GSEB Class 11 Economics Solutions Chapter 1 Economics An introduction

GSEB Class 11 Economics Economics: An Introduction Text Book Questions and Answers

Exercise 1. Choose the Correct Option for the Following from the Options Provided:

Question 1.What is the science which studies human behaviour and deals with economic problems called?
(A) Philosophy
(B) Physics
(C) Economics
(D) Statistics
Answer: (C) Economics
In simple words: The field that analyzes how individuals make choices to address scarcity and manage resources is known as economics.

🎯 Exam Tip: Understanding the fundamental definition of economics is crucial, as it sets the stage for all further studies in the subject.

 

Question 2.From which Greek word is economics derived?
(A) Oikonomikos
(B) Ecology
(C) PHILO
(D) NOMOS
Answer: (A) Oikonomikos
In simple words: The term "economics" originates from the ancient Greek word 'Oikonomikos', referring to household management.

🎯 Exam Tip: Knowing the etymological roots of economic terms can provide deeper insight into their historical context and meaning.

 

Question 3.Who is known to be the first economist to have started studying economics as a separate science?
(A) Kautilya
(B) Marshall
(C) Robbins
(D) Adam Smith
Answer: (A) Kautilya
In simple words: Kautilya is historically recognized as the earliest scholar to treat economics as a distinct academic discipline, primarily through his work 'Arthashastra'.

🎯 Exam Tip: Historical figures like Kautilya are important for understanding the evolution of economic thought; remember their key contributions.

 

Question 4.Who introduced economics as a real science?
(A) Adam Smith
(B) Robbins
(C) Samuelson
(D) Marshall
Answer: (B) Robbins
In simple words: Lionel Robbins formalized economics as a genuine science by emphasizing its study of human behavior in relation to scarce resources with alternative uses.

🎯 Exam Tip: Differentiate between those who initiated economic study and those who established its scientific rigor for accurate recall.

 

Question 5.In how many branches is economics classified by the method of study and analysis?
(A) Four
(B) three
(C) two
(D) five
Answer: (C) two
In simple words: Economics is broadly categorized into two main branches for study and analysis: microeconomics and macroeconomics.

🎯 Exam Tip: Identifying the major classifications of economics is fundamental to understanding its scope and various areas of focus.

 

Question 6.On which axis are the independent variables like countries, year, rainfall, etc. usually represented?
(A) Vertical axis
(B) Horizontal axis
(C) On the point of origin
(D) On the corner of the graph
Answer: (A) Vertical axis
In simple words: Independent variables, such as time or distinct entities, are conventionally plotted on the X-axis (horizontal axis) in graphical representations, while dependent variables are plotted on the Y-axis.

🎯 Exam Tip: Correctly identifying axes for independent and dependent variables is crucial for interpreting and constructing economic graphs accurately.

 

Question 7.Who has written the book ‘Principles of Economics'?
(A) Adam Smith
(B) Marshall
(C) Robbins
(D) Samuelson
Answer: (B) Marshall
In simple words: Alfred Marshall authored the influential book 'Principles of Economics', a foundational text in the development of modern economic thought.

🎯 Exam Tip: Key economists and their seminal works are frequently tested; associating the correct author with their famous publications is important.

 

Exercise 2. Answer the Following Questions in One Sentence:

Question 1.State the definition of economics given by Robbins.
Answer: Economics is defined as the scientific study of human actions in the context of a relationship between unlimited wants and limited resources, which possess alternative applications.
In simple words: Robbins defined economics as the study of how people allocate scarce resources that have multiple uses to satisfy their unlimited desires.

🎯 Exam Tip: When defining economic concepts, precision in language is key; ensure all essential components of the definition are included.

 

Question 2.Which is the focus point of Samuelson's definition of economics?
Answer: Samuelson's economic definition primarily focuses on the concepts of choice, the efficient allocation of available resources, and the evaluation of costs and benefits associated with various actions.
In simple words: Samuelson's definition highlights the core economic problem of making choices about resource allocation and weighing benefits against costs.

🎯 Exam Tip: Distinguishing between different economists' definitions helps in understanding varied perspectives on the nature of economics.

 

Question 3.Which are the three ways of representing economic information?
Answer: Economic information gathered through study or analysis can be presented in the following three ways:
1. Descriptive manner
2. Through data tables
3. Through graphs or diagrams
In simple words: Economic data can be shown through written descriptions, organized tables, or visual graphs and diagrams.

