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

ICSE Class 10 Economics Question Paper 2016 Solved

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

Question 1.
(a) Define a Direct Tax. Give two examples. [2]
(b) State any two differences between an entrepreneur and other factors of production. [2]
(c) How does money help in maximizing utility ? [2]
(d) Explain two rights of a consumer. [2]
(e) Mention one way by which the Government can reduce the inequalities of income and wealth in an economy. [2]
Answers :
(a) Direct taxes refer to those taxes which are really paid by those on whom they are legally imposed.

Examples:

  1. Income Tax.
  2. Wealth Tax.

(b) Two differences between an entrepreneur and other factors of production are:

  1. Labourers get wages for the tasks they perform, whereas an entrepreneur hopes to get profit.
  2. Labourers have nothing to do with the risks involved in the business. They will be sure to get wages. But an entrepreneur has to bear all risks of business and his income in form of profit is not certain and fixed.

(c)

  1. Government realizes all taxes, fees, fines in terms of money.
  2. It enables the consumers in making payments for goods and services of their requirement.

(d) Two rights of a consumer are :

  1. Right to be heard: The consumer’s interests should receive due consideration at appropriate forums relating to consumer welfare:
  2. Right to consumer education : This includes knowledge about goods and issues relating to consumer welfare.

(e) One way by which the government can reduce the inequalities of income and wealth in an economy is Direct Tax.

As direct taxes are progressive in nature, rich people are subjected to higher taxes in taxation, while the poor are exempted from direct taxes. Hence, these taxes help in removing inequalities of income.

ICSE 2016 Economics Question Paper Solved for Class 10

Question 2.
(a) What is meant by contraction in demand ? [2]
(b) Mention two ways by which producers benefit from division of labour. [2]
(c) Mention the degree of Price elasticity of demand for the following goods.

  1. cosmetics
  2. medicine
  3. school uniform
  4. air conditioners [2]

(d) Explain briefly two factors affecting the productivity of land. [2]
(e) A special virtue of Indirect Taxes is that, they sometimes help in Social reforms. Explain. [2]
Answers:
(a) Other things being the same, when demand for a commodity falls as a result of rise in its price, it is called contraction in demand or decrease in quantity demanded.

(b) Two ways by which producers benefit from division of labour are:

  1. Right man at the right job : Since work is divided into a number of parts or sub-parts, each worker can be given a job according to his taste and preference.
  2. Cooperation among workers: The work cannot be completed unless workers cooperate with each other. Division of labour thus develops sense of cooperation among workers.

(c)

  1. Cosmetics – Unitary elastic demand.
  2. Medicine – Perfectly inelastic demand.
  3. School uniforms – Relatively inelastic demand.
  4. Air conditioners – Relatively elastic demand.

(d) Two factors affecting the productivity of land are :

  1. Natural factors : Productivity of land is largely determined by its natural qualities, such as fertility, slope of land, climate, chemical and biological properties of the soil.
  2. Improvements on land : Productivity of land is affected by land development measures, like provision of well or tube well, irrigation, proper drainage, fencing, etc.

(e) Check on consumption of harmful commodities :
Heavy indirect taxation on commodities like wine, opium, etc, serves a great social purpose. It may check their consumption and save the society from their harmful effects.

Question 3.
(a) Define Bank rate. [2]
(b) Mention two causes of increase in public expenditure in recent times. [2]
(c) Complete the following demand schedule: [2]

Price (₹) Qty. of Mangoes demanded (kgs)
350.00 2
300.00
250.00
200.00
150.00
100.00

(d) Draw a perfectly inelastic supply curve. [2]
(e) Explain one cause for low capita/formation in India. [2]
Answers:
(a) The bank rate is the rate at which a central bank lends money to member commercial banks against approved securities or eligible bills of exchange.

(b) Two causes of increase in public expenditure in recent times are:

Political causes:

  1. Growth of democracy : Expenditure on elections and by-elections is increasing. Number of ministers and executive officers has also been increased. The ruling party has to fulfil its promises and launch new programmes to persuade public opinion in its favour. This also require increasing state expenses in order to provide new amenities and opportunities to the people at large.
  2. Increase in defence expenditure : International political situation is uncertain and insecure. People are always afraid of a war. Hence, every nation must be strong enough to protect itself to the extent possible for it. This has led to the increase in defence expenditure.

