Test: Introduction To Economics - 2 - UPSC MCQ

The four factors of production are inputs used in various combinations for the production of goods and services to make an economic profit. The factors of production are land, labor, capital, and entrepreneurship. They are the inputs needed for supply.

Human wants are unlimited but resources or means to satisfy them are limited. They are material and non- material goods like time, money, services, resources etc. These resources are scarce. Here the term scarcity is used not in the absolute sense but in the relative sense i.e., in relation to demand.

Economic theory the ideas and priniciples that aim to describe how economies work. 

Normative economics. Normative economics (as opposed to positive economics) is a part of economics that expresses value or normative judgments about economic fairness or what the outcome of the economy or goals of public policy ought to be.

A decision-making unit (DMU) is an individual - a group of individuals who are participants in a decision-making process, who share a common goal or goals which the decision will hopefully help them to achieve and who share the risk arising from the decision.

The Production Possibilities Curve (PPC) models a two-good economy by mapping production of one good on the x-axis and production of the other good on the y-axis. The combinations of outputs produced using the best technology and all available resources make up the PPC. Points inside the PPC result from inefficiency; output combinations outside the PPC are impossible to produce.

P.P.C. is concave to the origin due to increase in marginal rate of transformation.

Economic cost is the combination of losses of any goods that have a value attached to them by any one individual. Economic cost is used mainly by economists as means to compare the prudence of one course of action with that of another.

Through central planning because it is the Central Authority which directly solves the central problems of 'what, how and for whom to produce' by incorporating solution in the plan itself. the PPC, the opportunity cost increases.The second method which can be employed to solve the central problems is the adoption of economic planning.

There are two main methods to solve these central problems. The first method is to solve these problems through market or price mechanism. That is, what goods are to be produced and what quantities, which methods for production are to be employed for the production of goods and how the output is to be distributed, should be decided by the free play of the forces of demand and supply.
The second method which can be employed to solve the central problems is the adoption of economic planning.

The statement is refuted because it is not essential that an economy always produces on PPC. It is bound to produce inside a PPC when its resources work inefficiently or resources are underemployed.

Macroeconomic deals with the problem related to economy as a whole and this is the problem of one particular industry which comes under the study of microeconomics.

The market price of a commodity is determined (or reaches its competitive equilibrium) where the demand curve and the supply curve intersect — where the forces of demand and supply (also known as the impersonal market forces) are just in balance.
Microeconomics is a branch of economics that studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Price determination is related to individuals that is why it is a subject matter of microeconomics.

There are two sides to the study of economics: macroeconomics and microeconomics. As the term implies, macroeconomics looks at the overall, big-picture scenario of the economy. It focuses on the way the economy performs as a whole and then analyzes how different sectors of the economy relate to one another to understand how the aggregate functions.
Therefore, general price level is a part of macroeconomics.

Correct option is A. Market Economy

Any product or service can be emerged only on the sacrifice made by the activity which drives the output factor. When an activity is sacrificed it amounts to consumption of resources.

A mandatory convertible is a security that automatically converts to common equity on or before a predetermined date. This hybrid security guarantees a certain return up to the conversion date, after which there is no guaranteed return but the possibility of a much higher return.

POSITIVE ECONOMICS is often called "WHAT IS" economics , it deals with the variables as they are.
Positive Economics uses WHAT IS and WHAT HAS BEEN OCCURRING in an economy as the basis for any statement about the future.
An EXAMPLE of a positive economic is, "increasing the INTEREST RATE will encourage people to save." 
Another EXAMPLE of a positive economics is, " how government impacts INFLATION by printing more MONEY."

Since,the demand of the good is inelastic. So,even if the price will increase the consumer will not decrease the consumption of that good.They will continue to purchase that goods. Due to this the production will go on.And so,the expenditure will increase.

Infinite as demand can go on increasing even when the price is constant