10 short answer questions with answers, suitable for 2-3 marks each, based on the introductory concepts of Microeconomics for Class 12 students:

INTRODUCTORY MICRO ECONOMICS

I. Introduction

1.Define Microeconomics.

Answer: Microeconomics is the branch of economics that studies the economic behavior of individual units such as households, firms, and industries, and their interactions in specific markets.

 

2.What are the two main reasons why the study of economics is important?

Answer: The study of economics is important because it helps us understand how to make rational choices in the face of scarcity and how economies function to allocate limited resources to satisfy unlimited wants.

 

3.Explain the concept of scarcity in economics.

Answer: Scarcity refers to the fundamental economic problem where society has limited resources to satisfy its unlimited wants and needs. This necessitates making choices about resource allocation.

 

4.List the three central problems of an economy.

Answer: The three central problems of an economy are:

What to produce?

How to produce?

For whom to produce?

 

5.What does the central problem "What to produce?" imply?

Answer: "What to produce?" implies deciding which types of goods and services should be produced and in what quantities, given the limited resources available.

 

6.Differentiate between 'goods' and 'services' with examples.

Answer: Goods are tangible items that satisfy human wants (e.g., a car, a book). Services are intangible activities performed for others that satisfy wants (e.g., a doctor's consultation, a teacher's lesson).

Define 'utility' in the context of economics.

Answer: Utility refers to the want-satisfying power of a commodity or service. It is the satisfaction or benefit a consumer derives from consuming a good or service.

 

What is the difference between 'value' and 'price'?

Answer: Value in economics generally refers to the economic worth or usefulness of a good or service, often expressed in monetary terms. Price is the amount of money that a buyer pays to acquire one unit of a good or service. Price is a specific manifestation of value in a market.

 

Explain the concept of 'wealth' in economics.

Answer: Wealth in economics refers to the stock of assets that have economic value and can be exchanged or used to generate income. It includes tangible assets like land and machinery, as well as financial assets.

Why does the problem of 'choice' arise in an economy?

Answer: The problem of choice arises because resources are scarce, but human wants are unlimited. Therefore, individuals, firms, and the economy as a whole must make choices about how to allocate these limited resources among competing uses.

 

What is meant by the 'scope' of economics?

Answer: The scope of economics refers to the areas or subjects that economics studies. It generally includes production, consumption, distribution, and exchange of goods and services.

 

Give two examples of 'wants' and explain why they are generally considered unlimited.

Answer: Examples of wants include wanting a new car and wanting to travel abroad. These are considered unlimited because as soon as one want is satisfied, new wants emerge, driven by factors like changing tastes, technological advancements, and the desire for a higher standard of living.

 

How does the concept of 'price' help in solving the central problems of an economy in a market economy?

Answer: In a market economy, prices act as signals. High prices indicate greater demand and/or scarcity, encouraging producers to produce more (what to produce) using efficient methods (how to produce). Prices also influence who can afford the goods and services (for whom to produce).

Differentiate between positive and normative economics.

Answer: Positive economics deals with "what is" – it describes and explains economic phenomena as they are, based on facts and data. Normative economics deals with "what ought to be" – it involves value judgments and opinions about what economic policies or outcomes are desirable.

 

Explain the relationship between scarcity and the central problems of an economy.

Answer: Scarcity of resources is the fundamental reason why the central problems of an economy (what, how, and for whom to produce) arise. If resources were unlimited, there would be no need to make choices about production, allocation, or distribution.