ECONOMICS

STATISTICS AT A GLANCE

Total Number of students who took the examination 8,414

Highest Marks Obtained 100
Lowest Marks Obtained 10
Mean Marks Obtained 64.05

Percentage of Candidates according to marks obtained

Mark Range
Details
0-20 21-40 41-60 61-80 81-100
Number of Candidates 120 728 3,074 2,802 1,690
Percentage of Candidates 1.43 8.65 36.53 33.30 20.09
Cumulative Number 120 848 3,922 6,724 8,414
Cumulative Percentage 1.43 10.08 46.61 79.91 100.00

Range of Marks Obtained

40.00 36.53
33.30
Percentage of Candidates

35.00

30.00

25.00 20.09

20.00

15.00
8.65
10.00

5.00 1.43

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

Marks Obtained

210
 ECONOMICS

ANALYSIS OF PERFORMANCE
Question 1

(a) State any two factors that determine the Division of labour. [2]

(b) Mention two ways by which land differs from other factors of production. [2]

(c) Define an Indirect tax with the help of an example. [2]

d) Which of the following is considered as labour in Economics? Give a reason

to support your answer.
(i) A professor working in a college. [2]
(ii) A social worker serving in an orphanage.

(e) What is the significance of Capital in promoting economic growth? [2]

Examiners’ Comments
(a) Most candidates wrote about the advantages and
Suggestions for teachers
reasons for division and labour instead of writing
- A clarity must be made on terms
its factors.
relating to differences, factors and
(b) Most candidates wrote captions only without
advantages/reasons etc. Division of
offering appropriate examples or explanation. A
labour along with all the factors must be
few wrote only the random features of land.
explained in detail with the help of
They all were unable to co-relate basis of
examples.
differences between land and other factors of
- The concept of land being a different
production.
factor of production must be explained
(c) Most candidates were unable to define indirect
with the help of examples with emphasis
tax correctly and wrote incorrect examples.
on its correlation to other factors of
(d) Majority of candidates answered like yes or no
production.
for the parts of questions (i) and (ii) without
- The role and importance of a tax in the
offering proper reasons.
better functioning of the Government
(e) A few candidates were unable to link the
must be highlighted. Direct and indirect
importance of capital with economic growth.
taxes must be explained with the help of
various examples.
- Appropriate reasons must be given on
the classification of labour with suitable
examples.

211
 - Economic growth and capital are both
inter-related and complimentary to a
country’s growth and development and
must be clearly explained for a better
comprehension. Key words regarding
growth i.e employment generation and
increase in production etc. must be
stressed on with importance of capital in
promoting economic growth.

MARKING SCHEME
Question 1.
Division of labour depends on size of market, availability of inputs, nature of product,
a) availability of training facility.

Supply of land is fixed, it is costless, immobile, law of diminishing marginal returns operates,
b) has alternative uses.

c) Taxes imposed on goods and services. E.g. sales tax, excise duty.
i) mental effort done by the professor is labour as it generates utility and income.
ii) work of a social worker is not treated as a labour in economics as it is involuntary without
d)
any remuneration.

It raises productivity of labour, increases production, better standard of living, large scale
e) production, more employment.

Question 2

(a) What is meant by Cross elasticity of demand? [2]

(b) Mention any two factors that cause a rightward shift of the demand curve. [2]

(c) Distinguish between Normal goods and Inferior goods. [2]

(d) Draw a perfectly elastic supply curve. [2]

(e) Distinguish between Redeemable debt and Irredeemable debt. [2]

212
Examiners’ Comments
(a) Most candidates were confused about the
Suggestions for teachers
definition of cross elasticity of demand. They
- When teaching the topic on cross
wrote the definition of elasticity of demand
elasticity of demand, highlight the
instead and ignored the relevance of price
relation between price and the
with no co-relation with the quantity
commodity with the help of suitable
demanded.
examples
(b) Many candidates wrote on the factors that
- Thorough explanations with the help of
affect demand and failed to mention the
factors that cause a rightward shift of the
factors that cause a rightward shift of the
demand curve must be undertaken in
demand curve.
class discussions.
(c) Most candidates wrote incorrect answers with
- A clear distinction between inferior
no clear cut distinction being made between
goods and normal goods should be made
normal goods and inferior goods in relation to
with the help of suitable examples. A
the income of the consumer. Examples were
distinction should be co-related with the
also incorrectly written.
income of consumers.
(d) Many candidates made no mention of the
- The significance of the axis of a curve
vertical axis – Y and the horizontal axis – X.
i.e. horizontal and vertical with the
The Price and quantity supplied were also not
allocation of price and quantity supplied
mentioned properly.
must be emphasised upon. Topics on
(e) A few candidates were not clear about the
Elasticity of Demand and Supply must
meaning of redeemable debt and
be supported with the help of examples.
irredeemable debt. They omitted important
- Distinction between redeemable and
points of distinction i.e. rate of interest, time
irredeemable should be clear to all the
period and repayment mode.
students with examples. Key words
like, period of time, government and
interest must made clear or mentioned
for a suitable answer/distinction.

