Questions

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:
(i) Cotton yarns (ii) Dyes (iii) Power (iv) Weaving machines [2]

(e) What are progressive taxes? Give an example.

Expected Ans

(a) - Low wages - Enervating climate - Lack of education and training -

Uncongenial working condition - Lack of technology (Any two to be mentioned)

(b) Demand curve must be downward sloping Labelling: Quantity on X axis Price
on Y axis Demand curve must be labelled DD

(c) To control the supply of money and credit in the economy To control the
entire banking system of the country Have a sound monetary policy to achieve
full employment and stability To act as a banker to the government. (Any two to
be mentioned)

(d) (i) Circulating (ii) Circulating (iii) Circulating (iv) Fixed

(e) Progressive taxes are those where the rate of tax increases with an increase
in tax base. e.g., Income tax, House tax, Road tax or any other relevant
examples.

Questions
​(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.

Expected Ans

(a) Capital is a passive factor of production as it cannot do anything on its own.

It requires labour to operate it.

(b) Central Bank as it - supervises the working of the commercial banks - acts as
a lender of the last resort - keeps the cash reserves of the commercial banks
(Any one to be mentioned)

C. as in the book

(d) The producers gain the most during inflation as they make a profit due to an
increase in prices. However, if the price rise persists demand may fall, and the
producers may make a loss in the long run. OR Debtors gain because the
purchasing power was higher when they had borrowed money.

(e) - The government may collect more revenue from the rich by imposing
progressive taxes. - The revenue collected may be spent on programmes
benefitting the poorer section. - By providing necessities to the poorer section at
a subsidised rate. - Social security measures
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.Define the following terms:
(a) Price elasticity of Demand [2]
(b) Proportional taxation [2]
(c) Capital formation [2]
(d) Labour [2]
(e) Inflation.

Expected Ans

(a) - Entrepreneurship involves risk - bearing but ‘labour’ does not bear risks -
Entrepreneur has to have innovative ability, labour may or may not have this
ability. - The reward for entrepreneurship arises in the form of profits which may
be positive, negative or zero. But the price of labour ie, the wage rate is
contractually fixed, and it is always positive. - Entrepreneur is not a hired factor,
but labour is hired factor. (Any two to be mentioned)

(c) - Deforestation - Loss of soil fertility - Soil erosion - Pollution (Any two to be
mentioned)

(d) Selling costs are absent in Perfect competition - homogeneous products

which are perfect substitutes - perfect knowledge OR Monopoly - he is a single
seller - the product does not have any substitutes (Any one reason to be given)

e (a) Price elasticity of demand is the responsiveness of demand to a change in

price.
(b) The rate of tax remains constant even if the tax base changes.
(c) A change in the stock of capital in any economy during a particular time
period.
(d) Any physical or mental effort done by human beings with a view to earn
money.
(e) A sustained increase in the general price level.
OR A state in which the value of money is falling due to rising prices.

Questions

(i) What is considered as capital in economics? (ii) Discuss any three

characteristics of capital. [7]
(b) Explain how the following factors affect the supply of a commodity: (i) State
of technology.
(ii) Price of factors of production. (iii) Goals of the firm. (iv) Future price
expectations.

(c) Name any two industries where division of labour is possible.

(d) Explain any three demerits of the division of labour.

e. What happens to the demand curve when there is an increase in demand?

Discuss three instances when demand will increase. [7]
f.Explain any four ways by which Public Sector Enterprises play a dominant role
in an economy.

Expected Ans

​(a) Man-made goods which are used in the production of other goods and
services - Man made - Durable - Passive factor - Mobile factor of production -
Supply of capital is elastic - Capital depreciates in value - It is the result of past
savings (Any three to be explained)

(b) (i) If the technology is advanced, cost of production is low and so supply will
be more. If it is obsolete, cost of production is high, supply will be less. (ii) If
factor incomes are high, then cost of production is high, supply will be less. If
factor incomes are low, cost of production is low and so supply will be more. (iii)
If the goal is sales maximization then supply will be more. If the goal is profit
maximization, supply will be less. (iv) If prices are expected to rise in the future,
the supplier will supply less now and sell more later in order to make a profit. If
prices are expected to fall further in the future, he will supply more now in order
to avoid a loss.

