Samacheer Kalvi Class 11 Economics Solutions Chapter 1 Introduction to Micro Economics

Part - A

Multiple Choice Questions

 

Question 1. 'Economics is a study of mankind in the ordinary business of life' - It is the statement of
(a) Adam Smith
(b) Lionel Robbins
(c) Alfred Marshall
(d) Samuelson
Answer: (c) Alfred Marshall
In simple words: Alfred Marshall believed that economics is about studying how people live their daily lives and handle their everyday work. It focuses on the usual activities humans do in their ordinary business.

🎯 Exam Tip: Remember to associate key definitions or statements with their respective economists for full marks.

 

Question 2. The basic problem studied in Economics is
(a) Unlimited wants
(b) Unlimited means
(c) Scarcity
(d) Strategy to meet all our wants
Answer: (c) Scarcity
In simple words: The main problem economics tries to solve is scarcity. This means we have limited resources but everyone has unlimited wants, so we must make choices about how to use what we have.

🎯 Exam Tip: Scarcity is a fundamental concept in economics; always define it clearly as unlimited wants versus limited resources.

 

Question 3. Microeconomics is concerned with
(a) The economy as a whole
(b) Different sectors of an economy
(c) The study of individual economic units behaviour
(d) The interactions within the entire economy
Answer: (c) The study of individual economic units behaviour
In simple words: Microeconomics looks at how single parts of the economy, like one person, one household, or one business, make decisions and behave. This helps understand specific market dynamics.

🎯 Exam Tip: Distinguish microeconomics (individual parts) from macroeconomics (the whole economy) for full clarity.

 

Question 4. Which of the following is a microeconomics statement?
(a) The real domestic output increased by 2.5 percent last year
(b) Unemployment was 9.8 percent of the labour force last year
(c) The price of wheat determines its demand
(d) The general price level increased by 4 percent last year
Answer: (c) The price of wheat determines its demand
In simple words: Microeconomics focuses on small, specific things. A statement about how the price of one item, like wheat, affects how much people want to buy it, is a microeconomic topic.

🎯 Exam Tip: Macroeconomic statements usually involve economy-wide aggregates like GDP, unemployment rates, or general price levels.

 

Question 5. Find the odd one out.
(a) "An inquiry into the nature and the causes of the Wealth of Nations"
(b) "Principles of Economics”
(c) "Nature and Significance of Economic Science"
(d) "Ceteris paribus"
Answer: (d) "Ceteris paribus"
In simple words: Options (a), (b), and (c) are names of important books or definitions in economics. "Ceteris paribus" is a Latin phrase meaning "all other things being equal," used as an assumption in economic models, so it is the one that is different.

🎯 Exam Tip: "Ceteris paribus" is a crucial assumption in economic analysis, allowing economists to isolate the effect of one variable.

 

Question 6. The equilibrium price is the price at which
(a) Everything is sold
(b) Buyers spend their money
(c) Quantity demanded equals quantity supplied
(d) Excess demand is zero
Answer: (c) Quantity demanded equals quantity supplied
In simple words: Equilibrium price is where the amount of a product that buyers want to buy is exactly the same as the amount sellers are willing to sell. This creates a balanced market condition.

🎯 Exam Tip: Equilibrium is a state of balance where there is no tendency for price or quantity to change in the market.

 

Question 8. "Economics studies human behaviour as a relationship between ends and scarce means which have alternative uses” is the definition of economics of
(a) Lionel Robbins
(b) Adam Smith
(c) Alfred Marshall
(d) Paul A Samuelson
Answer: (a) Lionel Robbins
In simple words: Lionel Robbins defined economics as the study of how people act when they have many wants (ends) but only limited resources (scarce means) that can be used in different ways. It emphasizes the concept of choice due to scarcity.

🎯 Exam Tip: Robbins' definition highlights scarcity and choice, which are core themes in economic thought.

 

Question 9. Who is the Father of Economics?
(a) Max Muller
(b) Adam smith
(c) Karl Marx
(d) Paul A Samuelson
Answer: (b) Adam smith
In simple words: Adam Smith is widely recognized as the founder of modern economics. His ideas, especially those in "The Wealth of Nations," greatly influenced how we understand wealth and markets.

🎯 Exam Tip: Adam Smith is famous for his book "The Wealth of Nations" and for promoting free markets and the "invisible hand" concept.

 

Question 10. Who defined "Economics as the science of wealth"?
(a) Karl Marx
(b) Paul A. Samuelson
(c) Max Muller
(d) Adam Smith
Answer: (d) Adam Smith
In simple words: Adam Smith defined economics as the study of wealth. He focused on how countries create and increase their wealth through production and trade, a foundational idea in the field.

🎯 Exam Tip: Remember Adam Smith's wealth definition is one of the earliest and most influential definitions of economics.

 

Question 11. Utility means
(a) Equilibrium point at which demand and supply are equal
(b) Want - satisfying capacity of goods and services
(c) Total value of commodity
(d) Desire for goods and services
Answer: (b) Want - satisfying capacity of goods and services
In simple words: Utility means how much a good or service can satisfy a person's wants or needs. It refers to the usefulness or satisfaction a consumer gets.

🎯 Exam Tip: Utility is subjective, meaning it varies from person to person and situation to situation.

 

Question 12. A market is
(a)
(b) Only a place to sell things
(c) Only a place where prices adjust
(d) A system where persons buy and sell goods directly or indirectly
Answer: (d) A system where persons buy and sell goods directly or indirectly
In simple words: A market is a system where people buy and sell goods and services. It doesn't have to be a physical place; it can involve various interactions, like online trading.

