Maharashtra Board Class 11 Economics Important Questions Chapter 1 Basic Concept in Economics

Balbharti Maharashtra State Board Class 11 Economics Important Questions Chapter 1 Basic Concept in Economics Important Questions and Answers.

Maharashtra State Board 11th Economics Important Questions Chapter 1 Basic Concept in Economics

1A. Choose the correct option:

Question 1.
Key points in Adam Smith’s definition:
(a) Non-intervention of the Government.
(b) Capital & Wealth accumulation.
(c) Study of an ordinary man.
(d) Economics is a science of wealth.
Options:
(1) a, b and c
(2) a and b
(3) a, b and d
(4) b, c, and d
Answer:
(3) a, b and d

Question 2.
Statement incorrect with reference to Robbins definition:
(a) Means have specific uses.
(b) Welfare-oriented definition.
(c) Wants are unlimited.
(d) Means are scarce.
Options:
(1) a, b and c
(2) a and b
(3) c and d
(4) a, b and d
Answer:
(2) a and b

Question 3.
Statements related to National Income:
(a) Money value of goods and services produced in a year.
(b) It reveals the total economic performance of a nation.
(c) It is a macroeconomic concept.
(d) Income received by the person from all sources.
Options:
(1) a, b and d
(2) a, b, c, and d
(3) a, b and c
(4) b, c, and d
Answer:
(3) a, b and c

Question 4.
Aspects considered in microeconomics:
(a) Micro means small.
(b) It deals with the behaviour of the individual economic units.
(c) It covers the study of the entire economy.
(d) It includes national income.
Options:
(1) a, b and c
(2) a and b
(3) b, c, and d
(4) a, b and d
Answer:
(2) a and b

Question 5.
Statements related to features of Land:
(a) Resources available on, below, and above the surface.
(b) It is a natural factor of production.
(c) It is a man-made factor of production.
(d) It earns rent as a reward.
Options:
(1) a, b
(2) a, b, c, d
(3) a, b, d
(4) c, d
Answer:
(3) a, b, d

Question 6.
Statements related to features of Labour:
(a) Physical or mental effort undergone.
(b) It earns wages as a reward.
(c) Playing football for self-satisfaction.
(d) Gives coaching for football in XYZ school.
Options:
(1) a, c
(2) a, b, d
(3) a, b, c, and d
(4) b, d
Answer:
(2) a, b, d

Question 7.
Statement not related to Kenneth Boulding definition of Macro Economics:
(a) Macro Economic deals with totality or aggregate.
(b) Macro Economic deals with individual output.
(c) Macro Economic deals with National Income.
(d) Macro Economic deals individual price level.
Options:
(1) a, b, c
(2) c, d
(3) b, c
(4) b, d
Answer:
(4) b, d

1B. Complete the correlation:

Question 1.
Chemistry : Natural Science : : Economics : __________
Answer:
Social Science

Question 2.
Natural Science : __________ : : Social Science : Inexact
Answer:
Exact

Question 3.
Adam Smith : Wealth of Nation : : Kautilya : __________
Answer:
Arthashastra

Question 4.
Land : __________ : : Labour : Wages
Answer:
Rent

Question 5.
Necessity : Water : : __________ : Air conditioned car.
Answer:
Luxury

Question 6.
National Income : Macro economics : : Personal Income : __________
Answer:
Micro economics

Question 7.
Goods : Chalk : : __________ : Teaching
Answer:
Services

Question 8.
Prof. Marshall : Welfare oriented definition : : __________ : Scarcity oriented definition.
Answer:
Prof. Robbins

Question 9.
Wages : Fixed income : : Profit : __________
Answer:
Fluctuating income

Question 10.
Economic Want : Medicine : : Non-Economic Want : __________
Answer:
air/sun-shine

1C. Suggest the economic terms for the given statements:

Question 1.
Unemployment is created due to cyclical fluctuations.
Answer:
Cyclical Unemployment

Question 2.
Continuous fall in overall prices in an economy.
Answer:
Depression

Question 3.
Continuous rise in the general price level in an economy.
Answer:
Inflation

Question 4.
The aggregate monetary value of all final goods and services produced in a country during a year.
Answer:
National Income

Question 5.
Want satisfying capacity of a commodity.
Answer:
Utility

Question 6.
Earnings are received by a person from all sources.
Answer:
Personal Income

