Important Questions for Class 12 Economics Chapter 1 – Introduction to Micro Economics

1) What is the issue of “whom to produce” iterates?

Ans – The question “for whom to produce” depicts the people’s decision based on the total consumption of produced goods. Since resources are minimal, no one in society can satisfy all the needs and wants of citizens.

Ultimately, the problem of plenty rises, and prompt decisions must be taken. The economic question “For Whom to Produce?” involves determining the distribution of the total output of goods and services within society.

This final goods distribution is streamlined with national income allocation among production factors, like land, labor, finance, and entrepreneurship.

The problem of distribution can be categorized into 2 parts:

• Personal Distribution: Determines how national income is shared among various social groups.
• Functional Distribution: The percentage of each factor in the production process, including the total output of the economy by land, labor, and capital.

2) Explain the Production Possibility Frontier

Ans – The PPF describes all possible combinations of 2 goods that an economy can produce with its available tech resources. It is also called the Production Possibility Curve (PPC) or transformation curve.

The Pareto Efficiency is a tried and tested ideology given after Italian economist Vilfredo Pareto. It is based on the overall efficiency of the commodity allocation on the Production Possibility Frontier (PPF). The Pareto Efficiency depicts the idea that any point under the Production Possibility Frontier curve remains inefficient due to the total output of commodities ranging well under the output capacity.

Also, any point that lies outside the Production Possibility Frontier curve is unattainable as it depicts a fine combination of commodities that needs additional expert resources to create the ones more than that currently employed.

Since depleted resources, the commodity of an economy can be leveraged to a higher level if there is a shortage of goods in another commodity. So, the PPC curve remains in this concave form.

Here are some key assumptions:

1. Fixed Resources: The stock of resources in the economy is fixed.
2. Fixed Technology: Technology is given and immobile.
3. Scarcity of Resources: All available resources are used.
4. Non-Equal Efficiency: While making goods, not all resources are equally competent.

From the above figure, different combinations of goods X & Y from the mix of A, B, C, and D are created during optimal and complete usage of available resources from the economy. Any point on or below the PPC signifies an achievable output with minimal resources. The mix of goods below the PPC (Point E) indicates inefficient resource usage or kept them idle.

Some of the main factors contributing to this shift would be the switching of efficient resources and modifications of manufacturing tech for the goods. It also ends in 2 different shifts such as,

• Rightward Shift: Improvement in resources or technological advances regarding skill improvement, innovation, or higher land productivity.

• Leftward Shift: Deterioration in resources or technological backwardness like skill gaps, outdated technology, or low land productivity.

3) Mention the distinction between a planned & market economy.

Ans – The major variations between a planned and a market economy are:

Characteristics	Planned Economy	Market Economy
Meaning	The government controls the market from the center by deciding how resources should be allocated and priced.	Prices and production levels are determined by supply and demand, mainly based on buyers and sellers.
Government Regulation	Being maintained under the direct supervision of the government.	Minimal government intervention; producer and consumer power are prominent.
Objective	To attain social and macro goals.	Focuses mainly on profit maximization.
Consumer Choices	Consumer likings are largely ignored since the government determines what is produced and in what quantities.	Consumer choices dictate production decisions.
Innovation & Economic Development	Suppress innovation and growth.	Encourages competition and promotes innovation.
Business Ethics	Reduces unethical practices and unemployment since business conduct is regulated.	This may lead to unethical competition, increased unemployment, and higher income inequality.
Resource Sharing	More balanced resource distribution can minimize the gap in wealth between the poor and the rich.	Unequal resource allocation with a massive disparity between different income levels.

4) Analyze the main cause of product choice during production.

Ans: Basic economic issues are classified into 2 factors: Preference-based on product choices and overall quantity of the selected product.

As there is an issue between choices, the economy must finalize the production of goods & services. Since there is a demand for resources, make a sensible decision considering the total quantities of goods & services.

The primary area of concern arises over consumer & capital goods. Since resources are scarce, an economy must choose what it wants to create and whether to emphasize consumer goods (food and clothing) or capital goods (such as machinery).

For instance, when an economy allocates more inputs to consumer goods, the short-run standard of living is improved. On the other hand, allocating more inputs to capital goods improves future productive capacities.

Strike a balance to accomplish the short-run demands and the future requirements. The well-being of current and future generations must also be considered.

NCERT Questions for Class 12 Economics Chapter 1 – Introduction to Micro Economics

NCERT Class 12 Micro Economics Chapter 1 Introduction to Micro Economics. Microeconomics is a branch of economics that focuses on the study of individual behavior and the decisions that individuals make regarding the allocation of resources. It deals with how individuals, households, and firms make decisions about what to produce, how much to produce, and for whom to produce. In simple terms, microeconomics examines the economic choices that people make on a day-to-day basis.