🎯 Exam Tip: Markets facilitate exchange and price discovery, connecting buyers and sellers efficiently.

 

Question 13. Which one of the following is not a point in the Welfare Definition of Economics?
(a) Relation between cause and effect
(b) Economics does not focus on wealth alone
(c) Economics is the study of material welfare
(d) Economics deals with unlimited wants and limited means
Answer: (d) Economics deals with unlimited wants and limited means
In simple words: The Welfare Definition of Economics, by Alfred Marshall, focuses on human well-being and material welfare. The idea of unlimited wants and limited means is a key part of Robbins' scarcity definition, not Marshall's.

🎯 Exam Tip: Clearly differentiate between the various definitions of economics (wealth, welfare, scarcity, growth) and their key proponents.

 

Question 14. Growth definition takes into account
(a) The problem of choice in the dynamic framework of Economics
(b) The problem of unlimited means in relation to wants
(c) The production and distribution of wealth
(d) The material welfare of human beings
Answer: (a) The problem of choice in the dynamic framework of Economics
In simple words: The growth definition of economics, often linked to Samuelson, looks at how societies make choices over time to produce and distribute goods with limited resources. It considers how the economy develops dynamically over many years.

🎯 Exam Tip: The growth definition expands on earlier definitions by adding the dimension of time and resource allocation for future welfare.

 

Question 15. Which theory is generally included under micro economics?
(a) Price Theory
(b) Income Theory
(c) Employment Theory
(d) Trade Theory
Answer: (a) Price Theory
In simple words: Price theory, which studies how prices are set for individual goods and services, is a main part of microeconomics. It helps understand how supply and demand interact in specific markets.

🎯 Exam Tip: Microeconomics analyzes individual markets, firms, and households, making price determination a core aspect.

 

Question 16. ............ have exchange value and their ownership rights can be established and exchanged.
(a) Goods
(c) Markets
(d) Revenue
Answer: (a) Goods
In simple words: Goods are items that have value when exchanged, and people can own and trade them. This means they are tangible or can be transferred between individuals.

🎯 Exam Tip: Understand the characteristics that define 'goods' in economics, such as tangibility, exchange value, and transferability of ownership.

 

Question 17. Identify the correct characteristics of utility
(a) It is equivalent to 'usefulness'
(b) It has moral significance
(c) It is the same as pleasure
(d) It depends upon the consumer's mental attitude
Answer: (d) It depends upon the consumer's mental attitude
In simple words: Utility is how much satisfaction a person gets from something, and this feeling is personal to them. What one person finds useful or pleasing, another might not, demonstrating its subjective nature.

🎯 Exam Tip: Utility is a subjective concept, meaning its value varies from individual to individual based on their preferences and circumstances.

 

Question 18. Who has given scarcity definition of economics?
(a) Adam Smith
(b) Marshall
(c) Robbins
(d) Robertson
Answer: (c) Robbins
In simple words: Lionel Robbins provided the scarcity definition of economics. He focused on the problem of unlimited human wants facing limited resources with alternative uses, which requires choices.

🎯 Exam Tip: Robbins' definition highlights the fundamental economic problem of choice under conditions of scarcity.

 

Question 19. The process of reasoning from particular to the general is
(a) Deductive method
(b) Inductive method
(c) Positive economics
Answer: (b) Inductive method
In simple words: Inductive reasoning starts with observing specific facts or examples and then uses them to form a general rule or theory. It moves from specific observations to broader generalizations.

🎯 Exam Tip: Deductive reasoning goes from general principles to specific conclusions, while inductive reasoning goes from specific observations to general principles.

 

Question 20. Total revenue is equal to total output sold multiplied by
(a) Price
(b) Total cost
(c) Marginal revenue
(d) Marginal cost
Answer: (a) Price
In simple words: To find the total money a business earns from sales (total revenue), you simply multiply the number of items sold (total output) by the selling price of each item. This gives the total income before expenses.

🎯 Exam Tip: Total revenue is a key measure of a firm's earnings before accounting for production costs.

Part - B

Answer the Following Questions in One or Two Sentences.

 

Question 21. What is meant by Economics?
Answer: The term 'Economics' comes from 'oikonomikos', a Greek word meaning 'Management of households'. Later, 'Political Economy' was renamed as 'Economics' by Alfred Marshall. It studies how societies manage their limited resources.
In simple words: Economics originally meant "household management" in Greek. Alfred Marshall later changed "Political Economy" to "Economics." It is the study of how people manage resources to meet their wants.

🎯 Exam Tip: Knowing the etymology and evolution of economic terms can provide a deeper understanding of the subject's scope.

 

Question 22. Define microeconomics?
Answer: Microeconomics looks at how individual parts of the economy work, such as the choices made by single households, businesses, or industries. It studies how these individual economic units make decisions and behave in markets. For example, it looks at how buyers and sellers together determine prices. Microeconomics specifically helps us understand how prices are set and how the welfare of individual units is affected.
In simple words: Microeconomics studies how individual units, like a person or a company, make economic choices. It focuses on small parts of the economy, like how one market sets its prices.

🎯 Exam Tip: Microeconomics focuses on "the trees" (individual units), while macroeconomics focuses on "the forest" (the economy as a whole).

 

Question 23. What are goods?
Answer: In economics, goods are physical items or tangible services that can satisfy human wants. These items can be touched or used to fulfill a need, offering direct satisfaction to consumers. For example, food, clothes, or a house are considered goods.
In simple words: Goods are physical things or services that can meet people's needs. You can usually touch them, and they help satisfy human wants.

