How Choice Arises in Economics
Q 1)Why do central problems arise in an economy? 1 Marks
Ans. Central problems arise in an economy due to scarcity of resources having alternative uses in relation to unlimited wants.
Q 2)What is the general shape of the APP curve? 1 Marks
Ans. APP curve first rises and then falls when more units of a factor are employed.
Q 3)What do the returns to scale refer to?
Returns to scale relates to increase in output when all the inputs are increased in the same proportion.
Q 4)What are volume discount? 1 Marks
ANS-Volume discount is the discount on price when a large quantity is purchased
Q 5)Define monopoly. 1 Marks
Ans.Monopoly refers to a market situation in which there is a single seller and there is no close substitute of the commodity sold by the monopolist.
Q 6)Explain how scarcity and choice go together? 3 Marks
ANS- Resources refer to all the factors of production. Scarcity means that resources which produce goods and services are less in relation to their demand. Though these resources are scarce they can be used for producing different goods. Due to scarcity of these resources, an economy cannot produce all the goods and services as required by its citizens. So some wants will have to remain unfulfilled. Therefore choice has to be made which means decision-making. If the resources were unlimited like sunshine or air then there would be no problem of choice. So scarcity and choice is inseparable.
Q 7)What do you understand by the term Rationality in economics? 3 Marks
Ans. Rationality refers to the tendency of an individual to promote his self-interest. A consumer is rational in his behavior if he attempts to maximise his satisfaction while he is spending money on the purchase of different goods and services. Likewise a producer is rational, if he attempts to maximise his profits.
Q.8 Explain concept of marginal cost with the help of an example.
Ans. It is the addition to the total cost by using an additional unit of
Ans. Central problems arise in an economy due to scarcity of resources having alternative uses in relation to unlimited wants.
Q 2)What is the general shape of the APP curve? 1 Marks
Ans. APP curve first rises and then falls when more units of a factor are employed.
Q 3)What do the returns to scale refer to?
Returns to scale relates to increase in output when all the inputs are increased in the same proportion.
Q 4)What are volume discount? 1 Marks
ANS-Volume discount is the discount on price when a large quantity is purchased
Q 5)Define monopoly. 1 Marks
Ans.Monopoly refers to a market situation in which there is a single seller and there is no close substitute of the commodity sold by the monopolist.
Q 6)Explain how scarcity and choice go together? 3 Marks
ANS- Resources refer to all the factors of production. Scarcity means that resources which produce goods and services are less in relation to their demand. Though these resources are scarce they can be used for producing different goods. Due to scarcity of these resources, an economy cannot produce all the goods and services as required by its citizens. So some wants will have to remain unfulfilled. Therefore choice has to be made which means decision-making. If the resources were unlimited like sunshine or air then there would be no problem of choice. So scarcity and choice is inseparable.
Q 7)What do you understand by the term Rationality in economics? 3 Marks
Ans. Rationality refers to the tendency of an individual to promote his self-interest. A consumer is rational in his behavior if he attempts to maximise his satisfaction while he is spending money on the purchase of different goods and services. Likewise a producer is rational, if he attempts to maximise his profits.
Q.8 Explain concept of marginal cost with the help of an example.
Ans. It is the addition to the total cost by using an additional unit of