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 :
- Negotiating skill
- 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)
- Fixed Capital: As it will be used over many periods and will not get destroyed on being used once or twice.
- Working Capital: As they will get exhausted and converted into finished goods.
(c)
- Monopoly
- Perfect competition
- Monopolistic competition
- 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
Es = \(\frac{\frac{\Delta Q}{Q} \times 100}{\frac{\Delta P}{P} \times 100}=\frac{\frac{300}{100} \times 100}{\frac{20}{20} \times 100}\)
Es = 3
(d) The two functions are:
- Commercial banks may make various payments on behalf of their customers. E.g., Life Insurance Premium.
- It also collects various types of payments on behalf of their customers, e.g., Pension payments.
(e) The two reasons are as follows :
- Reduction in unproductive expenditure of the Government.
- 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.
- 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.
- The demand for commodity X will increase with a greater credit facility and will fall with less consumer credit facilities.
- 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:
- 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.
- 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)
- Land is a natural gift whereas capital is produced by the human being.
- The life of land is permanent whereas the life of capital is not permanent.
(iii) The two functions are as follow :
- Determines agricultural production: The supply of land resources in a country determines the level of agricultural production of that country.
- 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 :
- VAT (Value Added Tax)
- Service Tax
The two merits are as follow :
- 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).
- 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 :
- 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.
- 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:
- The products sold by the sellers are differentiated, yet they are closed substitutes.
- 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.
- 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.
- 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.
- 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 :
- 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.
- 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).
- 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.
- 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 :
- 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.
- 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.
- 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:
- Change in Reserve Ratio
- Credit Rationing.
(b) Explain four ways by which an entrepreneur can promote economic development. [8]
Answer:
(a)
- Monetary Policy which is Quantitative Credit Control Policy.
- 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. -
- 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.
- 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.