 2012

Terming payment of taxes as a ‘mark of civilisation ’. Finance Minister P. Chidambaram has assured that authorities will not “rashly “implement controversial retrospective tax rules while once again promising a non-adversial tax regime for all taxpayers. It is the second time in less than a week that Chidambaram has given assurance of a stable and fair tax regime, after the tax department attracted criticism for ushering in what some have called a “raid raj ” and for introducing a series of measures industry and investors have slammed as retrograde.
(i) Define direct tax. Give two examples.
(ii) State how a direct tax can foster social consciousness.
(iii) What is meant by a progressive direct tax? How does its imposition bring about equity?
(iv) State two demerits of direct tax.
Answers:
(a) Privatisation refers to the process of reducing participation of the public sector in economic activities of a country. The following are two arguments in favour of privatisation—

1. Poor performance of PSU ’s : PSU’s have continuously given poor performance due to inefficiency, corruption, etc. The public sector steeped in heavy losses, has become an economic burden on the country’s economy.
2. High Capital Output Ratio : The capital-output ratio in the public sector is high and ever increasing. Privatisation would provide a solution to this problem of high capital output ratio.

The following are two arguments against Privatisation :

1. Unbalanced Growth : Privatisation does not guarantee balanced regional growth. As the private sector is solely guided by profit motive, hence it is not interested in promoting development of all sections sectors of the economy.
2. Less emphasis on development of infrastructure: Private sector does not take any initiative for the development of social and economic infrastructure as these sectors are low return sectors. However development of infrastructure has a direct influence on the development of the country’s economy.

(b)

(i) Direct tax is a kind of tax which is actually paid by the person on whom it is imposed. The impact and incidence of a direct tax are on the same person. It is economical as its cost of collection is low. Eg., Income tax, Property tax.

(ii) Direct taxes can foster social consciousness by creating civic awareness and a sense of social responsibility among the tax-payers. As the tax-payer has to directly pay the tax from his own pocket to the government he keenly interested to see that these funds are properly utilised and this minimises wasteful public expenditure.

(iii) A progressive direct tax is one in which the rate of tax increases with increase in the taxpayer’s income. Such a tax is based on the connon of ability to pay. Its burden falls more heavily on the rich than on the poor. Thus, the economic burden of such a tax is equitably distributed on various income groups of the society. Hence, it brings about equity.

(iv) Two demerits of a direct tax are-

1. Possibility of evasion : The collection of direct taxes is dependent on the honesty and good intentions of the tax-payers. Hence, there is a great possibility of tax-evasion.
2. Inconvenience: Direct taxes are considered highly inconvenient by the tax-payers. The tax- payers have to maintain accounts and submit statements of their income with other relevant details. This creates inconvenience to the tax-payers.

Question 9.
(a) Define price elasticity of demand. Explain how the following factors determine price elasticity of demand: [7 + 8]
(i) Existence of substitute goods.
(ii) Nature of the commodity.
(iii) Proportion of expenditure incurred in a Household. Budget.
(b) State whether the following statements are true or false. Give reasons for each:
(i) If prices are expected to fall in the future current demand rises.
(ii) Slow growth rate in Indian agriculture has increased mobility of labour from rural to urban areas.
(iii) In a developing country like India public expenditure should not be incurred on infrastructural development.
(iv) An indirect tax can be made progressive by imposing higher tax rates on luxury goods.
Answers:
(a) Price eleasticity of demand is a measurement of percentage change in demand due to percentage change in own price of the commodity.

(i) Existence of substitute goods : Demand for a commodity will be more elastic, if there are close substitutes of the product available in the market, because if there is any increase in its price consumers have the option of switching over to the substitute product. For example, tea has its substitute in coffee. On the other hand, if there are no close substitutes available the product will have inelastic demand. Example – Cigrattes, liquor, etc.

(ii) Nature of the commodity : Elasticity of demand is very low for necessary goods like foodgrains, salt, medicines, textbooks, edible oil, etc., because the consumers have to consume a minimum amount of these goods irrespective of the changes in their prices. The elasticity of demand for luxury goods like care, jewellery, refrigerators etc. is very high as consumers are normally price-sensitive in case of such goods. Again, perishable goods like fruits, vegetables, fish, milk, etc., have inelastic demand whereas durable goods have more elastic demand.

(iii) Proportion of expenditure incurred in a Household Budget : Goods which consume a very small and insignificant proportion of the household budget have inelastic demand as the consumers overall budget is not much affected by changes in their price. For example, matchbox, toothpaste, safety pins, newspapers, etc., have inelastic demand. But goods like clothes, sugar, etc., which occupy a large share of the household budget, have more elastic demand.

(b)

1. False : If prices are expected to fall in future consumers will postpone their demand till prices have actually lowered. Hence, the current demand will not rise.
2. True: Indian workers tend to migrate from rural to urban areas in search of livelihood as agricultural activities are limited.
3. False : Infrastructural development is the backbone of overall growth and development of an economy so it is necessary to incur public expenditure on the development of social and economic infrastructure.
4. True : Luxury goods are normally purchased by the richer section of the society whose ability to pay is also higher. Hence, if luxury goods have higher taxes imposed on them it will be the higher income group paying the taxes along with the price of the product. In this way they can be made progressive.

Question 10.
(a) Under which type of a market are producers ‘price takers ’? Explain three of its characteristics. [7]
(b) With the help of a diagram state whether supply of a good is directly or inversely related to its price. Explain any four determinants of supply. [8]
Answers:
(a) Producers are ‘Price takers’ in a perfectly competitive market. In such a market condition individual firms or sellers sell a very small and insignificant portion of the total market produce hence they have no control over price. Industry is the price maker and each seller has to accept the price set by the industry, and adjust his sale output according to this price.

Three main characteristics of a perfectly competitive market are –

(i) Large number of buyers and sellers : The number of buyers and sellers in such a market infinite. Thus each buyer and seller buys and sells a very small negligible portion of the total market produce. So individual buyers and sellers cannot influence the market price of the product.

(ii) Homogeneous Products : All sellers in a perfectly competitive market sell completely identical products. There is no difference between the product sold by two sellers in terms of shape, size, colour, quantity, quality, packaging, etc. So there is no season for a buyer to prefer one sellers’s product to the other customers. Thus in such a market, uniform price prevails throughout the market.

(iii) Free entry and exit of firms : Firms are freely allowed to enter or leave the market under perfect competitor. There is no legal restriction on the entry or exit. If existing firms tend to earn abnormal profits, new firms can freely enter the market attracted by the abnormal profits. Thus, the total market supply increases and abnormal profits are wiped out. Similarly if existing firms incur heavy losses, some of them may leave the market thereby reducing the market supply till only normal profits are earned. Thus, in perfect competition firms can earn only normal profits in the long run.

(b) In the below figure SS is the supply curve for a normal curve. As price increases, the supply also increases and vice-versa. Hence, the supply curve is upward rising indicating a direct relation between supply and price.

The following are four determinants of supply-
(i) Price of related goods: If the price of substitute goods increases the supply of the original good will decrease as producers will find it more profitable to produce the substitute good. In case of complementary goods, if the price of the complementary good increases its supply will increase and consequently the supply of the original good will also increase, as the two goods are jointly demanded.

