NCERT Solutions for Class 12 Micro Economics Chapter-1 -CoolGyan

NCERT Solutions Class 12 Microeconomics Chapter 1 will have a detailed explanation of the topic. The material will be very organized and, to the point. The main theme of this article is to provide a clear understanding of the concept to the students so that the student will not have any further doubts regarding the subject. This is very useful for the last minute preparation before examination. You can find all the important points related to the concept in this article. This will help you maintain the short notes of all the concepts.

Access NCERT Solutions for Class 12 Economics Chapter 1- Microeconomics

Question 1. Discuss the central problems of an economy.

Solution: An economy is a collection of organisations and structures that help or hinder the production and distribution of commodities and services in a given society. Due to the diversity of wants, the scarcity of resources, and the problems of choice, every economy faces three major issues. This scarcity puts a premium on making the greatest use of the available resources in order to meet the seemingly endless demands.

The following are the three major economic issues:

1. Issues with resource allocation.

2. Issues with resource utilisation that is complete and more efficient.

3. Issues with resource growth.

1. One of the most important difficulties that every economy face is resource allocation:

a. What to produce: There are an endless number of demands in an economy, but only a finite number of resources that can be put to various purposes. The economy can't make all kinds of products, both consumer and producer goods. As a result, the economy must decide what types of commodities and services will be produced, as well as how much of each.

b. How much to produce: It's difficult to choose a method of production. There are two sorts of production techniques: -

Labour-intensive: This is a production method that emphasises labour over capital.
Capital-intensive: In this strategy, capital is utilised more than labour.

c. From whom to produce: This is a challenge addressing the allocation of manufactured items among different social groupings. There are two aspects to it:

Personal distribution: the allocation of national income based on who owns the production factors.
Functional distribution: When national revenue or production is allocated among various factors of production, such as land, labour, capital, and entrepreneurship, for the goal of providing rent, wages, interest, and profit.

2. Problem relating to the efficient use and fuller utilisation of resources: The term "production efficiency" refers to the ability to produce the most quantity of goods and services with the resources available. Because resources are already few in contrast to demand, an economy must ensure that its resources are not squandered by underutilization.

3. Problem relating to resource growth: It has to do with boosting the economy's production capacity in order to boost output volume. Technological innovation can help us reach this goal. Underdeveloped countries continue to suffer from slow resource expansion. Aside from better use, these countries should aim to increase their productive capacities by exploring more resource availability and developing better strategies for their utilisation.

Question 2. What do you mean by the production possibilities of an economy?

Solution: The myriad potential combinations of commodities and services that a specific economy can generate with the given technology/stock of technical knowledge and utilising the available resources completely and efficiently are referred to as an economy's production possibilities. In other terms, it refers to a variety of possible bundles of goods and services that can be created together while maximising the use of available technology and resources.

Question 3. What is a production possibility frontier?

Solution: The production possibility frontier (PPF) is a curve that depicts the possible combinations of two items that an economy can generate with current technology and fully utilised resources. It's also known as the production possibility curve (PPC) since it depicts the upper limit of what can be produced with current resources.

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All of the points on the PPC, i.e., curve AE, are linked to various quantities of good 1 and good 2 created by fully and efficiently utilising the available resources. Any point below the curve, such as F, represents inefficiency or underutilization of resources. Any point outside the curve, such as Z, represents an overabundance of resources and technology.

As we raise the production of Good 1, the production of Good 2 decreases due to the economy's limited resources. It signifies that resources are transferred from the production of Good 2 to the production of Good 1, i.e., one commodity is turned into the other by transferring resources rather than physically changing. As a result, it's also known as a 'transformation curve.'

As a result, PPF or PPC refers to a graphical representation of all potential combinations of two items that can be manufactured with the available resources and technology.

Question 4: Discuss the subject matter of economics.

Solution: Economics is a subject in and of itself. Economics describes how a person allocates his limited resources to meet his seemingly limitless desires. Economic theory is separated into two branches: Microeconomics and Macroeconomics. According to Ragnar Frisch's hypothesis, this division was established only after 1930.

Microeconomics is the study of particular economic units, such as consumer and business behaviour. Microeconomics is the study of how people use the resources they have to the best of their abilities in order to achieve their rational goals.

It's also the study of supply and demand, and how their interactions influence the prices of various goods and services. Microeconomics aids in the resolution of an economy's three main issues.

It's also known as the Price Theory because it's primarily concerned with how prices are set in commodity and factor markets. The main instruments of analysis are demand and supply in this case. Individual income and expenditure are its primary tools.

Since it encompasses the calculation of wages, rent, interest, and profit, it is also known as Factor theory or micro theory of distribution.