🎯 Exam Tip: Goods are distinct from services, which are intangible activities that also satisfy wants.

 

Question 24. Distinguish goods from services?
Answer: Goods are physical items you can touch, like a TV or a piece of fruit, and they can often be stored. Services, on the other hand, are actions or activities performed for you, which are intangible and usually consumed right when they are provided, like a haircut or a doctor's visit. This difference affects how they are produced and exchanged.

In simple words: Goods are physical things you can hold and store, like a chair or a fruit. Services are actions or help given by someone, which you cannot touch or store, like music or a doctor's advice.

🎯 Exam Tip: The key differences between goods and services lie in their tangibility, storability, and separability from the producer.

 

Question 25. Name any two types of utility?
Answer: Two types of utility are time utility and place utility. Time utility means something is useful only at a certain time, like blood being useful during an operation, not at donation. Place utility means something is useful only in a specific place, like a textbook being useful at school, not at the publishing house. These factors enhance a good's desirability.
In simple words: Two types of utility are 'Time Utility' (useful at a specific time) and 'Place Utility' (useful in a specific location). These show how usefulness changes with time and place.

🎯 Exam Tip: Utility is not just about the product itself but also when and where it is available and accessible to the consumer.

 

Question 26. Define positive economics?
Answer: Positive economics describes and explains economic events as they are, without saying if they are good or bad. It focuses on facts and cause-and-effect relationships. For example, it states that more money in circulation usually leads to higher prices, or that better farming methods increase food production. It simply describes what happens or what is likely to happen in the economy.
In simple words: Positive economics describes and explains how the economy works based on facts, without judging if things are good or bad. It answers "what is" questions.

🎯 Exam Tip: Positive economics deals with "what is," while normative economics deals with "what ought to be," often involving value judgments.

Part - C

Answer the Following Questions in One Paragraph.

 

Question 27. Give the meaning of the deductive method?
Answer: The deductive method is a way of thinking that starts with general ideas or rules and then uses them to figure out specific conclusions. It is also known as an analytical or abstract method. Economists like Ricardo, J.S. Mill, and Alfred Marshall applied this method in their studies. They would begin with broad economic principles, such as the law of demand, and then apply these to understand particular market situations. This method helps in forming economic laws from universal truths.
In simple words: The deductive method is a way of reasoning that starts from general rules to reach specific conclusions. Economists use it by applying broad principles to understand particular situations.

🎯 Exam Tip: In deduction, if the general premises are true, the specific conclusion must also be true, making it a strong logical tool.

 

Question 28. Explain the scarcity definition of Economics and assess it?
Answer: Lionel Robbins defined economics as the study of human behavior when people have many wants but only limited resources that can be used in different ways. His definition, published in 1932, highlights that human wants (ends) are endless, but the resources (means) to satisfy them are scarce and have multiple alternative uses. This means people must make choices and prioritize their most urgent wants, with scarcity being relative to demand. Economics, in this view, is a science of choice. However, some critics argue that Robbins' definition does not separate goods that improve human welfare from those that don't, and it also doesn't fully cover topics like economic growth and development, which are crucial aspects of economic study.
In simple words: Robbins' scarcity definition says economics studies how people choose when they have many wants but limited resources that can be used for different things. Critics say it doesn't cover welfare or growth enough.

🎯 Exam Tip: When discussing economic definitions, always state the economist, the core idea, its main features, and any relevant criticisms to provide a complete answer.

 

Question 29. What are the crucial decisions involved in 'what to produce'?
Answer: Every society must decide what goods to make and how much of each, as resources are limited. These important decisions involve choosing between different types of production. For example, a society needs to choose if it will make more basic necessities like food, clothing, and housing, or more luxury items. It also decides between agricultural goods and industrial goods, or between investing more resources in education and health versus military services. Further choices include prioritizing consumption goods over investment goods, or basic education over higher education. These choices reflect a society's current and future priorities and resource allocation strategies.
In simple words: Societies must decide what products to make and how much. This involves choices like producing more food or luxury goods, or investing in education versus defense. These decisions shape the economy.

🎯 Exam Tip: The 'what to produce' question is one of the three central problems of every economy, alongside 'how to produce' and 'for whom to produce'.

 

Question 30. Explain different types of economic activities?
Answer: There are several types of economic activities that describe different aspects of how economies work. Microeconomics looks at individual parts like households, firms, or industries, and studies price theory and economic welfare. Macroeconomics studies the economy as a whole, focusing on total employment, national income, and aggregates, as pioneered by Keynes. International economics focuses on trade, foreign capital, and investment links between countries, recognizing that no country can thrive in isolation. Public economics deals with government finances, including raising revenue and incurring expenditure. Developmental economics addresses features of developed nations, obstacles to growth, and strategies for economic advancement. Health economics applies economic ideas to health indicators, preventive measures, and budgetary allocations for health. Lastly, environmental economics looks at how the economy affects the environment and how ecological problems impact the economy, using interdisciplinary tools.
In simple words: Economic activities are divided into microeconomics (individual parts), macroeconomics (whole economy), international economics (global trade), public economics (government finances), developmental economics (country growth), health economics (health services), and environmental economics (ecology and economy). Each focuses on a different aspect of wealth and resource management.

🎯 Exam Tip: Categorizing economic activities helps in understanding the broad scope and various specializations within the field of economics, showing how different levels and sectors are studied.

