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Sure Shot Questions: Introduction to Microeconomics | Economics Class 11 - Commerce

Based on a careful analysis of the previous years' questions and trends, we've put together a list of questions that are most likely to appear in the  Class 11 Economics exam. These predictions aren’t just guesses—they’re based on how often these questions show up and how CBSE usually frames its papers.

Q1: Explain how scarcity and choice are interrelated.
Ans: Scarcity and choice are interconnected because human wants are unlimited, but resources are limited. This scarcity forces individuals and societies to make choices about how to allocate resources efficiently. Every choice involves an opportunity cost, as choosing one option means forgoing another. For example, a student choosing to spend time studying sacrifices leisure time, highlighting the trade-off due to scarce time resources.

Q2: What gives rise to an economic problem?
Ans: The economic problem arises due to: 
(i) Scarcity of Resources: Limited resources cannot satisfy unlimited wants. 
(ii) Unlimited Wants and Needs: Human desires for goods and services are endless. 
(iii) Alternative Uses of Resources: Resources can be used in multiple ways, requiring choices and leading to opportunity costs.

Q3: Why is the economic problem regarded as a problem of choice?
Ans: The economic problem is a problem of choice because scarce resources and unlimited wants force decisions on resource allocation. Choices involve trade-offs and opportunity costs, as selecting one option means sacrificing another. For example, a government choosing to invest in healthcare may forgo infrastructure development, prioritizing based on preferences and needs.

Q4: What are the central problems of an economy?
Ans: The three central problems are: 
(i) What to Produce: Deciding which goods and services to produce and in what quantities (e.g., consumer vs. capital goods). 
(ii) How to Produce: Choosing production techniques, like labor-intensive or capital-intensive methods, based on efficiency and cost. 
(iii) For Whom to Produce: Determining how goods and services are distributed among different groups, considering income and needs.

Q5: What is the Production Possibility Frontier (PPF)? Explain its properties.
Ans: The Production Possibility Frontier (PPF) is a curve showing all possible combinations of two goods that can be produced with fixed resources and technology. Properties: 
(i) Downward Sloping: To produce more of one good, production of another must decrease due to scarce resources. 
(ii) Concave to the Origin: The PPF curves outward, reflecting increasing opportunity costs as resources are not equally efficient for all goods.

Q6: What is meant by opportunity cost? Explain with a numerical example.
Ans: Opportunity cost is the value of the next best alternative forgone when a choice is made. Example: With ₹1,000, you can either invest in a savings account (5% interest, earning ₹1,050 in a year) or take a photography course (earning ₹1,200 from a business). Choosing the savings account, the opportunity cost is ₹1,200 - ₹1,050 = ₹150, the profit forgone from the photography business.

Q7: Distinguish between positive and normative economics.
Ans: Positive Economics: Focuses on objective analysis of what is, using factual data and empirical testing (e.g., "Unemployment is 5%"). Normative Economics: Involves subjective judgments about what ought to be, based on values and policy recommendations (e.g., "The government should reduce unemployment").

Q8: Differentiate between a planned economy and a market economy.
Ans: 
Planned Economy: Resource allocation is controlled by the government, with centralized decisions on production and distribution (e.g., Cuba).
Market Economy: Resources are allocated through supply and demand, with private ownership and minimal government intervention; prices guide decisions (e.g., USA).

Q9: Explain the central problem of ‘how to produce’.
Ans: The problem of ‘how to produce’ involves choosing the most efficient production techniques. It depends on resource availability and economic conditions. For example, a labor-abundant country may choose labor-intensive methods to reduce unemployment, while a capital-abundant country may opt for capital-intensive techniques to maximize efficiency and output.

Q10: Does massive unemployment shift the PPF to the left? Explain.
Ans: Massive unemployment does not shift the PPF to the left; it results in operating inside the PPF, indicating underutilization of resources. The PPF shifts left only with a reduction in resources or technology (e.g., loss of labor force). Unemployment means idle labor, reducing output but not the economy’s potential.