Question 7.
Leftover income after payment of taxes etc.
Answer:
Personal Disposable Income

Question 8.
Income is received in the actual currency of the country.
Answer:
Money Income

Question 9.
Wants which are satisfied at the individual level.
Answer:
Individual Wants

Question 10.
An economic study of a particular firm, a particular household, etc.
Answer:
Micro Economics

Question 11.
A great statesman, philosopher during Mourya Period.
Answer:
Kautilya

Question 12.
Wants that are meant for pleasure and enjoyment.
Answer:
Luxuries

Question 13.
Wants that are basic in nature.
Answer:
Necessities

Question 14.
Income received without indulging in any productive activity.
Answer:
Unearned Income

Question 15.
Increase in Real National Income of the country over a long period of time.
Answer:
Economic growth

Question 16.
Real captain of industry.
Answer:
Entrepreneur

1D. Find the odd word out:

Question 1.
Mathematics, Economics, Physics, Chemistry
Answer:
Economics

Question 2.
Psychology, Sociology, Economics, Chemistry
Answer:
Chemistry

Question 3.
Adam Smith, David Ricardo, J.M.Keynes, J.S. Mill.
Answer:
J. M. Keynes

Question 4.
Food, Medicines, Sunshine, Toothpaste
Answer:
Sunshine

Question 5.
Washing machine, AC – Car, Pressure Cooker, Geyser.
Answer:
AC – Car

Question 6.
Land, Interest, Labour, Entrepreneur
Answer:
Interest

Question 7.
National Income, National Output, Individual Income, Aggregate Supply.
Answer:
Individual Income

Question 8.
Investment, Want, Utility, Wealth.
Answer:
Investment

Question 9.
Rain, Air, Sunrays, Book.
Answer:
Book

Question 10.
Rent, Labour, Interest, Profit.
Answer:
Labour

1E. Complete the following statements:

Question 1.
Commodity which satisfies human wants is called __________
Answer:
Utility

Question 2.
Actual transfer of goods from one person to another is termed as __________
Answer:
Physical transfer

Question 3.
Income which is paid as per terms and condition is called as __________
Answer:
Contractual Income

Question 4.
Anything which has market value and can be exchanged for money is termed as __________
Answer:
Wealth

Question 5.
Adam Smith defines Economics as __________
Answer:
A Science of wealth

Question 6.
Scarcity oriented definition of economics was given by __________
Answer:
Lionel Robbins

Question 7.
Wealth oriented definition of economics was given by __________
Answer:
Prof. Alfred Marshall

Question 8.
Kautilya authored the Indian Political treatise called __________
Answer:
the ‘Arthashastra’

Question 9.
Paul Samuelson referred economics as __________
Answer:
“Queen of Social Science”

Question 10.
Psychology, Sociology, Political Science are the examples of __________
Answer:
Social Science/Abstract Science

Question 11.
Kautilya is also known by the name __________
Answer:
Chanakya or Vishnugupta

Question 12.
The term microeconomics and macroeconomics was coined by __________
Answer:
Sir Ragnar Frisch

1F. Choose the wrong pair:

Question 1.

Group ‘A’	Group ‘B’
1. Physics, Chemistry, etc	(a) Natural Science
2. Kautilya	(b) Arthshastra
3. Psychology, Sociology, etc	(c) Social Science
4. Prof. Alfred Marshall	(d) Father of Economics

Answer:
Wrong Pair: Prof. Alfred Marshall – Father of Economics

Question 2.

Group ‘A’	Group ‘B’
1. Alfred Marshall	(a) Welfare Oriented Definition
2. Lionel Robbins	(b) Scarcity Oriented Definition
3. Adam Smith	(c) Scarcity Oriented Definition
4. J. M. Keynes	(d) Modern School of Thought

Answer:
Wrong Pair: Adam Smith – Scarcity Oriented Definition

1G. Choose the correct pair:

Question 1.