ICSE 2016 Economics Question Paper Solved for Class 10

(c)

Price (₹) Qty. of Mangoes demanded (kgs)
350.00 2
300.00 3
250.00 4
200.00 5
150.00 6
100.00 7

(d)
ICSE 2016 Economics Question Paper Solved for Class 10 1

Price (₹) Qty. supplied
4 10
5 10
6 10

(e) One cause for low capital formation in india is :

  1. Most of the Public sector units (PSUs) have been running under losses.

Question 4.
(a) What is the impact of the level of technology on supply?[2]
(b) Define creeping inflation. Why is it considered good for an economy? [2]
(c) Mention two differences between fired deposits and demand deposits. [2]
(d) What is meant by a Degressive Tax system? [2]
(e) Define simple division of labour [2]
Answers:
(a) If the producers make use of improved and advanced technology in their process of production, the cost of production will come down. Total supplies, 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.

(b) When the rise in price is very slow like that of a snail or creeper, it is called creeping inflation. In terms of speed, prices rise about 2 percent annually which is regarded safe and essential for economic growth because it keeps the economy away from stagnation. But some economist regard creeping inflation as dangerous for the economy. According to them, in the beginning creeping inflation may look simple, but as time passes, it may assume alarming proportions.

(c)

Fixed Deposit Demand Deposit
(i) They are not chequeable.

(ii) These deposits constitute a part of money supply.

(i) They are chequeable.

(ii) They fall under the category of near money or liquid assets.

(d) Under this system, the rate of tax increases upto a certain limit but after that a uniform rate is charged.

(e) Product based division of labour is also known as simple division of labour. Under it, everybody performs a particular occupation. The entire work is done by the same person. The activities of blacksmiths, carpenters, tailors are some examples of product based or simple division of labour.

Section – B
(Attempt any FOUR Questions from this Section)

Question 5.
(a) Define demand. Explain clearly two factors which determine demand. [5]
(b) Explain four important characteristics of labour as a factor of production. [5]
Answers:
(a) Demand refers to the quantity of a commodity that a consumer is willing to buy at different prices with a given period of time. If demand is made by an individual, it is called individual demand. And, if it is made by all the consumers in the market, it is termed as market demand. Two factors which determine demand are :

(i) Determinants of individual demand

  1. Taste and preferences: The amount demanded of a commodity also depends on consumer’s tastes and preferences. When we begin to like certain commodities, their demand will increase. Reverse will happen, if we start disliking them.
  2. Consumer credit facility : If credit facilities provided at low rates of interest by the banks, or sellers of the commodity households would be encouraged to buy more than what they would buy in their absence. For instance, demand for cars will increase, if car loans from banks are easily and cheaply available. Similarly demand for residential houses will rise, if home loans are made cheaper.

(ii) Determinants of market demand

  1. Government policy : Government policy of a country can also affect the demand for a particular commodity or commodities. It may reduce the demand for a commodity by imposing tax on it or increase the demand by lowering its price through subsidies.
  2. State of business : The prevailing business conditions in a country also affect the level of demand. For example, during boom periods, market demand will increase. On the other hand, the level of demand goes down during the period of depression.

ICSE 2016 Economics Question Paper Solved for Class 10

(b) Four important characteristics of labour as a factor of production are :

  1. Labourer sells his labour, not himself : The labourer does not sell himself, he sells his labour only. A labourer may or may not agree to do work. He remains quite independent while doing his task.
  2. 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.
  3. 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.
  4. Labour can improve its efficiency : By investing capital on worker’s education and training, the productivity of labour can be improved.

Question 6.
(a) Define Public expenditure. Explain two ways by which it promotes economic development. [5]
(b) What is meant by efficiency of labour ? Explain three causes of low efficiency of labour in India. [5]
Answers:
(a) Public expenditure refers to the expenses incurred by public authorities central, state and local governments to satisfy common wants. The government imposes taxes and earns revenue from other sources to meet its expenditure requirements.

Two ways by which it promote economic development are :

  1. To increase the production of certain essential commodities to end private monopolies in various spheres, the state starts public enterprises.
  2. Public expenditure on the establishment of heavy and basic goods industries in the initial periods increases the growth rate of the economy.

(b) Efficiency of labour implies the productive capacity of a worker. It is influenced by several factors like climate, education and training, working conditions, level of wages, the type of machines and tools used, employer- employee relation, etc.

