Introduction to Micro Economics VBQs Class 12 Economics

VBQs for Class 12

VBQs Introduction To Micro Economics Class 12 Economics with solutions has been provided below for standard students. We have provided chapter wise VBQ for Class 12 Economics with solutions. The following Introduction To Micro Economics Class 12 Economics value based questions with answers will come in your exams. Students should understand the concepts and learn the solved cased based VBQs provided below. This will help you to get better marks in class 12 examinations.

Introduction To Micro Economics VBQs Class 12 Economics

Very Short Answer Type Questions

Question. With the help of an example, define micro economics.
Answer : 
Micro Economics is that branch of economics in which economic problems are studied at individual level e.g. the behaviour of consumer, firms, etc.

Question. Define opportunity cost.
Answer : 
For the selection of an opportunity, the sacrifice of next best alternative use is called opportunity cost.

Question. Write two characteristics of resources.
Answer :
 Resources are scarce (limited) and they have alternative uses.

Question. What do you mean by marginal opportunity cost?
Answer : 
Marginal rate of transformation (MRT) is the ratio of one good sacrificed to increase one more unit of the other good.

Question. Why is there a need for economizing of resources?
Answer :
 Because resources are limited.

Question. Why is PPC downward sloping from left to right?
Answer :
 Because in situation of full employment of resources, production of one good can be increased only with less of other good.

Question. Why does the problem of choice arise?
Answer :
 Relative scarcity of resources having alternative uses in relation to unlimited wants, gives rise to an economic problem.

Question. Which factor lead to a shift of PPC towards right hand side?
Answer : 
Growth of resources or technological progress leads to a shift of PPC towards righthand side.

Question. What does slope of PPC show?
Answer
: Negative slope of PPC shows that in order to produce more units of one good, some units of the other good must be sacrificed.

Short Answer Type Questions

Question. Draw PPC and show the followings:-
a. Full employment of resources,
b. Underutilisation of resources, and
c. Growth of resources.

Introduction to Micro Economics VBQs Class 12 Economics

Answer :
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’.

Question. What does a PPC show? When will it shift to the right? 
Answer :
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.

Question. Why does an economic problem arise? Explain.
Answer :
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.

Question. Why is a production possibilities curve concave? Explain.
Answer :
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.

Question. Explain the problem of ‘what to produce’.
Answer :
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.

Question. Explain the problem ‘How to produce’.
Answer :
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.

Value Based Questions

Question. Massive unemployment will shift the PPF to the left. Defend or refute.
Answer :
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.

Question. Utility is directly linked with the usefulness of a commodity. Is it true or false? Give reason.
Answer :
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.

Question. At certain level of output, the marginal cost of a firm is above its marginal revenue Can this be its equilibrium output?
Answer :
No, it cannot be its equilibrium output because the marginal cost exceeds the marginal revenue. The firm is running at a loss.

Question. A severe drought results in a drastic fall in the output of wheat. Analyze how it will affect the market price of wheat.
Answer :
Market price of wheat will increase (due to decrease in supply).

Question. ‘Both, microeconomics and macroeconomics have same degree of aggregation’.
Defend or refute.
Answer :
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.

Question. “MC can be calculated both from total cost and total variable cost and is not affected by total fixed cost.” Discuss.
Answer :
The given statement is correct.MC 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.

Question. How does a firm under monopolistic competition exercise partial control over price?
Answer :
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.

Question. ” Demand and supply are like two blades of a pair of scissors”. Comment.
Answer :
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

Question. What do you mean by alternative uses of resources?
Answer :
Alternate use of resources mean, more than 1 uses to which a resource can be put.

Question. Unemployment in India is a subject matter of Micro or Marco eco., give reason.
Answer :
Unemployment in India is a subject matter of macroeconomics because it relates to economy as whole.