Q. 1. Choose the correct option :
1) Statements related to Economics :
a) Economics is a social science.
b) Concept of economics is derived from Greek word ‘Oikonomia’.
c) Economics is related to the study of human economic behavior.
d) Economics is related to management of the household.
Options :
1) a, b and c
2) a and b
3) b and c
4) a, b, c and d
Ans. 4) a, b, c and d
2) Statements incorrect with reference to Adam Smith’s definition :
a) Adam Smith is a classical economist.
b) Wealth of Nations is authored by Adam Smith.
c) Economics is the science of wealth.
d) Economics studies common man.
Options :
1) d
2) a, b and c
3) a and d
4) c and d
Ans. 1) d
3) Key points in Lionel Robbins’ definition :
a) Wants are unlimited
b) Means are limited
c) Wants are not gradable
d) Means have alternative uses.
Options :
1) a and b
2) b and c
3) a, b and d
4) a, b, c and d
Ans. 3) a, b and d
4) Statements related to wealth :
a) Wealth means anything which has market value and can be exchanged for money.
b) It is external to human being.
c) Wealth has no utility.
d) Wealth is scarce and exchangeable.
Options :
1) a, b and d
2) a, c and d
3) b, c and d
4) None of the above
Ans. 1) a, b and d
5) Aspects considered in National Income :
a) Final goods and services are included in national income.
b) Produced goods and services in a financial year are included in national income.
c) Double counting is avoided.
d) Value is considered as per market price.
Options :
1) a and c
2) b and c
3) a, b and d
4) a, b, c and d
Ans. 1) a and c
Q. 2. Complete the correlation :
Ans.
1) Natural sciences : Exact sciences : : Social sciences : Abstract or Behavioural Sciences
2) Physics : Natural or Exact Science : : Psychology : Social science
3) Arthshastra : Kautilya : : Wealth of Nations : Adam Smith
4) Necessity : Food/Clothing/ Shelter : : Comforts : Washing machine
5) Free goods : Value-in-use : : Economic goods : Value-in-exchange
Q. 3. Identify and explain the concepts from the given illustrations :
1. My father purchased a two-wheeler vehicle. This helps to fulfil my travel needs.
Ans. Concept: Individual want
Explanation:
i. In economics, want denotes a feeling of lack of satisfaction’. This feeling enables the individual to satisfy his want.
ii. Personal or individual wants refer to those wants which are satisfied at the individual level.
iii. Collective wants are social wants where there is collective satisfaction of wants.
iv. In the given illustration, a two-wheeler will only satisfy that person’s travel needs.
v. Hence, it is an example of individual want.
2. A study of the annual income of the family of Ramesh.
Ans. Concept: Micro Economics
Explanation:
i. Micro means small and macro means large.
ii. Micro Economics deals with the behaviour of the individual variables such as household, worker, firm, industry.
iii. On the other hand, Macro Economics is the study of aggregates covering the entire economy such as total employment, national income, total investment etc.
iv. A study of annual income of the family of Ramesh is the study of an individual variable i.e. a household.
v. Hence, this illustration relates to the concept of Micro Economics.
3. As per the data for financial year 2018-19, the country’s production of goods and services increased by 20%.
Ans: Concept: Economic growth
Explanation:
i. In the economic sense, national income is the aggregate monetary value of all final goods and services produced in an economy during a year.
ii. Economic growth means an increase in the real national income of the country.
iii. The given case highlights the fact that the country’s production of goods and services increased by 20%.
iv. Hence, the given illustration relates to the concept of economic growth.
4. Karuna’s mother saves ? 1000/- every month out of her given salary.
Ans: Concept: Saving
Explanation:
i. Saving is that part of income which is set aside to satisfy the future needs by foregoing current consumption.
ii. In other words, saving is that part of income which is not spent currently on consumption.
iii. Karuna’s mother saves ? 1000 every month out of her given salary.
iv. In other words, she is not spending that amount on current consumption and setting it aside to satisfy the future needs.
v. Hence, the illustration relates to the concept of saving.
5. Ram’s father utilized his provident fund amount to set up grocery store.
Ans: Concept: Capital and Entrepreneur
Explanation:
i. Capital is a factor of production.
ii. It is the produced means for further production.
iii. Ram’s father utilized his provident fund to set up the grocery store i.e. he introduced capital in the business.
iv. Further, Ram’s father will earn the reward of ‘profit’ from the grocery store that he sets up.
v. In economic sense, he will be an entrepreneur.
vi. Hence, the given illustration relates to concepts of capital and entrepreneur.
Q. 4. Answer the following :
1) Explain the features of wealth.
Ans. Wealth : Wealth refers to “anything which has market value and can be exchanged for money.” To be regarded as ‘wealth’, a commodity must possess the following characteristics/features :
i) Utility : A commodity must have the capacity to satisfy human wants, e.g. furniture, refrigerator etc.
ii) Scarcity : A commodity must be scarce in supply in relation to its demand if it is to be included in the term ‘Wealth’, e.g. all economic goods for which price is paid.
iii) Transferability : A commodity should be transferable from person to person as well as place to place. If the good is material or tangible then only it is possible to transfer it from place to place, e.g. vehicle, jewellery etc.
iv) Externality : A good can be transferred only if it is external to human body, e.g. bag, chair etc.
