Chapter-4
BASIC ECONOMIC PROBLEMS AND THE ECONOMY
EXPECTED QUESTIONS FOR EXAMINATIONS
1. What is basic need?
The essential needs for the survival of life such as food, clothing and shelter can be called
basic needs.
2. What do you mean by Gratifying needs?
There are certain needs that make our life more comfortable and happy. These are called
gratifying needs. Examples for this include the use of luxury cars, expensive jewellery
and costly dresses.
3. What are the Characteristics of Needs?
Human needs are diverse and innumerable. Some needs can be met alone and others
through collective efforts .A need once fulfilled may be repeated .Needs vary with time,
place and individuals.
4. What are the Basic Economic Problems faced by a society or a country?
What to produce?
How to produce?
For whom to produce?
5. Explain what to produce?
Each country has to prioritize what to produce using the available resources. Once it is
decided what to produce, the question as how much to produce becomes relevant. A
country has to produce many goods and services. It is necessary to decide what industries
to start and how many units if it is decided to manufacture industrial products.
6. Explain How to Produce?
How to produce," focuses on the methods and techniques employed in the production
process. There are two types of production Technique ; ie Labour Intensive Technique
7. Define Labour Intensive Technique
The method of production using more labour and less capital is called ‘Labour Intensive
Technique & Capital Intensive Technique
8. Define Capital Intensive Technique-
The method of production using more capital and less labour is called ‘Capital Intensive
Technique.’
9. Characteristics of Labour Intensive Technique
Production involving more labourers. Low level of capital utilization a production
method that requires more time .eco-friendly production method. limited use of
technology
10. Characteristics of Capital Intensive Technique .Less demand for laborers.
Utilizes more capital investment .Ensures productivity. Depends more on technology
11. Explain For Whom to Produce? Reasons that led to the discovery of an eastward sea
route from Europe by the end of the fifteenth century?
Technological advances in European shipbuilding and sailing
Growth in knowledge about geography
Advances made in compass and map making
Travel writings by voyagers provided knowledge about new territories and their wealth
12. Explain For Whom to Produce?
Production should be done to meet the needs of the people. The question for whom to
produce means how goods and services produced are distributed among the people.
Production activities should be planned in such a way that available resources are utilized
to benefit everyone in the society.
13. Factors of production & Reward
Land -Rent
Labour -Wages
Capital -Interest
Entrepreneurship -Profit
14. Elucidate characteristics of the Economy?
Economy is man-made. Economy is subject to change .Economic activities in the
economy keep changing. Production, distribution and consumption are the main
activities in the economy.
15. What are the different Types of Economies and its Features
It is an economy in which ownership of the factors of
production is concentrated in individuals.
Capitalist Economy Features -All persons have the right to own property
maximum profit .Limited government intervention.
Competition among industries
A socialist economy is one in which the government owns
and controls all the factors of production. A centralized
planning committee will take decisions on economic
Socialist Economy activities.
Features -Ownership of the factors of production is vested
in the
Government .Social welfare is the main objective
.Government's control over the market reducing inequality
in income and wealth.
A mixed economy is one that combines some features of a
capitalist economy and a socialist economy.
Features -Coexistence of private and public sector.
Mixed Economy Profitability and social welfare become the main objectives
.Individual freedom in economic a c t i v i t i e s . Financial
planning for preparation of
Government schemes.
16. Who is known as the Father of Economics?
Adam Smith
17. Economist and their thought
Economist Thought/ ideas
Alfred Marshall Formulated economics as the science that deals with welfare
Envisioned economics as the branch that deals with the
Lionel Robbins
relationship between human wants and limited resources.
Came up with the theory that trade between two countries can
David Ricardo increase the welfare of both countries. His ‘Theory of Rent’
regarding the lease of land is very famous.
Developed the ‘Theory of Surplus Value.’ According to Marx, the
basis of production is the labour of the workers. But only a small
Karl Marx
portion of this is given to the labourers and the majority is kept by
the capitalist.
Argued for the theory of government intervention the economic
J. M. Keynes sector. He opined that economic problems can be solved to
some extent through government intervention
Devised an efficient tax system for the country’s economic
Chanakya
development
Dadabhai Naoroji The originator of ‘The Drain Theory,’ are prominent among them
Describes the economic visions in his books Hind Swaraj and India
Mahatma Gandhi
of My Dreams.
18. What are the Gandhiji’s Economic Thoughts
Gandhiji envisioned an economy based on self-sufficiency and decentralization. Rural
industries need to be nurtured to increase employment opportunities locally. Expand
local markets for marketing locally produced goods. Economic inequality should be
alleviated to ensure social justice.
19. The first Indian economist to win the Nobel Prize in Economics in the year 1998
Amartya Kumar Sen
20. What are the Amartya Kumar Sen’s thoughts on Welfare Economics?
Emphasis should be placed on education, health care and social justice to achieve
economic progress. Gender equality and women empowerment are essential for the
progress of the country. Economic development should be evaluated on the basis of its
influence on human rights and freedoms.
21. Name the Indian-American economist was awarded the 2019 Nobel Prize in Economics
for devising an experimental approach to global poverty eradication?
Abhijit Vinayak Banerjee