🎯 Exam Tip: Listing methods of data presentation is straightforward; ensure accuracy in the names of the techniques.

 

Question 4.On which axis are the independent and dependent variables usually represented?
Answer: Typically, independent variables, such as time, are placed on the X-axis (horizontal axis), while dependent variables are represented on the Y-axis (vertical axis).
In simple words: Independent variables like time go on the X-axis, and dependent variables go on the Y-axis.

🎯 Exam Tip: This is a fundamental graphing convention; correct placement is essential for interpreting statistical and economic charts.

 

Question 5.What is a pie diagram?
Answer: A pie chart is a graphical representation where a circle is divided into sectors, with each sector illustrating a proportion of the total. Numerical data is converted proportionally into degrees within the circle to form these sectors.
In simple words: A pie diagram is a circular graph split into sections, where each section shows a part of a whole, calculated by converting numerical data into angles.

🎯 Exam Tip: When defining diagram types, describe both their visual structure and their function in data representation.

 

Exercise 3. Answer the Following Questions in Short:

Question 1.Give Kautilya's definition of economics.
Answer: Kautilya, also known as Chanakya, discussed the essence of economic activity undertaken by a state and society in his book 'Arthashastra' approximately 2500 years ago. According to Kautilya, the primary goal of human endeavor is 'arth' (wealth). The land inhabited by humans is considered their 'arth' (wealth), and therefore, the discipline that explains the purpose and utility of creating wealth on Earth is termed economics.
In simple words: Kautilya defined economics as the study of wealth creation and its purpose, considering land and human efforts as the source of 'arth' (wealth) within a state and society.

🎯 Exam Tip: Kautilya's definition highlights wealth and state management; remember its ancient context and focus on 'arth'.

 

Question 2.Explain Marshall's definition of economics.
Answer: Alfred Marshall, in his 1890 book 'Principles of Economics', defined economics as "the study of mankind in the ordinary business of life". This definition implies that people typically aim for material well-being in their daily routines. Marshall's perspective explains economics as the study of routine human activities and how individuals achieve well-being from material possessions. Although it might not encompass a broad scope, as it primarily focuses on material consumption and well-being, it remains significant for placing human welfare at the core of human activity.
In simple words: Alfred Marshall defined economics as the study of everyday human life and how people pursue material well-being, emphasizing human welfare in economic activities.

🎯 Exam Tip: Marshall's definition emphasizes human welfare and daily life activities; contrast this with other economists' views on scarcity or wealth.

 

Question 3.Explain the difference between economic and non - economic activities.
Answer:

Economic activity	Non-economic activity
1. An activity performed with the purpose of obtaining economic benefits in the form of income is called economic activity.	1. An activity which is done without the purpose of obtaining economic gains is called non-economic activity.
2. Objective of making economic gains, satisfaction of some want and involvement of exchange and cost are important aspects of an economic activity.	2. Unlike economic activities, such activities do not involve exchange of benefits on both sides of the transaction.
3. Activities done by farmers, lawyers, teachers, actors, government, etc. are all example of economic activities.	3. Charitable activity, or activities done out of love, affection, compassion, such as social service, mother teaching her son, etc. are all non-economic activities.

In simple words: Economic activities are undertaken to earn income or gain material benefits, involving exchange and cost. Non-economic activities, conversely, are performed without the aim of monetary gain, driven by emotions or social welfare.

🎯 Exam Tip: Clearly differentiate activities by their underlying motivation-material gain for economic, and social/emotional for non-economic; examples strengthen your explanation.

 

Question 4.Specify the difference between microeconomics and macroeconomics.
Answer:

Microeconomics	Macroeconomics
1. Microeconomics is the study and analysis of economics at an individual, group, or company level.	1. Macroeconomics is the study of the national economy as a whole.
2. Microeconomic analysis uses the 'Principle of Marginalism' to analyze how individual units make decisions in an economy.	2. Macroeconomic analysis has helped to develop principles for managing resources in such a way that leads to increase in national income, reduce unemployment, poverty, inflation, and so on.
3. Determining price and wages, equilibrium output level for a firm, etc., are studied here.	3. Macroeconomics studies determining national income, unemployment, poverty, etc.