Group ‘A’	Group ‘B’
1. Economic Wants	(a) Travelling by Bus
2. Non-Economic Wants	(b) Air, Sunshine, etc.
3. Individual Wants	(c) Food, Medicine, etc.
4. Collective Wants	(d) Doctor using Stethoscope

Options:
(a) 1 – d; 2 – c; 3 – a; 4 – b
(b) 1 – b; 2 – c; 3 – d; 4 – a
(c) 1 – c; 2 – b; 3 – d; 4 – a
(d) 1 – a; 2 – d; 3 – b; 4 – c
Answer:
(c) 1 – c; 2 – b; 3 – d; 4 – a

2. Identify and explain the concepts from the given illustrations:

Question 1.
Mangesh saves ₹ 200/- every month out of his pocket money.
Answer:
Savings.
Saving is a part of income, which is kept aside to meet future needs. In the above illustration, since Mangesh is foregoing his current consumption, it forms his part of savings.

Question 2.
People drink water when they are thirsty because water has the capacity to satisfy thirst.
Answer:
Utility.
The utility is a power of a commodity or service which satisfies human want. In this case, water has utility, as it satisfies the thirst of people.

Question 3.
A farmer sold 2 kg rice for ₹ 100/-
Answer:
Exchange.
It refers to the worth of a commodity or a service expressed in terms of a commodity. In the above case farmer exchanges rice i.e. commodity for cash.

Question 4.
₹ 45,000/- remained in the hands of Mr. Shah from his income, after paying tax.
Answer:
Personal Disposable Income.
It is that part of a personal income that is left over after the payment of direct taxes. In the above case, ₹ 45,000 forms part of Mr. Shah’s Personal Disposable Income, as it is leftover income after payment of his tax.

Question 5.
Raju’s mother purchased a blanket. It helps her to keep warm during winter.
Answer:
Necessity Want and Utility.
Want is referred to as a need of a person. Here, in the above case, the blanket is a need of Raju’s mother, which falls under necessity want.
The utility is a power of a commodity or service to satisfy human wants. Here, in the above case, the blanket provides utility to Raju’s mother by giving her warmth during winter.

Question 6.
Alka uses a washing machine to wash clothes.
Answer:
Comforts Want.
A commodity that provides comfort to our life is termed comfort goods. In the above case, the washing machine provides comfort to Alka, as she does not need to wash clothes with her hands anymore.

Question 7.
Sahil utilized his bank balance to start a fruit shop.
Answer:
Investment.
Investment refers to the creation of capital assets through the mobilization of savings. In the above case, Sahil mobilizes his bank savings into investment in a fruit shop.

Question 8.
National income estimates help to measure the economic performance of a country.
Answer:
Macro-economics.
Macroeconomics means studying the economy at a large or whole. It includes the study of total employment, total savings, total consumption, aggregate supply, aggregate demand, etc. In the above case, the study of the whole country’s income leads to the measurement of the economic performance of a country.

Question 9.
A carpenter makes furniture and earns wages.
Answer:
Labour.
Labour means any kind of physical or mental effort/exertion undergone during the process of production against a certain reward. In the above case, labour makes furniture and earns wages as a reward.

Question 10.
Tanvi goes to the office in an air-conditioned car.
Answer:
Luxury.
The commodity which satisfies the want of pleasure and enjoyment means luxury goods. In the above case, the air-conditioned car is treated as a luxury good.

3. Distinguish between:

Question 1.
Fixed Income and Fluctuating Income.
Answer:

Fixed Income	Fluctuating Income
(i) Income that is stable or remains the same over a period of time is called fixed income.	(i) Income that is unstable and keeps on changing is called fluctuating income.
(ii) Earnings of the landlord, labour, etc. are fixed income.	(ii) Earnings of businessmen, organisers, self-employed persons, etc. are fluctuating income.
(iii) It cannot be zero or negative.	(iii) It can be positive, negative, or zero.

Question 2.
Value-in-use and Value-in-exchange.
Answer:

Value-in-use	Value-in-exchange
(i) It refers to the usefulness of a commodity.	(i) It refers to the value of a commodity or a service expressed in terms of another commodity.
(ii) Value-in-use depends upon utility.	(ii) Value-in-exchange depends upon scarcity.
(iii) Free goods like water, air, sunshine, etc. have greater value in use but less value in exchange.	(iii) Economic goods like a diamond, gold, etc. have greater value-in-exchange but less value-in-use.