(ii) Prices of factors of production: An increase in the prices of factors of production will increase the cost of production. This in turn will reduce the profit margin for the producers and hence supply will decrease. If, on the other hand, prices of factors of production decrease, the cost of production is lowered and profit margin increases for the producers. Hence, supply also increases.

(iii) Technique of Production : If the technique is complex and needs large stock of capital, then the supply of the commodity will be less elastic, because production cannot be easily increased. On the other hand, goods involving simple technique of production will have more elastic supply.

(iv) Goals of the firm : If the firms goal is profit maximisation, more quantity will be supplied only at higher prices. But if the firm adopts the goal of sales maximisation, it will supply large quantities, even at the same price. Thus, supply will be influenced by the goals of the firm.

Solving ICSE Class 10 Economic Applications Previous Year Question Papers ICSE Class 10 Economic Applications Question Paper 2022 Semester 2 is the best way to boost your preparation for the board exams.

ICSE Class 10 Economic Applications Question Paper 2022 Solved Semester 2

Time : 1 1/2 hour
Maximum Marks: 50

General Instructions :

• Answers to this Paper must be written on the paper provided separately.
• You will not be allowed to write during the first 10 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.
• Attempt all questions from Section A and any four questions from Section B.
• The marks intended for questions are given in brackets [ ].

Section – A
(Attempt all questions)

Question 1.
Choose the correct answers to the questions from the given options. (Do not copy the question. Write the correct answer only.) [10]
(i) Which of these is the primary function of money?
(a) Store of value
(b) Standard of deferred payment
(c) Measure of value
(d) Transfer of value
Answer:
(c) Measure of value

Explanation :
Measurement of value of a commodity is the primary function of money.

(ii) Overdraft facility is usually availed by:
(a) Savings deposit holders
(b) Current account holders
(c) Fixed deposit holders
(d) Recurring deposit holders
Answer:
(b) Current account holders

Explanation :
Overdraft facility is generally provided to the current account holders.

(iii) “A policy under which the government uses its expenditure and revenue programmes to produce desirable effect and avoid undesirable effects on the national income production and employment” – This defines’.
(a) Monetary Policy
(b) Wage Policy
(c) Price Policy
(d) Fiscal Policy
Answer:
(d) Fiscal policy

Explanation:
Fiscal policy refers to the revenue and expenditure policy of the government to carry out her responsibilities.

(iv) Identify the tax which is most likely to foster civic consciousness:
(a) Property tax
(b) Entertainment tax
(c) Goods and Services tax
(d) Customs duty
Answer:
(a) Property tax
Explanation :
Property tax is a direct tax and direct taxes are considered to develop civic sense among the taxpayers.

(v) When money is used to settle debts or make payment in future, it is said to perform the function of:
(a) Standard of deferred payment
(b) Medium of exchange
(c) Transfer of value
(d) Store of value
Answer:
(a) Standard of deferred payments

Explanation :
When money is used to settle debts or make payments in future, it is said to perform the function of Standard of deferred payments.

(vi) Which of the following sections of the society is most adversely affected by inflation?
(a) Government
(b) Producers
(c) High income group
(d) Fixed income groups
Answer:
(d) Fixed income groups

Explanation :
Fixed income group people are the most adversely affected group in the case of inflation because their real income or the purchasing power gets eroded due to inflation.

(vii) Which of these are known as term/ time deposits?
(a) Fixed deposits and current accounts
(b) Current account and savings account
(c) Recurring deposits and fixed deposits
(d) Recurring deposits and savings account
Answer:
(c) Recurring deposits and fixed deposits

Explanation :
Recurring deposits and fixed deposits are considered to be term/ time deposits.

(viii) Purchasing power of money falls when:
(a) Prices decrease
(b) Prices increase
(c) Income increases
(d) Supply of money falls
Answer:
(A) Prices increase

Explanation :
Purchasing power of money falls when the prices increase. Sustained rise in prices is known as inflation.

(ix) The following table indicates:

Tax Base in	Rate of tax in %
10,000	8
20,000	8
30,000	8
40,000	8

(a) Progressive taxation
(b) Regressive taxation
(c) Proportional taxation
(d) Degressive taxation
Answer:
(c) Proportional taxation

Explanation :
Taxes in which the rate of tax remains constant, though the tax base changes, are called proportional taxes.

(x) Which of these banks formulates the credit control tools?
(a) Canara Bank
(b) Industrial Development Bank of India
(c) State Bank of India
(d) Reserve Bank of India
Answer:
(d) Reserve Bank of India

Explanation :
Reserve Bank of India is the Central Bank of the country which formulates the credit control policies.

Section – B
(Attempt any four questions from this Section)

Question 2.
(i) Why do producers gain in the short run during inflation? [2]
Answer:
During inflation, the producers and businessmen gain in the short-period. This happens because the cost of production, generally, does not match the pace with the rise in the price of the product during inflationary period. So, the producers earn an artificial margin of profit in the short period.

(ii) Give two reasons why the Government imposes tax. [2]
Answer:
Following are the two reasons of why government imposes taxes:

1. Government carries out many types of welfare activities for which it has to incur huge expenditure. The government raises fund through taxes for such expenditure.
2. There are many types of goods and services which are not desirable from the social point of view such as liquor, cigarettes, gambling etc. The government intends to discourage the consumption of such goods and services by imposing huge tax on them.

(iii) Explain the transfer of value function of money. [3]
Answer:
Money also acts as a means to transfer of value. As the money has the quality of general acceptability as a medium of exchange, it can be used in any purpose and at any place. Hence, value can be transferred from one person to another with the help of money. For example, when we pay the price of any commodity to its seller, we transfer the value to the seller.

Similarly, money is a quick and efficient means of transferring value from one place to another. For example, when we pay to online sellers from Chennai for any good or service, wre transfer the value from one place to another place. Similarly, money can be transferred from one use to another. Suppose a businessman has kept some fund for buying raw material but his machine breaks down. He may use that money for the repairing of the machine.

(iv) Explain how banks can advance loans through cash credit. [3]
Answer:
Cash credit is a loan arrangement in which a bank advances a ‘cash loan’ up to a specified limit to the customer against some security. The borrower needs to open a current account and the bank allows the borrower,to withdraw up to the full amount of the loan. The interest is chaiged only on the amount actually utilised by the borrower and not on the loan sanctioned. The bank takes into consideration the credit score of the borrower before extending cash credit to him.

Question 3.
(i) Define privatisation.   [2]
Answer:
Privatisation also known as disinvestment. It refers to the process of transferring the ownership of a public sector or government enterprise to the private individual or enterprise by the way of sale of shares or the asset.

(ii) State one important difference between fiscal and monetary policy. [2]
Answer:
The most important difference between the fiscal policy and monetary policy is that the fiscal policy are exercised by the government directly while the monetary policy is exercised by a country’s Central Bank on behalf of the government.

(iii) Explain how indirect taxes can be inflationary. [3]
Answer:
Indirect taxes tend to be highly inflationary. The imposition of indirect taxes on commodities increases their market price, this further tends to raise the cost of living, which leads to demand for rise in the wages of the workers. This increase in the cost of production compels the producer to raise the prices in the market. Thus indirect taxes generate a spiral of higher price, higher costs, higher wages and again higher price.