In simple words: Microeconomics focuses on individual economic units like firms and consumers, analyzing specific markets and prices. Macroeconomics, on the other hand, examines the economy on a broader national or global scale, looking at aggregates like national income, unemployment, and inflation.

🎯 Exam Tip: Remember that "micro" deals with small, individual parts of the economy, while "macro" deals with the large-scale, aggregate aspects.

 

Question 5."Statistical information is necessary to know the direction and condition of growth of an economy" explain.
Answer: Economics and statistics are inextricably linked; one cannot conduct economic studies effectively without utilizing statistics. Economics develops various theories and hypotheses, but these cannot be accepted or implemented without empirical validation. To test the real-world applicability of these theories across different times and locations, relevant data must be collected from actual economic activities. This information can then be quantified and presented using statistical tools. Data derived from statistical analysis supports and validates economic principles and theories, also indicating the direction and changing trends or growth patterns of economic parameters. Therefore, statistical information is indispensable for understanding an economy's growth trajectory and overall health.
In simple words: Statistical data is essential for economics because it provides evidence to test theories, shows how economic factors are changing over time, and helps in understanding the overall growth and health of an economy.

🎯 Exam Tip: Emphasize the role of statistics in empirical validation, trend analysis, and informing policy decisions in economics.

 

Exercise 4. Answer the Following Questions in Brief Points:

Question 1.Explain the definitions of economics by Adam Smith and Marshall.
Answer:**Adam Smith:** According to Adam Smith, 'Economics is the study of the nature and causes of wealth of nations'. His definition posits that economics examines the exchange of physical wealth produced through labor. Smith introduced economics as a Social Science because he studied human efforts (society) and employed a scientific methodology. Since Smith's time, economics has been recognized as an independent science, distinct from general philosophy, and his work also addressed human welfare. **Alfred Marshall:** In his 1890 book, 'Principles of Economics', Alfred Marshall offered the definition: 'Economics is the study of mankind in the ordinary business of life'. This definition suggests that in daily life, people generally strive for material well-being. Marshall's definition explains economics as the study of human routine activities, aiming to elucidate how individuals achieve well-being through materialistic means. While this definition might lack a broad scope, focusing primarily on material consumption and welfare, it is crucial for centering human well-being in economic activity.
In simple words: Adam Smith viewed economics as the study of national wealth and its creation through labor, establishing it as a social science. Alfred Marshall defined economics as the study of everyday human life and how individuals pursue material well-being, keeping human welfare central to the discipline.

🎯 Exam Tip: When comparing definitions, highlight the distinct focus of each economist – wealth for Smith and ordinary life/welfare for Marshall – and their historical context.

 

Question 2.Give the points of importance of statistical information in the study of economics.
Answer: Economics and statistics are inseparable; conducting economic studies without using statistics is impossible. The importance of statistical information in economics is outlined below: **1. Statistical information supports or confirms a principle:** When conducting an economic study, the approach can be divided into two parts: 1. **The philosophy of economics:** This aspect observes human behavior. 2. **Scientific tools of economics:** These tools establish principles and theories. One cannot simply accept established theories and apply them. Their validity must be tested in real-life situations across various times and places. To do this, information related to the theory needs to be collected from real-world activities and presented quantitatively using statistical tools. * For example, statistical data on rainfall and agricultural production can help confirm the cause-effect relationship between them. * Similarly, data on commodity price and demand can validate their theoretical relationship. **2. Statistical information gives an idea about the changing trends of economic parameters:** Statistical data derived from economic studies provides insight into the direction and magnitude of changes in economic parameters. * For example, it helps understand changes in a firm's sales revenue, employment trends in a nation, or production trends in different economic sectors. * This data assists governments in formulating appropriate economic policies and helps individuals adjust their production patterns.
In simple words: Statistical information is vital for economics because it helps confirm economic theories with real-world data, shows trends in economic indicators like sales or employment, and provides crucial insights for government policy-making and individual economic decisions.

🎯 Exam Tip: Focus on the dual role of statistics: validating theories with evidence and providing actionable insights into economic trends for decision-making.

