CBSE Important Questions Class-11 Economics Chapter-1 Introduction To Economics

CBSE
Important Questions
Class-11 Economics
Chapter-1 Introduction to Economics
Short Answer Type Questions(3-4 Marks)
1. Draw PPC and show the followings:-

a. Full employment of resources,
b. Underutilisation of resources, and
c. Growth of resources.
Ans.
a. Full employment of resources - A point anywhere on the PPC, shows the efficient use
or full employment of resources.
b. Underutilisation of resources - A point anywhere inside of the curve, shows
inefficient/under utilisation of resources.
c. Growth of resources – It refers to the shift in PPC. If more resources are generated, the
level of production will increase. In the figure it is represented by a shift in PPC from
PP to P’P’.
2. Why does PPC look concave to the origin? Explain.
Ans. PPC looks concave to the origin because of increasing marginal rate of
transformation/substitution (or increasing marginal opportunity cost). It means that
more and more units of commodity ‘y’ are to be sacrificed, to get each additional unit of
commodity ‘x’.
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3. What does a PPC show? When will it shift to the right?
Ans. Production Possibility Curve shows the different combinations of two goods which
an economy can produce with available technology and resources.
It would shift towards right-hand side in case of growth of resources or technological
progress.
4. Does production take place only on the PP curve?
Ans. Yes and no, both. Yes, if the given resources are fully and efficiently utilized. No, if
the resources are underutilized or inefficiently utilized or both.
Refer to the above figure; on a point anywhere on the PPC the resources are fully and
efficiently employed. On point U, below the PPC or any other point but below the PPC, the
resources are either underutilized or inefficiently utilised or both. Any point below the
PP curve thus highlights the problem of unemployment and inefficiency in the economy.
5. Why does an economic problem arise? Explain.
Ans. Reasons-
1. Unlimited wants - Human wants go on multiplying with the expansion of education,
knowledge, scientific advancement and economic growth. A man can not satisfy all of
his wants and therefore he has to make a choice in order of urgency.
2. Limited resources - The resources are limited in relation to need for them. It is the
main cause of economic problem.
3. Alternative use of resources - A resource can be utilized in a different way and for
different purposes. Therefore choice has to be made among different uses of
resources.
6. Calculate MRTXY at different production possibilities from the following
hypothetical data. Draw a PPC on the basis of the schedule.
Production possibilities Commodity X Commodity Y
A 0 15
B 1 14
C 2 12
D 3 9
E 4 5
F 5 O

Ans.
Production possibility Schedule
Marginal Rate of
Production Commodity Commodity
Transformation
possibilities X Y
(MRT) =ΔY/ΔX
A 0 15 -------------
B 1 14 1 X : 1 Y
C 2 12 2 X : 1 Y
D 3 9 3 X : 1 Y
E 4 5 4 X : 1 Y
F 5 0 5 X : 1 Y
Production possibility Curve
7. Why is a production possibilities curve concave? Explain.

Ans. The production possibility curve being concave means that MRT increases as we
move downward along the curve. MRT increases because it is assumed that no resource
is equally efficient in production of all goods. As resources are transferred from one good
to another, less & less efficient resources have to be employed. This raises cost and raises
MRT.
8. Explain properties of a production possibilities curve.
Ans. There are two properties of a production possibilities curve.
a. Downward sloping : It is because as more quantity of one good is produced some

quantity of the other good must be sacrificed.
b. Concave to the origin : It is because the marginal rate of transformation increases as
more of one good is produced.
9. Explain the problem of ‘what to produce’.
Ans. An economy can produce different possible combinations of goods & services with
given resources. The problem is that, out of these different combinations, which
combination is produced. If production of one good increases then less resources will be
available for other goods.
10. What is ‘Marginal Rate of transformation’? Explain with the help of an example.
Ans. MRT is the rate at which the units of one good have to be sacrificed to produce one
more unit of the other good in a two goods economy Suppose an economy produces only
two goods X and Y. Further suppose that by employing these resources fully and
efficiently, the economy produces 1X + 10Y. If the economy decides to produce 2X, it has
to cut down production of Y by 2 units. Then 2Y is the opportunity cost of producing 1X.
Then 2Y:1X is the MRT.
11. Explain the problem ‘How to produce’.
Ans. Broadly, there are two techniques of production.
a. Labour intensive Technique : Under this technique, production depends more on
the use of labour.
b. Capital Intensive Technique : Under this technique, production depends more on
the use of machines (called capital) efficient technique of production is that which
uses minimum possible inputs for a given amount of output. So that, cost per unit of
output is minimised.

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Short Answer Type Questions(3-4 Marks)

1. Draw PPC and show the followings:-

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Production possibilities Commodity X Commodity Y

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Production possibility Curve

7. Why is a production possibilities curve concave? Explain.

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