Question:
Discuss the central problems of an economy.
Answer:
The three central problems of an economy are:
- What to produce? [CBSE 2004C, 05, 06, 08, 08C, 09, 10; AI 2006, 10]
(a) What to produce refers to a problem in which decision regarding which goods and services should be produced is to be taken.
(b) Since its resources are limited, every economy has to decide what commodities are to be produced and in what quantities.
(c) The guiding principle for an economy here is to allocate resources in such a way that gives maximum aggregate utility to the society.
- How to produce?[CBSE 2014C, 2006, 08C, 10, AI 2001, 05, 08, 10, 11]
(a) How to produce refers to a problem in which decision regarding which technique of production should be used is made.
(b) Goods and services can be produced in two ways: by using labour intensive techniques, and by using capital-intensive techniques.
(c) The guiding principle for an economy in such a case has to decide about the techniques of production on the basis of cost of production. Those techniques of production should be used which lead to the least possible cost per unit of commodity or service.
- For whom to produce?[CBSE 2014, 2005C, AI 2013]
(a) For whom to produce refers to a problem in which decision regarding which category of people are going to consume a good, i.e., economically poor or rich.
(b) As we know, goods and services are produced for those who can purchase them or have the capacity to buy them.
(c) Capacity to buy depends upon how income is distributed among the factors of production. The higher the income, the higher will be the capacity to buy and vice versa. So, this is a problem of distribution.
(d) The guiding principle is that the economy must see here that important and urgent wants of its citizens are being satisfied for the maximum possible extent or not.
Introduction to Microeconomics
Q 1.
A country's resources are fully and p efficiently employed. The problem of scarcity exists. What advice would be given to raise the efficiency level of the human resource to fight scarcity?
Q 2.
Massive unemployment will shift PPC to the left. Defend or refute.
Q 3.
A doctor has a private clinic in New Delhi and his annual earnings are Rs 10 lakh. If he works in a government hospital in New Delhi, his annual earning will be Rs 8 lakh. What is the opportunity cost of having a clinic in New Delhi?
Q 4.
Giving reason comment on the shape of Production Possibilities curve based on the following schedule.
Q 5.
Explain the meaning of opportunity cost with the help of production possibility schedule.[CBSE, All India 2013]
Q 6.
How does Maruti Udyog Ltd. fix the prices of its cars, is it studied in macroeconomics?
Q 7.
Give two examples of growth of resources.
Q 8.
"An economy always produces on but not inside PPC. Defend or refute.
Q 9.
What is meant by economy?
Q 11.
Name any three variables of macroeconomics.
Q 12.
There are various sources of income a teacher has; such as,
- He can earn Rs 40000 from teaching in school.
- He can earn Rs 50000 by tuition/ coaching
- He earns Rs 60000 by writing the help book guides.
What is the opportunity cost of his teaching in school? Why should he choose teaching profession?
Q 13.
Which type of science is economics?
Q 14.
India is a labour abundance and capital scarce economy. Which technique of production should be used to produce the commodity?
Q 15.
Giving reasons, state whether the following statements are true or false.
An economy always manages to meet all the needs of the people living in the country.
Q 16.
Only Scarce Goods' attract price."Comment.
Q 17.
What do you mean by the production possibilities of an economy?
Q 18.
What is meant by economising of resources? [CBSE 2003]
Q 19.
As water resources are limited in our country, how can we economise the water resources so that it could not cause a future problem for us? Give any two suggestions.
Q 20.
Why is production possibility curve also called opportunity cost curve?
Q 21.
Giving reason comment on the shape of Production Possibilities curve based on the following schedule.
Q 22.
Give two examples of underutilisation of resources.
Q 23.
State the central problems of an economy. [CBSE Sample Paper 2014]
Q 24.
Although water is useful, yet it is cheap. On the contrary, diamond is not much of use, still it is very expensive. Give an economic reason for this paradox.
Q 25.
Why is it that on one hand coal is found in plenty, yet it is scarce while on the other, a rotten vegetable is rare but not scarce?
Q 26.
Production in an economy is below to its potentiality due to unemployment. Government starts employment generation schemes. Explain its effects by using production possibility curve.
Q 27.
What is meant by central problem of an economy?
Q 28.
Define Marginal Rate of Transformation (MRT). [CBSE 2012]
Q 29.
Define microeconomics.[CBSE 2007C; AI 2005, 2012]
Or
Give the meaning of microeconomics.[CBSE 2009]
Q 30.
State any two central problems under ‘problem of allocation of resources’.[CBSE Sample Paper 2016]
Q 31.
Economy always operates on PPC.
Q 32.
Name the economic value achievable when attempts are made to increase resources in the country.
Q 33.
Why does an economic problem arise? [CBSE 2007]
Or
What gives rise to an economic problem? [CBSE, Sample Paper 2008] Or
Why does the problem of choice arise? [CBSE 2004]
Q 34.
Why PPC is concave to the point of origin? [CBSE 2011, AI 2007]
Q 35.
"Scarcity and choice go all together". Defend or refute.
Q 36.
A farmer is getting more profit by producing opium rather than that of wheat. In situation of famine which crop should be produced?
Q 37.
What will likely be the impact of large scale outflow of foreign capital on Production Possibility Curve of the economy and why?
Q 38.
What is a production possibility frontier?
Q 39.
What is the basic reason for economic problem in all economies?
Q 40.
Because of destruction caused by war, a country's PPF will shift to the left.
Q 41.
Economy can never operate outside PPC with the given resources and technology.
Q 42.
The problems of scarcity of resources and their alternate uses arise everywhere but particularly in backward countries. For their solution non-economic considerations can be stressed. How?
Q 43.
Define Production Possibility Curve and state its properties.[CBSE, All India 2013 C]
Q 44.
A job guarantee scheme will lead to a rightward shift of PPF.
Q 45.
If the economy operates inside PPC, it shows full utilisation of resources.
Q 46.
Growth of resources shifts PPC towards left.
Q 47.
In an underdeveloped economy why there is the need of efficient utilization of resources?
Q 48.
Giving reason comment on the shape of Production Possibilities curve based on the following schedule.
Q 49.
Discuss the central problems of an economy.
Q 50.
Discuss the subject matter of economics.