 

Question 3.Give an idea regarding Indian economic thought.
Answer: India's history and culture span over 5000 years, offering a rich philosophical tradition that outlines various aspects of human life and provides insights into 'a way of life'. In Hinduism, the concept of 'Purushartha' (meaning 'Purpose of a human being' in Indian philosophy) refers to the four goals or aims of human life: 1. 'Dharma' (righteousness, duty) 2. 'Arth' (purpose, benefit, wealth) 3. 'Kama' (desire) 4. 'Moksha' (liberation) Among these four goals, activities in life undertaken for 'arth' (benefits) constitute the subject matter of economics. Thus, any activity performed with the intention of gaining some benefit is considered an economic activity. 'Arth' is one of the four human goals or duties, representing the creation of wealth as a means of sustenance and material satisfaction. Approximately 2500 years ago, Kautilya, also known as Chanakya, discussed the purpose of economic activity by a state and society in his book 'Arthshashtra'. According to Kautilya, the primary objective of a human being is 'arth' (wealth). The land where a human settles is considered their 'arth' (wealth), and the science explaining the purpose and utility of wealth creation on Earth is therefore called economics.
In simple words: Indian economic thought is deeply rooted in ancient philosophies like 'Purushartha', where 'Arth' (wealth or benefit) is one of life's four goals. Kautilya's 'Arthashastra' further elaborated on wealth creation and economic management within a state and society, defining economics as the science behind securing and utilizing 'arth'.

🎯 Exam Tip: When discussing Indian economic thought, mention 'Purushartha' and Kautilya's 'Arthashastra', linking 'arth' to wealth and economic activity.

 

Question 4.Clarify the importance of economics.
Answer:**Importance of economics:** In the modern world, with the continuous increase in the consumption of goods and their inherent scarcity, almost all human needs have become economic goods. Consequently, human activities are increasingly economic in nature. For these reasons, the significance of economics, both as a philosophy and a science, is growing in human life. Economics is fundamentally important for comprehending human, societal, and state behavior in managing daily activities and for applying scientific theories and principles that guide professional decision-making. The various aspects highlighting the importance of economics are discussed below: **1. For understanding everyday behaviour:** Economics is beneficial for understanding the daily behavior of individuals, society, and the state in managing routine tasks. It aids in understanding everyday behavior in the following ways: (A) **Understanding international events:** * People strive to understand how changes, such as a rise in crude oil prices in the international market, impact their cost of living. * Some individuals also try to understand why certain countries are more developed than others. * Today, a vast amount of global data is available on various events and situations. Studying this data continuously improves technology and the scope of economics in daily life. (B) **Understanding historical events:** * Knowledge of economics helps in better understanding historical events. * By examining historical events through an economic lens, one can better grasp the reasons behind wars, the East India Company's entry into India for trade, the establishment of the 'British Raj', India's resistance against British-made goods, labor movements, etc. **2. Economic importance:** (A) **Decision making by individuals:** * Individuals from all walks of life-households, lawyers, actors, singers, and others-aim to maximize gains from their efforts. * They endeavor to manage their time and resources optimally to increase their benefits, making economic decisions that yield the best returns. (B) **Understanding government policies:** * Knowledge of economics is extremely useful for understanding various government policies related to taxation, wages, human resources, etc. * Based on their understanding of these policies, individuals and firms make their business decisions. * **Example:** The bank rates, such as REPO and Reverse REPO Rates declared by the Reserve Bank of India, help in making decisions regarding savings and investments. (C) **Professional decision making:** * Economics provides scientific principles and theories that guide professional decisions. * For example, concepts like revenue, cost, demand, and supply are integral to all economic activities. * Certain economic theories assist businesses in daily decisions concerning price determination, wage setting, and employment of production factors. * Economics also offers insights into the impact of specific decisions, such as what happens if market competition leads to a significant price reduction. * Economics also serves as a science that helps individuals make daily decisions. * Every human being acts as a consumer, producer, or laborer at various times. Economics enables them to make logical decisions to maximize gains while minimizing costs. * For example, when purchasing vegetables, mobile phones, or planning a vacation, our basic economic knowledge helps maximize returns with minimum costs.
In simple words: Economics is important because it helps us understand everyday human behavior, international and historical events, and guides individual and governmental economic decision-making. It provides scientific tools for individuals and businesses to make informed choices, maximizing benefits and minimizing costs in a world of scarce resources.