 

Question 31. Elucidate different features of services?
Answer: Services are different from goods in several key ways. They are generally produced and used at the same time, and have the following features:
1. **Cannot be touched:** Services are not physical things you can hold. They are more like actions or ideas, such as a company's good name or the positive feelings a brand creates. Sometimes, these invisible services can be put onto a physical item, like music saved on a pen drive.
2. **Always different:** Services are not always exactly the same each time. They can change based on the place or culture where they are offered. Even one type of service, like music or a doctor's consultation, can feel different each time you experience it.
3. **Cannot be separated from the provider:** Services are closely tied to the person or thing providing them. For example, the work done by a laborer cannot be separated from the laborer themselves.
4. **Cannot be stored:** You cannot store services like physical goods. They disappear after you use them. For instance, a ticket for a cricket match becomes useless once the game is over. Services have no value if you try to keep them for later use. Services are essential in a modern economy, contributing significantly to a nation's GDP and employment.
In simple words: Services are different because you can't touch them, they vary each time, you can't separate them from the person giving the service, and you can't store them.

🎯 Exam Tip: When explaining service features, focus on core differences from goods, such as intangibility, inseparability, and perishability. Provide simple examples for each characteristic.

 

Question 32. What are the important features of utility?
Answer: Here are the important features of utility:
1. **Mind-based:** Utility depends on what a person feels or thinks. For example, a person who doesn't eat meat gets no utility from a mutton dish, while someone who eats meat would.
2. **Not always helpful:** Utility is not the same as being useful. For instance, a smoker gets utility from a cigarette, even though it is bad for their health.
3. **Different from pleasure:** Utility is not the same as pleasure. A sick person might get utility from taking medicine to feel better, but they don't necessarily enjoy taking it.
4. **Changes for each person:** Utility is personal and can change from one person to another, or even in different situations and places for the same person. The same item might give different utility to different people.
5. **Linked to desire:** How much utility someone gets depends on how strongly they want something. People often find that the more they have of something, the less extra utility they get from each new bit (this is the concept of diminishing utility).
6. **Hard to measure:** Utility is a feeling and cannot be easily measured with numbers. It is a personal idea, not something that can be weighed or counted objectively.
7. **No moral judgment:** Utility does not care if something is good or bad. For example, a cook uses a knife to cut vegetables, and a criminal might use it for harm. In economics, anything that satisfies a human want has utility. Understanding utility helps economists predict how consumers might behave and make choices in the market.
In simple words: Utility is a feeling of satisfaction that depends on a person's mindset, not always on how useful or pleasing something is. It changes from person to person and cannot be easily measured, and it has no moral meaning.

🎯 Exam Tip: Remember that utility is subjective and psychological, meaning it varies from person to person and doesn't always imply usefulness or pleasure. Focus on these core distinctions in your explanation.

 

Question 33. Distinguish between microeconomics and macroeconomics?
Answer: Here is a comparison between microeconomics and macroeconomics:

Both microeconomics and macroeconomics are important, offering different lenses to understand the complex world of economic activity.
In simple words: Microeconomics studies small parts of the economy, like one person or one business, and how prices are set. Macroeconomics looks at the entire economy, like a whole country, and deals with total income, inflation, and unemployment.

🎯 Exam Tip: Clearly separate the scope of study for each – micro focuses on individual parts, while macro focuses on the overall economy. Use clear examples to differentiate them.

 

Question 34. Compare positive economics and normative economics?
Answer: Here is a comparison between positive economics and normative economics:

Positive economics helps us understand how things are, while normative economics guides us on how things should be.
In simple words: Positive economics describes how the economy works using facts, like "prices rise if money increases." Normative economics suggests what should be done, giving opinions, like "it's better for prices to rise."

🎯 Exam Tip: Remember that positive economics deals with facts and "what is," focusing on objective analysis, while normative economics deals with opinions and "what ought to be," involving value judgments.

 

Question 35. Compare and contrast various definitions of Economics.
Answer: Economics has been defined in different ways by important thinkers over time. Each definition highlighted different aspects of the subject, reflecting the economic challenges and ideas of their era. **1. Adam Smith – Wealth Definition:** Adam Smith (1723-1790), often called the "Father of Economics," wrote in his 1776 book "An Inquiry into the Nature and Causes of the Wealth of Nations" that economics is the science of wealth. He explained how countries create and increase their wealth. Smith believed that individuals, while trying to gain for themselves, are guided by an "invisible hand" to benefit the whole society. He supported the idea of dividing labor to make more goods and thought strong competition helps make better products available at lower prices for buyers. This definition highlighted how a nation gets richer. **2. Alfred Marshall – Welfare Definition:** Alfred Marshall (1842-1924), in his 1890 book "Principles of Economics," defined economics as a study of people in their normal daily lives. He saw economics as looking at what people do to get and use things that improve their well-being. Marshall's definition moved the focus from just wealth to people's welfare. He believed that economics is not just about wealth for its own sake, but about how wealth helps people live better. It is a social science that studies how people in society influence each other and their decisions. **3. Lionel Robbins – Scarcity Definition:** Lionel Robbins, in his 1932 book "An Essay on the Nature and Significance of Economic Science," said that economics is a science studying human behavior. This behavior involves choosing between unlimited wants (ends) and limited resources (scarce means) that can be used in different ways. The main ideas in Robbins' definition are that human wants are endless, but the things to satisfy them are limited. These limited resources can be used for various purposes. People decide which of their most urgent wants to satisfy first. So, economics becomes the science of making choices. One small point of criticism was that this definition did not differentiate between goods that improve welfare and those that do not, and it didn't fully cover economic growth. **4. Paul Samuelson – Growth Definition:** Paul Samuelson defined economics as the study of how people and society choose to use scarce productive resources, with or without money, to produce various goods over time. These goods are then shared among people now and in the future. Like Robbins, Samuelson recognized that resources are limited compared to endless wants. His definition is considered dynamic because it includes the idea of time and focuses on economic growth. It also applies to economies without money (barter systems) and covers various aspects like production, distribution, and consumption. Samuelson saw economics as a social science. His definition is often considered the most comprehensive among them.
In simple words: Different economists saw economics in different ways. Adam Smith thought it was about how countries get rich. Alfred Marshall said it was about how people use things to live better lives. Lionel Robbins focused on how people make choices because their wants are endless but resources are limited. Paul Samuelson added that economics also looks at how societies produce and share goods over time to grow.