Question 3.
Contractual Income and Residual Income.
Answer:

Contractual Income	Residual Income
(i) When income is given as per the terms and conditions of the contract it is called contractual income.	(i) The income which is left over after making payment to other factors of production is called residual income.
(ii) Rent, Wages, etc. are examples of contractual income.	(ii) Profit is an example of residual income.
(iii) Contractual income is fixed and certain.	(iii) Residual income is fluctuating and uncertain.
(iv) It is neither zero nor negative.	(iv) It can be zero or even negative.

Question 4.
Money Income and Real Income.
Answer:

Money Income	Real Income
(i) Money income refers to income received in form of the currency of a country.	(i) Real income refers to the purchasing power of money income.
(ii) E.g. Income received in cash, ₹ 50,000/- per month.	(ii) E.g. Commodities purchased out of given income.
(iii) It is not influenced by a change in the price level.	(iii) It declines with a rise in the price level.

Question 5.
Land and Labour.
Answer:

Land	Labour
(i) Land is any natural resource, available above and below the surface of the earth.	(i) Labour is any physical or mental effort undergone during the production process to earn some remuneration.
(ii) Land is a natural factor of production.	(ii) Labour is a human factor of production.
(iii) Land earns ‘Rent’ as a factor reward.	(iii) Labour earns ‘Wages’ as a factor reward.
(iv) Land is a durable factor.	(iv) Labour is a perishable factor.

Question 6.
Land and Capital.
Answer:

Land	Capital
(i) Land is any natural resource available above and below the surface of the earth.	(i) Capital is a produced means for further production.
(ii) Land is a natural factor of production.	(ii) Capital is a man-made factor of production.
(iii) Land earns a reward in the form of ‘Rent’.	(iii) Capital earns a reward in the form of ‘Interest’.
(iv) In economics, minerals, soil, mountains, etc., are considered as land.	(iv) Machinery, factory building, tools, etc. are examples of capital.

Question 7.
Natural Sciences and Social Sciences.
Answer:

Natural Sciences	Social Sciences
(i) Natural Sciences are those sciences whose laws are universally acceptable.	(i) Social Sciences are those sciences whose laws are not universal. They are statements of general human tendencies.
(ii) Chemistry, Mathematics, Physics, etc. are examples of natural sciences.	(ii) Sociology, Psychology, Economics, etc. are examples of social sciences.
(iii) Natural sciences are also called exact sciences.	(iii) Social sciences are also called abstract or behavioural inexact sciences.
(iv) The validity of natural sciences can be tested in the laboratory.	(iv) The validity of social sciences cannot be tested in the laboratory.

Question 8.
Economic Growth and Economic Development.
Answer:

Economic Growth	Economic Development
(i) Economic growth refers to an increase in the real N.I. of the country over a long period of time.	(i) Economic development means economic growth plus progressive changes in the socio-economic structure which determine the well-being of the people.
(ii) It is a quantitative term.	(ii) It is a qualitative term.
(iii) It is a narrow concept.	(iii) It is a broad concept.
(iv) It is an automatic and natural process.	(iv) It is the result of purposeful and planned efforts.
(v) It is spontaneous and reversible.	(v) It is deliberate and irreversible.
(vi) Economic growth is related to the economic aspect only.	(vi) Economic development is related to economic, social, and political aspects.
(vii) It is uni-dimensional.	(vii) It is multi-dimensional.
(viii) Economic growth can be measured in terms of N.I. and per capita income.	(viii) Economic development is measured in terms of quality of human life, better infrastructure, political freedom, etc.
(ix) It is possible without economic development.	(ix) It is not possible without economic growth.

Question 9.
Labour and Entrepreneur.
Answer:

Labour	Entrepreneur
(i) Any physical or mental effort undergone during the production process to earn a reward is called labour.	(i) Entrepreneur is the organiser who coordinates all factors of production. He is regarded as a captain of the industry.
(ii) Labour earns ‘Wages’ as a factor reward.	(ii) Entrepreneur enjoys ‘Profit’ as a factor reward.
(iii) Earnings of labour are certain, fixed, and always positive.	(iii) Earnings of an entrepreneur are uncertain, fluctuating, and not always positive.

Question 10.
Economic Wants and Non-economic Wants.
Answer:

Economic Wants	Non-economic Wants
(i) Economic wants are those wants for which price has to be paid.	(i) Non-economic wants are those wants that can be satisfied without paying price.
(ii) Eg. a dress, a book, medicine, etc. satisfy economic wants.	(ii) Eg. rain, air, sun rays, etc. satisfy non-economic wants.
(iii) It is necessary to make monetary payments for them due to scarcity.	(iii) Monetary payment is not necessary, as they are available in plenty.