ci.Automobile industry, textile industry or any other relevant examples

d.Demerits of division of labour: - Monotony of work - Lack of skill and
craftsmanship - Retard development of personality - Excessive interdependence
- Danger of overproduction - Imbalance in regional development (Any three
relevant points to be explained)

e.The demand curve will shift to the right.

vii.Caused due to: - Increase in income - Fall in the price of Complementary
goods - Rise in the price of substitutes - The concerned good is in fashion -
Increase in number of consumers (Any three to be explained)

f.- Developing key and basic industries - Developing the infrastructure -

Generating employment opportunities - Ensuring balanced regional growth -
Capital formation - Check monopolistic powers - Contribute to Government
revenues - Promoting exports - Setting up a welfare State. (Any four to be
explained)

Questions

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

(c) What is privatization? Explain the following arguments favouring privatization:

(i) Greater flexibility in decision making. (ii) Better utilization of resources. (iii)
Greater employment opportunities. [7]

Expected Ans

(a) - The Central Bank - Monetary Policy Cash Reserve Ratio- The proportion of
total deposits that every commercial bank must maintain with the Central bank.
- During inflation CRR is increased and banks have to keep more cash with the
Central Bank. - Loanable funds with the commercial banks decrease and their
lending decreases thereby controlling credit Statutory Liquidity Ratio-The
percentage of their total deposits that the commercial banks have to maintain
in the form of liquid assets. -
During inflation SLR is increased by the Central Bank. - Commercial banks have
to keep a larger percentage of their deposits in the form of liquid assets.
They will have less money to lend and so credit will be controlled.

(b) He can charge different prices as he is the sole seller.

Features of monopoly: - Single Seller - Price discrimination - Restricted Entry -

Control over Price/ Price maker - Nil or minimal selling cost - Product may or
may not be homogeneous - The supply of the product by the single firm
constitutes the market supply (Any three to be explained)

(a) Privatization refers to any process that reduces the participation of public
sector / the government sector in economic activities. It implies greater role for
private capital enterprise in the functioning of the economy.
 (i) Private enterprises take timely and prudent decisions thereby ensuring
smooth running of business units
(ii) They ensure that there is no wastage of resources as it would increase their
cost of production thereby reducing profits. So, there is better utilization of
resources
(iii) When an industry is open to privatisation, a number of firms enter the industry
thereby creating employment opportunities.

Questions

Read the extract and answer the following:

Post: Gaurav Akrani 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 25 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?

iii) Classify the following into direct and indirect taxes. 1. Custom duty 2.
Professional tax 3. Income tax 4. Entertainment tax

​
(iv) Give two reasons why indirect taxes are important in developing countries.
(iv) Explain clearly how indirect taxes can be both regressive and progressive

Expected Ans
(i) A tax where the impact and the incidence is on different persons. OR Where
the burden of the tax can be shifted.

(iii) 1. Indirect tax 2. Direct tax 3. Direct tax 4. Indirect tax

(iv) – Source of revenue as they have to spend a lot on development

programmes. – Wider coverage as both the rich and the poor have to pay
indirect taxes.

(v) Regressive because both the rich and the poor have to pay the same
amount of tax but the poor feel the burden more as their incomes are
comparatively less. It can be progressive when more taxes are levied on
luxuries and less taxes on necessities.

Prepare well
Shifting of Demand curves • Methods of Credit Control-CRR and SLR •
Classification of Capital • Elasticity of Supply • Relatively elastic and Relatively
inelastic supply • Taxation • Importance of Indirect Tax in a developing
economy • Privatisation • Public Sector and State • Types of Bank Deposits

Think and Answer -Add diagram whenever required

Question 1
How would an increase in consumer income affect the demand for normal
goods and inferior goods?

Question 2. Consider a significant technological advancement in production.

How would this impact the supply curve of a good ?
Question3 : Evaluate the environmental impact of extensive use of natural
resources for economic activities. How can sustainable practices be
incorporated to balance economic growth and environmental preservation?

Question 4 Evaluate the role of entrepreneurship in driving economic change

and innovation. How do entrepreneurial activities contribute to job creation and
economic diversification?