ECONOMICS

STATISTICS AT A GLANCE
Total Number of students who took the examination 8,700
Highest Marks Obtained 100
Lowest Marks Obtained 15
Mean Marks Obtained 68.09

Percentage of Candidates according to marks obtained

Mark Range
Details
0-20 21-40 41-60 61-80 81-100
Number of Candidates 74 618 2,520 3,086 2,402
Percentage of Candidates 0.85 7.10 28.97 35.47 27.61
Cumulative Number 74 692 3,212 6,298 8,700
Cumulative Percentage 0.85 7.95 36.92 72.39 100.00

Range of Marks Obtained

35.47
40.00

35.00 28.97
27.61
Percentage of Candidates

30.00

25.00

20.00

15.00
7.10
10.00
0.85
5.00

0.00
0-20 21-40 41-60 61-80 81-100

Marks Obtained

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 ECONOMICS
ANALYSIS OF PERFORMANCE

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 [2]
wealth in an economy.

Comments of Examiners
1. Suggestions for teachers
(a) Most candidates were confused about the  Reinforce definitions with suitable
definition and were also unable to cite suitable examples.
examples of a direct tax.  Train students to read the question
carefully before attempting to
(b) Most candidates answered correctly.
answer.
(c) Majority of candidates wrote answers on a  Regular and consistent practice is
generalised basis. essential for revision.
(d) Answered correctly by most candidates. Thorough revision must be
(e) Most candidates answered correctly, however a undertaken to clear doubts and
few wrote incorrect and vague answers. understand concepts.
 An important topic relating to
taxation, all efforts must be made to
have regular classroom discussions
to bring about conceptual clarity.

MARKING SCHEME
Question 1.
(a) A direct tax is the one which is imposed on the income and property of a person. E.g. Income
tax, Corporation tax.
(b) (i) An Entrepreneur performs both Labour performs mainly physical work. Land and
physical and mental work involving capital are non-living factors.
planning and organizing.
(ii) An Entrepreneur faces business risks Labour does not involve any risk. Business risk
and enjoys the profits does not involve land and capital.

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(c) As prices of all goods are expressed in terms of money, a consumer can make rational decisions
while purchasing goods and services. He will be able to utilize his money in such a way that he
derives maximum utility from the purchase he makes.
(d) Right to safety, right to be informed, right to choose, right to be heard, right to seek redressal,
right to consumer education (Brief explanation)
(e) Through progressive taxation.

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:
i) cosmetics ii) medicine iii) school uniform iv) 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]

Comments of Examiners
2.
(a) Some candidates did not mention that the price
Suggestions for teachers
of a commodity increases causing a contraction,
thus reflecting a lack of understanding of  Factors responsible for change in
concepts. demand must be explained clearly
(b) A few candidates were unable to comprehend the with the help of examples based on
benefits of division of labour and wrote incorrect diagrams.
answers.  Students must be trained to interpret
(c) Most candidates wrote correct answers however the question according to the
some wrote ‘relatively’ elastic or inelastic that expected answer.
was not appropriate.  Elasticity of demand for
(d) Answered correctly by most candidates. commodities should be discussed in
(e) Most candidates were unable to understand the detail.
concept of ‘social reforms and its relation to  Classroom discussions must
Indirect Tax. highlight the importance of land and
its productivity.
 Guide students to answer questions
that require an element of application
and understanding.

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MARKING SCHEME
Question 2.
(a) Contraction in demand refers to fall in demand as a result of increase in price. This refers to
quantity change in demand due to an increase in price.
(b) (i) Efficiency of labour improves as a result of which volume of output expands.
(ii) Quality of production improves.
(iii) Large scale production.
(iv) Reduces cost of production.
(v) Increases the revenue of the firm. (Brief explanation of any two)
(c) Cosmetics – highly elastic
Medicine – highly inelastic
School Uniform – perfectly inelastic
Air conditioners – highly elastic
(d) (i) Natural fertility of land.
(ii) Proper use of land.
(iii) Investment on land.
(iv) Security of tenancy
(v) Location
(vi) Other inputs
(vii) Method of cultivation (Brief explanation of any two)
(e) Indirect taxes can be levied on certain commodities such as cigarettes, intoxicants, harmful
drugs etc. to control consumption of these harmful goods. By doing so the Government can
promote the quality of life in society.