MARKING SCHEME
Question 2. -
a) When demand for a commodity is influenced by the price of another good it is called cross
elasticity of demand. Eg if the price of petrol rises the demand for car falls.

b) Income of the consumer, prices of substitutes, increase, expectation of future prices,

number of potential consumers, Government policy.
c) Normal Goods - demand for which increases with increase of income. Eg refrigerator, car
etc.
Inferior Goods – Demand for which falls with increase in income.

213
 d)
Y
P S

O X
Quantity Supplied
Perfectly elastic Supply
No explanation required. Diagram should be neatly drawn and labelled. [1+1]
e) Redeemable – Such that the government pays it off after a specified date.
Irredeemable – the government pays interest on such debts and never repays the debt
completely.

Question 3
(a) Define creeping inflation. [2]
(b) Direct taxes are progressive in nature. Briefly explain. [2]
(c) Define efficiency of labour. [2]
(d) State any two demerits of the Barter system of exchange. [2]
(e) Mention two differences between the Central Bank and a Commercial Bank. [2]

214
Examiners’ Comments
(a) Most candidates incorrectly mentioned the rate of Suggestions for teachers
creeping inflation with most definitions written - The definition of creeping inflation
incorrectly or writing incomplete answers. should be explained clearly with a clear
(b) A few candidates were confused regarding the mention of the % as up to 2 to 2.5 to 3%
progressive nature of direct taxes with many per annum.
candidates writing that direct taxes help in - Direct tax should be explained
removing inequalities of income. comprehensively with suitable
(c) Most candidates were unable to comprehend the examples. Explain the fact that as
term labour efficiency and wrote general answers. income rises/increases direct tax rises
(d) Most candidates missed the key terms in showing the progressive nature. With
explaining the demerits of the Barter system of the help of a diagram and schedule (as
exchange. A few wrote the captions instead of progressive tax) may be explained.
writing adequate answers in detail. - The productive capacity or labour
(e) This question was answered correctly by most capacity/efficiency should be defined
candidates. Few candidates however were unable clearly.
to differ the actual points of difference between - The barter system of exchange must be
the Central Bank and Commercial Banks. discussed and explained thoroughly
with adequate examples.
- The significance and importance of the
Banking system must be explained in
context to the present economic
scenario with special emphasis on the
role of the Central Bank along with its
distinction from Commercial Banks.

MARKING SCHEME
Question 3.
a) Price level increases at slow rate – only at 2 to 2.5% per annum.
b) Direct tax increases as the income rises  it is progressive in nature.

c) Efficiency of labour refers to the qualitative aspect of labour. It is estimated on the basis of
quantity of goods produced, quality of the good and the time taken to produce.
d) Invisibility, problem of deferred payment, store of value, double co-incidence of wants.

e) Commercial Bank – earn profit, banker to consumer, no printing notes, accepts deposits from
public.
Central Bank – Prints notes, Banker to Government gives loans to government.

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Question 4
(a) Explain briefly two differences between Recurring deposits and Fixed deposits. [2]
(b) What is meant by Open market operations? [2]
How does it influence money supply?
(c) Mention two causes of Consumer Exploitation. [2]
(d) What is meant by RTI? [2]
(e) Distinguish between Fixed capital and Circulating capital quoting suitable
examples. [2]

