Exercise : Solutions of Questions on Page Number : 7 Q1 :Discuss the central problems of an economy. Answer : Every economy faces three central problems due to scarce availability of resources. This scarcity challenges the best possible usage of these available resources to fulfil the unlimited demands. The three central problems of an economy are as follows: What to produce and in what quantities?The very first problem encountered by any economy is to decide what goods are to be produced and in what quantities or amount. There is a lot to be decided; whether to produce consumer goods or…
Author: Admin
Exercise : Solutions of Questions on Page Number : 96 Q1 :Differentiate between balance of trade and current account balance. Answer : Points of difference Balance of trade Current account balance Definition It is the difference between the values of exports and imports of goods of a country. It is the difference between the values of exports and imports of goods, services and unilateral transfers of a country. Components 1. Export of goods 2. Import of goods Export and import of goods, export and import of services, unilateral transfers. Nature of transactions It records transactions related to visible items (i.e.…
Exercise : Solutions of Questions on Page Number : 74 Q1 :Explain why public goods must be provided by the government. Answer : A good that is non-rival and non-excludable is referred to as public good. Non-rival means that consumption by one individual does not affect the consumption of another individual. Whereas, non-excludable implies that no individual can be excluded from using the good. For example, parks, roads, national defence, etc. These goods must be provided by the government because of the following reasons: 1. The benefits of public goods can be easily enjoyed by anyone without affecting the consumption…
Exercise : Solutions of Questions on Page Number : 59 Q1 :What is marginal propensity to consume? How is it related to marginal propensity to save? Answer : Marginal propensity to consume refers to the ratio of change in the consumer’s expenditure due to the change in disposable income (income after deducting taxes). In other words, MPC measures how consumption will vary with the change in income. So, MPC Where, ΔC = Change in consumption ΔY = Change in income For example, if income increases from Rs 200 crores to Rs 250 crores and consumption increases from Rs 20 crores…
Exercise : Solutions of Questions on Page Number : 46 Q1 :What is a barter system? What are its drawbacks? Answer : Barter system is a system that was used in ancient times to exchange goods. In other words, this system was used to exchange one commodity for another before the monetary system came into existence. For example, if a person having rice wants tea, then he can exchange rice with a person who has tea and needs rice. The economy having the barter system was called ‘C-C economy’, i.e. commodity is exchanged for commodity. The various drawbacks of the…
Exercise : Solutions of Questions on Page Number : 30 Q1 :What are the four factors of production and what are the remunerations to each of these called? Answer : The four factors of production are: 1. Land – It denotes the natural resources like air, water, soil, etc. The payment that is paid by the firms to acquire these services is called rent. 2.Labour – It refers to the physical and mental effort required to do a work. For example, engineer, manager, worker, etc. The payment made to the labour in exchange of his/her services is called as wage.…
Exercise : Solutions of Questions on Page Number : 7 Q1 :What is the difference between microeconomics and macroeconomics? Answer : Points of Difference Microeconomics Macroeconomics 1 Definition It is a branch of economics that studies the economic variables at an individual level like the households, the firms, the consumers etc. It is a branch of economics that studies the economic variables of an economy as a whole 2 Deals with It deals with how consumers or the producers make decisions depending on their given budget and other variables. It deals with how different economic sectors like households, industries and…
Review questions : Solutions of Questions on Page Number : 187 Q1 : Explain the concept of motivation. Answer : The concept of motivation focuses on the explanation of the causes of behaviour. The term motivation has been derived from the Latin word ‘movere’, which refers to the movement of activity. The everyday behaviour is explained in terms of motives. For instance, earning money is the motive behind going to work. Though there can be other reasons too. Similarly, the motive behind attending school/college is getting good education or acquiring a degree so that one can get a good job.…
Review questions : Solutions of Questions on Page Number : 167 Q1 :Explain the nature of thinking. Answer : Thinking is the basis of all cognitive activities and processes, which are unique to humans. It involves manipulation and analysis of information received from the environment. It is the higher mental process through which things are manipulated and the required information is analysed. For example, while playing a video game the mind thinks of strategies or techniques to win it. Thus, thinking is organised and goal-directed. It is an internal mental process that is inferred through overt behaviour. Q2 :What is…
Review questions : Solutions of Questions on Page Number : 148 Q1 : What is the meaning of the terms ‘encoding’, ‘storage’ and ‘retrieval’? Answer : The meaning of the terms encoding, storage and retrieval are as follows: (i) Encoding – It refers to the first stage of memory in which information is recorded and registered for the first time, in order to be used by memory systems. The external stimulus generates neural impulses in sensory organs during encoding which helps to receive the information and process it in different areas of the brain, in order to derive a meaning…