NCERT Solutions for Class 12 Micro Economics Chapter 1 Introduction To Micro Economics

Question 1. Discuss the central problems of an economy.

Solution: An economy is a collection of organisations and structures that help or hinder the production and distribution of commodities and services in a given society. Due to the diversity of wants, the scarcity of resources, and the problems of choice, every economy faces three major issues. This scarcity puts a premium on making the greatest use of the available resources in order to meet the seemingly endless demands.

The following are the three major economic issues:

1. Issues with resource allocation.

2. Issues with resource utilisation that is complete and more efficient.

3. Issues with resource growth.

1. One of the most important difficulties that every economy face is resource allocation: 

a. What to produce: There are an endless number of demands in an economy, but only a finite number of resources that can be put to various purposes. The economy can't make all kinds of products, both consumer and producer goods. As a result, the economy must decide what types of commodities and services will be produced, as well as how much of each.

b. How much to produce: It's difficult to choose a method of production. There are two sorts of production techniques: - 

• Labour-intensive: This is a production method that emphasises labour over capital.

• Capital-intensive: In this strategy, capital is utilised more than labour.

c. From whom to produce: This is a challenge addressing the allocation of manufactured items among different social groupings. There are two aspects to it:

1. Personal distribution: the allocation of national income based on who owns the production factors.

2. Functional distribution: When national revenue or production is allocated among various factors of production, such as land, labour, capital, and entrepreneurship, for the goal of providing rent, wages, interest, and profit.

2. Problem relating to the efficient use and fuller utilisation of resources: The term "production efficiency" refers to the ability to produce the most quantity of goods and services with the resources available. Because resources are already few in contrast to demand, an economy must ensure that its resources are not squandered by underutilization.

3. Problem relating to resource growth: It has to do with boosting the economy's production capacity in order to boost output volume. Technological innovation can help us reach this goal. Underdeveloped countries continue to suffer from slow resource expansion. Aside from better use, these countries should aim to increase their productive capacities by exploring more resource availability and developing better strategies for their utilisation.

Question 2. What do you mean by the production possibilities of an economy?

Solution: The myriad potential combinations of commodities and services that a specific economy can generate with the given technology/stock of technical knowledge and utilising the available resources completely and efficiently are referred to as an economy's production possibilities. In other terms, it refers to a variety of possible bundles of goods and services that can be created together while maximising the use of available technology and resources.

Question 3. What is a production possibility frontier?

Solution:  The production possibility frontier (PPF) is a curve that depicts the possible combinations of two items that an economy can generate with current technology and fully utilised resources. It's also known as the production possibility curve (PPC) since it depicts the upper limit of what can be produced with current resources.

All of the points on the PPC, i.e., curve AE, are linked to various quantities of good 1 and good 2 created by fully and efficiently utilising the available resources. Any point below the curve, such as F, represents inefficiency or underutilization of resources. Any point outside the curve, such as Z, represents an overabundance of resources and technology. 

As we raise the production of Good 1, the production of Good 2 decreases due to the economy's limited resources. It signifies that resources are transferred from the production of Good 2 to the production of Good 1, i.e., one commodity is turned into the other by transferring resources rather than physically changing. As a result, it's also known as a 'transformation curve.'

As a result, PPF or PPC refers to a graphical representation of all potential combinations of two items that can be manufactured with the available resources and technology.

Question 4: Discuss the subject matter of economics.

Solution: Economics is a subject in and of itself. Economics describes how a person allocates his limited resources to meet his seemingly limitless desires. Economic theory is separated into two branches: Microeconomics and Macroeconomics. According to Ragnar Frisch's hypothesis, this division was established only after 1930. 

Microeconomics is the study of particular economic units, such as consumer and business behaviour. Microeconomics is the study of how people use the resources they have to the best of their abilities in order to achieve their rational goals.

It's also the study of supply and demand, and how their interactions influence the prices of various goods and services. Microeconomics aids in the resolution of an economy's three main issues.

It's also known as the Price Theory because it's primarily concerned with how prices are set in commodity and factor markets. The main instruments of analysis are demand and supply in this case. Individual income and expenditure are its primary tools.

Since it encompasses the calculation of wages, rent, interest, and profit, it is also known as Factor theory or micro theory of distribution.

