TN STATE BOARD 11TH ECONOMICS – INTRODUCTION TO MICROECONOMICS BOOK BACK ANSWERS

 


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 which means 'Management of
households'. 'Political Economy ' is renamed as 'Economics' by Alfred Marshall.


Question 22.
Define microeconomics?

Answer:

1. Microeconomics is the study of the economic actions of individual units say households, firms, or industries.

2. It studies how business firms operate under different market conditions.

3. The combined actions of buyers and sellers determine prices.

Microeconomics covers:

1. Value theory product pricing and factor pricing
2. Theory of economic welfare.

Question 23.
What are the goods?
Answer:

The materialistic things and services which satisfy human wants are called as goods in economics.


Question 24.

Distinguish goods and services?


Question 25.
Name any two types of utility?
Answer:

1. Time Utility: A sick man derives time utility from blood not at the time of its donation but only at the operation - time, i.e., when it is used.
2. Place Utility: A student derives place utility from a book not at the place of its publication (production centre) but only at the place of his
education (consumption centre).


Part - C

Answer the following questions in One Paragraph

Question 28.
Explain the scarcity definition of Economics and assess it.
Answer:

Lionel Robbins published a book "An Essay on the Nature and Significance of Economic Science". In it, he defined "Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses".

Assessment:

1. Robbins does not make any distinction between goods conducive to human welfare and goods that are not.
2. Economics deals not only with the microeconomic aspects but also with the macroeconomic aspects like how national income is generated. Robbins reduces economics merely to the theory of resource allocation.
3. Robbin's definition does not cover the theory of economic growth and development.


Question 30.

Explain different types of economic activities.

Answer:

1. Economics focuses on the behaviour and interactions among economic agents, individuals, and groups in the economic system.
2. It deals with the consumption and production of goods and services and distribution of income among the factors of production.
3. It includes the activities of the rational human beings under the existing social, legal, and institutional arrangement.

4. It studies the way in which people use the available resources to satisfy
their multiplicity of wants.


Question 31.
Elucidate different features of services

Answer:

Along with goods, services are produced and consumed. They are generally,
possess the following:

1.Intangible:

Intangible things are not physical objects but exist in connection to other things for example, brand image, goodwill etc. The intangible things are converted and stored into tangible items such as recording a music piece into a pen - drive.

2. Heterogeneous:

Services vary across regions or cultural backgrounds. A single type service yields multiple experiences, e.g., music, consulting physicians etc.

3. Inseparable from their makers:

Services are inextricably connected to their makes. For example, labour
and labourers are inseparable.

4. Perishable:

Services cannot be stored as inventories like assets.

For example, it is useless to possess a ticket for a cricket-match once
the match is over.

It cannot be stored and it has no value-in-exchange.

Question 32.
What are the important features of utility?
Answer:

Utility: Utility is the want satisfying power of a commodity or a service.
Features of utility:

1. Utility is psychological.
2. Utility is not equivalent to usefulness.
3. Utility is not the same as pleasure.
4. Utility is personal and relative.
5. Utility is the function of the intensity of human want.
6. Utility is a subjective concept.
7. Utility has no ethical or moral significance.

Question 33.
Distinguish between microeconomics and macroeconomics
Answer:




Part - D

Answer the following questions in about a page

Question 35.
Compare and contrast various definitions of Economics?
Answer:

1. Adam Smith - Wealth definition:

1. Adam Smith 1723-17001, in his book "An Inquiry into Nature and
Cause of Wealth of Nations" t1 7761 defines "Economics as the science of wealth"

2. He explains how a nation's wealth is created and increased.
3. He considers that the individual in the society wants to promote his own gain and in this process, he is guided and led by an "invisible hand"
4. Adam Smith favours the introduction of "division of labour" to increase the quantum of output.
5. Severe competition in factories and society helps in bettering the product.
6. Supply force is very active and a commodity is made available to the
consumers at the lowest price.

2. Alfred Marshall - Welfare definition:

1. Alfred Marshall 1842-19241 in his book "Principles of Economics" 1809 defines Economics thus "Political Economy" or Economics is a study of mankind in the ordinary business of life.
2. It examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.
3. Thus, it is on one side a study of wealth and on the other and more important side, a part of the study of man".

The important features of Marshall's definition are:

1. Economics does not treat wealth as the be all and end all of economic activities.
2. Man promotes primarily welfare and not wealth. '
3. The science of economics contains the concerns of ordinary people who are moved by love and not merely guided or directed by the desire to get maximum monetary benefit.
4. Economics is a social science. It studies people in the society who influence one another.

3. Lionel Robbins - Scarcity definition:

1. Lionel Robbins published a book "An Essay on the Nature and Significance of Economic Science" in 1932.
2. According to him, "Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses".

The major features of Robbins' definition:

1. Ends refer to human wants. Human beings have unlimited number of wants.
2. On the other hand. Resources or means that go to satisfy the unlimited human wants are limited or scarce in supply.
3. The scarce means are capable of having alternative uses.
4. An individual grades his wants and satisfies first his most urgent want.
5. Economics, according to Robbins, is a science of choice.

4. Samuelson's - growth definition:
Paul Samuelson defines Economics as "the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses to produce various commodities over time, and distribute them for consumption, now and in the future among various people and groups of society".

The major implications of this definition are as follows:

Samuelson makes his definition dynamic by including the element of time in it.

Samuelson's definition is applicable also in a barter economy. His definition covers various aspects like production, distribution and consumption.
Samuelson treats Economics as a social science.
Samuelson appears to be the most satisfactory.



Question 37.
Elaborate the nature and scope of Economics.
Answer:

Explanation:
Nature of Economics:

The nature of a subject refers to its contents and how and why they find a
place in the subject. This nature is understood by studying the various
definitions given by Economists.
The nature of Economics can be clearly understood from the following
definitions:

1 Adam Smith (classical Era) who considered Economics is a science of
wealth gave wealth definition.
2. Alfred Marshall (Neo-classical era) considered Economics as a social
science which studies wealth on one side and the material welfare of
human beings on the other side.
3. Robbin's Scarcity Definition (new age) He defined Economics is a
science of choice.
4. Samuelson gave growth definition which represents the modern age.
5. The scope of economics refers to the subject matter of economics. It
throws light on whether it is an art or a science and science, whether positive or normative science.

Economics it's Subject matters:



Related to society:

1. Economics focuses on the behavior and interactions among economic agents, individuals and groups belonging to an economic system.
2. It deals with the consumption and production of goods and services and the distribution of income among the factors of production.

Related to scarce resources:

1 Economics studies the ways in which people use the available
resources to satisfy their multiplicity of wants.

Human science or Social science:

1 Economics is concerned with activities of human beings.
2. The action of one member affect those of the others in the society. Hence, economics is called a human science or social science.

Related to wealth:

1 Economics constitute all human activities related to wealth.
2. Human activities not related to wealth are not included in Economics.

Economics as an art:

1. Art is the practical application of knowledge for achieving particular
goals.
2. Economics provides guidance to the solutions to all the economic
problems.

Economics as a science:

1 Science is a systematic study of knowledge. Science develops the co-
relation between cause and effect based on facts.

2. Economics examines the relationship between the cause and effect of
the problems. Hence, it is rightly considered as both an art and a
science.

Economics: Positive and Normative science:

1. Positive- Economics is concerned with how? And why? And normative
Economics with 'what ought to be Economics is both a positive and
normative science.