CLASS 11

ECONOMICS STUDY MATERIAL

LESSON – 1

2 MARKS

21.What is Economics
The term or word ‘Economics’ comes from the Ancient Greek oikonomikos.
Oikos means “households”; and, nomos means “management”. Thus, the term
‘Economics’ means ‘management of households’.

22.Define Micro economics

Micro Economics is the study of the economic actions of individual units, say
individual households, individual firms or individual industries.

23. What is Goods

Anything that satisfies a human need are considered as goods in economics.
Goods are also called ‘products’, ‘commodities’, ‘things’ etc., As they are
material they are tangible, transferable, and preserved and have value in
exchange.

24. Distinguish goods from services.

S.No. GOODS SERVICES
1. Goods are tangible Services are intangible
2. It have physical dimension They are not physical objects

3. Goods are transferable A single type of service yields

multiple experience

4. Goods are owned by same Services are connected to their

person makers
5. It can be preserved over time It cannot be stored as inventories
like assets

25. Name any two types of utility.

Place utility, time utility, form utility, service utility,
possession utility, knowledge utility

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26.Define Positive economics
Positive science deals with what it is: it means, it analyses a problem on the
basis of facts and examines its causes.

27. What is Deductive method

It consists in deriving conclusions from general truths; it takes few general
principles and applies them to draw conclusions. It consists of moving from
general to particular. It is also named as analytical or abstract method.

3 MARKS

28. Explain the scarcity definition of Economics and assess it.

Definition:
“Economics is a science which studies human behaviour as a relationship
between ends and scarce means which have alternative uses”.
Major Features.
a. Ends refer to human wants.
b. Resources or means that got to satisfy the unlimited human wants.
c. The scarce means are capable of having alternative uses.
Criticisms:
1. Robbins does not make any distinction between goods conducive to
human welfare and goods that are not. To him Economics is neutral between
ends.
2. Robbins reduces Economics merely to theory of resource allocation
(micro economic aspect. But there are some Macro economics aspects like
national income also.
3. Robbins’ definition does not cover the theory of economic growth and
development.

29.What are the crucial decisions involving ‘what is produced?’

a. Whether to produce more of food, clothing and housing or to have
more luxury goods
b. Whether to have more agricultural goods or to have industrial goods
and services
c. Whether to use more resources in education and health or to use
more resources in military services
d. Whether to have more consumption goods or to have investment
goods
e. Whether to spend more on basic education or higher education

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30. Explain different types of economic activities. (should write all four
points)
All human activities related to wealth constitute the subject-matter of
Economics- Production, consumption and capital formation are called the
basic economic activities of an economy.
1. Consumption: Human wants coming under consumption is the
starting point of economic activity. Ex .characteristics of human wants
,diminishing marginal utility and consumers surplus.
2. Production : Production is the process of transformation of inputs
into output. Ex. Characters of factors of production and production function.
3. Exchange: Exchange is concerned with price determination in
different market forms. Ex .Trade and commerce
4. Distribution: Production is the result of the coordination of factors of
production. Ex. pricing or reward of factors of production

31. Elucidate different features of services.

1. Intangible: Intangible things are not physical objects but exist in
connection to other things. For example, brand image, goodwill etc. But today,
the intangible things are converted into tangible items. Ex .music in pen drive
2. Heterogeneous: Services vary across regions or cultural backgrounds.
They differ in quality. Ex. music
3. Inseparable from their makers: Services are inextricably connected to
their makers. Ex. Labour is inseparable from his labourer
4. Perishable: Services cannot be stored as inventories like assets. Ex.
Ticket for cricket match becomes useless when the match is over.

32. What are the important features of utility?

1. Utility is psychological and it is mental attitude. Ex. Vegetarian does
not get utility from non veg items.
2. Utility is not equivalent to usefulness. Ex. Smoker gets utility from
cigarette, but it spoils his health.
3. Utility is not the same as pleasure. Ex taking medicine by sick person.
4. Utility is personal and relative. It differs from person to person and
time to time.
5. Utility is the function of the intensity of human want.
6. Utility cannot be measured numerically as it is subjective
7. Utility has no ethical or moral significance. Ex. A knife used by a cook
and a killer.

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33.Distinguish between Micro economics and Macroeconomics.
(Refer page no 15)

34. Compare positive economics and normative economics.

Positive economics Normative economics
1 Deals with ‘what it is’ Concerned with ‘what ought to be’
2 Analyses the problem on the basis Here the conclusions and results
of facts and examines its causes are not based on facts, but no
different considerations.
3 Looked in to why and how? It would be seen whether good or
bad
4 Ex. An increase in money supply Inflation is better than deflation
implies a price rise in an economy

5 MARKS

35. Compare and contrast various definitions of Economics.

Similarities between Marshall’s definition and Robbin’s definition:
1. Both definitions are concerned with human behaviour.
2. Both definitions are concentrate on optimization.
3. Marshall- wealth is the basic source of maximisation of material welfare.
Robbins – maximisation of our satisfaction by scarce resources.

