Basic Concepts of Economics MCQs
1. Who is known as the 'Father of Economics'?
Adam Smith is considered the father of modern economics, famous for his book "The Wealth of Nations" (1776).
2. The term 'Economics' is derived from the Greek word 'Oikonomia' which means:
'Oikos' means household and 'Nemein' means management.
3. Which branch of economics deals with individual units like a consumer or a firm?
Microeconomics studies the behavior of individual economic agents such as households and firms.
4. The Indian Economy is best described as a:
India follows a mixed economy model where both the public (government) and private sectors co-exist.
5. Which sector is known as the 'Primary Sector' of the economy?
The primary sector involves the extraction and harvesting of natural products (e.g., farming, fishing, mining).
6. GDP stands for:
GDP is the total monetary value of all finished goods and services produced within a country's borders in a specific time period.
7. What does 'Laissez-faire' mean in economics?
It refers to a policy of minimum governmental interference in the economic affairs of individuals and society.
8. The 'Opportunity Cost' of a factor of production is:
Opportunity cost is the benefit missed or lost when an investor, individual, or business chooses one alternative over another.
9. Which organization calculates the National Income in India?
Previously it was the Central Statistics Office (CSO), now merged under NSO.
10. 'Utility' in economics means:
Utility is a measure of satisfaction an individual gets from the consumption of commodities.
11. A market structure with a 'Single Seller' and many buyers is called:
In a monopoly, a single entity controls the entire supply of a product or service.
12. The tertiary sector of the economy is also known as:
This sector provides services rather than producing goods (e.g., banking, transport, education).
13. Which body replaced the Planning Commission of India in 2015?
The National Institution for Transforming India (NITI Aayog) replaced the Planning Commission on January 1, 2015.
14. Inflation generally leads to:
As prices rise (inflation), each unit of currency buys fewer goods and services.
15. Monetary Policy in India is formulated by:
The RBI formulates monetary policy to control money supply and interest rates.
16. The concept of 'Disguised Unemployment' is most common in which sector in India?
It occurs when more people are employed in a task than are needed, so the marginal productivity of excess labor is zero.
17. Which tax is an example of Indirect Tax?
GST is an indirect tax levied on the supply of goods and services. Income tax is a direct tax.
18. The Human Development Index (HDI) is released by:
The United Nations Development Programme (UNDP) releases the HDI report.
19. What is 'Fiscal Policy' related to?
Fiscal policy involves the government using its revenue collection (taxation) and expenditure (spending) to influence the economy.
20. The curve showing the inverse relationship between inflation and unemployment is called:
The Phillips curve states that inflation and unemployment have a stable and inverse relationship.
21. 'Repo Rate' is the rate at which:
Repo rate is the rate at which the central bank of a country (RBI in India) lends money to commercial banks in the event of any shortfall of funds.
22. What does the Lorenz Curve measure?
The Lorenz curve is a graphical representation of the distribution of income or wealth within a population.
23. Which five-year plan was based on the 'Mahalanobis Model'?
The Second Plan (1956-61) focused on rapid industrialization and was based on the P.C. Mahalanobis model.
24. What is the main cause of 'Cost-Push Inflation'?
Cost-push inflation occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials.
25. 'Per Capita Income' is obtained by dividing National Income by:
Per capita income is the average income earned per person in a given area in a specified year.
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๐ 1. Basic Concepts of Economics
๐น What is Economics?
Economics is the social science that studies how individuals, businesses, and governments make choices about allocating scarce resources to satisfy unlimited wants.
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๐น Key Concepts
- Scarcity: Limited availability of resources.
- Opportunity Cost: The next best alternative forgone when a choice is made.
- Utility: Satisfaction gained from consumption of goods or services.
- Wants vs Needs: Wants are unlimited, while needs are essential for survival.
- Goods: Tangible products like food, clothes, etc.
- Services: Intangible products like education, banking, etc.
- Resources (Factors of Production): Land, Labour, Capital, and Entrepreneurship.
๐น Types of Goods
- Consumer Goods: Directly used by consumers (e.g. bread, pen).
- Capital Goods: Used to produce other goods (e.g. tools, machinery).
- Free Goods: Abundant and not priced (e.g. air).
- Economic Goods: Scarce and priced (e.g. petrol, wheat).
๐น Branches of Economics
- Microeconomics: Deals with individual units (e.g. households, firms).
- Macroeconomics: Deals with the economy as a whole (e.g. inflation, GDP).
๐น Central Economic Problems
- What to produce? Decide goods/services to produce.
- How to produce? Choose production methods – labor-intensive or capital-intensive.
- For whom to produce? Distribution among population.
๐น Economic Activities
- Production: Creation of goods and services.
- Consumption: Using goods and services to satisfy wants.
- Exchange: Buying and selling in markets.
- Distribution: Sharing of income among factors of production.
๐น Important Definitions
| Term | Definition |
|---|---|
| Economy | An organized system of human activity in a country related to production and consumption. |
| GDP | Total value of goods and services produced within a country in a year. |
| Inflation | General rise in prices of goods and services over time. |
| Recession | Negative economic growth for two consecutive quarters. |
๐น MCQs – Practice Questions
- Q1: Which of the following is not a factor of production?
๐ A. Money ❌ | B. Land ✅ - Q2: What is the basic problem of economics?
๐ A. Scarcity of resources ✅ - Q3: Opportunity cost means:
๐ A. Value of next best alternative ✅
๐น FAQs – People Also Ask
- Q: What is the difference between micro and macroeconomics?
A: Micro focuses on individuals/firms; macro on economy-wide issues. - Q: Why is scarcity important in economics?
A: Because resources are limited, choices must be made. - Q: What are economic goods?
A: Goods that are scarce and have a price.
๐ Conclusion
Understanding basic economic concepts lays the foundation for deeper topics like GDP, inflation, budget, and policies. Focus on keywords like scarcity, opportunity cost, economic goods and distinguish between micro and macro aspects.