Economics primarily studies how individuals and societies
A Accumulate unlimited wealth
B Use scarce resources to satisfy unlimited wants
C Eliminate human wants entirely
D Produce luxury goods only
Economics deals with scarcity and choice. Resources are limited, while wants are unlimited. Economics studies how people use limited means to fulfil unlimited needs efficiently.
“What to produce?” is a basic economic question because
A Every society always produces all possible goods
B Human wants are limited
C Resources are limited and require prioritisation
D Markets cannot decide production
Since resources are scarce, societies must choose which goods to produce. This selection is essential to avoid misuse of scarce resources.
Economics is considered a social science because
A It studies only government activities
B It deals with controlled laboratory experiments
C It studies human behaviour in economic situations
D It has no connection with society
Economics analyses how people make choices in real life. Human behaviour changes, so economics is classified as a social rather than natural science.
Microeconomics is concerned with
A National-level employment
B Behaviour of an individual consumer or firm
C Price level of the whole economy
D International trade patterns
Microeconomics studies individual units like households and firms, their choices, prices, and market behaviour.
Which of the following falls under the scope of “consumption” in economics?
A How income is distributed among factors
B How individuals use goods to satisfy wants
C How factories produce goods
D How governments borrow money
Consumption focuses on using goods and services to fulfil wants, including preferences, buying behaviour, and spending patterns.
Distribution in economics studies how
A Goods are transported from one place to another
B Goods are advertised to consumers
C Income is shared among factors of production
D Prices rise or fall in the market
Distribution focuses on how output’s earnings are divided into rent, wages, interest, and profit.
Which element is included under “Production” in economics?
A How much to consume
B Allocation of scarce resources for creating goods
C How to distribute income
D How to improve welfare only
Production involves decisions about what and how much to produce, methods, and the use of inputs like land, labour, and capital.
Welfare economics primarily studies
A Government profits
B Consumer satisfaction and standard of living
C Machine efficiency
D Only national GDP
Welfare economics measures whether economic activities improve human well-being, focusing on fairness, equity, and quality of life.
Positive economics deals with
A What should be done
B Moral opinions
C Statements that can be tested and verified
D Only government policies
Positive economics explains facts and cause-effect relationships that are objectively measurable.
Normative economics involves statements that are
A Free from value judgments
B Only based on statistics
C Suggestive and opinion-based
D Always incorrect
Normative economics expresses value judgments about what ought to be, influenced by beliefs.
Economics deals with scarcity because
A Resources are unlimited
B Human wants are fixed
C Resources are limited relative to wants
D Markets always fail
The central reason for economic problems is limited resources and unlimited wants, forcing choice-making.
Which method begins with real-world data and builds theories?
A Deductive method
B Inductive method
C Inferential method
D Assumption-based method
The inductive method uses observed data to develop general principles, common in statistical economics.
“Other things remaining constant” refers to the assumption of
A Perfect competition
B Rational behaviour
C Ceteris paribus
D Marginal analysis
Ceteris paribus isolates one variable at a time by assuming all others remain constant.
Economics is both a science and an art because
A It has no theories
B It only uses imagination
C It uses scientific methods and provides practical solutions
D It ignores real-life situations
Economics uses scientific analysis (science) and also gives practical policy guidance (art).
The deductive method starts with
A Data collection
B Broad principles or assumptions
C Conclusions only
D Laboratory experiments
Deductive reasoning moves from general principles to specific cases, forming theories.
Economic models are used because
A The real economy is too simple
B They complicate economic study
C They simplify complex economic realities
D They avoid assumptions
Models reduce complexity, allowing economists to analyse core relationships clearly.
Basic economic problems arise mainly due to
A Unemployment only
B Inflation only
C Scarcity of resources
D Unlimited government revenue
Scarcity of land, labour, and capital relative to wants creates the need for economic choices.
“How to produce?” refers to deciding
A Which goods to export
B Distribution among consumers
C The technique of production
D Price regulation
It determines whether to use labour-intensive or capital-intensive methods.
In a market economy, the question “for whom to produce?” is determined mainly by
A Government planning
B Consumer sovereignty
C Income and purchasing power
D Social equality
In capitalist systems, distribution depends on income, leading to unequal access to goods.
A labour-abundant economy like India generally prefers
A Highly capital-intensive techniques
B Labour-intensive techniques
C No production
D Only export-based production
Abundant labour and limited capital push economies toward labour-intensive production.
Which economic system uses central planning to solve basic economic problems?
A Market economy
B Mixed economy
C Planned economy
D Traditional economy
Socialist systems use centralised planning authorities for all production and distribution decisions.
Alternative uses of resources lead to
A No need for choice
B Economic planning being unnecessary
C Opportunity cost
D Unlimited production possibilities
Since resources can be used for many purposes, choosing one option means sacrificing another.
Which of the following is NOT a solution to basic economic problems?
A Efficient use of technology
B Proper planning
C Random production decisions
D Promoting investment
Efficient solutions require planning, investment, and technology, not random choices.
