ICSE 2015 Economics Question Paper Solved for Class 10

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

ICSE Class 10 Economics Question Paper 2015 Solved

Section – A (40 Marks)
(Attempt ALL Questions)

Question 1.
(a) State any two factors that determine the Division of labour. [2]
(b) Mention two ways by which land differs from other factors of production. [2]
(c) Define an Indirect tax with the help of an example. [2]
(d) Which of the following is considered as labour in Economics? Give a reason to support your answer. [2]

A professor working in a college
A social worker serving in an orphanage.

(e) What is the significance of Capital in promoting economic growth? [2]
Answers:
(a)

Skill.
Availability of technology.

(b)

Land is a natural factor of production.
Productivity of land varies from one place to another.

Excise Tax
VAT, value added tax.

(d)

Labour because he is involved in a productive activity.
No because he is not involved in a productive activity.

(e)

Capital is a basic input for all economic activities.
Capital can be helpful in improving other factors of production.

Question 2.
(a) What is meant by Cross elasticity of demand? [2]
(b) Mention any two factors that cause a rightward shift of the demand curve. [2]
(c) Distinguish between Normal goods and Inferior goods. [2]
(d) Draw a perfectly elastic supply curve. [2]
(e) Distinguish between Redeemable debt and irredeemable debt. [2]
Answers:
(a) In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good.

(b)

Increase in income (normal good)
Increase in expected future goods

(c)

Basis	Normal Goods	Inferior Goods
Definition	The goods whose demand increase with an increse in income.	The goods whose demand decreases with an increase in income.
Income/ Price Effect	Income effect is positive where as price effect is negative in case of inferior goods.	Both income and price effect is negative in case of normal goods.
Relation	There is direct relation between income and demand for normal goods.	There is an inverse relation between income and demand for inferior goods.

(d)

(e)

Redeemable public debt : Redeemable public debt is the debt that the Government promises to pay off at some predetermined future date. The Government regularly pays interest on this debt. The principal amount is paid back on the expiry of the due date. Therefore, in case of redeemable debt, the Government has to make arrangement for its repayment. Public debts are normally redeemable.
Irredeemable public debt : Irredeemable public debt is that debt the principal amount of which is never returned. The Government does not make any promise to pay it off at some future date. However, the Government continues to pay interest on it regularly. Such type of public debt is rare.

Question 3.
(a) Define creeping inflation. [2]
(b) Direct taxes are progressive in nature. Briefly explain. [2]
(c) Define efficiency of labour. [2]
(d) State any two demerits of Barter system of exchange. [2]
(e) Mention two differences between the Central bank and Commercial Bank. [2]
Answers:
(a)

A moderate annual increase in the price level is called creeping inflation.
Under this situation the rise in price level is at very slow rate over a period of time. But it is difficult to quantify. lt is also called Mild inflation.

(b) Direct tax are progressive in nature because there are levied as per the income slab. They are directly proportional to the income of an individual i.e higher the income higher the tax.
(c) An inherent ability of labour to perform the task allotted in the process of production.
(d)

Problem of double coincidence of want i.e both buyer and seller should be ready to exchange the goods.
Lack of common measure of value.

(e)

Central Bank	Commercial Bank
(i) Central Bank functions as the apex bank of the country.	(i) Commercial banks functions according to the rules and regulations stipulated by the central bank.
(ii)The central bank designs and controls all instruments of monetary policy of the country.	(ii) Commercial banks only executes the monetary policy as directed by the central bank.

Question 4.
(a) Explain briefly two differences between Recurring deposits and Fixed deposits. [2]
(b) What is meant by open market operation? How does it influence money supply? [2]
(c) Mention two causes of Consumer Exploitation. [2]
(d) WhatismeantbyRTl? [2]
(e) Distinguish between Fixed and Circulating capital quoting suitable examples. [2]
Answers:
(a)

Fixed or time deposit account : Cash is deposited in this account for a fixed time period. They are not payable on demand and do not enjoy chequing facilities.
Recurring deposit account : Under this account a specialised amount is deposited every month for specified period say 12, 24, 36, or 60 months.