(iv) Why is the Central Bank called the ‘lender of the last resort”? [3]
Answer:
The Central Bank is the apex bank of the country. Alongwith being the banker to the bankers, the Central Bank also acts as the lender of the last resort for the banks. Hence, the Central Bank provides financial help to the Commercial Banks in times of emergency.

This financial emergency may emerge when due to shortage of funds with the commercial bank it is not able to arrange funds from other sources. Under such circumstances, the ‘Central Bank’ either grants loan or purchases the securities of that commercial bank to help it out. Thus, the ‘Central Bank’ of the country acts as a ‘lender of the last resort’ for the commercial banks.

Question 4.
(i) State any two differences between current deposits and fixed deposits. [2]
Answer:
Following are the differences between current deposit and fixed deposit:

Current Deposit	Fixed Deposit
1. There is no fixed period of deposit on this account.	1.  The deposit in this account is made for a fixed period.
2. The bank does not give any interest on this account.	2.   The bank provides highest interest on this account.

(ii) What is the impact of an increase in Cash Reserve Ratio on loanable funds? [2]
Answer:
Cash Reserve Ratio refers to a certain percentage of the total deposits of a commercial bank which it has to keep as reserve with the Central Bank. All the commercial banks have to maintain statutory cash reserve with the Central Bank.

The loanable capacity of a commercial bank gets reduced by the amount of cash reserve ratio. By increasing the cash reserve ratio, the excess reserve of the commercial bank is reduced which restricts the credit granting capacity of the commercial bank.

(iii) What do you understand by shifting of tax burden? Under which type of tax is this possible? [3]
Answer:
Shifting of tax burden refers to the transferring of final burden of paying the tax on someone else. It means that shifting of the tax burden involves impact of the tax on one person but the incidence of the tax on someone else. Under indirect tax system such as Goods and Services Tax, the shifting of tax burden can takes place.

For example, when a customer buys some commodity from a seller, the seller has to pay GST. The impact of GST is upon the seller of goods. But the seller does not pay the amount of the tax from his own pocket. He easily shifts the tax on to the customer, therefore, the incidence is upon the ultimate consumer.

(iv) What is creeping inflation? Explain its impact on the economy. [3]
Answer:
Creeping inflation occurs when there is a sustained rise in prices at a mild rate over a period of time, say around 2 to 3 percent per year. It is also known as ‘mild inflation’. This type of inflation is not much of a problem. This rate of inflation is considered to be conducive to economic progress and growth as it provides a kind of motivation to producers to expand their production which helps in creating the employment and raising the income further. In this form the prices rise gradually over a long period.

Question 5.
(i) Explain how Public Sector Enterprises can remove regional imbalance. [2]
Answer:
One of the objectives of establishing public sector undertakings was to remove the regional disparities. While some of the regions in India are highly developed, others are still backward. Private entrepreneurs are not generally interested in establishing industries in the backward regions as they are guided by profit motive and not by any societal motive. The public undertakings are therefore set up in the backward regions to have balanced development of the country.

(ii) Identify the following Credit Control measures undertaken by the Central Bank during inflation: [2]
(a) The Central Bank sells government approved securities to the public.
(b) The Central Bank increases the rate at which it lends to the Commercial bank.
Answer:
(a) This refers to the Open Market Operations of the Central Bank. Open market Operations involve the purchases or sale of government securities in an open market by the Central Bank for credit control.

(b) This action refers to the Bank Rate. The bank rate is the rate at which the Central Bank gives loans to the commercial banks or re-discounts the approved bills of exchange and securities held by the commercial banks.

(iii) What are progressive and regressive taxation? Which one is better and why? [3]
Answer:
Progressive tax refers to a tax system in which the rate of tax increases with the rise in tax payer’s income. Thus, in a progressive tax, the amount of tax will increase at a higher rate than the increase in tax base or income while the regressive tax refers to a tax system in which the rate of tax decreases as the payer’s income rise.

Progressive tax system is a better system because it is equitable, as a larger part of tax is on higher incomes. It is just as the law of diminishing marginal utility operates in the case of money. Hence, the disutility of paying a high tax by rich is not as much as that of poor in paying even a low tax.

(iv) Mention three arguments against privatisation. [3]
Answer:
Following are the three arguments against privatisation:

1. Public sector was established by the government with the objective of the general welfare. The private sector operates with the sole objective of profits and not general welfare.
2. Privatisation increases the economic inequality in the society. Privatisation creates big business conglomerates in the society which may spoil the businesses of small firms. This encourages economic concentration.
3. The social resources are utilised for the personal wealth creation and for this purpose they resort to false reporting which is harmful for the economy.

Question 6.
(i) Who normally keep their deposits in the Central bank? [2]
Answer:
The Central Bank acts as the banker to the government and the commercial banks of the country. As a banker to the government, the Central Bank makes and receives payments on behalf of the government and provides loans to the government. Similarly, as banker’s bank, the Central Bank accepts the reserves from the banks and provides loans to them in case of need.

(ii) State two drawbacks of direct taxes.  [2]
Answer:
Following are the two drawbacks of direct taxes:

1. Inconvenient: The greatest drawback of direct taxes is that they put the tax-payer to a lot of botheration and inconvenience. For example, the taxpayers have to maintain elaborate accounts for the enumeration of tax liability.
2. Disincentive: Direct taxes reduce the desire to work and save. As a part of hard earned income is taken away by the tax authorities without any corresponding benefits, it discourages the people to go on higher levels of income.

(iii) Mention any three features of a savings bank account. [3]
Answer:
Following are the three features of savings bank account:

1. This account provides the features of both the current account and the fixed deposit account. For example, it provides the withdrawal facility as available in current account and also provides the interest on deposits as is available with fixed deposit account.
2. This kind of account is opened by banks with the objective of collecting small savings from the people and households. Commercial organisations are not allowed to open this account.
3. The cheque facility is also available with this account.

(iv) Name the three types of Public Sector in India. |3]
Answer:
Following are the three types of public sector in India:
1. Departmental undertaking:
This type of public enterprises is formed as a department under some ministry of the government. It is generally formed to provide some essential goods or services to the public. Examples of departmental undertakings are Indian railways, postal department etc.

2. Statutory corporation:
Also known as public corporation, such kind of corporations are formed by the special acts passed by Parliament or assemblies. Examples of such organisations are Life Insurance Corporation of India, State Trading Corporation etc.

3. Government companies:
Government Company refers to an organisation registered under the Companies Act. The majority shares, i.e., 51 percent or more of the total shares are owned by the government.

Question 7.
(i) Why is money called legal tender? [2]
Answer:
A currency is considered to be a legal tender when it receives the government recognition and approval to be accepted as a medium of exchange in expediting the sale, purchase and debt transactions.

(ii) An indirect tax can be made progressive by imposing higher tax rates on luxuries. Justify the above statement. [2]
Answer:
The statement is absolutely true. The higher indirect tax such as Goods and Services Tax can be imposed on the luxury goods. It acts as progressive tax because the marginal utility of money for the rich people is very low in comparison to that of the low income people. Hence, higher indirect tax on luxuries gives rich people less disutility.