Economic stability involves managing
A Only long-term growth
B Only price decreases
C Inflation, unemployment, and fluctuations
D Only foreign trade
Stability requires balancing prices, employment and preventing economic crises.
In a market economy, prices are determined by
A Government orders
B Demand and supply forces
C Random market behaviour
D Political decisions
Market economies use the price mechanism, where prices adjust based on demand-supply.
Which feature is most associated with a planned economy?
A Profit motive
B Consumer sovereignty
C Government ownership of major resources
D Free competition
Socialist economies place productive resources under state control.
Mixed economies attempt to balance
A Only competition
B Only equality
C Market efficiency with social justice
D Only private ownership
Mixed systems combine private efficiency with government welfare and regulation.
Traditional economies base economic decisions on
A Modern technology
B Central planning
C Customs and long-established practices
D International trade
Traditional systems rely on heritage and customs, not modern markets or planning.
A limitation of the market economy is
A Very low innovation
B High government control
C Inequality of income
D Absence of variety
Market systems tend to create income and wealth disparities because distribution depends on income.
A key advantage of planned economies is
A Complete freedom of choice
B Reduction in inequalities
C Unlimited variety of goods
D Rapid price fluctuations
Central planning focuses on equal distribution, reducing inequality across society.
India follows which type of economic system?
A Pure market economy
B Pure socialist economy
C Mixed economy
D Traditional economy
India combines public and private sectors, balancing growth and social welfare.
Subsistence production is commonly found in
A Mixed economies
B Planned economies
C Traditional economies
D Capitalist economies
Traditional economies produce mainly for self-consumption, not for markets.
A positive economic statement is one that
A Expresses personal beliefs
B Cannot be tested
C Can be verified using data
D Gives moral advice
Positive statements describe what is and can be validated using evidence.
“The government should increase pensions for the elderly” is
A Positive
B Normative
C Scientific
D Descriptive
It expresses a value judgment about what the government ought to do.
Positive economics helps policymakers by
A Giving moral guidelines
B Providing factual foundation
C Telling them what is fair
D Expressing ethical values
Positive economics supplies data and facts required before forming policies.
Normative economics cannot be tested because
A It is based on data
B It deals with opinions
C It uses mathematics
D It is always wrong
Normative statements are subjective and depend on beliefs, so they cannot be objectively proven.
Welfare economics belongs primarily to
A Positive economics
B Normative economics
C Classical economics
D Behavioural economics
Welfare economics uses value judgments on fairness, poverty, inequality, and welfare.
A statement like “inflation rose to 6% last year” is
A Positive
B Normative
C Predictive only
D Hypothetical
It is a factual statement that can be verified using economic data.
Microeconomics studies
A National income
B Aggregate employment
C Individual markets and units
D Country-wide inflation
Microeconomics examines consumers, producers, individual firms, and markets.
Which of the following is a macroeconomic concept?
A Consumer equilibrium
B Firm’s cost curves
C Gross Domestic Product
D Price of one product
GDP measures total national output, a macroeconomic aggregate.
Inflation is studied under
A Microeconomics
B Macroeconomics
C Behavioural economics
D Classical theory only
Inflation affects the entire economy, making it a macroeconomic issue.
Micro and macroeconomics are interdependent because
A They study unrelated subjects
B Micro decisions affect macro outcomes and vice-versa
C Microeconomics is superior
D Macroeconomics ignores individual behaviour
Individual actions aggregate into macro outcomes while macro conditions influence micro decisions.
National unemployment rate belongs to the study of
A Microeconomics
B Macroeconomics
C Linear economics
D Household economics
Unemployment is a country-wide variable studied under macroeconomics.
The price of one company’s product is studied under
A Macroeconomics
B Microeconomics
C Public economics
D International trade
Microeconomics analyses firm-level pricing and market behaviour.
Economic models are developed to
A Add complexity
B Provide simplified representations of real life
C Replace real economic data
D Show every detail of the economy
Models simplify reality to analyse relationships clearly.
“Consumers behave rationally” is an example of a/an
A Preference
B Assumption
C Theory
D Law
Rational behaviour is a simplifying assumption used in many economic models.
Which model uses real-world data to test economic theories?
A Verbal model
B Graphical model
C Econometric model
D Hypothetical model
Econometric models use statistics + maths + data to test theories.
Assumptions are necessary because
A They make models unnecessarily complex
B They allow focus on key variables
C They eliminate the need for data
D They always reflect reality
Assumptions remove irrelevant factors and allow economists to focus on core relationships.
Ceteris paribus is used in models to
A Change multiple factors at once
B Study one variable while keeping others constant
C Add more complexity
D Predict political behaviour
Ceteris paribus means isolating one factor to analyse its effect accurately.
A demand-supply graph is an example of a
A Verbal model
B Graphical model
C Written model
D Statistical model
Demand and supply curves visually show the relationship between price and quantity, making it a graphical model.