Examiners’ Comments
Suggestions for teachers
(a) Majority of candidates answered this question
- Students must be made aware about
correctly. Candidates misunderstood the concept
recurring deposit and fixed deposit
of recurring deposits but answered the concept
accounts, with the distinction based on
on fixed deposits correctly.
of rate of interest and period of time.
(b) Most candidates answered both parts of the
- Emphasis must be laid on concepts
question correctly, however the second part was
based on open market operations, its
not understood by a few candidates.
meaning and its implications etc. It
(c) Most candidates wrote the forms of exploitation
must be explained in all clarity as it is
instead of its causes. Few candidates wrote the
one of the most important methods of
captions with no explanation and appeared
the monetary policy of the Central
confused in relating to the concept of consumer
Bank (RBI).This technique seeks to
exploitation.
influence the excess reserves of the
(d) Most candidates were unable to write the full
Central Bank/RBI. Money supply is
form of RTI nor were aware of its role.
directly affected through ONO (Open
(e) Answered correctly by most candidates but a
market Operations).
few candidates were unable to understand the
- Explain the distinction between the
concept and wrote incorrect answers.
causes, forms and factors of consumer
exploitation in detail.
- RTI must be explained
comprehensively with conceptual
clarity.
- Concepts on types of capital must be
explained with a clarity in concept and
suitable examples.

216
MARKING SCHEME
Question 4.
a) Recurring Deposit – money deposited in equal time interval, interest gets accumulated, rate
of interest is not very high.
Fixed Deposit – total amount is deposited, rate of interest is high, amount withdrawn only
after maturity.
b) Central Bank purchases and sells government securities during inflation, RBI sells securities
to reduce supply of money, and during deflation it buys securities to increase supply of
money.
c) Reason for consumer exploitation – illiteracy, ignorance, unorganised, consumers,
malpractices of businessmen.

d) RTI refers to Right to Information. This allows information related to:

(1) Information on public policy procedures.
(2) Information on departmental records
(3) Information regarding delivery of service
(4) Business information (regarding information on PWD officers, etc.)
(The full form with any one feature)
e) Fixed capital is not used up within a single period of production e.g. machines, tools, etc.
On the other hand circulating capital refers to capital goods which is exhausted on being used
just once. e.g. raw materials, fuel, etc.

Question 5
(a) Define Division of labour. Explain three benefits of Division of labour to
producers. [5]
(b) Define Capital Formation. Explain three causes of low capital formation in a
developing economy. [5]

217
Examiners’ Comments
Suggestions for teachers
(a) Majority of candidates wrote the first part of the
- The concepts on division of labour must
question correctly but a few wrote an incomplete
be clearly defined with the help of
definition of division of labour. Key terms like
examples with key emphasis on terms
ability and aptitude of workers were not
associated – ability and aptitude etc.
mentioned. Many candidates explained the
Producers are always benefited by the
benefits correctly but were unable to correlate
division of labours – whether directly or
these benefits (of division of labour) to
indirectly – so it is must be explained to
producers.
correlate all the benefits to the producers
(b) Most candidates wrote improper definitions with
by division of labour.
no mention of key terms relating to ‘period of
- The definition of capital formation must
time’. Candidates only wrote captions with no
be explained comprehensively with
explanation with reference to a developing
factors relating to ‘over a period of time’
economy. Candidates wrote the process of capital
and its importance in the economic
formation rather than its causes of low rate of
growth and development of a
capital formation.
developing economy.

MARKING SCHEME
Question 5.
a) Division of labour refers to division of work into parts and subparts according to ability and
aptitude of the worker.
Benefits of division of labour to workers:
(1) Expansion in production
(2) Better quality of products
(3) Greater efficiency of workers
(4) Reduced average cost
(5) Rise in profits (brief explanation of any three)
b) Capital formation refers to addition made to existing volume of capital in an economy at a
given period of time.
Causes of low capital formation:

(1) Low level of saving

(2) Lack of investment opportunity
(3) Inadequate banking network
(4) Low level of income
(5) Higher taxes
(6) Fear of nationalisation. (any three of the above should be explained)

218
Question 6

(a) Mention five qualities of a good entrepreneur. [5]

(b) Differentiate between Decrease in demand and Contraction of demand. [5]

Examiners’ Comments
(a) A few candidates wrote the functions of an Suggestions for teachers
entrepreneur instead with many candidates  Active classroom discussions must be
omitting key terms associated with qualities conducted with a thorough explanation
relating to risk bearing, organisational ability in understanding the qualities of a good
decision making and innovative financial abilities entrepreneur. The revenue earning
etc capacities of an entrepreneur should be
(b) Most candidates were confused between the highlighted. Key issues on the good
concepts ‘decrease in demand’ and ‘contraction in qualities to promote revenue with the
demand’. Diagram for decrease in demand – left help of or adding to innovative financial
ward shift price at vertical axis and quantity ability, risk bearing, decision making,
demanded at horizontal axis were incorrectly and organisational ability must be
drawn. In contraction of demand the graph for highlighted.
upward movement, price and quantity demanded  A comparative understanding bringing
were not mentioned properly. Candidates wrote out distinction between decrease in
distinction between increase in demand and demand and construction of demand
decrease in demand rather than contraction of must be explained with an emphasis on
demand. the Diagrams of decrease in demand
with a leftward shift and contraction of
demand with upward movement should
be clearly explained along with price
mentioning at vertical axis and
demanded quantity of horizontal axis.
.
MARKING SCHEME
Question 6.
a) Entrepreneur should have risk bearing organisational ability, decision making and
innovative financial ability coordinating with different departments etc.
]
b) Decrease in Demand – left ward shift, fall in quantity demanded, same price, other factors
change – graph.
Contraction – upward movement, change in demand curve due to change in price, other
factors constant, graph.