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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]
Qty. of Mangoes
Price (`)
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 capital formation in India. [2]

Comments of Examiners
3.
(a) Answered correctly by most candidates.
(b) Most candidates answered the question correctly.
(c) Majority of candidates were able to complete the
schedule.
(d) Most candidates drew the correct diagram,
however most of them did not label the diagram.
(e) Most candidates were unable to relate the low
level of capital formation in India with low
savings.
Suggestions for teachers
 Banking being an important topic
must be given emphasis with a focus
on issues related to the Central Bank.
 - Government policy of revenue and
expenditure must be revised
thoroughly to bring about a better
understanding.
 The law of demand is a basic and
fundamental topic in the learning of
Economics and must be explained
with conviction and clarity quoting
suitable examples.
 Students should be advised to read
the question carefully.
 The reasons for low capital formation
in India must be explained
thoroughly with the help of active
classroom discussions.

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MARKING SCHEME
Question 3.
(a) Rate at which the Central Bank lends money to Commercial Banks.
(b) Growth of democracy, increase in defence expenditure, economic and social infrastructure etc.
(Explain two)
(c) Price (`) Qty. of Mangoes (in kgs)
350.00 2
300.00 4
250.00 6
200.00 8
150.00 10
100.00 12
(d) Perfectly inelastic supply curve:
Y S
P
R
I
C
E

O Q Qty X

(e) Causes of low capital formation:

(i) Low level of savings.
(ii) Inadequate number of efficient entrepreneurs
(iii) Poor banking network
(iv) Many PSU’s are running at a loss.
(v) Policy paralysis

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 fixed deposits and demand deposits. [2]
(d) What is meant by a Degressive Tax system? [2]
(e) Define simple division of labour. [2]

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Comments of Examiners
4.
(a) Most candidates wrote the effects of advanced
modern technology without making mention of
obsolete or traditional techniques that may also
influence the level of supply.
(b) The first part of the question was answered
correctly, however candidates were unable to
offer a convincing answer in the second part of the
question.
(c) Most candidates wrote correct answers, however,
they were unable to quote correct interest rates
between the two types of deposits.
(d) Most candidates answered correctly, though a few
incorrectly wrote about the regressive tax system.
(e) Few candidates wrote an incomplete definition of
simple division of labour.
Suggestions for teachers
 The pros and cons of technology on
supply must be explained
thoroughly.
 Definition of creeping inflation
should be supported with its rate /
percentage.
 Conceptual clarity of topics must be
brought about to enable a better
understanding.
 Digressive Tax system should be
explained with the help of a table.
 Students must be advised to write the
complete definition of terms stated in
the question.

MARKING SCHEME
Question 4.
(a) Highly advanced technology will increase supply and outdated technology will reduce supply.
(b) When price rise is slow and is 2% per annum it is considered good for an economy because it
keeps the economy away from stagnation and is essential for economic growth.
(c) Fixed Deposit Demand Deposits
(i) Time deposits Current account deposits
(ii) High rate of interest is paid by the bank No interest is paid. (Depositors pay
something to the bank for its services.)
(iii) No withdrawal through cheque Withdrawable through cheques.
(Any two)
(d) Degressive tax system is a mixture of proportional and progressive system. Under this system,
the rate of tax increases upto a certain limit but after that a uniform rate is charged.
(e) Division of society on the basis of different occupations such as teachers, lawyers, doctors etc.
is known as simple division of labour.

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 SECTION B (40 Marks)
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]

Comments of Examiners
5.
(a) Most candidates answered the question correctly.
(b) Answered correctly by most candidates, however
a few wrote on the characteristics of land instead
of labour, that reflected the question was not
read carefully.
Suggestions for teachers
 Reinforce the determinants / factors
that affect the demand of a
commodity.
 Factors of production are the basic
topics in the understanding of
Economics, hence it is important that
their characteristics be explained
separately and thoroughly.

MARKING SCHEME
Question 5.
(a) Desire for a good or service backed by the ability and willingness to pay for the good is demand.
Demand is related to time and price.
Its determinants are the following:
(i) Price of the good
(ii) Price of related goods.
(iii) Income of the consumer
(iv) Taste and preference of the consumer
(v) Consumer credit
Or any other relevant matter. (Brief explanation of any two).
(b) (i) Labour cannot be separated from the labourer
(ii) Labour cannot be accumulated.
(iii) Labour supply changes over time.
(iv) Labour is mobile.
(v) Human labour has an element judgement.
(vi) Labour has alternative uses.
(vii) Human labour generates income.
(viii) Labour is the beginning and end of production.
(ix) Labour varies in efficiency.
(Any four of the above with examples (one) for each characteristic should be explained.)

