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NIOS Class 10 Economics Chapter 5 Central Problems of an Economy
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Central Problems of an Economy
Chapter: 5
MODULE 2: ABOUT ECONOMY
TEXTBOOK QUESTIONS (SOLVED)
INTEXT QUESTIONS 5.1
Q.1. What can be the alternative uses of the following items?
(a) A bus.
(b) A room.
(c) A building.
(d) A computer.
Ans. (a) A bus: (i) It can be used for carrying passengers from Delhi to Faridabad.
(ii) It can be used for carrying staff of a school.
(b) A room: (i) A room can be used as a study-room.
(ii) It can be used as a dinning room.
(c) A building: (i) It can be used for a school.
(ii) It can be used for an office.
(d) A computer: (i) A computer can be used for typing of a letter.
(ii) It can be used for playing a specific game.
INTEXT QUESTIONS 5.2
Q.1. Give one reason which gives rise to economic problems.
Ans. Scarcity of resources.
Q.2. Give the three central problems of an economy.
Ans. (i) What to produce?
(ii) How to produce?
(iii) For whom to produce?
INTEXT QUESTIONS 5.3
Q.1. What is the main aim of producing goods and services?
(a) In a market economy.
(b) In a planned economy.
Ans. (a) Profit Motive.
(b) To satisfy wants of masses.
Q. 2. For whom are the goods produced in a market economy?
Ans. Who can pay for it.
INTEXT QUESTIONS 5.4
Q.1. Give one example of under-utilisation of resources.
Ans. Unemployment of labour.
Q.2. Give two examples of growth of resources.
Ans. (i) Increase in the number of skilled and unskilled workers through population growth.
(ii) Growth of technology.
TERMINAL EXERCISE
Choose the right answer in Question 1 and Question 2.
Q.1. Central problems of an economy arise because:
(a) Many goods are sold in market.
(b) Government makes decision.
(c) Shortage of labour.
(d) Multipl city of wants and scarcity of resources.
Ans. (d) Multiplicity of wants and scarcity of resources.
Q.2. Choice is fundamental to economic behaviour, because
(a) People find it difficult to choose what they want.
(b) Resources are scare in relation to peoples’ want.
(c) People behave rationally.
(d) Price of a commodity depends on choice.
Ans. (c) People behave rationally.
Q.3. Explain how scarcity and choice go together.
Ans. There are number of wants. But we cannot satisfy all wants due to scarcity of resources. With the scare resources, we can satisfy only a few of our wants. Here we have to make a choice of satisfying our wants. So scarcity and choice go together. If the resources had not been scare, there would have been no problem of choice because in that case we would have been able to satisfy our all wants.
Q.4. Why is it said that free market economy ensures most efficient allocation of resources?
Ans. It has been rightly said that free market ensures most efficient allocation of resources, because in this market, the are produced only those goods and services which the consumers want and moreover maximum quantity of goods are produced at the minimum cost per unit.
Q. 5. Explain the three central problems with one suitable example of each.
Ans. Following are three central problems:
(i) What goods shall be produced and in what quantities? In an economy, resources are limited. These resources have also alternative uses. The decision, therefore, has to be taken how much and which of the alternative goods and services shall be produced. An economy cannot produce all the goods and services required and therefore, the decision has to be taken whether more food should be produced or more luxurious goods should be produced. Thus, choices will have to be made on the basis of priorities. The decision regarding the amount of more consumer goods or capital goods is largely affected by society’s choice regarding future consumption as opposed to current consumption.
(ii) How shall goods be produced? This is the second fundamental problem about the organisation of production, that is, by whom and with what resources and in what technological manner are they to be produced ? A particular commodity may be produced in a variety of ways. The technology may be capital-intensive using large and automatic machines or labour-intensive in small or tiny scale as in cottage industries. A decision, therefore has to be taken about the scale and technique to production.
(iii) For whom shall goods be produced? is related to the distribution of national income in economies. The distribution among different people has to be decided.
SOME IMPORTANT QUESTIONS FOR EXAMINATIONS
VERY SHORT ANSWER TYPE QUESTIONS
Q.1. We have multiple wants. Can we satisfy all these wants? Give answer with reason.
Ans. No, we cannot satisfy all our wants because resources to satisfy them are scare.
Q.2. You have only 110 with you. Suppose a shirt is available at 150, a book is with 95, a gift costs you 90 and a movie ticket can be purchased at ₹ 100. Can you purchase all these things? Answer with reason.
Ans. I cannot purchase all the goods as these goods cost 435 and I have only 110 only with me.
Q.3. Name the problems involved in the allocation of resources.
Ans. (i) What goods and services should be produced and in what quantities?
(ii) How should these goods and service be produced?
(iii) For whom to produce?
Q.4. Name the two techniques of production.
Ans. (i) Labour-intensive technique. and
(ii) Capital-intensive technique.
Q.5. Which central problem is related to the method by which the goods are to be produced?
Ans. How to produce?
Q.6. Which central problem is essentially the problem of distribution of income?
Ans. For whom to produce?
Q.7. With what objective goods and services are produced in a capitalist economy?
Ans. In a capitalist economy, goods and services are produced with the objective of earning maximum profit.
Q.8. In planned economy, who decides what to produce, how to produce and for whom to produce?
Ans. In planned economy central planning authority of the government decides what to produce, how to produce and for whom to produce.
Q.9. Which type of goods and services are produced in planned economies?
Ans. In planned economies, those goods and services are produced which the people should have.