🎯 Exam Tip: When comparing definitions, highlight the key focus of each economist: Smith (wealth), Marshall (welfare), Robbins (scarcity and choice), and Samuelson (growth and dynamics). Mentioning their key books or dates can add detail and show a good understanding of economic thought.

 

Question 36. Explain various Steps of Deductive and Inductive methods?
Answer: Economics uses two main ways to study things and form theories: the deductive method and the inductive method. **Steps of the Deductive Method:** 1. **Understand the Problem:** First, the person studying the problem needs to clearly understand what they want to investigate or solve. 2. **Define Terms and Assumptions:** Next, they must clearly define any special words they are using in their study. Also, they must be very clear about any basic assumptions or starting ideas for their theory. 3. **Form a Hypothesis:** Then, they use these assumptions and general principles to form a guess or a "hypothesis." This is a statement that can be tested. 4. **Verify the Hypothesis:** Finally, they check if their guess is true by looking at real-world events and using statistics. For example, they might check if a higher price for a product really leads to less demand, as their theory suggests. This method often helps predict what might happen based on general rules. **Steps of the Inductive Method:** 1. **Collect Data:** First, information (data) is gathered about a certain economic event. These facts are then carefully organized. 2. **Draw Conclusions:** By carefully looking at the collected information, researchers can easily find patterns and draw general conclusions from these specific observations. 3. **Generalize and Form Hypothesis:** After that, these specific observations are turned into general rules or statements, and a hypothesis is formed. This hypothesis is then checked to see if it is correct or consistently true (for example, checking Engel's law). Both methods help us understand how the economy works by either testing general theories with facts or building general theories from facts.
In simple words: The deductive method starts with a general idea and tests it with real information. The inductive method starts by collecting lots of specific information and then uses it to find general rules or patterns.

🎯 Exam Tip: Remember that deduction goes from general to specific (theory to observation), while induction goes from specific to general (observation to theory). Both methods are crucial for building and testing economic theories.

 

Question 37. Elaborate on the nature and scope of Economics?
Answer: The nature of economics is understood by looking at how different economists have defined it. Its scope shows what economics covers and why it is important. Economics is a dynamic field that continually adapts to new challenges and information. **Nature of Economics:** The nature of economics can be seen through various definitions: 1. **Adam Smith** (classical era) saw economics as the study of wealth. 2. **Alfred Marshall** (neo-classical era) viewed economics as a social science that looks at both wealth and people's well-being or welfare. 3. **Lionel Robbins** (new age) defined economics as the science of choice, focusing on how people choose because their wants are unlimited but resources are scarce. 4. **Samuelson** offered a growth definition, focusing on how economics changes over time and how resources are used for future growth. 5. The scope also helps us understand if economics is more like an art or a science, and if it is about what "is" (positive) or what "should be" (normative). Economics is about understanding human actions in the face of limited resources. **Scope of Economics:** The scope of economics includes different areas: **1. Related to society:** * Economics studies how people and groups in an economic system act and interact. * It looks at how goods and services are made and used, and how income is shared among the things that help produce them (like land, labor, capital). **2. Related to scarce resources:** * Economics studies the ways in which people use the limited resources they have to satisfy their many wants. **3. Human science or Social science:** * Economics is about what human beings do. * Since what one person does affects others in society, economics is known as a human or social science. **4. Related to wealth:** * Economics includes all human activities that have to do with wealth. * However, human activities not linked to wealth are generally not included in economics. **5. Economics as an art:** * Economics can be seen as an art because it uses knowledge to achieve specific goals. * It offers practical guidance on how to solve economic problems. **6. Economics as a science:** * Economics is a careful, systematic study of knowledge. It finds connections between causes and effects based on facts. * It examines the relationship between the reasons for economic problems and their outcomes. Therefore, it is rightly considered as both an art and a science. **7. Economics: Positive and Normative science:** * Positive economics asks "what is?" and "why?" (It describes facts). * Normative economics asks "what ought to be?" (It gives opinions and suggestions). * Economics covers both positive and normative science aspects.
In simple words: The nature of economics comes from its different definitions, showing it's about wealth, welfare, choice, and growth. Its scope covers how people act in society, deal with limited resources, manage wealth, and helps solve problems like both a science (using facts) and an art (applying knowledge).

🎯 Exam Tip: When discussing the nature and scope, ensure you define economics from different perspectives (wealth, welfare, scarcity, growth) and then elaborate on its various aspects like social science, art, science, and its positive/normative dimensions.

