Q. Why is scarcity the basic economic problem?
Resources are limited, but human wants are unlimited and constantly changing. Therefore, individuals, enterprises and governments have to make choices about how to use scarce resources efficiently.
Q. Distinguish between needs and wants with one example each.
Answer:
Needs
- Essential requirements for life
- Example: food and shelter
Wants
- Desires beyond basic requirements
- Example: gadgets and vacations
Q. What is a Production Possibility Curve (PPC)?
Answer: A PPC shows different combinations of two goods that can be produced using all available resources. It illustrates the trade-off between the production of the two goods.
Q. Why must economic choices consider opportunity cost?
Answer: Resources have alternative uses. When one option is selected, another option is sacrificed. The value of the sacrificed alternative is the opportunity cost. Considering it helps with better decision-making.
Q. Case Study:
A farmer has limited land, water and labour. He can grow either wheat or barley. If he increases barley production, he has to reduce wheat production.
a) What economic concept is illustrated?
b) What does the PPC represent in this situation?
c) Why must the farmer make a choice?
Answer:
a) The concept of trade-off and opportunity cost is illustrated.
b) The PPC shows different combinations of wheat and barley that can be produced with available resources.
c) The farmer must choose because land, water and labour are limited and have alternative uses.
Q. Case Study:
A garment manufacturer is deciding whether to use more workers or automated machines. Machines are expensive, but skilled workers are easily available and relatively inexpensive.
a) Which two production techniques can the firm choose between?
b) Which technique is likely to be preferred in this situation?
c) Mention one factor that can influence this decision.
Answer:
a) Labour-intensive and capital-intensive production.
b) A labour-intensive technique is likely to be preferred.
c) The relative cost and availability of labour and capital can influence the decision.
Q. A government has to decide whether to spend more money on hospitals or highways.
a) Why is this an economic choice?
b) What happens when one option is selected?
c) What concept explains the value of the sacrificed option?
Answer:
a) Government resources are limited and can be used for different purposes.
b) The alternative use of resources is sacrificed.
c) Opportunity cost explains the value of the sacrificed alternative.
Q. "A shoe company produces school shoes, office shoes, sports shoes and casual footwear. It studies customers' income, preferences and demand before deciding which shoes to manufacture."
Questions:
a) Which central economic question is being addressed?
b) Why are different types of shoes produced?
c) How does purchasing power influence production?
d) Why is analysing demand important?
Answer:
a) For whom to produce?
b) Different consumers have different needs, tastes, lifestyles and income levels.
c) Producers design and price products according to the purchasing power of different groups.
d) It helps producers use limited resources efficiently and avoid wastage.
Q. “Economics is essentially about making choices in a world of scarce resources and unlimited wants.” Explain.
Answer:
Human wants are unlimited and keep changing, whereas resources such as land, labour, capital and technology are limited. These resources also have alternative uses. Therefore, individuals, enterprises and governments must decide how to allocate them efficiently. Every choice involves sacrificing an alternative, which creates an opportunity cost. These choices lead to the three central economic questions—what to produce, how to produce and for whom to produce. Thus, economics studies how limited resources can be used to satisfy human needs and wants.
Q. “A mixed economy is more practical in the real world.” Analyse the statement.
Answer:
A mixed economy combines features of both planned and market economies. Private individuals and enterprises can own and operate businesses, encouraging competition, innovation and profit-making. At the same time, the government regulates private activities and provides public goods, welfare programmes and infrastructure. This combination allows economic freedom while addressing areas where government intervention is required. The chapter notes that most modern economies have features of mixed economic systems.
Assertion–Reason Questions
17. Assertion (A): Every economic choice involves an opportunity cost.
Reason (R): Resources have alternative uses.
Answer: Both A and R are true, and R correctly explains A.
Resources are limited and can be used for different purposes; choosing one option means giving up another.
18. Assertion (A): A market economy generally encourages innovation.
Reason (R): Competition among producers encourages better quality and innovation.
Answer: Both A and R are true, and R correctly explains A.
19. Assertion (A): A planned economy generally has limited competition among private enterprises.
Reason (R): The government controls major economic decisions and heavily regulates enterprises.
Answer: Both A and R are true, and R correctly explains A.
Competency-Based MCQs
20. A student has ₹100 and must choose between buying a notebook and saving for a tennis racket. Which concept best explains the situation?
A. Demand
B. Opportunity cost
C. Production
D. Inflation
Answer: B. Opportunity cost
21. If machines become cheaper and more easily available, a garment producer may:
A. Completely stop production
B. Shift towards greater automation
C. Stop using technology
D. Always employ more workers
Answer: B. Shift towards greater automation
22. Which situation best represents the question “For whom to produce?”
A. Whether to use machines or workers
B. Whether to produce shoes or bags
C. Deciding which group of consumers should be served
D. Deciding how much land to use
Answer: C. Deciding which group of consumers should be served
23. Which of the following is a public good mentioned in the chapter?
A. Luxury car
B. Designer shoes
C. Street lights
D. Jewellery
Answer: C. Street lights
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