Worksheet Solutions: Introduction to Microeconomics - 2 | Economics Class 11 - Commerce PDF Download

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Q1: Economics is the social science of studying the __________, __________, and __________ of goods and services.
Ans: production, distribution, consumption
Economics is the study of how goods and services are produced (created), distributed (allocated or made available), and consumed (used or purchased) in society. It examines the relationships between these three fundamental economic activities.

Q2: Scarcity is the root cause of all __________ problems in economics.
Ans: economic
Scarcity is the fundamental economic problem that arises because resources are limited, but human wants and needs are virtually unlimited. This limited supply of resources must be allocated to meet the demand for various goods and services, leading to choices and trade-offs.

Q3: The central problems faced by an economy can be categorized under __________ heads.
Ans: three
These central economic problems revolve around resource allocation. "What to produce" involves deciding which goods and services to create and in what quantities. "How to produce" pertains to the selection of efficient production techniques. "For whom to produce" addresses the distribution of output and income among individuals and factors of production.

Q4: What and how much to produce is a decision based on the importance of various goods and the allocation of resources in such a way that maximizes __________ __________ __________.
Ans: maximum aggregate satisfaction
Opportunity cost is the value or benefit that is foregone when a choice is made. It represents the benefits that could have been gained from the next best alternative that wasn't chosen.

Q5: In microeconomics, the study of individual consumers and businesses' decisions and behavior falls under __________ economics.
Ans: micro
Microeconomics focuses on the behavior of individual economic agents, such as consumers and businesses. It examines how these agents make decisions, interact in markets, and allocate resources.

Q6: The opportunity cost is the cost incurred by not enjoying the benefit associated with the __________ __________ choice.
Ans: best alternative
The best alternative is the one that offers the greatest advantage or benefit when making a choice. It's the option that one gives up when selecting another.

Q7: In economics, the curve that shows alternative combinations of production of two goods that an economy can produce within given resources and technology is called the __________ __________ __________.
Ans: Production Possibility Curve (PPC)
The PPC illustrates the trade-offs an economy faces when allocating resources between two different goods. It shows the possible combinations of these goods that can be produced, given the available resources and technology.

Q8: Outward/rightward shifts of the Production Possibility Curve (PPC) are caused by __________ in resources or improvement in technology.
Ans: increase
An outward shift of the PPC indicates economic growth, meaning the economy can produce more of both goods. This can happen when there is an increase in available resources (e.g., more labor or capital) or an improvement in technology (e.g., better production methods).

Q9: The central problems of an economy include deciding how to achieve fuller utilization of resources and remove __________ __________.
Ans: involuntary unemployment
"For whom to produce" addresses the distribution of the output and income in an economy. Personal distribution refers to how the output is distributed among different individuals and households, considering income and consumption. Functional distribution looks at how factors of production (land, labor, capital, entrepreneurship) receive their share of income.

Q10: Microeconomics focuses on individual consumers and businesses, while macroeconomics deals with the functioning of the __________ __________.
Ans: entire global economy
In this context, the opportunity cost is the Rs. 5,000 that the teacher is forgoing by not continuing to work at the first school. By choosing the second school, they are missing out on the Rs. 5,000 they could have earned in the first school.

Assertion and Reason Based 

Q1: Assertion: Economics is a simple social science with no relation to other fields.
Reason: Economics involves the study of scarce resources, allocation of resources, and welfare at the individual and society level.
(a) Both assertion and reason are true, and the reason is a correct explanation of the assertion.
(b) Both assertion and reason are true, but the reason is not a correct explanation of the assertion.
(c) Assertion is true, but the reason is false.
(d) Both assertion and reason are false.
Ans: (b)

• Economics is indeed a social science that focuses on the production, distribution, and consumption of goods and services.
• Economics involves the study of decision-making processes related to the allocation of resources to meet human wants and needs.

Q2: Assertion: The production possibility curve (PPC) can shift outward or inward.
Reason: An outward shift indicates economic growth, while an inward shift signifies the economy's decline.
(a) Both assertion and reason are true, and the reason is a correct explanation of the assertion.
(b) Both assertion and reason are true, but the reason is not a correct explanation of the assertion.
(c) Assertion is true, but the reason is false.
(d) Both assertion and reason are false.
Ans: (a)

• The PPC, also known as the Production Possibility Frontier, can indeed shift outward or inward based on various factors.
• An outward shift of the PPC represents economic growth, where an economy can produce more with the same resources and technology. Conversely, an inward shift signifies a decline in resources or technology, leading to a decrease in production capacity.

