Introduction to Micro Economics Class 12 Economics Important Questions
Please refer to Introduction to Micro Economics Class 12 Economics Important Questions with answers below. These solved questions for Chapter 1 Introduction to Micro Economics in NCERT Book for Class 12 Economics have been prepared based on the latest syllabus and examination guidelines issued by CBSE, NCERT, and KVS. Students should learn these solved problems properly as these will help them to get better marks in your class tests and examinations. You will also be able to understand how to write answers properly. Revise these questions and answers regularly. We have provided Notes for Class 12 Economics for all chapters in your textbooks.
Important Questions Class 12 Economics Chapter 1 Introduction to Micro Economics
All Introduction to Micro Economics Class 12 Economics Important Questions provided below have been prepared by expert teachers of Standard 12 Economics. Please learn them and let us know if you have any questions.
Question. What is the other name for opportunity cost in economics?
a) Economic problem
b) Marginal cost
c) Total Cost
d) Economic cost
Question. In a market economy, the central problems are solved by
a) Demand for goods
b) Supply of goods
c) Planning authority
d) Market mechanism
Very Short Answer Type Questions
Question. Define scarcity.
Answer : Scarcity means shortage of resources in relation to their demand is called scarcity.
Question. Name the three central problems of an economy.
Answer : a) What to produce? b) How to produce? c) For whom to produce?
Question. Define Normative Economics with a suitable example.
Answer : Normative economics is the type of economics that examines the way an economy should work under ideal circumstances. The price of milk should be Rs. 20 a litre to give dairy farmers a higher living standard and to save the family farm.
Question. What does a point inside the PPC indicate?
Answer : Any point inside the production possibility curve indicate underutilization of resources.
Question. What is opportunity cost?
Answer : It is the cost of next best alternative foregone.
Short Answer Type Questions
Question. From the following PP schedule calculate MRT of good x.
Question. What is opportunity cost? Explain with the help of a numerical example.
Answer : Opportunity cost represents the benefits an individual, investor or business misses out on when choosing one alternative over another. In microeconomic theory, the opportunity cost, also known as alternative cost, is the value (not a benefit) of the choice in terms of the best alternative while making a decision.
For example, Johnson has three job offers to select from. Job A has salary of Rs. 60000, Job B with Rs. 70000 and Job C with Rs. 80000. If Johnson chose Job C, then in this case opportunity cost would be Rs. 70000 per month.
Long Answer Type Questions
Question. What is production possibility frontier?
Answer : It is a boundary line which shows that maximum combination of two goods which can be produced with the help of given resources and technology at a given period of time.
Let’s take an example here. An economy can produce two goods like rice and ghee by using all the given resources. The different combination of rice and ghee are as follows:-
Question. What is the difference between planned economy and market economy?
Answer : Planned economic systems are referred to as centrally planned economies as well. The decisions on investments, production, distribution and pricing, etc. are made by the government or by an authority. Therefore, it is also referred as command economy. The aim of the planned economy is to increase the productivity by getting more information on productions and deciding the distribution and pricing accordingly. The main advantage of a planned economy is that the government gets the ability to connect labor, capital, and profit together without any intervention and thus, it will lead to the achievement of economic targets of the particular country.
The opposite of planned economy is the market economy. In this economic structure, the decisions on production, investment, and distribution are taken according to the market forces. Depending on the supply and demand, these decisions may vary from time to time. There is a free price system as well. One of the main features is that the market economies decide about the investments and production inputs through market negotiation.
There are some important differences between the two, which are detailed here.
1. Operating Method:
When we look at the differences, the main difference is the way they both operate.
• Planned economy operates according to plans drawn in advance by the state or an authority.
• Market economy operates on the market forces; that is, based on demand and supply.
• In a planned economy, the decisions on investment, production, distribution and pricing are taken by the government.
• In contrast, market economies do not have a decision maker but they operate on free market flows.
• Consumer needs, shortages and surplus:
• It is said that planned economies fail to identify the consumers’ needs, shortages and surplus in the market.
But the market economies always work depending on those factors.
However, in the current world, we usually see a mixture of both these economic systems; that is, what we see now in the world is the mixed economy.