The Shri Ram School - Aravali

First Term Examination (2023 – 2024)

Class: X Time: 2 hr.
Subject: Economic Applications M. Marks: 100

Marking Scheme

SECTION A
(Attempt all questions from this Section.)

Question 1 [20]
Choose the correct answers to the questions from the given options.
(Do not copy the question, write the correct answers only.)
(i) Assertion (A): There is no place for sales promotion in perfect competition.
Reason (R): Perfectly competitive firms are price takers.
(a) A is true but R is false.
(b) A is false but R is true.
(c) Both A & R are true, and R explains A.
(d) Both A & R are true, but R does not explain A.
(ii) Increase in wage rate, ____________ the supply of labour at a higher wage rate.
(a) Increases
(b) Decreases
(c) Does not change
(d) Increases and then decreases
(iii) Tax evasion can lead to _________.
(a) Increase in government revenue
(b) Increase in equitable distribution of income.
(c) Civic and social consciousness
(d) Black money
(iv) Study the information given below and answer the following questions.

Which of the following represents the situation of change in quantity demanded caused
due to rise in price of the commodity?
(a) A to B
(b) A to C
(c) C to B
(d) C to A
(v) Which of the following statements is true?
(a) Different trademarks and packaging can lead to the creation of
differentiated products in the market.
(b) A monopolist incurs high advertisement cost to sell his products.
(c) A perfectly competitive firm can earn supernormal profit in the long-run.

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 (d) A monopsonist is a price-taker.
(vi) Which of the following is not an assumption of law of supply?
(a) Goals of the consumers
(b) Government policy
(c) Price of inputs
(d) Technique of production
(vii) Match the following:
1. Sunk Capital P Bonds
2. Social Capital Q Weaving machine
3. Financial Capital R Electricity
4. Working Capital S Highways

(a) 1 (R), 2 (S), 3 (P), 4 (Q)

(b) 1 (S), 2 (R), 3 (P), 4 (Q)
(c) 1 (Q), 2 (S), 3 (P), 4 (R)
(d) 1 (R), 2 (S), 3 (Q), 4 (P)

(viii) Assertion (A): In the initial stages, government forces private sector to undertake large
investment in building roads, bridges, and highways.
Reason (R): The development of infrastructure involves large investment and accrues
returns after a long time.
(a) A is true but R is false.
(b) A is false but R is true.
(c) Both A & R are true, and R explains A.
(d) Both A & R are true, but R does not explain A.
(ix) As a result of rise in consumer’s income, the demand curve for coarse-grain (inferior
good) will:
(a) move upward along the same demand curve.
(b) move downward along the same demand curve.
(c) the demand curve will shift to the right.
(d) the demand curve will shift to the left.

(x) Which of the following is not an indirect tax:

(a) VAT
(b) GST
(c) Expenditure tax
(d) Property tax
(xi) Which of these features of capital as a factor of production makes it different from
other factors of production?
(a) It is a man- made factor of production.
(b) It is a mobile factor of production.
(c) The supply of capital can be increased.
(d) It will lead to increased productivity.

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(xii) Which of the following supply curve shows relatively inelastic supply?

(a) S1
(b) S2
(c) S3
(d) 𝐒𝟒
(xiii) If the price of a commodity decreases from ₹60 per unit to ₹10 per unit and the
quantity demanded increases from 4 units to 5 units, then the price elasticity of demand
for that commodity will be:
(a) Zero
(b) One
(c) Less than one
(d) More than one
(xiv) The graphical representation of total demand for a commodity in an economy is a:
(a) Individual demand curve.
(b) Market demand curve.
(c) Market demand schedule.
(d) Composite demand schedule.
(xv) Which of the following is true with respect to price elasticity of demand.
(a) It is the responsiveness of price due to changes in demand pattern.
(b) It is a qualitative phenomenon.
(c) It is the same thing as law of demand.
(d) Its value can be between zero and infinity.
(xvi) ____________ refers to the payment of tax in the first instance.
(a) Direct tax
(b) Indirect tax
(c) Impact of tax
(d) Incidence of tax
(xvii) The practice of charging different prices from different people is possible when in such
a market:
(a) The seller is a price taker.
(b) The goods have close substitutes.
(c) The seller has no competitors.
(d) The seller incurs a lot on advertising to attract customers.