2) Explain the characteristics of human wants.
Ans. Characteristics of wants :
i) Wants are unlimited : Wants not only arise again and again but they are also unending. If one want gets satisfied, another arises. Wants go on multiplying in number.
ii) Wants are recurring in nature : Several human wants occur again and again, while some might be only occasional.
iii) Wants differ with age : Wants and their satisfaction differ as per the chronological age.
iv) Wants differ with gender : Men and women want different goods according to their needs.
v) Wants differ due to preferences :Individual habits, tastes and preferences matter a lot while deciding wants of the people.
vi) Wants differ with seasons : Wants keep on changing with seasons
vii) Wants differ due to culture : Differences in culture influence wants that are related to food, dressing styles etc.
Q. 5. State with reasons whether you agree or disagree with the following statements :
1) All wants can be satisfied at a time.
Ans. I disagree with the above statement. All wants cannot be satisfied at a time.
Reasons:
1) Want is one of the basic concepts of Micro Economics.
2) In simple words, want refers to need.
3) In economics, want denotes a feeling of ‘lack of satisfaction’. This feeling enables the individual to satisfy his want.
4)Wants not only arise again and again but they are also unending.
5) If one want gets satisfied, another arises.
6) Wants go on multiplying in number.
7) Several human wants occur again and again, while some might be only occasional.
8) Thus, all wants cannot be satisfied at a time.
2) Human wants change as per the seasons and preferences.
Ans: I agree with the above statement.
Reasons:
1) Want is one of the basic concepts of Micro Economics.
2) In simple words, want refers to need.
3) In economics, want denotes a feeling of ‘lack of satisfaction’. This feeling enables the individual to satisfy his want.
4) Individual habits, tastes and preferences greatly influence the wants of people.
E.g.: One person would want to eat Chinese food while another person would want to eat Italian.
5) Also, certain goods would be more in demand during certain seasons.
E.g.: We want air conditioner during summer season whereas light cotton clothing during summers.
6) Thus, we can say that human wants change as per the seasons and preferences.
3) Value-in-use and Value-in-exchange are the same.
Ans: I disagree with the above statement. Value-in-use and value-in-exchange are two different concepts.
Reasons:
Value-in-use
1) It refers to the worth of a commodity.
2) In simple words, it is the usefulness of a commodity.
3) E.g.: No one hos to pay for sunshine but it is very useful for us. Similarly, oxygen is available freely in nature but it is very useful for us.
4) In economic language, sunshine or oxygen are said to have high value-in-use.
5) They are examples of ‘free goods’ .
Value-in-exchange
1) It refers to the worth of a commodity or a service expressed in terms of another commodity. E.g.: I will give you my TV in exchange for your old laptop. Here, the laptop is the value-in-exchange for the TV and vice versa.
2) When this value is expressed in terms of money, it is called as the price of a commodity.
3) Any good which commands a price is termed as ‘economic goods’.
E.g.: TV, car, salt, bottled water etc.
Some commodities have high value-in-use but low value-in-exchange.
E.g.: water, oxygen in the atmosphere
Some commodities have low value-in-use but high value-in-exchange due to their scarcity.
E.g.: diamonds, expensive paintings
Q. 6. Answer in detail :
1) Explain the basic concepts of macro economics.
Ans. Macro-Economics :
Macro means large or aggregate or total. Macro-Economics is therefore the study of aggregates covering the entire economy such as total employment, national income, national output, total investment, total savings, total consumption, aggregate supply, aggregate demand, general price level etc.
Kenneth Boulding’s definition of Macro Economics :
“Macro Economics deals not with individual quantities as such, but with the aggregates of these quantities, not with the individual incomes but with the national income, not with individual prices but with the general price level, not with individual output but with the national output”.
Basic Concepts of Macro Economics :
1) National Income : This reveals the total economic performance of a nation. It is referred to as the total income of a country. In the economic sense, national income is the aggregate monetary value of all final goods and services produced in an economy during a year.
Definition by National Income Committee :
“A national estimate measures the volume of commodities and services turned out during a given period counted without duplication”.
2) Saving : It is that part of the income which is set aside to satisfy the future needs by foregoing current consumption. In other words, saving is that part of income which is not spent currently on consumption.
3) Investment : It refers to creation of capital assets through mobilisation of savings, e.g. machinery, equipment etc.
4) Trade Cycles : Trade cycles are fluctuations in business. They are ups and downs in the overall economic activities. Ups and downs means fluctuations caused by inflation and depression respectively.
• Inflation is a continuous rise in general price level.
• Depression is a continuous fall in overall prices and lowering down of economic activity in general.
5) Economic Growth : The term economic growth has a ‘quantitative’ dimension. In simple words, economic growth means an increase in the real national income of the country, over a long period of time.
6) Economic Development : This is a wider concept which has a ‘qualitative’ dimension. Economic development implies economic growth plus progressive changes in certain important variables which determine well-being of the people, e.g. education, health etc.