Shortened 4 mark Answers:
VI.answer the following questions in 12 sentences.
Chapter 1
1.Briefly explain the production possibility frontier.
Ans: The production possibility frontier is a graphical representation of the combinations of two
commodities (corn and cotton) that can be produced when the resources of the economy are
fully utilized. It is also called as Production possibility curve (PPC) also known as transformation
curve.
Combination Corn Cotton
A 0 10
B 1 8
C 2 5
D 3 3
E 4 0
When all the resources are used in the production of corn, maximum corn that can be produced
is 4 units.
When all the resources are used in the production of cotton, maximum cotton that can be
produced is 10 units.
This can be graphically represented as follows:
,2.Briefly explain the central problems of an economy.
Ans: Generally, human wants are unlimited and resources to satisfy them are limited. Every
economy faces three basic economic problems.
They are What to produce, How to produce and For whom to produce.
1.What to Produce i.e., what is to be produced and in what quantities:
Every country has to decide which goods are to be produced and in what quantities. Whether
more guns should be produced or more foodgrains, whether more capital goods or more
consumer goods will be produced.
In socialistic economy, the Government decides and in Capitalistic economy market forces
decided and in mixed economy both the Government and market forces provide solutions to this
problem.
2.How to Produce i.e., how are goods produced?:
There are various alternative techniques of producing a product. There are two types of
techniques of production
(a) Labour intensive technology: It is the one which employs more labour in the process of
production.
(b) capital intensive technology:It is the one which employs more capital in the process of
production.
3.For whom to produce i.e., for whom are the goods to be produced: The economy has to
decide who should get how much of the total output of goods and services. The society has to
decide about the shares of different groups of people- poor, middle class and the rich, in the
national output.
3.Write a short note on a centrally planned economy.
Ans: A planned economy also called as socialistic economy is that economy where the
economic activities are controlled by the central Government. Here, the Government takes
decisions to attain social welfare. Example, Russia, China, North Korea etc.
Government decides what to produce, how to produce and what prices are to be fixed.
Regarding what to produce, the Government may produce those goods and services which are
most useful for its society.
Regarding how to produce, the most suitable technique in production is adopted whether
labour intensive or capital intensive in accordance with the situation in the economy.
Regarding whom to produce, the goods and services are produced to those people who are
suffering from hunger though there is a loss.
4.Write a short on market economy.
Ans: A market economy also known as capitalistic economy is that economy in which the
economic decisions are undertaken on the basis of market mechanism by the private
entrepreneurs. In USA, Japan, Autralia, UK we can see Market Economic systems.
,In market economy, private individuals own the factors of production. Here, the profit is the main
goal of business.
Regarding basic problems of an economy, the problem of what to produce is solved on the
basis of demand and profit. The producers produce those products which bring more income.
The problem - how the goods are to be produced is determined by the competition among
different entrepreneurs. The select least cost combination of technology so that they can get
more returns with less cost.
In market economy, the problem of whom to produce is decided on the basis of purchasing
power of consumers. The producers produce commodities to the rich as they can afford to pay
more.
Chapter 2
1.Write the differences between total utility and marginal utility.
Total Marginal Utility
Utility
● It is the aggregate utility derived by ● It is the additional utility derived
the consumer by consuming all the by the consumer by consuming
units. additional unit
● It represents utility of all the ● It represents the utility of single
units consumed. unit.
● It may be symbolically written
as TUn=U1+U2+U3+U4
● It may be written
Un.
as
● It increases in the beginning and MUn=TUn-TUn-1
later decreases as the consumer ● It decreases from the beginning
consumes more and more units. and becomes negative later.
2.Briefly explain the budget set with the help of a diagram.
Ans: It is a collection of all bundles available to a consumer at the prevailing market
price and at his given level of income.
The Budget set is also known as opportunity set. Consider, for example, a consumer
who has Rs.20 and suppose, both the goods are priced at Rs.5 . Then The bundles that
this consumer can afford to buy are; (0,0), (0,1), (0,2), (0,3), (0,4), (1,0), (1,1), (1,2),
(1,3), (2,0), (2,1), (2,2), (3,0), (3,1) and (4,0
, Among these bundles, (0,4), (1,3), (2,0), (2,2), (3,1) and (4,0) cost exactly Rs.20 and all the
other bundles cost less than Rs.20.
Combinatio Bananas Mangoes Money Spent
n
A 0 4 0×5+4×5=20
B 1 3 1×5+3×5=20
C 2 2 2×5+2×5=20
D 3 1 3×5+1×5=20
E 4 0 4×5+0×5=20
The budget set can be represented in a diagram as follows:
3.Explain the derivation of slope of the budget line.