4. Answer the following:

Question 1.
Explain various factors of production.
Answer:
Production means the creation of utility.
There are four factors of production. They are land, labour, capital, and entrepreneur.
They are explained as follows:

(i) Land: In economics, the land is a wider concept. It is the primary, natural and original factor of production. According to Prof. Marshall, land means all natural resources, available on, above, and below the surface of the earth.
E.g. On the surface of the earth – mountains, rivers, forests, etc.
Above the surface of the earth – air, sunshine, etc.
Below the surface of the earth – gold, silver, coal, etc.
E.g. A landlord gets rent for the productive use of land.

(ii) Labour: Labour is a living factor of production. It is the most active and human factor of production. Any physical or mental effort undergone during the production process to earn a reward is called labour. The remuneration of labour is wages. E.g. a labourer working in a factory.

(iii) Capital: Capital refers to produced means of production. It is the stock of capital assets that yield income. Capital earns interest for its productive use. Capital is a man-made factor of production.
E.g. machinery, raw material, etc.

(iv) Entrepreneur: The entrepreneur is the organizer and the controller of a business. He combines all the factors of production. He supervises the production process. He is a special kind of labourer who gets rewarded in the form of profit. An entrepreneur is regarded as a real captain of the industry.

Question 2.
Write a note on Kautilya’s views on Economics.
Answer:
Kautilya was traditionally known as ‘Chanakya’ or ‘Vishnugupta’. He is identified as the pioneer in the field of Political Science and Economics in India.
He was a teacher, philosopher, economist, and royal advisor of the Mourya Empire.
He wrote the ancient Indian Political treatise named “Arthashastra”, where Artha’ means ‘Wealth’ and ‘Shastra’ means ‘Science’. It covers various aspects of the political, social, economic, and military organization of the past economy.

Key-points based on Kautilya’s views are as follows:

• The role of the State or Government is crucial. The state should regulate economic activities.
• He focused on creating wealth as a means, to ensure the welfare of the state.
• He stated a great need for efficient administrative machinery for good governance.
• Compilation of Political ideas into Arthashastra.
• Kautilya attached great significance to public finance.

Question 3.
Explain ‘Trade Cycle’ in economics.
Answer:
The Trade cycle is also called the ‘business cycle’. It takes place due to fluctuations in business.
There are ups and downs in overall economic activities. These fluctuations arise due to inflation and depression.
It can be explained with the help of the following diagram.

Inflation means a continuous rise in the general price. Depression is a continuous fall in overall prices and lowering down economic activities in general.
In the given diagram, the ‘X’-axis indicates the time period and the ‘Y’-axis shows the level of economic activity. Line ab shows a steady growth path.
Various phases of the business cycle or trade cycle like Prosperity, Recession, Depression, Recovery, and Inflation indicate fluctuations in economic activities.
When unemployment is created due to the trade cycle (cyclical fluctuation), it is called cyclical unemployment. It is temporary in nature.

5. State with reasons whether you agree or disagree with the following statements:

Question 1.
Profit is a contractual income.
Answer:
No, I do not agree with the statement.

• Contractual income is that income that is paid as per the terms and conditions of payment.
• Profit is not a contractual income.
• It is residual income because profit is the earning of an entrepreneur.
• It is the income that is left over after making payments to all factors of production.
• Profit may not be always positive.
• It can be zero or even negative.
• Thus, it is a fluctuating income.

Question 2.
The concepts of economic development and economic growth are interrelated but not the same.
Answer:
Yes, I agree with the statement.

• Economic development and economic growth go hand in hand. They are interrelated but they do not mean the same.
• Economic growth refers to an increase in a country’s real output of goods and services, whereas economic development refers to the progressive changes in the socio-economic structure of a country.
• Also, economic growth considers the quantitative aspect whereas economic development considers the qualitative aspect.
• Again, economic growth is possible without economic development but, economic development is not possible without economic growth.
• Hence, economic development is a wider term and economic growth is a part of it which makes them two different concepts.

Question 3.
An entrepreneur plays an important role in the economic development of a country.
Answer:
Yes, I agree with the statement.

