INTRODUCTION

TO MICROECONOMICS

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BY- G.S.BEHL
(9810332316)
 IMPORTANT TERMS AND CONCEPTS
1. An economy means the collection of production units operating in a well-defined
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area or region through which people of that area earn their living

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 IMPORTANT TERMS AND CONCEPTS
2. An economic problem is the problem of choice-making from the available
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alternatives. human wants are unlimited but the economic resources to satisfy these
wants are limited and have alternative uses. Thus, the economic problen or problem of
choice arises from the scarcity of resources available vis-a-vis the unlimited human wants.

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 IMPORTANT TERMS AND CONCEPTS
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3. The central problem of what to produce and in what quantities' refers to which
goods and services to be produced in an economy and in what quantities.

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 IMPORTANT TERMS AND CONCEPTS
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4. The central problem of 'how to produce' refers to the choice between different
production methods (i.e., labour intensive or capital intensive) to be used to produce
the goods and services.

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 IMPORTANT TERMS AND CONCEPTS
5. The central problem for whom to produce' is related to the distribution of the final
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goods and services (i.e., national income) among the factors of production in the form
of rent, wages, interest and profit.

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 IMPORTANT TERMS AND CONCEPTS
6. Scarcity is an economic problem that arises due to the limited resources available
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to satisfy the unlimited human wants. All central problems of an economy arise due to
scarcity of resources available.

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 IMPORTANT TERMS AND CONCEPTS
7. Microeconomics is that branch of economics which deals with the behaviour of
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individual economic units. The study of an individual firm, a consumer, demand for a
commodity or supply of a commodity or price determination ofa commodity, etc. is a
microeconomics study.

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 QUESTIONS
1. Which of the following central problem of an economy deals with the distribution of
National Income?
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(a) How to produce (b) What to produce

(c) For whom to produce (d) None of these
2. An economy in which all economic activities are organised through the market is
called:
(a) How to produce (b) What to produce
(c) For whom to produce (d) None of these
3. Economics is:
(a) the study of stocks and bond market (b) mainly the study of business firms
(c) For whom to produce
(d) the study of management decisions
4. Microeconomics is not concerned with the behaviour of:
(a) national income (b) a consumer
(c) a firm (d) a producer

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 QUESTIONS
5. Assertion (A): Microeconomics is the study of an
individual unit of a commodity.
Reason (R): The basic tools of micro-economics are
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demand and supply.

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
(b) Both ASsertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of
Assertion (A)
(c) Assertion (A) is true but Reason (R) is false
(d) Assertion (A) is false but Reason (R) is true

6. Assertion (A): Scarcity is the mother of all economic problems. Reason (R): Scarcity and choice go
hand in hand
(e) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
(f) Both ASsertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of
Assertion (A)
(g) Assertion (A) is true but Reason (R) is false
(h) Assertion (A) is false but Reason (R) is true 10
 QUESTIONS
5. Assertion (A): Microeconomics is the study of an
individual unit of a commodity.
Reason (R): The basic tools of micro-economics are
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demand and supply.

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
(b) Both ASsertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of
Assertion (A)
(c) Assertion (A) is true but Reason (R) is false
(d) Assertion (A) is false but Reason (R) is true

6. Assertion (A): Scarcity is the mother of all economic problems. Reason (R): Scarcity and choice go
hand in hand
(e) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of
Assertion (A)
(f) Both ASsertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of
Assertion (A)
(g) Assertion (A) is true but Reason (R) is false
(h) Assertion (A) is false but Reason (R) is true 11
 QUESTIONS
Q-Read the following case study and answer the questions that follow (Q.7 to Q.10).

The resources that we valuetime, money, labour, tools, land, and raw materials exist in limited supply. There are simply
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never enough resources to meet all our needs and desires. This condition is known as scarcity. At any moment of time,
there is a finite amount of resources available. Even when the number of resources is very large, it's limited. Because
these resources are limited, so are the numbers of goods and services we can produce with them. Combine this with the
fact that human wants seem to be virtually infinite, and you can see why scarcity is a problem. When faced with limited
resources, we have to make choices. Again, economics is the study of how humans make choices under conditions of
scarcity. These decisions can be made by individuals, families, businesses, or societies.

Q-7 Short supply in relation to demand is called.

(a) Abundance
(b) Scarcity
(c) Both (a) and (b)
(d) None of these

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 QUESTIONS
Q-8 Scarcity is the mother of all _________ problems
(a) social
(b) economic
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(c) political
(d) All of these

Q-9 Which of the country does not have scarcity of RESOURCE ?

(e) America
(f) India
(g) China
(h) None of these

Q-10 Which of the following factors cause economie problem?