(b)

Buying and selling of government securities in the market is known as open market operations.
Open market operations have an impact on the lending capacity of the banks.
It is an important mean of a controlling the money supply.
During inflation or excess demand situation the main motive of the Central Bank is to reduce the money
supply. To suck excess liquidity from the market the Central Bank sells bonds, government securities and treasury bills.
Due to low money supply there is fall in the volume of investment, income and employment resulting in lower demand.
During deflation the main motive of the Central bank is to increase the money supply and to increase the money supply the Central Bank buys bonds, government securities and treasury bills.

(c)

Limited information: In the absence of information about different aspects of the products namely price, quality, composition, conditions of use, terms of purchase, etc; the consumers are liable to make a wrong choice and lose money.
Wrong information: Companies spend a considerable amount on advertisements alone to attract consumers and feed information they want the consumer to know but not the information the consumer wants about the products.

(d) RTI is Right to Information Act which empower citizens to find out what is happening in government. The citizens have the right to seek any information from any public office.

(e)

(i) Fixed capital : Fixed capital needs relate to the investments that the business is required to make in purchasing real estate, i.e., land, buildings, stores, plant and machinery, interest during the period of construction of these assets etc. It is used in producing commodities continuously and for years. These are mostly long term needs of the industry. They may involve development capital, expansion and improvement capital and fixed working capital.

This capital is permanently invested in business and cannot be taken back at will without dissolution of the business. The amount of fixed capital required by a business would depend upon the nature of industry, scale of operations, the technique and method of handling production and the extent to which one or more of the activities are pursued. It is also affected by the mode of acquiring fixed assets i.e., outright purchase or obtaining them on hire- purchase or instalment payment.

(ii) Working capital: Money required by a company to meet out day-to-day expenses, to finance production and stocks, to pay wages and other production expenses, etc., is called the working capital of the company. Working capital requirements are ordinarily changing in its nature and form. Working capital is used in operating the business. It is mostly kept in circulation by realising it back after selling the products and reinvesting it in further production. It is because of this regular cycle that the working capital requirements are usually for short periods.

Section – B (40 Marks)
(Attempt any FOUR Questions)

Question 5.
(a) Define Division of labour. Explain three benefits of Division of labour to producers. [5]
(b) Define capital formation. Explain three causes of low capital formation in a developing economy. [5]
Answers :
(a) Division of labour implies the arrangement of labour power in such a way so as to maximize the amount and quality of the output.

Benefits:

Increase in efficiency: Division of labour increases the efficiency of a worker.
Improvement in quality: Due to increase in efficiency as a result of specialization, the quality of output also increases.
Optimum use of work force: Specialisation permits the optimum use of human as well as non human resources.

(b) Capital formation refers to net additions of capital stock such as equipment, buildings and other intermediate goods. A nation uses capital stock in combination with labour to provide services and produce goods; an increase in this capital stock is known as capital formation.

Low productivity: Per capita incomes are low in less- developed countries because of low productivity of human and non-human resources. There are various causes of low productivity in agriculture, industry and services.
Predominance of agriculture: Agriculture employs a very large proportion of the labour force in LDCs. Agriculture also accounts for a major share of the total output of goods and services.
Extremely uneven income distribution: In many LDCs, income is extremely unevenly distributed. A few people are extremely rich, while the vast majority lives in abject poverty.

Question 6.
(a) Mention five qualities of a good entrepreneur. [5]
(b) Differentiate between Decrease in demand and Contraction of demand. [5]
Answers:
(a)

He should have an optimistic outlook.
He should know how to handle human resources.
He should be creative.
He should have ability to plan.
He should have marketing skills.

