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ECONOMIC APPLICATIONS (Two Hours) Answers to this Paper must be written on the paper provided separately. You will not be allowed to write during the first 15 minutes. This time is to be spent in reading the question paper. The time given at the head of this Paper is the time allowed for writing the answers. Attempt all questions from Part I and any four questions from Part II. The intended marks for questions or parts of questions are given in brackets [ ]. PART I (40 Marks) Attempt all questions from this Section. Question 1 (a) Define human capital. [2] (b) What is inflation? [2] (c) Give two reasons why monopolistic competition is the most realistic of a market. [2] (d) Savings is essential for capital formation. Explain. [2] (e) M ention two factors which have increased mobility of labour in times from rural to urban areas. [2] Question 2 (a) A farmer grows rice and wheat. How will an increase in the price of rice affect the supply of wheat? [2] (b) In which form of market is the seller a price taker? Justify your answer. [2]

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(c) If the Government of India levies excise duty on sugar, in which direction will the supply curve of sugar shift? [2] Question 2 (d) For each of the following, state whether it has inelastic demand or elastic. [2] (i) Luxury cars (ii) Life saving drugs (iii) Salt (iv) English text book of Class X. Question 2 [2] (e) M ention two factors affecting the productivity of land. Question 3 (a) The price of a commodity falls from Rs. 15 to Rs. 10. As a result, demand rises from 100 units to 150 units. Use the expenditure method to find the price elasticity of demand. [2] (b) What does the demand curve given below show? [2] Question 3 (c) Identify the market forms of the following: (i) The Government of India is the sole buyer of fighter aircrafts. (ii) Goods sold are homogeneous. (iii) M otorcar market in India. (iv) M arket for toilet soaps in India.

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Q uestion 3 [2] (d) Distinguish between a tax and a subsidy. Question 3 (e) What is meant by product differentiation. [2] Question 4 (a) M ention two objectives of our national wage policy. [2] (b) State two ways by which increase in public expenditure can promote growth in backward areas. [2] (c) What is the impact of reduction in Cash Reserve Ratio on loanable funds? [2] (d) Differentiate between current deposits and fixed deposits. [2] (e) How does money help in the distribution of national income? [2] PART II (60 Marks) Attempt any four questions from this Part. Question 5 (a) Who is an entrepreneur? Discuss three functions of an entrepreneur. [7] Question 5 (b) State whether the following will cause a shift of demand or movement along the same demand curve. Justify your answer giving one reason for each. [8] (i) The effect of rise in the price of petrol: (1) on demand for cars. (2) on demand for public transport. (ii) The effect of a sharp increase in air fare due to rise in aviation fuel:

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(1) on tourism (2) on business travel. Question 6 (a) Define demand. Explain any three types of price elasticity of demand with the help of diagrams. [7] (b) Draw an individual supply curve based on an imaginary individual supply schedule. Distinguish between contraction in supply and increase in supply of a commodity. [8] Question 7 (a) Define a perfectly competitive market. Discuss three differences between a perfectly competitive market and a monopoly. [7] (b) Explain any four factors that lead to monopoly. [8] Question 8 (a) Read the extract given below and answer the questions that follow: [7] Economic Survey, Govt, of India, 2002-2003 Disinvestment of Government equity began in 1991-1992. However, till 1999-2000, it was done through the sale of minority share holdings in small lots. It is only from 1999-2000 that emphasis of disinvestments changed in favour of strategic sale. The primary objective of disinvestments especially through the strategic sale route is that with the transfer of management control into private hands, private capital and management would be used effectively to increase the operational efficiency of the country. Evidence suggests that there has been an improvement in the efficiency of PSU's after disinvestments. (i) What is meant by disinvestment? (ii) M ention two important roles played by PSU's in economic development. (ii) Give two arguments in favour and two against privatization. Question 8 (b) [8]

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(i) Define efficiency of labour. (ii) Explain two ways in which labour is different from capital. (iii) What happens to supply of labour at very high wages? Question 9 (a) [7] (i) Explain any two monetary measures undertaken during deflationary conditions. (ii) M ention any two fiscal measures that the government can adopt to fight economic and social inequality. (iii) Which form of tax discourages consumption expenditure? Give an example. Question 9 (b) [8] (i) Define economic growth. (ii) Discuss three measures taken by the government to help agricultural labourers. Question 10 (a) Read the extract given below and answer the questions that follow: [7] Financial Express, Bangalore, Sunday, September 11, 2005. Banks are said to be the backbone of an economy. If you want to break economy, break the bank's back. There are times when banks break themselves, go bankrupt and are probably at the top of the chain to bring down an upward moving economy. Financial systems are critical to the working of an economy. The actual growth of an economy happens in the core sectors like infrastructure, manufacturing and services while the financial sector supports the core sector. A weak financial sector can wreck havoc on the economy the way it did in East Asia, Latin America and Russia a few years ago. Thus, the stability of an economy is reflected by the strength of its financial sector and more importantly the banking sector. (i) State two ways in which banks are said to be the backbone of economy. (ii) What is a Commercial Bank? Discuss any one of its functions. (iii) What role does the financial sector play in the working of an economy? Question 10 (b) Explain the following functions of the Central Bank: (i) M onopoly of Note issue. (ii) Clearing house facility. [8]

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Additional Info : Solved ICSE Board exam paper study guide - ICSE 2007 : ECONOMIC APPLICATIONS - I.C.S.E. Free Online Question Paper
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