(iii) List three ways in which the Government can undertake privatisation. [3|
Answer:
Following are the three ways in which government can undertake privatisation:

1. Sale of shares: The majority of the shares of public sector enterprises are sold to the private sector entities. This gives them the ownership and management rights to carry out the activities of the organisation.
2. Sale of assets: The government sell the assets of the public sector to private sector to promote privatisation.
3. Displacement: Under displacement, the private enterprises are allowed to enter the market which was earlier reserved for public sector.

(iv) What do you understand by qualitative methods of credit control? Name two qualitative tools of credit control. [3]
Answer:
The qualitative measures include those actions which are concerned with the regulation, allocation and distribution of credit in the economy or make available concessional credit to specified classes of people. The two qualitative credit control measures are :
1. Moral Suasion : Suasion means to persuade, so it is a method of request and advice to the commercial banks by the Central Bank. Under certain circumstances, the Central Bank requests and persuades the commercial banks to grant or not to grant credits to certain sectors. Since, the Central Bank is the symbol of financial authority and sovereignty, the commercial banks honor such requests.

2. Direct Action: The method of direct action is used, sometimes, by Central Bank to implement its credit policies. Direct action refers to the actions involving punishment against the erring banks which do not follow the Central Bank’s directions.

Solving ICSE Class 10 Economic Applications Previous Year Question Papers ICSE Class 10 Economic Applications Question Paper 2012 is the best way to boost your preparation for the board exams.

ICSE Class 10 Economic Applications Question Paper 2012 Solved

Section – A (40 Marks)
(Attempt All questions from this Section)

Question 1.
Explain in brief the following terms:
(a) Ceteris paribus assumption of the law of demand [2]
(b) Fiscal Policy [2]
(c) Sunk Capital [2]
(d) Product Differentiation [2]
(e) Statutory Liquidity Ratio [2]
Answers:
(a) Ceteris paribus assumption of Law of Demand: Law of demand depends on the basic assumption of other things being equal (ceteris paribus). By other things we mean factors other than price which affect the demand for a commodity. For example, prices of related goods, tastes and preferences of consumer, income of the consumer, population, etc. For the law to operate correctly, there should be no change in any of these determinants.

(b) Fiscal Policy: Fiscal policy is the policy of a government with regard to its revenue and expenditure. Fiscal policy means the use of taxation and public expenditure by the government for stabilisation or growth. Government uses various tools or investments such as taxation policy, public expenditure policy, public debt policy and deficit financing to achieve the objectives of fiscal policy. The objectives of fiscal policy for developed economies are different from its objectives for underdeveloped economies. The basic objectives of fiscal policy in developed countries are:

1. Economic Stability
2. Full employment

In case of underdeveloped or developing economies, its basic objectives are:

1. Economic growth
2. Price stability
3. Reduction in inequalities
4. Attainment of external equilibrium.

(c) Sunk Capital: Capital is said to be sunk when it is put to some special use and it cannot be shifted to any other use. It always remains at the place where it is fixed. Factory, machine or roads can be described as sunk capital.

(d) Product Differentiation: It is the most important feature of a monopolistically competitive market. In monopolistic competition, products sold by different firms are close substitutes but differentiated. Each producer tries to differentiate his product with a view to attracting the buyers. Product differentiation may be real or imaginary.

1. Real or physical differentiation is based on difference in chemical components of the products, difference in quality, size, weight, design, colour, etc. For example, the calorie components of different cold drinks may differ or different brands of shirts may differ in terms of cotton and polyester mix.
2. Sometimes, differentiation is only imaginary or artificial such as difference in packaging, brand name, trade mark, advertising, salesmanship, etc. Buyers develop some preference for the products of particular sellers depending on their taste, income, nature, etc.

(e) Statutory Liquidity Ratio (SLR) : Every bank is required maintain a fixed percentage of their total demand and time liabilities in the form of liquid assets which may be:

1. Excess reserves
2. Government and other approved securities
3. Current account balances with other banks.

By changing SLR, the credit supply is affected. Increased SLR would reduce the credit supply and vice-versa.

Question 2.
(a) Distinguish between Fixed and Circulating Capital. [2]
(b) Explain one exception to the law of demand. [2]
(c) Mention the impact of advanced technology on the supply of a commodity. [2]
(d) What is meant by Running inflation? State its impact on fixed income groups. [2]
(e) Define a Degressive tax. [2]
Answers:
(a) Difference between Fixed and Circulating Capital: The fixed capital is used for the purchase of fixed assets, such as land, building, machinery, etc. On the other hand, the capital which can be used once or which becomes useless for the second time is called circulating capital such as materials, coal, kerosene oil, petrol, etc.

(b) Exceptions to the Law of Demand : According to the law, consumers purchase normally less of a commodity at a higher price and more of it at a lower price but there are situations when this may not hold good. Sometimes more of a commodity is purchased with rise in prices and less with fall in prices. Such a situation is called an exception. One of the exceptions to the Law of Demand is as follows:

• Status symbol goods: This type of goods are purchased not because of their intrinsic value but because of status or prestige value. The same jewellery when sold at low price sells poorly but offered at five times the price, sells quite well. Similarly, demand for colour T.V. set, video tape recorders has been rising because of their status symbols in spite of the fact that their prices have also been rising continuously.

(c) Impact of Technology on Supply of a Commodity : A change in technique of production which lessens cost of production, increases supply of the commodity and shifts supply curve rightward. As against it, supply of those goods which are being produced with old and inferior technology causing increase in cost of production will fall and supply curve will shift leftward. That is why efforts are constantly made by the producing units to evolve an efficient technology which reduces marginal cost of production. Under such conditions of falling marginal cost, supply curve shifts rightwards (i.e., below the old supply curve). Hence it follows that a technological progress shifts the supply curve to the right.

(d) Running Inflation: When the price level rises at a faster rate and is generally around 10 per cent per annum, it is called running inflation. It normally shows two digit inflation. Running inflation is a warning signal indicating the need for controlling it.

Impact on Fixed Income Groups: Fixed income earners such as pensioners lose during running inflation. First, in many cases, pension is fixed so that the money income of the pensioners remains same during inflation. Even when pensions are revised periodically, increase in pension does not keep pace with the rising prices. Second, pensioners keep their savings in the form of bank and postal deposits which give them a fixed income in the form of interest.

(e) Degressive Tax: A tax is called degressive when the rate of progression in taxation does not increase in the same proportion as the increase in income. In this case, the rate of tax increases upto a certain limit, after that a uniform rate is charged. For instance, in the personal income tax structure in India, as amended in 2011, income upto ₹ 1.8 lakh a year is exempted from income tax. The rate of income tax is 10 per cent for the income between ₹ 1.8 lakh to ₹ 5 lakh a year, which increases to 20 per cent for the income between ₹ 5 lakh a year to ₹ 8 lakh a year and all income above ₹ 8 lakh a year is taxed at a flat rate of 30 per cent. Thus, degressive tax is a combination of progressive and proportional taxation. It is mildly progressive.