Q3: Assertion: Opportunity cost is only monetary in nature.
Reason: Opportunity cost can also be in terms of time or physical resources.
(a) Both assertion and reason are true, and the reason is a correct explanation of the assertion.
(b) Both assertion and reason are true, but the reason is not a correct explanation of the assertion.
(c) Assertion is true, but the reason is false.
(d) Both assertion and reason are false.
Ans: (a)

• Opportunity cost is not limited to monetary aspects; it can encompass various factors.
• Opportunity cost can indeed be in terms of time, physical resources, or other non-monetary considerations. For example, the opportunity cost of spending time studying is the leisure time that is forgone.

Q4: Assertion: Microeconomics deals with the economy as a whole.
Reason: Microeconomics focuses on individual consumers and businesses.
(a) Both assertion and reason are true, and the reason is a correct explanation of the assertion.
(b) Both assertion and reason are true, but the reason is not a correct explanation of the assertion.
(c) Assertion is true, but the reason is false.
(d) Both assertion and reason are false.
Ans: (d)

• Microeconomics does not deal with the economy as a whole but focuses on specific components within the economy.
• Microeconomics primarily deals with individual consumers, businesses, and specific markets, analyzing their behavior and decision-making processes.

Q5: Assertion: The central problem of allocation of resources arises due to unlimited resources.
Reason: If resources were not scarce, there would be no problem of allocation.
(a) Both assertion and reason are true, and the reason is a correct explanation of the assertion.
(b) Both assertion and reason are true, but the reason is not a correct explanation of the assertion.
(c) Assertion is true, but the reason is false.
(d) Both assertion and reason are false.
Ans: (c)

• The central problem of allocation arises precisely because resources are scarce, not unlimited.
• If resources were not scarce and unlimited, there would be no need for allocation, as there would be enough resources to meet all wants and needs.

Very Short Answer Type Questions

Q1: Define scarcity.
Ans: Scarcity is the limitation of the supply of a good with its demand.

Q2: What are the central problems of an economy?
Ans: The central problems of an economy are what to produce, how to produce, and for whom to produce.

Q3: Explain the concept of opportunity cost.
Ans: Opportunity cost is the cost incurred by not enjoying the benefit associated with the best alternative choice.

Q4: Differentiate between microeconomics and macroeconomics.
Ans: Microeconomics deals with individual consumers and businesses, while macroeconomics deals with the economy as a whole.

Q5: What is the key factor leading to the central problem of allocation of resources?
Ans: Scarcity of resources is the key factor leading to the central problem of allocation of resources.

Q6: What are the two features of resources?
Ans: Two features of resources: They are scarce and limited, and they have alternative uses.

Q7: Describe an example of an outward shift of the PPC.
Ans: An example of an outward shift of the PPC is when an economy experiences growth, leading to increased resources and technological improvements.

Q8: What does the rotation of the PPC signify?
Ans: The rotation of the PPC signifies changes in the allocation of resources or changes in technology.

Q9: How is opportunity cost not limited to monetary aspects?
Ans: Opportunity cost is not limited to monetary aspects; it can also be in terms of time, physical resources, or other non-monetary factors.

Q10: What is the key economic concept expressed by opportunity cost?
Ans: The key economic concept expressed by opportunity cost is the basic relationship between scarcity and choice.

Short Answer Type Questions

Q1: Explain the concept of the central problem of the economy and its three components.
Ans: The central problem of the economy involves three components: what to produce, how to produce, and for whom to produce. It deals with the allocation of scarce resources to meet unlimited wants.

Q2: Discuss the factors that can lead to an outward shift of the PPC.
Ans: Factors that can lead to an outward shift of the PPC include increased resources, technological improvements, growth in the labor force, and discoveries of new resources.

Q3: Why is opportunity cost a fundamental concept in economics? Provide examples.
Ans: Opportunity cost is fundamental in economics as it represents the cost of choosing one option over another. For example, the opportunity cost of going to a movie is the value of the next-best alternative use of that time.

Q4: Differentiate between microeconomics and macroeconomics, and explain their significance.
Ans: Microeconomics focuses on individual consumers and businesses, while macroeconomics deals with the economy as a whole, including factors like national income and inflation.

Q5: How do limited resources and alternative uses of resources contribute to the central problem of allocation?
Ans: Limited resources and alternative uses contribute to the central problem of allocation as they require the economy to make choices regarding the production of various goods and services.

Q6: Describe the impact of an inward shift of the PPC and the possible reasons behind it.
Ans: An inward shift of the PPC signifies a decrease in resources or technological degradation. Reasons behind it can include natural disasters, war, or a decline in available resources.

Q7: Elaborate on the concept of economic growth and its relationship with the PPC.
Ans: Economic growth involves increasing a country's production capacity to raise the standard of living. It can occur through the discovery of new resources or improved technology.