Ans: The slope of the budget line measures the quantity of change in one product required per
VI.answer the following questions in 12 sentences.
Chapter 1
1.Briefly explain the production possibility frontier.
Ans: The production possibility frontier is a graphical representation of the combinations of two
commodities (corn and cotton) that can be produced when the resources of the economy are
fully utilized. It is also called as Production possibility curve (PPC) also known as transformation
curve.
Combination Corn Cotton
A 0 10
B 1 8
C 2 5
D 3 3
E 4 0
When all the resources are used in the production of corn, maximum corn that can be produced
is 4 units.
When all the resources are used in the production of cotton, maximum cotton that can be
produced is 10 units.
This can be graphically represented as follows:
,2.Briefly explain the central problems of an economy.
Ans: Generally, human wants are unlimited and resources to satisfy them are limited. Every
economy faces three basic economic problems.
They are What to produce, How to produce and For whom to produce.
1.What to Produce i.e., what is to be produced and in what quantities:
Every country has to decide which goods are to be produced and in what quantities. Whether
more guns should be produced or more foodgrains, whether more capital goods or more
consumer goods will be produced.
In socialistic economy, the Government decides and in Capitalistic economy market forces
decided and in mixed economy both the Government and market forces provide solutions to this
problem.
2.How to Produce i.e., how are goods produced?:
There are various alternative techniques of producing a product. There are two types of
techniques of production
(a) Labour intensive technology: It is the one which employs more labour in the process of
production.
(b) capital intensive technology:It is the one which employs more capital in the process of
production.
3.For whom to produce i.e., for whom are the goods to be produced: The economy has to
decide who should get how much of the total output of goods and services. The society has to
decide about the shares of different groups of people- poor, middle class and the rich, in the
national output.
3.Write a short note on a centrally planned economy.
Ans: A planned economy also called as socialistic economy is that economy where the
economic activities are controlled by the central Government. Here, the Government takes
decisions to attain social welfare. Example, Russia, China, North Korea etc.
Government decides what to produce, how to produce and what prices are to be fixed.
Regarding what to produce, the Government may produce those goods and services which are
most useful for its society.
Regarding how to produce, the most suitable technique in production is adopted whether
labour intensive or capital intensive in accordance with the situation in the economy.
Regarding whom to produce, the goods and services are produced to those people who are
suffering from hunger though there is a loss.
4.Write a short on market economy.
Ans: A market economy also known as capitalistic economy is that economy in which the
economic decisions are undertaken on the basis of market mechanism by the private
entrepreneurs. In USA, Japan, Autralia, UK we can see Market Economic systems.
,In market economy, private individuals own the factors of production. Here, the profit is the main
goal of business.
Regarding basic problems of an economy, the problem of what to produce is solved on the
basis of demand and profit. The producers produce those products which bring more income.
The problem - how the goods are to be produced is determined by the competition among
different entrepreneurs. The select least cost combination of technology so that they can get
more returns with less cost.
In market economy, the problem of whom to produce is decided on the basis of purchasing
power of consumers. The producers produce commodities to the rich as they can afford to pay
more.
Chapter 2
1.Write the differences between total utility and marginal utility.
Total Marginal Utility
Utility
● It is the aggregate utility derived by ● It is the additional utility derived
the consumer by consuming all the by the consumer by consuming
units. additional unit
● It represents utility of all the ● It represents the utility of single
units consumed. unit.
● It may be symbolically written
as TUn=U1+U2+U3+U4
● It may be written
Un.
as
● It increases in the beginning and MUn=TUn-TUn-1
later decreases as the consumer ● It decreases from the beginning
consumes more and more units. and becomes negative later.
2.Briefly explain the budget set with the help of a diagram.
Ans: It is a collection of all bundles available to a consumer at the prevailing market
price and at his given level of income.
The Budget set is also known as opportunity set. Consider, for example, a consumer
who has Rs.20 and suppose, both the goods are priced at Rs.5 . Then The bundles that
this consumer can afford to buy are; (0,0), (0,1), (0,2), (0,3), (0,4), (1,0), (1,1), (1,2),
(1,3), (2,0), (2,1), (2,2), (3,0), (3,1) and (4,0
, Among these bundles, (0,4), (1,3), (2,0), (2,2), (3,1) and (4,0) cost exactly Rs.20 and all the
other bundles cost less than Rs.20.
Combinatio Bananas Mangoes Money Spent
n
A 0 4 0×5+4×5=20
B 1 3 1×5+3×5=20
C 2 2 2×5+2×5=20
D 3 1 3×5+1×5=20
E 4 0 4×5+0×5=20
The budget set can be represented in a diagram as follows:
3.Explain the derivation of slope of the budget line.
Ans: The slope of the budget line measures the quantity of change in one product required per