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 (xviii) Needles have price elasticity of demand_________.
(a) greater than one
(b) less than one
(c) equal to one
(d) equal to zero

(xix) Which of the following is not a feature of capital as a factor of production:

(a) They last for a considerable period of time.
(b) It is a secondary factor of production.
(c) Capital is a part of wealth.
(d) It is the same thing as investment
(xx) In short-run, supply is ____________.
(a) Relatively inelastic
(b) Relatively elastic
(c) Unitary elastic
(d) Highly elastic
[ 1m for every correct answer]

Question 2
(i) If the market price of peas rises, farmers will produce more peas and supply more [2]
peas at the cost of cabbage by diverting resources from the production of other
vegetables to the production of peas.
Illustrate the change in supply of cabbage in the market.

Leftward shift in supply of cabbage as price of substitute goods rises

[2 marks for completely labelled diagram]

(ii) Ernest and Julio Gallo- a conglomerate of wineries and wine producers- is so large [2]
and has so much buying power over grape growers that grape wholesalers have no
choice but to lower prices and agree to the company’s terms.
Identify and state the meaning of the above-mentioned market structure.
Monopsony
It is defined as a situation where there is a single buyer who is not in competition with
other buyers for the products which he purchases and in which the entry into the market
by other buyers is impossible.
[One mark for identification, mark for stating the meaning]

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 (iii) State any two reasons for low efficiency of Indian labourers. [2]
Reasons for low efficiency of Indian labourers are:
(i) traditional and less efficient techniques
(ii) lack of a highly trained labour force
(iii) problem of power shortage
(iv) working conditions
(v) low wages
(vi) absence of adequate Social Security scheme
(vii) absence of competitive environment
[Any two; one mark for each point of explanation]

(iv) ‘Sometimes, supply and cost conditions may change due to changes in technique of [2]
production or government policy.’
Explain the type of risk being borne by the entrepreneur in the above situation.
In the above case entrepreneur bears the risk associated with uncertainty. Risks which
cannot be insured against is a type of risks give rise to uncertainty.
[One mark for stating the type of risk and one more for explanation]

(v) Explain clearly how indirect taxes can be both regressive and progressive. [2]
Indirect taxes can be regressive as the poor people have to pay the tax at the same rate
as the rich people. The poor people have lower ability to pay than the rich hence when
the indirect tax is imposed on necessities garden is proportionately more on the poor.
The government imposes heavy taxes on luxury goods consumed by the rich consumers
and low taxes on the essential commodities. They are progressive in the sense that the
rate of tax on luxury goods consumed by the rich higher.
[2 marks for complete explanation]

Question 3
(i) Rise in income of a consumer has the same effect on the consumer’s demand for all [2]
commodities. State true or false with appropriate reasons.
• False, Income of the consumer and demand for a commodity depend on 3 types
of goods or commodities:
• For normal goods the demand increases with increase in income of the consumer
and decreases with the fall in income.
• For inferior goods the demand falls as income of the consumer increases and
increases with fall in his income.
• Inexpensive necessities of life: in case of inexpensive basic necessities of life
such as salt matchbox etc. the quantity purchased increases with increase in
income up to a certain level and thereafter it remains constant irrespective of the
level of income.
[½ m-stating false, ½ m for stating the types of goods and their relationship with
income]
(ii) How do indirect taxes promote social welfare? [2]
Indirect taxes can be used to increase social welfare. The consumption of goods which
are undesirable or sin goods and such as wine, cigarettes or any other tobacco product
can be discouraged by imposing heavy taxes on them.
[2m for complete explanation]

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 (iii) Land does not yield anything by itself unless human efforts are employed on it. [2]
(a) Which feature of land is highlighted above?
Land is a passive factor of production.
(b) Which other factor of production shares the same feature?
capital is also passive factors of production.
[1m for each]

(iv) How does perfect knowledge of market conditions ensure uniform price in the [2]
market?
In a perfectly competitive market each producer knows the price prevailing in the
market and he will not sell the commodity at a price below the market price. Similarly
each buyer has perfect knowledge about the prevailing price and the quality of the
product he is not prepared to pay price higher than the price prevailing in the market
perfect knowledge on the part of producers and consumers would ensure that a single
price prevails in the market.
[2M for complete explanation]
(v) Explain any two functions of land. [2]
1. Determining the output level
2. Determinant of economic development
3. promoting agricultural development
4. promoting industrial development
5. meeting food requirements
6. source of electricity
7. Source of water transport
[Any 2, 1m each- ½ H, ½ E]

SECTION B
(Answer any four questions from this Section.)