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Question 6
(a) Define Public expenditure. Explain two ways by which it promotes economic [5]
development.
(b) What is meant by efficiency of labour ? Explain three causes of low efficiency of labour [5]
in India.

Comments of Examiners
6. Suggestions for teachers
(a) The first part of the question was answered  Conceptual based topics must be
correctly, however candidates wrote very general explained with active classroom
answers that lacked content. discussion.
(b) Most candidates wrote an incomplete meaning of  Labour being an important factor of
the efficiency of labour, however they answered production must be taught with
the second part of the question correctly. clarity.

MARKING SCHEME
Question 6.
(a) Public expenditure refers to the expenditure which the government incurs for its own
maintenance as also to provide various benefits to the society and the economy.
OR
Expenses incurred by public authorities – central government, state government and local bodies
for its maintenance and for the collective needs of the people.
Public expenditure and economic development
(i) Public expenditure on education, public health etc. improves the efficiency of the people.
(ii) Public expenditure can be used to promote security and law and order.
(iii) Public expenditure helps in promoting basic and key industries.
(iv) Public expenditure helps in promoting employment opportunities and poverty eradication.
(v) Public expenditure can be used to reduce regional imbalance.
(vi) Public expenditure in the form of subsidy will help in promoting agricultural and industrial
growth.
(Any two to be explained clearly with examples.)
(b) Efficiency of labour refers to the production capacity or productivity of labour. It is measured
in terms of quality, quantity and the time taken to produce.
Causes of low efficiency of labour

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 (i) Poverty
(ii) Climate
(iii) Wages are not based on efficiency
(iv) Wage legislations are inadequate
(v) Training facility which is poor
(vi) Low rate of literacy
(vii) Poor working conditions
(viii) Inefficiency of organisers. etc.
( Explain any three causes)

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

Comments of Examiners
7.
(a) Few candidates drew the Demand curve instead
of the Supply curve that reflected lack of
conceptual clarity and understanding of the given
topic.
(b) Answered correctly by most candidates. Some
wrote the reasons instead of ‘ways’ of consumer
exploitation.
Suggestions for teachers
 Regular practice of diagrams is
essential for students to gain
confidence in concepts that require
application.
 A distinction between ways and
reasons of consumers’ exploitation
must to be explained in detail.

MARKING SCHEME
Question 7.
(a)
Y
S
P S S
2
R 1
I P
C S
E 2 S S
1
O Q0 Q Q1 X
Qty

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 Increase in supply refers to a situation when the producers are willing to supply larger quantity
of the commodity at the same price.
Decrease in supply on the other hand, refers to a situation when producers are willing to supply
a smaller quantity at the same price.
Students must label the diagram neatly and accurately and explain that the amount supplied of a
commodity changes not because of any change in its own price but due to change in other factors
such as change in price of input, change in technology etc.
(b) Consumer awareness refers to the need for the consumers to be aware of their rights in order to
ensure proper standards for the goods and services they purchase. It also refers to the awareness
of legal measures available in India for consumer protection.
Four ways by which consumers are exploited.
(i) Production of spurious goods.
(ii) Poor quality of products
(iii) False weights and measures
(iv) Selling goods at a higher price
(v) Offering gifts or prizes to cheat the consumers.
(vi) Selling second hand goods as brand new goods.
(vii) Creating false impression on consumers through sales strategy.
(Explain any four of the above)

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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]

Comments of Examiners
8.
(a) Most candidates answered correctly, however it
was observed that some candidates wrote on the
‘secondary’ functions instead of the Primary
functions as suggested by the question.
(b) Answered correctly by most candidates, however
a few candidates wrote more than 5 points that
was not required.
Suggestions for teachers
 Instruct students to read he question
carefully before any attempt is made
to answer.
 A comparative tabular presentation
may be prepared to bring out the
differences between a direct and
indirect tax that should be supported
with examples.