• In the history of developed countries, it has been shown that entrepreneurs have played a very important role in economic development. Hence quality entrepreneurship is a crucial indicator of economic development.
• Economic development requires a class of talented entrepreneurs because they are the ones who keep the wheels of the economy moving.
• An entrepreneur is a person who has the ability to recognize business opportunities.
• He is a person with some special qualities such as the ability to innovate, do hard work, have the vision, risk-taking capacity, social responsibility, positive thinking, etc.

Question 4.
There is no difference between individual wants and collective wants.
Answer:
No, I do not agree with the statement.

• Individual wants refer to those wants which are satisfied at the individual level. While collective wants are those wants that are satisfied at the general level or macro level.
• A doctor using a stethoscope is an example of individual wants while people travelling by train or bus is an example of collective want.
• Thus, there is a difference between individual wants and collective wants.

Question 5.
Microeconomic and macroeconomic are two different phenomena.
Answer:
Yes, I agree with the statement.

• Microeconomics deals with the economic behaviour of small units while macroeconomics deals with the economic behaviour of large units.
• Microeconomics uses the slicing method while macroeconomics uses the lumping method.
• Microeconomics is based on partial equilibrium analysis, while macroeconomics is based on general equilibrium analysis.
• The microeconomic analysis is also called a “Price theory” while macroeconomic analysis is also called an “Income theory”.
• Thus, microeconomics and macroeconomics are two different phenomena.

6. Answer in detail:

Question 1.
Explain the basic concepts of microeconomics.
Answer:
“Micro Economics is the study of particular firms, particular households, individual prices, wages, incomes, individual industries, particular commodities”.

Basic Concepts of Micro Economics:
(i) Want: Want denotes a feeling of ‘lack of satisfaction. This feeling enables the individual to satisfy his want.
Characteristics of wants:

• Wants are unlimited.
• Wants are recurring in nature.
• Wants differ with age.
• Wants differ with gender.
• Wants differ due to preferences.
• Wants differ with seasons.
• Wants differ due to culture.

Classification of Wants:
Wants can be classified into.

• Economic and Non-economic want.
• Individual Wants and Collective wants.
• Necessities, Comforts, and Luxuries.

(ii) Goods and Services:
Anything that satisfies human wants is termed as a ‘good’ and has material existence while services also satisfy human wants but do not have any material existence.

(iii) Utility: Want satisfying power of a commodity is called utility.

(iv) Value: Value has two approaches in economics, i.e. ‘value-in-use and ‘value in exchange’.

• Value-in-use: It refers to the worth of a commodity or it is the usefulness of a commodity.
• Value-in-exchange: It refers to the worth of a commodity or a service expressed in terms of another commodity.

(v) Wealth: Wealth refers to “anything which has market value and can be exchanged for money.” A commodity must possess the following characteristics to be wealthy.

• Utility
• Scarcity
• Transferability
• Externality

(vi) Personal Income: Earnings received by a person from all sources is called his personal income.

(vii) Personal Disposable Income (PDI): It is that part of personal income which is left over after payment of direct taxes such as income tax, wealth tax, etc.

Question 2.
Explain the various types of income.
Answer:
Following are the various types of income.
(i) Fixed income: Income that remains stable over a period of time is called fixed income. It is always positive.
E.g. rent, wages, etc.

(ii) Fluctuating income: Income that is not fixed but keeps on changing is called Fluctuating income.
E.g. profit. It can be positive, negative, or zero.

(iii) Money income: Income received in the actual currency of the country is called Money income. It is the income in cash.
E.g. ₹ 70,000.

(iv) Real income: The purchasing power of money income is called Real income.
E.g. Commodities purchased out of money income.

(v) Contractual income: Income paid as per the terms and conditions of the contract is called Contractual income.
E.g. rent, wages, etc.

(vi) Residual income: Income that is left over after making payments to all factors of production is called residual income.
E.g. profit.

(vii) Earned income: Income obtained after participating in the productive activity is called Earned income.
E.g. rent, wages, interest, profit.

(viii) Unearned income: Income received from all sources without indulging in any productive activity is called Unearned income.
E.g. windfall gains, lottery prizes.

(ix) Economic activity: Economic activities can be classified into four types which include production, distribution, exchange, and consumption.