The Price Puzzle: What Drives the Market
Short Questions
1. What is scarcity?
Answer: Scarcity is the situation where resources are limited but human wants are unlimited.
2. What are the three basic economic questions?
Answer: What to produce, How to produce, and For whom to produce.
3. What is opportunity cost?
Answer: Opportunity cost is the value of the next best alternative that is given up.
4. What are the four factors of production?
Answer: Land, Labour, Capital, and Technology.
5. What is labour-intensive production?
Answer: It is a method of production that uses more workers than machines.
6. What is capital-intensive production?
Answer: It is a method of production that uses more machines and technology than workers.
7. What is an economic system?
Answer: An economic system is the way a society organizes the production, distribution, and consumption of goods and services.
8. What is a planned economy?
Answer: A planned economy is an economy where the government makes major economic decisions.
9. What is a market economy?
Answer: A market economy is an economy where demand and supply determine production and prices.
10. What is a mixed economy?
Answer: A mixed economy combines features of both planned and market economies.
11. Who prepares the Economic Survey of India?
Answer: The Ministry of Finance prepares the Economic Survey.
12. When is the Economic Survey presented?
Answer: It is presented before the Union Budget.
13. What determines demand for a product?
Answer: Consumers’ needs, income, and preferences determine demand.
14. When were major economic reforms introduced in India?
Answer: Major economic reforms were introduced in 1991.
15. Why do economic choices have to be made?
Answer: Economic choices have to be made because resources are limited.
Long Questions
1. Explain scarcity and its importance in economics.
Answer: Scarcity means that resources are limited while human wants are unlimited. Because resources are not sufficient to satisfy all wants, individuals, businesses, and governments must make choices about how resources should be used. Scarcity is the basic problem of economics.
2. Explain the three basic economic questions.
Answer: Every economy must answer three basic questions: What to produce, How to produce, and For whom to produce. These questions help in deciding the type of goods to produce, the method of production, and the people who will use those goods and services.
3. What is opportunity cost? Explain with reference to economic choices.
Answer: Opportunity cost is the value of the next best alternative that is sacrificed when a choice is made. Since resources are limited, choosing one option means giving up another. Therefore, every economic decision involves an opportunity cost.
4. Explain the factors of production.
Answer: The four factors of production are land, labour, capital, and technology. Land includes natural resources, labour refers to human effort, capital includes machines and tools, and technology improves production methods. These factors work together to produce goods and services.
5. Explain labour-intensive and capital-intensive production methods.
Answer: Labour-intensive production uses more workers and fewer machines. Capital-intensive production uses more machines and technology and fewer workers. Producers choose the method depending on costs, resources, and production requirements.
6. Describe the features of a planned economy.
Answer: In a planned economy, the government decides what goods will be produced, how they will be produced, and how they will be distributed. Most resources are controlled by the government, and economic activities are regulated through planning.
7. Describe the features of a market economy.
Answer: In a market economy, private individuals and firms own most resources. Production and prices are mainly determined by demand and supply. Competition encourages efficiency, innovation, and better quality products.
8. Explain the features of a mixed economy.
Answer: A mixed economy combines the features of planned and market economies. Both the government and private sector participate in economic activities. The government regulates important sectors while private enterprises operate freely in many areas.
9. Explain the importance of the Economic Survey of India.
Answer: The Economic Survey reviews the performance of the Indian economy. It studies sectors such as agriculture, industry, services, employment, health, and education. It helps policymakers understand economic trends and prepare future plans.
10. Explain the economic reforms of 1991.
Answer: The economic reforms of 1991 reduced government controls, encouraged private investment, promoted competition, and opened the Indian economy to global trade. These reforms increased the role of markets while retaining an important role for the government.
Leave a Reply