(b)

Basis	Contraction in Demand or Decrease in Quantity Demanded	Decrease in Demand
Meaning	When the quantity demanded falls due to an increase in the rice, keeping other factors constant, it is known as contraction in demand.	When the demand falls due to an unfavourable change in the other factors, at the same price, it is known as decrease in demand.
Effect on Demand Curve	There is an upward movement (fig.) along the same demand curve.	There is a leftward shift (fig) in the demand curve.
Reason	It occurs due to an increase in the price of the given commodity.	It occurs due to an unfavourable change in the other factors like increase in the prices of complementary goods, decrease in income in case of normal goods, etc.

Question 7.
(a) What is meant by Shiji in supply? Explain three determinants of a lefiward shift of the supply curve? [5]
(b) Define Elasticity of demand. Explain briefly three determinants of elasticity of demand. [5]
Answer:
(a) When supply of a commodity changes due to change in any factor other than the price of the commodity.

Factors:

Use of outdated technology, causing a fall in efficiency and rise in cost of production.
Increase in factor price (like increase in price of raw material , wages etc) cause increase in cost of production.
Decrease in number of firms also decreases the market supply.

(b) The relative response of a change in quantity demanded to a change in price.

1. Availability of substitutes :

Demand for a commodity with large number of substitutes will be more elastic. The reason is that even a small rise in its prices will induce the buyers to buy the substitute.
For example tea and coffee are close substitutes and a minor rise in the price of tea will induce the consumers to switch over to coffee.
Thus, availability of close substitutes makes the demand sensitive to change in the prices. On the other hand, commodities with few or no substitutes like wheat and salt have less price elasticity of demand.

2. Income Level: Elasticity of demand is also affected by income level. It is generally less for higher income level groups as compared to people with low incomes. People falling under high income brackets are not influenced much by changes in the price of goods. But, poor people are highly affected by increase or decrease in the price of goods. As a result, demand for lower income group is highly elastic.

3. Price Level : Price level also affects the price elasticity of demand. The demand for high priced commodities is elastic. On the other hand the low priced goods is said to have inelastic demand. High priced commodities are luxurious goods and low priced goods are necessaries. Luxurious goods like LED TV, car, laptops, etc are mainly consumed by the people of high income brackets. However, demand for necessities like needle, match box, etc. is inelastic as change in prices of such goods do not change their demand by a considerable amount.

Question 8.
(a) What is meant by Public Expenditure? Explain three reasons for an increase in public expenditure in India. [5]
(b) Define a tax. Explain briefly three merits of a Direct tax. [5]
Answers:
(a) Public expenditure refers to the expenses incurred by public authorities for its own maintenance as also for the satisfaction of collective needs of the citizens or promoting their economic and social welfare.

Defence: An important factor responsible for increase in public expenditure is the large defence expenditure that the Government allocates to defend its country from the attack of other countries so as to maintain its sovereignty.
Population growth: Another important factor responsible for the increase in public expenditure is the growth in population. In India, the population has increased at an alarming rate. The population of India increased from 36 crores in 1951 to 102.7 crores in 2011.

(b) A tax is a compulsory charge or payment imposed by Government on individuals or corporations E.g. sales tax, excise tax etc.

Merits of Direct Taxes

1. Equitable : Direct taxes are based on the cannon of equity. Their burden is equitably distributed, as they are progressive in nature. As the income of a person increases, the rate of income tax also increases. So all direct taxes fall heavily on the people whose income and wealth increased. The poor are not affected by such taxes.

2. Certain : Direct tax satisfy the cannon of certainty. Tax payer is certain as to the time and manner of payment, and the amount of taxes to paid in the case of these taxes. Similarly, the government is also certain as to the amount of money it shall receive from these taxes.

3. Economical: These taxes also satisfy the cannon of economy. The cost of collection of direct taxes is low. In the case of income tax, it is deducted at the source from the salaried persons. The same officers can make the assessment of wealth, incomes, inheritances, gifts, etc. No separate staff is needed for each. Such taxes are also economical to the tax payers who make payment direct into the treasury.