 

Question 38. Explain basic problems of the economy with the help of the production possibility curve?
Answer: The production possibility curve (PPC) is a helpful tool that illustrates the basic problems an economy faces, especially the problem of making choices when resources are limited. **1. The Problem of Choice:** The PPC is a drawing that shows the different combinations of two goods an economy can produce when it uses all its limited resources fully and efficiently, with the current technology. It helps illustrate how a society must choose between making more of one good or more of another, because it cannot have an unlimited amount of both. **2. Assumptions for the Production Possibility Curve:** To draw this curve, we assume a few things: * The time period we are looking at does not change. * The ways of making goods (production techniques) stay the same. * Everyone who wants to work has a job, and all resources are fully used (full employment). * Only two kinds of goods can be made from the given resources. * The resources used for production can be moved easily between making different goods. * The amount and quality of resources remain fixed. * The "law of diminishing returns" operates in production, meaning adding more resources to one type of production eventually gives less extra output. If any of these assumptions change, the nature of the production possibility curve will also change. **3. Production Possibilities Schedule:** To understand the PPC, let's look at an example table that shows different production possibilities:

This table suggests that if all resources are used to make only food, a maximum of 500 tons of food can be produced, but no cars. If all resources are instead used for producing cars, 25 cars can be produced, but no food. In between these two extremes, many other choices exist. If we are willing to give up some food, we can have some cars. The PPC is drawn from these points, usually with food on the x-axis and cars on the y-axis. **Problems of the Economy:** **a. The problem of choice:** Because resources are limited and wants are endless, every economy faces the problem of choice. This involves deciding how to share resources between different groups (like making goods for richer people vs. poorer people) or for different uses (like defense vs. civilian goods). Since the PPC shows all the possible combinations, the problem of choice is about picking a suitable point on this curve. **b. Solution of central problems:** The PPC also helps explain an economy's main problems. For example, deciding "what to produce" means choosing a specific combination on the production possibility curve. If an economy is producing at a point inside the PPC, it means it is not using its resources or production methods efficiently, and it could produce more of both goods.
In simple words: The production possibility curve helps us see how an economy must choose what to make with its limited resources. It shows that if you make more of one thing, you have to make less of another. It also highlights if resources are not being used fully or efficiently.

🎯 Exam Tip: Always draw and label the PPC clearly when asked. Explain its concave shape and how points inside, on, and outside the curve represent underutilization, efficiency, and unattainable production, respectively.

Samacheer Kalvi 11th Economics Introduction to Micro Economics Additional Important Questions and Answers

PART - A

Multiple Choice Questions.

 

Question 1. Alfred Marshall renamed "Political Economy" as "Economics" in
(a) 18th century
(b) 19th century
(c) 20th century
(d) 21st century
Answer: (b) 19th century
In simple words: Alfred Marshall changed the name of "Political Economy" to "Economics" during the 19th century. This name change reflected a shift towards a more scientific and less politically focused study of wealth and welfare.

🎯 Exam Tip: Remember key economists and their contributions, including when they made significant changes to the field of economics.

 

Question 2. Marshall definition of Economics is known as
(a) Wealth
(b) Welfare
(c) Scarcity
(d) Modern
Answer: (b) Welfare
In simple words: Alfred Marshall's way of defining economics is mostly called the "Welfare definition" because he focused on how economic activities affect human well-being. This was a shift from earlier definitions that only focused on wealth.

🎯 Exam Tip: Associate Alfred Marshall's name with the "Welfare Definition" of economics, as it highlights his focus on human well-being over just accumulating wealth.

 

Question 3. Alfred Marshall wrote "Principles of Economics" in
(a) 1776
(b) 1890
(c) 1776
(d) 1932
Answer: (b) 1890
In simple words: Alfred Marshall published his famous book, "Principles of Economics," in the year 1890. This book became a very important text in the study of economics.

🎯 Exam Tip: Key economists and their major works, along with their publication dates, are important facts to remember for historical context.

 

Question 4. The term "micro" means
(a) Small
(b) Big
(c) Normal
(d) Abnormal
Answer: (a) Small
In simple words: The word "micro" means very small. In economics, "microeconomics" looks at the small parts of the economy, like individual people or businesses.

🎯 Exam Tip: Understand that "micro" relates to individual units or small-scale economic decisions, while "macro" refers to large-scale or overall economic issues.

 

Question 5. Examples of perishable goods
(a) Television, Furnishers
(b) Fish, Fruits, Flowers
(c) Textiles, Shoes
(d) Vehicles, Capital goods
Answer: (b) Fish, Fruits, Flowers
In simple words: Perishable goods are things that spoil quickly and cannot be kept for a long time, like fish, fruits, and flowers. They need to be sold and consumed fast.

🎯 Exam Tip: Distinguish between different types of goods based on their characteristics, such as durability (perishable vs. durable) and purpose (consumer vs. capital).

 

Question 6. __________ means a place where commodities are bought and sold.
(a) Market
(b) Price
(c) Cost
(d) Revenue
Answer: (a) Market
In simple words: A market is a place or a system where buyers and sellers meet to exchange goods and services. It helps in deciding prices for these items.

🎯 Exam Tip: A market is not always a physical place; it can be any platform where buying and selling activities happen, driven by supply and demand.

 

Question 7. The value of goods expressed in money terms is
(a) Price
(b) Revenue
(c) Market
(d) Cost
Answer: (a) Price
In simple words: The price is the amount of money that is asked or paid for a good or service. It shows how much something is worth in money.

🎯 Exam Tip: Price is the monetary expression of value, distinct from cost (what it takes to produce) or revenue (total money earned from sales).

 

Question 8. __________ goods directly satisfy human wants.
(a) Consumer
(b) Capital
(c) Economic
(d) Producer
Answer: (a) Consumer
In simple words: Consumer goods are items that people buy and use directly to satisfy their needs and wants, like food, clothes, or electronics. They are meant for final use.