Macroeconomics refers to the study of the economy as a whole. It focuses on how aggregate metrics, such as aggregate demand, aggregate supply, and overall price level, are determined and how they evolve over time. It's also known as the Income and Employment Theory because it's primarily concerned with how income and employment levels are determined. Macroeconomics aids in the analysis and resolution of issues such as unemployment, inflation, BOP disequilibrium, poverty, and so on. The main instruments of analysis are aggregate demand and aggregate supply.

Question 5. Distinguish between a centrally planned economy and a market economy.

Solution:

Centrally Planned Economy	Market economy
Things are managed by a central authority in a centrally planned economy with the goal of accomplishing specific aims.	Things are managed in a market economy by capitalists who seek to maximise profits.
Social welfare is the motive of production.	Profit making is the main motive.
Factors or means of production are owned by the government, i.e., public ownership.	The factors of production such as land, labour, capital, and enterprise are all privately owned.
The degree of income disparity is modest.	There is a disparity in income distribution.
Production is managed by a planning process, which means that it is carried out in accordance with government plans.	The price mechanism, i.e., demand and supply, governs production.
From manufacturing through distribution, the government plays the most important role.	Private actors play the most important role. They pick what to produce, whereas the government's responsibility is confined to upholding the country's law and order.

Question 6. What do you understand by positive economic analysis?

Solution: Positive economic analysis is the study of what is or how an economic problem is solved via the examination of numerous positive statements and methods. To put it another way, it's also known as a cause-and-effect relationship. It expresses "what is."

These are true statements that explain what was, is, and will be in the future. These assertions may be examined, proven, or disproven, and they are free of personal value judgments. If someone states it's raining outside, for example, the truth of that assertion can be checked. It is concerned with real-life or realistic issues. Economic theory is regarded as pure science by economists such as Lionel Robbins. Other instances include India being an overpopulated country with a diversified economy, and so on.

Question 7. What do you understand by normative economic analysis?

Solution: Normative economic analysis is the process of determining whether or not a specific method is good. This analysis focuses on what should be the desired state or how the economic problems should be addressed. It offers economic goals and objectives, as well as what should be done to accomplish these goals and objectives. We come across normative propositions in normative economic analysis that cannot be evaluated because they require human value judgments. It is founded on ethics and deals with idealistic issues.

For instance, the government should support private enterprises to increase the pace of industrialization, as an illustration of this analysis. Economists such as Marshall, Pigou, and others consider economics to be a normative science.

Question 8. Distinguish between microeconomics and macroeconomics.

Solution:

	Points of Difference	Microeconomics	Macroeconomics
1.	Origin	The word ‘micro’ comes from the Greek word ‘micros,’ which means ‘small.’ It's also known as Price theory.	The word macro originated from the Greek ‘makros,’ which means ’large.’ It's also known as the Income and Employment Theory.
2.	Study Matters	It investigates individual economic relationships or issues such as households, businesses, and consumers.	It investigates the economy as a whole.
3.	Objective	Its main goal is to examine the principles, issues, and policies that can be used to achieve the goal of optimal resource allocation.	It looks into the principles, issues, and policies that go into achieving full employment and expanding productive capacity.
4.	Deals with	It is concerned with how consumers and producers make decisions based on their budget and other factors.	It examines how different economic sectors, such as households, industries, the government, and the international community, make decisions.
5.	Method	It employs the partial equilibrium method, which involves achieving equilibrium in only one market.	It employs the general equilibrium method, which ensures that all markets in an economy are in equilibrium.
6.	Variables	Price, individual consumer demand, wages, rent, profit, revenues, and other macroeconomic variables are all important.	Aggregate price, aggregate demand, aggregate supply, inflation, unemployment, and other macroeconomic variables are important.
7.	Theories	1. Consumer Behaviour and Demand Theory 2. Producers Behaviour and Supply Theory 3. Price Determination Theory under various Market Situations 4. Factor pricing/distribution theory 5. Economic Welfare Theory	1. National Income Theory 2. Money Theory 3. General Price Level and Inflation Theory 4. Employment Theory 5. International Trade Theory 6. Macro-distribution Theory 7. Economic Growth Theory
8.	Main Problem	Its main issues are price determination and resource allocation.	Its main issue is determining the economy's level of income and employment.
9.	Popularised by	Alfred Marshall	John Maynard Keynes

Microeconomics Chapter 1 Class 12 - Free PDF Download

The Class 12 Economics Chapter 1 NCERT solutions will have optimized content that will help you understand the concepts with ease. Our app and website will have the content of Chapter 1 of Microeconomics so that you can easily download the content. The concepts of Microeconomics Class 12 Chapter 1 NCERT Solutions will be so interesting that the students who read the concepts will not forget them easily. This will help a lot while taking the exam. Once the content is downloaded, it will be available to you anytime so that you can easily find it and go through it. The contents will be interesting and will make the learning process interesting too.