Question 4
(i) (a) Illustrate the situation when the demand for a commodity is not responsive to [7]
the change in its price.
Perfectly inelastic demand

[2 marks for completely labelled diagram]

(b) What is the elasticity of demand? Explain its three types.
Degree of responsiveness of quantity demanded due to change in its price, income of
the consumer and price of related goods.
1. Price elasticity of demand

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 2. Income elasticity of demand
3. Cross Price elasticity of demand
[2 marks for the meaning and 3 marks for types: how mark header and half mark
explanation]

(ii) Define efficiency of labour. How do the following factors affect efficiency of [8]
labour?
Efficiency of labour refers to the productivity per hour of labour. It is the ratio of total
output to the total number of hours worked:
It is equal to total output/total number of hours worked

(a) Absence of adequate social security scheme

Efficiency of labour is determined by how comprehensive and effective is the
Social Security scheme in an economy. Their hardly exists a comprehensive
Social Security scheme in the unorganised sector of the Indian economy like
agriculture and tiny industrial establishments. There is lack of free medical and
hospitalization facilities. Unemployment relief scheme and pension schemes do
not cover these sectors. The workers working in these sectors therefore are not a
motivated lot. They are not contented and are in constant worry about their
sickness unemployment or retirement. Low efficiency is bound to occur under
such an environment.
(b) Working conditions
the conditions under which workers work affect their efficiency if the working
condition and environment is healthy and congenial the efficiency of labour will
be high. The working environment in India is not very conducive except to
some extent in large modern industries. A large number of industries do not
have clean and hygienic industrial environment. There is lack of basic amenities
like canteens recreational facilities etc. The efficiency of labour is bound to
remain low under such working conditions.
(c) Less efficient techniques
The productivity of labour depends significantly on the types of technologies
with which workers work. The most important factor accounting follow
efficiency of Indian labour is the use of traditional and less efficient techniques,
particularly in the agricultural sector and in small scale industries. Machinery
and equipment there have become obsolescent. Highly specialised and
automatic machines are used only in large industries. With no access to latest
techniques efficiency of labour is bound to be low.
(d) Low wages
efficiency of labour is influenced by the wages owned by them most of the
workers in India get low wages the standard of living is low they are not able to
get adequate and balanced diet. They cannot afford adequate medical facilities.
As a consequence, workers are not healthy and agile. They are not able to work
in view of their poor health. Therefore, workers are less efficient.
[2 marks for meaning And one and a half marks for each point of explanation]

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Question 5
(i) A market supply curve is a horizontal summation of individual supply curves. Justify. [7]
Price of Good X Quantity Quantity Market
(In Rs.) Supplied of Supplied of Supply
Good X by Good X by (A+B)
Firm A Firm B (Units)
(Units) (Units)
5 1 2 3
10 2 4 6
15 3 6 9

Sa and Sb are the supply curves of firms A and B respectively. Sm is the market
supply curve which is a horizontal submission of Sa &Sb curves. We have added
the individual supply curves FA and SP horizontally because we show the quantity
supplied horizontally. Point A on Sa and point D on Sb are added to get a point G
on Sm and so on.
[3 marks for the schedule and 3 marks for the diagram and one mark explanation]

(ii) (a) Explain the role of state in: [8]

1. Human capital formation.
State is expected to undertake the responsibility of creation of human capital by
educating and training the labour force so that the labour productivity increases.
Human capital is the stock of valuable and useful technical knowledge build up
through education and on the job training of the labour force it represents
investment of time and money in improving the quality of workers through
training and education. Underdeveloped countries need technicians, doctors
engineers, administrators etc., who would help in increasing the production of
goods and services accelerating the pace of development.
2. Reduction of income inequalities.
The government may help in reducing inequalities through the instrument of
taxes and transfer payments.
Progressive taxation: Taxing a larger fraction of incomes of the rich rather than
of the poor.
Secondly the policy of transfer payments can be used to transfer income to poor
people. Search transfers can be in the form of old age pension, unemployment
relief, aid to disabled etc.

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 The government may subsidise the consumption expenditure of low-income
groups by providing subsidised food through fair price shops.
[2 marks for each point of explanation]

(b) Differentiate between progressive and degressive taxation with the help of
suitable examples.
Progressive taxation degressive taxation
progressive taxation refers to the regressive taxation is when
taxation system where the rate the rate of tax increases
of taxation increases as the progressively up to a certain
taxpayer’s income increases i.e. point and after that point the tax
the higher the income the higher may be charged at a flat rate,
is the rate of tax. that is it becomes proportional.

Income PROGRESSIVE DEGRESSIVE

(In ₹ Lakh) Rate (%) Rate (%)

5 5% 5%

10 10% 10%
15 15% 15%

20 20% 15%

[one mark for meaning and one mark for explanation for each]

Question 6
(i) (a) State any two differences between labour and entrepreneur. [7]
Labour entrepreneur
labour refers to the human efforts An entrepreneur is one who
both physical and mental involved organises production manages a
in the process of production. business, takes important
decisions regarding productions,
hires the factors of production and
where's the risk and uncertainty
involved in production.
A labourer income is wages which An entrepreneur earns residual
acts as a cost of production. income.
A labourer does not bear the risk. An entrepreneur bears the risk of
uncertainty.