🎯 Exam Tip: Understand that consumer goods are for direct use by individuals, while capital goods are used to produce other goods and services.

 

Question 9. __________ is the assumption in economics that makes the economic laws hypothetical
(a) Other things remaining the same
(b) Time remaining the same
(c) Money remaining the same
(d) Wants to remain the same
Answer: (a) Other things remaining the same
In simple words: When economists study how one thing affects another, they often pretend that everything else stays constant. This makes their theories easier to understand, but it means their laws are based on these "what if" conditions.

🎯 Exam Tip: Remember the Latin phrase "ceteris paribus" which means "all other things being equal" or "other things remaining the same." This is a key assumption in many economic models.

 

Question 10. Who defined "Economics as the science of wealth"?
(a) Karl Marx
(b) Paul A. Samuelson
(c) Max Muller
(d) Adam Smith
Answer: (d) Adam Smith
In simple words: Adam Smith, an important economist from the past, saw economics as the study of how nations get rich and how wealth is created. This idea was central to his famous book.

🎯 Exam Tip: Knowing the key economists and their core definitions (wealth, welfare, scarcity, growth) helps in understanding different schools of thought in economics.

Part - B

Answer the Following Questions in One or Two Sentences.

 

Question 1. What is the scope of Economics?
Answer: The scope of economics refers to what the subject covers. It helps us understand if economics is an art, a science, or both, and whether it deals with positive (what is) or normative (what should be) statements. Understanding its scope helps define its boundaries.
In simple words: The scope of economics means what topics it includes and how it is seen as a field of study, whether as a science, an art, or both.

🎯 Exam Tip: When defining the scope, remember to mention both the "what it is" (subject matter) and "how it is viewed" (art/science, positive/normative aspects).

 

Question 2. Write a note on Distribution.
Answer: Distribution in economics is about how the money paid for production factors like land, labor, capital, and entrepreneurship is decided. It looks at how income is shared among these different parts of production. For example, it explains how rent for land, wages for labor, interest for capital, and profit for entrepreneurs are determined.
In simple words: Distribution in economics studies how the income earned from making things is shared among the people and things used for production.

🎯 Exam Tip: Focus on linking distribution directly to the "pricing of factors of production" (rent, wages, interest, profit) to show a clear understanding.

 

Question 3. Define macroeconomics?
Answer: Macroeconomics studies the economy as a whole, looking at large-scale economic issues. It focuses on broad aggregates such as national output, overall inflation, total unemployment, and government taxes. This helps in understanding the big picture of how a country's economy functions.
In simple words: Macroeconomics looks at the big parts of an economy, like how much a whole country produces or the total number of people without jobs.

🎯 Exam Tip: Clearly state that macroeconomics deals with the "economy as a whole" and "aggregates" to distinguish it from microeconomics.

Part - C

Answer the Following Questions in One Paragraph.

 

Question 1. Explain different types of utility?
Answer: Utility means how much satisfaction a person gets from something. There are several types:
1. **Form utility:** This happens when changing the shape or form of a raw material makes it more useful. For example, wood has more utility when it's turned into furniture than as a log.
2. **Time utility:** This is about having a good or service available when it is most needed. For instance, blood donation provides utility only when it is used for an operation, not at the time it was donated.
3. **Place utility:** This occurs when a good or service becomes more useful because it's available in a specific location. A book has place utility for a student at their education center, not just where it was published.
4. **Service utility:** This refers to the usefulness of a service provided when a person needs it most.
5. **Possession utility:** This is gained when someone buys or owns a product. A student gets possession utility from a dictionary only after purchasing it from a bookseller.
6. **Knowledge utility:** This comes from gaining information about something, like how an advertisement helps people learn about a product.
7. **Measurability of utility:** This concept states that the satisfaction from consumption can be measured in units called 'Utils.' A 'Util' is a way to quantify how much satisfaction a person gets.
In simple words: Utility is the satisfaction you get from something. It can come from its shape (form), when you get it (time), where you get it (place), by owning it (possession), from a service, or by learning about it (knowledge). We can try to measure this satisfaction in units called 'Utils'.

🎯 Exam Tip: When listing types of utility, provide a simple, distinct example for each to clearly illustrate the concept.

 

Question 2. What are the major implications of Samuelson's growth definition?
Answer: Samuelson's definition of economics emphasizes growth and has several key implications. First, like Robbins, it acknowledges that resources with alternative uses are scarce compared to unlimited wants. Second, Samuelson's definition is dynamic because it includes the element of time, covering the theory of economic growth and how economies develop over periods. Third, this definition is also useful for non-monetary or barter economies, showing its broad applicability. Finally, it covers many aspects of economics, such as production, distribution, and consumption. Samuelson also treats economics as a social science that helps people make choices over time.
In simple words: Samuelson's idea of economics focuses on how economies grow over time, considering limited resources and unlimited wants. It also works for simple trading systems and covers many economic activities like making and sharing goods.

🎯 Exam Tip: Highlight the "dynamic" nature and "element of time" as central to Samuelson's growth definition, differentiating it from earlier static definitions.

 

Question 3. What is the importance of microeconomics?
Answer: Microeconomics is very important for understanding how an economy works. It provides tools for creating economic policies and helps examine conditions for economic welfare. Microeconomics shows how resources can be used efficiently and is useful for international trade. It aids in decision-making and helps achieve optimal allocation of resources. This field also forms the basis for predicting economic trends and determining prices in markets.
In simple words: Microeconomics helps us understand how small parts of the economy, like individual businesses or people, make choices. It helps make policies, use resources well, and understand prices.