Three causes of low efficiency of labour in India are :

  1. Hot climate : India is a subtropical country and its climate is hot. This is the most important natural cause of low efficiency of Indian labour.
  2. Poor technology: The machines are either outdated and of poor standard. Besides, frequent breakdown of machines and electricity, causes the downfall in the efficiency of Indian workers.
  3. Education and training : It is found that the Indian workers do not have proper education and training about the work. This lowers their efficiency.

Question 7.
(a) With the help of a diagram explain the meaning of Increase in supply and Decrease in supply. [5]
(b) What is meant by consumer awareness ? Explain briefly four ways by which consumers are exploited. [5]
Answers:
(a)

Increase in supply

Decrease in supply

(i) In a shift of the supply curve, a new supply curve is drawn. When the supply of a commodity increases due to favourable changes in factors other than price of the product’s own price,t is termed as increase in supply. (i) When there is a decrease in supply, the supply curve shifts to the leftward. When the supply of a commodity falls due to unfavourable changes in factors other than the commodity’s own price, it is called decrease in supply.
(ii) Causes

  • Improvements in technology.
  • Fall in the prices of factors of production.
  • Changes in the goals of the firms.
  • Increase in the number of firms.
(ii) Causes

  • Obsolete technique of production.
  • Increase in the prices of related goods.
  • Increase in the cost of production.
  • Decrease in the number of firms.
(iii)
ICSE 2016 Economics Question Paper Solved for Class 10 2
(iii)
ICSE 2016 Economics Question Paper Solved for Class 10 3
(iv)
ICSE 2016 Economics Question Paper Solved for Class 10 4
(iv)
ICSE 2016 Economics Question Paper Solved for Class 10 5

(b) Consumer’s consciousness towards their rights and duties is known as consumer awareness.
Four ways by which consumers are exploited are :

  1. Underweight and under measurement: The goods being sold in the market are sometimes not measured or weighed correctly.
  2. Sub-standard quality : The goods sold are sometimes of sub-standard quality. Selling of medicines beyond their expiry dates and supply of defective home appliances are generally the regular guidances of consumers.
  3. Duplicate articles : In the name of genuine parts, duplicate items are being sold to the consumers.
  4. High prices : Very often the traders charge a price higher than the prescribed retail price.

ICSE 2016 Economics Question Paper Solved for Class 10

Question 8.
(a) Define money. Explain the Primary functions of money. [5]
(b) Mention five differences between a Direct Tax and an Indirect Tax. [5]
Answers:
(a) Money may be anything chosen by common consent as a medium of exchange. It is accepted in payment for goods and services and in settlement of debts.

Primary functions of money are :

(i) Medium of exchange : Medium of exchange is considered to be the first and the most important function of money. As money has the quality of general acceptability, therefore all the exchanges in an economy take place in terms of money.

While functioning as medium of exchange, money benefits the society in many ways.

  1. It overcomes the difficulties of barter system.
  2. It promotes transactional efficiency in exchange with minimum effort and time. By acting as an intermediary, it increases the ease of trade.
  3. It allows freedom of choice in the sense that a person can use money to buy goods of his choice from people who offer him the best bargain.

(ii) Measure of value: 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 is a useful measuring rod of value when its own value remains stable. As the value of money is linked to its purchasing power, the general price rise or fall effects the purchasing power. Money also acts as a unit of account. For instance, the rupee is the unit of account in India, the dollar is the unit of account in USA and so on.

(b)

Direct Tax Indirect Tax
(i) Taxes imposed on income or properties are direct taxes.

(ii) They are directly paid to government by the person on whom it is imposed.

(iii) They cannot be shifted on to others.

(iv) These taxes are levied according to the ability of the tax-payer.

(v) Examples : Income tax, Wealth tax, Corporation tax, Estate Duty.

(i) Taxes imposed on commodities are indirect taxes.

(ii) They are paid to the government by one person but their burden is borne by another.

(iii) They can be shifted on to others.

(iv) These are the taxes in which tax paying ability of the tax-payer is assessed indirectly.

(v) Examples : VAT, Excise duty, Customs duty, service tax etc.

