ICSE – X : 2023–’24 Economic Application : Mock Test–2 MODEL ANSWER

(ii) (a) Creeping inflation Hyper inflation

When the price level increases at Price rises at the rate of 200% or
a very slow rate that is 2.5 to 25 p.a. more per month.

(b) Central bank Commercial bank

Has the monopoly of note issue. Donot enjoy such right.
Main motive is not to earn profit. Main motive is to earn profit.

(c) Price maker Price taker

Can infuence the market price by Cannot influence the market price
changing supply. by changing supply.
Monopoly Perfect competition.

(d) Public sector Private sector

Owned & managed by Govt. Owned & managed by private individuals.
Social welfare is the main motive. Profit is the main motive.
9. (i) (a) Monopolistic Competitive market.

Monopolistic Competition Monopsony

Large number of buyers & sellers. Single buyer but large number of sellers.
Sellers influence the price. Buyers influence the price.
(b) Large number of buyers and sellers exists in the market.
Restrictions on entry into or exit from the market are absent.
The Principal goal of a firm is to maximise its profit.
(c) Existence of Product differentiation.
Importance of selling cost.
(ii) (a) Two qualitative methods of credit control :
Margin money : This implies the minimum margins to be kept by the borrowers with commercial
banks while borrowing money against specific securities from commercial banks.
Moral suasion : It is a moral appeal of the RBI to commercial banks wiging them to restrian
from certain lines of credit operations.
(b) Primary functions of money : Medium of exchange — The major function of money is to
facilitate the process of exchange by removing the defects of barter system.
Measure of value : Money is the measure of value. The price of any one good has to be
expressed in terms of another.

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ICSE – X : 2023–’24 Economic Application : Mock Test–2 MODEL ANSWER

7. (i) (a)  CRR SLR

Every commercial bank had to keep Every commercial bank are to maintain
a certain minimum cash reserves liquid assets in the form of cash, gold
with RBI. and other securities.

 Direct tax Indirect tax

Impact and incidene of tax falls on Impact and incidence of tax falls on
same person. two different person.
Small coverage Wide coverage.
(b) Two problems of public sector :
 Cost Over run
 Lack of competitiveness.
(c) Two secondary functions of money :
 Standard of deferred payment.
 Store of value.

(ii) (a) Time deposit Demand deposit

Here, a given amount can be withdrawn This amount can be wirhdrawn at any
only after a maturity period. time on demand.
The rate of interest is high. The rate of interest is low.

(b) Term Loans : Entire sanctioned amount is credited to the current account of the borrower
and interest is charged on entire amount sanctioned.
Cash Credit : Cash credit is sanctioned as per requirement and borrower pays interest on
the amount withdrawn.
8. (i) The per capital availability of land is decreasing with growing population and so the land area
is used more purposes.
Land Use Impact on ecosystem
1. Agriculture Reduction in forest cover damage to surface and ground
water resources.
2. Building of dwelling Reduction in forest cover, encroachment on croplands,
places & Urbansation grasslands, waterlands and plains, damage to water resources.
3. Construction of dams Loss of forest & agricultural lands, migration of project
& hydropower plants. affected people, reduction in the flow of river in the
downstream, etc.

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ICSE – X : 2023–’24 Economic Application : Mock Test–2 MODEL ANSWER

Four advantages of division of labour :

Increase in the efficiency of labour.
Quality of Production improves.
Rise in profits
Large scale production.
(ii) Four reasons for downward sloping demand curve :
Income effect — with the fall in price, consumer's real in come increases and increases the demand.
Substitution effect — When price of the commodity falls, this commodity becomes relatively cheaper
than its substitutes.
Demand for this commodity increases.
(iii) Increase in number of consumers — With the fall in price, many new consumers can now afford
to but the commodity and therefore demand increases.
(iv) Several uses of the commodity — If the price of such goods fall then it can be used for many
other purposes and therefore its demand increases.