Q8: Explain the significance of the rotation of the PPC and provide examples.
Ans: The rotation of the PPC indicates changes in the allocation of resources or technology. For example, a shift in production from agriculture to manufacturing can lead to a rotation of the PPC.

Long Answer Type Questions

Q1: Discuss the concept of scarcity and its role in economics. Explain how scarcity is the root cause of economic problems.
Ans:

• Scarcity is a fundamental concept in economics that arises from the imbalance between limited resources and infinite human wants and needs. In a world with finite resources, people and societies must make choices about how to allocate these resources to fulfill their needs and desires. Scarcity is the foundation of economic problems because it necessitates these choices and trade-offs.
• Scarcity leads to the central economic problem, which includes three key questions: What to produce, how to produce, and for whom to produce. When resources are scarce, societies must decide what goods and services to produce, how to produce them efficiently, and who will benefit from their production. These choices involve opportunity costs, where selecting one option means forgoing the benefits of other choices.
• In summary, scarcity is the root cause of economic problems because it drives the need for resource allocation, decision-making, and trade-offs in the face of limited resources and unlimited human wants.

Q2: Explain the three central problems of an economy in detail, providing real-world examples.
Ans: The three central problems of an economy encompass the core challenges faced in resource allocation and production. Let's delve into each problem with real-world examples:

• What to Produce: This problem involves deciding which goods and services should be produced and in what quantities. For instance, consider a nation's agricultural sector. Should the country allocate resources to produce more wheat or more rice? The choice is based on consumer preferences, demand, and resource availability.
• How to Produce: This problem pertains to selecting the most efficient production techniques. In a manufacturing setting, a car manufacturer must decide whether to use automated robotic assembly or manual labor to produce cars. The choice influences production costs, efficiency, and product quality.
• For Whom to Produce: This problem deals with the distribution of output and income among individuals and factors of production. In a society, should high-income earners receive a larger share of the economic output, or should there be more equitable distribution? For instance, a government may decide how to allocate resources for healthcare, education, and social welfare programs to address income inequality.

These central problems reflect the constant need to make choices in the allocation of limited resources and have profound economic, social, and political implications.

Q3: Elaborate on the factors that can lead to an inward shift of the PPC, and discuss the consequences of such a shift on an economy.
Ans: An inward shift of the Production Possibility Curve (PPC) indicates a decrease in a nation's production capacity.
This shift can result from various factors:

• Resource Depletion: If a nation's natural resources, like oil or minerals, are exhausted, the PPC will shift inward. For example, consider an oil-dependent economy facing depletion of its oil reserves. This can severely limit its capacity to produce energy-related goods.
• Technological Degradation: When an economy experiences a decline in technology or a lack of innovation, the PPC may shift inward. If, for example, outdated machinery or outdated production methods are used, efficiency decreases, leading to reduced production of goods and services.
• Natural Disasters: Large-scale natural disasters such as earthquakes, floods, or hurricanes can damage infrastructure, disrupt production, and reduce the availability of resources. This can result in an inward shift of the PPC, as the economy struggles to recover.

The consequences of an inward shift of the PPC on an economy are detrimental. It signifies a reduction in the production of goods and services, leading to lower living standards, unemployment, and reduced economic growth. Resource scarcity, inefficiency, and reduced output can result in higher prices, reduced consumer welfare, and overall economic stagnation.

Q4: Describe the concept of economic growth and its significance. Provide examples of how economic growth can be achieved.
Ans: Economic growth refers to the sustained increase in an economy's capacity to produce goods and services over time. It is a vital concept with significant implications for an economy.
Economic growth is essential for several reasons:

• Standard of Living: Economic growth improves the standard of living for the population. As an economy produces more goods and services, people have access to a wider range of products and better living conditions.
• Employment: Economic growth leads to increased job opportunities, reducing unemployment rates and promoting economic stability.
• Reduction of Poverty: As an economy grows, income levels rise, helping to alleviate poverty and improve the well-being of citizens.
• Investment: Economic growth attracts investment, both domestic and foreign, as investors seek opportunities in a growing market.
• Technological Advancements: Growth often goes hand in hand with technological progress, which can enhance efficiency and innovation.

Economic growth can be achieved through various means, including:

• Investment in Human Capital: Education and training programs that enhance the skills and productivity of the workforce.
• Investment in Physical Capital: Expanding infrastructure and capital goods, such as factories and technology.
• Research and Development: Investing in innovation and technology to create new products and services.
• Trade: Expanding trade with other nations can lead to increased exports and economic growth.
• Government Policies: Fiscal and monetary policies can stimulate economic growth by regulating factors like taxation, interest rates, and government spending.

In summary, economic growth is crucial for an economy's prosperity and well-being, and it can be achieved through various strategies, investments, and policies.