[Any 2 differences, two marks for each point of difference]

(b) State any three points highlighting the role of entrepreneur in economic
development.
1. Arranges capital.
2. supervisor and coordinator

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 3. innovator
4. taking initiative
[any 3 points, one more for each statement]
(ii) Why does a demand curve slope downwards? Discuss any four reasons. [8]
4 reasons for a downward sloping demand curve are
1. Law of diminishing marginal utility
MU gradually diminishes as the consumer consumes more of a commodity. This
is referred to as the Law of Diminishing Marginal Utility.
A consumer gets maximum satisfaction when Price (P) is equal to MU.
At the level of P=MU, if the price falls, MU > P and the consumer will readily
consume more of the commodity until MU = P.

2. Income effect
With a fall in price a consumer has greater purchasing power, even though
income has not changed. This induces him to increase his demand. The
opposite happens with an increase in prices. This explains the inverse relation
between price and demand and hence, a downward slope of the demand curve.

3. Substitution effect
With a fall in price of a good, this good becomes more attractive to the
consumer as compared to others. He then substitutes this commodity for others
and demand for this good increases.

4. Increase in the number of consumers

A fall in the price of a commodity leads to an increase in quantity demanded by
the existing consumers due to income and substitution effects. At the same time
and the price of a commodity falls the number of consumers increases and this
tends to raise the demand for their commodity. When the price of the
commodity is sky high only a few rich people can afford to buy this commodity.
When the price of the commodity falls a little people with moderate income will
also be able to purchase this commodity. Does when the price of commodity
falls the number of consumers increases.

5. Several uses of a commodity

There are some goods which can be put to a number of users. Some of these
uses are more important while others are less important. Steve aluminium coal
electricity and milk are examples of such commodities. When the price of such
a commodity is very high it will be used for more important purposes only and
therefore a small quantity will be demanded. But when the price falls the
commodity may be put to less important uses also. This leads to an increase in
demand for this commodity.
[Any 4 reasons, half mark header and one and a half marks for the explanation
for each point]

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Question 7
(i) [7]

(a) Which form of division of labour is highlighted above?

Complex/Vertical division of labour
[one mark]
(b) Name any two industries where this form of division of labour is possible.
Furniture and textile
[2 marks, one mark each example]
(c) State any two advantages and any two disadvantages of advantages of
division of labour.
1. use of individual ability
2. increase in efficiency
3. use of specialised machinery
4. promotes inventions
5. reduction in wastage of time
6. economy in the use of tools and implements
7. encourages large scale production
8. reduction in training time
9. improvement in the quality of the product
disadvantages of division of labour
1. monotonous job
2. Retards development of workers personality
3. Retards craftsmanship
4. high degree of interdependence
5. lack of motivation
6. lack of responsibility
[2 marks for advantages and 2 marks for disadvantages come on one mark for
each point]

(ii) Discuss the concept of increase and decrease in demand with the help of diagrams. [8]
State any three reasons that cause such changes.

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 It refers to a situation when the consumers buy a larger quantity of the commodity at the
same price.

It refers to a situation when the consumers buy a smaller quantity of the commodity at the
same price.
In the diagram above, price is depicted on y-axis, demand is depicted on x-axis. We
observe that price remains constant at P0, but there is a decrease in demand from OQ0 to
OQ1. This is shown as a leftward shift in the demand curve from DD to D1D1.

Change income, change in price of substitute good, change e in price of complementary

good, unfavourable and favorable changes in tastes and preferences, future expectation
regarding
change in price, government policy and change in size and composition of population.
[1.5 marks for diagram and 1 mark for explanation for each, 3 marks for 3
determinants]

Question 8
(i) [7]

(a) Complete the process.

Stage one refers to generation of savings and stage 2 refers to mobilisation of
saving.
[2 marks: One mark for each stage]
(b) What is this process known as? State its meaning.
The process of capital formation
Capital formation or capital accumulation refers to the process of adding to the
stock of capital overtime.
[One mark for stating the process and one mark for the meaning]
(c) Explain any three factors that affect the process.
• Magnitude of saving: hey savings depend on 2 types of factors ability to
save willingness to save.
• Presence of financial institutions
• Incentives for investment economic and political conditions
• availability of infrastructure
[3 marks, half mark header half mark explanation for each]

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 (ii) Explain the following: [8]
(a) All inferior goods are not giffen goods.
Inferior goods are those goods the demand for which falls as income of the
consumer increases and increases with fall in his income. Giffen goods on the
other hand are those inferior goods on which the consumer spends a large
portion proportion of his income and the demand for which falls with the fall
emprise and rises with the rise in price. Health different goods are special type
of inferior goods which do not follow law of demand or are an exception to law
of demand.