Question 3.
(a) Capital is the result of past labour. Briefly explain. [2]
(b) Define Monopsony. [2]
(c) Producers in a Monopoly market are price makers. Briefly explain. [2]
(d) What is bank rate? How is it altered to correct a depression in an economy? [2]
Answers:
(a) Capital is the Result of Past Labour : All man-made goods which are used for further production of wealth are included in capital. Thus it is man-made material source of production. Alternatively all man-made aids to production which are not consumed for then own sake are termed as capital. It is produced means of production. Examples are: machines, tools, buildings, roads, bridges, raw material, trucks, factories, etc. Logically and chronologically, capital is derived from land and labour and has, therefore, been named as stored-up labour or the result of past labour.

(b) Monopsony: It is a market structure in which there is a single buyer for a good or service. It may arise under the following situations:

1. When consumers of a certain commodity are organised.
2. When a single large firm is the sole buyer of some commodity.
3. When a certain individual has liking or taste for some commodity which no one else requires.

Features:

1. A single buyer of a good, service or factor input.
2. Large number of sellers of a good, service or factor input.
3. A monopsonist is a price maker.
   Monopsony is the counter-part of monopoly in the buyer’s market.

(c) Producers in a Monopoly are Price Makers: Under monopoly, the seller (or producer) is price maker and not ‘price taker because being the only seller of his product in the market, he fixes/ influences the price in two alternative ways:

1. either he fixes the price himself and allows the output to be determined by the demand of the customers; or,
2. he fixes the quantity to be sold and allows the price to be determined by the customers in the market. Either way a monopolist has substantial control over price directly or indirectly. It is in this sense that he is said to be a price maker.

(d) Bank Rate (or Discount Rate): Bank rate refers to that bank rate at which a central bank gives credit to commercial banks or to discount’ bills of specified types. In other words, rise in bank rate increases rate of interest and fall in bank rate lowers rate of interest. During the course of inflation, monetary authority raises the bank rate to curb inflation. Higher bank rate will check the expansion of credit of commercial banks. On the contrary, during depression, bank rate is lowered, business community will prefer to have more and more loans to pull the economy out of depression. Therefore, bank rate (or discount rate) can be used in both types of situation i.e. inflation and depression.

(e) According to given:
Original price (P) = ₹ 100
Change in price (ΔP) = ₹ (15 – 10) = ₹ 5
Original quantity supplied (Q) = 200 units
Change in quantity supplied (AQ) = 225 – 200
= 25 units
Elasticity of supply (e_s) = \(\frac{\Delta Q}{Q} \times \frac{P}{\Delta P}\)
= \(\frac{25}{200} \times \frac{10}{5}\) = 0.25

Question 4.
Citing reasons state the advantage of
(a) A progressive tax over proportional tax. [2]
(b) Monopolistic competition over monopoly. [2]
(c) Private sector over public sector. [2]
(d) A direct tax over an indirect tax. [2]
(e) A credit card over currency notes. [2]
Answers:
(a) Advantage of a Progressive Tax over Proportional Tax:
In case of a proportional tax, the rate of taxation remains constant as the income of the tax-payer increases. In this tax system, all incomes are taxed at a single uniform rate irrespective of whether tax-payer’s income is high or low. However, in case of a progressive tax, the rate of tax goes on increasing with every increase in income. In other words, lower income is taxed at a lower rate, whereas higher income is taxed at a higher rate. For example, income upto ₹ 1 lakh a year may be taxed at a rate of 10 per cent, and income between ₹ 1 lakh and ₹ 2 lakh a year may be taxed at a rate of 20 per cent and so on. It is for this reason that a progressive tax is considered to better than a proportional tax.

(b) Advantage of Monopolistic Competition over Monopoly: Monopolistic competition is a market structure in which there are a large number of sellers selling closely related but differentiated products.
Products produced by such firms are close substitutes to each other. For example, toothpaste industry in which various firms like Colgate, Close-up, Pepsodent, etc. sell closely related products but differentiated on account of colour, size, taste, etc. Monopolistic competition has blending elements of monopoly as well as competition. This is because each producer has a monopoly control over his own product but at the same time has to face Competition from rival firms producing different varieties of the same product. It is for this reason that monopolistic competition is considered to be better as compared to monopoly.

(c) Advantage of Private Sector over Public Sector: Private sector is considered to be better than public sector because it leads to improvement in managerial efficiency, improvement in production, and greater investment & employment opportunities. Also it does not suffer from some of the serious drawbacks of public sector, such as:

1. low efficiency
2. low profitability
3. underutilisation of installed capacity
4. lack of functional autonomy
5. lack of incentive and dynamism.

(d) Advantage of a Direct Tax over an Indirect Tax : A direct tax is better than an indirect tax because of various reasons such as:

1. it is economical in the sense that the cost of collection is low as compared to an indirect tax.
2. its burden can be put more on the rich than on the poor by making its rate-structure progressive. This is not applicable in case of an indirect tax.

(e) Advantage of a Credit Card over Currency Notes: In modem times, credit cards are called as money. Credit cards are a form of identification which allows the individual to purchase commodities on credit. Thus, with a credit card, one can purchase goods without cash or cheques. This means credit cards allow one to purchase goods without using money but ultimately, all transactions are settled with the use of money. Its advantage over liquid money (currency notes) is that it is safer to cany from one place to another.

Section – B (60 Marks)
(Attempt any FOUR questions from this Section)

Question 5.
(a) Explain with the help of an example the Horizontal and the Vertical division of labour. Mention any three merits of division of labour. [7]
(b) Define Composite demand. Clearly explain any three determinants of demand in a market. [8]
Answers:
(a) Horizontal and Vertical division of labour : They are forms of process-based division of labour. In Horizontal division of labour, the production process is organised that the different parts of the process can run simultaneously. For example, in case of automobiles, different parts are manufactured simultaneously and then assembled together at the end.

In Vertical division of labour, the production process is organised in such a way that there are successive stages in the production of a commodity. For example, in cotton textile industries, raw cotton is first transformed into yam by spinning. Only then can the yam be woven into cloth. Thus, weaving depends upon spinning and dying depends upon weaving.

Merits of Division of Labour:

1. Right man at the right job: Every worker is assigned a job for which he is best suited. When the job matches worker’s capability, aptitude and taste, he gets job satisfaction and a motivation to give his best.
2. Increase in labour efficiency: Division of labour permits a worker to repeat the same task again and again. This gives him specialisation, proficiency and perfection in that task. This makes him expert in the job and improves his efficiency in terms of quantity and quality.
3. Saving of time: As the worker is required to carry out only one type of job, he is not required to move frequently from one job to another. Also he need not change the tool or machine now and then. This saves time and increases output.
4. Economics of large scale production: Division of labour facilitates economics of large scale production, both internal and external. This results in higher profits for the producers as well as reasonable prices for the consumers.
5. Facilitates occupational mobility: The worker becomes professional and specialized in a particular job process by performing it again and again. This facilitates his occupational mobility, both horizontal and vertical.
6. Increased employment opportunities: Due to the division of labour, the number and variety of jobs have increased. Complex process is simplified into several small steps so that even semi-skilled and unskilled workers get a chance for some kind of job.

(b) Composite Demand: Demand for a commodity which can be put to several uses is called composite demand, for example, demand for coal, steal, electricity, demand for milk that can be used for cheese, butter, tea, sweets, etc.