🎯 Exam Tip: Structure your answer by categorizing the importance of economics into understanding behavior, historical events, individual decision-making, government policies, and professional choices, providing brief examples for each.

 

Exercise 5. Answer the Following Questions in Detail:

Question 1.Give an idea of the development of economics as a science in the west.
Answer: The development of economics as a science in the West has a long history. Greek philosopher Aristotle, in his book 'Oeconomica', shared his perspectives on economics. With the advent of the Industrial Revolution in the West, the concepts of division of labor and specialization were introduced in the industrial sector. Under these frameworks, specific tasks were performed by individual workers or groups of workers specializing in those particular jobs. Owing to these new concepts and logical approaches, philosophical knowledge began to be categorized into various specialized sciences. Social Sciences started developing as a distinct branch, much like other scientific disciplines such as Physics and Mathematics. The methodologies of Social Science were no longer solely based on descriptive logic; studies in Social Sciences began to be supported by scientific tools and methods. Consequently, the study of human activities with a specific purpose evolved beyond being merely a subject of political or social philosophy and emerged as an independent science. Adam Smith conducted an in-depth study of wealth creation and, in 1776, published 'An Inquiry into the Nature and Causes of Wealth of Nations', commonly known as 'Wealth of Nations'. With this seminal work, Adam Smith established economics as a specialized field of knowledge in the Western world. By adopting economic theories and principles, industries began utilizing newly introduced machinery and making significant investments for mass production. This led to the Industrial Revolution, which, in turn, fostered a new socio-economic way of life and innovative methods of wealth creation.
In simple words: Economics in the West evolved from philosophical thoughts, like Aristotle's 'Oeconomica', into a distinct science. The Industrial Revolution brought concepts like specialization, leading to the classification of knowledge. Adam Smith's "Wealth of Nations" formalized economics as a specialized field, laying the groundwork for modern economic study.

🎯 Exam Tip: When discussing the development of economics in the West, key milestones include Aristotle's early thoughts, the impact of the Industrial Revolution, and Adam Smith's foundational work, 'Wealth of Nations'.

 

Question 2.'Graphs/diagrams are a better method of precisely presenting economic information.' Explain.
Answer: When an economic study is conducted, a considerable amount of numerical data is generated. This data can be effectively represented using various types of graphs and diagrams, which offer a more precise and easily understandable way to present economic information. Diagrams illustrating both linear and non-linear relationships are common in economics, with the demand curve being a prime example. Other frequently used charts, graphs, and diagrams in economics include:
(A) Bar diagram
(B) Grouped bar diagram
(C) Pie diagram, etc. (A) **Bar diagram:** A bar diagram (also known as a bar chart or bar graph) is a visual representation that uses rectangular bars to depict grouped data. The lengths of these bars are directly proportional to the values they represent.
**Example:** A bar diagram can illustrate the production of wheat in India over various years.

ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख भारत में गेहूं उत्पादन को विभिन्न वर्षों (X-अक्ष) और उत्पादन की मात्रा (Y-अक्ष) के अनुसार एक बार ग्राफ़ के रूप में दर्शाता है। प्रत्येक वर्ष के लिए गेहूं का उत्पादन लाख टन में अलग-अलग ऊँचाई के आयताकार बारों द्वारा दिखाया गया है, जिससे वर्षों के साथ उत्पादन में वृद्धि की प्रवृत्ति स्पष्ट रूप से दिखाई देती है।

Year	Production (lakh tonnes)
1970-71	23.8
1980-81	36.3
1990-91	55.1
2000-01	69.7
2010-11	86.9

(B) **Grouped/Clustered bar diagram:** These charts are employed when the dependent variable is categorized into more than one group.
**Example:** We can create a clustered bar diagram to analyze the literacy rates of 'Males', 'Females', and 'Total literacy' in Gujarat for different years. In this case, a combined bar is created for each year, with each category within the bar shaded or colored differently for distinction.
In simple words: Graphs and diagrams are superior for presenting economic information because they visually simplify complex numerical data, making trends and relationships easier to understand. Bar diagrams show grouped data with proportional bar lengths, while grouped bar diagrams compare multiple categories within a single group over time.

🎯 Exam Tip: Emphasize that visual tools simplify complex data, highlight trends, and aid comprehension. Provide clear definitions and examples for different diagram types to illustrate their utility.

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