Basic concepts in economics
Short Questions
1. What is Economics?
Answer: Economics is a social science that studies how people satisfy unlimited wants with limited resources.
2. What does ‘Oikonomia’ mean?
Answer: ‘Oikonomia’ is a Greek word meaning management of the household.
3. Who is called the “Father of Economics”?
Answer: Adam Smith is called the “Father of Economics.”
4. What is Arthashastra?
Answer: Arthashastra is an ancient Indian treatise on political economy by Kautilya.
5. What is Micro Economics?
Answer: Micro Economics studies individual units like households, firms, or industries.
6. What is Macro Economics?
Answer: Macro Economics studies aggregates like national income or total employment.
7. What is a ‘want’ in Economics?
Answer: A want is a feeling of lack of satisfaction that motivates people to fulfill it.
8. What is utility in Economics?
Answer: Utility is the capacity of a commodity to satisfy human wants.
9. What is National Income?
Answer: National Income is the total monetary value of goods and services produced in a year.
10. What is Economic Growth?
Answer: Economic Growth is an increase in a country’s real national income over time.
Long Questions
1. What are the main types of sciences mentioned in Economics?
Answer: The two main types of sciences are Natural Sciences (e.g., Physics, Chemistry) and Social Sciences (e.g., Economics, Sociology). Natural Sciences are exact and testable in labs, while Social Sciences study human behavior and are not universally applicable.
2. Why is Economics called a social science?
Answer: Economics is a social science because it studies the economic behavior of humans, focusing on how they manage scarce resources to meet unlimited wants. It deals with social aspects like production and consumption, not lab-tested laws.
3. What are the key points of Adam Smith’s definition of Economics?
Answer: Adam Smith defines Economics as a science of wealth. Key points include laissez-faire (no government intervention), wealth accumulation, nature’s laws in economic affairs, and division of labor as a growth factor.
4. What are the characteristics of human wants?
Answer: Human wants are unlimited, recurring, differ by age, gender, preferences, seasons, and culture. They multiply due to desires for better living and population growth, making them dynamic and varied.
5. What is the Water-Diamond Paradox of Value?
Answer: The Water-Diamond Paradox explains why water, with high value-in-use, has low exchange value due to abundance, while diamonds, with low use value, have high exchange value due to scarcity.
6. What are the features of wealth in Economics?
Answer: Wealth must have utility (satisfy wants), scarcity (limited supply), transferability (movable or ownership transferable), and externality (external to the human body). These make it valuable and exchangeable.
7. What are the four factors of production?
Answer: The four factors of production are Land (natural resources earning rent), Labour (human effort earning wages), Capital (man-made tools earning interest), and Entrepreneur (organizer earning profit).
8. What is the difference between economic and non-economic wants?
Answer: Economic wants require monetary payment for satisfaction (e.g., food, clothes), while non-economic wants are satisfied without payment (e.g., air, sunshine). Economic wants involve market transactions.
9. What are the types of income in Economics?
Answer: Types of income include fixed (stable, e.g., rent), fluctuating (varies, e.g., profit), money (cash), real (purchasing power), contractual (per agreement), residual (after payments), earned (from work), and unearned (e.g., lottery).
10. What is the difference between Economic Growth and Economic Development?
Answer: Economic Growth is a quantitative increase in national income, while Economic Development is broader, including qualitative improvements like education and health. Growth is reversible, but development is deliberate and multidimensional.
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