Q11: Assertion (A): Scarcity of resources leads to the economic problem of choice. Reason (R): Limited resources and unlimited wants force individuals to prioritize and make trade-offs.
Ans: (a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). Scarcity necessitates choices due to the need to prioritize limited resources against unlimited wants.

Q12: Assertion (A): The PPF is concave to the origin. Reason (R): The PPF reflects increasing opportunity costs as resources are not equally efficient for all goods.
Ans: (a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). The concave shape of the PPF shows that opportunity costs rise as production shifts due to resource specialization.

Q13: Assertion (A): A market economy relies on the price mechanism. Reason (R): Prices signal scarcity and guide resource allocation in a market economy.
Ans: (a) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A). Prices in a market economy coordinate supply and demand, directing resources efficiently.

Q14: Assertion (A): Massive unemployment shifts the PPF to the left. Reason (R): Unemployment indicates underutilization of labor resources, reducing potential output.
Ans: (d) Assertion (A) is false, but Reason (R) is true. Unemployment causes production inside the PPF, not a leftward shift, which occurs due to a loss of resources or technology.

Q15: Calculate the Marginal Rate of Transformation (MRT) from the following PPF schedule: 
Good X: 0, 1, 2, 3, 4; Good Y: 20, 18, 14, 8, 0.

Ans: MRT = ΔY / ΔX. Calculations:
(i) From X=0 to X=1: ΔY = 20-18 = 2, ΔX = 1, MRT = 2/1 = 2.
(ii) From X=1 to X=2: ΔY = 18-14 = 4, ΔX = 1, MRT = 4/1 = 4.
(iii) From X=2 to X=3: ΔY = 14-8 = 6, ΔX = 1, MRT = 6/1 = 6.
(iv) From X=3 to X=4: ΔY = 8-0 = 8, ΔX = 1, MRT = 8/1 = 8.
MRT increases, reflecting the concave nature of the PPF.

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FAQs on Sure Shot Questions: Introduction to Microeconomics - Economics Class 11 - Commerce

1. What is microeconomics and how does it differ from macroeconomics?
Ans.Microeconomics is the branch of economics that studies individual consumers, firms, and markets. It focuses on how these entities make decisions regarding the allocation of resources and the pricing of goods and services. In contrast, macroeconomics looks at the economy as a whole, analyzing aggregate indicators like GDP, inflation, and unemployment rates. While microeconomics examines the details and behaviors of specific markets, macroeconomics provides a broader overview of economic trends and policies.
2. What are the main concepts of microeconomics?
Ans.The main concepts of microeconomics include supply and demand, elasticity, utility maximization, and market structures. Supply and demand determine prices and quantities in a market. Elasticity measures how responsive consumers and producers are to changes in price. Utility maximization refers to how consumers allocate their resources to achieve the highest satisfaction. Market structures, such as perfect competition, monopoly, and oligopoly, describe the competitive environment in which firms operate.
3. How do supply and demand affect market equilibrium?
Ans.Supply and demand interact to determine market equilibrium, which is the point where the quantity supplied equals the quantity demanded. If demand increases, prices tend to rise, leading producers to supply more, moving toward a new equilibrium. Conversely, if supply increases, prices may fall, prompting consumers to buy more until the market reaches a new equilibrium. This dynamic ensures that resources are efficiently allocated in the market.
4. What is the significance of elasticity in microeconomics?
Ans.Elasticity measures the responsiveness of quantity demanded or supplied to changes in price. It is significant because it helps businesses and policymakers understand how changes in prices affect consumer behavior and market dynamics. For example, if a product is price elastic, a small change in price will lead to a large change in quantity demanded. This information is crucial for pricing strategies, tax policies, and assessing the potential impact of economic changes on different markets.
5. What are the different market structures analyzed in microeconomics?
Ans.Microeconomics analyzes various market structures, including perfect competition, monopolistic competition, oligopoly, and monopoly. Perfect competition features many buyers and sellers with identical products, while monopolistic competition involves many firms with differentiated products. Oligopoly is characterized by a few firms dominating the market, often leading to strategic interactions. Monopoly exists when a single firm controls the entire market, allowing it to set prices without competition. Each structure has different implications for pricing, output, and consumer choice.
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