Determinants of Demand in a Market: All the factors that influence the individual demand are equally relevant in determining the market demand. Some of them are summarised below:

1. Price of the commodity.
2. Price of related commodities (substitutes and complimentary goods).
3. Consumer’s income.
4. Consumer credit facility.
5. Consumer’s tastes and preferences.
6. Consumer’s expectations.

Some other determinants of market demand are as follows:

1. Size and composition of population: An increase in the population size increases the demand for a commodity and vice versa. Population composition in terms of age, sex etc. also affects, the nature of demand for different commodities. For example, with an increase in the population of children, demand for toys, toffees, etc. will increase. Similarly with an increase in female population demand for goods meant for female will go up.
2. Income Distribution: Market Demand is also influenced by change in the distribution of income in the society. If income is equally distributed, there will be more demand. If income is not equally distributed, there will be less demand.
3. Government Policy : Due to tax on commodities such as sales tax, excise duty, etc. their prices rise and there is fall in demand. Due to subsidies the prices of commodities fall and their demand increases. Also if government incurs more expenditure on construction of roads, bridges, setting up of industries etc. then demand for cement, iron and other goods used for these purposes will increase.
4. Prevailing business conditions : During boom periods market demand increases, while the level of demand goes down during the period of depression.
5. Climatic factors : For example during summers demand for ice, air conditioner etc. increases. During rainy season rain coats, umbrellas, etc. are more in demand.

Question 6.
(a) What is meant by privatisation ? Explain in brief three arguments against privatisation of public sector units in India. [7]
(b) Explain four characteristics of a perfectly competitive market. [8]
Answers:
(a) Privatisation: Privatisation is the process which leads to transfer of ownership of public sector enterprises from the government to the private sector and the policy of granting autonomy to the public sector enterprises. Thus any process that reduces the participation of the state or public sector and greater role for private sector in economic activities of a country is called privatisation. Arguments against Privatisation of Public Sector in India : A number of arguments have been advanced against the policy of privatisation of public sector units in India. Some of them are as follows :

(i) Social welfare neglected: Public sector enterprises are set up to achieve social welfare, while private sector enterprises operate mainly with the aim of profit- maximisation. Private operaters would not like to provide goods at the subsidised prices to the poor consumers to promote social welfare.

(ii) Growth of Private, monopoly : Another genuine apprehension is that the sale of a public sector undertaking to a private company can only result in the substitution of a public monopoly by a private monopoly. This may lead to monopolistic exploitation by efficient private owners replacing the inefficient public ownership.

(iii) Possibility of corrupt practices: Implementation of the privatisation policy may open the door to corruption. There is the possibility of under-valuation of assets of public sector units to favour the private sector. There may be complicity between politicians, bureaucrats and particular business groups. In India, the sale of BALCO, a cash-rich public sector company, to Sterlite group in 2001, was in news for being heavily under valued.

(iv) Possibility of unemployment: One of the fears of labour is that privatisation leads to unemployment. The experience of privatisation in many countries is testimony to this fact.

(v) Cumbersome process: Privatisation needs strategic planning efforts as well as appropriate administrative apparatus to carry it out. However, in developing economy like India, this is not feasible due to cumbersome bureaucratic system.

(b) Characteristics of a Perfectly Competitive Market: Perfect competition is a market structure where there are a large number of firms producing a homogeneous product, so that no individual firm can influence the price of the commodity. Characteristics of a perfectly competitive market are as follows:

(i) Large number of buyers and sellers: Under perfect competition, number of buyers is very large and thus no single buyer can influence the market price of the good. Similarly, there are large number of sellers so that no single seller or firm can influence the market price. Therefore, the price is determined by the total supply of the industry and the total demand in the market. All buyers and sellers are ‘price-takers’.

(ii) Homogeneous products: All the firms sell goods which are completely identical with regard’ to quality, shape, colour, size, design, packing, servicing and all other attributes associated with the product. Thus buyers do not have preference for a particular seller. Thus, no firm has any basis for charging higher price for its product. This ensures a uniform price throughout the market.

(iii) Free entry and exit of firms: New firms can enter the industry without any time and cost barriers. Similarly, quitting the industry is also easy and quick. Thus, if existing firms in the industry make super normal profits, new firms can enter the industry so that extra profits are removed. If existing industries make losses they can move out of the industry so that losses are removed. Thus, all firms in perfect competition will make only normal profits in the long run.

(iv) Perfect knowledge: All the buyers, sellers and owners of factor services have perfect knowledge about the market conditions and changes in market conditions. Thus, no buyer or seller can take advantage of any exclusive knowledge that only he possesses and can make a profit. Each seller knows the prevailing market price and will not sell below it. Each buyer – also knows the prevailing price and quantity of the product. This ensures a single uniform price in the market.

(v) Perfect, mobility: There is no restriction on the movement of both-goods and factors of production. All factors of production can move from one firm or industry to another without any time lag or extra cost. Similarly, there is perfect mobility of goods from areas of surplus to areas of deficit. This condition ensures free entry and exit of firms, production of homogenous goods and a single uniform price in the market.

(vi) Absence of transportation cost: No buyer or seller incurs any transportation cost for buying or selling the product. This ensures a uniform price throughout the market. The location of different sellers in the market does not affect the price. No seller is close or far off from group of buyers.

(vii) Absence of selling cost: Selling costs are incurred by the firms to increase their sales such as expenditure on advertisement, publicity, etc. Under perfect competition, goods are completely identical and sold at uniform price. Hence, firms need not incur any selling cost.

(viii) Independent Decision : There is no agreement between the sellers regarding production, quantity and price. All firms are free to take their own decision.

Question 7.
(a) Explain the terms Impact, Shifting and Incidence of a tax. Explain in brief two merits of direct tax. [7]
(b) Define price elasticity of supply. With the help of suitable diagrams explain the following degrees a of elasticity.
(i) Perfectly elastic supply
(ii) Perfectly inelastic supply [8]
Answers:
(a) Impact, Shifting and Incidence of a tax : Direct taxes can be distinguished from indirect taxes on the basis of shifting of the ultimate burden (called incidence) of taxation. In this context, it is important to differentiate between impact of a tax and incidence of a tax. The impact of a tax refers to the person who pays it to the government in the first instance. The incidence of a tax refers to the money burden of a tax on the person who ultimately pays it. The impact and the incidence of tax is on the same person. He cannot shift or transfer the burden of tax on some other person; he has to pay it himself.

For example, income tax is a direct tax as it has to be paid by the person on whom it is levied. On the other hand, an indirect tax is that tax which is initially imposed on and paid by one individual, but the burden of which is passed over to some other individual who ultimately bears it. Indirect taxes are imposed upon and collected from producers and sellers but producers and sellers can shift the burden of these taxes on to the consumers. For example, excise duty on motor cars is paid in the first instance by the manufacturer of the cars, but ultimately he transfers the burden of this duty to the buyer of the car in the form of higher price.