6. (i) (a) Monopolistic competition Perfect competition

Each firm sells differentiated products. Each firm sells homogeneous products.
Each firm possesses some degree of Each firm does not have any control
control over the market price. over the market price.

(b) Labour Entrepreneur

Performs mainly physical work. Performs both physical and mental works
involves planning & organising.
It does not involve any risk taking It involves risk taking activities.
activity.

(c) Simple division of labour Complex division of labour

This division of labour force into The different parts of a production
different occupations. process is ofter entrusted to different
groups of workers.
(d) Monopoly market.
(ii) (a) Creation of a competitive business environment Reduction in unproductive expenditure of the
Govt.
(b) Broad coverage of Indirect tax.
Work effort is not reduced.
(c) Money solved the problem of Lack of Double coincidence of wants.
Money solved the problem involved in deferred payments.
(d) More efficient
Full utilisation of resources.

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ICSE – X : 2023–’24 Economic Application : Mock Test–2 MODEL ANSWER

3. (i) Further increase in the wage rate, the individual worker may prefer leisure to income.
(ii) (a) Monopoly.
(b) Price discrimination.
(iii) (a) Reduction to taxes increases the disposable income of tax payers and so demand for various
goods increases and due to subsidies, the investible funds with Private Sector will rise.
(b) Mention one positive outcome for such government action Economic growth.
(iv) Land, it is a free gift of nature.
(v) Debtors will lose during inflation as they are actually receiving an amount having lower value than
before.
SECTION B
4. (i) (a) A change in the stock of capital in any economy during any particular time period is called
capital formation.
(b) Three factors affecting capital formation.
Personal saving
Profits of Public Sector enterprise.
Financial Institutions.
Two reasons for low capital formation :
Lack of ability to save
Inadequate mobilisation of savings.
(ii) (a) Elasticity of supply measures the degree of responsiveness of quantity supplied to changes
in the own price of the commodity.
Y Y S
1
E 6> S
Price Price

O X O X
Qty Q Qty
% charge in supply No change in supply
is more than % charge even with a change
in price. in price.
E.g. Luxury goods. E.g. Antique products.
(b) Factors affecting elasticity of supply :
Nature the Commodity — Perishable goods Inelastic.
Durable goods Elastic.
Risk taking — Taking risk Elastic.
No risk taken Inelastic.
5. (i) Division of labour we mean the allocation of different parts of the production process to different
workers or to different groups of workers.

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 PATHFINDER EDUCATIONAL CENTRE LLP

ICSE - X : 2023 – ’24 ECONOMIC APPLICATION Mock Test – 2

Model Answer

SECTION A
1. (i) (d) Both A and R are True but R doesn’t explain A.
(ii) (b) Slopes downward.
(iii) (a) Elastic.
(iv) (d) Entrepreneur.
(v) (c) Rightward shiftment of supply curve.
(vi) (c) Smaller than 1.
(vii) (a) Perfect competition.
(viii) (d) Normal goods.
(ix) (d) Sunk capital.
(x) (b) Buyer is the price maker.
(xi) (b) Margin requirements
(xii) (c) Standard of deferred payment.
(xiii) (b) Indian Railways.
(xiv) (a) Direct tax.
(xv) (c) Sell securities in the open market.
(xvi) (d) 1(Q), 2(R), 3(S), 4(P)
(xvii) (d) Fixed deposit account.
(xviii)(d) All of the above.
(xix) (b) Savings — Mobilization of savings — Investment.
(xx) (c) Wealth tax
2. (i) Two assumptions of Law of demand :
 Income of the consumer remains constant.
 Tastes & preferences of consumers remains constant.
(ii) (a) Overdraft facility.
(b) Current Account.
(iii) By increasing the bank rake, the cost of borrowing credit money becomeshigher for the commercial
bank. Commercial banks increases their lending rate which discourages investors to take loan.
(iv) Rate of direct tax increases with the increase in income.
(v) Loss of Forest Land
Damage to surface and ground water resources.