(i) Limited resources
(j) Unlimited wants
(k) Alternative use of resources
(l) All of these

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 ADDITIONAL QUESTIONS
1. Microeconomics deals with which of the following?
(a) Total output of an economy Distribution (b) Measurement of a nation's inflation rate
(c) How producers and consumers interact in individual market?
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(d) How tax policies influence economic growth?

2.The government of India decided to produce 1,000 million quintals of wheat this year. The decision
regarding quantity of production is a part of which central problem of the economy?
(b) Word to produce
(c) How to produce
(d) From whom to produce
(e) None of these.

3. The centre problem of how to produce is a problem of choice regarding:

(f) Distribution
(g) Technique of production
(h) Quantity to be produced
(i) Commodities to be reduce

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 ADDITIONAL QUESTIONS
4. Which of the following is the root cause of all economic problems
(a) Miss allocation of resources
(b) Scarcity
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(c) Under consumption

(d) Overpopulation

5. If due to fall in price of good eggs demand for good why raises the two goods are:
(e) Substitutes
(f) Compliments
(g) Not related
(h) Competitive

6. Horizon income of consumer ex leads to fall in the demand for the good a by him what is the
good a called?
(i) Complimentary good
(j) Substitute good
(k) Inferior good
(l) Normal good
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 ADDITIONAL QUESTIONS
7. Which of the following is not a central problem?
(a) What to produce
(b) When to produce
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(c) How to produce

(d) From home to produce

8. _______ of resources as necessary for the development of the economy

(e) Utilisation
(f) Growth
(g) Wastage
(h) Non utilisation

9. Resources of every economy _______

(i) Sufficient
(j) Limited
(k) Unlimited
(l) Unutilized

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 ADDITIONAL QUESTIONS
10. The activity which are linked with the use of code and services for the satisfaction of wants
directly are know as :
(a) Production
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(b) Consumption
(c) Distribution
(d) Exchange

11. Economic problem arise due to:

(e) Unlimited human wants
(f) Alternative users of resources
(g) Scarce resources
(h) All of these

12. Which of the following subjects matter study in micro economics?

(i) Money supply
(j) Aggregate demand
(k) Market demand of a good
(d) National income
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 ADDITIONAL QUESTIONS
13. Central problem of an economy is/are
(a) Word to produce an in what quantities
(b) How to produce
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(c) From whom to produce

(d) All of these

14. Theory of distribution study the problem of :

(e) Word to produce an in what quantities
(f) How to produce
(g) From whom to produce
(h) All of these

15. Theory of production study is the problem of :

(i) Word to produce an in what quantities
(j) How to produce
(k) From whom to produce
(l) All of these

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 ADDITIONAL QUESTIONS
16. Prize theory studies the problem of:
(a) Word to produce an in what quantities
(b) How to produce
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(c) From whom to produce

(d) All of these

17. Scarcity refers to the limitation of _______ in relation to ___________ for a commodity
(e) Demand,sale
(f) Demand , Supply
(g) Supply , Demand
(h) None of these

18. The Word “Economics” is most closely connected with the word:
(i) Free
(j) Scarcity
(k) Unlimited
(l) Restricted

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 ADDITIONAL QUESTIONS
19. Which economic problem involves selection of category of people who will ultimately consume the
goods ?
(a) How to produce
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(b) For whom to produce

(c) what to produce
(d) None of these

20. Which off the following central problems of an economy deals with technique of production
(e) What to produce
(f) How to produce
(g) Four whom to produce
(h) When to produce

21. The central problem of “what to produce” covers the issue relating to:
(i) What goods are to be produced
(j) What quantities of goods to be produce
(k) Both (a) & (b)
(l) Neither (a) nor (b)
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 ADDITIONAL QUESTIONS
22. And deciding “how to produce” ,the economy should consider :
(a) Labor intensive techniques
(b) Capital Intensive techniques
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(c) Both (a) and (b)

(d) Neither (a) nor (b)

23. Which of these is a central problem of an economy ?

(e) Deficit demand
(f) Equilibrium of an economy
(g) From whom to produce
(h) Decreasing return to a factor

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 ADDITIONAL QUESTIONS
24. Identify the correct pair from column 1 and column 2 and choose the correct alternative

Column 1 Column 2
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A. Resource (i) Scarce only in poor countries

B. For whom to produce (ii) Deals with problem of choosing technique of
C. What to produce production
D. Economic Problem (iii) Concerned with choice of technique of
production
(iv) Problem concerning with allocation of
resource to different uses

(a) (A)----(i) (b) (B)----(ii) (c) (C)----(iii) (d) D-----(iv)

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