NCERT Solutions of Class 12 Microeconomics Chapters

Chapter – 1: Introduction to Microeconomics

NCERT Solutions of Class 12 Microeconomics Chapter 1 - Introduction to Microeconomics will cover all the basic concepts related to Microeconomics and all the terms which will be used to explain the concepts. It explains the types of economics and its importance. It will clearly explain the difference between Microeconomics and macroeconomics.

It will give a basic idea of Possibility Curve and Opportunity Cost, Production Possibility Curve, and Central problems. These topics will be covered in detail in the next chapters. The importance of this concept is medium to low. All the important concepts will provide a good weightage of marks in the examination.

NCERT Solutions of Class 12 Microeconomics Chapter-Wise Marks Weightage

Microeconomics will have 50 marks weightage in the entire syllabus. The weightage of marks will have the introduction topic with 4 marks, customer behaviour and demand will constitute 18 marks, producer behaviour and supply will constitute 18 marks as well. The forms of market and price determination will have 10 marks weightage. Customer behaviour and demand and producer behaviour and supply will have the highest weightage and are the most important concepts from the exam point of view. These two concepts will hold 60% of marks in this concept so preparing them will ensure good results.

Our subject matter experts have made sure that all the important points and tips and tricks are included which are important while preparing for the examination.

Why Are NCERT Solutions For Class 12 Microeconomics Chapter 1 Important?

NCERT Class 12 Microeconomics Chapter 1 provides an in-depth explanation of concepts and also the importance of the subject.
The solutions are very handy in last-minute revisions during the exams from Microeconomics Class 12 Chapter 1 NCERT solutions.
It lists all the repeated questions and important points which can be expected in the exams.
The topics are listed along with the weightage of marks so that it will be easy to figure out the important concepts.

FAQs (Frequently Asked Questions)

1. What is Normative Economics?

Normative economics is defined as the current situation of economics should be the ideal case of economics. It is generally based on the principle of 'what ought to be'. It will check the result of economic behaviour if it is good or bad. It will evaluate the result when certain policies or statements are changed and how it impacts the economy. It will also give importance to value judgments.

For example, the price of milk is Rs. 1000 per 40 litres of milk so that the dairy farmers will have higher standards of living.

2. What are the Differences Between the Planned Economy and the Market Economy?

In the planned economy, the government will have the power to make decisions related to the price of the item, distribution, production, and production will have constant units and will not plan according to the needs of the people. In the market economy, the current needs of the people will be taken into consideration. The excess and shortage will be considered and the sellers will have the power of decision making. The government will not have the authority of making decisions.

3. Where can I find NCERT Solutions for Chapter 1 Introduction to Microeconomics of Class 12 Microeconomics?

Students can download the NCERT Solutions for Chapter 1 Introduction to Microeconomics of Class 12 Microeconomics from CoolGyan’s website or CoolGyan App . Students can find solutions to all textbook questions related to Chapter 1 Introduction to Microeconomics of Class 12 Microeconomics in simple language. All solutions are prepared by expert teachers who have experience of many years. Solutions can help students to prepare for the final exams and revise all concepts of Chapter 1 thoroughly using the solutions. These solutions are available free of cost.

4. How come NCERT Solutions Chapter 1 Introduction to Microeconomics of Class 12 Microeconomics is going to help me?

NCERT Solutions for Chapter 1 Introduction to Microeconomics of Class 12 Microeconomics can help students to understand the concepts easily. Students can use NCERT Solutions to prepare for exams and score high marks. Students can understand the pattern of questions asked in the exams and help them give the right answers to the questions asked in the exams. It can help students to save time during exams as students can make short notes using the NCERT Solutions and practise well, which means they can answer all the questions easily.

5. What is positive economic analysis?

Positive economic analysis is a term that defines facts about economics, objectives, measurements, and processes. It includes the study of the cause and effect relationship between different economic factors and phenomena.

6. Give a brief account of the production possibilities of an economy.

Resources are scarce due to which we do not know what to produce and what should be the quantity. Production possibility curve can help us to find out the way by which we can combine two goods and produce goods using given resources after making assumptions. In this method, resources are used efficiently and techniques are the same. It is an effective method that can help to improve the economy of society by using the available resources.

7. What is the main idea given in Chapter 1 Introduction to Microeconomics of Class 12 Microeconomics?

Chapter 1 Introduction to Microeconomics of Class 12 Microeconomics will give a basic idea about microeconomics and different terms related to microeconomics. The chapter also introduces the different types of economics and their importance. It will also help students to understand the difference between microeconomics and macroeconomics. Students will also learn the idea of possibility curve and opportunity cost, production possibility curve, and main problems. It is the first chapter that will introduce the important terms used in Class 12 Microeconomics.