NCERT Solutions for Class 11 Economics Chapter 1 - Introduction

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1. Mark the following statements as true or false.

Statistics can only deal with quantitative data.
Statistics solves economic problems.
Statistics is of no use to Economics without data.

Ans.

True. Statistics deals only with quatitative data.
True. Economists use Statistical tools and techniques to comprehend and evaluate an economic problem by evaluating the past information. Statistical tools help economists to find out the cause of an economic problem and make policies and strategies accordingly.
True. Data is the raw fact for economic analysis. Without data, economists cannot analyse or understand economic problem.

2. Make a list of activities in a bus stand or a marketplace. How many of them are economic activities?

Ans. The following are the activities in a bus stand or a marketplace:

Buying of goods and services.
Selling of goods and services.
Production process carried out by a firm.
People purchasing bus tickets.
Homeless person asking for cash. Yes, the above-mentioned activities are considered as economic activities because these activities are related with money.

3. The government and policy makers use statistical data to formulate suitable policies of economic development’. Illustrate with two examples.

Ans. The statistical data provide the base for the government and the policy makers to formulate policies. The statistical data not only assist them in analysing and evaluating the results of the past policies but also help them to take corrective actions and to formulate new strategies and policies. Statistical data also assist the government to know the relationship between economic variables and make strategies and policies accordingly. For instance, if Indian Government aims at
expanding the output, then it prepares its investment expenditure policy depending on the capital output ratio in the past years. Another instance could be the preparation of monetary policy. The former data related to inflation and economic growth are taken into consideration for assessing the money supply required in the upcoming period.

4. “You have unlimited wants and limited resources to satisfy them.” Explain the statement by giving two examples.

Ans. The most common economic problem is the problem of scarcity. Human needs are unlimited and resources to satisfy those wants and needs are limited and have alternative uses. Scarcity of resources states that there are unlimited wants and limited resources which means supply of resources is less as compared to the demand for goods.
The key concern of an economy is to allocate those scarce resources in such a way so us to get the optimum utilisation of resources to satisfy maximum wants. The limited resources have alternative and multiple uses which forces the economy to make a choice among several available alternatives.
For instance, an economy endowed with a given level of resources has to make a choice between the production of capital and consumer goods.
The decision regarding what to produce and in what quantities will depends on the need of the economy.
The scarcity problem can be felt at an individual level also. For instance, with a given amount say, ₹12,000, one cannot buy a washing machine and an air conditioner simultaneously.

5. How will you choose the wants to be satisfied?

Ans. A person has unlimited wants but resources are limited. So, one has to manage the resources according to the priority of their intensity. The wants of highest intensity need to be fulfilled first as they will provide the highest satisfaction and hence, the individual attaches the topmost priority to these wants.
Further, the choice is also based on the need in the prevailing situation, availability of the commodities that can satisfy the needs and the purchasing power to realise a particular want. Thus, depending on these conditions, one can conclude that a person having a limited budget will fulfil a specific need that would provide him the maximum satisfaction with given budget at given prices of the commodities.

6. What are your reasons for studying Economics?

Ans. As we know, wants are unlimited but resources are limited and having alternative uses also. The main concern of economy is to allocate the scarce resources to the best possible use in order to get maximum benefit from them. Due to the scarcity, an economy needs to allocate these resources in appropriate way to get maximum and optimum returns.

The following are the reasons for studying economics:

To Study the Behaviour of the Consumer: The theory of consumer behaviour studies the consumer behaviour in different kinds of market situations. This theory helps us comprehend how the rational consumers make their decisions to get the maximum satisfaction within the given budget or income and given prices of the commodities.
To Study the Production Theory: The theory of production deals with the production decisions of the producers in different kinds of market. The theory defines how a manufacurer takes production decisions in order to maximise the output and minimise the production cost. The theory focuses on how a producer combines different inputs in order to minimise the production cost and to maximise the revenues.
To Study the Distribution of Income: The study of economics tells us how the income arises. It is arising in the form of wage, interest, rent and profit and is distributed to different factors such as labour, capital, land and entrepreneur.
To Study the Macroeconomic Problems: Economics proves to be the most powerful tool to comprehend and analyse the root cause of macroeconomic problems faced by an economy like unemployment, poverty, recession, inflation etc. Economics helps us not only in knowing the interrelationship among these problems but also to take several corrective actions.

7. Statistical methods are no substitute for common sense. Comment with examples from your daily life.

Ans. It is absolutely true that statistical tools and methods are no substitute for common sense. Statistical data must not be believed blindly as they can be misused or misinterpreted. The statistical data may involve personal judgement and biasness of the statistician which includes manipulations and window dressing.

Statistical information and tools are subject to the errors while collecting and surveying data. Thus, one should use his/her common sense while working with the statistical tools. Let us understand this with the help of an example.

A person wanted to cross a river along with his family but the members did not know how to swim. He knews the average depth of the river to be 127 cm. His height was 170 cm, that of his wife was 153 cm and his two children measured 123 cm and 86 cm respectively in height.

Then, he calculated the average height of his family and which comes to 133 cm. He thought that the average depth of the river (127 cm) was less than the average height of his family (133 cm) and concluded that they all will easily cross the river on foot. But this resulted in drowning of his children. So, this example proves that common sense must supersede statistical tools.