219
Question 7
(a) What is meant by Shift in supply? Explain three determinants of a leftward
shift of the supply curve. [5]
(b) Define Elasticity of demand. Explain briefly three determinants of elasticity
of demand. [5]

Examiners’ Comments
(a) Most candidates were unable able to explain shift
in supply correctly. However many candidates Suggestions for teachers
explained the factors influencing supply instead of - Explain concepts related to ‘shifts in
shift in supply. Candidates failed to mention other supply carefully with instructions to
than price i.e. supply of a commodity changes due write price and quantity supplied on
to factors other than price. A few wrote only both the X and Y axis along with details
captions of a leftward shift of the supply curve. of determinants causing
Most candidates wrote the determinants of leftward/rightward shifts through
rightward shift instead of leftward shift of the diagrams.
supply curve. - The topic of elasticity of demand must be
(b) A few candidates were confused between explained thoroughly either by formula or
by given price and quantity ratio/change.
determinants of demand and determinants of
Key terms related to elasticity of demand
elasticity of demand. Most candidates omitted like responsiveness/degree ratio/price
key terms like ratio /degree /responsiveness /price elastic and inelastic should be clearly
/elastic /inelastic etc in their answers. They did not mentioned. Determinants of elasticity of
mention the word – magnitude regarding the demand must be explained in detail.
elasticity of demand. Many wrote the captions of
determinants of elasticity of demand with no
details.

220
MARKING SCHEME
Question 7.
a) Shift in supply refers to change in supply.
This is when supply increases or decreases at the same price (e.g. leftward shift and rightward
shift)
Determinants of leftward shift in supply
(1) Rise in the cost of production
(2) Low level of technology
(3) Change in the goal of the firm
(4) Change in Government policy
(5) Change in the number of producers.
(any three of these determinants should be explained with relevance to leftward shift
of supply curve)
b) Elasticity of demand refers to the degree of responsiveness of demand to a given change in
price. Eg. p > 1, p < 1 etc.
Determinants of elasticity of demand

(1) Nature of the commodity

(2) Existence of substitutes
(3) Variety of uses of a good
(4) Level of income
(5) Proportion of income spent
(6) Possibility of postponing consumption.
(7) The price level
(8) Time
(9) Role of habits etc.
(any three of the above mentioned should be explained)

Question 8

(a) What is meant by Public Expenditure? Explain three reasons for an increase
in public expenditure in India. [5]
(b) Define a tax. Explain briefly three merits of a Direct tax. [5]

221
Examiners’ Comments
(a) Most candidates wrote generalised answers with
no mention of key terms related to economic Suggestions for teachers
development, infrastructure etc. A few candidates - Concepts based on public expenditure
only wrote captions. must be explained in detail with key
(b) Most candidates were unable to mention key terms linked to Government, growth
terms related to government, compulsory and development, infrastructure etc
payment or contribution public welfare etc. in being an integral part in making
writing their definition. A few candidates were concepts clear for students to
confused about concepts of direct tax and understand.
indirect tax with incorrect examples. - Important and relevant points
associated with the term ‘Tax’ and its
types must be discussed in length.
Terms like compulsory contribution,
government, general public welfare etc
should be highlighted with merits and
demerits of direct tax should be
explained in detail with the examples.

