11th Economics

Scarcity refers to the fundamental economic problem where unlimited wants and needs clash with limited resources. This forces individuals and societies to make choices about how to allocate scarce resources, leading to opportunity costs. Scarcity is crucial because it drives economic activity, forcing individuals and businesses to prioritize and make trade-offs to maximize their satisfaction.

A command economy is centrally planned, with the government controlling resources and production. The Soviet Union during the Cold War is a classic example. In contrast, a market economy is driven by private enterprise and free markets, with minimal government intervention. The United States is a prominent example of a market economy.

Perfect competition features many firms, free entry and exit, identical products, and perfect information. This leads to price-taking behavior, where no single firm can influence the market price. While it is considered an idealized structure, it serves as a benchmark for understanding market efficiency and the potential for welfare maximization.

<p>Opportunity cost is the value of the next best alternative foregone when making a choice. It helps individuals and businesses assess the trade-offs involved in decision-making. For example, if you choose to spend your time studying instead of working, the opportunity cost is the income you could have earned by working.</p> Signup and view all the answers

<p>In a mixed economy, the government plays a significant role in regulating and influencing the market. It provides public goods, sets rules and regulations, and intervenes in areas like healthcare, education, and infrastructure. Examples include taxation, subsidies, minimum wage laws, and environmental regulations.</p> Signup and view all the answers

<p>In an oligopoly, firms are highly interdependent because their actions have a significant impact on each other's profits. Since there are few firms, each firm's pricing and output decisions will affect the market share and profits of the other firms. This leads to strategic interaction, where firms constantly anticipate and react to each other's moves, often resulting in price wars or collusion.</p> Signup and view all the answers

<p>The Law of Demand and the Law of Supply work in opposite directions to determine equilibrium. As price increases, the quantity demanded decreases (Law of Demand), while the quantity supplied increases (Law of Supply). Equilibrium occurs where these two forces meet, at the price where the quantity demanded equals the quantity supplied.</p> Signup and view all the answers

<p>GDP measures the total value of goods and services produced within a country's borders. An increase in GDP indicates that the economy is producing more goods and services. This increase in production generates income for businesses and individuals involved in the production process. Hence, an increase in GDP leads to an increase in national income.</p> Signup and view all the answers

<p>High inflation erodes purchasing power, leading to a decline in the value of savings. It can also distort investment decisions, making it harder for businesses to plan for the future. Additionally, high inflation can lead to social and political instability.</p> Signup and view all the answers

<p>A country can improve its balance of payments by increasing its exports and reducing its imports. Exports bring in foreign currency, while imports use up foreign currency. A positive balance of trade (exports exceeding imports) contributes to a favorable balance of payments.</p> Signup and view all the answers

<p>The HDI considers factors beyond just income, such as life expectancy and education levels, making it a more holistic measure of development. While GDP per capita reflects economic output, the HDI captures the well-being and quality of life of a country's population. It provides a broader perspective on development by taking into account social and human capital alongside economic growth.</p> Signup and view all the answers