NCERT Solutions Class 12 Economics Introduction to Economics

NCERT Solutions Class 12 Economics Introduction to Economics. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises.

Introduction to Economics

Question 1. Discuss the central problems of an economy. [4-6 Marks]

Answer: The three central problems of an economy are:

1. What to produce? [CBSE 2004C, 05, 06, 08, 08C, 09, 10; AI 2006, 10]

(a) What to produce refers to a problem in which decision regarding which goods and services should be produced is to be taken.

(b) Since its resources are limited, every economy has to decide what commodities are to be produced and in what quantities.

(c) ‘The guiding principle for an economy here is to allocate resources in such a way that gives maximum aggregate utility to the society.

2. How to produce? [CBSE 2014C, 2006, 08C, 10, AI 2001, 05, 08, 10, 11]

(a) How to produce refers to a problem in which decision regarding which technique of production should be used is made.

(b) Goods and services can be produced in two ways: by using labour intensive techniques, and by using capital-intensive techniques.

(c) The guiding principle for an economy in such a case has to decide about the techniques of production on the basis of cost of production. Those techniques of production should be used which lead to the least possible cost per unit of commodity or service.

3. For whom to produce? [CBSE 2014, 2005C, AI 2013]

(a) For whom to produce refers to a problem in which decision regarding which category of people are going to consume a good, i.e., economically poor or rich.

(b) As we know, goods and services are produced for those who can purchase them or have the capacity to buy them.

(c) Capacity to buy depends upon how income is distributed among the factors of production. The higher the income, the higher will be the capacity to buy and vice versa. So, this is a problem of distribution.

(d) The guiding principle is that the economy must see here that important and urgent wants of its citizens are being satisfied for the maximum possible extent or not.

Question 2. What do you mean by the production possibilities of an economy? [1 Mark]

Answer: Production possibilities of an economy refer to different combinations of goods and services which an economy can produce from a given amount of resources and a given stock of technology.

Question 3. What is a production possibility frontier? [CBSE 2006C; AI 2006, 09] [1 Mark]

Answer: Production possibility frontier is a curve which depicts all the possible combinations of two goods which can be produced with given resources and technology inan economy.

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