MARKING SCHEME
Question 8.
a) Public expenditure refers to expenditure undertaken by the Government to promote growth
and development in the economy. E.g. money spent on economic infrastructure.
Reasons for increase in public expenditure
(1) Increase in defence needs
(2) Building up strong economic infrastructure
(3) To increase output
(4) Development of backward regions
(5) Supply of basic facilities to citizens
(6) Expansion of administrative machinery
(7) Increase in social security
(8) Servicing of public debt
(9) Implementing fiscal policy
(10) Attainment of social objective
(any three of the above mentioned should be explained)
b) Tax is a compulsory contribution made by the citizens to the government to defray the
expenses involved in promoting the general welfare of the public. Tax payers do not receive
any direct benefit. E.g. Income tax.
Merits of direct taxes
(1) Equity is ensured
(2) Certainty
(3) Economical
(4) It is elastic
(5) Promotes civic consciousness (Any three)

222
Question 9
(a) Explain the secondary functions of money. [5]
(b) What is meant by Cost-push inflation? Briefly explain three of its
determinants. [5]

Examiners’ Comments
(a) Most candidates wrote the primary functions of Suggestions for teachers
money instead of writing the secondary functions - Explain the primary
that the question posed. and secondary functions in detail with
(b) Most candidates wrote an incomplete answer. The examples that must be written as per
concepts of Inflation and its distinction from cost- requirements of the question.
push was not understood by a few candidates. Key - The significance of secondary
words like production, aggregate, output of goods functions of money should be
and services, price level etc. were not mentioned. highlighted with suitable examples.
Determinants of Cost-push inflation were not - Inflation is an important topic in the
explained. study of Economics and must be
explained thoroughly. Its meaning,
types and impact must be
comprehensively taught with the help
of day to day examples. Terms
associated i.e price level, production,
aggregate supply, output of goods and
services must be explained with the
help of appropriate examples.

223
MARKING SCHEME
Question 9.
a) Secondary Functions – deferred payments, store of value, transfer of value.

b) An increase in the cost of production will shift the aggregate supply curve to the left. As a
result, the aggregate output of goods and services in the economy will fall and subsequently
the aggregate price level will rise. Since this inflation is caused by the cost of production,
this is called cost push inflation.

Causes of cost push inflation are:

(1) Rise in the cost of production
(2) Rise in wage level
(3) Rise in profit margin.
(Three of the above mentioned should be explained)

Question 10

(a) With reference to the Central Bank, explain the following:

(i) Monopoly of note issue
(ii) Lender of the last resort. [5]
(b) ‘An alert consumer is a safe consumer’.
Give reasons to support your answer. [5]

224
Examiners’ Comments
(a) Most candidates were unable to answer
comprehensively. There was no explanation Suggestions for teachers
offered for the important role of the Central Bank - Banking is an important topic with the
as a ‘Monopoly of note issue’ or ‘Lender of last Central Bank being the Apex Bank. It is
resort’. The distinction between the Central Bank imperative that its functions be
and Commercial Banks in relation to their explained in absolute totality. The
functions was not understood by many candidates. functions of Commercial Banks too
(b) Most candidates wrote the rights and duties of need to be revised thoroughly.
consumers and displayed no connection to support - Consumer awareness is a topic that
their answers with appropriate reasoning. needs to be explained with the help of
day to day examples. The forms of
exploitation should be highlighted to
make aware of the malpractices carried
out in markets. Rights of consumers
must be explained to ensure a consumer
is aware of issues related to quality of
product, warranty period, price etc

MARKING SCHEME
Question 10.
a) (i) Central Bank enjoys monopoly of note issue. If Commercial Banks enjoy this power,
they will manipulate the issue of paper notes to sent their own objectives. This may
not be for the good of the country  this right has been granted to the Central Bank.
(ii) Commercial Banks borrow money from the Central Bank. When Commercial Banks
are unable to borrow money from any other source, Central Bank will always come
to their rescue. Central bank provides financial assistance to commercial banks
through rediscounting of bills of exchange.
b) Consumer awareness of right and obligations, demand proper bill, check the quality of the
product, warranty period, price tag etc .

225
Topics found confusing/difficult:

- Definition of labour/discussion of labour

- Elasticity of demand (Decrease and contraction)
- Perfectly elastic supply curve
- Distinction between redeemable and irredeemable debt.
- Capital and capital formation.
- Functions of Central Bank/Reserve Bank of India
- Rights and duties of consumers
- Public expenditure
- Shift in supply
- Costpush inflation
- Primary and Secondary functions of money
- Mixed/Circulating capital and sunk/floating capital.

Suggestions for candidates:

- Regular practice of writing answers along with examples is necessary.

- Avoid selective study of topics
- Practice drawing of diagrams on a regular basis
- Always write the captions and then explain in the light of the concept of the questions
- Use flow charts as required
- Definition always should be given along with examples
- Write key words to support your answers
- Answers should be relevant and to the point
- Revise and recheck the answers after completion of the examination.
- Attempt all these questions as per instruction given

226