Merits of Direct Taxes: The following are the merits of direct taxes:

1. Economical: Direct taxes are economical in the sense that cost of collecting these taxes is relatively low as they are usually collected at source and they are paid to the government directly by the tax-payers.
2. Certainty: Direct taxes satisfy the cannon of certainty. The tax-payers know how much they have to pay and on what basis they have to pay. The government also knows fairly definitely the amount of tax revenue it will receive. Thus, the direct taxes satisfy the cannon of certainty.
3. Equity: Direct taxes can be made to conform to the principle of ability to pay by choosing the appropriate rate-schedules. By making the rate-structure progressive, their burden can be put more on the rich than on the poor persons.
4. Reducing Inequalities: Direct taxes are progressive in nature. Rich people are subjected to higher rate of taxation as compared to poor people. Hence, these taxes can be used for reducing inequalities of income and wealth in the economy.
5. Elasticity: Another advantage of direct taxes is that these taxes are elastic as the government revenue can be increased by raising the tax rates in time of crisis. Moreover, the yield from direct taxes goes up with increase in income of the people.

(b) Price Elasticity of Supply : Price elasticity of supply indicates how sellers react to change in price. The greater the reaction, the greater will be the elasticity, lesser the reaction, the smaller will be the elasticity.
For example, if the price of wheat roes, the farmers may be tempted to sell more in the market, and keep less for themselves. On the other hand, if the price of cars falls, the car manufacturers may not probably be in a position to offer more cars for sale, because they may not be keeping stock of cars.
Price Elasticity of Supply

Diagrammatic Representation of Price Elasticity of Supply:

(i) Perfectly elastic supply (Es = ∞) : When supply of a commodity rises or falls to any extent without or with very little change in price, the supply of the commodity is said to be perfectly elastic or infinitely elastic supply. Here elasticity of supply = ∞

Price (₹ per kg)	Supply (kg)
20	100
20	300

(ii) Perfectly inelastic supply (Es = 0) : When quantity supplied does not change at all irrespective of any change in price of the commodity, it is said to be perfectly inelastic supply. Here elasticity of supply = 0

Price (₹ per kg)	Supply (kg)
10	50
20	50

Question 8.
(a) Define production. Explain threefactors which determine land productivity. [7]
(b) Explain an important characteristic of each of the following factors ofproduction:
(i) Land
(ii) Labour
(iii) Capital
(iv) Entrepreneur [8]
Answers:
(a) Production: Production is a process of creating various goods and services. It is a process of value adding.
Thus, ‘Production’ covers the whole field of creating the goods and the services in agriculture, industry, trade and many other sectors of the economy. The activities of men for increasing the supply of goods may also be included in ‘Production’.

Factors which Determine Land Productivity :
Productivity of land is defined as average output per unit of land i.e., output per acre, per hectare etc. It is calculated using following formula :
Productivity of land =

Productivity of land depends upon a large number of factors which are as follows:

1. Natural Factors: Land productivity is largely determined by its natural qualities such as fertility, climate, chemical and biological properties of the soil, slope of land etc.
2. Human Factors: Land is a passive factor of production. It cannot produce anything by itself, efforts of labour generate yield from land. Thus productivity of land also depends upon the knowledge and training of labour. A wise farmer can grow more produce on the same land than an untrained farmer.
3. Availability of Capital: Land productivity can be increased with the help of machines, chemical manures, improved seeds, implements and scientific methods. Intensive cultivation gives a higher productivity on a small piece of land.
4. Improvements on Land: Land development measures like provisions of well or tubewell for proper irrigation, hedging and fencing of fields, proper drainage, etc. have positive effects on the land productivity. In states like Punjab and Haryana, productivity is high mainly at because of adequate irrigation facilities which lack in case of states like Bihar and Orissa.
5. Population Pressure on Land: It adversely affects the average availability of land. The law of inheritance of equal land among children leads to subdivision and fragmentation of land holdings. These small pieces of land are uneconomic holdings where productivity of land tends to be low. These small holdings cannot take advantage of the large scale production and modem techniques of production.
6. Location of Land : For example, land located near water resources is more desirable and productive. Similarly, land located near the market is supposed to be more productive as money is saved in bringing the produce to the market.

(b) Characteristics of Factors of Production :

(i) Land

• Free Gift of Nature : Land is a gift of nature given to man free of cost. Rather, it existed long before the evolution of man. However, to improve the usefulness or fertility of land or extraction of minerals involves cost. Moreover, from the view point of entire economy, land may have a zero cost of production. But from the view point of any particular user, land too has at cost or a price. For example, if a farmer needs a piece of land for agricultural purposes, he has to purchase or hire it on rent.
• Fixed Supply: The supply of land available to the economy is relatively fixed, whereas supply of other factors of production can be increased.

(ii) Labour.

• Labour is inseparable from the Labourer: Land and capital can be separated from their owners but labour cannot be separated from a labourer. Labour and labourer are inseparable from each other. Labourer always carries his labour power with him. Thus, the labourer will have to present himself at a place where work is going on. For example, it is not possible for a teacher to teach in the school, while staying away at home.

(iii) Capital

• Mobility: It has the highest mobility amongst all the factors of production. It has both-place as well as occupational mobility, i.e., it is easily transferable from one place to another and also from one occupation to another. On the other hand, land is immobile, while labour has low mobility.
• Elastic Supply : The supply of capital is elastic and can be adjusted easily and quickly according to demand. On the other hand, the supply of land is fixed and supply of labour cannot be increased or decreased easily and quickly.

(iv) Entrepreneur

• Not a hired factor: One fundamental feature which distinguishes the entrepreneur from other factors of production is that while land, labour and capital are all hired factors, entrepreneur is not a hired factor. In fact, an entrepreneur hires other factors.
• Residual income : An important difference between an entrepreneur and other factors of production is that unlike the ‘rewards of the other factors, the reward of an entrepreneur is in the nature of residual. Labour gets wages, land gets rent and capital gets interest but an entrepreneur gets profit, which is the residue left after paying to other factors. Moreover, while the rewards of the other factors of production are always positive, the reward of an entrepreneur can be negative, i.e., may suffer losses.

Question 9.
(a) Name the bank which has sole authority to issue currency in India. Mention three ways by which it differs from a commercial bank. [7]
(b) Define money. Explain how money performs thefollowing functions:
(i) As a measure of value.
(ii) As a standard of deferred payment.
(iii) As a store of value. [8]
Answers:
(a) The Reserve Bank of India (RBI) has the sole monopoly to issue currency notes in India from ₹ 2 and above. The central government (Ministry of Finance) issues the one-rupee note and all coins but the responsibility for putting them into circulation rests with the RBI.

Difference between RBI and a Commercial Bank

	RBI (Central Bank)		Commercial Bank
1.	It is the apex bank in the money market of a country.	1.	It is merely a unit in the banking structure of the country.
2.	Its primary aim is general public welfare.	2.	Its primary aim is to make profit.
3.	It has the sole monopoly right to issue currency notes.	3.	A commercial bank is statutorily denied function of issuing notes.
4.	It cannot deal with the public.	4.	It directly deals with the public and business firms.
5.	It acts as a banker to the government.	5.	It has no such responsibility towards the state.
6.	It decides its monetary policy to realise economic stability and full employment in the country.	6.	It plays a supplementary role and is quite often regulated by the Central Bank
7.	It is custodian of Nation’s Gold and Foreign Exchange Reserve.	7.	It does not perform such function.
8.	The central bank does not accept any deposits or advance loans.	8.	Commercial banks accept deposits and advance loans.