Question 9.
(a) What is secondary functions of money? [5]
(b) What is meant by Cost push inflation ? Briefly explain thee of its determinants. [5]
Answers:
(a)

1. Store of value : In order to be a medium of exchange, money must hold its value over time; that is, it must be a store of value. If money could not be stored for some period of time and still remain valuable in exchange, it would not solve the double coincidence of wants problem and therefore would not be adopted as a medium of exchange. As a store of value, money is not unique; many other stores of value exist, such as land, works of art, and even baseball cards and stamps. Money may not even be
the best store of value because it depreciates with inflation. However, still money is used as store of value as :

It is more liquid than most other stores of value.
It is readily accepted everywhere.
It is easy and economical to store as its storage does not require much space.

2. Unit of account : Money also function as a unit of account, providing a common measure of the value of goods and services being exchanged. Knowing the value of price of a good, in terms of money, enables both the supplier and the purchaser of the good to make decisions about how much of the good to supply and how much of the good to purchase.

In the absence of common measure the seller has to express value of his good in all other goods. For example if you want to sell your horse you have to express its value.
1. Horse = 2 cows
1. Horse = 5 bags of wheat
1. Horse = 20 kg of iron

3. Standard of deferred payment

(i) Money is accepted as a standard of deferred payments because
(a) its price remains relatively stable compared to other commodities,
(b) it has the merit of general acceptability,
(c) it is more durable compared to other commodities. It is because of this function of money that there has been a significant expansion of trade.

(ii) Using money as a standard of deferred payments is a direct consequence of the unit of account and store of value functions of money.

(iii) Serving as a standard of deferred payments, money has stimulated the process of capital formation. It is because of this function of money that there has been a considerable growth of the money market as well as capital market.

(b) Cost-push inflation occurs when rise in price is due to rise in the cost of production. In this type of inflation, demand factor remains unchanged and supply factor plays an important role. Once this type of inflation sets in one industry, it spreads to all other industries of an economy. Main causes of cost-push inflation are:

Higher Wage Rates: Strong trade union ensures payment of higher wages. Due to this the producer shifts the burden of increase in cost to the consumer through price rise. An increase in price makes cost of living more expensive whereby again union demands more wages. Thus, it becomes never-ending wage price spiral.
Higher Profit Margin: Producers charge higher price to earn higher profit margin.
Higher Taxes: Sometimes, rise in the price of the commodity is due to increase in excise duties and other taxes imposed by the government. Due to this the producer raises the price.

Question 10.
(a) With reference to the Central Bank, explain the following. [5]

Monopoly of note issue
Lender of the last resort.

(b) ‘An alert consumer is a safe consumer ’. Give reason to support your answer. [5]
Answers :
(a)

Central bank of a country has the exclusive right of issuing notes or it is the only currency authority. It is the sole agency of note issuing in the country. Actually till the beginning of 20th century, the central bank was known as ‘Bank of Issue’. The notes issued by the central bank are an unlimited legal tender. Because of its sole currency authority, it has the following merits:
- The central bank imparts uniformity to the monetary system.
- People’s confidence in the currency of the country remains high, because the central bank enjoys the support of the Govt.
- It implies a central check on the supply of money in the country.
- It imparts elasticity to the monetary system.
- It is a profitable business. When it is done by the central bank, the profit so earned goes to the state exchequer.
1. The Central Bank acts as the lender of the last resort.
2. 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. The Central Bank provide this facility to protect the interest of the depositers and to prevent possible failure of the bank.
4. The commercial banks can borrow on the basis of eligible securities.

(b) When we as a consumer become conscious of the rights, while purchasing various goods and services he will be able to discriminate and make right choices. This calls for acquiring the knowledge and skill to become a well informed consumer.

While purchasing the goods, consumer should look at the quality of the product, the marked price, guarantee or warrantee period.
Consumer should preferably purchase standardize products which contain of ISI or Agmark.
A Consumer should ask for a cash -memo and warrantee card.
Consumer must be aware of his rights and duties.
Consumer should form consumer awareness organizations, which can be given representation in various committees formed by the government and other bodies in the matters relating to the consumers.
He should know the method how to proceed if he is cheated.