MARKING SCHEME
Question 8.
(a) Money refers to any commodity which is generally accepted as a common medium of exchange.
Primary functions:
(i) Medium of exchange
(ii) Measure of value
(Functions should be explained clearly)
(b) Direct Tax Indirect Tax
(i) Imposed on income. Imposed on goods and services.
(ii) Directly paid to the Government. Paid to the Government by one person and the
burden is borne by another person.
(iii) It cannot be shifted. Can be shifted.
(iv) Cannot be evaded – it is linked to the This tax can be avoided.
tax payer.
(v) Creates civic consciousness Does not create civic consciousness.
(vi) Certainty Uncertain.
Any five differences should be stated briefly.

235
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

Comments of Examiners
9.
(a) Majority of candidates answered correctly,
however a few mixed the agency functions with
that of the general utility functions.
(b)
(i) Capital was defined correctly by most
candidates; however, some candidates wrote the
incorrect meaning of debt capital.
(ii) Candidates appeared confused between various
types of capital and mistook ‘circulating’ capital
to be ‘sunk’ capital. Hence they wrote incorrect
answers.
Suggestions for teachers
 The various types of functions of
Commercial banks must be explained
separately with the help of suitable
examples.
 Capital is an important topic and all
efforts must be made to clear
concepts associated with different
types with the help of examples and
tables.

MARKING SCHEME
Question 9.
(a) Agency functions of Commercial Banks:
(i) Commercial collect funds through cheques, drafts and bills of exchange.
(ii) They make payments on behalf of their customers.
(iii) They act as agents of their customers in the sale and purchase of securities.
(iv) They render services such as selling foreign currency to them and buying it. They buy and
sell NSC, Units of UTI etc on behalf of their customers.
(v) They act as trustee and executors.
Students must state these.
(b) Capital is defined as produced means of production e.g. Machines.
(i) Real Capital refers to physical stock of goods e.g. machines, raw materials etc. This
increases national output.
Debt Capital refers to titles to wealth such as shares, debentures etc. This yields income to
the investors.
(ii) Money Capital refers to money used for buying capital goods such as machines, raw
materials etc.
Sunk Capital refers to Capital good used for a specific use e.g. mine shaft – it is site
specific cannot be relocated.
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Question 10
(a) What is meant by Price elasticity of supply? Explain three factors which determine [5]
elasticity of supply.
(b) Explain the following: [5]
(i) Internal and External debt
(ii) Productive and Unproductive debt

Comments of Examiners
10.
(a) Most candidates answered the first part of the
question correctly, however a few wrote the
factors determining ‘supply instead of those
affecting the ‘elasticity’ of supply.
(b) Answered correctly by most candidates.
Suggestions for teachers
 Elasticity of demand/supply is an
important topic of Economics and
must be thoroughly explained with
the help of charts, tables, diagrams
and examples.
 Difference based questions must be
explained with the help of tables.

MARKING SCHEME
Question 10.
(a) Percentage change in supply as a result of percentage change in price.
Factors which determine elasticity of supply
(i) Cost of production
(ii) Time
(iii) Availability and price of factor inputs
(iv) Ability of the entrepreneur to take risks.
(v) Expectation of future price.
Or any other relevant matter.
(Any three factors should be explained.
(b) (i) Internal Debt
Internal debt refers to Government borrowing, from individuals and institutions located
within the country. E.g. Government bonds.
External Debt
What Government borrows from individuals, institutions and Governments of foreign
countries and international financial institutions. E.g. IMF, World Bank etc.
(ii) Productive Debt
Which is used by the Government for productive purpose e.g to build roads, bridges etc.
Unproductive Debt
Money spend by the Government on projects which are not directly productive e.g. financing
war, controlling floods, epidemics etc.

237
Topics found confusing/difficult:

- Division and Efficiency of Labour

- Elasticity of Supply (Decrease and contraction)
- Direct and Indirect tax.
- Government expenditure and revenue policy
- Primary and Secondary functions of money
- Mixed/Circulating capital and sunk/floating capital.
- Capital formation

Suggestions for candidates:

 Avoid Selective study

 Practice diagrams on a regular basis
 Label diagrams correctly
 Support answers with examples where required
 Use terms associated with Economics and Finance
 Write specific answers
 Read the question carefully before answering
 Plan a time table for preparation
 Participate in class discussions actively
 Practice Sample / previous years Question papers.

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