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Unit 1: Basic Concepts of Economics

1.6 Self Assessment Notes

Fill in the blanks:

1. Economics is often referred to as a …………………… science.
2. Theory of ‘Invisible Hands’ was given by………………………..
3. As per Marshall, economics is the study of ………………... in ordinary business of life.
4. Resources are ……………. and human wants are …………..

5. Scarce resources should be used with maximum ………….. to get optimum results.
6. …………… problems involve decisions about installation of additional machines or hiring
of extra labour.
7. Any fi rm works for profi ts and optimal or near maximum profi ts depend upon accurate
……………decisions.
8. ………….. helps in empirical testing of the economic theory.
State whether the following statements are true or false:

9. Study of national income would be a part of macro economics.

10. Study of pricing decisions of a firm is a part of micro economics.
11. Macro and micro economics are two distinct branches of economics that have no connection
with each other.

12. Micro economics takes a top-down approach and macro economics takes a bottom-up
approach in analyzing the economy.
13. The optimal economic activity is to optimise the attainment of ends, given the means and
their scarcities.
14. In macro analysis, the focus is on a single individual in an economy.
15. General equilibrium and partial equilibrium are slightly different concepts.
16. “We should cut taxes in half to increase disposable income levels.” It is a normative
statement.

1.7 Review Questions

1. Define the term economics in your own words.

2. ‘Economics is a dismal science’. Do you agree. Give reasons for your answers.

3. Discuss the scope of economics.
4. Contrast micro and macro economics using examples.
5. Discuss the different analysis methods used in economics.
6. Examine the use of economic analysis in managerial decision making.
7. How do you justify the fact that most of the economies in the world have registered growth

even after influenced by the global meltdown?
8. Are micro and macro economics interdependent on each other? Give reasons for your
answer.

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