(b) Meaning of Money : Money is a concept which we all understand but which is difficult to define in exact terms. Most definitions of money take ‘functions of money as their starting point. ‘Money is that which money does. According to Prof. Walker, ‘Money is as money does.’ This means that the term money should be used to include anything which performs the functions of money, viz., medium of exchange, measure of value, unit of account etc. Since general acceptability is the fundamental characteristic of money, therefore, money may be defined as ‘anything which is generally accepted by the people in exchange of goods and services or in repayment of debts’.

Functions of Money:

(i) As Measure of Value : Money serves as unit of account or a measure of value. Money is the measuring rod, i.e., it is the unit in terms of which the values of other commodities and services are measured and expressed different goods produced in the country are measured in different units, e.g., cloth in metres, milk in litres, sugar in kilograms. Without a common unit of measure, exchange of goods and services becomes very difficult. Values of all goods and services can be expressed in a single common unit called money. Again without a measure of value, there can be no pricing process.

The measuring rod of money is also indispensable to all forms of economic planning. Consumers compare the values of alternative purchases in terms of money. Producers compare the relative costliness of the factors of production in terms of money and also plan their output on the basis of the money yield. For example: Value of sugar can be expressed in monetary unit by saying that price of sugar is ₹ 25 per kg.

(ii) As a Standard of Deferred Payments: It refers to those payments which are made in future. Debts are usually expressed in terms of the money account. Loans are taken and repaid in terms of money. The use of money as the standard of deferred or delayed payments immensely simplifies borrowing and lending operations and thereby facilitates the formation of capital markets and the work of financial intermediaries like Stock Exchange, Investment Trust and Banks. Money is the link which connects the values of today with those of the future.

(iii) As a Store of Value: Money can store value of goods in liquid form. By spending it we can get any commodity in future. Holding money is equivalent to keeping a reserve of liquid assets because it can be easily converted into other things. People, therefore, normally wish to keep a part of their wealth in the form of money. This desire is known as liquidity preference. Thus it would seem that value can be stored by hoarding money. Wheat or any other product which will command a value cannot be stored, for a long period.

Question 10.
(a) What is a public sector undertaking? Explain three problems faced by public sector undertakings in India. [7]
(b) Read the excerpt given below and answer the questions that follow:
The Hindu, 11th July 2011.
“We need to remember that we should work towards bringing nearly 400 million citizens to the formal fold of the banking sector,” said RBI Deputy Governor, K.C. Chakraborty.
In rural areas, where accessibility is a problem, banks are using the Micro finance network business correspondents and facilitators to bring more people under the ambit of banking services.
(i) Why is it necessary to bring more people under the formal fold of the banking sector ? Give one reason. [1]
(ii) Mention one way by which people would benefit from banking services. [1]
(iii) Which stage of capital formation is the above extract referring to? Explain the stage in brief. [2]
(iv) Explain two ways in which banks accept deposits. [2]
(v) What is meant by cash credit ? [2]
Answers:
(a) (i) Public Sector Undertaking (PSU): The term ‘Public Sector’ covers all undertakings which are owned and managed by the government or by an agency or body set up by the government. The purpose is to promote public interest. Public sector undertaking are the industrial and commercial enterprises which are owned, managed and operated by the government. According to one of the many ways of defining a PSU: “By public enterprises is meant the industrial, commercial and economic activities carried out by the Central Government or by a State Government or jointly by the Central Government and a State Government.”

Public Sector can be classified into three broad categories:

1. Departmental undertakings
2. Statutory Corporations
3. Government companies.

Problems Faced by PSUs in India: Public sector undertakings are facing a number of problems due to which their performance has been much below expectations. Some of these problems are as follows:

(i) Low Efficiency : Public sector enterprises are characterised as inefficient. Main reasons for their inefficiency are their monopoly power and lack of competition, non-technical and bureaucratic regulations, political interference and absence of clear cut goals and objectives.

(ii) Low Profitability : Poor performance of the public sector enterprises is reflected in their low profits. Low profitability is partly due to the deliberate policy of keeping the prices of their products low for welfare and economic development considerations, particularly in case of public utilities like railways, electricity, telecommunication etc.

(iii) Sick Units: Public sector enterprises are also facing the problem of a large number of sick units. Sick units are those enterprises which have been showing continuous losses for several years. Continuation of sick enterprises involves a very high cost in terms of financial losses as well as locking up of resources in these enterprises.

(iv) Underutilisation of Installed Capacity: The output produced by the public sector enterprises is much below what they are capable of producing. Underutilisation of installed plant capacity is due to inefficient operation, poor management, labour disputes, etc. This underutilised capacity leads to an increase in average cost of production.

(v) Lack of Incentive: The government servants do not have the same incentive to do their best, as a man in private enterprise. In the government service, promotion is awarded by seniority instead of merit. Employees enjoy job security and are least concerned with the profitability of the enterprises. Indiscipline and lack of responsibility among the workers, frequent labour unrest, poor labour management relations also paralyse public sector enterprises.

(b) (i) More and more of people should be brought under the formal fold of the banking sector because banks provide the households the most important and reliable agency where they may deposit their surplus funds to earn interest income with high degree of security. Banks promote thrift and habit of saving among people by providing various attractive saving schemes. Banks make available these savings for productive investment and thereby promote capital formation, which is very vital for economic development of the country.

(ii) People will benefit from banking services in the following ways:

• Transfer of Funds: Banks help their customers in transferring funds from one place to another through cheques, drafts, mail transfers, tele transfers, etc.
• Collection and Making of Payments: Commercial banks collect and make various types of payments on behalf of their customers such as insurance premium, pension, dividends, interests, etc.

(iii) The given extract refers to the second stage of capital formation (Mobilisation of Savings).

• Mobilisation of Savings: Savings by itself does not ensure capital formation. Capital formation cannot take place, unless the savings of people are actually invested in the production of capital goods. Thus, the savings of various households and individuals need to be effectively mobilized and made available to businessmen and entrepreneurs for investment. Financial intermediaries such as banks, mutual funds, insurance companies, finance corporations, etc., play a significant role in bringing together the savers and investors.

(iv) Methods of Accepting Deposits by Commercial Banks: The primary function of a commercial bank is to accept deposits from people who have surplus funds with them. People deposit money with banks for safekeeping, convenience or to earn interest income. Commercial banks accept deposits in many ways. We discuss below two of them:

• Demand Deposits: Deposits in these accounts are payable to demand. These deposits can be withdrawn by the depositor any number of times he likes and can also withdraw the same any number of times he likes. These accounts are mostly held by traders, businessmen and industrialists who use these accounts for making business payments. Banks do not pay any interest on these deposits. Rather, the depositors have to pay something to the bank for the services rendered by it.

Savings Deposits : These deposits are also payable on demand and money can be withdrawn by cheques. However, the bank imposes a limit on the amount and number of withdrawals during a particular period. For example, a bank may allow its saving depositors only five cheques a month. These accounts are normally held by households who have idle cash for a short period. Saving accounts earn interest at nominal rates.

(v) Cash Credit : Cash credit is one of the several accounts commercial banks extend loans and advances to their customers. In case of cash credit, the entire sanctioned amount of loan but the bank is not given to the borrower at a particular time. The borrower is allowed to withdraw the sanctioned amount as and when he require money. Interest is charged only on the actual amount withdrawn from the bank.