Q.10. It is said that planned economic system does not allocate the resources in the most ideal manner. Do you agree with this statement? Give reason in support of your answer.
Ans. Yes, we agree with this statement. The reason is that decision for whom to produce is not based on the choice and preference of people.
Q.11. Which economic system combines government planning with the free market economy?
ans. A mixed economy.
Q.12. How many sectors are there in mixed ecnomy? Name these sectors.
Ans. Two sectors-
(i) Public Sector. and
(ii) Private sector.
Q.13. On what basis the choice of goods and services to be produced by the government (in public sector) in mixed economy depends?
Ans. The choice of goods and services to be produced by the government depends on the basis of needs and requirements of the people.
Q.14. On what basis the choice of goods and services to be produced by the private sector depend in mixed economy?
Ans. In the mixed economy, the choice of goods and services to be produced by the private sector depends on the basis of profit motive.
Q.15. Which economy combines the efficiency of production with the justice of distribution?
Ans. Mixed economy.
Q.16. Which economic system attempts to combine the advantages of the market economic system with the advantage of the planned economic system?
Ans. Mixed economic system.
Q.17. What do you mean by production possibilities of an economy?
Ans. Production possibilities mean that an economy can produce combinations of two goods with limited resources and technology.
Q.18. What does the following production possibilities schedule indicate?
Ans. The schedule (table) given in the question shows that if some amount of wheat is given up, we can have more of bicycles.
Q.19. In what situation is the production below the optimum capacity of an economy?
Ans. The production is below the optimum capacity of economy when the factors of production are not fully employed.
Q.20. How can the problem of scarcity be addressed?
Ans. problem of scarcity can be addressed if resources like labour, capital and technology grow over a period of time.
Q.21. How should the resources available to the economy behave if the economy is to grow?
Ans. The resources available to the economy should grow if the economy is to grow.
Q.22. Can there be an economy without central economic problems? Give reason in support of your answer.
Ans. No, there cannot be an economy without central economic problems as in all economies, resources are scare in relation to wants.
Q.23. What do you mean by alternative uses of resources?
Ans. By alternative uses of resources we mean that resources can be put to many uses. For example, milk can be used for preparing cheese, ghee, curd, rasgullas.
Q.24. Why is it that one hand coal is found in plenty, yet it is scare, while on the other had, a rotten vegetable is rare, but not scare?
Ans. Coal is found in plenty yet it is scare because its demand is more than its supply. But the demand for scare rotten vegetable is less than its supply.
Q.25. If the sources have been unlimited would there have been economic problems?
Ans. There have been no economic. problem if the resources had been unlimited produced resources had not alternative uses.
Q.26. In which type of economy, self-interest is the prime consideration?
Ans. Market economy.
Q.27. In which type of economy, all decisions are taken with a view to maximise social welfare?
Ans. Centrally planned economy.
Q.28. What is identified as the problem of distribution of income?
Ans. For whom to produce.
Q.29. What do you mean by allocation of resources?
Ans. Allocation of resources means how much of each resource is devoted to the production of various goods and services.
Q.30. What does efficient use of resources imply?
Ans. It means more production with minimum cost.
Q.31. Name the technique of production in which labour is less employed than capital.
Ans. Capital-intensive technique of production.
Q.32. Name the decision involved in “What to produce.” problem.
Ans. “What to produce” problem implies
(i) Types of goods to be produced.
(ii) Quantity of good to be produced.
Q.33. Which technique of production is the most efficient technique of production?
Ans. That technique of production is the most efficient with the help of which more quantity of goods are produced with less resources.
Q.34. What do you mean by unattainable combination of production?
Ans. Unattainable combination of production means that combination of production cannot be achieved with the given resources.
Q.35. Give an example of under- utilisation of resources in India.
Ans. Unemployment in India is an example of under-utilisation of resources.
Q.36. How are central problems in a capitalist economy solved?
Ans. Central problems in a capitalist economy are solved by the prices of demand and supply working through price mechanism.
Q.37. What is the difference between unutilised of resource and under utilisation of resources?
Ans. Unutilised resources means that resources are not totally utilised. They remain unutilised, but under utilisation of resources means that they are partly utilised.
SHORT ANSWER TYPE QUESTIONS
Q.1. Let us assume that an economy producing only two commodities-
(i) wheat. and
(ii) bicycle.
With the limitation of total resources if all the resources are utilised in the production of wheat, 20 quintals of wheat can be produced and no production of bicycle will take place. If he produces 8 quintals of wheat and can produce 30 bicycles. With the production 5 quintals of wheat he can produce 60 bicycles. If all the resources are used in the production of bicycles, 100 cycles can be produced and zero production of wheat.
With the help of information given above, make a production possibility schedule.
Ans. Production Possibilities Schedule
Q.2. Compare capitalist economy with socialist economy (planned economy) in context of resource allocation.
Ans. In capitalist economy, resources are privately owned and goods and services are produced with the objective of earning maximum profit. There is no central authority to guide the choice of goods and services. Only those goods and services are produced which are demanded by the customers.
On the other hand, in planned economy, there is a central planning authority of the government which decides what to produce, how to produce and for whom to produce. The government produces goods and services to satisfy the wants of masses.
Q.3. Why do economic problem arise?
Ans. Economic problem arises due to following reasons:
(i) Wants are unlimited.
(ii) Resources to satisfy unlimited wants are limited.
(iii) Limited resources have alternative uses i.e., they can be put to many uses.
