TN STATEBOARD 11th ECONOMICS CHAPTER 1
TEST SOLUTIONS
INTRODUCTION TO MICROECONOMICS CHAPTER
TEST
TEST – 1 SOLUTIONS
PADVIKSHA BLOG
TOTAL MARKS: 25
I Multiple Choice Questions (MCQ) (Mark- 5 x 1 = 5)
1. Find the odd one out:
d. “Ceteris paribus”
2. Which of the following
is a microeconomics statement?
c. The price of wheat
determines its demand
3. Utility can be measured
indirectly using the 'Measuring rod of money' is the statement of
(c) Marshall
4. Which one of the
following is not a point in the Welfare Definition of Economics?
d. Economics deals with
unlimited wants and limited means
5. ______is the unit of
measurement of utility.
(b) Utils
II ANSWER THE FOLLOWING QUESTIONS IN ONE OR TWO SENTENCES. (3x2=6)
Write Any 3 Questions:
1. Define normative
economics?
Answer
1. Inflation is better than deflation.
2. More production of luxury goods is
not good for a less-developed country.
3. Inequalities in the distribution of
wealth and incomes should be reduced.
2. 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).
3. Distinguish goods from
services.
4. What is Income?
Answer Income is the amount of monetary
or other returns, either earned or unearned, accruing over a period of time.
5. Give the meaning of
deductive method.
Answer:
1. the deductive method is
also named as an analytical or abstract method.
2. It consists in deriving
conclusions from general truths.
3. It takes a few general
principles and applies them to draw conclusions.
4. The classical and
neoclassical school of economists notably, Ricardo, JS Mill, Malthus Marshall,
Pigou applied the deductive method in their economic investigations.
III ANSWER THE FOLLOWING QUESTIONS IN ONE PARAGRAPH. (3 X 3 = 9)
WRITE ANY 3 QUESTIONS
1. Whether economics is an
art or science? Explain
Answer
1. Economics as an art: Art is the practical
application of knowledge for achieving particular goals. Economics provides
guidance to the solutions to all the economic problems. A.C. Pigou, Alfred
Marshall and others regard economics as an art.
2. Economics as a science:
Science is a systematic study of knowledge. Science develops the co-relation
between cause and effect based on fads. Economics examines the relationship
between the cause and effect of the problems. Hence, it is rightly considered
as both an art and a science.
2. State the importance of
Microeconomics. (Any 3)
Answer
1. To understand the operation of an
economy.
2. To provide tools for economic
policies.
3. To examine the condition of economic
welfare.
4. Efficient utilization of resources.
5. Useful in international trade.
6. Useful in decision making.
7. Optimal resource allocation.
8. The basis for prediction.
9. Price determination.
3. What are the crucial
decisions involved in ‘what to produce?’
Answer:
Every society much decides on what goods
it will produce and how much of these it will produce.
In this process, the crucial decisions
include:
1. Whether to produce more of food,
clothing and housing or to have more luxury goods.
2. Whether to have more agricultural
goods or to have industrial goods and services.
3. Whether to use more resources in
education and health or to use more resources in military services.
4. Whether to have more consumption
goods or to have investment goods.
5. Whether to spend more on basic
education or higher education.
4. What are the 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.
5. What are the four
definitions of economics?
Answer. Based on the
particular stage of the growth of the subject of economics, the four
definitions are presented here.
1. Smith's wealth
definition, representing the classical era.
2. Marshall's welfare
definition, representing the Neo-classical era.
3. Robbin's scarcity
definition representing the new age.
4. Samuelson's growth
definition representing the modern age.
IV. ANSWER THE FOLLOWING QUESTIONS IN ABOUT A PAGE (1 x 5 = 5)
WRITE ANY ONE QUESTION
1. Explain basic problems
of the economy with the help of production possibility curve.
Answer:
The Problem of choice
between relatively scarce commodities due to limited resources can be
illustrated with the help of a geometric device, is known as production
possibility curve
Basic Assumptions:
(i) The time period does
not change. It remains the same throughout the curve.
(ii) Techniques of
production are fixed.
(iii) There is full
employment in the economy.
(iv) Only two goods can be
produced from the given resources.
(v) Resources of
production are fully mobile.
(vi) The factors of
production are given in quantity and quality
(vii) The law of
diminishing return operates in production.
Every production
possibility curve is based upon these assumptions. If some of these assumptions
changes or neglected, then it affects the nature of production possibility
curve.
To draw this curve we take
the help of production possibilities schedule, as shown below.
This Schedule suggests that if all resources are
thrown in to the production of food a maximum of 500 tons of food can be
produced given the existing technology.
For diagram refer book Pg.
no: 18
Explanation:
(i) The quantity of food
is shown on X-axis and No. of Cars on the Y - axis.
(ii), The different six
production possibilities are being shown as point P,, P,, P;, P,.®, & P,.
(iii) The PPC P1 to P6
(iv) The, locus of points
of the different possibilities of production of two commodities which a firm or
an economy can produce, with the help of given resources and the techniques of
production.
(v) Points lying inside
the curve like P, are attainable by the society but these points resources
production are not fully employed.
(vi) Shift of Production
Possibility Curve the PPC shifts upward or downward due to.
The change in the supply of productive
resources.
The change in the state of technology.
This outward shift of the PPC is the
features of economic growth.
2. 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.