CBSE Important Questions
Class-11 Economics
Chapter-1 Introduction to Economics
Value Based Questions
1. Massive unemployment will shift the PPF to the left. Defend or refute.
Ans. The given statement is refuted. Massive unemployment does not decrease the
capacity of economy to produce. So, there will be no shift of PPF. However, 1 economy
will operate at some point inside the PPF, due to un utilisation of human resources.
2. What is the opportunity cost of an input which has no alternative use?
Ans. The opportunity cost of such input is zero.
3. Utility is directly linked with the usefulness of a commodity. Is it true or false? Give
reason.
Ans. False. A commodity may not be useful, yet it may have utility for a particular
person. For example, chewing tobacco is harmful for health, yet many people derive high
degree of utility from it.
4. In order to encourage tourism in Goa, Indian Airlines reduces the air fare to Goa.
How will it affect market demand curve for air travel to Goa?
Ans. There will be a downward movement along the same market demand curve for air
travel to Goa. It happens because of decrease in the air fare.
5. At certain level of output, the marginal cost of a firm is above its marginal revenue
Can this be its equilibrium output?
Ans. No, it cannot be its equilibrium output because the marginal cost exceeds the
marginal revenue. The firm is running at a loss.
6. Trendz produces both jeans and shirts. How will an increase in the price of jeans
affect the supply curve of shirts?
Ans. An increase in the price of jeans will make the production of jeans more attractive.
As a result Trendz will shift its resources from shirts to [Link] will shift the supply curve
of shirts towards left.
7. A severe drought results in a drastic fall in the output of wheat. Analyze how it will
affect the market price of wheat.
Ans. Market price of wheat will increase (due to decrease in supply).
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8. What will be the effect on equilibrium price and equilibrium quantity of telephone
instruments, if China exports a large number of telephone instruments to India.
Ans. Equilibrium price will fall and equilibrium quantity will rise (due to increase in
supply).
9. ‘Both, microeconomics and macroeconomics have same degree of aggregation’.
Defend or refute.
Ans. The given statement is refuted.
Micro economics involves limited degree of aggregation. For example, market
demand (micro concept) is derived by aggregating individual demands of all the
buyers in particular market.
On the other hand, macroeconomics involves the highest degree of aggregation.
For example, aggregate demand (macro concept) is derived for the entire
economy. It means, micro economics and macroeconomics differ in degree of
aggregation.
10. ”Law of demand is a quantitative statement”. Comment.
Ans. Law of demand is only an indicative and not a quantitative statement. It indicates
only the direction, in which the demand will change with a change in price. It says
nothing about the magnitude of such a change. For example price of Pepsi rises from Rs
10 to Rs 12 per bottle, then, as per law of demand, we can say that the demand for Pepsi
will fall. But the law does not give the actual amount by which the demand for Pepsi will
decline.
11. “MC can be calculated both from total cost and total variable cost and is not affected
by total fixed cost.” Discuss.
Ans. The given statement is [Link] is not at all affected by total fixed cost (TFC). MC is
addition to TC or TVC when one more unit of output is produced. As TFC remains same
with increase in output ,MC is independent of fixed cost and is affected just by change in
variable costs.
12. Why AR curve under monopolistic competition is more elastic than AR curve under
monopoly?
Ans. The AR curve under monopolistic competition is more elastic because there exists
close substitutes of the product sold by the monopolistic firm whereas under monopoly
the AR curve is less elastic because there is non availability of close substitutes of the
product sold by the monopoly firm.
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13. How does a firm under monopolistic competition exercise partial control over
price?
Ans. A monopolistic competitive firm enjoys partial control over price. It happens
because by incurring heavy selling costs, the firm is able to create a differentiated image
of its product in the minds of consumers. Products are differentiated on the basis of
brand, size, color, shape, etc. Buyers are attracted to buy a particular product even at a
relatively higher price.
14. Why is number of firms small in an oligopoly market?
Ans. The main reason for small number of firms under Oligopoly is the Barriers to entry,
which prevent entry of new firms into the industry. Patents, requirement of large capital,
control over crucial raw materials, etc, are some some of the other reasons, which
prevent new firms from entering into industry. As a result, there are few firms in an
Oligopoly market.
15. ” Demand and supply are like two blades of a pair of scissors”. Comment.
Ans. The given statement is correct. Both the blades of pair of scissors are equally
important to cut a piece of cloth. Similarly, both demand and supply are need for
determining price in the market. There is no use for demand for a product if there is no
supply for the product and supply is not needed if there is no demand for the product.
One of the two may play more active role in price determination in the short run. But,
both are needed to determine the price in the long run.
Higher Order Thinking Skills
1. What is meant by economizing the use of resources?
Ans. Economising the resources means that resources are to be used in a manner such
that maximum output is realised per unit of output. It also means optimum utilisation of
resources.
2. What do you mean by alternative uses of resources?
Ans. Alternate use of resources mean, more than 1 uses to which a resource can be put.
3. What will be the shape of PPF when MRT is constant?
Ans. Shape of PPF will be a straight line sloping down ward.
4. Unemployment in India is a subject matter of Micro or Marco eco., give reason.
Ans. Unemployment in India is a subject matter of macroeconomics because it relates to
economy as whole.
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