Question 9.
(a) Explain briefly the five agency functions of a Commercial Bank. [5]
(b) Define Capital. Differentiate the following, with examples: [5]
(i) Real Capital and Debt Capital
(ii) Money Capital and Sunk Capital
Answers:
(a) Five agency functions of a commercial bank are :

  1. Collecting receipts : Banks collect amounts of cheques, bills, promissory notes and hundies on behalf of their customers. They also collect interest, dividend and rent on the instructions of their customers.
  2. Making payments: On the instructions of customers, banks make payments of loan instalments, interest, rent, insurance premium, taxes, etc., on behalf of account holders.
  3. Purchase and sale of securities : Banks undertake purchase and sale of various securities like share stocks, bonds, debentures, etc., on behalf of their customers.
  4. Trustee and Executer: Banks preserve the wills of their customers and execute them after their death.
  5. Transfer of funds : Banks help their customers in transferring funds from one place to another through cheques, drafts, etc. On account of their network branches, throughout the country, they can easily provide this remittance facility.

(b) Capital refers to those reproducible or man-made durable goods that are used as inputs to produce other goods and services in the future.

(b)

(i)                          Real Capital Debt Capital
Real capital refers to the physical stock of goods which are used as inputs in the production process. Thus, the machines, raw materials etc. are the examples of real capital. This is also called concrete capital. The contribution of real capital towards the increase in national output of any country is certainly more important than the money capital, because money capital does not necessarily contribute towards the increase in national output. Debt capital consists of titles to wealth, like share, debentures, government promissory notes, etc. They represent invested funds and yield income. For example, if any individual invests his fund in purchasing IDBI flexibonds, ICICI bonds, etc., in our country, then he will earn fixed interest income on the value of those bonds. Hence, the bonds are considered as debt capital.
(ii) Money Capital Sunk Capital
We may use the term ‘Money Capital’ or ‘Finance Capital’ to describe capital in terms of money. Money itself is not a means of production. However, money can be used for buying capital goods (like machines, and raw materials). It would not be wrong to treat the money used for this purpose as capital. Sunk capital is that which can only be put to a single use. It is also called as ‘specialised capital.’ It always remains at the place where it is fixed. For example, a printing machine can only be put for printing and nothing else.

Question 10.
(a) What is meant by Price elasticity of supply ? Explain three factors which determine elasticity of supply. [5]
(b) Explain the following: [5]
(i) Internal and External debt
(ii) Productive and Unproductive debt
Answers:
(a) The price elasticity of supply indicates the responsiveness iri quantity supplied of a commodity due to one percent change in the price of that commodity. It is expressed as follows:
ICSE 2016 Economics Question Paper Solved for Class 10 6

Three factors which determine elasticity of supply are :

  1. Length of time : Price elasticity of supply also depends upon the length of time for response. It may be difficult to change quantities supplied in few weeks or months in response to price change but easy to do so over a period of year. Therefore supply tends to be relatively inelastic in the short-run and relatively elastic is the long-run.
  2. Behaviour of cost of production : Elasticity of supply is influenced by how cost of production respond to automatic changes. If an increase in output by the firms in an industry causes only a small increase in their cost per unit or leads to decrease in cost per unit, supply will be fairly elastic. If, on the other hand, an increase in cost of production, the supply would be relatively inelastic.
  3. Risk-taking: The elasticity of supply is determined by the willingness of the entrepreneurs to take risk. If entrepreneurs are willing to take risk, the supply will be more elastic. On the other hand, if entrepreneurs hesitate to take risk, the supply will be inelastic.

ICSE 2016 Economics Question Paper Solved for Class 10

(b)

(i) Internal debt is that debt which is raised by the government from individual and institutions, etc. within the country. In the case of external debt, the government borrows from persons, institutions or governments of foreign countries. Internal debt is taken mainly for internal purposes as financing of development expenditure within the country while external debt is incurred both for development purposes and for meeting the balance of payment deficits.

The payment of interest on foreign debt reduces the national income of the debter country by transferring a part of its income remains the same in case of internal debt. Hence, external debts impose a greater burden on the domestic economy. However, they should not be considered bad if the same are used for productive purpose.

(ii) Productive debts are those debts which are used by the government for those projects which yield income. In other words, debt is said to be productive when it is used to finance a project which brings revenue to the government. For example, loans used for the construction of railways, irrigation and power projects and for the establishment of heavy industries such as iron and steel, cement, fertilisers, etc. The income earned from these projects is enough to pay the interest of the loan along with the principal.

Thus, productive loans should not be considered a burden on the government. On the other hand, unproductive loans refer to those loans which are incurred on those projects which do not yield any income. For example, loans taken by the government to finance a war and for covering the budgetary deficit are unproductive loans. Such loans do not add to the productive capacity of the economy. Unproductive loans are considered as a dead weight upon the government.