(b) In economics, demand and desire are not the same.

Demand for any good or service refers to the quantities of that commodity
which consumers are willing and able to purchase a different possible prices
during a given period of time. Desire refers to the idea of having something.
Demand refers to both the desire to have a commodity and the ability to fulfil
this desire. When desire is backed by the willingness and the power to pay in
order to fulfil it only then it gives rights to demand. In other words demand is an
effective desire.

(c) Distribution of income affects the demand for goods in the market.
If distribution of income in a country is unequal rich people will have larger
purchasing power with them. Therefore, there will be a larger demand for those
goods which are consumed by the rich people. There will be more demand for
luxury goods like cars and led television sets. On the other hand if the income is
evenly distributed there will be less demand for luxury goods and more demand
for essential goods like clothes scooters, etc. in the market.
(d) Derived demand generally relates to the demand for factors of production.
Demand for factors of production such as labour is derived from the demand for
the goods produced with these factors of production. For instance the demand
for the labour in a textile mill is derived from the demand for the cloth produced
by the labour.
[2 marks for each point of explanation]

Question 9
(i) (a) Define market structure. [7]
Market structure refers to the types of markets in which the producers or firms
operate.
[One mark definition]
(b) Differentiate between monopolistic competition and monopoly based on:
1. Market control: in a monopolistically competitive market, there are large
number of sellers but it is not unusually large. Each firm produces small share of
the total market. However monopoly is a market situation where there is only
one seller of producer for commodity. Since there is only one seller it would
have a great significant influence on the market price and the difference
between the firm and industry disappears.

2. Nature of the product: under monopolistic competition producers produce

differentiated products they are substitutes for each other but are only close
substitutes and not perfect substitutes. For example restaurants clothing brands,

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 toothpastes, etc. However farmer under monopoly the monopolist produces such
a commodity which has no close substitutes. For instance Railways in India.
Hey

3. Freedom of entry:

Monopolistic competition is characterised by free entry and free exit. There is

freedom of entry in the sense that new films are free to produce close substitutes
of any brand of a product. Free entry would ensure that there are no super
normal profits. A monopoly market is characterised by closed entry to the
prospective producer. If new forms are allowed to enter into the industry
monopoly will breakdown. Therefore, there are some barriers or restrictions on
the entry of new firms into the monopoly industry these restrictions may take
several forms such as patent rights, copyrights, government laws, etc. In view of
the closed entry the monopolist may continue to earn super normal profits even
in the long run.
[6 marks: 2 marks for each point]
(ii) Answer the following questions based on the following passage: [8]
Finance Minister Nirmala Sitharaman said that tax revenue has been steadily
increasing in the last three to four years, even though tax rates have not been hiked.
She attributed this to the efforts of the Central Board of Direct Taxation (CBDT) to
control evasion and the use of technology to improve tax collection. This is good
news for taxpayers, as it means that they are not being overburdened by taxes.

(a) Define the term tax.

Tax is a compulsory charge or payment imposed by government on individuals or
businesses without any reference to special benefits to the tax payers.
[2 marks for complete definition]
(b) State its any two features.
(i) Tax is a compulsory payment from people to the government no one can
refuse to pay taxes Refusal to pay taxes is liable to legal action and
punishment by the government.
(ii) It imposes personal obligation on the taxpayer. It is the duty of the taxpayer
to pay the taxes that he is liable to pay.
(iii) Taxes collected by the government are spent by IT for the general welfare
of the people. The taxes received from the taxpayers may not be incurred
for their benefits alone.
(iv) A taxpayer does not receive a definite, and proportionate benefit from the
government for payment of the taxes.
[2 marks, one mark for each point]
(c) Mention any two direct taxes imposed by the Indian government.
(i) Personal income tax
(ii) corporation tax
(iii) Interest tax
(iv) property tax
(v) professional tax
[2 marks, one mark for each example]

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 (d) How is the burden of direct taxes linked to willingness to work and save?
High rates of income tax and other direct taxes may discourage people from
working hard to earn more income because a large part of the income maybe taken
away by the government. These taxes are also likely to discourage the will to save
and investment because of heavy property and inheritance taxes.
[2 marks for complete explanation]

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