Difference:
PART I Wealth Definition Welfare Definition
Author Adam Smith Alfred Marshal
Year 1776 1890
“Definition” “Economics as the science of “Economics is a study of
wealth” mankind in the ordinary
business of life”
Motivation Everything is motivated by Man promoting welfare and
his self-interest not wealth
Religious and spiritual values Economics is neural between
are held high ends
Introduction of division of Maximum monetary benefits
labour to increase output
Economic activities base on Material welfare
accumulation of wealth
------ Practical in nature
Social science
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 Based on human material
welfare
1. Economics as a ‘dismal 1. Does not consider
Criticisms science’, immaterial
“pig science” etc. things,
2. As it teaches selfishness 2. Welfare varies from person
which is to
against ethics. person, country to country and
one
period to another.

PART II Scarcity Definition Growth Definition

Author Lionel Robbins Paul Samuelson
Year 1932 1948
“Definition” “Economics is a science “Economics is the study of how
which studies human men and society choose, with
behaviour as a relationship
or without the use of money,
between ends and scarce to produce various
means which commodities over time, and
have alternative uses”. distribute them for
consumption, now and in the
future”
Motivation Science of individual It covers various aspects like
behaviour production, distribution and
consumption.
Science of choice Economics as a social science
Theory of resource allocation Applicable in a barter economy
where money is not used
Material and immaterial
activities
Theoretical in nature
Natural science like physics,
chemistry etc
Based on scarcity resources
Criticisms 1. Does not make any 1. Samuelson’s definition is
distinction applicable also in a barter
between goods conducive to economy, where money is not
human welfare and goods used.
that are not

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36. Explain various divisions of Economics.
1. Consumption: Human wants coming under consumption is the
starting point of economic activity. Ex. Law of diminishing marginal utility
2. Production: Production is the process of transformation of inputs into
output. The four factors of production are Land, Labour, Capital and
Organization. Ex. relationship between input and output.
3. Exchange: Exchange is concerned with price determination in
different market forms. This division covers trade and commerce.
4. Distribution: Production is the result of the coordination of factors of
production. The reward for factors of production is studied in this division
under rent, wages, interest and profit. Distribution studies about the pricing of
factors of production.

37. Elaborate the nature and scope of Economics.

I. Nature of Economics:
1. A Law expresses a causal relation between two or more than two
phenomena.
2. Marshall states that the Economic laws are statement of tendencies
the laws function with cause and effect.
3. Economic laws are not as precise and certain
4. Economic laws are not inviolable
5. The use of the assumption ‘other things remaining the same’
6. Economics makes the Economic laws hypothetical.
7. Laws in economics are more exact, precise and accurate than the
other social sciences.
8. Some economic laws are simply truisms.
II. The scope of the subject of Economics refers to on the subject-matter of
Economics.
1. All human activities related to wealth constitute the subject-matter of
Economics.
2. Production, consumption and capital formation are called the basic
economic activities of an economy.
3. The flow chart give the scope of economics. ( FOR CHART REFER PG 5)
4. Economics focuses on the behaviour and interactions among
economic agents,
individuals and groups belonging to an economic system.
5. Human activities not related to wealth (noneconomic activities) are
not treated in Economics. For example, playing cricket for pleasure, mother’s
child care.

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38. Explain basic problems of the economy with the help of production
possibility curve.
Production Possibility Curve
Meaning: Production possibility curve shows the menu of choice along which a
society can choose to substitute one good for another assuming a given state
of technology and given total resources.
Choice between relatively scarce commodities due to limited productive
resources with the help of a “Geometric Device” (that is production possibility
curve)
Basic economic problems:
1. What and how much to produce?
2.How to produce?
3. For whom to produce?
Assumptions
(i) no change in time period.
(ii) fixed techniques of production.
(iii) full employment.
(iv) Only two goods can be produced from the given resources.
(v) Resources of production are fully mobile.
(vi) Given factors of production
(vii) operation of law of diminishing returns.

Table:

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Diagram:

Explanation
1. The quantity of food is shown on x-axis and the number of cars is
shown on y-axis
2. The different six production possibilities are being shown as point P1
P2 P3 P4 P5 & P6.
3. A maximum of 500 tons of food can be produced, given the existing
technology.
4. If on the other hand, all resources are instead used for producing cars,
25 cars can be produced.
5. In between these two extremes, possibilities exist.
6. If we are willing to give up some food, we can have some cars.

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