🎯 Exam Tip: List at least 4-5 distinct points covering key areas like policy, resource use, and pricing to show a comprehensive understanding of microeconomics' importance.

Part - D

Answer the Following Questions in About a Page.

 

Question 1. What is the nature of economic laws?
Answer: Economic laws describe a cause-and-effect relationship between two or more economic situations. Alfred Marshall stated that economic laws are like statements of general tendencies in human behavior, especially concerning actions that can be measured with money. Unlike the exact and certain laws of physical sciences, economic laws are less precise because they deal with human behavior, which is complex and unpredictable.
Economists cannot easily conduct controlled experiments like physical scientists to test their theories. Changes in economic conditions are also hard to implement and observe. This often leads to unpredictability in economic outcomes. Economic laws are indicative, meaning they show what is likely to happen, rather than being assertive, which means they don't guarantee a specific outcome.
The use of assumptions like "other things remaining the same" makes economic laws hypothetical. Additionally, the value of money, which acts as a measuring stick, is not constant, adding another layer of hypothetical elements to economic laws. Some economic laws are also considered truisms, simple truths that are always valid. For example, saving money depends on how much income you have, and human wants are unlimited.
In simple words: Economic laws explain how different economic things are connected. They are not as exact as science laws because they involve people's choices. These laws often rely on assumptions like "everything else stays the same" and only show what is likely to happen, not what will definitely happen.

🎯 Exam Tip: Emphasize that economic laws are tendencies, not absolute, due to human behavior and the ceteris paribus assumption. Compare them to physical laws to highlight their nuanced nature.

 

Question 2. Explain the types of economics.
Answer: Economics can be broadly divided into several types based on what they study:
1. **Micro-Economics:** This field studies the economic actions of small, individual units like households, businesses, or industries. It focuses on how these units make decisions and interact in markets.
2. **Macro-Economics:** Macroeconomics looks at the economy as a whole. It studies broad aspects like national output, inflation, unemployment, and taxes. This helps understand the overall performance of a country's economy.
3. **International Economics:** This branch deals with economic links between different countries. It covers foreign capital, investments (like foreign direct investment), and global trade. No country can grow alone in today's world.
4. **Public Economics:** Public economics focuses on the government's role in the economy. It examines how public authorities raise income (revenue) and spend money (expenditure). This includes public debt and financial administration.
5. **Developmental Economics:** This area studies how nations develop, especially focusing on factors that hinder or promote economic growth. It explores various growth models and strategies for development.
6. **Health Economics:** Health economics is a specialized field that applies economic principles to health. It looks at health indicators, preventive measures, medical research, education in health, rural health programs, drug prices, childcare, and how money is set aside for health.
7. **Environmental Economics:** This field studies the links between the economy and the environment. It uses tools from different subjects to solve problems related to ecology, the economy, and the environment, such as resource depletion and pollution from rapid economic growth.
In simple words: There are many types of economics. Microeconomics looks at small parts like single businesses, while macroeconomics looks at the whole country's economy. Other types study international trade, government finances, how countries develop, health-related economic issues, and how the economy affects the environment.

🎯 Exam Tip: For each type of economics, provide a clear, concise definition and mention one or two key aspects it focuses on to show depth of knowledge.

Activity

Meet ten of your classmates and prepare a report on the advantages of studying Economics?

Advantages of Studying Economics:
1. Economic policy is financial supporters.
2. Many treatments of economics are inexact and can contradict each other.
3. These is analytic or mathematical theories.
4. The Economic subject in a logical and Pseudo-Scientific manner.
5. The future of our daily lives in regards to the economic status and happenings of the world.
6. Economics is basically called the "Queen Subject” of all subjects of social sciences.
7. Economics is one of the most useful of sciences.
8. To learn how to distribute scarce resources efficiently.
9. To understand how the market will react to certain actions.
10. Economics is described as the study of production, distribution, and consumption of goods and services, along with the transfer of wealth.

Student: 2
1. People like it.
2. It studies people's behaviors in different markets.
3. They make economics a social study.
4. Economics is a study of how money is distributed.
5. Economic policies are good.
6. Its connection to human behavior is clear.
7. They save, spend, or invest funds.
8. It studies how market decisions are made.
9. In Economics you will study how to work in the financial and learn how to manage money.
10. Economics is the study of Economic Activities.
11. The resources that are needed to satisfy everyone's wants.
12. Economics studies how scarcity causes people to make different choices.

Student: 3
1. Economics is the study of the effects of social, emotional, and cognitive factors on the economic decisions of people and companies.
2. Economics enables us to understand money.
3. Economics makes a nation prosper.
4. It makes a person educated in a real sense.
5. Economics is defined as the science of money.
6. The most important factor in modern man's life.
7. It is most important to study.
8. Economics addresses many interesting problems in modern society.
9. We encourage growth in developing countries.
10. An opportunity to get an education.
11. To prove to a prospective employer.
12. The primacy of Economic life.
13. Economics studies the way the world works as a human society.
14. The priorities of its wants and needs.
15. It is a huge subject covering natural resources.
16. The contributions of humans.
17. The contributions of investors.

Student: 4
1. I am interested in economics.
2. Economics addresses many interesting problems in modern society.
3. The valuation of nonmarket goods.
4. We encourage growth in developing countries.
5. Economics is a social science, which may be helpful in life.
6. An opportunity to get an education to prove to a prospective employer.
7. Economics teaches you how to know what is needed and wanted.