Macroeconomics refers to the study of the economy as a whole. It focuses on how aggregate metrics, such as aggregate demand, aggregate supply, and overall price level, are determined and how they evolve over time. It's also known as the Income and Employment Theory because it's primarily concerned with how income and employment levels are determined. Macroeconomics aids in the analysis and resolution of issues such as unemployment, inflation, BOP disequilibrium, poverty, and so on. The main instruments of analysis are aggregate demand and aggregate supply.

Question 5. Distinguish between a centrally planned economy and a market economy.

Solution: 

Question 6. What do you understand by positive economic analysis?

Solution: Positive economic analysis is the study of what is or how an economic problem is solved via the examination of numerous positive statements and methods. To put it another way, it's also known as a cause-and-effect relationship. It expresses "what is."

These are true statements that explain what was, is, and will be in the future. These assertions may be examined, proven, or disproven, and they are free of personal value judgments. If someone states it's raining outside, for example, the truth of that assertion can be checked. It is concerned with real-life or realistic issues. Economic theory is regarded as pure science by economists such as Lionel Robbins. Other instances include India being an overpopulated country with a diversified economy, and so on.

Question 7. What do you understand by normative economic analysis?

Solution: Normative economic analysis is the process of determining whether or not a specific method is good. This analysis focuses on what should be the desired state or how the economic problems should be addressed. It offers economic goals and objectives, as well as what should be done to accomplish these goals and objectives. We come across normative propositions in normative economic analysis that cannot be evaluated because they require human value judgments. It is founded on ethics and deals with idealistic issues. 

For instance, the government should support private enterprises to increase the pace of industrialization, as an illustration of this analysis. Economists such as Marshall, Pigou, and others consider economics to be a normative science.

Question 8. Distinguish between microeconomics and macroeconomics.

Solution: 

Microeconomics Chapter 1 Class 12 - Free PDF Download

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NCERT Solutions of Class 12 Microeconomics Chapters

Chapter – 1: Introduction to Microeconomics

NCERT Solutions of Class 12 Microeconomics Chapter 1 - Introduction to Microeconomics will cover all the basic concepts related to Microeconomics and all the terms which will be used to explain the concepts. It explains the types of economics and its importance. It will clearly explain the difference between Microeconomics and macroeconomics.

It will give a basic idea of Possibility Curve and Opportunity Cost, Production Possibility Curve, and Central problems. These topics will be covered in detail in the next chapters. The importance of this concept is medium to low. All the important concepts will provide a good weightage of marks in the examination.

NCERT Solutions of Class 12 Microeconomics Chapter-Wise Marks Weightage

Microeconomics will have 50 marks weightage in the entire syllabus. The weightage of marks will have the introduction topic with 4 marks, customer behaviour and demand will constitute 18 marks, producer behaviour and supply will constitute 18 marks as well. The forms of market and price determination will have 10 marks weightage. Customer behaviour and demand and producer behaviour and supply will have the highest weightage and are the most important concepts from the exam point of view. These two concepts will hold 60% of marks in this concept so preparing them will ensure good results. 

Our subject matter experts have made sure that all the important points and tips and tricks are included which are important while preparing for the examination.

Why are NCERT Solutions for Class 12 Microeconomics Chapter 1 Important?

• NCERT Class 12 Microeconomics Chapter 1 provides an in-depth explanation of concepts and also the importance of the subject.

• The solutions are very handy in last-minute revisions during the exams from Microeconomics Class 12 Chapter 1 NCERT solutions.

• It lists all the repeated questions and important points which can be expected in the exams.

• The topics are listed along with the weightage of marks so that it will be easy to figure out the important concepts.

Important Study Material Links for Class 12 Economics Chapter 1 - Introduction to Micro Economics

NCERT Solutions for Class 12 Macro Economics - Chapter-wise List

Given below are the chapter-wise NCERT Solutions for Class 12 Macro Economics. These solutions are provided by the Macro Economics experts at Vedantu in a detailed manner. Go through these chapter-wise solutions to be thoroughly familiar with the concepts.

NCERT Solutions for Class 12 Micro Economics - Chapter-wise List

Given below are the chapter-wise NCERT Solutions for Class 12 Micro Economics. These solutions are provided by the Micro Economics experts at Vedantu in a detailed manner. Go through these chapter-wise solutions to be thoroughly familiar with the concepts.

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The NCERT Books for Class 12 Economics provide a comprehensive understanding of key economic theories and concepts. These textbooks are essential resources for students preparing for their board exams, covering both microeconomics and macroeconomics in detail.

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