Class 11 Economics Short Questions With Answers (Part - 1) - Introduction to Micro Economics

Q.1. Explain how scarcity and choice are related to each other.

Human wants are unlimited but resources are scarce

Ans: Scarcity and choice go together in economics because limited resources force individuals and societies to select among competing uses. Scarcity means we cannot satisfy all wants at once, so choices must be made about how best to use what is available.

• Resources are limited, so we must prioritise their use among competing ends.
• Everyone faces scarcity; even those with large incomes must allocate time and money among alternatives.
• Because wants exceed available resources, making choices is important. 

Q.2. What gives rise to an economic problem?

Ans:

• Scarcity of resources: There is a limited supply of land, labour, capital and entrepreneurship compared with the wants of people.
• Unlimited wants and needs: Human desires for goods and services are virtually endless and keep changing.
• Alternative uses of resources: Each resource can be put to different uses, so choosing one use means forgoing another (opportunity cost).

Q.3. Why is the economic problem regarded as a problem of choice? 

Ans:

• Scarcity necessitates choice: Because resources are limited relative to wants, we must decide how to allocate them.
• Opportunity cost: Every choice involves trade-offs; choosing one option means sacrificing another.
• Decision-making: Choices reflect preferences, priorities and constraints faced by individuals or society.
• Limited resources, unlimited wants: This fundamental mismatch makes choice unavoidable in economic life.

Q.4. Why do problems related to the allocation of resources in an economy arise? Explain. 

Ans:

• Scarcity: Limited resources cannot satisfy all wants, so allocation must be efficient.
• Diverse needs: Different sectors and people require different goods and services, requiring prioritisation.
• Changing demands: Consumer preferences and technology evolve, so resource distribution must adjust over time.

Q.5. What is positive economics?

Ans: Positive economics studies and describes economic behaviour and outcomes as they are, using facts and evidence rather than value judgments.

• Objective analysis: It answers questions about what is happening or what will happen, without saying whether it is good or bad.
• Empirical testing: Theories are tested against data and observed evidence.
• Predictive power: It aims to forecast economic events and show causal relationships based on observation.

Q.6. What is normative economics?  

Ans: Normative economics involves value judgments about what the economy ought to be like and what policies should be adopted. It is prescriptive rather than descriptive.

• Prescription: Recommends actions or policies to improve outcomes based on beliefs about fairness or welfare.
• Subjective analysis: Uses opinions, ethical views and social goals in evaluation.
• Policy recommendations: Guides resource allocation according to chosen criteria like equity or efficiency.
• Value-based: Normative statements reflect preferences about what is desirable in society.

Q.7. What is a market economy?  

Ans:

• Decentralised allocation: In a market economy, resources are allocated mainly through interactions of buyers and sellers in markets rather than by a central authority.
• Private ownership: Most land, labour and capital are owned and managed by individuals and firms instead of the government.
• Profit motive: Producers are guided by the desire to earn profits, which provides incentives for efficiency and innovation.
• Limited government intervention: The state plays a smaller role, intervening mainly to enforce contracts, protect property rights and correct market failures.
• Price mechanism:Prices signal relative scarcity and help coordinate production and consumption decisions across the economy.